On Expectations, Realizations and Partial Retirement

This study investigates whether many people fear an unexpected shock in their …nancial situation around retirement and whether the related expectations and realizations match each other. We use the Dutch Social Economic Panel survey data, where expectations about the next year’s …nancial situation are reported. We show that realized changes exceed expectations, and that this …nding is more prominent around age 65. The descriptive statistics, as well as the nonparametric tests on the conditional distribution of expectations and realizations, suggest that individuals around retirement are overly pessimistic and attach more weight to prospective bad events than to good events. The model estimates show that their fears are unjusti…ed, in particular when individuals are highly educated. Further the link between macro shocks, micro-shocks and expectations is investigated.