Retirement as a hedge

Pestieau, Jean;Possen, Uri M.
(2009) , 29 pages

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  • Pestieau, JeanUCLouvain
    Author
  • Possen, Uri M.Cornell University
    Author
Abstract
This paper explores the effect of letting individuals choose their retirement age in a world of uncertainty where there exist both defined benefit (DB) and defined contribution (DC) pension plans. The paper shows that giving individuals the flexibility to determine when to retire is an important tool for them when they are hedging against future uncertainty. It also finds that it is preferable to let people make their retirement decision after rather than before the uncertainty is lifted. Finally, it shows that shifting from DB to DC plans fosters the rate of activity of elderly workers.
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Pestieau, J., & Possen, U. M. (2009). Retirement as a hedge (Core Discussion Papers 2009/43). https://hdl.handle.net/2078.5/250038