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on Economics of Ageing |
| By: | Johannes Geyer; Peter Haan; Svenja Lorenz; Mona Pfister; Thomas Zwick |
| Abstract: | This paper shows that labor demand plays an important role in the labor market reactions of older women affected by pension deductions for early retirement. Based on a large representative sample of the German workforce (SIAB), we calculate the consequences of individual financial incentive changes caused by a pension reform in Germany on employment, unemployment, and partial retirement. The reform reduces financial incentives for early retirement. In line with labor demand theory, we show that employers with a high share of older worker inflow compared with the share of younger worker inflow, employers in sectors with a high share of collective bargaining agreements, and employers in sectors with few investments in research and development are more responsive to their employees´ demand to stay longer in the labor market. These employer groups mainly offer their older employees the option of staying longer in partial retirement instead of forcing them into unemployment before retirement. |
| Keywords: | pension reform, labor demand effects, early retirement, employer heterogeneity |
| JEL: | J14 J18 J22 J26 H31 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp1827&r=all |
| By: | Maurer, Raimond; Mitchell, Olivia S.; Rogalla, Ralph; Schimetschek, Tatjana |
| Abstract: | Many Americans claim Social Security benefits early, though this leaves them with lower benefits throughout retirement. We build a lifecycle model that closely tracks claiming patterns under current rules, and we use it to predict claiming delays if, by delaying benefits, people received a lump sum instead of an annuity. We predict that current early claimers would defer claiming by a year given actuarially fair lump sums, and the predictions conform with respondents' answers to a strategic survey about the lump sum. In other words, such a reform could provide an avenue for encouraging delayed retirement without benefit cuts or tax increases. Moreover, many people would still defer claiming even for smaller lump sums. |
| Keywords: | retirement,annuity,delayed claiming,pension,early retirement,Social Security |
| JEL: | G11 G22 H55 J26 J32 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cfswop:629&r=all |
| By: | Ricardo Alejandro Peña Pinzón |
| Abstract: | The Colombian Pensional System (CPS) is failing to protect the elderly population of the country despite having a large stake in the governmental budget. In face of this crisis the CPS is undergoing a process of transformation towards a neoliberal model, in which the individual becomes the sole responsible of his retirement and the private pension funds displace the public entity Colpensiones. Certain financial organizations like Asofondos and ANIF support reforms aiming to these objectives based on a speech that favors financial sustainability over social security. This paper will attempt to show how the neoliberal speech shapes and defends this way of action. ****** El Sistema Pensional Colombiano (SPC) falla en proteger a la población mayor del país a pesar de tener una participación considerable en el Presupuesto General de la Nación. De cara a esta crisis, el SPC se encuentra en un proceso de transformación hacia un modelo neoliberal, donde el individuo es el único responsable de su retiro y los fondos privados de pensiones desplazan a la entidad estatal Colpensiones. Ciertas organizaciones financieras como Asofondos y ANIF apoyan reformas encaminadas a estos objetivos basadas en un discurso que favorece la sostenibilidad financiera sobre la seguridad social. Este artículo muestra cómo el discurso neoliberal modela y defiende este proceso. |
| Keywords: | colombian pensional system, social security, Colpensiones, AFP, pensionalreform, neoliberal pensional model |
| JEL: | H44 J14 I38 |
| Date: | 2019–09–30 |
| URL: | http://d.repec.org/n?u=RePEc:col:000538:017573&r=all |
| By: | Andrea Lizeth López Rodríguez |
| Abstract: | Resumen En la actualidad, las brechas de género toman cada vez más importancia en el contexto de las políticas públicas. Una de ellas, que ha sido poco estudiada en el caso colombiano, es la existente en el sistema pensional en contra de las mujeres, quienes se encuentran en desventaja para cumplir con los requisitos de acceso a una pensión. Con el fin de abordar esta brecha de género en la jubilación, el presente estudio indaga por los efectos que tendrían políticas pensionales enfocadas en las mujeres sobre la probabilidad de pensionarse y la diferencia de ingresos por género en la etapa de retiro en Colombia. Además, se evalúa el costo que tendrían estas políticas para el sistema pensional. Usando técnicas de microsimulación y datos del trimestre de abril a junio de 2018 de la Gran Encuesta Integrada de Hogares (GEIH), se evalúan seis escenarios de reformas enfocados en aumentar la probabilidad de acceso a pensión de las mujeres y reducir la brecha de ingresos por género en la edad de retiro. Se encuentra que, bajo las condiciones actuales del sistema, 4,18 % de las mujeres del área rural y 15,12 % de las mujeres del área urbana podrían pensionarse. Para el caso de los hombres, estas cifras son 9,07 % y 26,56 %, respectivamente. Además, dentro de los escenarios evaluados, el más efectivo en el corto plazo, para cerrar las brechas de género en la etapa de retiro, se asocia con reducir las semanas de cotización requeridas a las mujeres para alcanzar una pensión, igualar la edad de retiro y compensar a las mujeres por cuidado infantil. Sin embargo, en el largo plazo debe pensarse en reformas que, además de lo anterior, incentiven la permanencia de las mujeres en el mercado laboral. ****** Abstract Gender gaps are becoming increasingly important in the context of public policies. One of them, which has been little studied in the Colombian case, is that existing in the pension system against women, who are at