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on Economics of Ageing |
| By: | Esen Erdogan-Ciftci (Erasmus University Rotterdam); Eddy Van Doorslaer (Erasmus University Rotterdam); Angel Lopez-Nicolas (Universidad Politecnica de Cartagena, Cartagena, Spain) |
| Abstract: | We estimate the impact of health and financial incentives on the retirement transitions of older workers in Spain. Individual measures of pension wealth, peak and accrual values are constructed using labor market histories and health shocks are derived as changes in a composite health stock measure over time. We examine labour market exits into both old age retirement and a broader definition of retirement including inactivity, while controlling for unobserved heterogeneity. We find that pension wealth, accrual and peak value are significant determinants of retirement decisions, although their effect is weaker in the case of the broad definition of retirement. Initial health stock shows a significant impact on both definitions of retirement. Only large negative health shocks have a significant effect on the probability of entering the broader definition of retirement. Unlike previous literature, we find that (i) financial incentives, when measured adequately, exert a greater impact on retirement behaviour than health shocks, and (ii) initial health stock plays a more important role than health shocks in determining retirement decisions. We also perform simulations of a recently enacted reform of pension incentives and show how its expected effects compare to those of health improvements. |
| Keywords: | Health; Retirement; Social security and public pensions |
| JEL: | H55 I10 J26 |
| Date: | 2008–10–02 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:20080093&r=age |
| By: | Alicia H. Munnell; Dan Muldoon; ; |
| Abstract: | Since the mid-1960s, the median retirement age for men has declined from 66 to 63. If Americans continue to retire at age 63, a great many will risk income shortfalls, especially at older ages. This risk is even greater for those currently nearing retirement who have recently seen a large portion of their nest eggs evaporate... |
| Date: | 2008–10 |
| URL: | http://d.repec.org/n?u=RePEc:crr:issbrf:ib2008-8-17&r=age |
| By: | Alicia H. Munnell; Mauricio Soto; Natalia A. Zhivan |
| Abstract: | With increasing pressure on the nation’s retirement systems, questions about how long people stay in the labor force and why they decide to retire are of great importance. The big unknown going forward is whether the contraction of the retirement income system will cause workers to continue working at older ages. The literature to date suggests that the availability of benefits has a larger impact than the level of benefits on people’s decision to retire. Indeed, 55 percent of men and 59 percent of women who claimed Social Security benefits in 2005 were 62 — the earliest age of eligibility.1 If availability of benefits is the main driver of retirement, future workers will be relatively insensitive to the coming decline in replacement rates from Social Security and employer-sponsored pension plans. On the other hand, if the level of benefits has a significant impact, future declines could trigger increased work... |
| Date: | 2008–08 |
| URL: | http://d.repec.org/n?u=RePEc:crr:issbrf:ib2008-8-6&r=age |
| By: | Alicia H. Munnell; Francesca Golub-Sass; Mauricio Soto; Anthony Webb |
| Abstract: | The National Retirement Risk Index (NRRI) measures the percentage of working-age households who are ‘at risk’ of being financially unprepared for retirement today and in coming decades. The calculations show that even if households work to age 65 and annuitize all their financial assets, including the receipts from reverse mortgages on their homes, 44 percent will be ‘at risk’ of being unable to maintain their standard of living in retirement. An extension of the analysis to account explicitly for health care costs in retirement raises the share of ‘at risk’ households from 44 percent to 61 percent... |
| Date: | 2008–08 |
| URL: | http://d.repec.org/n?u=RePEc:crr:issbrf:ib2008-8-11&r=age |
| By: | Bodor , Andras; Robalino, David; Rutkowski, Michal |
| Abstract: | Mandatory pension systems can have a negative impact on individual savings and labor supply decisions. In particular, defined benefit pension schemes that are not actuarially fair, can create incentives for early retirement, and therefore, reduce labor supply and the stock of human capital. After a review of frequently applied approaches to assess the incentives generated by a pension system, the paper develops an indicator to predict the age-specific retirement probabilities induced by a particular pension system given heterogeneous individual preferences. The paper then describes how this indicator could be used to project the size of the labor force by gender, age and skill level, and correspondingly, the dynamics of human capital accumulation. Finally, the paper develops a set of life-cycle income measures to assess how the pension system affects decisions regarding the supply of labor in the public and private sectors. The methods are illustrated in the case of Morocco. |
