Tuesday, April 25, 2017

Upcoming event: “The Personal Finance Index (P-Fin Index): A New Measure of Financial Literacy”

Click here for more information.

Read more!

New paper: “Who Contributes to Individual Retirement Accounts?”

The Center for Retirement Research at Boston College has released a new Issue in Brief:

“Who Contributes to Individual Retirement Accounts?

by Anqi Chen and Alicia H. Munnell

The brief’s key findings are:

  • IRAs were intended to give those without an employer plan access to a tax-deferred savings vehicle.
  • Today, IRAs hold nearly half of all private retirement assets, but most of these funds are rollovers from 401(k)s, rather than contributions.
  • The 14 percent of households who do contribute to IRAs include:
    • higher-income dual-earners who also save in a 401(k);
    • moderate-income singles or one-earner couples, often with a 401(k); and
    • higher-income entrepreneurs with no current 401(k).
  • One way to turn IRAs back into an active savings vehicle – one used more for contributions – is to auto-enroll all workers without an employer plan in an IRA.

This brief is available here. Read more!

Monday, April 24, 2017

Is There a Retirement Crisis? A Wall Street Journal Online Debate

In today’s Wall Street Journal I “debate” Alicia Munnell of the Center for Retirement Research on whether Americans face a “crisis” of inadequate retirement saving. I think both sides make good points and readers will have to judge for themselves.

But I think a graphic featured in the story makes some of my point for me. The right-hand side of the graphic shows the Center for Retirement Research’s estimates of the percentage of households who are at risk of an inadequate retirement income. The left-hand side shows total retirement savings as a percentage of GDP, from the Federal Reserve’s flow of funds database.


But here’s the thing: only one of these two charts shows data. The Fed figures are based on tabulations of balances in IRA, 401(k) and other savings accounts, along with the benefits accrued by participants in defined benefit pension plans. These show that retirement savings have roughly tripled as a percentage of GDP since 401(k)s were introduced in 1979.

The right-hand figure isn’t data. It’s the CRR’s interpretation of how many households have inadequate retirement savings, based both upon data (mostly from the Survey of Consumer Finances) and the CRR’s interpretation of what counts as an adequate retirement income.

So to make these figures consistent, the CRR has to hold that there are other factors that more than offset a tripling of retirement savings. I talk about some of these factors in this National Affairs article from 2014, but the short story is that I don’t buy it. Sure, life spans have gone up a bit and the Social Security retirement age has increased by a year. But Americans are also retiring 2 years later than they used to. And again, there’s that tripling of retirement savings.

Maybe Americans still aren’t saving enough, even if they’re saving more than they used to. I doubt it, given that most current retirees say that they’re doing just fine. But still, I think it’s hard to make the case that tomorrow’s retirees will be significantly worse off than today’s are. 

Read more!

New paper: “35 Years of Reforms: A Panel Analysis of the Incidence of, and Employee and Employer Responses to, Social Security Contributions in the UK”

35 Years of Reforms: A Panel Analysis of the Incidence of, and Employee and Employer Responses to, Social Security Contributions in the UK

Stuart Adam, David Phillips, Barra Roantree

NBER Working Paper No. 23336
Issued in April 2017
NBER Program(s):   LS PE

We exploit variation in National Insurance contributions (NICs) – the UK’s system of social security contributions – and a large panel dataset to examine the effects of 35 years of employee and employer NICs reforms on labour cost (gross earnings plus employer NICs), hours of work and labour cost per hour, both immediately (0–6 months) after reforms are implemented and in the slightly longer term (12–18 months). We consider assumptions under which the estimated coefficients on net-of-marginal and net-of-average tax rates in a panel regression can be interpreted as behavioural elasticities or as reflecting incidence. We find a compensated elasticity of taxable earnings with respect to the marginal rate of employee NICs of about 0.2–0.3, operating largely through hours of work, while that with respect to the marginal rate of employer NICs is not statistically significantly different from zero.

We also find that labour cost falls by a much larger amount when the average rate of employer NICs is reduced than when the average rate of employee NICs is reduced, which is consistent with the economic incidence of NICs being strongly affected by its formal legal incidence. Estimates from the hours and hourly labour cost regressions provide further support to this interpretation of the findings, and also suggest the presence of substantial income effects – though also, after 1999, a puzzling effect of average employer NICs rates on hours of work. Each of these results remains true after 12–18 months (if anything, coefficients on lagged changes in NICs rates strengthen these findings), implying that any shifting of employer NICs changes to the individual employees concerned (and vice versa for employee NICs) does not begin over this time horizon. These results are similar to those found by Lehmann et al. (2013) for France but represent an extension of that work by considering hours as well as labour cost responses and second-year as well as immediate effects.

