Earned, Not Given'? The Effect of Lowering the Full Retirement Age on Retirement Decisions

Arbeitspapier

This paper analyzes behavioral responses to a 2014 reform in the German public pension system that lowered the full retirement age (FRA) of individuals with a long contribution history by up to two years and framed the new FRA as reference age for retirement. Using administrative data from public pension insurance accounts, we first document a substantial bunching response at the FRA exceeding the control group's bunching by 83%. Second, we show in a difference-in-difference setting that a 1.0 year decrease in the FRA leads to a reduction in the average pension claiming age by 0.3-0.4 years. Treated individuals neither have poorer health nor are more likely to be liquidity-constrained than individuals in the control group. Our results suggest that the strong responses to the reform are driven both by the new FRA serving as a reference point and by financial incentives. Estimated fiscal costs of the reform are at the upper end of the range of previous back-of-the-envelope calculations.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 10420

Classification and Topics

• Classification: Wirtschaft ; Social Security and Public Pensions ; Economics of the Elderly; Economics of the Handicapped; Non-labor Market Discrimination ; Demographic Economics: Public Policy ; Retirement; Retirement Policies
• Subject: retirement age ; early retirement ; pension reform

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Dolls, Mathias ; Krolage, Carla
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2023

Further information

• Handle: http://hdl.handle.net/10419/279169
• Last update: 2025-03-10T11:45:09+0100