This project report presents findings from the qualitative component of a study to examine American’s understanding of Social Security terminology regarding retirement, and to test responses to alternate names for those terms. Phase 1 of this study was a short survey of 1,260 respondents of the Understanding America Study (UAS) panel, which assessed whether the terms “Early Eligibility Age” (EEA), “Full Retirement Age” (FRA) and “Delayed Retirement Credits” (DRC) were well understood by respondents. The study’s second phase, which is the focus of this report and described in more detail below, consists of qualitative interviews with a small number of respondents selected from the UAS panel. The third and final phase of the study will be an experiment run through the UAS to test participants’ responses to and understanding of alternate names for Social Security retirement-related terminology.
{"title":"The Nomenclature of Social Security Retirement Benefits – Qualitative Exploration of Alternate Terminology","authors":"A. Filus, L. Rabinovich","doi":"10.2139/ssrn.2822546","DOIUrl":"https://doi.org/10.2139/ssrn.2822546","url":null,"abstract":"This project report presents findings from the qualitative component of a study to examine American’s understanding of Social Security terminology regarding retirement, and to test responses to alternate names for those terms. Phase 1 of this study was a short survey of 1,260 respondents of the Understanding America Study (UAS) panel, which assessed whether the terms “Early Eligibility Age” (EEA), “Full Retirement Age” (FRA) and “Delayed Retirement Credits” (DRC) were well understood by respondents. The study’s second phase, which is the focus of this report and described in more detail below, consists of qualitative interviews with a small number of respondents selected from the UAS panel. The third and final phase of the study will be an experiment run through the UAS to test participants’ responses to and understanding of alternate names for Social Security retirement-related terminology.","PeriodicalId":39542,"journal":{"name":"Social Security Bulletin","volume":"85 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2016-08-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"75950605","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}
Although researchers have shown that purchasing longevity insurance at retirement guarantees pensioners of a high annual income for the rest of their lives, most retirees (who have a choice) choose to take the lump sum and self-manage the portfolio. This is a long-standing puzzle called the "annuity puzzle". This question arises in importance due to the UK government's recent changes in pension policy. This paper implements a behavioural model, the hyperbolic discount model, to analyse annuity purchase decisions. We give an explanation for the low demand of immediate annuity at retirement, and uncover the high desirability of long-term deferred annuities for both retirees and working-age pensioners. Based on our modeling result, a 65-year-old individual would like to pay 24% higher than the fair price for a 30-year deferred annuity. Moreover, we suggest that if governments were to introduce a pre-commitment device which requires pensioners to make annuitisation decisions 10 years before retirement, the take up rate of annuities would become higher.
{"title":"Why the Deferred Annuity Makes Sense","authors":"A. Chen, S. Haberman, Stephen H. Thomas","doi":"10.2139/ssrn.2797795","DOIUrl":"https://doi.org/10.2139/ssrn.2797795","url":null,"abstract":"Although researchers have shown that purchasing longevity insurance at retirement guarantees pensioners of a high annual income for the rest of their lives, most retirees (who have a choice) choose to take the lump sum and self-manage the portfolio. This is a long-standing puzzle called the \"annuity puzzle\". This question arises in importance due to the UK government's recent changes in pension policy. This paper implements a behavioural model, the hyperbolic discount model, to analyse annuity purchase decisions. We give an explanation for the low demand of immediate annuity at retirement, and uncover the high desirability of long-term deferred annuities for both retirees and working-age pensioners. Based on our modeling result, a 65-year-old individual would like to pay 24% higher than the fair price for a 30-year deferred annuity. Moreover, we suggest that if governments were to introduce a pre-commitment device which requires pensioners to make annuitisation decisions 10 years before retirement, the take up rate of annuities would become higher.","PeriodicalId":39542,"journal":{"name":"Social Security Bulletin","volume":"58 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2016-06-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"75880718","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}
Pension obligations constitute a critical issue for public finances and budgets. This is especially true for the European Union whose institutional mechanism aims to supervise Member States’ spending through centralised budgetary rules based upon financial covenants. In this context, accounting methods of recognition and measurement of pension obligations become an integral and critical aspect of Europe’s transnational budgetary and financial supervision. Drawing upon a comprehensive overview of pension management and regulation, this article aims to analyse the ongoing debate on accounting for pension obligations with a specific attention to the harmonization of European Public Sector Accounting Standards (EPSAS). While the European Commission has been favouring the ‘indisputable reference’ to the International Public Sector Accounting Standards (IPSAS), European Member States’ practices and views remain inconsistent with the normative solution imposed by the IPSAS 25, which favours and facilitates Definite Contribution pension schemes. In this context, we do summarise the IPSAS position mimicking the IFRS, review the pension’s accounting in national statistics and EPSAS debate, and provide some building blocks for a comprehensive model of accounting for pension obligations that admits and enables several viable modes of pension management.
