Why are US men retiring later?

2018 ◽  
Vol 19 (3) ◽  
pp. 442-457
Author(s):  
Wenliang Hou ◽  
Alicia Munnell ◽  
Geoffrey Todd Sanzenbacher ◽  
Yinji Li
Keyword(s):  
Social Security ◽  
Structural Model ◽  
Retirement Age ◽  
Defined Benefit ◽  
Defined Contribution ◽  
Retirement Plans ◽  
Original Cohort ◽  
The Past ◽  
Retirement Timing ◽  
Retirement Study

AbstractOver 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 toward 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) of the Health and Retirement Study (HRS). The predicted behavior is then compared with the actual retirements of the Early Boomer cohort (1948–1953) to see how much of the later cohort's delayed claiming and retirement can be explained by these changes. The Early Boomer cohort was less likely to be fully retired than the HRS cohort at both age 62 (36.7% vs. 44.0%) and age 64 (49.5% vs. 53.9%). The model suggests that the shift from DB toward DC plans was the biggest contributor to these declines, followed by better health. Social Security rules and improvements in mortality played smaller roles.

scholarly journals What the Stock Market Decline Means for the Financial Security and Retirement Choices of the Near-Retirement Population

2010 ◽  
Vol 24 (1) ◽  
pp. 161-182 ◽  
Author(s):  
Alan L Gustman ◽  
Thomas L Steinmeier ◽  
Nahid Tabatabai
Keyword(s):  
Stock Market ◽  
Older Workers ◽  
Housing Prices ◽  
Household Wealth ◽  
Health And Retirement Study ◽  
Retirement Age ◽  
Defined Benefit ◽  
Defined Contribution ◽  
Defined Contribution Plans ◽  
Retirement Study

This paper investigates the effect of the current recession on the retirement age population. Data from the Health and Retirement Study suggest that those approaching retirement age (early boomers ages 53 to 58 in 2006) have only 15.2 percent of their wealth in stocks, held directly or in defined contribution plans or IRAs. Their vulnerability to a stock market decline is limited by the high value of their Social Security wealth, which represents over a quarter of the total household wealth of the early boomers. In addition, their defined contribution plans remain immature, so their defined benefit plans represent sixty five percent of their pension wealth. Simulations with a structural retirement model suggest the stock market decline will lead the early boomers to postpone their retirement by only 1.5 months on average. Health and Retirement Study data also show that those approaching retirement are not likely to be greatly or immediately affected by the decline in housing prices. We end with a discussion of important difficulties facing those who would use labor market policies to increase the employment of older workers.

Widowhood and Retirement Timing: Evidence from the Health and Retirement Study

2018 ◽  
Vol 18 (3) ◽  
Author(s):  
Philipp Schreiber
Keyword(s):  
Older Workers ◽  
Early Stage ◽  
Low Fertility ◽  
Health And Retirement Study ◽  
Retirement Age ◽  
Retirement Plans ◽  
Skilled Workers ◽  
Health And Social Care ◽  
Retirement Timing ◽  
Retirement Study

AbstractThe combination of an increasing life expectancy, low fertility rates, and an early effective retirement age creates a pressure to act for governments and organizations. The pay-as-you-go social security systems of many countries are troubled by the increasing ratio of retirees to working people. In addition, many organizations face difficulties caused by a shrinking workforce and the accompanied shortage of skilled workers. To counteract, it is essential to create an environment in which older workers are encouraged to stay in the workforce. Therefore, it is important to understand which factors influence the retirement timing decision of workers. This study analyzes how widowhood and changes in demographic, health-related, and financial factors lead to changes in retirement plans of Health and Retirement Study (HRS) respondents. I compare respondents’ actual retirement age with their retirement plans elicited in the HRS wave prior to retirement. The strongest change in retirement timing is caused by widowhood. Respondents who become widowed retire on average 1.7 years earlier than previously planned. The estimated effect of widowhood goes beyond the deterioration of physical health and mental health. My findings suggest that an intervention in an early stage after widowhood by the employer or by health and social care services can help the widowed employee to overcome the temporary adverse effects of widowhood and to prevent a precipitous retirement decision.

