This paper examines how the retirement strategies of older (age 50 or older) Americans have changed over the period of 2006-2010. The data used for this study come from the University of Michigan’s Health and Retirement Study (HRS), sponsored by the National Institute on Aging and the most comprehensive national survey of older Americans. HRS asks individuals at what age they plan to stop working and what their chances are of working past ages 62 and 65. The survey retains a panel structure (where an individual is observed over several years), which makes it possible to study how these individuals’ plans to retire have changed over time. This study examines what percentage of the working population (age 50 or older) plans to retire at the traditional U.S. ages of retirement (62 and 65) and beyond. Then it examines how this expected retirement age has changed over the two-year periods of 2006-2008 and 2008-2010 and also the four-year period of 2006-2010. It also examines the trends in self-reported probability of working past ages 62 and 65 and how these probabilities have changed over the two-year periods of 2006-2008 and 2008-2010. Data from the HRS show a clear trend that workers age 50 or over are expecting to work longer, which is correlated with the financial crisis of 2007-2009. In 2006 (just before the recent recession), 11.2 percent expected to retire at age 70, and by 2010 (after it had officially ended) that had increased to 14.8 percent. Even at higher ages, the expected retirement has jumped: Just 1.7 percent of workers age 50 or over planned to retire at age 80 in 2006, which more than tripled to 5.2 percent in 2010. Expected retirement at ages 62 and 65 steadily declined over this four-year period. In 2008, during the recession, 22.4 percent of the workers age 50 or over said they plan to never retire. That declined to 16.3 percent in 2010 after the recession. Over the 2006-2010 period (before, during, and after the recession), another 14-18 percent of workers said they don’t know when they will retire.
The PDF for the above title, published in the December 2011 issue of EBRI Notes, also contains the fulltext of another December 2011 EBRI Notes article abstracted on SSRN: “Variation in Public Opinion on the Future of Employment-Based Health Benefits: Findings From the 2011 Health Confidence Survey.”
MAURO MASTROGIACOMO, CPB Netherlands Bureau of Economic Policy Research, Tinbergen Institute
ROB J.M. ALESSIE, University of Groningen, Netspar, Tinbergen Institute, Tilburg University - Center for Economic Research (CentER), University of Utrecht - Utrecht University School of Economics
We use a confirmatory factor analysis to study the relation between the importance of a broad spectrum of saving motives, such as saving for retirement, and saving behavior. Survey data show that many respondents save for retirement in unconventional retirement accounts, such as investments in real estate. We show that finding the retirement motive important does not directly translate in additional retirement savings. We show that the annuity stream generated by conventional and unconventional accounts from age 65 onwards is small and that most savings are residual and are not being put aside for a specific motive. Also self-employed retirement savings are low, even though this group has generally no occupational pension.
MARLEEN DAMMAN, Netherlands Interdisciplinary Demographic Institute (NIDI)
KENE HENKENS, Netherlands Interdisciplinary Demographic Institute
MATTHIJS KALMIJN, Tilburg University
Objectives: Even though in retirement and career theories reference is made to a pre-retirement work disengagement process among older workers, quantitative empirical knowledge about this process is limited. The aim of this study is to improve our understanding of work disengagement in the pre-retirement period, by examining the impact of proximity to planned retirement (anticipated future) and work, educational, and health experiences (lived past) on pre-retirement work disengagement.
Methods: Using panel data of Dutch older workers, a scale was developed to measure the hypothesized reductions in work investments, activities, and motivation (i.e., disengagement) in pre-retirement years. We estimated linear regression models (cross-sectional analyses; N=1634) and conditional change models (panel analyses; N=652) to examine the pre-retirement work disengagement process.
Results: In line with the notion of the pre-retirement disengagement process, this study shows that many older employees disengage more from work when getting closer to their planned retirement age. Career experiences of promotion and employer change slow down the disengagement process. Declining health, in contrast, accelerates the process.
Discussion: For achieving a comprehensive understanding of the retirement process, not only past and present experiences, but also the anticipated future (i.e., expected time-left in the current state) should be taken into account.
JACK VANDERHEI, Employee Benefit Research Institute (EBRI)
SARAH HOLDEN, Investment Company Institute
LUIS ALONSO, Employee Benefit Research Institute (EBRI)
STEVEN BASS, Investment Company Institute
This paper is an update of the Employee Benefit Research Institute and the Investment Company Institute’s ongoing research into 401(k) plan participants’ activity through year-end 2010. The report is divided into four sections: The first describes the EBRI/ICI 401(k) database; the second presents a snapshot of participant account balances at year-end 2010; the third looks at participants’ asset allocations, including analysis of 401(k) participants’ use of target-date, or lifecycle, funds; and the fourth focuses on participants’ 401(k) loan activity. On average, at year-end 2010, 62 percent of 401(k) participants’ assets were invested in equity securities through equity funds, the equity portion of balanced funds, and company stock. Thirty-three percent were in fixed-income securities such as stable-value investments and bond and money funds. At year-end 2010, 11 percent of the assets in the EBRI/ICI 401(k) database were invested in target-date funds and 36 percent of 401(k) participants held target-date funds. Also known as lifecycle funds, they are designed to offer a diversified portfolio that automatically rebalances to be more focused on income over time. At year-end 2010, 44 percent of the account balances of recently hired participants in their 20s were invested in balanced funds, compared with 42 percent in 2009, and about 7 percent in 1998. A significant subset of that balanced fund category is target-date funds. At year-end 2010, 35 percent of the account balances of recently hired participants in their 20s were invested in target-date funds, compared with 31 percent at year-end 2009. The share of 401(k) accounts invested in company stock continued to shrink, falling by more than a percentage point (to 8 percent) in 2010, continuing a steady decline that started in 1999. Recently hired 401(k) participants contributed to this trend: They tended to be less likely to hold employer stock. In 2010, 21 percent of all 401(k) participants who were eligible for loans had loans outstanding against their 401(k) accounts, unchanged from year-end 2009, and up from 18 percent at year-end 2008. Loans outstanding amounted to 14 percent of the remaining account balance, on average, at year-end 2010, compared with 15 percent at year-end 2009. Loan amounts outstanding declined slightly from those in the past few years. To understand changes in 401(k) participants’ average account balances, it is important to analyze a sample of consistent participants. As with previous EBRI/ICI updates, analysis of a sample of consistent 401(k) participants (those that have been in the same plan since 2003) is expected to be published in 2012.
ROEL M. W. J. BEETSMA, University of Amsterdam - Research Institute in Economics & Econometrics (RESAM), Centre for Economic Policy Research (CEPR), CESifo (Center for Economic Studies and Ifo Institute for Economic Research), Tinbergen Institute - Tinbergen Institute Amsterdam (TIA), Netspar
ALESSANDRO BUCCIOL, University of Verona - Department of Economics, University of Amsterdam - Amsterdam School of Economics (ASE)
This paper explores the introduction of collective risk-sharing elements in defined contribution pension contracts. We consider status-contingent, age-contingent and asset contingent risk-sharing arrangements. All arrangements raise aggregate welfare, as measured by equivalent variations. While working individuals hardly benefit or may even lose, retirees experience substantial welfare gains. An increase in the tax deductibility of pension contributions can be beneficial for working cohorts, but comes at the cost of a reduction in aggregate welfare due to efficiency losses.