Tuesday, February 12, 2019

New study: “Retiring Earlier than Planned: What Matters Most?”

The Center for Retirement Research at Boston College has released a new Issue in Brief:

“Retiring Earlier than Planned: What Matters Most?”

by Alicia H. Munnell, Matthew S. Rutledge, and Geoffrey T. Sanzenbacher

The brief's key findings are:

  • More than a third of older workers retire earlier than planned: the question is why?
  • This study looks at: 1) the impact of unexpected changes in health, employment, family, and finances on early retirement; and 2) the prevalence of these shocks.
  • The findings suggest that:
    • Health shocks play the largest role, mainly because they are widespread.
    • Job loss without finding a new job, while not as prevalent, is also important.
    • Family transitions have a modest impact, while financial shocks appear to have little effect.
  • A key caveat is that all the shocks combined explain only about a quarter of earlier-than-planned retirements, so clearly other factors are also at play.

This brief is available here. Read more!

Wednesday, January 16, 2019

Meeting of the 2019 Technical Panel on Assumptions and Methods

The 2019 Social Security Technical Panel on Assumptions and Methods will hold its third public meeting Friday, January 25th, 2019 from 9:30am to 2:30pm. The meeting will be held at Social Security Administration Headquarters in Baltimore(6401 Security Blvd.; Gwynn Oak, MD 21207

Room: 1700A Robert M. Ball Building). The meeting agenda is attached to this invitation.

Because of security considerations at SSA and space limitations, those wishing to attend in person should RSVP to the Social Security Advisory Board staff: joel.feinleib@ssab.gov , call our office at 202-475-7700 or reply to this email by Friday, January 18. Additional details for entry to SSA facilities and parking will communicated next week.

For those who cannot attend in person, there will be a teleconference line available for the entirety of the meeting 9:30am-2:30. Please RSVP with a request for the teleconference information. Material presented to the panel at the meeting will be made available by the meeting time on the panel’s public information page (see below).

Information on the 2019 Technical Panel on Assumptions and Methods can be found on the panel’s public information page. Meeting agendas will be posted to the site approximately one week before meeting dates and material presented at meetings, such as handouts or presentation slides will posted following the meeting.

Attendees who require a reasonable accommodation,  should please call 202-475-7700 at least three days before the meeting date.

Meeting Agenda

9:30am -11:00am Economic assumptions and methods
Presentation: Office of the Chief Actuary

11:00am-12:30pm Trends in economic inequality and implications for Social Security
Presentation: David Deming, Professor of Public Policy, Harvard
Kennedy School; Professor of Education and Economics, Harvard
Graduate School of Education

12:30pm-1:00pm Lunch

1:00pm-2:30pm Technology and the future of work and employment
Presentation: Michael Chui, Partner, McKinsey and Company,
and McKinsey Global Institute

Read more!

Thursday, January 3, 2019

New Issue Brief: “What Financial Risks Do Retirees Face in Late Life?”

The Center for Retirement Research at Boston College has released a new Issue in Brief:

What Financial Risks Do Retirees Face in Late Life?

by Matthew S. Rutledge and Geoffrey T. Sanzenbacher

The brief’s key findings are:

  • As life expectancy rises, more retirees will face late-life financial risks, including: high health costs, financial mistakes due to cognitive decline, and widowhood.
  • To date, the research literature suggests that these risks severely affect only a minority of retirees, but the impact may become more widespread in the future.
  • The reasons include growing health costs; the rise of 401(k)s, which can be more vulnerable to fraud; and the declining role of Social Security’s widow benefits.

Read more!

Wednesday, January 2, 2019

Does Early Retirement Cause Earlier Death?

Early Retirement and Mortality Rates of Blue-Collar Men

For blue-collar male workers in Austria, an extra year of early retirement, induced by a policy change, was associated with an increase in the probability of death before age 73 of 1.85 percentage points.

