The Impact of an Increase in the Legal Retirement Age on the Effective Retirement Age

Noelia Bernal, Frederic Vermeulen

Research output: Contribution to journalArticle in a journalpeer-review

6 Scopus citations

Abstract

We analyze the impact of an increase in the legal retirement age on the effective retirement age in the Netherlands. We do this by means of a dynamic programming model for the retirement behavior of singles. The model is applied to new administrative data that contain very accurate and detailed information on individual incomes and occupational pension entitlements. Our model is able to capture the main patterns observed in the data. We observe that as individuals get older their labor supply declines considerably and this varies by age and gender. We simulate the current pension reform which aims at gradually increasing the legal retirement age from 65 to 67 and a hypothetical reform that immediately increases the retirement age to 67. The simulation results show a small impact on the effective retirement age for the first reform and a bigger impact for the second reform. Respectively, individuals postpone their retirement by <1 month and 7 months on average; while differences across individuals mainly depend on their gender and health status.
Original languageEnglish
Pages (from-to)115-145
Number of pages31
JournalEconomist (Netherlands)
Volume162
Issue number2
DOIs
StatePublished - 1 Jan 2014
Externally publishedYes

Keywords

  • Dynamic programming
  • Effective retirement age
  • Normal retirement age

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