International Pension Workshop, held June 10-11, 2010, Zürich, Switzerland.
June 1, 2010
This paper investigates the effect of asset price fluctuations and labour market conditions on retirement behaviour to gauge the likely impact of the current recession on retirement plans. A number of papers use asset price fluctuations to estimate wealth effects in retirement behaviour in the US. But in contrast to other wealth shocks, asset prices fluctuations comprise wealth and substitution effects. The latter may encourage people to delay retirement to work and save more in expectations of high rates of return. We find that rising stock markets do indeed encourage people to delay retirement. We also find that unemployment increases retirement transitions. On balance, the current recession has likely increased the stock of retired.