There's No Time Like the Present: The Cost of Delaying Retirement Saving

30 Pages Posted: 10 Sep 2007

See all articles by Alistair Byrne

Alistair Byrne

University of Edinburgh - Business School

Kevin Dowd

Nottingham University Business School (NUBS)

David P. Blake

City University London - Cass Business School

Andrew J. G. Cairns

Heriot-Watt University - Department of Actuarial Science & Statistics

Abstract

Many people delay joining a pension plan until well into their working lives. We use a stochastic simulation model to show the cost of this delay in terms of the higher pension contributions that must eventually be paid to ensure an adequate retirement income. We find the levels of contributions required for individuals who start saving late are so high it is questionable whether they are affordable for anyone not on a high income. We also analyse the cost in terms of reduced pension of an interrupted labour market history, such as that experienced by someone who leaves work for a period to bring up a family.

Keywords: retirement saving, defined contribution, stochastic simulation

JEL Classification: D14, G11, G23

Suggested Citation

Byrne, Alistair and Dowd, Kevin and Blake, David P. and Cairns, Andrew J. G., There's No Time Like the Present: The Cost of Delaying Retirement Saving. Financial Services Review, Vol. 15, No. 3, 2006. Available at SSRN: https://ssrn.com/abstract=1012857

Alistair Byrne (Contact Author)

University of Edinburgh - Business School ( email )

University of Edinburgh
29 Buccleuch Place
Edinburgh, EH8 9JS
United Kingdom

Kevin Dowd

Nottingham University Business School (NUBS) ( email )

Jubilee Campus
Wollaton Road
Nottingham, NG8 1BB
United Kingdom

David P. Blake

City University London - Cass Business School ( email )

London, EC2Y 8HB
Great Britain
+44 (0) 20-7040-5143 (Phone)
+44 (0) 20-7040-8881 (Fax)

Andrew J. G. Cairns

Heriot-Watt University - Department of Actuarial Science & Statistics ( email )

Edinburgh, Scotland EH14 4AS
United Kingdom

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