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Full-Text Articles in Social and Behavioral Sciences

Understanding Debt In The Older Population, Annamaria Lusardi, Olivia S. Mitchell, Noemi Oggero May 2020

Understanding Debt In The Older Population, Annamaria Lusardi, Olivia S. Mitchell, Noemi Oggero

Wharton Pension Research Council Working Papers

Poor financial capability can have important consequences for well-being in later life. To explore aspects of financial management related to debt, we have designed and analyzed a new module in the 2018 Health and Retirement Study along with information from the 2018 National Financial Capability Study to evaluate the factors associated with debt and debt management in later life. We show that, even for older Americans, student loans and unpaid medical bills represent a large proportion of their debt, and having children also contributes to their indebtedness. By contrast, the more financially literate have more positive financial perceptions and behaviors ...


How The Coronavirus Could Permanently Cut Near-Retirees’ Social Security Benefits, Andrew G. Biggs Apr 2020

How The Coronavirus Could Permanently Cut Near-Retirees’ Social Security Benefits, Andrew G. Biggs

Wharton Pension Research Council Working Papers

As a group, retirees are more financially insulated from the economic effects of the COVID-19 pandemic than are most other demographic groups in the United States. Yet due to how the Social Security benefit formula interacts with the sharp economic downturn due to the Coronavirus, some groups of near-retirees are likely to suffer substantial permanent reductions to their Social Security retirement benefits. Assuming a 15 percent decline in the Social Security Administration's measure of economywide average wages in 2020, a middle-income worker born in 1960 could have his annual Social Security benefits in retirement reduced by around 13 percent ...


How Would 401(K) ‘Rothification’ Alter Saving, Retirement Security, And Inequality?, Vanya Horneff, Raimond Maurer, Olivia S. Mitchell Mar 2020

How Would 401(K) ‘Rothification’ Alter Saving, Retirement Security, And Inequality?, Vanya Horneff, Raimond Maurer, Olivia S. Mitchell

Wharton Pension Research Council Working Papers

The US has long incentivized retirement saving in 401(k) and similar retirement accounts by permitting workers to defer taxes on contributions, levying them instead when retirees withdraw funds in retirement. This paper develops a dynamic life cycle model to show how and whether ‘Rothification’ – that is, taxing 401(k) contributions rather than payouts – would alter household saving, investment, and Social Security claiming patterns. We show that these changes differ importantly for low- versus higher-paid workers. We conclude that moving to a system that taxes pension contributions instead of withdrawals will lead to later retirement ages, particularly for the better-educated ...


Social Security Research At The University Of Michigan Retirement And Disability Research Center, John Laitner, Eric French, Alan L. Gustman, Michael D. Hurd, Olivia S. Mitchell, Kathleen J. Mullen, Susan C. Barnes Feb 2020

Social Security Research At The University Of Michigan Retirement And Disability Research Center, John Laitner, Eric French, Alan L. Gustman, Michael D. Hurd, Olivia S. Mitchell, Kathleen J. Mullen, Susan C. Barnes

Wharton Pension Research Council Working Papers

In 1998, the Social Security Administration established the Retirement Research Consortium to encourage research on topics related to Social Security and the well-being of older Americans, and to foster communication between the academic and policy communities. The Michigan Retirement Research Center (MRRC) participated in the Consortium from its inception until 2019, when the MRRC expanded and became the Michigan Retirement and Disability Research Center. This article surveys a selection of the MRRC’s output over its second 10 years (2008–2017), summarizes its innovative use of new data sources, and highlights several key themes in the center’s research contributions.


Household Debt And Aging In Japan, Charles Yuji Horioka, Yoko Niimi May 2019

Household Debt And Aging In Japan, Charles Yuji Horioka, Yoko Niimi

Wharton Pension Research Council Working Papers

In this paper, we analyze the borrowing behavior of Japanese households in comparison to the other Group of Seven (G7) countries and also broken down by the age group of the household head. We find that pre-retirement households (households with a head in the 50-59 age group) in Japan do not have inordinate amounts of debt and that their financial health is satisfactory. However, we also find that households with a head in the 30-39 age group have shown a sharp increase in debt holdings in recent years, due partly to the fact that tax breaks for housing purchase, reforms ...