Click here to access the paper.

Read more!

Thursday, April 20, 2017

New paper: “Why Are U.S. Households Claiming Social Security Later?

Why Are U.S. Households Claiming Social Security Later?”

by Wenliang Hou,Alicia H. Munnell,Geoffrey T. Sanzenbacher and Yinji Li

Over the past two decades, the share of individuals claiming Social Security at the Early Eligibility Age has dropped and the average retirement age has increased.  At the same time, Social Security rules have changed substantially, employer-sponsored retirement plans have shifted from defined benefit (DB) to defined contribution (DC), health has improved, and mortality has decreased.  In theory, all of these changes could lead to a trend towards later claiming.  Disentangling the effect of any one change is difficult because they have been occurring simultaneously.  This paper uses the Gustman and Steinmeier structural model of retirement timing to investigate which of these changes matter most by simulating their effects on the original cohort (1931-1941 birth years) of the Health and Retirement Study (HRS).  The predicted behavior is then compared to the actual retirements of the Early Baby Boomer cohort (1948-1953 birth years) to see how much of the later cohort’s delayed claiming and retirement can be explained by these changes.

This paper found that:

  • The Early Baby Boomer cohort was less likely to be fully retired than the HRS cohort at both age 62 (36.7 percent vs. 44.0 percent) and age 64 (49.5 percent vs. 53.9 percent).
  • The model suggests that the shift from DB towards DC plans was the biggest contributor to these declines, followed by better health.
  • Changes to Social Security rules and improvements in mortality played smaller roles.
  • Taken together, the four changes explain about 60 percent of the drop in full retirement at 62 – the remaining could be due to changes in preferences or other changes not simulated like the rising cost of health care.

The policy implications of this paper are:

  • As DB plans continue to fade in the private-sector, claiming will likely be further delayed.
  • If health continues to improve, claiming could be moderately delayed.
  • The resumption of the increase in the Full Retirement Age is not likely to lead to substantial delays in claiming.
Read more!

Monday, April 17, 2017

At National Affairs: An Agenda for Retirement Security

In the new issue of National Affairs I have a long article outlining a conservative agenda for retirement security, which both debunks some myths about retirement saving and proposes some ideas that could help those who need to save more for retirement to do so.

The truth is, increased Social Security benefits and other progressive reforms would actually aid the highest earners the most, fail to make the program solvent or pay for higher benefits, and prompt Americans to reduce their retirement savings. Another progressive approach, retirement plans run by state governments, risks lowering private saving and forcing Americans to rely on public officials with poor track records of delivering on the benefits they promise. The overall result would be future retirees receiving a substantially greater share of their total income from the government, which has shown itself to be a poor steward of citizens' money. 

This is an unacceptable outcome for conservatives who care about America's tradition of limited government and personal responsibility. Too often in the past, however, conservatives have failed to articulate a compelling vision for Social Security reform that would gain political support. They have treated reform as merely an accounting exercise requiring tax-and-benefit adjustments, rather than as an opportunity to truly strengthen the program and America's private retirement-savings system.

You can check out the whole article here.

Read more!

New papers from the Social Science Research Network

"Closing the Retirement Savings Gap: Are State Automatic Enrollment IRAs the Answer?"
George Mason Law Review, Vol. 24, No. 1, 2016-2017

KATHRYN L. MOORE, University of Kentucky College of Law
Email: kmoore@pop.uky.edu

Drawing on insights from behavioral law and economics, automatic enrollment IRAs are intended to address the nation’s retirement savings gap by taking advantage of workers’ inertia. Although automatic enrollment IRAs were initially intended to apply at the federal level, they have gained little traction at the federal level, and states have begun to step into the breach. Between September 2012 and June 2016, five states enacted state automatic enrollment IRA programs.
Studies have uniformly shown that workers are more likely to participate in an automatic enrollment 401(k) plan than in a traditional opt-in 401(k) plan. Proponents of state automatic enrollment IRAs point to this experience to contend that state automatic enrollment IRAs are an answer, or at least a partial answer, to increasing retirement savings in this country. The efficacy of such programs, however, raises more complicated and nuanced questions. This article identifies the fundamental as well subsidiary and sometimes overlapping questions they raise. It then offers important insights on how to address the many issues these questions implicate.