{"title":"Accounting for Pension Obligations in the European Union: A Case Study for EPSAS and Transnational Budgetary Supervision","authors":"Y. Biondi, M. Sierra","doi":"10.2139/ssrn.2785725","DOIUrl":"https://doi.org/10.2139/ssrn.2785725","url":null,"abstract":"Pension obligations constitute a critical issue for public finances and budgets. This is especially true for the European Union whose institutional mechanism aims to supervise Member States’ spending through centralised budgetary rules based upon financial covenants. In this context, accounting methods of recognition and measurement of pension obligations become an integral and critical aspect of Europe’s transnational budgetary and financial supervision. Drawing upon a comprehensive overview of pension management and regulation, this article aims to analyse the ongoing debate on accounting for pension obligations with a specific attention to the harmonization of European Public Sector Accounting Standards (EPSAS). While the European Commission has been favouring the ‘indisputable reference’ to the International Public Sector Accounting Standards (IPSAS), European Member States’ practices and views remain inconsistent with the normative solution imposed by the IPSAS 25, which favours and facilitates Definite Contribution pension schemes. In this context, we do summarise the IPSAS position mimicking the IFRS, review the pension’s accounting in national statistics and EPSAS debate, and provide some building blocks for a comprehensive model of accounting for pension obligations that admits and enables several viable modes of pension management.","PeriodicalId":39542,"journal":{"name":"Social Security Bulletin","volume":"23 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2016-05-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"73977069","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}
The Australian Superannuation Guarantee Levy system (SGL) and the Age Pension are linked through the income and asset test of the Age Pension system. Variations in likely demands for full or partial Age Pensions will occur as variations occur in the amount of retirement benefits that members of the SGL system receive. Despite the intention that the SGL system would reduce reliance on the Age Pension system, in this paper we demonstrate that there is a real possibility that this intended reduction may not occur.
{"title":"The Impact of the SGL System on Age Pension Demand in Australia","authors":"Amandha Ganegoda, John R. Evans","doi":"10.2139/ssrn.2710443","DOIUrl":"https://doi.org/10.2139/ssrn.2710443","url":null,"abstract":"The Australian Superannuation Guarantee Levy system (SGL) and the Age Pension are linked through the income and asset test of the Age Pension system. Variations in likely demands for full or partial Age Pensions will occur as variations occur in the amount of retirement benefits that members of the SGL system receive. Despite the intention that the SGL system would reduce reliance on the Age Pension system, in this paper we demonstrate that there is a real possibility that this intended reduction may not occur.","PeriodicalId":39542,"journal":{"name":"Social Security Bulletin","volume":"160 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2016-01-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"78592549","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}
Rafal Chomik, J. Piggott, Alan D. Woodland, George Kudrna, C. Kumru
Means testing can balance the need to provide adequate retirement incomes with the requirement that such provision is fiscally sustainable and economically efficient. Critics of the policy suggest that to reduce benefits as a retiree’s income and/or wealth increase is to discourage work and savings. Yet such distortions are small compared to those resulting from large earnings related pensions that, due to demographic change, require greater levels of financing via payroll taxes. Some form of means testing exists in most countries, usually involving small, safety-net schemes that target the poorest retirees (e.g., the Supplemental Security Income program in the U.S.). But an appropriately designed means-testing instrument can also be used to reduce the liability of large, publicly financed social security promises by excluding the affluent. This paper summarises means-testing design and implementation in a number of OECD countries as well as tackling key criticisms of means testing. In doing so, we discuss a number of recent, cutting-edge modelling approaches and empirical insights that examine economic impacts of means testing in the Australian and U.S. contexts.
