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The impact of an increase in the legal retirement age on the effective retirement age

Listed author(s):
  • Noelia BERNAL
  • Frederic VERMEULEN

We analyze the impact of an increase in the legal retirement age on the effective retirement age in the Netherlands. We do this by means of a dynamic programming model for the retirement behavior of singles. The model is applied to new administrative data that contain very accurate and detailed information on individual incomes and occupational pension entitlements. Our model is able to capture the main patterns observed in the data. We observe that as individuals get older their labor supply declines considerably and this varies by health status. We simulate a soon to be implemented pension reform which aims at gradually increasing the legal retirement age from 65 to 67. The simulation results show a rather small impact on the effective retirement age. Individuals postpone their retirement by only 3 months on average, while differences across individuals mainly depend on their health status.

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Paper provided by KU Leuven, Faculty of Economics and Business, Department of Economics in its series Working Papers Department of Economics with number ces13.03.

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Date of creation: Feb 2013
Handle: RePEc:ete:ceswps:ces13.03
Contact details of provider: Web page: http://feb.kuleuven.be/Economics/

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