The impact of deferring retirement age on retirement income adequacy

UPDATE OF RSPM-POST-65 RETIREMENT AGES: The EBRI Retirement Security Projection Model (RSPM) was developed in 2003 to provide an assessment of national retirement income prospects. The 2011 version of RSPM adds a new feature that allows households to defer retirement age past age 65 in an attempt to determine whether retirement age deferral is indeed sufficiently valuable to mitigate retirement income adequacy problems for most households (assuming the worker is physically able to continue working and that there continues to be a suitable demand for his or her skills). The answer, unfortunately, is not always "yes," even if retirement age is deferred into the 80s. LOWEST-INCOME LEVELS, 50-50 CHANCE OF ADEQUACY: RSPM baseline results indicate that the lowest preretirement income quartile would need to defer retirement age to 84 before 90 percent of the households would have a 50 percent probability of success. Although a significant portion of the improvement takes place in the first four years after age 65, the improvement tends to level off in the early 70s before picking up in the late 70s and early 80s. Households in higher preretirement income quartiles start at a much higher level, and therefore have less improvement in terms of additional households reaching a 50 percent success rate as retirement age is deferred for these households. LOWEST-INCOME LEVELS, HIGHER CHANCES OF ADEQUACY: If the success rate is moved to a threshold of 70 percent, only 2 out of 5 households in the lowest-income quartile will attain retirement income adequacy even if they defer retirement age to 84. Increasing the threshold to 80 percent reduces the number of lowest preretirement income quartile households that can satisfy this standard at a retirement age of 84 to approximately 1 out of 7. IMPORTANCE OF DEFINED CONTRIBUTION RETIREMENT PLANS: One of the factors that makes a major difference in the percentage of households satisfying the retirement income adequacy thresholds at any retirement age is whether the worker is still participating in a defined contribution plan after age 65. This factor results in at least a 10 percentage point difference in the majority of the retirement age/income combinations investigated. FACTORING IN RETIREMENT HEALTH COSTS: Another factor that has a tremendous impact on the value of deferring retirement age is whether stochastic post-retirement health care costs are excluded (or the stochastic nature is ignored). For the lowest preretirement income quartile, the value of deferral (in terms of percentage of additional households that will meet the threshold by deferring retirement age from 65 to 84) decreases from 16.0 percent to 3.8 percent by excluding these costs. The highest preretirement income quartile experiences a similar decrease, from 12.8 percent to 2.6 percent.     

A post-crisis assessment of retirement income adequacy for Baby Boomers and Gen Xers

DETERMINING THOSE "AT RISK" OF INSUFFICIENT RETIREMENT INCOME: The analysis in this paper was designed to answer two questions: 1) What percentage of U.S. households became "at risk" of insufficient retirement income as a result of the financial market and real estate crisis in 2008 and 2009? 2) Of those who are at risk, what additional savings do they need to make each year until retirement age to make up for their losses from the crisis? The results are from the 2010 EBRI Retirement Security Projection Model by the Employee Benefit Research Institute. KEY FINDINGS: Range at risk: The percentage of households that would not have been "at risk" without the 2008-2009 crisis but that ended up "at risk" varies from a low of 3.8 percent to a high of 14.3 percent. 50-50 chance of adequacy: Looking at all Early Boomer households that would need to save an additional amount (over and above the savings already factored into the baseline model), the median percentage of additional compensation for these households desiring a 50 percent probability of retirement income adequacy would be 3.0 percent of compensation each year until retirement age to account for the financial and housing market crisis in 2008 and 2009. 90 percent chance of adequacy: Looking at all Early Boomer households that would need to save an additional amount (over and above the savings already factored into the baseline model), the median percentage of additional compensation for these households desiring a 90 percent probability of retirement income adequacy would be 4.3 percent of compensation. Range of adequacy: Looking only at Early Boomer households that would need to save an additional amount (over and above the savings already factored into the baseline model), that had account balances in defined contribution plans and IRAs as well as exposure to the real estate crisis in 2008 and 2009 shows a median percentage for of 5.6 percent for a 50 percent probability and 6.7 percent for a 90 percent probability of retirement income adequacy.     