{"title":"Means Testing Social Security: Modeling and Policy Analysis","authors":"Rafal Chomik, J. Piggott, Alan D. Woodland, George Kudrna, C. Kumru","doi":"10.2139/ssrn.2802761","DOIUrl":"https://doi.org/10.2139/ssrn.2802761","url":null,"abstract":"Means testing can balance the need to provide adequate retirement incomes with the requirement that such provision is fiscally sustainable and economically efficient. Critics of the policy suggest that to reduce benefits as a retiree’s income and/or wealth increase is to discourage work and savings. Yet such distortions are small compared to those resulting from large earnings related pensions that, due to demographic change, require greater levels of financing via payroll taxes. Some form of means testing exists in most countries, usually involving small, safety-net schemes that target the poorest retirees (e.g., the Supplemental Security Income program in the U.S.). But an appropriately designed means-testing instrument can also be used to reduce the liability of large, publicly financed social security promises by excluding the affluent. This paper summarises means-testing design and implementation in a number of OECD countries as well as tackling key criticisms of means testing. In doing so, we discuss a number of recent, cutting-edge modelling approaches and empirical insights that examine economic impacts of means testing in the Australian and U.S. contexts.","PeriodicalId":39542,"journal":{"name":"Social Security Bulletin","volume":"29 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2015-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"78239575","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}
The Australian age pension is noncontributory, funded through general tax revenues and means tested against pensioners?private resources, including labour earnings. This paper constructs an overlapping generations (OLG) model of the Australian economy to examine the economy wide implications of several counterfactual experiments in the means testing of the age pension. These experiments include policy changes that both relax and tighten the existing mean test. We also consider a policy change that only exempts labour earnings from the means testing. Our simulation results indicate that tightening the existing means test combined with lower income tax rates leads to higher labour supply, domestic assets and consumption per capita, as well as to welfare gains in the long run, while labour earnings exemptions from the means testing have largely positive e¤ects on labour supply at older ages. Population ageing is shown to further strengthen the case for the pension means testing.
{"title":"Means Testing of Public Pensions: The Case of Australia","authors":"George Kudrna","doi":"10.2139/ssrn.2802763","DOIUrl":"https://doi.org/10.2139/ssrn.2802763","url":null,"abstract":"The Australian age pension is noncontributory, funded through general tax revenues and means tested against pensioners?private resources, including labour earnings. This paper constructs an overlapping generations (OLG) model of the Australian economy to examine the economy wide implications of several counterfactual experiments in the means testing of the age pension. These experiments include policy changes that both relax and tighten the existing mean test. We also consider a policy change that only exempts labour earnings from the means testing. Our simulation results indicate that tightening the existing means test combined with lower income tax rates leads to higher labour supply, domestic assets and consumption per capita, as well as to welfare gains in the long run, while labour earnings exemptions from the means testing have largely positive e¤ects on labour supply at older ages. Population ageing is shown to further strengthen the case for the pension means testing.","PeriodicalId":39542,"journal":{"name":"Social Security Bulletin","volume":"1 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2015-10-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"90382136","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}
Anek Belbase, Geoffrey T. Sanzenbacher, Christopher M. Gillis
While declines in physical and mental performance are inevitable as workers age, they are not uniform across the various systems of the body – some physical and cognitive abilities decline much earlier than others. This variance implies that workers in occupations that rely on skills that decline early may be unable to work until late ages, even as policy changes like increases in the Full Retirement Age (FRA) encourage them to. Researchers often estimate models of early retirement that include a control for whether a worker is in a blue-collar job – basically assuming that less-physical white-collar work allows longer careers. But this assumption ignores the fact that even workers in white-collar occupations may find themselves relying on skills that have declined. This paper instead reviews the literature on aging and constructs a Susceptibility Index meant to reflect how susceptible an occupation is to declines in ability, regardless of whether the occupation relies on physical abilities (as blue-collar occupations do) or cognitive ones.