Many workers dream of retiring as early as possible to pursue travel, leisure, sport, and other pursuits. But the research findings in Fatal Attraction? Extended Unemployment Benefits, Labor Force Exits, and Mortality (NBER Working Paper No. 25124), a study by Andreas Kuhn, Stefan Staubli, Jean-Philippe Wuellrich, and Josef Zweimüller, suggest that some individuals, particularly men, might want to postpone retirement if possible. Studying a temporary change in unemployment insurance rules in Austria which allowed workers to retire early, they find that men who retired before the normal retirement age experienced an increased risk of premature death. They do not find any statistically significant effect of early retirement on women.

Many nations are grappling with aging populations and the strains that pension and medical-care obligations place on government budgets. Some are considering changes to retirement programs, such as raising the age of eligibility or reducing benefits. The effect of such changes on the health and well-being of the elderly is a subject of ongoing debate.

To shed light on this question, the researchers analyze a unique public program in Austria in the late 1980s and early 1990s that was adopted when that nation's steel sector underwent dramatic downsizing. The shock affected tens of thousands of workers and their family members, and to cushion the economic blow to older workers, the Austrian government implemented the Regional Extended Benefits Program (REBP). This program effectively allowed workers to take early retirement via disability insurance or old-age pension programs. The program was only available in some regions of the country.
Using information from the Austrian Social Security Database, the researchers were able to compare the employment histories, incomes, gender, age, retirement dates, and age at death of those who took early retirement and those who were eligible but did not. They ultimately compiled information on 310,440 men and 144,532 women — excluding those from the steel sector — and compared data from REBP — eligible regions and nearby non-REBP regions.

The program induced a significant increase in early retirement. When the researchers examined the mortality rates of those who took early retirement, they found that an additional year in early retirement increased a man's probability of death before age 73 by 1.85 percentage points — equivalent to a relative increase of 6.8 percent — and reduced the age at death by 0.2 years. For women, early retirement was not associated with elevated mortality, a finding that is in line with previous research by others.

Men in blue-collar occupations, men with low work experience, and men who had some pre-existing health impairment displayed higher mortality effects than men in white-collar occupations. An additional year in early retirement increased the probability of death before age 73 by 1.91 percentage points for blue-collar men, 3.45 percentage points among men who have spent some time on sick leave, and by 2.42 percentage points among men with low work experience.

To check the robustness of their findings, the researchers analyzed data from before and after the early retirement program and found no differences in mortality and early retirement trends between those two periods. They also found that the changes in lifetime income associated with early retirement were negligible, particularly when generous government old-age benefits were counted, and that they could not explain the increased mortality among certain groups of the population. The researchers suggest that lifestyle changes may explain the study's mortality findings.

Jay Fitzgerald

Read more!

Friday, December 28, 2018

New papers from the NBER

Social Security Incentives in Belgium: An Analysis of Four Decades of Change
Anne-Lore Fraikin, Alain Jousten, and Mathieu Lefebvre #25375
The paper traces labor market reforms over the last four decades. It provides estimates of retirement incentives for a selected set of typical worker profiles across time and socioeconomic groups and links these series to the labor market performance in Belgium. The results show that the numerous retirement and social security program reforms have had a marked impact on incentives at the micro level. At the aggregate level, results are less clear-cut given the extreme diversity of programs and features in the Belgian institutional context.

Social Security Reforms and the Changing Retirement Behavior in Sweden
Mårten Palme and Lisa Laun #25394
We show how the economic incentives to remain in the labor force induced by Sweden’s public old-age pension system and disability insurance program have changed between 1980 and 2015. Based on earnings histories for different hypothetical individuals corresponding to groups by gender and educational attainments we calculate the following measures: the replacement rate (RR), the social security wealth (SSW), the accrual in the social security wealth from working one additional year as well as the implicit tax rate on working longer (ITAX). We then investigate to what extent the observed changes in these measures concur with changes in employment rates among older workers.

Read more!

