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on Economics of Ageing |
| By: | Richard W. Johnson; Karen E. Smith; Damir Cosic; Claire Xiaozhi Wang |
| Abstract: | Various policy developments and long-term economic, social, and demographic trends raise worrisome questions about the financial security of future retirees. An erosion in employer-sponsored defined benefit pension coverage and the increase in Social Security’s full retirement age could shrink future benefits. Stagnating employment and earnings for men could threaten future retirement security, because retirement benefits and the capacity to save depend on lifetime earnings. The financial crisis, Great Recession, and collapse of the housing market in the second half of the previous decade could significantly disrupt retirement savings. This paper assesses retirement prospects for future generations, with a special focus on the late Generation-X and Millennial generations. Because retirement outcomes depend on how much people earned and saved when they were younger, the analysis compares trends in employment, earnings, pension coverage, and wealth during working ages across cohorts, using data from the Current Population Survey and the Survey of Consumer Finances. The analysis also projects age-70 incomes for future generations using DYNASIM4, the Urban Institute’s dynamic microsimulation model. |
| Date: | 2017–11 |
| URL: | http://d.repec.org/n?u=RePEc:crr:crrwps:wp2017-17&r=age |
| By: | Xi Chen; Lipeng Hu; Jody L. Sindelar |
| Abstract: | China’s recently implemented New Rural Pension Scheme (NRPS), the largest social pension program in the world, was designed to provide financial protection for its rural population and reduce economic inequities. Yet the impact of this program is mitigated if those eligible fail to enroll. This paper examines the extent to which pension-eligible individuals, and their families, make optimal pension decisions. Families are involved in the NRPS decisions because, in most cases, adult children need to enroll as a prerequisite of their parents’ receipt of benefits. We examine the decisions of both those eligible for pension benefits (i.e. over 60 years old) and their adult children. We use the rural sample of the 2012 China Family Panel Study to study determinants of the decision to enroll in NRPS, premiums paid, and time taken to enroll. We find evidence of low and suboptimal pension enrollment by eligible individuals and their families. Suboptimal enrollment takes various forms including failure to switch from the dominated default pension program to NRPS and little evidence that families make mutually beneficial intra-family decisions. For the older cohort, few individual and family characteristics are significant in enrollment decisions, but village characteristics play an important role. For the younger cohort, we find that more individual-level characteristics are significant, including own and children’s education. Village characteristics are important but not as much as for the older cohort. |
| JEL: | D13 D14 H55 I3 |
| Date: | 2017–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:24065&r=age |
| By: | Geoffrey T. Sanzenbacher; Steven A. Sass |
| Abstract: | Working longer is one of the most effective ways to improve prospects for a secure retirement. It increases monthly Social Security benefits, allows more time for saving in 401(k)s, and shortens the period of retirement that assets need to cover. Working longer is also widely seen as a reasonable response, because people are living longer and healthier lives. The question is whether this prescription is realistic for individuals across the socioeconomic spectrum. This brief addresses this question by synthesizing the findings of a series of five recent studies conducted by the Center, using educational attainment as the measure of socioeconomic status (SES).1 The brief proceeds as follows. The first section addresses whether it is reasonable to expect lower-SES individuals to work longer by examining recent patterns in life expectancy gains. The findings suggest that working somewhat longer is reasonable, so the rest of the brief focuses on the feasibility of this option for the lower-SES group. The second section explores whether lower-SES individuals currently plan to work long enough to achieve retirement security. The third section analyzes whether job switching can help workers extend their careers, while the fourth section explores the breadth of job options available to those who do switch. The fifth section examines whether reducing the health insurance costs of older workers can improve their labor force prospects. The final section concludes that less-educated workers could clearly benefit from extending their worklives but they face narrower options than their better-educated counterparts. Therefore, society may need to find remedies, other than working longer alone, that allow lower-SES households to secure an adequate retirement income. |
| Date: | 2017–11 |
| URL: | http://d.repec.org/n?u=RePEc:crr:issbrf:ib2017-21&r=age |
| By: | Isabel Correia Dias (Universidade do Minho, NIMA); Priscila Ferreira (Universidade do Minho, NIMA); Lígia Costa Pinto (Universidade do Minho, NIMA); Marieta Valente (Universidade do Minho, NIMA); Paula Veiga (Universidade do Minho, NIMA) |
| Abstract: | In this study we provide evidence on the health status and the role of gender and socioeconomic inequality in self-reported health and morbidity status amongst the elderly in Portugal. We find a negative self-perception of health status amongst the elderly; high prevalence of chronic diseases since an earlier age; high level of depression problems reported by women; and high levels of disability amongst the oldest old. There are, nonetheless, substantial differences in health status between age groups that suggest a potential for health gains in the future. The prevalence of chronic diseases, mental problems and high disability requires an adequate (re)organization of healthcare delivery to the elderly. Moreover, the evidence presented clearly calls for a gendered perspective on health policy, particularly in mental health policy. |
| Keywords: | ageing, health status, inequality |
| JEL: | I1 I14 I18 |
| Date: | 2017–11 |
| URL: | http://d.repec.org/n?u=RePEc:nim:nimawp:67/2017&r=age |
| By: | Horneff, Vanya; Maurer, Raimond; Mitchell, Olivia S. |
