Abstract and Keywords
This chapter presents an economist’s analysis of how households decide when to retire. It lays out a dynamic model of household behavior in which age of retirement and year-by-year saving/consumption decisions are choice variables. We describe necessary conditions for a solution and suggest interpretations. The model highlights the roles of growth in household consumption expenditures with age, and the age trajectory of earnings, as determinants of the optimal time of retirement. We explain how key parameters might be estimated—and note a set of recent estimates. Then we present two illustrative applications: we derive the model’s forecast of the effect of greater longevity on retirement ages, and we examine the consequences for retirement of a stylized Social Security system. Finally, we reference a number of papers that extend and generalize the basic framework that we present.
Access to the complete content on Oxford Handbooks Online requires a subscription or purchase. Public users are able to search the site and view the abstracts and keywords for each book and chapter without a subscription.
If you have purchased a print title that contains an access token, please see the token for information about how to register your code.