Financial Distress Among The Elderly: Bankruptcy Reform And The Financial Crisis, Wenli Li, Michelle J. White May 2019

Financial Distress Among The Elderly: Bankruptcy Reform And The Financial Crisis, Wenli Li, Michelle J. White

Wharton Pension Research Council Working Papers

Both the proportion of bankruptcy filings that are by the elderly and the proportion of foreclosure starts that affect the elderly have increased dramatically over the past twenty years—suggesting an increase in financial distress of the elderly relative to younger age groups. In this paper, we use new data to examine whether these trends can be explained by either of two events: the 2005 bankruptcy reform and the 2008 financial crisis. Our results show that while these events made both the elderly and younger age groups worse off, they do explain the increase in relative financial distress of the ...


How Much Should The Poor Save For Retirement? Data And Simulations On Retirement Income Adequacy Among Low-Earning Households, Andrew G. Biggs May 2019

How Much Should The Poor Save For Retirement? Data And Simulations On Retirement Income Adequacy Among Low-Earning Households, Andrew G. Biggs

Wharton Pension Research Council Working Papers

Both policymakers and members of the public are concerned regarding the adequacy of U.S. households’ retirement savings. In response, proposals have been made to expand Social Security benefits and to establish state government-run retirement plans for private sector employees. In both cases, the largest effects would be on low-earning households, who currently have low rates of retirement plan coverage and participation and who rely heavily upon Social Security benefits in retirement. However, there has been little systematic analysis of the retirement saving needs of low-earning households other to point out that they currently save little. But this leaves open ...


Trust And Retirement Preparedness: Evidence From Singapore, Benedict S.K. Koh, Olivia S. Mitchell, Joelle H. Fong Feb 2019

Trust And Retirement Preparedness: Evidence From Singapore, Benedict S.K. Koh, Olivia S. Mitchell, Joelle H. Fong

Wharton Pension Research Council Working Papers

Trust is an essential component of the financial system, and distrust can undermine saving and economic growth. Accordingly, prior research has shown that survey responses to a question about ‘trust in people’ are associated with household willingness to invest in the stock market. Nevertheless, little is known about how trust shapes economic behaviors predictive of retirement preparedness. Our study draws on the Singapore Life Panel (SLP®), a high-frequency internet survey of people age 50-70, to assess how trust ties to older respondents’ (1) pension plan participation and withdrawals; (2) life, health and long-term care insurance purchases; and (3) stock market ...


Retirement Preparedness And Financial Literacy In Singapore: How Do The Self-Employed Compare?, Benedict S.K. Koh, Olivia S. Mitchell Jan 2019

Retirement Preparedness And Financial Literacy In Singapore: How Do The Self-Employed Compare?, Benedict S.K. Koh, Olivia S. Mitchell

Wharton Pension Research Council Working Papers

Policymaker and media attention has recently focused on the rise of the so-called “gig” or freelance employment sector, where workers lack formal long-term relationships with one specific firm. This topic has captured public interest partly because of concern that those engaged in nontraditional work arrangements may lack the opportunity to save in formal retirement plans. This paper examines how the self-employed in Singapore compare to regular employees as well as the unemployed in terms of retirement preparedness, retirement saving, and portfolio diversification. We also investigate the extent to which differences in financial literacy can account for the different behaviors across ...