How much do respondents in the health and retirement study know about their contributions to tax-deferred contribution plans? A cross-cohort comparison

2014 ◽  
Vol 14 (3) ◽  
pp. 203-239 ◽  
Author(s):  
IRENA DUSHI ◽  
MARJORIE HONIG
Keyword(s):  
Social Security ◽  
Pension Plans ◽  
Absolute Difference ◽  
Health And Retirement Study ◽  
Defined Benefit ◽  
Defined Contribution ◽  
The Mean ◽  
Wage Earners ◽  
Survey Responses ◽  
Retirement Study

AbstractWe use information from Social Security earnings records to examine the accuracy of survey responses regarding participation in tax-deferred pension plans. As employer-provided defined benefit pensions are replaced by voluntary contribution plans, employees’ understanding of the link between their annual contributions and their post-retirement wealth is becoming increasingly important. We examine the extent to which wage-earners in the Health and Retirement Study (HRS) correctly report their inclusion in tax-deferred contribution plans and, conditional on inclusion, their annual contributions. We use three samples representing different cohorts in three different periods: the original HRS cohort interviewed in 1992 at ages 51–56, the War Babies cohort interviewed in 1998 at ages 51–56, and the Early Baby Boomer cohort interviewed in 2004 at the same ages. Our findings indicate that while respondents interviewed in 1998 and 2004 were more likely to correctly report whether they were included in defined contribution plans, they were no more accurate when reporting whether they had contributed to their plans than respondents interviewed in 1992. Contributors in the three cohorts, moreover, overstated their annual contributions and thus would be likely to realize lower than expected account balances at retirement. The magnitude of this error is not negligible. In all three cohorts, the mean reporting error (the absolute difference between respondent-reported and Social Security earnings record contributions) was approximately 1.5 times larger than the mean contribution in the W-2 earnings record.

scholarly journals Addressing Longevity Risk: How Best to Annuitize Defined Contribution Assets?

2020 ◽  
Vol 4 (Supplement_1) ◽  
pp. 686-686
Author(s):  
Alicia Munnell ◽  
Gal Wettstein ◽  
Wenliang Hou
Keyword(s):  
Social Security ◽  
Longevity Risk ◽  
Defined Benefit ◽  
Defined Contribution ◽  
Economics Of Aging ◽  
Distribution Rules ◽  
Lifetime Income ◽  
The Social ◽  
Defined Benefit Pensions ◽  
Deferred Annuity

Abstract Unlike defined benefit pensions, 401(k) plans provide little guidance on how to turn accumulated assets into income. The key risk that retirees face is outliving their assets. Insurance against such risk is available through several routes, including immediate annuities, deferred annuities, and additional Social Security through delayed claiming. Under this Social Security bridge option, participants would tap their 401(k) for payments equal to their Social Security to delay claiming. This paper compares these three options in simulations against a baseline in which no assets are used to obtain lifetime income. In each option, assets not allocated to purchasing lifetime income are consumed following the Required Minimum Distribution rules. The analysis finds that, when market and health shocks are included alongside longevity uncertainty, the Social Security bridge option is generally the best for households with median wealth. Wealthier households can benefit from combining the bridge option with a deferred annuity. Part of a symposium sponsored by the Economics of Aging Interest Group.

scholarly journals Retirement Ages by Socio-Economic Class

Risks ◽  
2020 ◽  
Vol 8 (4) ◽  
pp. 102
Author(s):  
Séverine Arnold ◽  
Anca Jijiie
Keyword(s):  
Risk Aversion ◽  
Time Preference ◽  
Retirement Age ◽  
Defined Benefit ◽  
Defined Contribution ◽  
Policy Makers ◽  
Economic Class ◽  
Notional Defined Contribution

