Early Retirement, Social Security and Well-Being in Germany

42 Pages Posted: 26 Jun 2006 Last revised: 15 Aug 2010

See all articles by Axel H. Börsch-Supan

Axel H. Börsch-Supan

Max Planck Society for the Advancement of the Sciences - Munich Center for the Economics of Aging (MEA)

Hendrik Jürges

University of Mannheim - Mannheim Research Institute for the Economics of Aging (MEA); German Institute for Economic Research (DIW Berlin)

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Date Written: June 2006

Abstract

Germans retire early. On the one hand, early retirement is very costly and amplifies the burden which the German public pension system has to carry due to population aging. On the other hand, however, early retirement is also seen as a much appreciated social achievement which increases the well-being especially of those workers who suffer from work-related health problems.This paper investigates the relation between early retirement and well-being using the GSOEP panel data. The general picture that emerges from our analysis is that early retirement as such seems to be related to subjective well-being, in fact more so than normal retirement. Early retirement most probably is a reaction to a health shock. Individuals are less happy in the year of early retirement than in the years before and after retirement. After retirement, individuals attain their pre-retirement satisfaction levels after a relatively short while. Hence, the early retirement effect on well-being appears to be negative and short-lived rather than positive and long. Whether this is an effect of retirement itself or a psychological adaptation to an underlying shock cannot be identified in our data and remains an open research issue waiting for a more objective measurement of health.

Suggested Citation

Börsch-Supan, Axel H. and Jürges, Hendrik, Early Retirement, Social Security and Well-Being in Germany (June 2006). NBER Working Paper No. w12303, Available at SSRN: https://ssrn.com/abstract=910835

Axel H. Börsch-Supan (Contact Author)

Max Planck Society for the Advancement of the Sciences - Munich Center for the Economics of Aging (MEA) ( email )

Amalienstrasse 33
Munich, 80799
Germany

HOME PAGE: http://www.mea.mpisoc.mpg.de

Hendrik Jürges

University of Mannheim - Mannheim Research Institute for the Economics of Aging (MEA) ( email )

D-68131 Mannheim
Germany

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117
Germany

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