Older workers’ labor force participation (LFP) and migration across state lines have been trending in opposite directions, counter to conventional economic wisdom. This paper investigates what might explain this puzzle using data from the Current Population Survey (CPS) and Health and Retirement Study (HRS). Descriptive analysis identifies several factors that may explain the decline in migration, including greater housing price dispersion, fewer opportunities for wage arbitrage, and greater geographical sorting. I employ a series of empirical tests to examine how older workers’ LFP, retirement, and migration decisions respond to income and housing wealth losses by exploiting job losses to identify individual income shocks, and shocks to specific labor markets to identify housing wealth losses using an import competition shock that began in 2001 after Congress ratified permanent normalized trade relations with China in October 2000. The puzzle appears to be driven by composition effects. In response to a housing wealth shock, non-college educated homeowners (the largest subgroup of older workers) reduce their two-year migration rate by 54% but only slightly reduce their labor supply, while college-educated renters (the smallest subgroup) increase their labor supply by 13% but only weakly increase their propensity to move.
{"title":"Why Are Older Workers Moving Less While Working Longer?","authors":"Brian J. Asquith","doi":"10.2139/ssrn.3911516","DOIUrl":"https://doi.org/10.2139/ssrn.3911516","url":null,"abstract":"Older workers’ labor force participation (LFP) and migration across state lines have been trending in opposite directions, counter to conventional economic wisdom. This paper investigates what might explain this puzzle using data from the Current Population Survey (CPS) and Health and Retirement Study (HRS). Descriptive analysis identifies several factors that may explain the decline in migration, including greater housing price dispersion, fewer opportunities for wage arbitrage, and greater geographical sorting. I employ a series of empirical tests to examine how older workers’ LFP, retirement, and migration decisions respond to income and housing wealth losses by exploiting job losses to identify individual income shocks, and shocks to specific labor markets to identify housing wealth losses using an import competition shock that began in 2001 after Congress ratified permanent normalized trade relations with China in October 2000. The puzzle appears to be driven by composition effects. In response to a housing wealth shock, non-college educated homeowners (the largest subgroup of older workers) reduce their two-year migration rate by 54% but only slightly reduce their labor supply, while college-educated renters (the smallest subgroup) increase their labor supply by 13% but only weakly increase their propensity to move.","PeriodicalId":284824,"journal":{"name":"SIRN: Retirement Decision-Making (Sub-Topic)","volume":"77 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-06-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"117220911","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper investigated the need to raise Mandatory Retirement Age (MRA) and to what level, in Uganda; as a policy towards addressing the challenges that emanate from rising life expectancy and unemployment. Guided by two theories: time allocation theory and positive theory of early retirement; while using the Early Retirement Incentives (ERIs) of the public service pension scheme as a probing tool, with probit simulations as estimation techniques on public servants’ retirement dataset (2017), results strongly support increment in the MRA from 60 to 65. For the named socioeconomic challenges, the policy is more effective if jointly implemented with a rise in Early retirement age from 45 to 55.
{"title":"Need to Increase the Public Servants’ Retirement Age to 65 in Uganda: Policy Report.","authors":"Kibs Boaz Muhanguzi","doi":"10.2139/ssrn.3874775","DOIUrl":"https://doi.org/10.2139/ssrn.3874775","url":null,"abstract":"This paper investigated the need to raise Mandatory Retirement Age (MRA) and to what level, in Uganda; as a policy towards addressing the challenges that emanate from rising life expectancy and unemployment. Guided by two theories: time allocation theory and positive theory of early retirement; while using the Early Retirement Incentives (ERIs) of the public service pension scheme as a probing tool, with probit simulations as estimation techniques on public servants’ retirement dataset (2017), results strongly support increment in the MRA from 60 to 65. For the named socioeconomic challenges, the policy is more effective if jointly implemented with a rise in Early retirement age from 45 to 55.","PeriodicalId":284824,"journal":{"name":"SIRN: Retirement Decision-Making (Sub-Topic)","volume":"22 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-06-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124479320","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Unlike defined benefit pensions that provide participants with steady benefits for as long as they live, 401(k) plans and Individual Retirement Accounts (IRAs) provide little guidance on how to turn accumulated assets into income. As a result, retirees have to decide how much to withdraw each year and face the risk of either spending too quickly and outliving their resources or spending too conservatively and consuming too little. Surveys of individuals’ plans and several recent studies suggest that people will not draw down their accumulations for fear that they will exhaust their money and be unable to cover end-of-life health care costs. They also must consider how to invest their savings after retirement. These are difficult decisions.