We are interested in defining the optimal retirement age by socio-economic class, given a Defined Benefit and a Notional Defined Contribution scheme. We firstly implement a utilitarian framework. Depending on the risk aversion coefficients and individual time preference factors, the results differ significantly. Since this approach is individualistic, with no consensus in the existing literature on what values these parameters should take, it is not suitable to be used by policy makers. Therefore, we provide an alternative based on two accounts. We look for the retirement age allowing the accumulated value, at the last age with survivors, of the pensions received under each system, held in one account, to be close in value to the accumulated amount should the actuarially fair pension be paid, representing the second account. Our approach results in setting a lower retirement age for lower socio-economic classes and a higher retirement age for wealthier individuals.

scholarly journals Use of Advisors and Retirement Plan Performance

2020 ◽  
Vol 31 (2) ◽  
pp. 342-356
Author(s):  
Rui Yao ◽  
Weipeng Wu ◽  
Cody Mendenhall
Keyword(s):  
Portfolio Allocation ◽  
Objective Measures ◽  
Retirement Savings ◽  
Defined Benefit ◽  
Defined Contribution ◽  
Retirement Plans ◽  
Cross Sectional ◽  
Retirement Plan ◽  
Research Gap

As defined contribution (DC) plans become more popular than defined benefit (DB) plans, American workers are increasingly responsible for their retirement savings. Because retirement plan participants' portfolio allocation is constrained by the available funds in the plan, the construction of a plan's investment menu has become extremely important. No research has evaluated fund selection in retirement plans or compared plans involving an advisor with self-directed plans. To fill this research gap, this study employs cross-sectional, nationwide data that include 5,570 retirement plans with 100 or more participants in 2013, 2014 and 2015. Results show that in most cases, using advisors is not related to plan performance. Plan sponsors should require advisors to periodically evaluate the performance of plans under their management using objective measures.

Investing for Retirement in a Low Returns Environment

2018 ◽  
Author(s):  
Catherine Reilly ◽  
Alistair Byrne
Keyword(s):  
Social Security ◽  
Financial Services ◽  
Financial Assets ◽  
Defined Benefit ◽  
Market Returns ◽  
Savings Behavior ◽  
Benefit Plan ◽  
The Past ◽  
Investment Returns ◽  
Near Term

Low returns on financial assets and increasing longevity mean saving for retirement is becoming more challenging than it has been in the past. Generations retiring in the near term face increased longevity but have lived through periods with strong market returns boosting their assets, and many also have defined benefit plan entitlements. Younger generations, who also face increasing longevity, are unlikely to earn historical investment returns on their retirement portfolios, and few have traditional pensions. We model the likely outcomes for different cohorts under scenarios for savings behavior, investment returns, and longevity. While younger generations do face substantial challenges, we show that plausible courses of action involve increased contributions and delayed or partial retirement, which can provide reasonable income replacement rates in retirement. We map out the steps that the retirement industry (government, employers, and financial services providers) must take to support people in following these courses of action, such as providing more flexibility over social security.

Financial Advice, Plan Choice, and Retirement Plan Satisfaction

2020 ◽  
pp. JFCP-18-00050
Author(s):  
Michael P. Ryan ◽  
Brenda J. Cude
Keyword(s):  
Risk Tolerance ◽  
Defined Benefit ◽  
Defined Contribution ◽  
Retirement Plans ◽  
Retirement Plan ◽  
Defined Contribution Plans ◽  
Plan Choice ◽  
Public Sector Employees ◽  
Selection Of

Most private sector employees have access to defined contribution retirement plans while public sector employees often may choose defined benefit or defined contribution plans. This research utilized a survey of faculty to analyze retirement plan satisfaction. Advice from a financial planner was positively associated with satisfaction with portability. Retirement plan knowledge was negatively associated with satisfaction on the decision period. Selection of a defined benefit plan was positively related to four aspects of satisfaction and negatively related to regret. Financial planners assisting individuals who face such choices should acknowledge the decision's challenges and evaluate the client's level of retirement planning knowledge. Focusing on long-term goals and the client's investment and mobility risk tolerance may be helpful, especially after market corrections.

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