subject: Wp2004
0-11 of 11
Employer Matching and 401(k) Saving: Evidence from the Health and Retirement Study
description- – Employer matching of employee 401(k) contributions can provide a powerful incentive to save for retirement. We examine the effect of matching on 401(k) saving accounting for non-linearities in the intertemporal budget set. We use detailed administrative contribution, earnings, and pension plan data from the Health and Retirement Study and estimate that the elasticity of contributions with respect to matching is 0.15-0.27 overall, with sixty percent of this effect on the participation margin and the remaining forty percent on the intensive margin. The estimated after-tax cross-price elasticity of 401(k) contributions with respect to IRA saving is -0.60, which suggests 401(k)s and IRAs are substitutes in tax-deferred saving. We find no evidence of endogenous worker sorting based on the discount rate to plans that offer matching.
- – WP2004-18
- – 2004-05-01
- – application/pdf
Motivation for Money and Care that Adult Children Provide for Parents: Evidence from"Point-Blank"Survey Questions
description- – When adult children provide care for their aging parents, they often do so at great expense to themselves incurring psychic, monetary, emotional, and even physical costs, in conjunction with care that is labor intensive and, at the extreme, unrelenting. While the nature of parent care and the profile of care giving children are well described in the literatures of the social sciences, we still lack insight into why adult children undertake parent care without compensation or compulsion. In this paper, we adopt a novel, direct question approach using newly available data from a special module fielded in the 2000 Health and Retirement Study that included questions on motivations for, and concerns with, the provision of familial assistance. Transfers are not always provided free of pressure from other family members, for example, and familial norms of obligations and traditions appear to matter for many respondents. These findings suggest that the standard set of economic considerations--utility interdependence, budget constraints, exchange, and the like--are insufficient for a complete understanding of private transfer behavior. Though one must always be skeptical about reading too much into what people say about why they do the things they do (or think they will do) we nonetheless conclude that "point-blank" questions offer, at the very least, a worthwhile complement to the more conventional methods for unraveling motivations for private, intergenerational transfers.
- – WP2004-17
- – 2004-05-01
- – application/pdf
The Well-Being of Retirees: Evidence Using Subjective Data
description- – While previous economic research focuses on the financial well-being of retirees, this paper examines the determinants of overall well-being of retirees. Using data from the 2000 Health and Retirement Study, the strongest predictor of retirement well-being is the reason for entering retirement. If individuals were "forced" to retire, their well-being is significantly lower than those who chose to retire. This indicates the importance of expectations on retirement satisfaction. Additionally, health, current income, and comparison retirement income have important roles in determining overall well-being.
- – WP2004-24
- – 2004-11-01
- – application/pdf
Why Don't Americans Save?
description- – This paper provides an examination of the decline in the household saving rate over the past two decades from both the macroeconomic and microeconomic perspectives. Between 1980-84 and 2000-04 private saving fell more than 8 percentage points of U.S. GDP. At the aggregate level, about 40 percent of the fall in the household saving rate occurred within contractual retirement accounts, that is, within employer-sponsored and individual retirement plans. Moreover, much of the drop in discretionary saving occurred before the sharp rise in equity and home values in the late 1990s. The paper examines the potential scope of a number of other explanations for the fall in aggregate saving, such as the drop in inflation, increased capital gains on wealth, and alternative treatments of consumer durables as investment. Lower rates of inflation do emerge as a possible cause of the drop in measured saving, but the other factors do not seem consistent with the observed timing of the decline.The microeconomic section explores the feasibility of using information from successive Surveys of Consumer Finances (SCF) to follow the wealth accumulation of specific age cohorts over the period of most dramatic change in aggregate saving. For many components of wealth, the surveys are very similar to the corresponding aggregates of the flow of funds accounts (FFAs), but there are important discrepancies for corporate equities that become particularly large for the 2001 survey. The discrepancies in the nominal wealth are magnified when the two estimates are adjusted for capital gains, yielding substantially different estimates of household saving. The paper reports on some efforts to benchmark the SCF to the FFAs, using the distributional information of the SCF to provide an added dimension to the FFA data. The resulting microeconomic data indicate a widespread drop in saving that cannot be associated with any specific group of households.
- – WP2004-26
- – 2004-11-01
- – application/pdf
How Do Pensions Affect Expected and Actual Retirement Ages?
description- – This paper uses the first six waves of the Health and Retirement Study to investigate the impact of pensions on expected retirement age, on the probability of being retired in each wave given employment in the previous wave, and on the probability of retiring earlier than planned. Pension coverage per se and the type of pension are important in each case. Pension wealth reduces the expected retirement age by 0.6 year, and the incentives in defined benefit plans lower the expected age by another 1.1 years. Pension wealth increases the probability of retiring in a given wave, and pension accruals reduce the probability. Other characteristics of defined benefit plans, as measured by the pension dummy, further raise the probability of being retired. Finally, with regard to the probability of retiring earlier than planned, a change in defined contribution wealth increases the probability, but pension coverage per se reduces it. That is, those with pensions tend to be more accurate planners than those without.
- – WP2004-27
- – 2004-11-01
- – application/pdf
The Impact Of Aging On Financial Markets
description- – All major industrial countries will experience significant population aging over the next several decades. In both academic circles and the business press it is widely believed that population aging will have important effects on financial markets because of its expected impact on saving rates and the demand for investment funds. This paper reviews the literature on the macroeconomic and asset market effects of population aging, focusing on four related issues: (a) The impact of population age structure on aggregate household saving; (b) The effect of population aging on investment demand; (c) Evidence on the influence of population age structure on financial market asset prices and returns; and (d) Effects of globalization on our interpretation of the impact of demographic change.