a disadvantage to meet the requirements to access a pension. For this reason, it is relevant to ask what effects would pension policies focused on women have on the probability of retiring and the distribution of earnings by gender during retirement in Colombia? Moreover, how much would it cost to the pension system? This study uses micro simulation techniques and data from the AprilJune 2018 quarter of the Large Integrated Household Survey (GEIH) to evaluate six reform scenarios, which aim to increase the probability of women's pension access and reduce the earnings gap by gender in the retirement age. I find that, under current conditions, 4,18 % of rural women and 15,9 % of urban women could retire. In the case of men, these estimates are 9,07 % and 26,56 %. Finally, I conclude that within the evaluated scenarios, the most effective short-term solution to close gender gaps in the probability of retiring with a pension and the pension amount are associated with reducing the weeks required for women, compensating women for childcare and increasing their retirement age. However, in the long-term, the efforts should focus on reforms that encourage women to remain in the labor market |
| Keywords: | Sistema de pensiones colombiano, brecha de ingreso en la etapa de retiro, brecha de género, reforma pensionalColombian Pension System, Retirement Income Distribution, Gender Gap, Pension Reform |
| JEL: | H55 J16 J26 |
| Date: | 2019–08–23 |
| URL: | http://d.repec.org/n?u=RePEc:col:000547:017568&r=all |
| By: | Horneff, Vanya; Liebler, Daniel; Maurer, Raimond; Mitchell, Olivia S. |
| Abstract: | In the wake of the financial crisis and continued volatility in international capital markets, there is growing interest in mechanisms that can protect people against retirement account volatility. This paper explores the consequences for savers' wellbeing of implementing market-based retirement account guarantees, using a life cycle consumption and portfolio choice model where investors have access to stocks, bonds, and tax-qualified retirement accounts. We evaluate the case of German Riester plans adopted in 2002, an individual retirement account produce that includes embedded mandatory money-back guarantees. These guarantees influenced participant consumption, saving, and investment behavior in the higher interest rate environment of that era, and they have even larger impacts in a low-return world such as the present. Importantly, we conclude that abandoning these guarantees could enhance old-age consumption for over 80% of retirees, particularly lower earners, without harming consumption during the accumulation phase. Our results are of general interest for other countries implementing default investment options in individual retirement accounts, such as the U.S. 401(k) defined contribution plans and the Pan European Pension Product (PEPP) recently launched by the European Parliament. |
| Keywords: | individual retirement account,investment guarantee,longevity risk,retirement income,lifecycle model |
| JEL: | D14 D91 G11 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:safewp:263&r=all |
| By: | Lusardi, Annamaria; Mitchell, Olivia S.; Oggero, Noemi |
| Abstract: | We analyze debt and debt management of Americans nearing retirement age. We show that older people have numerous financial obligations that can lead to financial distress. Using data from the 2015 National Financial Capability Study and an extensive literature review, we show that lack of financial literacy, lack of information, and behavioral biases help explain the prevalence of debt later in life. Our evidence indicates that debt at older ages can negatively influence retirement well-being. |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cfswop:631&r=all |
| By: | Fong, Joelle H.; Koh, Benedict SK.; Mitchell, Olivia S.; Rohwedder, Susann |
| Abstract: | Over the life-cycle, wealth holdings tend to be highest in the early part of retirement. The quality of financial decisions among older adults is therefore an important determinant of their financial security during the asset drawdown phase. This paper assesses how financial literacy shapes financial decision-making at older ages. We devised a special module in the Singapore Life Panel survey to measure financial literacy to study its relationship with three aspects of household financial and investment behaviors: credit card debt repayment, stock market participation, and adherence to age-based investment glide paths. We found that the majority of respondents age 50+ has some grasp of concepts such as interest compounding and inflation, but fewer know about risk diversification. We provide evidence of a statistically significant positive association between financial literacy and each of the three aspects of suboptimal financial decision-making, controlling for many other factors, including education. A one-unit increase in the financial literacy score was associated with an 8.3 percentage point greater propensity to hold stocks, and a 1.7 percentage point higher likelihood of following an age-appropriate investment glide path. The financial literacy score is only weakly positively linked with timely credit card balance repayment, both in terms of statistical significance and estimate size. |
| Keywords: | retirement,financial literacy,credit card debt,stock market nonparticipation,lifecycleinvestment,household portfolio |
| JEL: | D14 E21 G11 J32 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cfswop:630&r=all |
| By: | Cooper, Daniel H. (Federal Reserve Bank of Boston); Dynan, Karen E. (Harvard University); Rhodenhiser, Hannah (Federal Reserve Bank of Boston) |
