Optimal Retirement Age Research Articles

Impact of Delay of Retirement Age on Middle Age Employment Rate

Abstract: This paper examines the implications of delaying retirement on the labor market in China, focusing on its impact on the employment rates across different age groups. Over the past several decades, demographic shifts, such as the aging population and extended education durations, have necessitated adjustments to retirement policies. These adjustments pose significant questions about the optimal retirement age and the consequent effects on the labor market. Utilizing a combination of theoretical frameworks and empirical data, this study explores the correlation between delayed retirement and employment rates among middle-aged and older workers. The findings suggest a significant and positive correlation between these groups, indicating that a delayed retirement age could enhance employment opportunities for middle-aged individuals without adversely affecting the younger workforce. The study engages with data from the 2020 census in China and employs Ordinary Least Squares (OLS) regression models to analyze the relationship between age groups and employment rates. The results show a nuanced impact of delayed retirement on the labor market, with implications for policy-making. Specifically, the paper addresses the potential benefits of a flexible retirement age policy, considering economic, demographic, and social factors.

Optimal Retirement Age and Lower Bound on Interest Rate

For a long time now, the monetary policies in the US and other industrialized countries have been a regime of cheap money with the interest rate often being negative. A low interest rate in the framework of the Keynesian monetary policy stimulates demand but is hard on the retirees who are mostly on a fixed income. This paper generates a simple model to understand the interaction between current wealth, savings rate, interest rate and retirement age. The model also suggests a lower bound on the interest rate. The minimum interest rate at which Americans of median age with median wealth and median income, and retiring at the age of 67, turns out to be 10%.

Bounded rationality and optimal retirement age

This paper explores a lifecycle model of labor supply and endogenous retirement behavior for households whose planning window is truncated and who will reoptimize as extra information on productivity is revealed over time. This short horizon model internalizes the restriction on temporal resource allocation, and the labor supply is closely dependent on the degree of productivity changes in view. With the model, the retirement timing—the moment at which the marginal value from the expected resources drops below a threshold—evolves according to the planning window. Using a discrete time overlapping generations framework with leisure substitutability, in which the constraint on time is explicitly added, I demonstrate that the calibrated model economy reasonably replicates the salient facts regarding lifecycle labor supply and retirement behaviors without a borrowing constraint commonly found in models of leisure-consumption substitutability. Furthermore, this result is robust to sensitivity check. With the extended environment of mortality risks and bequests, this paper explicitly quantifies the relationship among retirement age, planning horizon, equilibrium bequests and other lifecycle characteristics from the calibrated general equilibrium.

How old is too old to work for physicians?

The healthcare systems throughout the world are facing numerous problems, including aging and shortages of medical staff. Although senior medical practitioners are important to the healthcare, their competency may decline with age. A major problem experienced nowadays by some elderly practitioners is digital exclusion caused by difficulties with adopting new technologies. Some attempts are being made to determine the optimum moment to retire, considering its possible impact on the safety and wellbeing of patients, as well as on the health system and human resource allocation. Until legal regulations are adopted, the age-related screening programs can be used to determine the optimal retirement age.

On the evolution of the gender gap in life expectancy at normal retirement age for OECD countries

Population aging is evolving at different rates across countries and over time, and it represents a long-term challenge for both the sustainability of pension schemes and for the realization of public intergenerational transfers. In this context, this work focuses on gender differences in survival at older ages. Specifically, we implement a comparative analysis of OECD countries to assess the adequacy of the corresponding gender-specific normal retirement age when faced with growing life expectancy. The analysis hinges on several graphical representations and is motivated by recent findings on Italian longevity to determine optimal retirement age shifts necessary to match growing life expectancy at older ages while accounting for model risk for mortality projections. Our analysis determines—at the country level—the extent to which adjustments to the normal retirement age are advisable for the sustainability of the intergenerational paradigm for pensions. The study considers males and females separately because most of these countries are characterized by aging societies where men and women have different crucial characteristics, including life expectancy. It is therefore important that policymakers have information on the future evolution of the longevity gender gap so they will be able to apply policies that preserve the principles of equality and solidarity and reduce the pension gender gap. We find groups of countries where gender gap in life expectancy follows the same dynamics.