"Life Cycle Investing and Smart Beta Strategies"

BILL CARSON, BlackRock, Inc
Email: bill.carson@blackrock.com
Email: sara.shores@blackrock.com
Email: Nick.Nefouse@BlackRock.com

In traditional life cycle models, the equity-bond glide path shifts investment allocation from riskier assets to relatively safer assets as investors approach retirement. In this paper, we develop a smart beta glide path which seeks to take advantage of broad, persistent patterns within asset classes to identify securities with higher risk-adjusted returns than the market. Within equities, investors can shift from return-enhancing strategies — like value, momentum, size, and quality — to risk-reducing strategies like minimum volatility as they move through their life cycles. Adopting smart beta glide paths may improve Sharpe ratios by up to 20% over a standard equity-bond glide path.

Read more!

Should Social Security’s Funding Source be Changed?

There’s a proposal associated with tax reform that would fund Social Security from general tax revenues rather than from the program’s own dedicated payroll tax. What should we think about this?

Brenton Smith is against. He argues that the Social Security payroll tax was set up for a reason, which is to establish a link between taxes and benefits that will strengthen Social Security politically by distinguishing it form a “welfare” program.

All that is true. But as I argued at Forbes,the link between taxes and benefits – which creates the perception that Social Security is an “earned benefit” – can be unhelpful when it comes to reforms, especially reforms that would restrain benefits for middle and upper income Americans and focus a smaller, more affordable program on preventing poverty in old age.

Read more!

Should Social Security Invest in the Stock Market?

That’s the question. And here are a bunch of answers.

Starting with a pro/con in the Wall Street Journal between Alicia Munnell of the Center for Retirement Research and Mike Tanner of the Cato Institute.

I followed up at Forbes with some thoughts that Munnell and Tanner hadn’t hit on. Namely, that while stock investment is kind of a nothing – higher expected returns, but higher risk to match – people who propose it do so instead of full-solvency reforms rather than in addition to them. So stock market investment could encourage Congress to further delay real reforms.

And here’s another write-up from Alicia Munnell at Marketwatch.

Read more!

Monday, April 10, 2017

Retirement Policy Analyst Job Opening at CRS

The Congressional Research Service has an opening for an Analyst in Income Security 

From the job description:

The analyst will prepare objective, non-partisan analytical studies and descriptive and background reports on retirement policy; provide personal consultation and assistance to congressional committees, Members, and staff on such policies throughout the legislative process; and participate in or lead team research projects and seminars.

This work requires knowledge of the history, trends, and current status of retirement policy; measurement of retirement income and wealth; economic and health shocks in retirement; the role of defined benefit plans, defined contribution plans, and Social Security in retirement savings; decumulation of retirement wealth, including options for annuitization; insights from behavioral economics on retirement income security; and labor force issues related to older workers. The analyst is also expected to develop over time the skills necessary to provide legislative analysis and consultation to congressional committees, Members, and staff at increasingly sophisticated levels.

The ideal candidate would have a background in economics, demography, mathematics, statistics, or a related field and have applied these skills to public policy analysis. Strong research, analytical, writing, and presentation skills are essential.

The job is posted at the GS-12 level ($79,720 per year in Washington DC). The application deadline is April 26, 2017 and the complete job listing is available here: https://www.usajobs.gov/GetJob/ViewDetails/466768700/ .

Read more!

Monday, March 27, 2017

Upcoming event: "Using Tax Panel Data to Examine the Transition to Retirement"

Please Join us for a meeting of the Savings and Retirement Foundation with Guest Speaker
Peter Brady
discussing his new paper on

"Using Tax Panel Data to Examine the Transition to Retirement"

Tuesday, March 28th, 2017

12:00 p.m. - 1:00 p.m.


Tax Foundation
1325 G St. NW
Suite 950
Washington, DC 20005

Lunch will be provided.
This is a widely attended event.

