New papers from the Social Science Research Network

SOCIAL SECURITY, PENSIONS & RETIREMENT INCOME eJOURNAL

"How Sensitive are Subjective Retirement Expectations to Increases in the Statutory Retirement Age? The German Case" 

MEA Discussion Paper No. 207-10

MICHELA COPPOLA, University of Mannheim - Mannheim Research Institute for the Economics of Aging (MEA)
Email: mcoppola@mea.uni-mannheim.de
CHRISTINA B. WILKE, University of Mannheim - Mannheim Research Institute for the Economics of Aging (MEA)
Email: wilke@mea.uni-mannheim.de

Population Aging poses an evident threat to the financial sustainability of pension systems based on a "pay-as-you-go" (PAYG) scheme. To cope with this threat, pension systems have undergone numerous reforms in many countries in order to keep people longer at work. One crucial element of these reforms typically is an increase in the statutory retirement age at which workers are legally allowed to retire. Two questions still remain unanswered: Will people really work longer? Who is more likely to retire before the new legal retirement age?

In this paper, we focus on subjective retirement expectations, analysing if and to what extent they are affected by such a policy change. We consider the legislative reform introduced in Germany in 2007, which gradually will increase the statutory retirement age (SRA) from 65 to 67 years. Using the SAVE survey, a representative panel of German households, we estimate the increase of the individuals' expected retirement age (ERA) as an effect of the reform.

Our results show that less productive workers living in relatively wealthier households are more likely to plan an early retirement. The introduction of the reform seems to motivate better educated workers to remain longer in the labour force although it does not seem to completely succeed in keeping women longer in the labour force: especially among the younger cohorts, whose SRA will be 67 years, women are still more likely than men to plan an early retirement. In terms of the magnitude of the effect, we find that the reform shifted the expectations of the younger cohorts by almost two years – if these expectations will be realized, this reform would have been quite successful.

"Geography of Savings in the German Occupational Pension System" 

CSABA BURGER, University of Oxford - Saint Peter's College Oxford
Email: csababurger@yahoo.com

Relationships between individual traits and savings decisions vary geographically. Understanding the structure of such relationships is interesting in general, but it is particularly important in the case of the Germany, where the pension reform of 2001 significantly decreased the level of public pensions, and subsidized voluntary funded pension plans were created to so that individuals can save for themselves. This paper analyses the regional structure of individual savings decisions in the case of occupational pensions using a unique, commercial data-set containing the records of more than 286 thousand pension plan contracts signed between 2002 and 2009 across the regions of Germany. The analysis provides a framework for applying different geographical location definitions in explaining financial behaviour. The differences in the relationship between metropolitan/non-metropolitan, East-West and North and South are explained with the different contexts. Implications are drawn on the relationships among human behaviour, geography and context.

"The Case for Security Plus Annuities" 

PAMELA J. PERUN, Aspen Institute - Initiative on Financial Security
Email: pamela.perun@aspeninstitute.org

As Americans live longer and increasingly rely on 401(k) plan savings as a prominent source of income in retirement, they will need to find ways to convert their savings into income that lasts a lifetime. Because the financial situations and goals of American savers are diverse, they will need a variety of products and services to secure their income.

One future solution, if policy makers are successful, is to enable more savers to buy annuities and other lifetime income products through their 401(k) plans. Alternatively, savers, especially savers with large account balances, could be encouraged to purchase some of the longevity-protected products and services available through private insurance companies.

Another promising solution that could become operational quickly is a proposal called "Security Plus Annuities." Developed by the Aspen Institute Initiative on Financial Security (Aspen IFS), the proposal partners private industry with the Social Security Administration to offer low-cost, inflation-protected, "starter" life annuities.

"Peter Thullen and Mathematics at the Beginning of Social Security in Colombia (Peter Thullen Y Las Matemáticas En Los Inicios Del Seguro Social En Colombia)" 

Documentos de Matemática y Estadística, No. 1, 2010

FABIO ORTIZ, Universidad Externado de Colombia
Email: fabio.ortiz@uexternado.edu.co

We explore some aspects of one part of the history of actuarial mathematics in Colombia with the contributions of the German mathematician Peter Thullen to the formation of the social security system in Colombia. We treat aspects of his going into exile from Europe to Ecuador and then to Colombia and his return to Europe stressing the relations with different episodes in the history of the development of Colombian mathematics.

"Social Security Spouse and Survivor Benefits 101: Practical Primer Part II (Or Another Reason to Put a Ring on It)" 

American Bar Association – Section of Taxation, News Quarterly, Vol. 30, No. 1, Fall 2010

FRANCINE J. LIPMAN, Chapman University - School of Law
Email: lipman@chapman.edu
JAMES E. WILLIAMSON, San Diego State University - College of Business Administration
Email: james.williamson@sdsu.edu

As the country and courts continue to debate the importance of marriage in a variety of contexts, when determining Social Security benefits it is clear that marriage matters. Marriage matters for Social Security benefits planning because of meaningful spouse and survivor benefits. Given the broad and deep devastation of a record recession on retirement and saving accounts, including the continuing demise of defined benefit plans with joint and survivor benefits protection, Social Security benefits, generally, and spouse and survivor benefits, specifically, have become and will continue to be a more significant percentage of retirees' income. As a result of the interplay between recently phased in changes under 1983 legislation and amendments under the Senior Citizens' Freedom to Work Act of 2000, it is critical that Social Security benefits timing analysis becomes a more important part of many retirement plans. In this article, we describe how to use these changes to devise strategies to maximize Social Security spouse and survivor benefits.