IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/33069.html
   My bibliography  Save this paper

Retirement Incentives and Decisions across the Income Distribution: Evidence in Canada

Author

Listed:
  • Kevin S. Milligan
  • Tammy Schirle

Abstract

We evaluate the retirement incentives embedded in Canada’s retirement income system with attention to where individuals are located in the income distribution. We find that larger social security benefits are available to individuals with lower earnings in their work history because of the benefit income tests, but those from the top of the income distribution tend to enjoy longer lives over which they may receive benefits. Overall, we see greater Social Security Wealth among individuals from lower deciles. The implicit tax rates on continued work tend to be higher for workers from lower-earning deciles. Considering changes to actuarial adjustments associated with early pension take up, these implicit tax rates on work at older ages fell substantially after 2011. Our regression estimates confirm the importance of incentives on retirement behavior, with substantially larger effects for individuals in lower deciles. These effects are greater for women than men. In simulations, we show that changes to the actuarial adjustment had some impact on retirement rates by lowering the implicit tax on work. The overall redistributive effect of these induced retirement changes was fairly small, however, as the actuarial adjustments brought the system closer to actuarial fairness.

Suggested Citation

  • Kevin S. Milligan & Tammy Schirle, 2024. "Retirement Incentives and Decisions across the Income Distribution: Evidence in Canada," NBER Working Papers 33069, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:33069
    Note: AG
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w33069.pdf
    Download Restriction: Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html. Free access is also available to older working papers.
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or

    for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Michael Baker & Jonathan Gruber & Kevin Milligan, 2003. "The retirement incentive effects of Canada's Income Security programs," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 36(2), pages 261-290, May.
    2. Kevin Milligan & Tammy Schirle, 2021. "The evolution of longevity: Evidence from Canada," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 54(1), pages 164-192, February.
    3. Kevin Milligan, 2008. "The Evolution of Elderly Poverty in Canada," Canadian Public Policy, University of Toronto Press, vol. 34(s1), pages 79-94, November.
    4. Tammy Schirle, 2013. "Senior Poverty in Canada: A Decomposition Analysis," Canadian Public Policy, University of Toronto Press, vol. 39(4), pages 517-540, December.
    5. Kevin Milligan & Tammy Schirle, 2023. "Retirement Decisions and Retirement Incentives: New Evidence from Canada," NBER Chapters, in: Social Security Programs and Retirement around the World: The Effects of Reforms on Retirement Behavior, pages 67-91, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bev Dahlby & Kevin Milligan, 2017. "From theory to practice: Canadian economists’ contributions to public finance," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 50(5), pages 1324-1347, December.
    2. Glenzer, Franca & Michaud, Pierre-Carl & Staubli, Stefan, 2025. "Frames, incentives, and education: Effectiveness of interventions to delay public pension claiming," Journal of Public Economics, Elsevier, vol. 248(C).
    3. Nicholas-James Clavet & Mayssun El-Attar & Raquel Fonseca, 2022. "Replacement Rates of Public Pensions in Canada: Heterogeneity across Socio-Economic Status," Canadian Public Policy, University of Toronto Press, vol. 48(S2), pages 22-34, November.
    4. LoRiggio, Tessa & Morris, Todd, 2024. "The Gender Wealth Gap near Retirement in Canada," IZA Policy Papers 207, Institute of Labor Economics (IZA).
    5. Kevin Milligan, 2005. "Life‐cycle asset accumulation and allocation in Canada," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 38(3), pages 1057-1106, August.
    6. Michael R. Veall, 2007. "Which Canadian Seniors Are Below the Low-Income Measure?," Social and Economic Dimensions of an Aging Population Research Papers 186, McMaster University.
    7. Bernardo Lanza Queiroz, 2007. "The determinants of male retirement in urban Brazil," Nova Economia, Economics Department, Universidade Federal de Minas Gerais (Brazil), vol. 17(1), pages 11-36, January-A.
    8. Sam Norris & Krishna Pendakur, 2013. "Imputing rent in consumption measures, with an application to consumption poverty in Canada, 1997-2009," Canadian Journal of Economics, Canadian Economics Association, vol. 46(4), pages 1537-1570, November.
    9. Fabio Pammolli & Pietro Rizza & Nicola Carmine Salerno, 2004. "Regole pensionistiche e incentivi al prolungamento della vita lavorativa: analisi del caso italiano," Working Papers CERM 06-2004, Competitività, Regole, Mercati (CERM).
    10. Doreen Wing Han Au & Thomas F. Crossley & Martin Schellhorn, 2005. "The effect of health changes and long‐term health on the work activity of older Canadians," Health Economics, John Wiley & Sons, Ltd., vol. 14(10), pages 999-1018, October.
    11. Lori J. Curtis & Kate Rybczynski, 2014. "Exiting Poverty: Does Sex Matter?," Canadian Public Policy, University of Toronto Press, vol. 40(2), pages 126-142, June.
    12. Bruce D. Meyer & James X. Sullivan, 2011. "Viewpoint: Further results on measuring the well‐being of the poor using income and consumption," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 44(1), pages 52-87, February.
    13. -, 2018. "Promoting equality: An interregional perspective," Documentos de Proyectos 43677, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    14. Kevin Milligan & Tammy Schirle, 2018. "The Labor Force Participation of Older Men in Canada," NBER Chapters, in: Social Security Programs and Retirement around the World: Working Longer, pages 51-65, National Bureau of Economic Research, Inc.
    15. Kevin Milligan, 2024. "Innis Lecture: The time of your life: The mortality and longevity of Canadians," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 57(4), pages 1088-1108, November.
    16. McDonald, James Ted & Worswick, Christopher, 2013. "Retirement Incomes, Labour Supply and Co-residency Decisions of Older Immigrants in Canada: 1991-2006," CLSSRN working papers clsrn_admin-2013-23, Vancouver School of Economics, revised 29 Apr 2013.
    17. Dhaene, Jan & Milevsky, Moshe A., 2024. "Egalitarian pooling and sharing of longevity risk a.k.a. can an administrator help skin the tontine cat?," Insurance: Mathematics and Economics, Elsevier, vol. 119(C), pages 238-250.
    18. Milevsky, Moshe A., 2020. "Swimming with wealthy sharks: longevity, volatility and the value of risk pooling," Journal of Pension Economics and Finance, Cambridge University Press, vol. 19(2), pages 217-246, April.
    19. Michael R. Veall, 2008. "Canadian Seniors and the Low Income Measure," Canadian Public Policy, University of Toronto Press, vol. 34(s1), pages 47-58, November.
    20. Bernardo Lanza Queiroz & Moema Gonçalves Bueno Figoli, 2011. "Population aging and the rising costs of public pension in Brazil," Textos para Discussão Cedeplar-UFMG td438, Cedeplar, Universidade Federal de Minas Gerais.

    More about this item

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:33069. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.