Better strategies are possible that will ensure a higher level of lifetime income, reduce the likelihood that people will outlive their resources, and alleviate some of the anxiety associated with post-retirement investing. Workers could use a portion of their 401(k) and IRA assets to purchase an immediate annuity that pays a fixed amount throughout their lives, typically starting at age 65. Or they could purchase an advanced life deferred annuity (ALDA) that requires a smaller share of accumulated assets and begins payments at a later age like 85. Alternatively, they could use their assets to delay claiming Social Security – essentially purchasing an inflation-indexed annuity. Right now, none of these three options is commonly used. Very few workers choose to purchase immediate or deferred annuities (the first two options). And few retirees appear to be deferring claiming in order to receive the maximum annuity income from Social Security – most people simply retire earlier and claim immediately.
Increasing annuitization in a meaningful way would require embedding annuities in 401(k) plans, with annuitization as the default. Recent proposed federal legislation, such as the SECURE Act (Setting Every Community Up for Retirement Enhancement), encourages plan sponsors to offer annuities in their plans by establishing a fiduciary safe harbor when specific statutory conditions are followed in selecting an insurance company. This legislation does not address, however, the question of defaults or the possibility of using 401(k) assets to purchase additional Social Security benefits. Moving forward on these fronts would require some consensus about the appropriate share of 401(k) assets to be annuitized and the best method for annuitizing them.
To address these issues, this paper compares the level of lifetime utility generated by alternative annuitization approaches – immediate annuities, deferred annuities, and additional Social Security through delayed claiming. The analysis also tests different assumptions for the share of initial wealth that participants use to purchase these products.
{"title":"How Best to Annuitize Defined Contribution Assets?","authors":"A. Munnell, Gal Wettstein, Wenliang Hou","doi":"10.2139/ssrn.3478061","DOIUrl":"https://doi.org/10.2139/ssrn.3478061","url":null,"abstract":"Unlike defined benefit pensions that provide participants with steady benefits for as long as they live, 401(k) plans and Individual Retirement Accounts (IRAs) provide little guidance on how to turn accumulated assets into income. As a result, retirees have to decide how much to withdraw each year and face the risk of either spending too quickly and outliving their resources or spending too conservatively and consuming too little. Surveys of individuals’ plans and several recent studies suggest that people will not draw down their accumulations for fear that they will exhaust their money and be unable to cover end-of-life health care costs. They also must consider how to invest their savings after retirement. These are difficult decisions.<br><br>Better strategies are possible that will ensure a higher level of lifetime income, reduce the likelihood that people will outlive their resources, and alleviate some of the anxiety associated with post-retirement investing. Workers could use a portion of their 401(k) and IRA assets to purchase an immediate annuity that pays a fixed amount throughout their lives, typically starting at age 65. Or they could purchase an advanced life deferred annuity (ALDA) that requires a smaller share of accumulated assets and begins payments at a later age like 85. Alternatively, they could use their assets to delay claiming Social Security – essentially purchasing an inflation-indexed annuity. Right now, none of these three options is commonly used. Very few workers choose to purchase immediate or deferred annuities (the first two options). And few retirees appear to be deferring claiming in order to receive the maximum annuity income from Social Security – most people simply retire earlier and claim immediately.<br><br>Increasing annuitization in a meaningful way would require embedding annuities in 401(k) plans, with annuitization as the default. Recent proposed federal legislation, such as the SECURE Act (Setting Every Community Up for Retirement Enhancement), encourages plan sponsors to offer annuities in their plans by establishing a fiduciary safe harbor when specific statutory conditions are followed in selecting an insurance company. This legislation does not address, however, the question of defaults or the possibility of using 401(k) assets to purchase additional Social Security benefits. Moving forward on these fronts would require some consensus about the appropriate share of 401(k) assets to be annuitized and the best method for annuitizing them.<br><br>To address these issues, this paper compares the level of lifetime utility generated by alternative annuitization approaches – immediate annuities, deferred annuities, and additional Social Security through delayed claiming. The analysis also tests different assumptions for the share of initial wealth that participants use to purchase these products.","PeriodicalId":284824,"journal":{"name":"SIRN: Retirement Decision-Making (Sub-Topic)","volume":"38 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-10-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126024385","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Recent research by Bee and Mitchell (2017) has refocused attention on the fact that the Current Population Survey (CPS) underestimates retirement income. In the wake of this study, some observers have questioned whether other surveys more frequently used by retirement researchers also understate retirement income and, if so, whether prior research suggesting that many households are unprepared for retirement is accurate. This paper addresses both questions by examining retirement income data from the CPS and four other surveys: 1) the Survey of Consumer Finances (SCF); 2) the Health and Retirement Study (HRS); 3) the Panel Survey of Income Dynamics (PSID); and 4) the Survey of Income and Program Participation (SIPP). The paper compares the income measures from each survey to administrative data from tax and Social Security records, both in aggregate and across the income distribution. It then uses a common measure of retirement income adequacy, the replacement rate, to assess overall household preparedness for retirement.