The impact of retirement on psychological well-being in Canada

The objective of this study is to investigate the effect of retirement on psychological wellbeing. The empirical part of this study uses seven longitudinal waves of the Canadian National Population Health Survey, spanning 1994 through 2006. To account for biases due to unobserved individual specific heterogeneity, this study deploys panel data methodologies such as fixed effect method, fixed effect logistic method, and instrumental variable fixed effect method. Using age specific retirement incentives provided by Canada's Income Security System as instruments for retirement behavior, the study finds that retirement has significant positive impact on subsequent psychological well-being. The findings of the study would substantiate the continuity theory notion that retirement may actually improve psychological well-being.     

The impact of AIDS on income and human capital

This paper studies the impact of HIV/AIDS on per capita income and education. It explores two channels on how HIV/AIDS affects income that have not been sufficiently stressed by previous literature: the reduction of the incentives to stay in school due to shorter expected longevity and the reduction in productivity of experienced workers. In the model, individuals live for three periods, may get infected in the second period, and with some probability die of AIDS before reaching the third period of their lives. Parents care for the welfare of the future generations so that they will maximize lifetime utility of their dynasty. The simulations predict that the most affected countries in Sub-Saharan Africa in the future will be, on average, 30% poorer than they would be without AIDS. Schooling will decline in some cases by 40%. These figures are dramatically reduced with widespread medical treatment, as it increases the survival probability and productivity of infected individuals.     

The impact of income inequality on values and attitudes

Scholars in several social science disciplines scholars have argued from their respective disciplinary perspectives that income inequality has a considerable impact on economic and social performance of a nation. This essay investigates the possible impact of income inequality on 290 values and attitudes in forty industrial nations from an economic perspective. The results show that inequality has a significant impact on values and attitudes especially concerning religion and the family.     

Impact of retirement type on income for people with disabilities

The purpose of this paper is to investigate the impact of involuntary retirement on the economic security of persons with a disability. Very little research examines the economic consequences to forced retirement and no research focuses on persons with disabilities who have a higher rate of involuntary retirement than the general population. Analysing the 2006 Canadian Participation and Activity Limitation Survey, we find that persons with a disability who involuntarily retire have lower median personal and household incomes and they are more likely to be under the low-income cut-off point than those who retire voluntarily. When socio-demographic, socio-economic and geographical characteristics are controlled; those who retired involuntarily are more likely to be under the low-income cut-off point than those whose retirement was voluntary. Further, those who retired involuntarily are more likely to receive disability benefits whereas those who retired voluntarily are more likely to receive retirement income. The authors argue for employers and governments to implement accommodation in the workplace and flexible employment opportunities so that more persons with disabilities are able to continue in their employment for as long as possible.     

The impact of macroeconomic conditions on income inequality

This paper analyzes the relationship between macroeconomic factors and the income distribution using data on equivalized disposable household income from the United Kingdom for 1961–99. We argue in favour of fitting a parametric functional form to the income distribution for each year, and then modeling the time series of model parameters in terms of the macroeconomic factors, as this better allows us to take into account non-stationarity in the time series. Estimates from models that relate income distribution parameters to cyclical variables in first differences (to account for non-stationarity) suggest that neither inflation nor unemployment have significant effects on income inequality. Compared to the commonly-used method of modelling the income shares directly, our approach indicates that there was no clear cut relationship between macroeconomic factors and the UK income distribution during the last third of the twentieth century.     

Racial differences in retirement income: the roles of public and private income sources

Despite great overall improvement in the elderly's economic status over the past two decades, minority elders still comprise the poorest population group of all. Nonetheless, the income security of minority elders has not been given special attention in the scrutiny in recent years of the size and the future of various federal programs affecting older persons. Based on data from the 1971, 1981, and 1991 public-use data tapes of the Current Population Survey, the racial difference in income status of the elderly and the role of Social Security and Supplemental Security income versus that of income from private sources are analyzed in terms of how income inequality among races is ameliorated or escalated. The findings show that racial/ethnic differences in income status increased between 1970 and 1990. The findings also confirm that, for both elderly singles and couples, Social Security is the most important income source. Without it, poverty rates among elderly black couples, for example, would have increased by as much as 48.5 percentage points in 1990. Policies that would help improve the income status of the low-income elderly are discussed.     

