Abstract
This paper proposes to find how wealth shocks such as inheritances and housing wealth impact retirement behaviour using cross-sectional micro data from the Canadian Survey of Financial Security. Estimation of wealth impact on retirement decision is challenging since wealth and retirement decision may be endogenously determined. We found no evidence that housing wealth impacts retirement decision suggesting that individuals are correctly anticipating future housing wealth and adjusting their labour market behaviour accordingly. However, the data supports the hypothesis that receiving an inheritance significantly increases the retirement hazard, which may indicate the existence of some financial constraints.
Highlights
The aging population is raising some issues for Canada, especially concerning implications related to the adequacy of the retirement income system for the middle class
This paper proposes to find how wealth shocks such as inheritances and housing wealth impact retirement behaviour using cross-sectional micro data from the Canadian Survey of Financial Security
Estimation of wealth impact on retirement decision is challenging since wealth and retirement decision may be endogenously determined
Summary
The aging population is raising some issues for Canada, especially concerning implications related to the adequacy of the retirement income system for the middle class. Based on the 2012 Survey of Financial Security, about 24% of Canadian households received inheritances with an accumulated value of $753 billion representing a median value of $33,656. About 71% of Canadians own their houses for a total value of $8170 billion representing a median value of $325,000. Fougère 2 pensions programs or tax policies. Many policy options such as changes to retirement age or to public pension replacement rate involve either implicit or explicit transfers of wealth, which creates incentives that affect retirement decisions, through wealth effects
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