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What Triggers Early Retirement? Results from Swiss Pension Funds

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Listed author(s):
  • Monika Bütler
  • Olivia Huguenin
  • Federica Teppa

Abstract

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
Handle: RePEc:dnb:dnbwpp:041
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Keywords: Occupational Pension; Retirement decision; Duration models;

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Find related papers by JEL classification:
  • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
  • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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Cited by:

  1. Hanel, Barbara & Riphahn, Regina T., 2006. "Financial Incentives and the Timing of Retirement: Evidence from Switzerland," IZA Discussion Papers 2492, Institute for the Study of Labor (IZA).
  2. Nicolas Sirven & Thomas Barnay, 2017. "Expectations, loss aversion and retirement decisions in the context of the 2009 crisis in Europe," International Journal of Manpower, Emerald Group Publishing, vol. 38(1), pages 25-44, April.
  3. Christian Keuschnigg & Mirela Keuschnigg & Christian Jaag, 2011. "Aging and the Financing of Social Security in Switzerland," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 147(II), pages 181-231, June.
  4. Monika Riedel & Helmut Hofer, 2013. "Determinants of the Transition from Work into Retirement," NRN working papers 2013-10, The Austrian Center for Labor Economics and the Analysis of the Welfare State, Johannes Kepler University Linz, Austria.
  5. Marjan, MAES, 2008. "Financial and redistributive impact of reforming the old-age pension system in Belgium," Discussion Papers (ECON - Département des Sciences Economiques) 2008040, Université catholique de Louvain, Département des Sciences Economiques.
  6. Daniel Hallberg, 2010. "Do buy-outs of older workers matter?: Estimating retirement behavior with special early retirement offers," International Journal of Manpower, Emerald Group Publishing, vol. 31(3), pages 337-359, June.
  7. Piera Bello & Vincenzo Galasso, 2015. "Old Before their Time: The Role of Employers in Retirement Decisions," CESifo Working Paper Series 5667, CESifo Group Munich.
  8. Justina A.V. Fischer & Alfonso Sousa-Poza, 2006. "The Institutional Determinants of Early Retirement in Europe," University of St. Gallen Department of Economics working paper series 2006 2006-08, Department of Economics, University of St. Gallen.
  9. Carmen Petrovici & Jörg Neugschwender, 2014. "Who can (still) afford to retire early? Cross-country comparison of incomes of senior workers and young retirees using LIS data for 2007 & 2010," LIS Working papers 608, LIS Cross-National Data Center in Luxembourg.
  10. David Dorn & Alfonso Sousa-Poza, 2010. "'Voluntary' and 'involuntary' early retirement: an international analysis," Applied Economics, Taylor & Francis Journals, vol. 42(4), pages 427-438.
  11. Bütler, Monika & Staubli, Stefan & Zito, Maria Grazia, 2008. "The Role of the Annuity's Value on the Decision (Not) to Annuitize: Evidence from a Large Policy Change," CEPR Discussion Papers 6930, C.E.P.R. Discussion Papers.
  12. Piekkola, Hannu & Deschryvere, Matthias, 2004. "Retirement Decisions and Option Values: Their Application Regarding Finland," Discussion Papers 951, The Research Institute of the Finnish Economy.
  13. Alejandra Cox Edwards & Estelle James, 2010. "Impact of Social Security Reform on Labor Force Participation Rates of Pensioners and Nonpensioners: Evidence from Chile," Journal of Human Capital, University of Chicago Press, vol. 4(2), pages 130-172.
  14. Estelle James & Alejandra Cox Edwards, 2005. "Do Individual Accounts Postpone Retirement: Evidence from Chile," Working Papers wp098, University of Michigan, Michigan Retirement Research Center.

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