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Retirement Ages by Socio-Economic Class

Séverine Arnold () and Anca Jijiie ()
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Séverine Arnold: Faculty of Business and Economics (HEC Lausanne), University of Lausanne, 1015 Lausanne, Switzerland
Anca Jijiie: Faculty of Business and Economics (HEC Lausanne), University of Lausanne, 1015 Lausanne, Switzerland

Risks, 2020, vol. 8, issue 4, 1-40

Abstract: 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.

Keywords: class-specific retirement age; pay-as-you-go; public pensions; fairness; utility functions; mortality by socio-economic class (search for similar items in EconPapers)
JEL-codes: C G0 G1 G2 G3 M2 M4 K2 (search for similar items in EconPapers)
Date: 2020
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