On Expectations, Realizations and Partial Retirement
Tinbergen Institute Working Paper No. TI 2004-052/3
41 Pages Posted: 7 May 2004
Date Written: December 2003
Abstract
This study investigates whether many people fear an unexpected shock in their financial situation around retirement and whether the related expectations and realizations match each other. We use the Dutch Social Economic Panel survey data, where expectations about the next year's financial situation are reported. We show that realized changes exceed expectations, and that this finding is more prominent around age 65. The descriptive statistics, as well as the non-parametric tests on the conditional distribution of expectations and realizations, suggest that individuals around retirement are overly pessimistic and attach more weight to prospective bad events than to good events. The model estimates show that their fears are unjustified, in particular when individuals are highly educated. Further the link between macro shocks, micro-shocks and expectations is investigated.
Keywords: Retirement, expectations, non parametric test
JEL Classification: D84, J26
Suggested Citation: Suggested Citation
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