Linking Retirement Age to Life Expectancy Effects on Healthy Life Expectancy Before and After Retirement

Abstract

This paper considers the effects of a policy that links retirement age to life expectancy. We focus on the effects on healthy life expectancy before and after retirement, and on the likelihood of being in good health at retirement age. To investigate these effects, we use a stochastic projection model that allows to jointly model and forecast health and mortality, and to quantify the corresponding uncertainties. In the best-estimate projection, linking retirement age to life expectancy would lead to an increase in retirement age of about 9 months per decade. Even though younger cohorts face significantly higher retirement ages than older cohorts, the likelihood of being in good health at retirement age is higher for younger cohorts. The effects of the policy on healthy life expectancy before and after retirement, however, are somewhat more mixed. Whereas best estimate projections suggest that healthy life expectancy before and after retirement would increase or remain constant over time, there is considerable uncertainty regarding the actual development.The bounds of the forecast intervals correspond to significant increases in time spent in poor health before retirement age, and decreases in time spent in good health after retirement age.