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What Triggers Early Retirement? Results from Swiss Pension Funds

  • Monika Bütler
  • Olivia Huguenin
  • Federica Teppa

Early retirement is predominantly considered as the result of incentives set by social security and the tax system. But people seem to retire early even in the absence of such distortions as the Swiss example demonstrates. We look for determinants of early retirement, in particular the role of lifetime income and family status, using individual data from a selection of Swiss pension funds. Our findings suggest that affordability is a key determinant in retirement decisions: More affluent men, and to a much smaller extent women, tend to leave the work force earlier. The fact that early retirement has become much more prevalent in the last 15 years is another indicator for the importance of affordability as Switzerland's funded pension system has matured over that period leading to higher effective replacement rates. We also find sizeable differences in retirement behavior across marital status. These may be explained by a constrained rational choice based on differential mortality and the desire of couples to coordinate their entry into retirement. JelClassification: D91, H55

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Paper provided by Netherlands Central Bank, Research Department in its series DNB Working Papers with number 041.

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Date of creation: May 2005
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Handle: RePEc:dnb:dnbwpp:041
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