Full or Partial Retirement? Effects of the Pension Incentives and Increasing Retirement Age in the United States and the Netherlands

42 Pages Posted: 22 Oct 2013 Last revised: 22 Sep 2017

See all articles by Tunga Kantarci

Tunga Kantarci

Tilburg University

Arthur van Soest

Tilburg University; Netspar; RAND Corporation; Institute for the Study of Labor (IZA)

Multiple version iconThere are 2 versions of this paper

Date Written: August 3, 2015

Abstract

The share of the older workers in the labor force has increased due to population aging and pension reforms in many countries. However, rules of the public and private pension schemes and restrictions from the employers still require large populations of older workers with possibly heteregeneous work preferences to retire fully at a given age. We study the preferences of older people for a rich set of retirement trajectories charactersized by early or delayed full retirement as well as partial retirement at various ages in the Netherlands and the United States. Two in five prefer partial retirement over early or delayed abrupt full retirement. This suggests that partial retirement can substantially increase the utility derived from work in old age. Furthermore, we study the effects of the pension incentives and increasing retirement age on the preferences to delay retirement fully or partially as means of reducing public expenditure. Individuals want to use partial retirement to extend their work lives if deferring pension rights are made actuarially attractive or if pension accruals are made less generous. On the other hand, as the retirement age increases, individuals want to retire early or work part-time instead of full-time. The comparison of the results between the Netherlands and the United States shows that while people in the Netherlands are responsive to a substitution effect of higher pensions, people in the United States are responsive to an income effect of higher pensions.

Keywords: older worker, gradual retirement, phased retirement, pension, vignette

Suggested Citation

Kantarci, Tunga and van Soest, Arthur H. O., Full or Partial Retirement? Effects of the Pension Incentives and Increasing Retirement Age in the United States and the Netherlands (August 3, 2015). Netspar Discussion Paper No. 10/2013-038. Available at SSRN: https://ssrn.com/abstract=2343072 or http://dx.doi.org/10.2139/ssrn.2343072

Tunga Kantarci (Contact Author)

Tilburg University ( email )

P.O. Box 90153
Tilburg, DC 5000 LE
Netherlands

Arthur H. O. van Soest

Tilburg University ( email )

P.O. Box 90153
Tilburg, DC 5000 LE
Netherlands

Netspar

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

RAND Corporation ( email )

P.O. Box 2138
1776 Main Street
Santa Monica, CA 90407-2138
United States

Institute for the Study of Labor (IZA)

P.O. Box 7240
Bonn, D-53072
Germany

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