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Why Forcing People to Save for Retirement may Backfire

  • Monika Bütler
  • Olivia Huguenin
  • Federica Teppa

If individuals are unable or unwilling to borrow, a higher than desired second pillar pension capital may induce people to retire earlier than they would have in the absence of such a scheme. Individuals thus leave the workforce as soon as the retirement income is deemed sufficient and the pension plan avails withdrawal of benefits. We provide evidence using individual data from a selection of Swiss pension funds, allowing us to perfectly control for pension scheme details. Our findings suggest that affordability is a key determinant in the retirement decisions. The higher the accumulated pension capital, the earlier individuals tend to leave the workforce.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1458.

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Date of creation: 2005
Date of revision:
Handle: RePEc:ces:ceswps:_1458
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