Pension reductions: can welfare be preserved by delaying retirement?

Marie-Eve Lachance

Journal of Pension Economics and Finance, 2008, vol. 7, issue 2, 157-177

Abstract: Economic and demographic pressures may lead Social Security systems and employers to reduce their pensions in the future. Can delaying retirement help preserve welfare in that context? We examine this question with a life-cycle framework which includes the utility from leisure. One unique feature of our model is that it lets the retirement date be endogenously determined, unless an external constraint or shock applies first. By solving this model we find that, in reasonable scenarios, working longer does little to mitigate the negative impact of pension reductions on welfare. Building on our model, we suggest strategies to enhance the effectiveness of policies designed to induce and enable longer working lives.

Date: 2008
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Persistent link: https://EconPapers.repec.org/RePEc:cup:jpenef:v:7:y:2008:i:02:p:157-177_00

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