The Emergence Of The Robo-Advisor, Jill E. Fisch, Marion Labouré, John A. Turner Dec 2018

The Emergence Of The Robo-Advisor, Jill E. Fisch, Marion Labouré, John A. Turner

Wharton Pension Research Council Working Papers

This volume examines how technology is transforming financial applications, and how FinTech promises a similar revolution in the retirement planning processes. Robo-advisors and mobile savings apps are a few harbingers of innovations to come. Nevertheless, these changes will bring with them new ethical and regulatory considerations, design challenges related to promoting adoption by an older population less trusting of technology, and concerns over data security and privacy. Our contributors take stock of the disruptive impact of financial technology on retirement planning, saving, investment, and decumulation; and it also highlights issues that regulators, plan sponsors, academics, and policymakers must consider as ...


Financial Knowledge And Portfolio Complexity In Singapore, Benedict S. K Koh, Olivia S. Mitchell, Susann Rohwedder Nov 2018

Financial Knowledge And Portfolio Complexity In Singapore, Benedict S. K Koh, Olivia S. Mitchell, Susann Rohwedder

Wharton Pension Research Council Working Papers

Financial literacy in Singapore has not been analyzed in much detail, despite the fact that this is one of the world’s most rapidly aging nations. Using the Singapore Life Panel®, we explore older Singaporeans’ levels of financial knowledge and compare them to those observed in the United States. We assess portfolio complexity for these older households, to examine how financial literacy is related to outcomes of interest. We show that older Singaporeans’ levels of financial literacy are comparable overall to those in the United States, even though older Singaporeans score slightly lower on some dimensions (knowledge of interest and ...


Accounting And Actuarial Smoothing Of Retirement Payouts In Participating Life Annuities, Raimond Maurer, Olivia S. Mitchell, Ralph Rogalla, Ivonne Siegelin Nov 2016

Accounting And Actuarial Smoothing Of Retirement Payouts In Participating Life Annuities, Raimond Maurer, Olivia S. Mitchell, Ralph Rogalla, Ivonne Siegelin

Business Economics and Public Policy Papers

Life insurers use accounting and actuarial techniques to smooth reporting of firm assets and liabilities, seeking to transfer surpluses in good years to cover benefit payouts in bad years. Yet these techniques have been criticized as they make it difficult to assess insurers’ true financial status. We develop stylized and realistically-calibrated models of a participating life annuity, an insurance product that pays retirees guaranteed lifelong benefits along with variable non-guaranteed surplus. Our goal is to illustrate how accounting and actuarial techniques for this type of financial contract shape policyholder wellbeing, along with insurer profitability and stability. Smoothing adds value to ...


Seven Life Priorities In Retirement, Surya Kolluri, Cynthia Hutchins May 2016

Seven Life Priorities In Retirement, Surya Kolluri, Cynthia Hutchins

Wharton Pension Research Council Working Papers

As more and more Baby Boomers turn 65 and reach retirement age, they are reshaping the landscape of the retirement phase with a shift in their mindset; they are pursuing old dreams, exploring new opportunities, and thinking about retirement in an entirely new manner. Bank of America Merrill Lynch partnered with Age Wave to examine how Americans are preparing for retirement and analyze the seven life priorities that are most important to today’s retirees: Health, Home, Family, Work Giving, Finances, and Leisure. Although there is much optimism and opportunity that comes with this new wave of retirement, there is ...


Are Retirees Falling Short? Reconciling The Conflicting Evidence, Alicia H. Munnell, Matthew S. Rutledge, Anthony Webb Sep 2014

Are Retirees Falling Short? Reconciling The Conflicting Evidence, Alicia H. Munnell, Matthew S. Rutledge, Anthony Webb

Wharton Pension Research Council Working Papers

A fundamental question in the retirement area is whether people will have adequate retirement income to maintain their pre-retirement standard of living. Existing studies offer conflicting assessments; some indicate a serious problem while others present an optimistic view. This chapter attempts to explain why the assessments differ. We find that the optimistic views of retirement preparedness depend crucially on behavioral assumptions that may not reflect real world activity or on consumption levels that are unsustainable in the long run. Thus, our best assessment is that retirees are falling short and will fall increasingly short over time.


