Munich Personal RePEc Archive

Gradual retirement and lengthening of working life

Ilmakunnas, Pekka and Ilmakunnas, Seija (2006): Gradual retirement and lengthening of working life.

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Abstract

In order for the part-time pension to make sense economically, it should extend the length of the working career. An interesting question is also whether the timing of retirement and willingness to work after retirement are related. We use data on the aspirations of individuals regarding their old-age retirement behaviour to estimate a multivariate probit model with three binary dependent variables: partial retirement, planning to continue working beyond age 63, and planning to continue working while on retirement. The model is estimated using simulated maximum likelihood. The probability of being on part-time pension increases with the length of working career, but decreases with wage. It is positively related to an indicator of chronic illness. Age has a positive effect on the probability of thinking about continuing working after age 63, which is natural since in the older age cohorts those preferring to retire early have already done that. Higher wage and private pension insurance have a negative effect on the probability of continuing to work, while the level of education increases it. Women and those having mental strain in their job are less likely to postpone retirement. The probability of continuing work while retired is difficult to predict. Only good self-assessed health seems to play an important role in this decision-making. Being on partial retirement has no positive impact on the probability of preferring to stay longer at work. This gives support to the worries that partial retirement is a tool that helps in increasing the labour force participation of the aging labour force, but at a relatively high cost.

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