Analysis of Balance of Income and Expenditure and Optimal Retirement Age of Pension Insurance Co-Ordination Account Based on Improved Machine Learning Algorithm.

Since the turn of the twenty-first century, the issue of aging has gained international attention. Both developed and developing nations are currently dealing with this issue. To ensure the sustained and healthy growth of the economy and society in the face of an aging society, it is especially important to establish a scientific old-age insurance system and a reasonable retirement system. We are all aware that the key indicators for the state to control the old-age insurance system in the old-age insurance system are the income and expenditure balance of the old-age insurance pooling account and the analysis of the ideal retirement age. In this paper, a better machine algorithm is used. By independently learning the rules present in a large amount of data and gaining new experience and knowledge, machine learning (ML) can increase computer intelligence and give computers decision-making abilities comparable to those of humans. In general, a machine learning algorithm uses the laws it derives from data to predict unknown data after automatically analysing the data. This study's findings suggest that the ideal retirement age and life expectancy are positively correlated, with the ideal retirement age's growth rate 12.57 percent higher than that of life expectancy.

Time-inconsistent life-cycle consumption and retirement choice with mortality risk

In this paper, we propose a general model to study life-cycle consumption and retirement choice of individuals with mortality risk and various forms of discounting preference. By solving the Euler-Lagrange equations, we obtain the optimal consumption strategy explicitly and provide an equation to solve for optimal retirement age. Two intuitive budget constraints are established to demonstrate the effects of precautionary saving and bequest motives on the optimal choices. We also explore the effects of interest rate, income and discounting preference on the optimization, where numerical examples are used to illustrate the role of these factors on the consumption behavior and retirement timing.

Bounded Rationality and Optimal Retirement Age

Bounded Rationality and Optimal Retirement Age

Optimal Retirement Age and Lower Bound on Interest Rate

Optimal Retirement Age and Lower Bound on Interest Rate

Mortality decline, productivity increase, and positive feedback between schooling and retirement choices

AbstractThe twentieth century has seen a phenomenal decline in mortality and an increase in productivity level. These two important events likely affect people's choices of schooling years and retirement age. We first show that in a standard life-cycle model, positive feedback exists between optimal schooling years and retirement age choices. We then evaluate the impact of a mortality or productivity shock on an endogenous variable (schooling years or retirement age) by decomposing it into the direct and indirect effects, where the indirect effect arises from feedback from the other endogenous variable. Finally, we extend the model by including the utility benefit of schooling and show that a negative correlation of schooling years and retirement age is possible. Apart from clarifying the apparently similar concepts of positive co-movement and positive feedback, our results have implications relevant to the economic demography literature.

Older adults’ accounts of the relationships between retirement timing and health: a descriptive qualitative analysis in Chile

AbstractRetirement timing can have important health implications. Little is known, however, about older adults’ views on this issue and whether they consider it better to retire later, earlier, on time or anytime. This knowledge gap about older adults’ views is particularly true outside North America and Europe. This qualitative study aims to examine older Chileans’ ideas about the relationship between retirement timing and health and to explore gender and class patterns in qualitative themes identified, knowledge which may strengthen quantitative population-based approaches. Framework analysis was conducted on qualitative accounts from a purposive, non-random sample of 40 older Chileans in six focus groups, stratified by gender and class as marked by lifetime occupation. Transcriptions were coded by two independent reviewers (inter-coder reliability = 81%) according to four deductive categories of retirement timing as well as inductive coding of emergent themes. The content and sequence of codes were visually represented in MAXQDA's document portraits and illustrated with descriptive quotes. Results indicate that participants’ views about when to retire in order to maximise health did not highlight retirement age or timing (later, earlier, on time, anytime). Instead, these older Chileans emphasised that the optimal retirement age depends on other conditions, such as employment quality, retirement income and gender. These views were patterned: lower occupational-class participants emphasised income and job hazards, higher-class males emphasised job satisfaction and higher-class females emphasised gendered patterns. Women and lower-class participants were relatively more favourable to earlier retirements than men and higher-class participants. Overall, qualitative analyses of lay perspectives from understudied country contexts complement and extend population-based models focused on timing or retirement age, suggest specific characteristics of retirement transitions that may moderate health consequences, and highlight class and gender differences in views of retirement timing. More research is needed using mixed-methods approaches and leveraging both purposive and random samples.