Featured Guest:
Peter Brady is is a Senior Economist in the Retirement and Investor Research Division at the Investment Company Institute (ICI). At the Institute, Mr. Brady focuses on pensions, retirement savings, and the taxation of capital income. Peter’s current research is focused on measuring changes in income in retirement and the tax treatment of retirement savings. His prior research includes work on retirement adequacy, replacement rates, pension coverage, and trends in pension income. Mr. Brady is currently President of the National Tax Association and is a member of the SOI Consultants Panel (for the Internal Revenue Service, Statistics of Income Division). Prior to joining the Institute, Mr. Brady worked as a financial economist in the Office of Tax Analysis at the U.S. Department of Treasury and, prior to working at the Treasury Department, as a staff economist in the Research Division at the Federal Reserve Board. Mr. Brady is a graduate of St. Lawrence University and holds a Ph.D. in economics from the University of Wisconsin.
Peter Brady
Senior Economist
Investment Company Institute

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You are receiving this email because of your interest in retirement policy and the Savings & Retirement Foundation.

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Tuesday, March 21, 2017

New IMF paper: “Pension Reform Options in Chile : Some Tradeoffs”

Working Paper No. 17/53 : Pension Reform Options in Chile : Some Tradeoffs

Author/Editor: Marika Santoro


In this paper, we study the macroeconomic impact of pension reform options in Chile, using a dynamic general equilibrium model. The main reform proposal considers raising contributions (employer side) and vehicle additional proceeds to individual accounts and to increase the support of solidarity pensions. We model increased contributions as a labor tax. We find the impact of this reform on GDP to be negative in the near to the medium run, with GDP declining by 0.5 percent by 2021, as a result of labor tax distortions which lead to a fall in labor supply, investment and to a loss in competitiveness. We also illustrate the main macroeconomics tradeoffs by analyzing alternative reforms, such as using revenues only to improve future pensions or a reform package funded by a mix of higher contributions and indirect taxes.


Read more!

Monday, March 20, 2017

New papers from the National Bureau of Economic Research

Annuity Options in Public Pension Plans: The Curious Case of Social Security Leveling

by Robert L. Clark, Robert G. Hammond, Melinda S. Morrill - #23262 (AG)


Social Security Leveling is an annuity option that allows participants to receive a level income before and after age 62. The retiree receives a larger pension benefit prior to age 62, but then the pension benefit is lowered at age 62 when the individual is expected to claim Social Security benefits. This option is not uncommon in public pension plans, yet little is known about how this option is used in practice and its impact on well-being in retirement. Our study uses a combination of administrative records and survey data from recent North Carolina public sector retirees.

We find that one-third of all retirees selecting a single life annuity between 2009 and 2014 opted for Social Security Leveling.

The evidence suggests that individuals are choosing this option in a way that is consistent with their stated preferences and a consumption smoothing motive. However, we also see higher rates of ex post "regret" in the annuity choice among those choosing the level income option.


A Head-to-Head Comparison of Augmented Wealth in Germany and the United States

by Timm Boenke, Markus Grabka, Carsten Schroeder, Edward N. Wolff - #23244 (AG LS PE)


We provide levels of, compositions of, and inequalities in household augmented wealth - defined as the sum of net worth and pension wealth - for two countries: the United States and Germany. Pension wealth makes up a considerable portion of household wealth: about 48% in the United States and 61% in Germany. The higher share in Germany narrows the wealth gap between the two countries: While average net worth in the United States (US$337,000 in 2013) is about 1.8 times higher than in Germany, augmented wealth (US$651,000) is only 1.4 times higher. Further, the inclusion of pension wealth in household wealth reduces the Gini coefficient from 0.892 to 0.701 in the United States and from 0.765 to 0.511 in Germany.


Read more!

Friday, March 3, 2017

New papers from the Social Science Research Network

"The Emergence of Redistributive Pensions in the Developing World"

ACHIM KEMMERLING, Central European University (CEU)
Email: Kemmerlinga@ceu.hu
MICHAEL NEUGART, Technische Universit├Ąt Darmstadt
Email: neugart@vwl.tu-darmstadt.de

In recent decades, redistributive pension schemes have seen a remarkable surge in developing countries, particularly in the form of so-called social or non-contributory pension schemes. We note that many of these redistributive schemes target the rural elderly and correlate with higher urban population density, and weaker social norms about parent-children relationships. We use this stylized evidence to motivate a political economy model for a Beveridgean social security system which shows trade-offs between four different segments in the population: the (poorer) rural old and young, and the (richer) urban old and young. We show under which conditions governments will install a pension system and increase its generosity as the share of the urban population rises, productivity differentials between urban and rural workers widen, or if the social norm erodes. We conclude that the role of the rural-urban divide in shaping redistribution merits more scholarly attention, as in many developing countries the gap between cities and the countryside widens.

