288 research outputs found
Social Security Reform and Labor Supply
No full textA structural life-cycle retirement model with an improved specification over previous models is used to analyze and compare the long-run labor supply effects of the rules for Social Security in place in 1972,1977 and 1983, and for an actuarially fair system. The effects of separate provisions from the 1983 amendments are examined. These include the raising of the normal retirement age to 67, the increase in the delayed retirement credit to 8 percent, and the lowering of the reduction rate for earnings over the test amount to one dollar for every three dollars of earnings.
Retirement Outcomes in the Health and Retirement Study
No full textThis study examines retirement outcomes in the first four waves of the Health and Retirement Study. Measured retirement is seen to differ, sometimes substantially, with the definition of retirement used and among various groups analyzed. Moreover, these differences vary with the wave of the survey as respondents age. Retirement is comprised of a complex set of flows among states representing full time work, partial retirement and complete retirement. Seventy seven percent of transitions continue in the same or equivalent states between adjoining waves of the HRS; 17 percent involve a move from greater to lesser labor force participation, and 6 percent involve a move from states of lesser to greater labor force participation. Twenty two percent of the sample report they were partially retired at some time in the first four waves, and by age 65, over a fifth of the population is partially retired. Altogether, 14 percent of the sample experienced a reversal in the course of the survey, moving from a state of less work to a state of more work. Comparing retirement flows for men between the HRS and the 1969-1979 Retirement History Study, the large spike in the population leaving full time work at age 65 observed in the RHS is reduced to half its original size in the HRS, while the share leaving full time work at age 62 has almost doubled over time. The results presented here should help researchers to improve their understanding of the structure of the dependent variable in retirement studies.
What People Don't Know About Their Pensions and Social Security: An Analysis Using Linked Data from the Health and Retirement Study
No full textPension plan descriptions from respondents to the 1992 Health and Retirement Study are compared with descriptions obtained from their employers. Earnings histories reported by respondents are compared with earnings histories from the Social Security Administration. The probability of linking employer pension data, which is two thirds for current jobs, and of obtaining permission to link an earnings history, which is over 70 percent, are not well explained by respondent characteristics. Half of respondents with linked pension data correctly identify plan type, and fewer than half identify, within one year, dates of eligibility for early and normal retirement benefits. Benefit reduction rates are essentially not reported. Respondents do better in reporting pension values, but the unexplained variation is still considerable. In contrast, respondent reported values, together with other observables, account for 80 percent of the variation in pension values and 75 percent of the variation in covered earnings measured from linked records. Thus prospects are good for imputing plan values, but not for imputing the location or size of early retirement incentives. Our findings raise questions about how well respondents understand complex pension and Social Security rules.
Retirement and Wealth
No full textThis paper estimates reduced form retirement and wealth equations, and analyzes the relationship between them. Data are from the first four waves of the longitudinal Health and Retirement Study, individuals born from 1931 to 1941. Single equation retirement models relate the probability of retiring to forward looking measures of changes in the values of social security and pension benefits when retirement is postponed. Such simple models suggest that if the social security early retirement age were to be raised or abolished, more people would retire earlier rather than later. Our work analyzes the reasons for such counter intuitive predictions, and discusses the need to analyze these policies in the context of a structural model of retirement and wealth. To improve retirement analysis, we develop the premium value, a measure of the future value of pensions and social security that better reflects the accrual of benefits under defined contribution plans. We also introduce a new definition of retirement to blend information on objective hours worked with subjective self reports of retirement status. Our findings also explore the effects of social security incentives on partial retirement, and consider the importance of partial retirement in any study relating social security to retirement behavior.
How Changes in Social Security Affect Recent Retirement Trends
No full textAccording to CPS data, men 65 to 69 were about six percentage points less likely to be retired in 2004 than in 1992. CPS and Health and Retirement Study (HRS) data indicate a corresponding difference of 3 percentage points between 1998 and 2004. Simulations with a structural retirement model suggest changes in Social Security rules between 1992 and 2004 increased full time work of 65 to 67 year old married men by a little under 2 percentage points, about a 9 percent increase, and increased their labor force participation by between 1.4 and 2.2 percentage points, or 2 to 4 percent, depending on age. Social Security changes account for about one sixth of the increase in labor force participation between 1998 and 2004, for married men ages 65 to 67. These rule changes encourage deferring retirement from long term jobs, returning to full time work after retiring, and increasing partial retirement. Although married men in their fifties decrease their participation in the labor force over this period, this is not due to changes in Social Security, but may reflect other factors, including changes in disability.
How to Evaluate the Effects of Social Security Policies on Retirement and Saving When Firm Policies Affect the Opportunities Facing Older Individuals
No full textThis project uses data from the Health and Retirement Study to examine, in the context of a structural retirement model, the effects on retirement of non-wage aspects of employment emanating from firm side factors. Factors examined include minimum hours constraints, layoffs, physical and mental requirements of the job, informal pressures to retire, accommodations made by the employer when a person has a health problem, and retirement windows. The most important effects found pertain to minimum hours constraints. Should minimum hours constraints be abolished, the percent of the population ages 62 to 69 who are completely retired will decline by 10 to 15 percentage points. The fraction in this age group who are working in partial retirement jobs will increase by roughly twenty percentage points of the population. Were minimum hours constraints abolished, more than twice as many people would enter partial retirement as would leave full time work. As a result, total FTE employment would increase were minimum hours constraints eliminated. Increasing the importance of partial retirement would affect the role of the earnings test and liquidity of the Social Security system, although the increase in partial retirement would be largely, but not entirely offset by the decline in full time work. This would limit the size of any effects on Social Security finances. Authors’ Acknowledgment This paper was supported by a grant from the U.S. Social Security Administration (SSA) to the Michigan Retirement Research Center, UM 03-03. The opinions and conclusions are solely those of the authors and should not be construed as representing the opinions or policy of SSA, the Michigan Retirement Research Center, or the National Bureau of Economic Research. Alan L. Gustman is Loren Berry Professor of Economics at Dartmouth College, Department of Economics, Hanover, N.H. 03755 ([email protected]). Thomas L. Steinmeier is Professor of Economics, Texas Tech University, Department of Economics, Lubbock, Texas 79409 ([email protected]).