{"title":"How Much Income Do Retirees Actually Have? Evaluating the Evidence from Five National Datasets","authors":"Anqi Chen, A. Munnell, Geoffrey T. Sanzenbacher","doi":"10.2139/ssrn.3290751","DOIUrl":"https://doi.org/10.2139/ssrn.3290751","url":null,"abstract":"Recent research by Bee and Mitchell (2017) has refocused attention on the fact that the Current Population Survey (CPS) underestimates retirement income. In the wake of this study, some observers have questioned whether other surveys more frequently used by retirement researchers also understate retirement income and, if so, whether prior research suggesting that many households are unprepared for retirement is accurate. This paper addresses both questions by examining retirement income data from the CPS and four other surveys: 1) the Survey of Consumer Finances (SCF); 2) the Health and Retirement Study (HRS); 3) the Panel Survey of Income Dynamics (PSID); and 4) the Survey of Income and Program Participation (SIPP). The paper compares the income measures from each survey to administrative data from tax and Social Security records, both in aggregate and across the income distribution. It then uses a common measure of retirement income adequacy, the replacement rate, to assess overall household preparedness for retirement.","PeriodicalId":284824,"journal":{"name":"SIRN: Retirement Decision-Making (Sub-Topic)","volume":"52 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123148306","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Ashton M. Verdery, J. Daw, C. Campbell, R. Margolis
This paper examines transfers of time and money between retirees and their children. It uses data from the Panel Study of Income Dynamics to test whether numbers of children, parent-child wealth differentials, geographic proximity, and gender contribute to racial and ethnic differences in transfers of time and money between retirement-aged adults and their children. Critical components of the analysis include measuring kin availability, the spatial and social embeddedness of family networks, supply as well as demand for transfers, and gender. Key limitations are that we exclude those who have no living family members with whom they could transfer, and we do not examine the role of non-familial transfers.
本文考察了退休人员和子女之间的时间和金钱转移。它使用收入动态小组研究(Panel Study of Income Dynamics)的数据来测试子女数量、亲子财富差异、地理邻近性和性别是否会导致退休年龄的成年人与子女之间在时间和金钱转移方面的种族和民族差异。该分析的关键组成部分包括测量亲属可用性、家庭网络的空间和社会嵌入性、转移支付的供应和需求以及性别。关键的限制是，我们排除了那些没有活着的家庭成员可以转移的人，我们没有研究非家庭转移的作用。
{"title":"Family Transfers with Retirement-Aged Adults in the United States: Kin Availability, Wealth Differentials, Geographic Proximity, Gender, and Racial Disparities","authors":"Ashton M. Verdery, J. Daw, C. Campbell, R. Margolis","doi":"10.2139/SSRN.3033278","DOIUrl":"https://doi.org/10.2139/SSRN.3033278","url":null,"abstract":"This paper examines transfers of time and money between retirees and their children. It uses data from the Panel Study of Income Dynamics to test whether numbers of children, parent-child wealth differentials, geographic proximity, and gender contribute to racial and ethnic differences in transfers of time and money between retirement-aged adults and their children. Critical components of the analysis include measuring kin availability, the spatial and social embeddedness of family networks, supply as well as demand for transfers, and gender. Key limitations are that we exclude those who have no living family members with whom they could transfer, and we do not examine the role of non-familial transfers.","PeriodicalId":284824,"journal":{"name":"SIRN: Retirement Decision-Making (Sub-Topic)","volume":"11 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-09-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126667019","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This note introduces the Longevity Visualizer (LV), a visual-analysis tool that enables users to explore various applications of cohort life-table data compiled and calculated by the Social Security Administration’s Office of the Chief Actuary. The LV presents the life-table data in two series — survival functions and age-at-death probability distributions — each of which is generated for each potential age and each sex across a long range of historical and projected birth cohorts. The LV is designed to make complex longevity projections accessible to analysts and researchers, as well as to individuals making financial and retirement plans.