"How Does the Level of Household Savings Affect Preference for Immediate Annuities?"
EBRI Issue Brief, Number 430 (February 8, 2017)

SUDIPTO BANERJEE, Employee Benefit Research Institute (EBRI)
Email: banerjee@ebri.org

With the decline of defined benefit (DB) pension plans, there has been some renewed interest in providing other annuity income options to American workers, but demand for annuities has remained low in the United States. To develop future annuity income solutions, it is important to understand the public’s preferences for such products. This paper uses a unique experiment in the Health and Retirement Study (HRS) to assess the effect of savings on the preference for immediate annuities (which begin paying out a regular stream of income as soon as they are purchased). Regression results show that people at the bottom- and top-ends of the savings distribution (those with the least and most assets) are more likely to buy annuities than people in the middle of the savings distribution. Also, savings has a large positive effect on preference for annuities only for those in the highest savings category. Possible explanations for such behavior follow. People at the bottom of the savings distribution are very likely to run out of money in retirement and thus are inclined to select annuities. People at the top end of the savings distribution expect longer lifespans and can afford annuities even after leaving a financial legacy for their heirs. People in the middle generally face more uncertainty about their retirement adequacy and so they are more likely to hold on to their savings for precautionary purposes and perhaps also for some hope of leaving a financial legacy for their heirs. The results also show clear preference for annuitizing smaller shares of assets or partial annuitization. When compared to their current financial situation, only 16.5 percent of retirees (ages 65 and above) preferred full annuitization compared to 43.0 percent who preferred a one-quarter annuitization. A large majority (70.2 percent) of the current Social Security recipient households receive at least three-quarters of their income in annuities from Social Security, employer-provided pensions, and other annuity contracts. The fact that most retirees are already highly annuitized might help explain the lack of demand for additional annuity income.

"Report to the New Leadership and the American People on Social Insurance and Inequality"

BENJAMIN VEGHTE, National Academy of Social Insurance
Email: bveghte@nasi.org
ELLIOT SCHREUR, National Academy of Social Insurance (NASI)
Email: elliot.jcs@gmail.com
ALEXANDRA L. BRADLEY, National Academy of Social Insurance
Email: abradley@nasi.org

Our nation’s social insurance infrastructure forms the foundation of economic and health security for American workers and their families. Like all infrastructure, it must be periodically strengthened and modernized if it is to continue to meet the needs of a changing economy and society. This Report presents the new Administration and Congress with a range of evidence-based policy options, developed by the nation’s top social insurance experts, for doing so.
The first part of the Report takes stock of the policy challenges facing existing social insurance programs: Social Security, the major health insurance programs, and Unemployment Insurance. The second part discusses potential new directions for social insurance in coping with emerging needs in the areas of long-term services and supports, caregiving supports, and nonstandard work.

"Pensions, Retirement, and the Disutility of Labor: Bunching in Brazil"

BENJAMIN THOMPSON, University of Michigan at Ann Arbor
Email: bpthomp@umich.edu

Elderly workers in developing countries face certain frictions, such as credit constraints, in their retirement decisions that may not be as common among their counterparts in the developed world, and these concerns may lead workers to work more or less than their preferred number of years. In this study, I firstly use regression discontinuity methods to show that a large fraction of urban male heads of households in Brazil (roughly 45%) react contemporaneously to pension eligibility by retiring. Because retirement is not required to receive the pension and because the return to working does not change discontinuously at the eligibility cutoff, workers should not react contemporaneously unless optimization frictions, such as credit constraints, are at work. Secondly, I develop a model of retirement decisions that explores how pensions in the face of credit constraints can influence such decisions, and I discuss applications of this model to determine how the observed behavior in conjunction with the model can be used to make inferences about welfare and labor supply decisions in the face of different pension values.