| Keywords: | life cycle models; labor supply; human capital; retirement policies; job and occupational mobility |
| JEL: | J62 J22 D91 J24 J26 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:12046&r=age |
| By: | Natalia Zhivan; Steven A. Sass; Margarita Sapozhnikov |
| Abstract: | In the early 1980s, Congress responded to the Social Security program’s long-term financing shortfall, in part, by raising the Full Retirement Age (FRA) from 65 to 67. When fully phased in, for those who turn 62 in 2022, workers will have to wait an additional two years to get the same monthly benefit. If they do not postpone claiming, the increase in the FRA will cut their benefits by about 13 percent. Congress did not change the earliest age at which workers can claim. This Earliest Eligibility Age (EEA) remains 62. When the increase in the FRA is fully phased in, workers who claim at 62 will get 70 percent, rather than 80 percent, of their FRA benefit. This has raised concerns that benefits claimed at the EEA will be too low, especially as retirees age and other sources of income decline. One response would be to raise the EEA from 62 to 64, in line with the two-year rise in the FRA. There are, however, two important objections to an increase in the EEA. The primary concern is that it would create hardship for those unable to work or find employment and who lack the resources to support themselves without working until age 64. A second objection is that raising the EEA is unfair to disadvantaged groups with low life expectancy. This brief addresses these concerns by considering an “Elastic” EEA, which gives different workers different earliest eligibility ages. |
| Date: | 2008–02 |
| URL: | http://d.repec.org/n?u=RePEc:crr:issbrf:ib2008-8-2&r=age |
| By: | Leora Friedberg; Wei Sun; Anthony Webb |
| Abstract: | This brief seeks to answer the question in the title by analyzing data from the Health and Retirement Study (HRS), a nationally representative survey of older Americans. New questions in the HRS enable researchers to compare the value that workers place on health insurance with their perceptions about the cost of coverage... |
| Date: | 2008–07 |
| URL: | http://d.repec.org/n?u=RePEc:crr:issbrf:ib2008-8-9&r=age |
| By: | Piggot, John; Robalino, David; Jimenez-Martin, Sergi |
| Abstract: | The paper explores the incentive effects of retirement income transfers – essentially, non-contributory cash transfers aimed at reducing poverty among the elderly. A literature review reveals how little academic analysis of the impact of these transfers has been completed. We begin with a taxonomy of retirement income transfers, differentiating between ex-ante and ex-post interventions and universal and targeted arrangements. This distinction allows important differences across designs to be highlighted. We then provide a simple framework for thinking about what the incentive impacts of the transfers might be, distinguishing between effects related to the transfer itself and those related to the financing mechanism. Thus, from theory and available empirical evidence we derive a few policy relevant findings. First, incentive effects will depend on the level of the transfer relative to average earnings and the degree of integration between the formal and informal sectors in the economy. In general, for modest transfers, negative impacts on savings and labor supply would be contained. Second, we highlight the tradeoff between maintaining low effective marginal tax rates (EMTRs) to reduce distortions and keeping the program costs at affordable levels. This tradeoff suggests that universal programs are suboptimal. Third, in terms of design features, we emphasize the importance of implementing a gradual withdrawal of the benefit to avoid crowding-out contributory pensions among low income individuals and of indexing the eligibility age with life expectancy to contain costs. Finally we find that matching contributions can be a promising instrument to promote savings among individuals with limited savings capacity. |
| Keywords: | Social pensions; Pension coverage; Retirement Insurance; matching contributions |
| JEL: | E62 H55 J41 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:12020&r=age |
| By: | Steven A. Sass; Wei Sun; Anthony Webb |
| Abstract: | Most married men claim Social Security benefits at age 62 or 63, well short of the age that maximizes the expected present value of the average household’s benefits. That many married men “leave money on the table” is surprising. It is also problematic. It results in much lower benefits for surviving spouses and the low incomes of elderly widows are a major social problem. If married men delayed claiming Social Security benefits, retirement income security would significantly improve. This brief focuses on the potential gains from delayed claiming and the factors that may influence claiming behavior. It then considers possible policy responses. |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:crr:issbrf:ib2008-8-4&r=age |
