SANG-WOOK (STANLEY) CHO, University of New South Wales - Australian School of Business - School of Economics
RENUKA SANE, Indian Statistical Institute, New Delhi
We investigate whether households adjust retirement savings decisions in response to changes in the means-tested public pension plans. The policy in question lowered the taper rate of the assets test on the age pension in Australia in 2007. We use HILDA, a detailed micro panel data-set for Australian households and focus on the age group between 50 and 64 in 2006, prior to the reform. We compare savings behaviours of those who were constrained to increase financial wealth because of the assets test prior to the reform with those who were not constrained, and find that assets tests do have a perverse impact on saving.
RON VAN SCHIE, Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE)
BENEDICT G. C. DELLAERT, Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE), Erasmus Research Institute of Management (ERIM)
BAS DONKERS, Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE), Erasmus Research Institute of Management (ERIM), Tinbergen Institute
Individuals’ planned retirement age is affected by a trade-off between financial costs (a feasibility oriented consideration) and the number of years in retirement (a desirability oriented consideration). Previous research shows that construal level interventions (i.e., activating a global vs. local mindset with individuals) affect the relative importance of these two types of decision aspects such that primary considerations become more important under a global mindset compared to secondary considerations. In this research we predict that this results in an age-related reversal of the effect of a construal level induced global mindset on planned retirement age. The reason is that as individuals’ chronic temporal distance to retirement decreases (i.e., they become older) their primary retirement goals are likely to change. Younger individuals are temporally distant from retirement and primarily driven by desirability goals, while older individuals are temporally close to retirement and driven by feasibility goals. Therefore, since a global construal level intervention increases the impact of individuals’ primary goals, we predict that such an intervention decreases planned retirement age for the younger age group but increases it for the older age group. Results from two online surveys confirm this predicted decision process. They show first that indeed younger individuals are more likely than older individuals to plan for a retirement age that they cannot afford. Second, the results demonstrate that a construal level intervention-induced global mindset increases the impact of desirability considerations on planned retirement age for younger individuals (and lowers planned retirement age), but that it increases the impact of feasibility considerations for older individuals (and increases planned retirement age). Jointly, these findings underline the importance of taking into account both individuals’ chronic and situationally-induced mental construals of the planned retirement decision when designing policy communications to promote individuals’ retirement at a later age.
This paper quantifies the welfare implications of the U.S. Social Security program during the Great Recession. We find that the average welfare losses due to the Great Recession for agents alive at the time of the shock are notably smaller in an economy with Social Security relative to an economy without a Social Security program. Moreover, Social Security is particularly effective at mitigating the welfare losses for agents who are poorer, less productive, or older at the time of the shock. Importantly, in addition to mitigating the welfare losses for these potentially more vulnerable agents, we do not find any specific age, income, wealth or ability group for which Social Security substantially exacerbates the welfare consequences of the Great Recession. Taken as a whole, our results indicate that the U.S. Social Security program is particularly effective at providing insurance against business cycle episodes like the Great Recession.
"Characteristics of Noninstitutionalized DI and SSI Program Participants, 2010 Update"
Research and Statistics Note, 2014
MICHELLE STEGMAN, Government of the United States of America - Office of Program Development, Social Security Administration
JEFFREY HEMMETER, Social Security Administration
The authors use data from the 2008 panel of the Survey of Income and Program Participation (SIPP) matched to administrative records from the Social Security Administration (SSA) to produce tables describing the characteristics of Disability Insurance (DI) beneficiaries and Supplemental Security Income (SSI) recipients in December 2010. This match to survey data allows the authors to provide detailed information on the economic and demographic characteristics of program participants not available in administrative records. These tables update those previously published by DeCesaro and Hemmeter (2008) using 2002 data.
Retirement distribution planning helps ensure the quality of life of retirees with all types of uncertainty. Probability of successfully funding through retirement has been a widely studied topic (Bengen, 1994; Ameriks et. al, 2001; Finke et. al, 2011; Pfau, 2012). However these studies treat the whole household only as one agent (Hubener et. al, 2013). And also, these literatures usually assume a 30 year planning horizon. For financial planning industry, some of the clients are couples and some of them outlive the 30 years planning horizon. So there is a need to study retirement for married retirees and set planning horizon conditional on their real mortality risk.
This paper adds to the current literature by constructing a simulation framework incorporating conditional mortality risk and evaluating the distribution of outcomes. Within this framework, all types of strategies can be evaluated with different objective functions (such as maximizing the probability of success within the specified planning horizon, maximizing annual consumption, and maximizing expected total utility during retirement), different consumption pattern (fixed versus variable).
Within the context of married couples, the joint mortality risks results in totally different retirement distribution outcomes, compared with the ones suggested by the previous studies.