Not knowing when you are going to retire can make it hard to plan both savings and consumption in old age. This column examines how much uncertainty people face over their retirement and how costly this is as they attempt to make optimal saving plans. It argues that current structure of the Social Security retirement and disability programmes in the US does not provide much insurance against this uncertainty.
Frank Caliendo, Maria Casanova, Aspen Gorry, Sita Nataraj Slavov, 16 November 2016
Tito Boeri, Pietro Garibaldi, Espen Moen, 08 September 2016
The Eurozone's sustained rise in youth unemployment since 2008 threatens to create a 'lost generation'. This column presents evidence that this is, in part, an unintended consequence of pension reforms in southern Europe that locked in older workers. In future, reforms that create flexible retirement ages alongside variable pension levels could minimise the impact on youth unemployment without increasing the state's long-term pension liabilities.
James Banks, Carl Emmerson, Gemma Tetlow, 07 May 2016
Many countries are increasing the age at which people can start claiming state-funded pensions. One objection often raised is that such policies are unfair because some will be too unhealthy to remain in paid work. This column compares employment rates in England of older people today to those of earlier generations, and also to those of younger people today. These comparisons suggest that a significant minority of older people appear to be unable to work on the grounds of health alone.
Hiroyuki Motegi, Yoshinori Nishimura, Kazuyuki Terada, 25 September 2015
It is still not clear whether the effect of retirement on health is positive or negative. This column discusses new evidence from Japan showing that it is likely positive. In Japan, elderly people reduce their smoking and drinking after retirement. People tend to smoke and drink with their colleagues, so the result is mostly due to a peer effect.
Mariacristina De Nardi, Eric French, John Jones, 05 July 2015
Rich US retirees are known to spend their last years living it up in retirement hubs such as Florida. This column presents new evidence from the US suggesting that, in fact, those with high incomes run down their assets more slowly than implied by the basic life cycle model. Uncertainty over when they’re going to die and the possibility of high medical expenses – along with altruism and bequest motives – are important in understanding their low rate of spending.
Charles Goodhart, Philipp Erfurth, 04 November 2014
Most of the world is now at the point where the support ratio is becoming adverse, and the growth of the global workforce is slowing. This column argues that these changes will have profound and negative effects on economic growth. This implies that negative real interest rates are not the new normal, but rather an extreme artefact of a series of trends, several of which are coming to an end. By 2025, real interest rates should have returned to their historical equilibrium value of around 2.5–3%.
Harun Onder, Pierre Pestieau, 20 May 2014
The world’s population is ageing, due to both increasing longevity and decreasing fertility. This column shows that the net effect of ageing on capital accumulation (and therefore growth) depends on which of these two factors dominates, and also on the structure of the pension system. Under a pension system with defined contributions, a reduction in fertility induces adjustments in savings and working life that unambiguously increase capital per worker.
Clemens Hetschko, Andreas Knabe, Ronnie Schöb, 04 May 2012
Most people’s wellbeing is permanently affected by unemployment. This column argues that the unhappiness is due to a loss of identity, rather than daily experiences. Using German data, it shows that the long-term unemployed become happier upon entering retirement, thus changing social category, even though this does not change their daily lives.
James Choi, Emily Haisley, Jennifer Kurkoski, Cade Massey, 28 March 2012
As if today’s problems aren’t enough, in the coming years Europe faces what economists are calling a ‘demographic timebomb’, with ageing populations placing an unsustainable burden on already precarious public finances. In order to encourage more people to save for themselves, this column argues that using a psychological intervention can increase contributions to retirement savings accounts by up to 2.9% of income.
Andreas Kuhn, Jean-Philippe Wuellrich, Josef Zweimüller, 25 March 2012
While the retirement age in most developed countries is going up, this column looks at what happens when it goes down. In some countries, those who work in physically demanding jobs are demanding the right to retire earlier. This column finds that people should be careful what they wish for.
Agar Brugiavini, Viola Angelini, Guglielmo Weber, 12 March 2012
In January the UK government launched an initiative to help the elderly downsize into smaller homes – and provoked the ire of pensioner groups nationwide. This reluctance to downsize to among the elderly perplexes economists, who maintain that leveraging housing wealth can help pensioners maintain a good standard of living on a fixed income. CEPR DP8889 investigates what is behind European pensioners’ puzzling housing decisions.
Philip Sauré, Hosny Zoabi, 19 November 2011
In Mexico, the average male worker retires at 75. In Bulgaria, he does so at 58. This column argues that an economy’s composition of occupations matters for its average effective retirement age as the nature of different occupations leads workers to retire at different ages. It suggests the differences in occupational composition explain up to 40% of the observed cross-country variation in retirement age.