Optimal Retirement with Increasing Longevity

21 Pages Posted: 13 Jun 2014

See all articles by David E. Bloom

David E. Bloom

Harvard University - T.H. Chan School of Public Health; National Bureau of Economic Research (NBER)

David Canning

Harvard University - T.H. Chan School of Public Health

Michael Moore

University of Warwick - Warwick Business School

Date Written: July 2014

Abstract

We develop an optimizing life‐cycle model of retirement with perfect capital markets. We show that longer healthy life expectancy usually leads to later retirement, but with an elasticity less than unity. We calibrate our model using data from the US and find that, over the last century, the effect of rising incomes, which promote early retirement, has dominated the effect of rising lifespans. Our model predicts continuing declines in the optimal retirement age, despite rising life expectancy, provided the rate of real wage growth remains as high as in the last century.

Keywords: Aging, health, retirement

JEL Classification: D91, J26

Suggested Citation

Bloom, David E. and Canning, David and Moore, Michael John, Optimal Retirement with Increasing Longevity (July 2014). The Scandinavian Journal of Economics, Vol. 116, Issue 3, pp. 838-858, 2014, Available at SSRN: https://ssrn.com/abstract=2450347 or http://dx.doi.org/10.1111/sjoe.12060

David E. Bloom (Contact Author)

Harvard University - T.H. Chan School of Public Health ( email )

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National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
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David Canning

Harvard University - T.H. Chan School of Public Health ( email )

677 Huntington Avenue
Boston, MA MA 02115
United States

Michael John Moore

University of Warwick - Warwick Business School ( email )

Coventry CV4 7AL
United Kingdom

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