Saturday, December 24, 2005

Early Retirement

I think the weird reaction people have to early pensions is not so much about the money, but more a reaction of oh my god you mean someone maybe sorta gets to stop working before they turn 65 that's unAmerican (even though, of course, at half pay that's unlikely to genuinely be a good option for most.

We have strange attitudes towards work in the country. There's almost a social stigma to retiring "early." There's nothing wrong or bizarre or even costly about a pension system which lets people cash out before 65. If it's well-managed and done right any pension scale is simply based on expected return on dollars contributed over the life of the worker. The "cost" isn't the pension paid, but the annual contributions made by employer and employee. If it's actuarially sound, the only thing "wrong" with a pension scheme that lets you cash out before 65 is that we think it's somehow wrong to retire early.