Early retirement in Germany: Loss of income and lifetime?
The public pension system in Germany allows early retirement albeit at the cost of pension deductions. Deductions are calculated under the assumption that life expectancy is independent of the age of retirement and apply equally for men and women. The 'fair' amount of deductions is currently debated, the general feeling being that they are too low. In this paper we show that remaining lifetime and thus the perpetuity period vary with the age of retirement. In a survival analysis using micro data from the German Pension Insurance, we find that remaining life expectancy of men at age 65 receiving old-age pensions with age 60 to 66 is up to 1.9 years higher if retirement occurred later. For women, instead, life expectancy is almost independent of retirement age. Extending the analysis to invalidity pensioners (they receive pensions before the age of 60), we find that men and women reaching the age of 65 have a more than 3 years lower remaining life expectancy than old-age pensioners on average. Many other variables, like residence (West and East Germany), lifetime wage income and number of children are considered, too. In a simple model we finally calculate and compare actuarial deductions under the alternative assumptions of constant and age-of-retirement dependent life expectancy. The main conclusion is that deductions currently in law are too high for very early retirees (below age 63) and too low for all others.
|Date of creation:||2008|
|Contact details of provider:|| Postal: Ulmenstr. 69, 18057 Rostock|
Web page: http://www.wiwi.uni-rostock.de/en/econ/department-of-economics/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Kühntopf, Stephan & Tivig, Thusnelda, 2007. "Renteneintrittsalter und Lebensdauer: Was kostet die Frühverrentung?," Thuenen-Series of Applied Economic Theory 67, University of Rostock, Institute of Economics.
- Martin Werding, 2007. "Versicherungsmathematisch korrekte RentenabschlÃ¤ge fÃ¼r die gesetzliche Rentenversicherung," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 60(16), pages 19-32, August.
- Axel Boersch-Supan & Christina B. Wilke, 2004. "The German Public Pension System: How it Was, How it Will Be," NBER Working Papers 10525, National Bureau of Economic Research, Inc.
- Borsch-Supan, Axel & Schnabel, Reinhold, 1998. "Social Security and Declining Labor-Force Participation in Germany," American Economic Review, American Economic Association, vol. 88(2), pages 173-178, May.
- Arnds, Pascal & Bonin, Holger, 2002. "Frühverrentung in Deutschland: Ökonomische Anreize und institutionelle Strukturen," IZA Discussion Papers 666, Institute for the Study of Labor (IZA).
- Kroker, Rolf & Pimpertz, Jochen, 2003. "Belastungsneutrale Abschläge bei Frühverrentung," IW-Trends – Vierteljahresschrift zur empirischen Wirtschaftsforschung, Institut der deutschen Wirtschaft Köln (IW) / Cologne Institute for Economic Research, vol. 30(4), pages 26-36.
When requesting a correction, please mention this item's handle: RePEc:zbw:roswps:85. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics)
If references are entirely missing, you can add them using this form.