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Flexible retirement

In: Modeling Pension Systems

Author

Listed:
  • András Simonovits

    (Hungarian Academy of Scientists)

Abstract

Flexible retirement means that the age at which an employee retires is a choice variable for him. (For the much neglected case in which the employer chooses, see the survey by Spiezia (2002).) Anyone who wants to retire before normal retirement age may do so, but he will receive lower annual benefit since he contributes for a shorter period and draws the benefit for a longer expected period. Similarly, if somebody can (and is allowed to) work longer, he will receive higher annual benefit since he contributes for a longer period and obtains the benefit for a shorter expected period. It is obvious that an actuarially fair solution would be to reward work beyond normal retirement by the amount the Social Security saves by receiving the contributions for a longer period and paying benefits for a shorter period, and similarly to charge early retirees by as much as the Social Security loses by receiving contributions for a shorter period and paying benefits for a longer period (Sheshinski, 1978; Crawford-Lilien, 1981; Stock-Wise, 1990, Samwick, 1998; Gruber-Wise, eds. 1999 and Guegano, 2000).

Suggested Citation

  • András Simonovits, 2003. "Flexible retirement," Palgrave Macmillan Books, in: Modeling Pension Systems, chapter 0, pages 114-130, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-0-230-59769-3_13
    DOI: 10.1057/9780230597693_13
    as

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