Optimal Retirement with Increasing Longevity


  • We would like to acknowledge financial support for this research from the National Institutes of Health (grant P30 AG024409 08), the Program on the Global Demography of Aging, Harvard University, and ESRC grant number ES/G007438/1, Centre of Excellence in Public Health, Northern Ireland.


We develop an optimizing life-cycle model of retirement with perfect capital markets. We show that longer healthy life expectancy usually leads to later retirement, but with an elasticity less than unity. We calibrate our model using data from the US and find that, over the last century, the effect of rising incomes, which promote early retirement, has dominated the effect of rising lifespans. Our model predicts continuing declines in the optimal retirement age, despite rising life expectancy, provided the rate of real wage growth remains as high as in the last century.