{"title":"Does Age-Related Decline in Ability Correspond with Retirement Age?","authors":"Anek Belbase, Geoffrey T. Sanzenbacher, Christopher M. Gillis","doi":"10.2139/ssrn.2665830","DOIUrl":"https://doi.org/10.2139/ssrn.2665830","url":null,"abstract":"While declines in physical and mental performance are inevitable as workers age, they are not uniform across the various systems of the body – some physical and cognitive abilities decline much earlier than others. This variance implies that workers in occupations that rely on skills that decline early may be unable to work until late ages, even as policy changes like increases in the Full Retirement Age (FRA) encourage them to. Researchers often estimate models of early retirement that include a control for whether a worker is in a blue-collar job – basically assuming that less-physical white-collar work allows longer careers. But this assumption ignores the fact that even workers in white-collar occupations may find themselves relying on skills that have declined. This paper instead reviews the literature on aging and constructs a Susceptibility Index meant to reflect how susceptible an occupation is to declines in ability, regardless of whether the occupation relies on physical abilities (as blue-collar occupations do) or cognitive ones.","PeriodicalId":39542,"journal":{"name":"Social Security Bulletin","volume":"1 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2015-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"83306342","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}
The paper explores the role that Social Health Insurance (SHI), as an organisational mechanism for raising and pooling additional funds, can play in financing health services in India. It formulates an SHI concept and its aims for India and examines case studies of different countries that have sought to finance their health services through SHI to see what lessons they offer for India and suggests a suitable design for India. It then estimates the volumes of tax revenues and payroll contributions that may be obtainable by India through SHI. Towards the end it also outlines some of the important design elements that need to be kept in mind for a successful implementation of an SHI scheme in India and identifies some of the important political and macro-level conditions that would be necessary to implement SHI in India.
{"title":"Social Health Insurance as a Complementary Financing Mechanism for Universal Health Coverage in India","authors":"Anuska Kalita, Nachiket Mor","doi":"10.2139/ssrn.2607180","DOIUrl":"https://doi.org/10.2139/ssrn.2607180","url":null,"abstract":"The paper explores the role that Social Health Insurance (SHI), as an organisational mechanism for raising and pooling additional funds, can play in financing health services in India. It formulates an SHI concept and its aims for India and examines case studies of different countries that have sought to finance their health services through SHI to see what lessons they offer for India and suggests a suitable design for India. It then estimates the volumes of tax revenues and payroll contributions that may be obtainable by India through SHI. Towards the end it also outlines some of the important design elements that need to be kept in mind for a successful implementation of an SHI scheme in India and identifies some of the important political and macro-level conditions that would be necessary to implement SHI in India.","PeriodicalId":39542,"journal":{"name":"Social Security Bulletin","volume":"6 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2015-07-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"72914258","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}
Automatic enrollment has been widely embraced for raising employee participation in 401(k) plans. However, the empirical evidence is based on data with limitations that, up until now, have prevented researchers from extrapolating the effects of automatic enrollment to the broader population of workers. This paper reexamines the determinants of 401(k) participation and contributions in the presence of automatic enrollment using nationally representative data from the Health and Retirement Study (HRS) for 2006 through 2012. The results confirm previous findings that automatic enrollment is associated with a higher proportion of workers included in DC plans; however, automatically enrolled workers are less likely to contribute to their DC plans than voluntarily enrolled workers. Auto enrollment is also associated with lower employee contribution amounts and rates. However, the employers of auto-enrolled workers are more likely to contribute to their employees’ accounts than are the employers of voluntarily enrolled workers. Additionally, employer contribution amounts and rates are higher among workers who are automatically enrolled. Even so, the combined effect is that the retirement accounts of automatically enrolled older workers receive, on average, $900 less in combined annual contributions and have contribution rates that are 1.6 percentage points lower than those of voluntarily enrolled workers. The paper found that: - Automatic enrollment is associated with a higher probability of being included in a DC plan. - On average, workers who are automatically enrolled in a DC plan tend to be less likely to contribute positive amounts than those who opt in. - However, the employers of automatically enrolled workers are more likely to make contributions and to contribute, on average, higher amounts and a higher percentage of their employees’ earnings. - The correlation between automatic enrollment and combined (employer and employee) contribution amounts and contribution rates, however, is still negative, despite controlling for a range of factors. The policy implications of the findings are: - Auto enrollment could do a better job of boosting overall contribution levels among participants. - Possible ways to achieve this might be by offering a more generous employer match and by using auto escalation. - More research and better data are needed to assess the potential impact on retirement plan contributions of implementing automatic enrollment features in DC plans on a national scale.
