Retirement Age:

One size does not fit all

Abstract

The European population is aging and, by 2050, Portugal will face a most alarming scenario, with an old-age dependency ratio — i.e. the number of individuals aged 65 or older as a share of the active age population — above 65%, almost double the figure for 2016. Portugal has already undertaken measures to improve the financial resilience of the pension system, but still lacks a better understanding of its social sustainability. We resort to the Survey of Health, Aging and Retirement in Europe (SHARE) to study individual heterogeneity on pension preferences and find that poor health and unemployment are, together with age and the length of the contributory career, key elements to understand early retirement, while late retirement is associated with higher income. Identifying socioeconomic groups with incentives to deviate from the statutory retirement age is crucial to policy makers currently debating the retirement age in Portugal.