{"title":"The Longevity Visualizer: An Analytic Tool for Exploring the Cohort Mortality Data Produced by the Office of the Chief Actuary","authors":"Brian J. Alleva","doi":"10.2139/ssrn.2778582","DOIUrl":"https://doi.org/10.2139/ssrn.2778582","url":null,"abstract":"This note introduces the Longevity Visualizer (LV), a visual-analysis tool that enables users to explore various applications of cohort life-table data compiled and calculated by the Social Security Administration’s Office of the Chief Actuary. The LV presents the life-table data in two series — survival functions and age-at-death probability distributions — each of which is generated for each potential age and each sex across a long range of historical and projected birth cohorts. The LV is designed to make complex longevity projections accessible to analysts and researchers, as well as to individuals making financial and retirement plans.","PeriodicalId":284824,"journal":{"name":"SIRN: Retirement Decision-Making (Sub-Topic)","volume":"31 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2016-05-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"134555174","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper uses a unique panel of consumer financial transactions to examine how aging consumers respond to the option to cash out retirement savings. To obtain causal identification, we exploit an administrative regulation in Singapore that allows individuals to cash out a fraction of their pension savings at age 55. We find a large and highly significant increase in bank account balances when an individual turns 55, suggesting that the average consumer in our sample withdraws a large portion of their eligible retirement savings. In line with the predictions from the life-cycle/permanent-income hypothesis, we find modest increases (about 9 percent of the increase in account balance) in cumulative total spending twelve months later. This increase is driven largely by an increase in debit card spending and is concentrated among low-liquidity consumers. Consumers also use the increase in disposable income to pay down their credit card debt. We do not find any evidence that the average consumer responds by excessively increasing present consumption at the expense of future financial security. Nevertheless, consumers leave a sizeable portion of their withdrawn savings in low-interest accruing bank accounts for at least a year after withdrawal. We provide some suggestive evidence that consumer demographics, especially those related to financial literacy and sophistication, appear to matter for consumers' withdrawal decisions.
