Tuesday, February 21, 2017

Upcoming event: “The Growing Longevity Gap Between Rich and Poor and its Impact on Redistribution through Social Security”

Guest Speaker
Gary Burtless
on
"The Growing Longevity Gap Between Rich and Poor and its Impact on Redistribution through Social Security"
Wednesday, February 22nd, 2017
12:00 p.m. - 1:00 p.m.
RSVP


  Location:  
NFIB
1201 F Street NW
Suite 200
Washington, DC 20004

Featured Guest:

Gary Burtless is a senior fellow and holds the John C. and Nancy D. Whitehead Chair in Economic Studies at the Brookings Institution in Washington, DC. He does research on issues connected with the income distribution and poverty, public finance, aging, labor markets, social insurance, and the behavioral effects of government tax and transfer policy.

Gary Burtless
Senior Fellow
Brookings Institute

RSVP to: savingsandretirement@gmail.com
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Tuesday, February 14, 2017

New working papers from the Pension Research Council

Does Financial Literacy Increase Students' Perceived Value of Schooling?
Luca Maria Pesando
Abstract
- Using data from the 2012 Programme for International Students Assessment (PISA) for Italy, this paper investigates whether financial literacy skills play a role in shaping the value that high school students place on schooling. We hypothesize that higher financial literacy may foster students' awareness of the financial and non-financial benefits of gaining additional education, together with the costs associated with poor school outcomes. We complement OLS estimates with an instrumental variable (IV) approach to recover a plausibly causal effect of financial literacy on the school outcomes of interest, namely (a) truancy and time spent on homework outside of school (time commitment to education), and (b) attitudes towards school (attitudes). Results suggest that higher financial literacy increases students' perceived value of schooling by boosting their time commitment to education. Conversely, there is no evidence that financial literacy shapes students' attitudes towards school. We see this finding as consistent with the idea that adolescents' behavior is easier to measure objectively and reliably than attitudes.

Optimal Social Security Claiming Behavior under Lump Sum Incentives: Theory and Evidence
Raimond Maurer, Olivia S. Mitchell, Ralph Rogalla, and Tatjana Schimetschek
Abstract
- People who delay claiming Social Security receive higher lifelong benefits upon retirement. We survey individuals on their willingness to delay claiming later, if they could receive a lump sum in lieu of a higher annuity payment. Using a moment-matching approach, we calibrate a lifecycle model tracking observed claiming patterns under current rules and predict optimal claiming outcomes under the lump sum approach. Our model correctly predicts that early claimers under current rules would delay claiming most when offered actuarially fair lump sums, and for lump sums worth 87% as much, claiming ages would still be higher than at present.

Read more!

Friday, February 10, 2017

New research finds rising retirement incomes, high replacement rates for new retirees

Over at Forbes, I write up some new research out of the Census Bureau which uses SSA and IRS administrative data to get a more accurate view of retirees’ incomes. Compared to household surveys, which miss much of the income that retirees draw out of 401(k) and IRA plans, the SSA and IRS data show much higher incomes for recent retirees, a much faster growth of incomes over time, and replacement rates – that is, retirement incomes as a percentage of pre-retirement incomes – for typical households that approach 100%.

You can check it out here.

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New papers from the Social Science Research Network

"Do Americans Really Save Too Little and Should We Nudge Them to Save More? The Ethics of Nudging Retirement Savings"
George Mason Law & Economics Research Paper No. 17-03

TODD J. ZYWICKI, George Mason University - Antonin Scalia Law School, Faculty, PERC - Property and Environment Research Center
Email: tzywick2@gmu.edu

The contention that consumers systematically “undersave” for retirement is a frequent example provided by adherents to behavioral economics and behavioral law and economics to purportedly illustrate their theories. Although frequently asserted, the claim that people systematically undersave is rarely assessed empirically.

This article, written for the Georgetown Institute for the Study of Markets and Ethics Symposium on “The Ethics of Nudging,” examines available data on how many people fail to save and the reasons why they do not. According to available evidence, the overwhelming number of households saves enough or more than they need for retirement; only a small minority does not seem to save enough. Those who do not save for retirement lack the money to do so or allocate available resources to paying down consumer and student loan debt. Behavioral economics theories explain little of the observed patterns of saving or non-saving behavior. Moreover, behavioral economics itself suggests that many people probably oversave for retirement and makes no effort to reconcile these offsetting biases.

More fundamental, once it is recognized that there is an opportunity cost to saving more — one must consume less today, borrow more, or work more — the theoretical validity of the claim that people undersave because of behavioral biases is suspect. Given the inherently subjective nature of opportunity cost, a central planner cannot be confident that he can make people better off by influencing their consumption expenditures across time than he could by shifting consumption expenditures across different goods and services today. It is concluded that there is little reason to believe that people would be made better off by nudging them to save more for retirement.

"Considering Part-Time Work after Retirement: Should I Stay or Should I Go?"

HONG MAO, Shanghai Second Polytechnic University
Email: hmaoi@126.com
JAMES M. CARSON, University of Georgia
Email: jcarson@uga.edu
KRZYSZTOF OSTASZEWSKI, Illinois State University
Email: krzysio@ilstu.edu
ZHONGKAI WEN, University of Illinois at Chicago
Email: zwen5@uic.edu

In this article, we use dynamic leisure preference to study the optimal retirement decision with consideration of part-time work after the “official” retirement. We also consider a risky investment besides risk-free investment. and allow investor borrowing money at risk-free interest rate. Our results indicate that the optimal retirement age is very sensitive to the following parameters: coefficient of risk aversion, the leisure, rate after retirement, coefficient of survival function (describing the individual’s mortality), interest rate and discount rate, and is especially sensitive to the drift of return rate of risky assets invested. Our results also show that mortality improvement greatly affect all other optimal solutions except optimal retirement age, but have small affect on optimal retirement age.

