Health, Longevity, and Optimal Retirement

32 Pages Posted: 28 Sep 2004

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: August 2004

Abstract

We develop a life-cycle model of optimal retirement and savings behavior under complete markets. Our model explains the long-run decline in the age of retirement as an income level effect, with higher wage growth and lower interest rates tending to increase the retirement age. We show that improvements in health and longevity tend to increase the desired retirement age, but less than proportionately, while, contrary to conventional views, reducing savings rates. These results suggest that social security systems should respond to population aging by raising the retirement age and not by increasing people's contributions or reducing their benefit rates.

Keywords: Aging, health, retirement, savings

JEL Classification: J26, D91

Suggested Citation

Bloom, David E. and Canning, David and Moore, Michael John, Health, Longevity, and Optimal Retirement (August 2004). National Bureau of Economic Research (NBER)Working Paper Forthcoming; WBS Finance Group Research Paper No. 34. Available at SSRN: https://ssrn.com/abstract=594801 or http://dx.doi.org/10.2139/ssrn.594801

David E. Bloom

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

677 Huntington Avenue
Boston, MA MA 02115
United States
617-432-0654 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

David Canning

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

677 Huntington Avenue
Boston, MA MA 02115
United States

Michael John Moore (Contact Author)

University of Warwick - Warwick Business School ( email )

Coventry CV4 7AL
United Kingdom

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