| By: | Alicia H. Munnell; Mauricio Soto; |
| Abstract: | House prices rose 60 percent between 2000 and 2007 before the housing bubble burst. The question is whether the housing boom made people better or worse prepared for retirement. If they extracted the equity from their home through some form of housing-related debt and consumed all their borrowings, they will be left with additional debt and no additional assets and probably will be worse off in retirement. If they did not borrow and consume their equity, they will have more housing wealth to tap in retirement and will be better off... |
| Date: | 2008–09 |
| URL: | http://d.repec.org/n?u=RePEc:crr:issbrf:ib2008-8-12&r=age |
| By: | Atsue Mizushima |
| Abstract: | Rising longevity has led to population aging in developed countries, causing increasing concerns about its economic impact. Specially, the trend of population aging increases health expenditure in developed countries, and 70% to 80% of health expenditure is funded by public sector. Therefore, this paper focuses on the health demand in an aging economy and examines how the aging of the population and public health funding (PHF) affects agents' behavior. For this purpose, we construct a simple growth model and examine the e®ect of aging and PHF on saving and the growth rate. We show that an increase in life expectancy increases the growth rate in the economy without PHF, but that it has an inverted U-shaped relation in the economy with PHF. From the welfare standpoint, we show that it increases the intergenerational conflict between current and future generation and that PHF has the result of alleviating the conflict. |
| Keywords: | life expectancy, household production, economic growth, social welfare |
| JEL: | I10 J14 O41 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:eui:euiwps:eco2008/35&r=age |
| By: | Alicia H. Munnell; Mauricio Soto; Robert K. Triest; Natalia A. Zhivan |
| Abstract: | The difference in labor force participation rates of men aged 55-64 across the United States is astounding. For example, West Virginia has a participation rate below 60 percent, while South Dakota has a participation rate approaching 90 percent (see Figure 1). This fact in itself has significant implications for the pressures that states will face as the baby boom starts to retire in the face of a contracting retirement income system, declining housing prices, and a lackluster stock market... |
| Date: | 2008–09 |
| URL: | http://d.repec.org/n?u=RePEc:crr:issbrf:ib2008-8-13&r=age |
| By: | Lassila , Jukka (Research Institute of the Finnish Economy); Valkonen, Tarmo (Research Institute of the Finnish Economy) |
| Abstract: | This study analyses the fiscal sustainability of the Finnish public sector using stochastic projections to describe uncertain future demographic trends and asset yields. While current tax rates are unlikely to yield sufficient tax revenue to finance public expenditure with an ageing population, if developments are as expected, the problem will not be very large. However, there is a small, but not negligible, probability that taxes will need to be raised dramatically, perhaps by over 5 percentage points. Such outcomes, if realised, could destabilise the entire welfare state. The study also analyses three policy options aimed at improving sustainability. Longevity adjustment of pension benefits and introduction of an NDC pension system would reduce the expected problem and narrow the sustainability gap distribution. Under the third option, pension funds would invest more in equities and expect to get higher returns. This policy also limits the sustainability problem, but only under precondition that policymakers in the future can live with substantially larger variation in the value of the funds without adjusting tax rules or benefits. |
| Keywords: | public finance; fiscal sustainability; uncertainty; stochastic simulations |
| JEL: | H30 H62 H63 J11 |
| Date: | 2008–12–03 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:bofrdp:2008_028&r=age |
| By: | Atsue Mizushima |
| Abstract: | Although a large number of studies have been done on intergenerational transfers of goods, little is known about intergenerational transfers of time. In step with an increase in the aging of the population, the demand for time-intensive transfers in health care and other health services increases. Using an overlapping generations model which incorporates uncertain longevity, we set up a model which incorporates intergenerational transfers of time and examine the macroeconomic effect of public long-term care policy (LTC). Using the model, we show that LTC decreases the steady state level of capital, but that it enhances the welfare level when the rate of tax is sufficiently small. |
| Keywords: | time transfers, household production, overlapping generations model |
| JEL: | E60 I12 J14 J22 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:eui:euiwps:eco2008/36&r=age |