Uncertain Length of Life, Retirement Age, and Pension Design

Thomas Aronsson and Sören Blomquist

FinanzArchiv: Public Finance Analysis, 2024, vol. 80, issue 1, 111-128

Abstract: In this paper, we consider how the hours of work and retirement age ought to respond to a change in the uncertainty of the length of life. The results show that a decrease in the standard deviation of life-length leads to an increase in the socially optimal retirement age and a decrease in the hours of work per period spent working, if the preferences for the number of years spent in retirement are characterized by constant or decreasing absolute risk version. We also show how a benevolent policy maker can implement the social optimum through an actuarially fair pension policy.

Keywords: uncertain lifetime; retirement age; work hours; pension policy (search for similar items in EconPapers)
JEL-codes: D61 D80 H21 H55 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1628/fa-2023-0013

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