Chile: Early retirement, impatience and risk aversion

About one third of all Chileans take early retirement. As retirement age approaches, people become more aware of the health issues associated with that stage of life. This reduces their uncertainty about their future quality of life and may lead to a relative increase in impatience. This article offers a theoretical examination of how future life expectancy affects relative levels of impatience in ways that may increase the probability of early retirement. The empirical findings for Chile show that the greater people’s future life expectancy is, the less likely they will be to take early retirement. The article also looks at how risk aversion increases relative impatience as a consequence of people’s uncertainty as to whether or not they will enjoy a good quality of life in the years ahead. The empirical findings point to a positive correlation between risk aversion and early retirement via the mechanism of life expectancy.