Illiquid Wealth and the Timing of Retirement

Job Boerma and Jonathan Heathcote
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Job Boerma: University of Minnesota

No 1485, 2019 Meeting Papers from Society for Economic Dynamics

Abstract: Retirement saving is relatively illiquid. We explore whether this can account for the clustering of retirement decisions around the normal retirement age. We construct a series of retirement models featuring realistic financial market frictions and pension systems. We then estimate these models using Dutch micro data on income, wealth, and retirement choices. We use the estimated model to simulate various pension reforms and examine their impact on labor force participation. The model can account well for the observed increase in the average age of retirement in the Netherlands between 2000 and 2016. A general message from the analysis is that households’ willingness to retire early is very sensitive to the liquidity of their retirement savings.

Date: 2019
New Economics Papers: this item is included in nep-age and nep-eur
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed019:1485

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