The Securitization Of Longevity Risk And Its Implications For Retirement Security, Richard D. Macminn, Patrick Brockett, Jennifer Wang, Yijia Lin, Ruilin Tian Oct 2013

The Securitization Of Longevity Risk And Its Implications For Retirement Security, Richard D. Macminn, Patrick Brockett, Jennifer Wang, Yijia Lin, Ruilin Tian

Wharton Pension Research Council Working Papers

The economic significance of longevity risk for governments, corporations, and individuals has begun to be recognized and quantified. The traditional insurance route for managing this risk has serious limitations due to capacity constraints that are becoming more and more binding. If the 2010 U.S. population lived three years longer than expected then the government would have to set aside 50% of the U.S. 2010 GDP or approximately $7.37 trillion to fully fund that increased social security liability. This is just one way of gauging the size of the risk. Due to the much larger capacity of capital ...


Exchanging Delayed Social Security Benefits For Lump Sums: Could This Incentivize Longer Work Careers?, Jingjing Chai, Raimond Maurer, Olivia S. Mitchell, Ralph Rogalla Oct 2012

Exchanging Delayed Social Security Benefits For Lump Sums: Could This Incentivize Longer Work Careers?, Jingjing Chai, Raimond Maurer, Olivia S. Mitchell, Ralph Rogalla

Wharton Pension Research Council Working Papers

Social Security benefits are currently provided as a lifelong benefit stream, though some workers would be willing to trade a portion of their annuity streams in exchange for a lump sum amount. This paper explores whether allowing people to receive a lump sum as a payment for delayed retirement rather than as an addition to their lifetime Social Security benefits might induce them to work longer. We model the factors that influence how people trade off a Social Security stream for a lump sum, and we also examine the consequences of such tradeoffs for work, retirement, and life cycle wellbeing ...


Financial Literacy And Retirement Planning In The United States, Annamaria Lusardi, Olivia S. Mitchell Oct 2011

Financial Literacy And Retirement Planning In The United States, Annamaria Lusardi, Olivia S. Mitchell

Business Economics and Public Policy Papers

We examine financial literacy in the United States using the new National Financial Capability Study, wherein we demonstrate that financial literacy is particularly low among the young, women, and the less-educated. Moreover, Hispanics and African-Americans score the least well on financial literacy concepts. Interestingly, all groups rate themselves as rather well-informed about financial matters, notwithstanding their actual performance on the key literacy questions. Finally, we show that people who score higher on the financial literacy questions are also much more likely to plan for retirement, which is likely to leave them better positioned for old-age. Our results will inform those ...


Retirement Behavior And The Global Financial Crisis, Jason J. Fichtner, John Wr Phillips, Barbara A. Smith Sep 2011

Retirement Behavior And The Global Financial Crisis, Jason J. Fichtner, John Wr Phillips, Barbara A. Smith

Wharton Pension Research Council Working Papers

Recent economic conditions have vastly changed the retirement landscape. Declines in assets as well as high unemployment changed the retirement plans of many Americans. Shocks to employment and wealth have likely influenced retirement behavior. This chapter provides a survey of the current literature on the influence of employment and wealth shocks on retirement and then makes use of administrative records on benefit applications to provide a preliminary analysis of changes in early retirement (age 62) claiming resulting from the recent economic downturn and implications. Since early claiming can have long lasting implications for retirement well being, we address how Americans ...


Effects Of The Economic Crisis On The Older Population: How Expectations, Consumption, Bequests, And Retirement Responded To Market Shocks, Michael Hurd, Susann Rohwedder Sep 2011

Effects Of The Economic Crisis On The Older Population: How Expectations, Consumption, Bequests, And Retirement Responded To Market Shocks, Michael Hurd, Susann Rohwedder

Wharton Pension Research Council Working Papers

We study the effects of the 2007-2009 recession on the population age 55+. Households in and near retirement have suffered sizeable losses in assets as a result of the economic crisis. There are a number of ways in which households might respond: reduce spending and with that increase saving, work longer, and/or bequeath less. Using longitudinal data from the Health and Retirement Study and its supplemental surveys, we find that all of these adjustments have been important.