Retirement Ages by Socio-Economic Class

We are interested in defining the optimal retirement age by socio-economic class, given a Defined Benefit and a Notional Defined Contribution scheme. We firstly implement a utilitarian framework. Depending on the risk aversion coefficients and individual time preference factors, the results differ significantly. Since this approach is individualistic, with no consensus in the existing literature on what values these parameters should take, it is not suitable to be used by policy makers. Therefore, we provide an alternative based on two accounts. We look for the retirement age allowing the accumulated value, at the last age with survivors, of the pensions received under each system, held in one account, to be close in value to the accumulated amount should the actuarially fair pension be paid, representing the second account. Our approach results in setting a lower retirement age for lower socio-economic classes and a higher retirement age for wealthier individuals.

Optimal stopping time, consumption, labour, and portfolio decision for a pension scheme

In this work we solve in a closed form the problem of an agent who wants to optimise the inter-temporal recursive utility of both his consumption and leisure by choosing: (1) the optimal inter-temporal consumption, (2) the optimal inter-temporal labour supply, (3) the optimal share of wealth to invest in a risky asset, and (4) the optimal retirement age. The wage of the agent is assumed to be stochastic and correlated with the risky asset on the financial market. The problem is split into two sub-problems: the optimal consumption, labour, and portfolio problem is solved first, and then the optimal stopping time is approached. We compute the solution through both the so-called martingale approach and the solution of the Hamilton–Jacobi–Bellman partial differential equation. In the numerical simulations we compare two cases, with and without the opportunity, for the agent, to work after retirement, at a lower wage rate.

Optimal Stopping Time, Consumption, Labour, and Portfolio Decision for a Pension Scheme

In this work we solve in a closed form the problem of an agent who wants to optimise the inter-temporal utility of both his consumption and leisure by choosing: (i) the optimal inter-temporal consumption, (ii) the optimal inter-temporal labour supply, (iii) the optimal share of wealth to invest in a risky asset, and (iv) the optimal retirement age. The wage of the agent is assumed to be stochastic and correlated with the risky asset on the financial market. The problem is split into two sub-problems: the optimal consumption, labour, and portfolio problem is solved first, and then the optimal stopping time is approached. The martingale method is used for the first problem, and it allows to solve it for any value of the stopping time which is just considered as a stochastic variable. The problem of the agent is solved by assuming that after retirement he received a utility that is proportional to the remaining human capital. Finally, a numerical simulation is presented for showing the behaviour over time of the optimal solution.

Reward and Punishment Mechanisms of the Flexible Retirement System in China

This article attempts to understand the reward and punishment mechanisms of the flexible retirement system in China. The life-cycle model is applied in the pay-as-you-go pension system with flexible retirement policy to establish the numerical model of optimal retirement age under the consideration of prolonged life span. The effect of penalty rate for early retirement and incentive rate for delayed retirement on optimal retirement age is studied. Numerical experiments show that appropriate delayed retirement incentive rate incentivises a delayed retirement decision for maximising the total lifetime utility. The optimal retirement age is raised by prolonging lifespan, and the flexible retirement system is an effective means to implement delayed retirement policy.