Wednesday, December 12, 2018

Social Security Bulletin, Vol. 78, No. 4

Social Security Totalization Agreements

by Brent W. Jackson and Scott Cash

Since the 1970s, U.S. negotiators have concluded bilateral agreements with 28 important trading partners to coordinate social security coverage and benefit provisions for individuals who live and work in more than one country in their working lives. Known as “totalization agreements,” they are similar in function and structure to treaties and are legally classified as congressional-executive agreements concluded pursuant to statute. The agreements have three main purposes: to eliminate double taxation on earnings, to provide benefit protections for workers who have divided their careers between the United States and another country, and to permit unrestricted payment of benefits to residents of the two countries. This article briefly describes totalization agreements, relates their history, and considers proposals to modernize and enhance them.

When Every Dollar Counts: Comparing Reported Earnings of Social Security Disability Program Beneficiaries in Survey and Administrative Records

by David C. Wittenburg, Jeffrey Hemmeter, Holly Matulewicz, Lindsay Glassman, and Lisa Schwartz

This article examines differences between survey- and administrative data–based estimates of employment and earnings for a sample of Social Security Administration (SSA) disability program beneficiaries. The analysis uses linked records from SSA's National Beneficiary Survey and administrative data from the agency's Master Earnings File. The authors find that estimated employment rates and earnings levels based on administrative data are higher than those based on survey data for beneficiaries overall and by sociodemographic subgroup. In proportional terms, the differences between survey and administrative data tend to be greater among subgroups with survey-reported employment rates that are lower than that of beneficiaries overall.

Social Security Administration Payments to State Vocational Rehabilitation Agencies for Disability Program Beneficiaries Who Work: Evidence from Linked Administrative Data

by Jody Schimmel Hyde and Paul O'Leary

This article's authors use linked administrative data from the Social Security Administration (SSA) and the Department of Education's Rehabilitation Services Administration to evaluate SSA's investment in services provided by the federal-state Vocational Rehabilitation (VR) program. A unique data resource permits a comparison of the value of SSA payments to state VRagencies for services provided to disability program beneficiaries who find and maintain a substantial level of work with the value of the cash benefits those beneficiaries forgo because of work. The authors find that the value of cash benefits forgone by beneficiaries after applying for VR services is substantially greater than the value of SSA payments to state VR agencies for those services, although the portion of the difference that is attributable to VR services cannot be determined.

Read more!

New papers from the NBER

The Effect of Economic Conditions on the Disability Insurance Program: Evidence from the Great Recession
Nicole Maestas, Kathleen J. Mullen, and Alexander Strand #25338
We examine the effect of cyclical job displacement during the Great Recession on the Social Security Disability Insurance (SSDI) program. Exploiting variation in the severity and timing of the recession across states, we estimate the effect of unemployment on SSDI applications and awards. We find the Great Recession induced nearly one million SSDI applications that otherwise would not have been filed, of which 41.8 percent were awarded benefits, resulting in over 400,000 new beneficiaries who made up 8.9 percent of all SSDI entrants between 2008-2012. More than one-half of the recession-induced awards were made on appeal. The induced applicants had less severe impairments than the average applicant. Only 9 percent had the most severe, automatically-qualifying impairments, 33 percent had functional impairments and no transferable skills, and the rest were denied for having insufficiently severe impairments and/or transferable skills. Our estimates imply the Great Recession in! creased claims processing costs by $2.960 billion during 2008-2012, and SSDI benefit obligations by $55.730 billion in present value, or $97.365 billion including both SSDI and Medicare benefits.

Annuity Pricing in Public Pension Plans: Importance of Interest Rates
Nino Abashidze, Robert L. Clark, Beth Ritter, and David Vanderweide #25343
There is little systematic information on the distribution options in public sector retirement plans and how annuity options are priced relative to the standard single life annuity. This study examines the distribution options of 85 large public retirement plans covering general state employees, teachers, and local government employees. An important component of the analysis is the construction of a data set presenting the annuity options offered by each of these plans and how the monthly benefits for these distribution options are priced. The analysis shows that interest rates used to price annuities vary considerably across the plans. As a result, retirees with the same monthly benefit if a single life benefit is chosen will have substantially different monthly benefits if they select the joint and survivor annuity offered by their retirement plan.

Read more!