Non-financial determinants of the retirement age
Many countries are reforming their pension schemes due to concerns for fiscal sustainability. This concern stems from the aging of populations. A highly visible feature of pension schemes is the presence of statutory retirement ages. The statutory retirement ages in a pension scheme are the age at which retirement benefits first come available, such as the ‘Early Retirement Age’ in the American Social Security (62 years of age) and the age at which ‘full’ retirement benefits are available, such as the ‘Full or Normal Retirement Age’ in the US. A widely used and highly visible reform in OECD countries is the increase in the statutory retirement age at which ‘full’ retirement benefits become available (OECD, 2013). This increase of the statutory retirement age has two effects. First, such an increase diminishes government expenditures as individuals receive less pension benefits over their life-times. Second, the increase in the statutory retirement age influences labor market participation decisions as individuals adjust their retirement age in response to such an increase. This thesis focuses on the different mechanisms underlying this behavioral response to an increase of this statutory retirement. Therefore, this work will concentrate at this statutory retirement age.
Chapter two examines the possible relevance of insights of behavioral economics and social norms to explain individual retirement behavior. The insights of behavioral economics studied in this chapter are defaults and reference points.
Having surveyed the available literature on non-financial determinants of the retirement age in the previous chapter, chapter 3 looks more closely at the role of social interactions for the retirement age. The previous chapter assesses the possible role for social norms for the retirement age. This chapter takes a broader view about the impact of social interactions on the retirement age of the individual.
The next chapter focuses on the presence of standard pension ages in pension overviews and studies its effect on the retirement age. Chapter 2 showed the possible relevance of reference points or defaults for the individual retirement age. Chapter 4 examines this relevance in greater detail and investigates the influence of standard pension ages on the retirement age. This chapter also assesses various explanations for the sensitivity to standard pension ages and examines the role of financial literacy, advice from the pension fund and social interactions in explaining this sensitivity
The last chapter focuses on the role of social preferences in the determination of the retirement age. Specifically, it examines the relevance of demanding occupations on aspects of the retirement scheme. Are individuals relating demanding occupations to lower reasonable retirement ages and are they willing to contribute to early retirement schemes of such occupations? Chapter 5 also examines whether self-identification plays a role in the consideration to what extent an occupation is demanding.