Age management of transportation workers in global supply chains

Because of increasing longevity and aging of the population in most EU countries, the fiscal pressure influence increasing of retirement age in public pension systems also for physically demanding jobs like the retirement of drivers, acting in the transport of items. In many countries, the average employment rate of people aged 55 to 64 years increased over 7 percentage points in the decade. But large trucks which serve a vital function in JIT delivery in global supply chains, are a disadvantage in terms of safety and exact timing. It is also important to note that older drivers are more vulnerable to serious injury and death in the event of a traffic crash due to changes in physiology associated with normal aging. Vision, cognition, and motor functions like flexibility, strength, and coordination, are required for safe and not delayed driving, but they are part of overall declining of functional capacities after the 50s. To solve this problem, we should put in place the early retirement of the occupational pension schemes, in which higher retirement age will not affect the reliability of logistic and therefore will not influence the ripple effect of the total logistic network. This paper is introducing an actuarial evaluation of optimal retirement age and related economically acceptable contribution rate to the occupational pension scheme for drivers regarding exposure to the risk of the total chain The model is based on actuarial mathematics for pension insurance. Therefore, the Net Present Value (NPV) is calculated in the extended MRP model to evaluate delays and disruptions caused by ageing. The output of the research is therefore the model which can be used as a basis for negotiations between employers and unions to keep the transportation and other logistics activities at the same level of quality. It also enables to develop the flexible occupational- truck drivers retirement schemes. In this paper the model for evaluation of delays in transport caused by older drivers only is given as a new solution to be able to compare with actuarial present value of early pension contributions for drivers.

Does Delayed Retirement Age Lead to the Increase in Social Welfare

Based on the reality background that delayed retirement age may result in employment extrusion and leisure losses, this paper incorporates heterogeneous consumers into a dynamic general equilibrium overlapping generation framework, and simulates the long-term effect of delayed retirement age policy on the welfare of enterprise employees according to main parameters of Chinese economic calibration and based on the control of the shocks of delayed retirement age to labor market in China. It comes to the conclusions as follows: firstly, no matter which policy is adopted, existing policy that maintains unchanged payment rate or the policy that maintains unchanged pension treatment, delayed retirement age can raise social welfare of urban enterprise employees; the first policy can lead to the increase in social welfare by 3.66% and the secondly policy 1.1%; in the case of keeping the pension insurance contribution rate unchanged, in the long run, delayed retirement age by five years results in the optimization of social welfare; secondly, optimal retirement age is closely related to the state of labor market, and if current employment situation is grim, optimal retirement age needs to be reduced correspondingly.

Considering Part-Time Work after Retirement: Should I Stay or Should I Go?

In this article, we use dynamic leisure preference to study the optimal retirement decision with consideration of part-time work after the “official” retirement. We also consider a risky investment besides risk-free investment. and allow investor borrowing money at risk-free interest rate. Our results indicate that the optimal retirement age is very sensitive to the following parameters: coefficient of risk version, the leisure, rate after retirement, coefficient of survival function (describing the individual’s mortality), interest rate and discount rate, and is especially sensitive to the drift of return rate of risky assets invested. Our results also show that mortality improvement greatly affect all other optimal solutions except optimal retirement age, but have small affect on optimal retirement age.

Public Pension Benefits Claiming Behaviour: new Evidence from the Japanese Study on Ageing and Retirement

The present study explores public pension claiming behaviour among the Japanese elderly. First, we perform financial simulations, estimate expected utility and depict the typical patterns of pension benefits over a lifecycle. We show that a beneficiary’s optimal retirement age depends on that beneficiary’s mortality risk, discount rate, initial wealth and risk attitude. Second, we use individual-level data from the Japanese Study on Aging and Retirement (JSTAR) to empirically examine the determinants of claim timing. We find evidence that most of the factors examined in the simulation are, indeed, significantly associated with early claiming among wage earners of pension benefits.

LONGEVITY, GROWTH, AND INTERGENERATIONAL EQUITY: THE DETERMINISTIC CASE

Challenges raised by aging (increasing longevity) have prompted policy debates featuring policy proposals justified by reference to some notion of intergenerational equity. However, very different policies ranging from presavings to indexation of retirement ages have been justified in this way. We develop an overlapping-generations model in continuous time that encompasses different generations with different mortality rates and thus longevity. Allowing for trend increases in both longevity and productivity, we address the normative issue of intergenerational equity under a utilitarian criterion when future generations are better off in terms of both material and nonmaterial well-being. Increases in productivity and longevity are shown to have very different implications for intergenerational distribution. Further, the socially optimal retirement age, dependency ratio, and intergenerational burden sharing in the case of a trend increase in longevity are shown to depend on how individuals' utility for time/leisure is affected by age and longevity.