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Seesaws and Social Security Benefits Indexing

January 29, 2015 Comments off

Seesaws and Social Security Benefits Indexing
Source: Harvard Business School Working Papers

The price indexation of Social Security benefit payments has emerged in recent years as a flashpoint of debate in the United States. I characterize the direct effects that changes in that price index would have on retirees who differ in their initial wealth at retirement and mortality rates after retirement. I propose a simple but flexible theoretical framework that converts benefits reform first into changes to retirees’ consumption paths and then into a net effect on social welfare. I calibrate that framework using recently produced data on Social Security beneficiaries by lifetime income decile and both existing and new survey evidence on the normative priorities Americans have for Social Security. The results suggest that the value retirees place on protection against longevity risk is an important caveat to the widespread enthusiasm for a switch to a slower-growing price index such as the chained CPI-U.

IRS — Accumulation and Distribution of Individual Retirement Arrangements, 2011–2012

January 28, 2015 Comments off

Accumulation and Distribution of Individual Retirement Arrangements, 2011–2012
Source: Internal Revenue Service

Twelve tables presenting statistics for taxpayers with individual retirement arrangements (six each for Tax Years 2011 and 2012) are now available. The tables are organized by adjusted gross income, age, and marital status. Information for both traditional and Roth IRAs is provided.

How Does Aging Affect Financial Decision Making?

January 23, 2015 Comments off

How Does Aging Affect Financial Decision Making?
Source: Center for Retirement Research at Boston College

The brief’s key findings are:

  • With the shift from traditional pensions to 401(k) plans, the welfare of retirees depends increasingly on their ability to make sound financial decisions.
  • Using a dataset that follows a group of older individuals in the Chicago area, the analysis examines how aging affects financial decision making.
  • Participants who suffer cognitive decline experience a reduction in their financial literacy but no change in their confidence in managing their money.
  • Perhaps not surprisingly then, while they are more likely to get help with financial decisions, more than half retain primary responsibility for managing their money.

National Retirement Risk Update Shows Half Still Falling Short

December 26, 2014 Comments off

National Retirement Risk Update Shows Half Still Falling Short
Source: Center for Retirement Research at Boston College

The brief’s key findings are:

  • Between 2010 and 2013, the National Retirement Risk Index improved only slightly, dropping from 53 percent to 52 percent of working-age households.
  • This result may seem surprising given that the stock market was up and housing prices had begun to rebound.
  • But other factors ­– Social Security’s rising “Full Retirement Age,” declining interest rates, and changes in reverse mortgage rules – acted as counterweights.
  • The bottom line is that retirement security remains a serious challenge; Americans need to save more and/or work longer.

New From the GAO

December 23, 2014 Comments off

New From the GAO
Source: Government Accountability Office

Reports

Higher Education: Education Should Strengthen Oversight of Schools and Accreditors. GAO-15-59, December 22.
http://www.gao.gov/products/GAO-15-59
Highlights – http://www.gao.gov/assets/670/667691.pdf

Mobile Devices: Federal Agencies’ Steps to Improve Mobile Access to Government Information and Services. GAO-15-69, December 22.
http://www.gao.gov/products/GAO-15-69
Highlights – http://www.gao.gov/assets/670/667694.pdf

401(K) Plans: Greater Protections Needed for Forced Transfers and Inactive Accounts. GAO-15-73, November 21.
http://www.gao.gov/products/GAO-15-73
Highlights – http://www.gao.gov/assets/670/667152.pdf

Federal Subcontracting: Further Actions Needed to Improve Oversight of Pass-through Contracts. GAO-15-200, December 22.
http://www.gao.gov/products/GAO-15-200
Highlights – http://www.gao.gov/assets/670/667715.pdf

Emergency Preparedness: Opportunities Exist to Strengthen Interagency Assessments and Accountability for Closing Capability Gaps. GAO-15-20, December 4.

http://www.gao.gov/products/GAO-15-20

Highlights – http://www.gao.gov/assets/670/667301.pdf

Education and Workforce Data: Challenges in Matching Student and Worker Information Raise Concerns about Longitudinal Data Systems. GAO-15-27, November 19.

http://www.gao.gov/products/GAO-15-27

Highlights – http://www.gao.gov/assets/670/667072.pdf

Temporary Assistance for Needy Families: Action Is Needed to Better Promote Employment-Focused Approaches. GAO-15-31, November 19.

http://www.gao.gov/products/GAO-15-31

Highlights – http://www.gao.gov/assets/670/667050.pdf

Airport Privatization: Limited Interest despite FAA’s Pilot Program. GAO-15-42, November 19.

http://www.gao.gov/products/GAO-15-42

Highlights – http://www.gao.gov/assets/670/667080.pdf

Anthrax: Agency Approaches to Validation and Statistical Analyses Could Be Improved. GAO-15-80, December 19.

http://www.gao.gov/products/GAO-15-80

Highlights – http://www.gao.gov/assets/670/667672.pdf

Ground Radar and Guided Munitions: Increased Oversight and Cooperation Can Help Avoid Duplication among the Services’ Programs. GAO-15-103, December 19.

http://www.gao.gov/products/GAO-15-103

Highlights – http://www.gao.gov/assets/670/667677.pdf

Improper Payments: DOE’s Risk Assessments Should Be Strengthened. GAO-15-36, December 23.
http://www.gao.gov/products/GAO-15-36
Highlights – http://www.gao.gov/assets/670/667738.pdf

Federal Food Service Operations: Implementation of the HHS/GSA Health and Sustainability Guidelines. GAO-15-262R, December 23.
http://www.gao.gov/products/GAO-15-262R

Press Release

1. GAO Makes MACPAC Appointments. December 19.

http://www.gao.gov/press/macpac_appointments_2015.html

Reissued Report

1. Dodd-Frank Regulations: Regulators’ Analytical and Coordination Efforts. GAO-15-81, December 18.

http://www.gao.gov/products/GAO-15-81

Highlights – http://www.gao.gov/assets/670/667634.pdf

Retirement Benefit Decisions by City and County Governments

December 19, 2014 Comments off

Retirement Benefit Decisions by City and County Governments
Source: Center for State & Local Government Excellence

Key findings:

  • Workers who work a full career in their city or county can expect a retirement income of between 45 and 80 percent of their pre-retirement income.
  • Career employees of local governments who participate in Social Security can expect retirement income replacement rates of 20 to 30 percentage points higher than employees whose governments do not participate in Social Security.
  • These and other variations mean that many local workers will need to be disciplined about participating in savings plans, outside of their primary plans, to meet their retirement security goals.

It Pays to Set the Menu: Mutual Fund Investment Options in 401(k) plans

December 11, 2014 Comments off

It Pays to Set the Menu: Mutual Fund Investment Options in 401(k) plans (PDF)
Source: Federal Reserve Board

This paper investigates whether mutual fund families acting as service providers in 401(k) plans display favoritism toward their own funds. Using a hand-collected dataset on retirement investment options, we show that poorly-performing funds are less likely to be removed from and more likely to be added to a 401(k) menu if they are affiliated with the plan trustee. We find no evidence that plan participants undo this affiliation bias through their investment choices. Finally, the subsequent performance of poorly-performing affiliated funds indicates that these trustee decisions are not information driven.

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