scholarly journals How Persistent Low Expected Returns Alter Optimal Life Cycle Saving, Investment, and Retirement Behavior

2018 ◽  
Author(s):  
Vanya Horneff ◽  
Raimond Maurer ◽  
Olivia S. Mitchell
Keyword(s):  
Life Cycle ◽  
Social Security ◽  
Expected Returns ◽  
Financial Conditions ◽  
Retirement Accounts ◽  
Retirement Behavior ◽  
Rate Environment ◽  
Large Peak ◽  
Social Security Benefits ◽  
Second Peak

This chapter explores how an environment of persistent low returns influences saving, investing, and retirement behaviors, compared to what in the past had been conceived of as ‘normal’ financial conditions. Using a calibrated life cycle dynamic model with realistic tax, minimum distribution, and social security benefit rules, we can mimic the large peak at the earliest claiming age at 62 that is seen in the data. Also in line with the evidence, our baseline results show a smaller second peak at the (system-defined) Full Retirement Age of 66. In the context of a zero-return environment, we show that workers will optimally devote more of their savings to non-retirement accounts and less to 401(k) accounts, since the relative appeal of investing in taxable versus tax-qualified retirement accounts is lower in a low return setting. Finally, we show that people claim social security benefits later in a low interest rate environment.

Roth versus traditional accounts in a life-cycle model with tax risk

2012 ◽  
Vol 12 (1) ◽  
pp. 28-61 ◽  
Author(s):  
MARIE-EVE LACHANCE
Keyword(s):  
Life Cycle ◽  
Social Security ◽  
Risk Reduction ◽  
Life Cycle Model ◽  
Cycle Model ◽  
Retirement Accounts ◽  
Small Risk ◽  
Traditional Account ◽  
Welfare Losses ◽  
Social Security Benefits

AbstractThis paper analytically solves a life-cycle model that compares traditional and Roth retirement accounts. It includes realistic features such as tax deductibility of contributions and taxation of withdrawals, tax bracket structure with deductions, taxation of Social Security benefits, and tax risk at retirement. With current taxes, choosing a traditional account over a Roth creates small welfare losses in only a few cases, largely for those with higher incomes and pensions who are subject to the taxation of Social Security benefits. We also investigate tax variability and find that diversified strategies offer only small risk reduction benefits in our illustrations.

Late Career Job Loss and Retirement Behavior of Couples

2016 ◽  
Vol 39 (1) ◽  
pp. 7-28 ◽  
Author(s):  
Ajin Lee
Keyword(s):  
Social Security ◽  
Job Loss ◽  
Health And Retirement Study ◽  
Budget Constraints ◽  
Unexpected Earnings ◽  
Retirement Behavior ◽  
Using Data ◽  
Social Security Benefits ◽  
The Impact ◽  
Retirement Study

This article argues that wealth uncertainty influences when couples choose to retire. Using data from the Health and Retirement Study, I show that wives delay retirement when their husbands retire following a job loss. This effect is stronger when husbands are the primary earners, and couples are relatively poorer. This provides evidence of intra-household insurance that mitigates the impact of an unexpected earnings shock. I find that wives tend to delay retirement only until they become eligible for social security. This suggests that social security benefits can relax households’ budget constraints and allow wives to join their husbands in retirement.

scholarly journals The Presidents Social Security Plan: How much would you pay to participate?

2011 ◽  
Vol 4 (4) ◽  
Author(s):  
Frank Caliendo ◽  
Allen B. Atkins
Keyword(s):  
Life Cycle ◽  
Social Security ◽  
Life Cycle Model ◽  
Present Value ◽  
Cycle Model ◽  
Rates Of Return ◽  
Social Security Program ◽  
Retirement Accounts ◽  
Long Time ◽  
President Bush

President Bush is in favor of using private retirement accounts to partially replace the current pay-as-you-go social security program.  We use a simple life-cycle model to analyze whether or not private accounts would benefit workers.  "Cash equivalents" are calculated under different assumptions to see how much a worker would be willing to pay to participate in the private account program.  In most circumstances, workers would benefit from the private account program.  Only when market rates of return are very low or a person expects to live for a very long time does the current pay-as-you-go system give a greater present value to a worker.

scholarly journals Can Information Change Personal Retirement Savings? Evidence from Social Security Benefits Statement Mailings

2018 ◽  
Vol 108 ◽  
pp. 93-97 ◽  
Author(s):  
Susan Payne Carter ◽  
William Skimmyhorn
Keyword(s):  
Social Security ◽  
Retirement Savings ◽  
Natural Experiments ◽  
Social Security Administration ◽  
Retirement Benefits ◽  
Retirement Accounts ◽  
The Us ◽  
Social Security Benefits ◽  
Information Change ◽  
The Impact

Despite concern about the viability of public retirement programs and potential undersaving for retirement, we still know little about the impact of government provided information on individual behavior. We exploit plausibly exogenous variation in exposure to the world's largest personalized retirement benefits statement from the US Social Security Administration to evaluate the effects of information and encouragement on individual retirement savings decisions. Using three natural experiments between 2011 and 2014 and administrative data, we find no impact of the statements on individual retirement savings in their employer provided retirement accounts.

scholarly journals Investment Strategies For Tax Diversification: Dont Put All Your Eggs In One Tax Basket

2010 ◽  
Vol 8 (1) ◽  
Author(s):  
J. David Ashby ◽  
Darla G. Williams ◽  
Terrye A. Stinson
Keyword(s):  
Social Security ◽  
Income Tax ◽  
Tax Burden ◽  
Investment Strategies ◽  
Tax Rates ◽  
Retirement Accounts ◽  
The Future ◽  
Social Security Benefits

Traditional analysis on the use of Roth accounts often focuses on the expectations of tax rates in the future. However, tax diversification into tax-free accounts such as the Roth accounts may make sense independent of expectations regarding future tax rates. This is due to the taxation of Social Security benefits and the laws relating to required minimum distributions for traditional retirement accounts. Many taxpayers may find their overall income tax burden lighter in the retirement years by making use of taxable, tax deferred and tax-free investment accounts.

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