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Retirement Planning > Retirement Investing

Retire early, live longer

By Paula Aven Gladych

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Encouraging people to retire early can mean a longer life.

A study by the Tinbergen Institute at VU University Amsterdam found that retiring early reduced a man’s risk of dying within five years by 42.3 percent.

The study looked at a policy change that went into effect in the Netherlands in 2004, where certain age groups of civil servants were offered the opportunity to retire as early as age 55. The standard retirement age in the Netherlands is 65, but the actual average age of retirement has been considerably lower because of the widespread use of early retirement arrangements in virtually all sectors of the economy.

The Dutch pension system rests on three pillars: a public old-age pension, which is financed on a pay-as-you-go basis; occupational pensions and private provisions.

In 2005, most occupational pension funds offered early retirement arrangements while the public-sector pension fund offered arrangements for early retirement from age 61 onward. When the rules changed in 2004, individuals who were at least 55 and employed as a civil servant for at least 10 years were eligible for early retirement benefits.

The report’s authors used a temporary decrease in the early retirement age for civil servants to estimate the impact of early retirement on the probability of dying within five years. 

The 42.3 percent drop in mortality rates because of early retirement was “large and significant,” according to the paper’s authors.

“When we shift the horizon, we find the largest impact of retirement on survival within the first year,” the study found. It posits that a main reason for the extended life after retirement is the removal of stress-related factors associated with demanding work. Many people who die shortly after retirement die from stroke.

“After retirement, workers’ body and mind are possibly discharged, reducing the probability to die within five years. As men were working more hours than women, work may have been more stressful and demanding for men than for women, discharging men from a heavier weight at retirement than women,” the study found.

The study’s results raise two major implications. Pension funds would have to pay more and for longer periods of time if people lived longer; but if the retirement age was increased, as many countries are doing, more people would die earlier, relieving stress on already strapped pension plans. Increased mortality would reduce the longevity risk borne by pension funds, which could allow pension funds to make their pension arrangements more generous, the paper concluded.

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