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on Economics of Ageing |
| By: | DE GRIP Andries; DUPUY Arnaud; JOLLES Jelle; VAN BOXTEL Martin |
| Abstract: | This paper uses longitudinal test data to analyze the relation between retirement and cognitive development. Controlling for individual fixed effects and lagged cognition, we find that retirees face greater declines in information processing speed than those who remain employed. However, remarkably, their cognitive flexibility declines less, an effect that appears to be persistent 6 years after retirement. Both effects of retirement on cognitive development are comparable to the effect of a five to six-year age difference. Controlling for changes in blood pressure, which are negatively related to cognitive flexibility, we still find lower declines in cognitive flexibility for retirees. Since the decline in information processing speed after retirement holds particularly for the low educated, activating these persons after retirement could lower the social costs of an aging society. |
| Keywords: | Cognitive decline; Labor market activity; Retirement |
| JEL: | J24 J26 |
| Date: | 2013–06 |
| URL: | http://d.repec.org/n?u=RePEc:irs:cepswp:2013-11&r=age |
| By: | Alicia H. Munnell; Anthony Webb; Rebecca Cannon Fraenkel |
| Abstract: | The National Retirement Risk Index (NRRI) measures the share of working-age households who are “at risk” of being unable to maintain their pre-retirement standard of living in retirement. The Index is calculated by comparing households’ projected replacement rates – retirement income as a percent of pre-retirement income – with target rates that would allow them to maintain their living standard. The Index is the percent of households for which the projection falls short of the target. The NRRI is based on the Federal Reserve’s Survey of Consumer Finances (SCF). The SCF is a triennial survey of a nationally representative sample of U.S. households, which collects detailed information on households’ assets, liabilities, and demographic characteristics. The NRRI results show that, even if households work to age 65 and annuitize all their financial assets, including the receipts from reverse mortgages on their homes, more than half of households are at risk. Real – inflation-adjusted – interest rates enter into the NRRI calculation primarily through the assumption that households purchase an inflation-indexed annuity with their assets at retirement. These assets include 401(k)/IRA holdings, financial assets outside of tax-preferred plans, and the proceeds from accessing home equity through a reverse mortgage. The higher the interest rate, the more income these financial assets produce. This effect is partially reduced by the fact that the portion of the house that can be accessed through a reverse mortgage varies inversely with the nominal interest rate. Interest rates do not play a role during the asset accumulation period, because, as described below, assets at 65 are based on the steady relationship by age between wealth and income reported in the SCF. This brief explores the percent of households at risk under two alternative interest rate scenarios: 1) real rates remain at zero as currently suggested by the yield on 10-year Treasury Inflation-Protected Securities (TIPS); or 2) real rates revert to the 4-percent level experienced when the indexed securities were first introduced in the 1990s. The discussion proceeds as follows. The first section describes the nuts and bolts of constructing the NRRI. The second section discusses the role of interest rates in the NRRI and reports the results. The final section concludes that changing interest rates has only a modest effect on the NRRI, and that, regardless of the interest rate, today’s workers face a major retirement income challenge. |
| Date: | 2013–06 |
| URL: | http://d.repec.org/n?u=RePEc:crr:issbrf:ib2013-9&r=age |
| By: | Juha Tuomala; Tomi Kyyrä |
| Abstract: | This study explores whether the experience rating of employers' disability insurance premiums affects the inflow of older employees to disability benefits in Finland. To identify the causal effect of experience rating, we exploit a pension reform that extended the coverage of the experience-rated premiums. The results show that a new disability benefit claim can cause substantial cost to the former employer through an increased premium. Nonetheless, we find no evidence of the significant effects of experience rating on the disability inflow. The lack of the behavioral effects may be due to the complexity of experience rating calculations and/or limited employer awareness. |
| Keywords: | Experience rating, disability insurance, early retirement |
| JEL: | H32 J16 J14 |
| Date: | 2013–04–25 |
| URL: | http://d.repec.org/n?u=RePEc:fer:wpaper:46&r=age |
| By: | Makoto Nakajima; Irina A. Telyukova |
| Abstract: | Reverse mortgage loans (RMLs) allow older homeowners to borrow against housing wealth without moving. In spite of growth in this market, only 2.1% of eligible homeowners had RMLs in 2011. In this paper, we analyze reverse mortgages in a life-cycle model of retirement, calibrated to age-asset profiles. The ex-ante welfare gain from RMLs is sizable at $1,000 per household; ex-post, low-income, low-wealth and poor-health households use them. Bequest motives, nursing-home moving risk, house price risk, and interest and insurance costs all contribute to the low take-up rate. The model predicts market potential for RMLs to be 5.5% of households. |
| Keywords: | Mortgages ; Mortgage loans, Reverse ; Housing ; Retirement ; Home equity loans |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedpwp:13-27&r=age |
| By: | FitzRoy, Felix (University of St. Andrews); Nolan, Michael A. (University of Hull); Steinhardt, Max (Hamburg Institute of International Economics (HWWI)); Ulph, David (University of St. Andrews) |
| Abstract: | In contrast to previous results combining all ages we find positive effects of comparison income on happiness for the under 45s, and negative effects for those over 45. In the BHPS these coefficients are several times the magnitude of own income effects. In GSOEP they cancel to give no effect of effect of comparison income on life satisfaction in the whole sample, when controlling for fixed effects, and time-in-panel, and with flexible, age-group dummies. The residual age-happiness relationship is hump-shaped in all three countries. Results are consistent with a simple life cycle model of relative income under uncertainty. |
| Keywords: | subjective life-satisfaction, comparison income, reference groups, age, welfare |
| JEL: | D10 I31 J10 |
| Date: | 2013–06 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp7452&r=age |
| By: | Jean-Yves Duclos; Bouba Housseini |
| Abstract: | The evaluation of development processes and of public policies often involves comparisons of social states in which populations differ in size and longevity. This requires social evaluation principles to be sensitive to both the number and the length of lives. This paper explores the use of axiomatic and welfarist principles to assess social welfare in that framework. It attempts to overcome some of the limits of existing methods in the literature, in particular by avoiding a temporal repugnant conclusion, by neither penalizing nor favoring life fragmentation, and by satisfying critical-level temporal consistency. It does this by characterizing a critical-level lifetime utility function that values life periodically. To address some of the controversies on discounting utilities across time, two alternative versions of the function are developed, one with discounting and one without. |
| Keywords: | Intertemporal social evaluation, population ethics, critical-level utilitarianism, lifetime utility, social discounting |
| JEL: | C02 D31 D63 I31 J17 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:lvl:lacicr:1315&r=age |
| By: | Eichhorst, Werner (IZA); Boeri, Tito (Bocconi University); Braga, Michela (Fondazione Rodolfo DeBenedetti); De Coen, An (IDEA Consult); Galasso, Vincenzo (Bocconi University); Gerard, Maarten (IDEA Consult); Kendzia, Michael J. (IZA); Mayrhuber, Christine (WIFO - Austrian Institute of Economic Research); Pedersen, Jakob Louis (NIRAS); Schmidl, Ricarda (IZA); Steiber, Nadia (Vienna University of Economics and Business) |
| Abstract: | Report based on a study conducted for the European Parliament, Bonn 2013 (142 pages) |
| Date: | 2013–06–24 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izarrs:53&r=age |