| Abstract: | This Chapter explores how an environment of persistent low returns influences saving, investing, and retirement behaviors, as compared to what in the past had been thought of as more "normal" financial conditions. Our calibrated lifecycle dynamic model with realistic tax, minimum distribution, and Social Security benefit rules produces results that agree with observed saving, work, and claiming age behavior of U.S. households. In particular, our model generates a large peak at the earliest claiming age at 62, as in the data. Also in line with the evidence, our baseline results show a smaller second peak at the (system-defined) Full Retirement Age of 66. In the context of a zero-return environment, we show that workers will optimally devote more of their savings to non-retirement accounts and less to 401(k) accounts, since the relative appeal of investing in taxable versus tax-qualified retirement accounts is lower in a low return setting. Finally, we show that people claim Social Security benefits later in a low interest rate environment. |
| Keywords: | dynamic portfolio choice,401(k) plan,saving,Social Security claiming age,retirement income,minimum distribution requirements,tax |
| JEL: | G11 G22 D14 D91 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:safewp:190&r=age |
| By: | Markus Leibrecht (Henley Business School, Malaysia Campus); Joelle H. Fiong (Nanyang Business School, Nanyang Technological University); |
| Abstract: | Pension systems are core institutional arrangements that are expected to be stable and reliable over consecutive generations. Nevertheless, reforms in pension provision intensified over the past decades, with several countries opting for privatisation of their pension system. We ask which factors lead governments to privatise pension systems and focus on economic crises and different facets of increased global pressures. We conduct duration analyses on a cross-section of nearly 100 economies among which 28 privatise their pension system between 1981 and 2012. Consistent with the crisis-begets-reform hypothesis, we find that severe economic crises speed up reform implementation. Likewise, high growth in economic and political globalisation is conducive for pension privatisation. These findings are robust to a variety of alternations in the empirical methodology. |
| Keywords: | economic crisis, pension reform, globalisation, duration analysis, privatisation |
| JEL: | H11 H12 H55 P11 |
| Date: | 2017–08 |
| URL: | http://d.repec.org/n?u=RePEc:rdg:icmadp:icma-dp2017-05&r=age |
| By: | Messacar, Derek |
| Abstract: | Despite a large literature estimating the effects of income taxation on the labour decisions of young and middle-aged workers, little is known about the extent to which older workers respond to changes in their income taxes. This paper explores this unresolved empirical issue, using longitudinal administrative data on more than one million individuals from Canada and exploiting a recent tax reform in the empirical identification strategy that explicitly targeted older couples. The findings offer new insight into the ?black box? of intra-household labour supply and inform the optimal designs of income tax and retirement income systems. |
| Keywords: | Household, family and personal income, Income, pensions, spending and wealth, Labour, Personal and household taxation, Wages, salaries and other earnings |
| Date: | 2017–11–23 |
| URL: | http://d.repec.org/n?u=RePEc:stc:stcp3e:2017400e&r=age |
| By: | Heeringa, Willem (Tilburg University, School of Economics and Management) |
| Abstract: | The four essays collected in this PhD thesis concern pay-as-you-go pension schemes, demographics, fiscal policy, credit constraints and house prices. The first essay shows how a pay-as-you-go pension scheme affects an individual’s optimal investment portfolio over the lifecycle. The second essay investigates policy options to keep the pay-as-you-go pension scheme in the Netherlands (AOW scheme) sustainable in the face of increasing longevity, declining fertility rates and changes in labour participation. The third essay demonstrates how tax-benefit policies impact aggregate consumption in a world of heterogeneous consumers, profit maximizing banks and imperfect information about future income shocks. The fourth essay studies the joint effect of changes in credit constraints, user cost and demographic factors on regional house prices in the Netherlands in conjunction with changes in the housing stock. |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:tiu:tiutis:da6000ea-c220-46e6-a78d-3ae595abd749&r=age |
| By: | Emmanouil Platanakis (School of Management, University of Bath); Charles Sutcliffe (ICMA Centre, Henley Business School, University of Reading,); |
| Abstract: | Although tax relief on pensions is a controversial area of government expenditure, this is the first study of the tax effects of a real world defined benefit pension scheme - the Universities Superannuation Scheme (USS). First, we estimate the tax and national insurance contribution (NIC) effects of the rule changes in 2011 on the gross and net wealth of the sponsor, government, and 16 age cohorts of members, deferred pensioners and pensioners. Second, we measure the size of the twelve income tax and NIC payments and reliefs for members and the sponsor, both before and after the rule changes. We find the total subsidy split is roughly: 40% income tax subsidy; 30% members’ NIC subsidy; and 30% sponsor NIC subsidy. However government proposals for reform have concentrated exclusively on the income tax relief, neglecting the substantially larger NIC relief, possibly because they have overestimated the size of the income tax relief. |
| Keywords: | Pension schemes, Taxation, Subsidy, National Insurance Contributions, Universities Superannuation Scheme, Redistribution, Rule changes |
| JEL: | G22 H20 J32 |
| Date: | 2017–09 |
| URL: | http://d.repec.org/n?u=RePEc:rdg:icmadp:icma-dp2017-08&r=age |
| By: | Mary K. Hamman; Daniela Hochfellner; Pia Homrighausen |
| Abstract: | This paper examines financial transfers within families before and after the great recession. Transfers within families have historically been an important source of wealth accumulation for younger generations, but what happens to these transfers when incomes and wealth are distorted by a recession? We document patterns of financial transfers within families in the U.S. and Germany before and after the Great Recession. This paper uses data from the Health and Retirement Study (HRS) and the Survey of Health, Aging and Retirement in Europe (SHARE). Critical components of the analysis include the estimation of a difference-and-differents model to compare transfer behavior over time, and multiple triple-difference-and-difference models to further study how transfer behavior differs for different population groups. Key limitations are related to available data. The SHARE data used does not contain information for year 2007, which thus had to be excluded from the analysis. In addition, harmonizing the both datasets might introduce some potential of errors. |
| Date: | 2017–11 |
| URL: | http://d.repec.org/n?u=RePEc:crr:crrwps:wp2017-16&r=age |