Pension Incentives and Job Mobility
No full textUsing models developed for this study which incorporate an array of behaviors generally omitted from conventional models relating backloading to turnover, Gustman and Steinmeier find that backloading plays only a slight role in explaining mobility differences associated with pension coverage. They propose that higher wages often paid at pension-covered jobs play a greater role in reducing mobility than do pensions.backloading, pensions, job mobility, labor mobility
Understanding Patterns of Social Security Benefit Receipt, Pensions Incomes, Retirement and Saving by Race, Ethnicity, Gender and Marital Status: A Structural Approach
No full textIn this paper we use data from the Health and Retirement Study to examine differences in retirement behavior, wealth, Social Security and pension benefits by race and gender. The differences observed among groups are sometimes substantial. We then estimate models jointly explaining retirement and wealth by race and gender. We decompose differences in outcomes into those due to differences in parameters of the preference function for leisure and goods, time preference rates, and those due to differences in the circumstances of the members of each group. By circumstances we mean both the opportunity set, and factors that determine the disutility of continued work, such as health status. We find that differences in outcomes among white, black and Hispanic males are not due to differences in preferences for leisure and goods consumption, but are due both to differences in time preference and to differences in circumstances. Differences in outcomes between men and women are primarily due to differences in preferences. Authors’ Acknowledgement This paper was supported by a grant from the U.S. Social Security Administration (SSA) to the Michigan Retirement Research Center, UM 03-13. The opinions and conclusions are solely those of the authors and should not be construed as representing the opinions or policy of SSA, the Michigan Retirement Research Center, or the National Bureau of Economic Research. Alan L. Gustman is Loren Berry Professor of Economics at Dartmouth College, Department of Economics, Hanover, N.H. 03755 ([email protected]). Thomas L. Steinmeier is Professor of Economics, Texas Tech University, Department of Economics, Lubbock, Texas 79409 ([email protected]).
Introduction and Overview [to Pension Incentives and Job Mobility]
No full textUsing models developed for this study which incorporate an array of behaviors generally omitted from conventional models relating backloading to turnover, Gustman and Steinmeier find that backloading plays only a slight role in explaining mobility differences associated with pension coverage. They propose that higher wages often paid at pension-covered jobs play a greater role in reducing mobility than do pensions.https://research.upjohn.org/up_press/1077/thumbnail.jp
Retirement and Wealth
No full textThis paper analyzes the relationship between retirement and wealth. In a simple model where the only heterogeneity is in leisure preference, other things the same, those who retire early accumulate more wealth while still working, enabling them to support themselves over their longer retirement period. Moreover, characteristics that encourage earlier retirement also encourage additional saving. If there were heterogeneity in both leisure and time preference, however, this simple relation is broken. Early retirees do not necessarily save more. Using data from the first four waves of the longitudinal Health and Retirement Study, a cohort of individuals born from 1931 to 1941, we estimate reduced form retirement and wealth equations. Linked employer provided pension plan descriptions and social security administrative records are central to the analysis. The value of the pension and social security beyond current period accrual is measured by the difference between the present value of the benefit stream resulting from additional work until the date of retirement and the present value of a stream of benefits equal each year to the value of benefit accrual in the initial period. This measure, which we call the premium value, captures any excess value from the spikes at early and normal retirement age in a defined benefit plan. But it also has zero value in the case of a defined contribution plan. Calculating benefit increments on the assumption that benefits are claimed as soon as eligible after retiring, and that respondents link delayed benefit claiming with delayed retirement, the estimated retirement equation indicates that a higher future reward from pensions and social security encourages postponed retirement. Factors leading to early retirement do not systematically generate higher saving. Many independent variables do not have symmetric effects in the retirement and wealth equations. Unobservables from the retirement and wealth equations are only weakly correlated. A related finding, not easily reconciled with a simple life cycle model of saving, is that higher pension wealth and social security wealth do not substitute for other forms of wealth, but add to total wealth. In addition, other findings support a more complicated view of the underlying behavior. Most importantly, despite a significant payoff to waiting, retirees do not time the acceptance of their social security benefits so as to maximize expected value. Most respondents take their social security benefits as soon as eligible after retirement. This raises questions about the way social security and pensions are calculated as explanatory variables in reduced form retirement equations. These and other findings, e.g., on measuring retirement and on the role of partial retirement, raise doubts about the value of using reduced form retirement equations to estimate the effects of changing such social security policies as the early retirement age. Reduced form retirement equations must be used with great caution in situations where they are analyzing new policy initiatives. Unobserved heterogeneity interacts with observable variables to produce the estimated coefficients in these equations, but these interactions are not necessarily the same if the policy changes in new ways.
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