Incomes in the Transition to Retirement: Evidence from Canada

Countries around the world are considering an increase to retirement ages in response to fiscal and demographic pressure on social security systems. However, concern may arise about the impact of such reforms on those who retire before the age of full social security entitlement. This paper addresses the question of how those stopping work before the age of benefit entitlement source their incomes and the extent to which they are able to avoid economic hardship. To do so, I study panels of Canadian men between 1993 and 2008 drawn from the Survey of Labour and Income Dynamics. The data allow a very detailed composition of income by source using a highquality income survey with annual information. These data are employed to make a novel calculation—determining the contribution of various supplemental income sources to lifting those not working at older ages out of a position of hardship. I find that demographic, health, and job characteristics are not very predictive of early retirement, and that those who retire early before the age of public pension entitlement are a very diverse group. Over half of the early retiring men I study who initially seem to suffer hardship before benefit entitlement are lifted out of hardship when other resources are accounted for.