{"title":"Age of Decision: Pension Savings Withdrawal and Consumption and Debt Response","authors":"Sumit Agarwal, Jessica Pan, Wenlan Qian","doi":"10.2139/SSRN.2487658","DOIUrl":"https://doi.org/10.2139/SSRN.2487658","url":null,"abstract":"This paper uses a unique panel of consumer financial transactions to examine how aging consumers respond to the option to cash out retirement savings. To obtain causal identification, we exploit an administrative regulation in Singapore that allows individuals to cash out a fraction of their pension savings at age 55. We find a large and highly significant increase in bank account balances when an individual turns 55, suggesting that the average consumer in our sample withdraws a large portion of their eligible retirement savings. In line with the predictions from the life-cycle/permanent-income hypothesis, we find modest increases (about 9 percent of the increase in account balance) in cumulative total spending twelve months later. This increase is driven largely by an increase in debit card spending and is concentrated among low-liquidity consumers. Consumers also use the increase in disposable income to pay down their credit card debt. We do not find any evidence that the average consumer responds by excessively increasing present consumption at the expense of future financial security. Nevertheless, consumers leave a sizeable portion of their withdrawn savings in low-interest accruing bank accounts for at least a year after withdrawal. We provide some suggestive evidence that consumer demographics, especially those related to financial literacy and sophistication, appear to matter for consumers' withdrawal decisions.","PeriodicalId":284824,"journal":{"name":"SIRN: Retirement Decision-Making (Sub-Topic)","volume":"23 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2016-04-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"134251463","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
B. Helppie‐McFall, A. Sonnega, R. Willis, Péter Hudomiet
Population aging and attendant pressures on public budgets have spurred considerable interest in understanding factors that influence retirement timing. A range of sociodemographic and economic characteristics have been shown to predict both earlier and later retirement. Less is known about the role of occupations and their characteristics on the work choices of older workers. Knowing more about the occupations that workers seem to stay in longer or leave earlier may point the way to policy interventions that are beneficial to both individuals and system finances. This project uses detailed occupational categories and work characteristics in the Health and Retirement Study (HRS) linked to information in the Occupational Information Network (O*NET) to examine compositional changes in occupations held by older workers over time; to provide some basic and interesting information about relationships between occupations and their characteristics and retirement expectations and outcomes; and to shed some light on which occupations and associated characteristics might encourage or discourage longer working lives. There are large percentage changes (increases in decreases) in the percentage of older workers in occupations over time. Considering detailed as opposed to aggregated occupational categories yields interesting additional information. Jobs that HRS respondents say entail less physical effort, less stress, and jobs that have not increased in difficulty in recent decades, and those in which people can reduce hours if desired, are associated with longer work. While the traditional blue collar-retire earlier and white collar-work longer associations emerge, we find interesting exceptions that suggest fruitful directions for future research.
{"title":"Occupations and Work Characteristics: Effects on Retirement Expectations and Timing","authors":"B. Helppie‐McFall, A. Sonnega, R. Willis, Péter Hudomiet","doi":"10.2139/SSRN.2737980","DOIUrl":"https://doi.org/10.2139/SSRN.2737980","url":null,"abstract":"Population aging and attendant pressures on public budgets have spurred considerable interest in understanding factors that influence retirement timing. A range of sociodemographic and economic characteristics have been shown to predict both earlier and later retirement. Less is known about the role of occupations and their characteristics on the work choices of older workers. Knowing more about the occupations that workers seem to stay in longer or leave earlier may point the way to policy interventions that are beneficial to both individuals and system finances. This project uses detailed occupational categories and work characteristics in the Health and Retirement Study (HRS) linked to information in the Occupational Information Network (O*NET) to examine compositional changes in occupations held by older workers over time; to provide some basic and interesting information about relationships between occupations and their characteristics and retirement expectations and outcomes; and to shed some light on which occupations and associated characteristics might encourage or discourage longer working lives. There are large percentage changes (increases in decreases) in the percentage of older workers in occupations over time. Considering detailed as opposed to aggregated occupational categories yields interesting additional information. Jobs that HRS respondents say entail less physical effort, less stress, and jobs that have not increased in difficulty in recent decades, and those in which people can reduce hours if desired, are associated with longer work. While the traditional blue collar-retire earlier and white collar-work longer associations emerge, we find interesting exceptions that suggest fruitful directions for future research.","PeriodicalId":284824,"journal":{"name":"SIRN: Retirement Decision-Making (Sub-Topic)","volume":"21 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2015-10-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127823264","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper examines the importance of annuity-like income as a share of total money income received by aged families. The analysis considers the aged (62+) population as a whole as well as different parts of the aged families’ income distribution during the period from the early 1980s through 2009. We use survey data from 1983 through 2009 from the March Current Population Survey (March CPS) and the Survey of Consumer Finances (SCF). The total income amounts reported in the files are compared with data in the National Income and Product Accounts (NIPA). We calculate the family income consisting of annuitized income flows (primarily Social Security and pensions) and measure it as a share of families’ total money income. We also expand the definition of both annuitized and non-annuitized income to include income flows not captured in the surveys, namely, health insurance subsidies and the housing services received by homeowners. Finally, we consider the potential impact on aged families if they were to convert their wealth into private annuities. The paper finds that: - Despite the shift from defined benefit (DB) to defined contribution (DC) retirement plans, there is little evidence that the annuity-like income share of total income has fallen for aged families – and, in particular, for low-income aged families – over the past three decades. - This basic result remains unchanged when we consider more comprehensive income definitions and when we focus on aged families with retired heads of family.N - Nonetheless, many middle- and high-income aged families would experience a sizeable increase in monthly income if they annuitized their wealth. The policy implications of the findings are: - Concerns that reduced rates of annuitization will lead retirees to spend down their assets at a too-rapid rate seem overblown or at least premature; there is little evidence that the share of income derived from annuity-like income sources has declined. - Contrary to a widespread fear, the shift from DB to DC workplace pensions has not reduced the share of retirement income that consists of relatively secure, annuity-like income flows that will last as long as aged breadwinners and their spouses survive.
