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Optimum Delayed Retirement Credit

Eytan Sheshinski ()

No 889, CESifo Working Paper Series from CESifo

Abstract: A central question for pension design is how benefits should vary with the age of retirement beyond early eligibility age. It is often argued that in order to be neutral with respect to individual retirement decisions benefits should be actuarially fair, that is, the present value of additional contributions and benefits (’Delayed Retirement Credit’ - DRC) due to postponed retirement should be equal. We show that in a self-selection, asymmetric information model, because individual decisions are suboptimal, the socially optimal benefit structure should be less than actuarially fair.

Keywords: delayed retirement credit; self-selection; moral hazard (search for similar items in EconPapers)
Date: 2003
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