Does Pension Wealth Peak at the Age of Early Retirement? |
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Authors: | JAMES E PESANDO MORLEY GUNDERSON |
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Institution: | Department of Economics and Director, Institute for Policy Analysis;Department of Economics and Director, Centre for Industrial Relations, University of Toronto |
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Abstract: | Once an employee has qualified for early retirement, continuing to work involves an implicit tax in the form of forgone pension payments. We explore this implicit pension tax in a Canadian setting and find that, contrary to Lazear (1983), but consistent with most U.S. studies, pension wealth generally does not peak at the date of first eligibility for early retirement. We highlight the importance of the earnings path posited for older workers, anticipated enrichments to flat benefit formulas, and the distinction between reduced and unreduced early retirement as determinants of this result. |
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