"Intergenerational Transfers and China's Social Security Reform"
The Journal of the Economics of Ageing, Forthcoming

AYSE IMROHOROGLU, University of Southern California - Marshall School of Business
Email: AIMROHOROGLU@MARSHALL.USC.EDU
KAI ZHAO, University of Connecticut - Department of Economics
Email: kai.zhao@uconn.edu

Most of the studies examining the implications of social security reforms in China use overlapping generations models and abstract from the role of family support. However, in China, family support plays a prominent role in the well-being of the elderly and often substitutes for the lack of government-provided old-age support systems. In this paper, we investigate the impact of social security reform in China in a model with two-sided altruism as well as a pure life-cycle model. We show that the quantitative implications of social security reform, in particular for capital accumulation and output, are very different across the two models.

Read more!

Thursday, February 9, 2017

Job opportunity: The Cato Institute

Research Assistant Center for Social Welfare Policy

 

Research Assistant Center for Social Welfare Policy

The Cato Institute seeks a research assistant for a full-time position located in DC as a research assistant specializing in social welfare policy. The ideal candidate will have exceptionally strong research skills, and knowledge of economics, health care, entitlement policy, and the US welfare system, as well as a commitment to limited government and individual liberty.  Successful candidates will be entrepreneurial, hard-working, self-starters, with a willingness to adapt to the changing needs of a growing policy center.

Company Overview:

The Cato Institute is a public policy research organization—a think tank—dedicated to the principles of individual liberty, limited government, free markets and peace. Its scholars and analysts conduct independent, nonpartisan research on a wide range of policy issues.

Founded in 1977, Cato owes its name to Cato’s Letters, a series of essays published in 18th- century England that presented a vision of society free from excessive government power. Those essays inspired the architects of the American Revolution. And the simple, timeless principles of that revolution — individual liberty, limited government, and free markets – turn out to be even more powerful in today’s world of global markets and unprecedented access to information than Jefferson or Madison could have imagined. Social and economic freedom is not just the best policy for a free people, it is the indispensable framework for the future. Cato Institute is an EOE.

Responsibilities:

  • Assist scholars with their task, projects and events
  • Conduct general or detailed research as required
  • Conduct literature reviews
  • Edit and fact check manuscripts
  • Supervising the work of interns
  • Minor administrative duties

Requirements:

  • Bachelor’s degree in economics, political science, or public policy, or equivalent work experience in those fields
  • An interest in social welfare policy
  • The ability to write well-structured, readable prose is essential
  • Expertise with Microsoft Word and Excel
  • Bonus skills include the ability to conduct regression analyses and a Master’s degree in a public policy related field

http://catoinstitute.applytojob.com/apply/R39Q3Mv75Q/Research-Assistant-Center-For-Social-Welfare-Policy?source=FACE

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Tuesday, January 31, 2017

New article: “Target Date Funds: What’s Under the Hood?”

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

“Target Date Funds: What’s Under the Hood?”

by Edwin J. Elton, Martin J. Gruber, Andre de Souza, and Christopher R. Blake

The brief’s key findings are:

  • While nearly 60 percent of new 401(k) participants have savings in target date funds (TDFs), little research has looked under the hood of this investment vehicle.
  • This analysis uses a unique dataset with extensive information on the underlying mutual funds that TDFs hold.
  • The results show that TDFs:
    • often invest in specialized assets (e.g., emerging markets and real estate);
    • charge fees that are only modestly higher than if an individual investor assembled a similar portfolio on his own; and
    • earn returns that are broadly in line with other mutual funds.
This brief is available here. Read more!

Monday, January 30, 2017

New working papers from the Pension Research Council

Does Financial Literacy Increase Students' Perceived Value of Schooling?
Luca Maria Pesando
Abstract - Using data from the 2012 Programme for International Students Assessment (PISA) for Italy, this paper investigates whether financial literacy skills play a role in shaping the value that high school students place on schooling. We hypothesize that higher financial literacy may foster students' awareness of the financial and non-financial benefits of gaining additional education, together with the costs associated with poor school outcomes. We complement OLS estimates with an instrumental variable (IV) approach to recover a plausibly causal effect of financial literacy on the school outcomes of interest, namely (a) truancy and time spent on homework outside of school (time commitment to education), and (b) attitudes towards school (attitudes ). Results suggest that higher financial literacy increases students' perceived value of schooling by boosting their time commitment to education. Conversely, there is no evidence that financial literacy shapes students' attitudes towards school. We see this finding as consistent with the idea that adolescents' behavior is easier to measure objectively and reliably than attitudes.


Optimal Social Security Claiming Behavior under Lump Sum Incentives: Theory and Evidence
Raimond Maurer, Olivia S. Mitchell, Ralph Rogalla, and Tatjana Schimetschek
Abstract - People who delay claiming Social Security receive higher lifelong benefits upon retirement. We survey individuals on their willingness to delay claiming later, if they could receive a lump sum in lieu of a higher annuity payment. Using a moment-matching approach, we calibrate a lifecycle model tracking observed claiming patterns under current rules and predict optimal claiming outcomes under the lump sum approach. Our model correctly predicts that early claimers under current rules would delay claiming most when offered actuarially fair lump sums, and for lump sums worth 87% as much, claiming ages would still be higher than at present.

Read more!