- – WP2004-23
- – 2004-10-01
- – application/pdf
Social Security Personal-Account Participation
description- – This paper examines the potential impact of government matching contributions on personal-account participation in the President's Commission on Strengthening Social Security's Model 3 for Social Security reform. Given the government's choice of four plan-design parameters, the magnitude of the match is determined solely by the differential return personal-account assets receive above the notional return, referred to as the"personal-account premium,"akin to the equity premium. The impact of matching on personal-account participation is simulated for older workers (ages 40 to 65) in the first wave of the Health and Retirement Study (HRS) using empirical estimates from a structural model of the impact of employer matching on participation in corporate 401(k) plans. For a personal-account premium of five percentage points, which implies a match rate of 12.5 percent for middle- to lower-income workers, the simulations imply that 53 percent of older workers would participate in voluntary personal accounts. The response of participation to matching is very inelastic; it is very unlikely that participation by older workers would achieve the mid-range assumption by the Commission of 67 percent. There is substantial heterogeneity in participation across subsets of older workers: participation would be the lowest for low-educated, minority, and unmarried older workers.
- – WP2004-22
- – 2004-10-01
- – application/pdf
Providing Guarantees in Social Security
description- – Some Social Security reforms would provide guarantees that individuals would not receive less under a reformed system than would be provided by current law. However, the "current law" benefit formula increases benefits when wages rise. Any reform successfully adding to economic growth, therefore, would affect those promised levels of benefits, as well as revenues and the interest rates that determine what could be earned and paid out of individual accounts. This paper concludes that guarantees could add significantly to the costs of Social Security, reduce any reduction in budget imbalance achieved through other parts of a reform, and add to taxes, direct or implicit, that must be paid to cover those costs. Stock and bond market variation, as well as variation in returns on individual accounts, also add to costs when reform contains a guarantee, as government bears mainly downside risks. A variety of examples are provided for one generic type of reform.
- – WP2004-21
- – 2004-08-01
- – application/pdf
Deferring Income in Employer-Sponsored Retirement Plans: The Dynamics of Participant Contributions
description- – This paper describes contributions to employer-sponsored retirement accounts, using newly available longitudinal data that combine administrative earnings records with survey data. The results reveal a fair amount of individual variability in contribution rates over time. However, potential negative shocks to income and increases in current consumption needs do not appear to lead workers to curtail their contributions. Instead, workers appear to raise their contribution rates after they have achieved key milestones in the lifecourse, such as the birth of a child or the purchase of a home.
- – WP2004-20
- – 2004-08-01
- – application/pdf
Reform Model Two of the President's Commission to Strengthen Social Security: Distributional Outcomes Under Different Economic and Behavioral Assumptions
description- – This project uses dynamic microanalytic simulation techniques to explore the distributional consequences of Plan 2 of the President's Commission to Strengthen Social Security. This plan includes a voluntary personal account that would be"carved out"of currently-scheduled benefit contributions, a new minimum benefit, and an increase in widow(er)s benefits. It also shifts the current wage-indexed initial benefit formula to a price-indexed formula to address most of the current system's long-term solvency problem. The analysis begins by adopting the assumptions of the Office of the Chief Actuary (OCACT) regarding portfolio allocation, rates of return, administrative costs, and mandatory annuitization of personal account balances to develop a baseline of Model 2. We compare the distributional results with current-law promised benefits and a current-law scenario adjusted to match the revenues we estimate are required to fund the OCACT baseline in 2050 exclusive of the private account provisions. Subsequently, we test the sensitivity of our baseline estimates to different assumptions about participation in personal accounts, investment patterns, administrative costs, variation in market returns across the life cycle, and rates of return on investments. To simulate likely participation patterns in voluntary private accounts and participants' portfolio allocation choices, we estimate models using recent data from the Survey of Consumer Finances. The results from our core and sensitivity analyses bracket the likely outcomes of the reform plan and demonstrate how this type of reform might affect subgroups of the future elderly population.
- – WP2004-19
- – 2004-08-01
- – Favreault, Melissa M.
- – Goldwyn, Joshua H.
- – Smith, Karen E.
- – Thompson, Lawrence H.
- – Uccello, Cori E.
- – Zedlewski, Sheila R.
- – application/pdf
Sliding into Poverty? Cross-National Patterns of Income Source Change and Income Decay in Old Age
description- – This article examines the change in the mix of income and benefits that older adults receive as they age, with a focus on older women. The study is a cross-national comparison of five OECD countries using the Luxemburg Income Study database. We investigate the change of private income and social benefits following synthetic cohorts for two decades. These results reveal that older women rely heavily on socially provided benefits for a majority of their income, and these benefits are primarily responsible for whether older women find themselves in poverty or not. Older men and women in countries with relatively generous (or well targeted) social retirement and social transfer benefits have lower levels of poverty. Housing appears to be a particularly important factor. Older homeowners are less likely to be in poverty than renters. As the value of homes and homeownership increase, housing will become an especially important source of support in old age.
- – WP2004-25
- – 2004-11-24
- – application/pdf
0-11 of 11
![[x]](/static/imgs/cross.gif)