"Legacy Savings Organizations: Beating Deferred Annuity Insurance Benefits by Over 50%; Practical Plan for Funding Extra-Long Retirement"

M. A. GUMPORT, MG Holdings/SIP
Email: magumport@att.net

Longevity insurance pays cash benefits to an insured individual who attains a defined age. Thereafter, benefits may continue throughout the insured’s life. For anyone concerned that living too long might become an economic hardship, longevity insurance, at the right price, can make sense. Yet, due to cost, few people purchase it.
Longevity insurance’s high price reflects three factors: 1) lingering effects of a 1905 government investigation which pushed the insurance industry to bundle costly, counterproductive features with its longevity products, 2) the corporate structure of the underwriting business which shoulders risk, requires remuneration and itself interposes an additional risk factor (potential insurer default) and, 3) most importantly, inequitable taxation.
A legacy savings organization (LSO) is an organizational structure that enables a group of individuals to self-insure far more cost effectively and at lower risk than through a commercial insurer. For instance, through such an organization, a typical 65 year old man, in return for a $100,000 payment placed in risk-free Treasury securities, could expect to receive beginning at age 85 roughly a $50,000 annual, after tax benefit, easily 50% more than most commercial insurers now offer.
Today, commercial insurers are engines that turn the principal of one insured into the taxable income of another. An LSO avoids this onerous tax treatment.
This report briefly reviews current, commercially available longevity insurance products, describes the construction and delivery of a more attractive alternative through LSO’s and briefly relates the history of similar alternatives

Read more!

Wednesday, March 1, 2017

New papers from the Social Science Research Network

"The Effect of Job Mobility on Retirement Timing by Education"
Boston College Center for Retirement Research WP No. 2017-1

GEOFFREY SANZENBACHER, Boston College Economics Department
Email: geoffrey.sanzenbacher.1@bc.edu
STEVEN A. SASS, Boston College - Center for Retirement Research
Email: steven.sass@bc.edu
CHRISTOPHER M. GILLIS, Boston College, Center for Retirement Research
Email: gillisch@bc.edu

Job-changing among late-career workers increased steadily from the 1980s through the mid-2000s before declining somewhat in recent years. This study asks how the rise in job-changing – which seems largely voluntary – affects retirement timing and whether this effect varies by a key measure of socioeconomic status: educational attainment. Workers presumably change jobs voluntarily to improve their well-being through gains in the economic or non-economic rewards of work or better working conditions. As a result, workers switching jobs late in their careers might retire later than they otherwise would have. Retiring later would be especially beneficial to less educated workers, who are generally less prepared financially to retire than better educated workers. Changing jobs, however, sheds the protection that tenure provides against involuntary job loss, which often leads to earlier retirements for older workers. This study seeks to understand which effect dominates, while dealing with the fact that job changing could be endogenous to retirement – that workers willing to bear the cost of a job search could intend to remain in the workforce longer. The analysis does so by controlling for each individual’s planned retirement age. The results show that the benefits of job changing are widely distributed and are associated with later retirements for men and women and for better and less educated workers.

"Report to the New Leadership and the American People on Social Insurance and Inequality"

BENJAMIN VEGHTE, National Academy of Social Insurance
Email: bveghte@nasi.org
ELLIOT SCHREUR, National Academy of Social Insurance (NASI)
Email: elliot.jcs@gmail.com
ALEXANDRA L. BRADLEY, National Academy of Social Insurance
Email: abradley@nasi.org

Our nation’s social insurance infrastructure forms the foundation of economic and health security for American workers and their families. Like all infrastructure, it must be periodically strengthened and modernized if it is to continue to meet the needs of a changing economy and society. This Report presents the new Administration and Congress with a range of evidence-based policy options, developed by the nation’s top social insurance experts, for doing so.
The first part of the Report takes stock of the policy challenges facing existing social insurance programs: Social Security, the major health insurance programs, and Unemployment Insurance. The second part discusses potential new directions for social insurance in coping with emerging needs in the areas of long-term services and supports, caregiving supports, and nonstandard work.

Read more!

Sunday, February 26, 2017

Upcoming event: “Should They Stay or Should They Go? Reexamining Retirement Tax Incentives”


Should They Stay or Should They Go? Reexamining Retirement Tax Incentives

Thursday, March 2, 2017
12pm - Lunch
12:30pm - Panel Starts
Do tax incentives raise retirement savings? Are they carefully targeted at the families who need them most? Join us for a lunchtime panel discussion on the effectiveness of current tax incentives to encourage saving for retirement – a timely topic given growing momentum in Congress to overhaul the tax code. In addition to debating the efficacy of retirement tax incentives, the conversation will cover the upside-down nature of current retirement tax expenditures, the potential role of the Saver’s Credit to boost savings for low- and moderate-income families, the possibility for consolidation and simplification of the various savings incentives in the code, and other reform proposals.

