Fair Retirement Under Risky Lifetime

A premature death unexpectedly brings a life and a career to their end, leading to substantial welfare losses. We study the retirement decision in an economy with risky lifetime, and compare the laissezfaire with egalitarian social optima. We consider two social objectives: (1) the maximin on expected lifetime welfare (ex ante), allowing for a compensation for unequal life expectancies; (2) the maximin on realized lifetime welfare (ex post), allowing for a compensation for unequal lifetimes. The latter optimum involves, in general, decreasing lifetime consumption profiles, as well as raising the retirement age, unlike the ex ante egalitarian optimum. This result is robust to the introduction of unequal life expectancies and unequal productivities. Hence, the postponement of the retirement age can, quite surprisingly, be defended on egalitarian grounds although the conclusion is reversed when mortality strikes only after retirement.