Health, longevity, and retirement.

AGE & employment; RETIREMENT age; SAVINGS; LONGEVITY; BLOOM, David E.; CANNING, David; MOORE, Michael, 1954-

This article discusses a study on the effects of improvements in health and longevity on the age of retirement and on retirement savings behavior in the U.S., conducted by David E. Bloom, David Canning, and Michael Moore of the U.S. National Bureau of Economic Research. According to the authors, the major innovation in their study is to model health during the agent's lifetime and its effect on the decision to retire. The study assumed that a worker's health status has a considerable effect on his or her decision to retire. The results of this study show that increased health and life expectancy tend to increase the optimal retirement age. At the same time, personal consumption may increase and the savings rate may decline. Other things equal, an aging population may produce large stocks of capital as its members save for retirement, and that in turn may lower the return to capital by driving down interest rates. As a result, this model predicts longer working lives but lower overall savings rates.