The Influence of Stock Market Performance on the Retirement Behaviour of Canadians: The Case of Defined Contribution and Defined Pension Plans in Selected Industries

With the Canadian population aging, stock markets growing in popularity as conduits for savings, and the volatility of North American stock markets trending higher in recent years, never has the relationship between wealth shocks induced by stock market fluctuations and retirement behaviour been so important. By grouping Canadians based on their participation in defined benefit and defined contribution pension plans, this study attempts to identify how the dot-com and housing booms and busts of the last decade influenced the labour-leisure decision of individuals nearing retirement age. Contrary to popular economic theory, we find that stock market busts are consistent with increases in retirement rates while booms are consistent with decreases in retirement rates. Although these results are statistically significant, we find it difficult to attribute them to pure wealth effects; as such, we conclude that economic factors and organizational incentives, which are likely correlated with stock market booms and busts, work together with our findings to provide a plausible explanation of such unexpected retirement behaviour