The effective retirement age

Many Western countries face two problems in relation to the sustainability of their pension system. Individuals live longer than at the time the pension system was set up and persons retire earlier than the standard retirement age due to incentives. This results in financial problems. Due to attractive early retirement schemes and high pension benefits, the effective retirement age nowadays is low. The effective retirement age is the age at which people actually retire. For France, Belgium, Germany, Sweden, the United States and the Netherlands the effective retirement age declined between 1960 and 1997. Compared to the other countries, Sweden and the United States have relative high effective retirement ages. In the Netherlands early retirement schemes were changed from a pay-as-you-go system to a funded prepension system in 1997. This reform had a significant positive effect on the effective retirement age.