Turning Wealth Into Lifetime Income: The Challenge Ahead, Olivia Mitchell, John Piggott Jan 2011

Turning Wealth Into Lifetime Income: The Challenge Ahead, Olivia Mitchell, John Piggott

Business Economics and Public Policy Papers

Longevity risk management was a family obligation in the old days; in the 20th century, as development, migration, and the scattering of families became more common, government and employers took over the role of providing longevity insurance. In the 21st century, demographic shift and government overspending has put all of these sources under stress. This chapter asks whether the future will be an era of more general and formalized private longevity insurance provision through annuities, and we explore answers across several different countries. Some nations have adopted mandatory annuitization; others have mandatory accumulation plans without requiring annuitization; and still others ...


What’S On The Menu? Included Versus Excluded Investment Funds For Singapore’S Central Provident Fund Investors, Benedict Sk Koh, Olivia S. Mitchell Aug 2010

What’S On The Menu? Included Versus Excluded Investment Funds For Singapore’S Central Provident Fund Investors, Benedict Sk Koh, Olivia S. Mitchell

Wharton Pension Research Council Working Papers

No abstract provided.


Health Cost Risk And Optimal Retirement Provision: A Simple Rule For Annuity Demand, Kim Peijnenburg, Theo Nijman, Bas Jm Werker Jun 2010

Health Cost Risk And Optimal Retirement Provision: A Simple Rule For Annuity Demand, Kim Peijnenburg, Theo Nijman, Bas Jm Werker

Wharton Pension Research Council Working Papers

We analyze the effect of health cost risk on optimal annuity demand and consumption/savings decisions. Many retirees are exposed to sizeable out-of-pocket medical expenses, while annuities potentially impair the ability to get liquidity to cover these costs and smooth consumption. We find that if out-of-pocket medical expenses can already be sizeable early in retirement, full annuitization is not optimal. In the other case of low health cost risk early in retirement, individuals should take advantage of the mortality credit that annuities provide and save out of the annuity income to build a buffer for health cost shocks at later ...


Collective Investments For Pension Savings: Lessons From Singapore's Central Provident Fund Scheme, Benedict Sk Koh, Olivia S. Mitchell, Joelle H. Fong May 2010

Collective Investments For Pension Savings: Lessons From Singapore's Central Provident Fund Scheme, Benedict Sk Koh, Olivia S. Mitchell, Joelle H. Fong

Business Economics and Public Policy Papers

Singapore's mandatory national defined contribution pension system permits participants to invest their retirement savings in a wide range of investment instruments if they wish, rather than leaving their savings in Central Provident Fund (CPF) accounts to earn interest rates by default. This article asks whether workers seeking to earn higher returns can expect to do better than the CPF-managed default, by moving their money into professionally managed unit trusts. We use historical data to investigate whether fund managers possess superior stock picking and market timing skills, as well as whether they exhibit persistence in performance and offer diversification benefits ...


Rating Retirement Advice: A Critical Assessment Of Retirement Planning Software, John A. Turner Apr 2010

Rating Retirement Advice: A Critical Assessment Of Retirement Planning Software, John A. Turner

Wharton Pension Research Council Working Papers

This paper develops a rating system for internet-based free retirement planning software that assumes unsophisticated users. The rating system takes into account two of the most important sources of retirement income—Social Security and investments—and the two main determinants of retirement income needs—the length of the planning period and the target replacement rate or target retirement income. We illustrate the rating approach with a sample of programs, and we find that these often tend to do a poor job in the way they handle Social Security benefits. Some encourage older persons to assume large benefit cuts, which we ...