  • Peter J. Brady, Senior Economist at the Investment Company Institute (ICI)
  • Catherine Collinson, President of the Transamerica Center for Retirement Studies
  • David Kamin, Professor of Law at New York University and author of new paper entitled “Getting Americans to Save: In Defense of (Reformed) Tax Incentives”
  • Monique Morrissey, Economist, Economic Policy Institute
  • Moderated by Ray Suarez

Attend Event

The Aspen Institute
1 Dupont Circle Northwest
Washington, DC 20036


We will be live tweeting the event with #TaxIncentives
Hosted by: @Aspen_FSP

Read more!

Tuesday, February 21, 2017

Upcoming event: “The Growing Longevity Gap Between Rich and Poor and its Impact on Redistribution through Social Security”

Guest Speaker
Gary Burtless
"The Growing Longevity Gap Between Rich and Poor and its Impact on Redistribution through Social Security"
Wednesday, February 22nd, 2017
12:00 p.m. - 1:00 p.m.

1201 F Street NW
Suite 200
Washington, DC 20004

Featured Guest:

Gary Burtless is a senior fellow and holds the John C. and Nancy D. Whitehead Chair in Economic Studies at the Brookings Institution in Washington, DC. He does research on issues connected with the income distribution and poverty, public finance, aging, labor markets, social insurance, and the behavioral effects of government tax and transfer policy.

Gary Burtless
Senior Fellow
Brookings Institute

RSVP to: savingsandretirement@gmail.com
Read more!

Tuesday, February 14, 2017

New working papers from the Pension Research Council

Does Financial Literacy Increase Students' Perceived Value of Schooling?
Luca Maria Pesando
- Using data from the 2012 Programme for International Students Assessment (PISA) for Italy, this paper investigates whether financial literacy skills play a role in shaping the value that high school students place on schooling. We hypothesize that higher financial literacy may foster students' awareness of the financial and non-financial benefits of gaining additional education, together with the costs associated with poor school outcomes. We complement OLS estimates with an instrumental variable (IV) approach to recover a plausibly causal effect of financial literacy on the school outcomes of interest, namely (a) truancy and time spent on homework outside of school (time commitment to education), and (b) attitudes towards school (attitudes). Results suggest that higher financial literacy increases students' perceived value of schooling by boosting their time commitment to education. Conversely, there is no evidence that financial literacy shapes students' attitudes towards school. We see this finding as consistent with the idea that adolescents' behavior is easier to measure objectively and reliably than attitudes.

Optimal Social Security Claiming Behavior under Lump Sum Incentives: Theory and Evidence
Raimond Maurer, Olivia S. Mitchell, Ralph Rogalla, and Tatjana Schimetschek
- People who delay claiming Social Security receive higher lifelong benefits upon retirement. We survey individuals on their willingness to delay claiming later, if they could receive a lump sum in lieu of a higher annuity payment. Using a moment-matching approach, we calibrate a lifecycle model tracking observed claiming patterns under current rules and predict optimal claiming outcomes under the lump sum approach. Our model correctly predicts that early claimers under current rules would delay claiming most when offered actuarially fair lump sums, and for lump sums worth 87% as much, claiming ages would still be higher than at present.

Read more!

Friday, February 10, 2017

New research finds rising retirement incomes, high replacement rates for new retirees

Over at Forbes, I write up some new research out of the Census Bureau which uses SSA and IRS administrative data to get a more accurate view of retirees’ incomes. Compared to household surveys, which miss much of the income that retirees draw out of 401(k) and IRA plans, the SSA and IRS data show much higher incomes for recent retirees, a much faster growth of incomes over time, and replacement rates – that is, retirement incomes as a percentage of pre-retirement incomes – for typical households that approach 100%.

You can check it out here.


Read more!

New papers from the Social Science Research Network

"Do Americans Really Save Too Little and Should We Nudge Them to Save More? The Ethics of Nudging Retirement Savings"
George Mason Law & Economics Research Paper No. 17-03

TODD J. ZYWICKI, George Mason University - Antonin Scalia Law School, Faculty, PERC - Property and Environment Research Center
Email: tzywick2@gmu.edu

The contention that consumers systematically “undersave” for retirement is a frequent example provided by adherents to behavioral economics and behavioral law and economics to purportedly illustrate their theories. Although frequently asserted, the claim that people systematically undersave is rarely assessed empirically.

