Michigan RRC newsletter and key findings of new research

The University of Michigan Retirement Research Center, part of the larger retirement research consortium funded by the Social Security Administration, has released its winter newsletter. You can read the whole thing in PDF by clicking here.

I've pasted below a section of the newsletter highlighting key findings from recent MRRC working papers. The full papers are available at the MRRC website.

How Much Do Respondents in the HRS Know About Their Tax-deferred Contribution Plans? A Cross-cohort Comparison by Irena Dushi and Marjorie Honig WP 2008-201

• Younger cohorts were more likely to report accurately that they were included in a tax-deferred plan.
  
• However, identical proportions (70 percent) of respondents in both the older and the younger cohorts accurately reported whether they made a contribution during the interview year. Both cohorts' self-reported contributions are systematically larger than the true values.
  
• Both self-reported and W-2 contributions are significantly larger among respondents in the younger cohort.
  

Does
the Rise in the Full Retirement Age Encourage Disability Benefits Applications? Evidence from the HRS by Xiaoyan Li and Nicole Maestas WP 2008-198

• As the Social Security full retirement age (FRA) rises, the relative generosity of Social Security retirement benefits compared to disability benefits is declining, raising the incentive for insured people to apply for disability benefits.
  
• We find that an average four month increase in the FRA slightly increases the two-year DI application rate by 0.04-0.30 percentage points.
  
• The effect is greater among those with a work limiting health problem (0.22-0.89 percentage points).
  

The Optimal Design of Social Security Benefits by Shinichi Nishiyama and Kent Smetters WP 2008-197

• Progressivity in the Social Security benefit structure provides risk sharing against shocks that are difficult to insure privately. On the other hand, progressivity introduces various marginal tax rates that distort labor supply.
  
• We find that the best U.S. Social Security replacement rate structure is fairly "flat." The relatively long averaging period used in the benefit formulation already provides some insurance against negative wage shocks but in a manner that is more efficient than explicit redistribution.
  

The Labor Supply Effects of Disability Insurance Work Disincentives by Nicole Maestas and Na Yin WP 2008-194

• The Social Security Disability Insurance (DI) program imposes strong work restrictions on beneficiaries.
  
• DI benefits are payable only until full retirement age (FRA), at which point they are converted to retired worker benefits, and the program's implicit high marginal tax rate on earnings is abruptly relaxed.
  
• We find a relative increase in labor force participation at FRA for DI beneficiaries of 10.4 percentage points, and argue that this is likely a lower bound estimate on the labor supply disincentive effects of the DI program.
  

Labor Market and Immigration Behavior of Middle-Aged and Elderly Mexicans by Emma Aguila and Julie Zissimopoulos WP 2008-192

• Compared to short-term, long-term Mexican migrants to the US are more likely to have US Social Security benefits and are less likely to have Mexican Social Security benefits and public health insurance coverage.
  
• Receipt of U.S. Social Security benefits increases retirement rates among return migrants. Return migrants are more likely to report being in poor health than non-migrants and this also increases the likelihood of retiring.
  
• A Social Security Agreement between the US and Mexico would likely have important implications for retirement behavior.