The effects of perceived locus of control and perceived income adequacy on satisfaction with financial status of rural households

The purpose of this study is to examine the relationships among selected socioeconomic variables — perceived locus of control, perceived income adequacy, and satisfaction with financial status. Results of the study indicate that age, household income, household net worth, perceived locus of control, and perceived income adequacy are significantly related to satisfaction with financial status. Household income and household net worth have indirect effects on satisfaction through perceived locus of control and perceived income adequacy. Perceived locus of control also has an indirect effect on satisfaction through perceived income adequacy. These findings suggest that counselors and educators should emphasize the importance of perceptions of income adequacy and control over financial aspect in their courses and programs.Journal Paper No. J-14499 of the Iowa Agriculture and Home Economics Experiment Station, Ames, Iowa. Project No. 2809.His research interests include consumer credit and family resource management. He received his Ph.D. from Iowa State University in 1993.Her research interests include family financial management and consumer bankruptcy. She received her Ph.D. from the University of Missouri.     

The impact of unionization on labor’s share of income

This study examines the effect of unions on labor’s share of income. Because economic conditions within each industry are important in addressing this issue, this analysis incorporates a more disaggregated approach than has been previously used. Cross-sectional data for the 1950s — a period of more stable unionization — permit an examination of the long-run effect of wage increases on labor’s share. The empirical analysis suggests that higher labor prices have no long-run impact on labor’s share in manufacturing.     

The impact of labour income risk on household saving decisions in Turkey

This paper analyses the Household Budget Surveys prepared by the Turkish Statistical Institute to reveal the empirical importance of precautionary saving in Turkey. The most difficult aspect of the empirical analysis is the approximation of labour income risk as a proxy variable for future labour income uncertainty. Individual disposable income is interacted alternately with the probability of being unemployed and with the probability of job loss in the next period to generate the labour income risk variables. The econometric results support the precautionary saving hypothesis and labour income risk emerges as one of the main determinants of household saving decisions. Moreover, households implement alternative strategies to smooth out their income streams such as holding a second job and increasing the number of income earners in the family. However, it is evident that they are still vulnerable against labour income risk, which underlines the need for an effective and efficient social security system.     

The impact of tax benefits on female labor supply and income distribution in Spain

Review of Economics of the Household - Tax benefits targeted to low-wage workers have become very common transfer programs that seek to meet both efficiency and equity targets. An expanding...     

The uneven impact of women's retirement on their daughters' employment

This paper studies the impact of women’s retirement on their daughters’ employment. Using SHARE and self-collected historical data on legal ret     

The impact of income on reunification among families with children in out-of-home care

Income appears to be associated with faster time to family reunification. The observed connection between income and reunification, however, may be causal in nature or the relationship may be an issue of selection, in that other underlying factors explain both income and family safety and stability. We examine the causal role that the source of income plays in reunification. We use administrative data on primary caregivers of children placed in out-of-home care in Washington State from 2000 through 2007 (N = 15,159) matched with public economic support and employment data linked by the Washington State Department of Social and Health Services (DSHS) Integrated Client Database (ICDB). Using instrumental variable analysis, we estimated the effect of the amount of earnings and the amount of cash benefits on reunification. We used county unemployment rates and county food stamp participation rates as instruments. We find modest and inconsistent results that suggest higher earnings are associated with lower likelihood of reunification. We find no consistent evidence linking cash assistance to reunification.     

The impact of parenting education on parent and child behaviors: Moderators by income and ethnicity

Parenting education has emerged as a promising resource for supporting parents, but the relative impact of parenting education among families facing higher versus lower risk remains unclear. The present study explored the effects of participating in an evidence-based parenting education series and examined whether those effects were moderated by families' socio-demographic contexts (income level and ethnicity status). Results indicated that parenting education series serving predominantly lower-income parents resulted in greater improvements in parents' parenting skills and their children's behaviors compared to series serving higher-income parents. Attending a parenting series with a higher proportion of Latino parents also significantly predicted greater improvements in child behaviors, but not parent skills. These findings provide preliminary evidence that parenting education may be most effective when it targets underserved populations. The findings further highlight the importance of continuing to explore the influence of parenting education adapted for low-income and Latino families to inform the design of evidence-based programs.