Early retirement in Europe: Housing equity, marital status, and ill health

Over the last two decades, there has been a tendency for workers to withdraw from the labour market at an age younger than the formal retirement age. The reasons for leaving the labour force vary between individuals; some workers make a rational economic decision based on individual circumstances whereas others are forced into early retirement due to adverse labour market conditions, such as the difficulty to find a job after unemployment.

This paper will focus on one specific aspect: is there a tendency for the elderly home owner to retire earlier, due to the security aspects of their housing wealth? Since most elderly home owners have few outstanding loans left, they live with small mortgage expenditures, which diminish their dependency on pensions and might encourage them to withdraw early from the labour market. Home owners, with substantial equity embedded in their houses, are therefore in an advantageous position relative compared to tenants.

The empirical analysis will use the SHARE dataset to investigate if there is evidence that owner occupiers retire earlier than renters. Along with household characteristics, differences in home ownership trends across Europe and the rise in house prices will be considered as potential explanatory variables of early retirement.