Effects of Social Security Policies on Benefit Claiming, Retirement and Saving by Alan L. Gustman, Thomas L. Steinmeier - #19071 (AG LS PE)
An enhanced version of a structural model jointly explains benefit claiming, wealth and retirement, including reversals from states of lesser to greater work. The model includes stochastic returns on assets. Estimated with Health and Retirement Study data, it does a better job of predicting claiming than previous versions.
Alternative beliefs about the future of Social Security affect predicted outcomes. Effects of three potential policies are also examined: increasing the early entitlement age, increasing the full retirement age, and eliminating the payroll tax for seniors.
Predicted responses to increasing the full entitlement age are sensitive to beliefs.
Framing Lifetime Income by Jeffrey R. Brown, Jeffrey R. Kling, Sendhil Mullainathan, Marian V. Wrobel - #19063 (AG)
We provide evidence that individuals optimize imperfectly when making annuity decisions, and this result is not driven by loss aversion.
Life annuities are more attractive when presented in a consumption frame than in an investment frame. Highlighting the purchase price in the consumption frame does not alter this result. The level of habitual spending has little interaction with preferences for annuities in the consumption frame. In an investment frame, consumers prefer annuities with principal guarantees; this result is similar for guarantee amounts below, at, and above the purchase price. We discuss implications for the retirement services industry and its regulators.