| Abstract: | While the Panel Study of Income Dynamics (PSID) has much to offer researchers studying household behavior, one limitation is that its summary measure of wealth is not as broad as those of other commonly used surveys, such as the Survey of Consumer Finances (SCF), because it does not include the value of defined-contribution (DC) pensions. This paper describes the pension data available in the PSID and shows how they can be used to create a more comprehensive picture of household finances. We then compare various measures derived from these data with their counterparts from the SCF. Along a number of dimensions, the PSID data line up fairly well. Notably, an augmented summary measure of PSID wealth that includes the value of DC pensions is considerably closer to the SCF summary measure than to the standard measure for the median household. We conclude by presenting several examples of research areas where using a broader measure of wealth might be important. |
| Keywords: | household wealth; retirement assets; household survey data |
| JEL: | E21 |
| Date: | 2019–08–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedbwp:19-6&r=all |
| By: | Andreas Backhaus; Mikkel Barslund |
| Abstract: | Grandparents at working-age spend a considerable amount of time taking care of their grandchildren. These time transfers might imply economic trade-offs regarding the participation in the labour market. Using an instrumental variable strategy and multiple waves of the Survey of Health, Ageing and Retirement in Europe (SHARE), we estimate the causal effect of grandparenthood on the labour supply of working-age grandparents in ten European countries. In our preferred specification, we find a large negative impact of grandparenthood on the labour supply of women aged 55 to 64. This effect is particularly pronounced following the arrival of the first grandchild and for grandmothers who live in close distance to their offspring. It further operates at the extensive margin of labour supply, resulting in grandmothers leaving the labour market entirely. By contrast, male labour supply does not significantly adjust in response to grandparenthood. Our results imply a relevant trade-off between labour supply and grandchild care for European women of later working age. |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:ces:econwp:_31&r=all |
| By: | Gretchen Donehower (University of California at Berkeley; Academic Specialist) |
| Abstract: | If we want to imagine the details of a person’s life, one of the most relevant facts about that person we can know is age. Given age, we can take a decent guess at many other aspects of life, such as household arrangement, educational status, work life, risk of death, relationship with the public sector, and many other features. For example, a 2-year-old most likely lives with one or two parents, is not involved in formal education or the labor force, has a fairly low probability of death, and is neither paying taxes nor receiving more than a small amount of public benefits that might go toward health care or as part of a family benefit. In contrast, a 40-year-old most likely lives with a spouse or partner and one or more children, has completed education, is in the labor force earning income and paying taxes, as well as making substantial transfers to family members to support their consumption. The ability of age to tell us so much about a person’s social and economic life is one of the central motivations behind the National Transfer Accounts (NTA) project. |
| Keywords: | Generational economy, National Transfer Accounts, measurement, Gender, Women's work, labour |
| Date: | 2018–07 |
| URL: | http://d.repec.org/n?u=RePEc:ctw:wpaper:cwwwp4&r=all |
| By: | Goda, Gopi Shah (Stanford University); Levy, Matthew R. (London School of Economics); Flaherty Manchester, Colleen (University of Minnesota); Sojourner, Aaron (Federal Reserve Bank of Minneapolis); Tasoff, Joshua (Claremont Graduate University) |
| Abstract: | Defaults have been shown to have a powerful effect on retirement saving behavior yet there is limited research on who is most affected by defaults and whether this varies based on features of the choice environment. Using administrative data on employer-sponsored retirement accounts linked to survey data, we estimate the relationship between retirement saving choices and individual characteristics – long-term discounting, present bias, financial literacy, and exponential-growth bias – under two distinct choice environments: an opt-in regime and an auto-enrollment regime. Consistent with our conceptual model, we find that the determinants of following the default and contribution behavior are regime-specific. Under the opt-in regime, financial literacy plays an important role in predicting total contributions, active saving choices, and maxing out contributions in the tax-preferred account. In contrast, under the auto-enrollment regime, present bias is the most significant behavioral predictor of contribution behavior. A causal interpretation of the estimates suggests that auto-enrollment increases saving primarily among those with low financial literacy. |
| Keywords: | Present bias; Exponential-growth bias; Household finance; Retirement saving decisions; Choice architecture; Defaults; Financial literacy; Procrastination |
| JEL: | J32 |
| Date: | 2019–09–26 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedmoi:0026&r=all |
| By: | John Armstrong; Cristin Buescu |
| Abstract: | In a collectivised pension fund, investors agree that any money remaining in the fund when they die can be shared among the survivors. We give a numerical algorithm to compute the optimal investment-consumption strategy for an infinite collective of identical investors with exponential Kihlstrom--Mirman preferences, investing in the Black--Scholes market in continuous time but consuming in discrete time. Our algorithm can also be applied to an individual investor. We derive an analytic formula for the optimal consumption in the special case of an individual who chooses not to invest in the financial markets. We prove that our problem formulation for a fund with an infinite number of members is a good approximation to a fund with a large, but finite number of members. |
| Date: | 2019–11 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1911.02296&r=all |