Ageing in Risk: The Economic Consequences of the Transition to Retirement
Retirement is a "life course risk" that affects the economic well-being of many households. This life course transition is usually associated with economic "risk outcomes" such as decrease in income and increase in medical expenses which, despite an anticipated drop in consumption, lead to growing difficulty in making ends meet. With the growing tendency to transfer risk from the state to individuals and democratization of credit in most OECD countries, financial indebtedness became a legitimate solution for maintaining the standard of living among households of the elderly.
While past studies have suggested that household debt has a considerable effect on retirement decisions, limited attention has been given to the economic consequences of retirement in social settings that differ in their management of social risks. The goal of this study, therefore, is to examine the dynamic relationship between retirement and short term debt, over time, in Germany and Israel. These countries were chosen as two case studies that represent varying degrees of welfare support and privatization of risk in their pension systems. For the empirical analysis we utilize panel data from the Survey of Health, Ageing and Retirement in Europe (SHARE).
Initial findings reveal that there are cross-country differences in the extent to which the transition to retirement affects the likelihood of financial indebtedness, and the extent to which the relationship is mediated by household wealth, health status and demographic attributes. In this regard, the current study furthers our understanding of socioeconomic inequality in late-life. More generally it contributes to the understanding of the extent to which cross-national differences in the management of social risks, shape the sensitivity of late life course transitions to economic risk outcomes among elderly households with diverse characteristics.