nep-age New Economics Papers
on Economics of Ageing
Issue of 2023‒08‒28
five papers chosen by
Claudia Villosio, LABORatorio R. Revelli

  1. An Analysis of Benefit Distribution Options Selected by Individuals Covered by the PBGC By Robert L. Clark; Denis Pelletier; Beth Ritter
  2. Guaranteed minimum income, universal transfers for children and older adults, and other income protection options By Farías, Consuelo; De Wispelaere, Jurgen; Santos García, Raquel
  3. Mortality Regressivity and Pension Design By Pashchenko, Svetlana; Porapakkarm, Ponpoje; Jang, Youngsoo
  4. Social Security Claiming Intentions: Psychological Ownership, Loss Aversion, and Information Displays By Suzanne Shu; John W. Payne
  5. Expenditure patterns of New Zealand retiree households By Trinh Le; Euan Richardson

  1. By: Robert L. Clark; Denis Pelletier; Beth Ritter
    Abstract: The Pension Benefit Guarantee Corporation becomes the trustee for private defined benefit plans that have defaulted. The PBGC pays retirement benefits as provided by the plan and that are consistent with federal guidelines concerning the type and amounts of distributions. In response to a Freedom of Information Request, the PBGC provided us with relevant information on all individuals who received a retirement benefit from the PBGC in the last 10 years, over 250, 000 retirees. We examine the PBGC distributions chosen over the last decade and how they vary by age at retirement, sex, months of service, and other relevant variables. Key findings indicate that men are much more likely to choose a joint and survivor annuity compared to female claimants and the difference increases with age. Conditional on selecting a J&S annuity, men are more likely to select a 100% survivor’s annuity while women tend to choose a 50% survivor’s benefit.
    JEL: J14 J26 J32
    Date: 2023–07
  2. By: Farías, Consuelo; De Wispelaere, Jurgen; Santos García, Raquel
    Date: 2023–07–20
  3. By: Pashchenko, Svetlana; Porapakkarm, Ponpoje; Jang, Youngsoo
    Abstract: How should we compare welfare across pension systems in presence of differential mortality? A commonly used standard utilitarian criterion implicitly favors the long-lived over the short-lived. We investigate under what conditions this ranking is reversed. We clearly distinguish between the redistribution along mortality and income dimensions, and thus between mortality and income progressivity. We show that when mortality is independent of income, mortality progressivity can be optimal only when (i) there is more aversion to inequality in lifetime utilities compared to aversion to consumption inequality, (ii) life is valuable. When the short-lived tend to have lower income, mortality progressivity can be also optimal when income redistribution tools are limited. In this case, mortality progressivity is used to substitute for income progressivity.
    Keywords: Mortality-related redistribution, Pensions, Social Security, Annuities, Life-Cycle Model
    JEL: G22 H21 H55 I38
    Date: 2023–07–14
  4. By: Suzanne Shu; John W. Payne
    Abstract: For many Americans the question of when to claim Social Security benefits is one of the most consequential financial decisions they will ever face. While acknowledging that individuals differ in terms of optimal timing for starting Social Security benefits, many economists argue that an average person would benefit from delaying claiming as long as they could. Yet this is not what average Americans do. Many more Americans claim as soon as possible, at age 62, rather than as late as possible, at age 70. Why? This paper focuses on individual differences in beliefs and values that influence Social Security claiming intentions. As expected from economic theory, individual differences in life expectations and degree of patience for later larger payouts relate to claiming intentions. In addition, however, we also find that individual differences in psychological ownership of one’s Social Security benefits and individual differences in degree of loss aversion are both significant predictors of Social Security claiming intentions. Further, we find that an “enriched” information display manipulation (nudge) that emphasizes longer-term consequences of late claiming leads to earlier, not later, claiming intentions, and that the size of this effect is related to individual differences in the degree of loss aversion.
    JEL: D14 D91 G51
    Date: 2023–07
  5. By: Trinh Le (Motu Economic and Public Policy Research); Euan Richardson (Motu Economic and Public Policy Research)
    Abstract: This paper uses household-level data from the New Zealand Household Economic Survey from 2006/07 to 2018/19 to examine expenditure patterns of retiree households. We find that in 2018/19 retiree households spend on average $55, 700 per annum, of which 13% is on groceries, 19% on housing, 14% on other necessities (household utilities, communications, and insurance), and the remaining 54% on discretionary expenses. Household expenditure patterns differ significantly across demographic groups and income levels. On average, singles living alone spend $30, 700 per annum whereas couple-only households spend $65, 100 per annum. As retiree households age, they spend less, especially on discretionary categories such as clothing, transport, and recreation and culture. We find that subjective wellbeing is higher for retiree households who have higher qualifications, own their home, have higher incomes, live with their partner and have no dependent children, and is the lowest for rent-paying renters, single retirees living with others and M?ori households. Retiree households are more likely to report having adequate income for every-day needs and being satisfied with life and less likely to report financial strain than pre-retirement households.
    Keywords: Retiree households, expenditures, retirement
    JEL: J14 J26 D12
    Date: 2023–08

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