This article, written for the Georgetown Institute for the Study of Markets and Ethics Symposium on “The Ethics of Nudging,” examines available data on how many people fail to save and the reasons why they do not. According to available evidence, the overwhelming number of households saves enough or more than they need for retirement; only a small minority does not seem to save enough. Those who do not save for retirement lack the money to do so or allocate available resources to paying down consumer and student loan debt. Behavioral economics theories explain little of the observed patterns of saving or non-saving behavior. Moreover, behavioral economics itself suggests that many people probably oversave for retirement and makes no effort to reconcile these offsetting biases.

More fundamental, once it is recognized that there is an opportunity cost to saving more — one must consume less today, borrow more, or work more — the theoretical validity of the claim that people undersave because of behavioral biases is suspect. Given the inherently subjective nature of opportunity cost, a central planner cannot be confident that he can make people better off by influencing their consumption expenditures across time than he could by shifting consumption expenditures across different goods and services today. It is concluded that there is little reason to believe that people would be made better off by nudging them to save more for retirement.

"Considering Part-Time Work after Retirement: Should I Stay or Should I Go?"

HONG MAO, Shanghai Second Polytechnic University
Email: hmaoi@126.com
JAMES M. CARSON, University of Georgia
Email: jcarson@uga.edu
KRZYSZTOF OSTASZEWSKI, Illinois State University
Email: krzysio@ilstu.edu
ZHONGKAI WEN, University of Illinois at Chicago
Email: zwen5@uic.edu

In this article, we use dynamic leisure preference to study the optimal retirement decision with consideration of part-time work after the “official” retirement. We also consider a risky investment besides risk-free investment. and allow investor borrowing money at risk-free interest rate. Our results indicate that the optimal retirement age is very sensitive to the following parameters: coefficient of risk aversion, the leisure, rate after retirement, coefficient of survival function (describing the individual’s mortality), interest rate and discount rate, and is especially sensitive to the drift of return rate of risky assets invested. Our results also show that mortality improvement greatly affect all other optimal solutions except optimal retirement age, but have small affect on optimal retirement age.

"Intergenerational Transfers and China's Social Security Reform"
The Journal of the Economics of Ageing, Forthcoming

AYSE IMROHOROGLU, University of Southern California - Marshall School of Business
KAI ZHAO, University of Connecticut - Department of Economics
Email: kai.zhao@uconn.edu

Most of the studies examining the implications of social security reforms in China use overlapping generations models and abstract from the role of family support. However, in China, family support plays a prominent role in the well-being of the elderly and often substitutes for the lack of government-provided old-age support systems. In this paper, we investigate the impact of social security reform in China in a model with two-sided altruism as well as a pure life-cycle model. We show that the quantitative implications of social security reform, in particular for capital accumulation and output, are very different across the two models.

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Thursday, February 9, 2017

Job opportunity: The Cato Institute

Research Assistant Center for Social Welfare Policy


Research Assistant Center for Social Welfare Policy

The Cato Institute seeks a research assistant for a full-time position located in DC as a research assistant specializing in social welfare policy. The ideal candidate will have exceptionally strong research skills, and knowledge of economics, health care, entitlement policy, and the US welfare system, as well as a commitment to limited government and individual liberty.  Successful candidates will be entrepreneurial, hard-working, self-starters, with a willingness to adapt to the changing needs of a growing policy center.

Company Overview:

The Cato Institute is a public policy research organization—a think tank—dedicated to the principles of individual liberty, limited government, free markets and peace. Its scholars and analysts conduct independent, nonpartisan research on a wide range of policy issues.

Founded in 1977, Cato owes its name to Cato’s Letters, a series of essays published in 18th- century England that presented a vision of society free from excessive government power. Those essays inspired the architects of the American Revolution. And the simple, timeless principles of that revolution — individual liberty, limited government, and free markets – turn out to be even more powerful in today’s world of global markets and unprecedented access to information than Jefferson or Madison could have imagined. Social and economic freedom is not just the best policy for a free people, it is the indispensable framework for the future. Cato Institute is an EOE.


  • Assist scholars with their task, projects and events
  • Conduct general or detailed research as required
  • Conduct literature reviews
  • Edit and fact check manuscripts
  • Supervising the work of interns
  • Minor administrative duties


  • Bachelor’s degree in economics, political science, or public policy, or equivalent work experience in those fields
  • An interest in social welfare policy
  • The ability to write well-structured, readable prose is essential
  • Expertise with Microsoft Word and Excel
  • Bonus skills include the ability to conduct regression analyses and a Master’s degree in a public policy related field


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