Optimal Portfolio Choice Over The Life Cycle With Social Security, Kent A. Smetters, Ying Chen Apr 2010

Optimal Portfolio Choice Over The Life Cycle With Social Security, Kent A. Smetters, Ying Chen

Wharton Pension Research Council Working Papers

This paper examines how households should optimally allocate their portfolio choices between risky stocks and risk-free bonds over their lifetime. Traditional lifecycle models in previous work suggest that the allocation toward stocks should start high (near 100%) early in life and decline over a person’s age as human capital depreciates. These models also suggest that, with homothetic utility, the allocation should be roughly independent of a household’s permanent income. The actual empirical evidence, however, indicates more of a “hump” shape allocation over the lifecycle; the lifetime poor also hold a smaller percentage of their portfolio in stocks relative ...


The Evolution Of Retirement Risk Management, Olivia S. Mitchell, Robert L. Clark Jan 2010

The Evolution Of Retirement Risk Management, Olivia S. Mitchell, Robert L. Clark

Business Economics and Public Policy Papers

No abstract provided.


Collective Investments For Pension Saving: Lessons From Singapore’S Central Provident Fund Scheme, Benedict Sk Koh, Olivia S. Mitchell, Joelle Hy Fong Jan 2010

Collective Investments For Pension Saving: Lessons From Singapore’S Central Provident Fund Scheme, Benedict Sk Koh, Olivia S. Mitchell, Joelle Hy Fong

Wharton Pension Research Council Working Papers

Singapore’s mandatory national defined contribution pension system permits participants to invest their retirement savings in a wide range of investment instruments if they wish, rather than leaving their savings in CPF accounts to earn interest rate by default. This paper asks whether workers seeking to earn higher returns can expect to do better than the CPF-managed default, by moving their money into professionally-managed unit trusts. We use historical data to investigate whether fund managers possess superior stock-picking and market-timing skills, as well as whether they exhibit persistence in performance and offer diversification benefits to participants. The evidence is mixed ...


Implications Of The Financial Crisis For Long Run Retirement Security, Olivia S. Mitchell Jan 2010

Implications Of The Financial Crisis For Long Run Retirement Security, Olivia S. Mitchell

Wharton Pension Research Council Working Papers

Managing retirement risk has become extraordinarily difficult in this era of financial turmoil, global interlinkages, and global population aging. It is particularly fraught since consumers must now engage in long-term contracts with themselves, employers, financial institutions, and governments, regarding the future of retirement financing. Moreover, these agreements will need to remain in force extraordinarily long, for fifty or even one hundred years into the future. This note reviews what institutions and instruments that have a successful track record in retirement risk management over such a long time horizon.


The Role Of Individual Retirement Accounts In Us Retirement Planning, Sarah Holden, Brian Reid Jan 2008

The Role Of Individual Retirement Accounts In Us Retirement Planning, Sarah Holden, Brian Reid

Wharton Pension Research Council Working Papers

With the rising importance of individual retirement accounts (IRAs), which now total onequarter of US retirement assets, public policy has sharpened its focus on how individuals manage those accumulations through work and retirement years. Individuals are required to take distributions from their IRAs after age 70½, while distributions taken prior to age 59½ generally incur a 10 percent penalty. Previous research has found that IRA owners rarely tapped these assets prior to retirement; this chapter updates results and shows that these patterns continue. Several factors influence the probability of withdrawal (prior to 70½): being younger than 60 lowers the probability ...


Rethinking Social Security Claiming In A 401(K) World, James I. Mahaney, Peter C. Carlson Jan 2008

Rethinking Social Security Claiming In A 401(K) World, James I. Mahaney, Peter C. Carlson

Wharton Pension Research Council Working Papers

This chapter argues that previous research on Social Security take-up alternatives has failed to recognize critical factors that greatly impact the discussion on when it is most beneficial to start Social Security retirement benefits. We show that the effect of taxes can have a dramatic effect on the financial security of retirees, yet the taxation caused by IRA withdrawals and the interaction with Social Security has been largely misunderstood. In addition, changes made under the Senior Citizens’ Freedom to Work Act of 2000 make delaying Social Security for married couples much more favorable. We also show how the traditional approach ...