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Retirement as a hedge

Author

Listed:
  • PESTIEAU, Pierre

    (Université de Liège, Belgium)

  • POSSEN, Uri M.

    (Cornell University, Ithaca, NY, USA)

Abstract

This paper explores the effect of letting individuals choose their retirement age in a world of uncertainty where there exist both defined benefit (DB) and de?ned contribution (DC) pension plans. The paper shows that giving individuals the flexibility to determine when to retire is an important tool for them when they are hedging against future uncertainty. It also finds that it is preferable to let people make their retirement decision after rather than before the uncertainty is lifted. Finally, it shows that shifting from DB to DC plans fosters the rate of activity of elderly workers.

Suggested Citation

  • PESTIEAU, Pierre & POSSEN, Uri M., 2009. "Retirement as a hedge," LIDAM Discussion Papers CORE 2009043, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvco:2009043
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    File URL: https://sites.uclouvain.be/core/publications/coredp/coredp2009.html
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    Cited by:

    1. Adema, Y. & Bonenkamp, J. & Meijdam, A.C., 2011. "Retirement Flexibility and Portfolio Choice," Discussion Paper 2011-077, Tilburg University, Center for Economic Research.

    More about this item

    Keywords

    retirement decision; defined benefit defined contribution;

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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