{"title":"The Relationship between Automatic Enrollment and DC Plan Contributions: Evidence from a National Survey of Older Workers","authors":"B. Butrica, Nadia S. Karamcheva","doi":"10.2139/SSRN.2634673","DOIUrl":"https://doi.org/10.2139/SSRN.2634673","url":null,"abstract":"Automatic enrollment has been widely embraced for raising employee participation in 401(k) plans. However, the empirical evidence is based on data with limitations that, up until now, have prevented researchers from extrapolating the effects of automatic enrollment to the broader population of workers. This paper reexamines the determinants of 401(k) participation and contributions in the presence of automatic enrollment using nationally representative data from the Health and Retirement Study (HRS) for 2006 through 2012. The results confirm previous findings that automatic enrollment is associated with a higher proportion of workers included in DC plans; however, automatically enrolled workers are less likely to contribute to their DC plans than voluntarily enrolled workers. Auto enrollment is also associated with lower employee contribution amounts and rates. However, the employers of auto-enrolled workers are more likely to contribute to their employees’ accounts than are the employers of voluntarily enrolled workers. Additionally, employer contribution amounts and rates are higher among workers who are automatically enrolled. Even so, the combined effect is that the retirement accounts of automatically enrolled older workers receive, on average, $900 less in combined annual contributions and have contribution rates that are 1.6 percentage points lower than those of voluntarily enrolled workers. The paper found that: - Automatic enrollment is associated with a higher probability of being included in a DC plan. - On average, workers who are automatically enrolled in a DC plan tend to be less likely to contribute positive amounts than those who opt in. - However, the employers of automatically enrolled workers are more likely to make contributions and to contribute, on average, higher amounts and a higher percentage of their employees’ earnings. - The correlation between automatic enrollment and combined (employer and employee) contribution amounts and contribution rates, however, is still negative, despite controlling for a range of factors. The policy implications of the findings are: - Auto enrollment could do a better job of boosting overall contribution levels among participants. - Possible ways to achieve this might be by offering a more generous employer match and by using auto escalation. - More research and better data are needed to assess the potential impact on retirement plan contributions of implementing automatic enrollment features in DC plans on a national scale.","PeriodicalId":39542,"journal":{"name":"Social Security Bulletin","volume":"29 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2015-07-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"77931212","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}
The transition from defined benefit (DB) to defined contribution (DC) pension plans has left workers forced to make choices that may decrease their financial resources in retirement: taking lump-sum distributions before retirement that divert funds that could support consumption in retirement, not annuitizing DC benefits, or choosing a single-life annuity over a joint-and-survivor option so that their surviving spouses are left susceptible to income loss. This study examines pension coverage, lump-sum distributions, annuitization, and annuity life options among Health and Retirement Study households observed at ages 65-69 and 75-79 and relates these pension provisions to poverty incidence and the risk of falling into poverty at older ages. The results indicate that households with pensions that are annuitized with the joint-and-survivor life option and that do not take lump-sum distributions before age 55 are best able to avoid income and asset poverty. The results emphasize the importance of making DC plans operate more like DB plans, because the opportunities for these poor financial choices are likely only to grow given the reliance on DC plans as the sole source of employer pension income for future cohorts of retirees.
{"title":"The Transition from Defined Benefit to Defined Contribution Pensions: Does It Influence Elderly Poverty?","authors":"N. Orlova, Matthew S. Rutledge, A. Wu","doi":"10.2139/SSRN.2634699","DOIUrl":"https://doi.org/10.2139/SSRN.2634699","url":null,"abstract":"The transition from defined benefit (DB) to defined contribution (DC) pension plans has left workers forced to make choices that may decrease their financial resources in retirement: taking lump-sum distributions before retirement that divert funds that could support consumption in retirement, not annuitizing DC benefits, or choosing a single-life annuity over a joint-and-survivor option so that their surviving spouses are left susceptible to income loss. This study examines pension coverage, lump-sum distributions, annuitization, and annuity life options among Health and Retirement Study households observed at ages 65-69 and 75-79 and relates these pension provisions to poverty incidence and the risk of falling into poverty at older ages. The results indicate that households with pensions that are annuitized with the joint-and-survivor life option and that do not take lump-sum distributions before age 55 are best able to avoid income and asset poverty. The results emphasize the importance of making DC plans operate more like DB plans, because the opportunities for these poor financial choices are likely only to grow given the reliance on DC plans as the sole source of employer pension income for future cohorts of retirees.","PeriodicalId":39542,"journal":{"name":"Social Security Bulletin","volume":"32 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2015-07-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"78056385","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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