{"title":"Do Retired Americans Annuitize Too Little? Trends in the Share of Annuitized Income","authors":"B. Bosworth, Gary T. Burtless, Mattan Alalouf","doi":"10.2139/ssrn.2622119","DOIUrl":"https://doi.org/10.2139/ssrn.2622119","url":null,"abstract":"This paper examines the importance of annuity-like income as a share of total money income received by aged families. The analysis considers the aged (62+) population as a whole as well as different parts of the aged families’ income distribution during the period from the early 1980s through 2009. We use survey data from 1983 through 2009 from the March Current Population Survey (March CPS) and the Survey of Consumer Finances (SCF). The total income amounts reported in the files are compared with data in the National Income and Product Accounts (NIPA). We calculate the family income consisting of annuitized income flows (primarily Social Security and pensions) and measure it as a share of families’ total money income. We also expand the definition of both annuitized and non-annuitized income to include income flows not captured in the surveys, namely, health insurance subsidies and the housing services received by homeowners. Finally, we consider the potential impact on aged families if they were to convert their wealth into private annuities. The paper finds that: - Despite the shift from defined benefit (DB) to defined contribution (DC) retirement plans, there is little evidence that the annuity-like income share of total income has fallen for aged families – and, in particular, for low-income aged families – over the past three decades. - This basic result remains unchanged when we consider more comprehensive income definitions and when we focus on aged families with retired heads of family.N - Nonetheless, many middle- and high-income aged families would experience a sizeable increase in monthly income if they annuitized their wealth. The policy implications of the findings are: - Concerns that reduced rates of annuitization will lead retirees to spend down their assets at a too-rapid rate seem overblown or at least premature; there is little evidence that the share of income derived from annuity-like income sources has declined. - Contrary to a widespread fear, the shift from DB to DC workplace pensions has not reduced the share of retirement income that consists of relatively secure, annuity-like income flows that will last as long as aged breadwinners and their spouses survive.","PeriodicalId":284824,"journal":{"name":"SIRN: Retirement Decision-Making (Sub-Topic)","volume":"204 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2015-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123358306","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Financial fraud is a major threat to older Americans, and this problem is expected to grow as the baby boom generation retires and more retirees manage their own retirement accounts. We use a unique dataset to examine the causes and consequences of financial fraud among older Americans. First, we find that decreasing cognition is associated with higher scam susceptibility scores and is predictive of fraud victimization. Second, overconfidence in one’s financial knowledge is associated with fraud victimization. Third, fraud victims increase their willingness to take financial risks relative to propensity-matched non-victims.
{"title":"The Causes and Consequences of Financial Fraud Among Older Americans","authors":"K. Gamble, P. Boyle, Lei Yu, D. Bennett","doi":"10.2139/SSRN.2523428","DOIUrl":"https://doi.org/10.2139/SSRN.2523428","url":null,"abstract":"Financial fraud is a major threat to older Americans, and this problem is expected to grow as the baby boom generation retires and more retirees manage their own retirement accounts. We use a unique dataset to examine the causes and consequences of financial fraud among older Americans. First, we find that decreasing cognition is associated with higher scam susceptibility scores and is predictive of fraud victimization. Second, overconfidence in one’s financial knowledge is associated with fraud victimization. Third, fraud victims increase their willingness to take financial risks relative to propensity-matched non-victims.","PeriodicalId":284824,"journal":{"name":"SIRN: Retirement Decision-Making (Sub-Topic)","volume":"15 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2014-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133478791","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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