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Using Your House for Income in Retirement

July 17, 2015 Comments off

Using Your House for Income in Retirement
Source: Center for Retirement Research at Boston College

Using Your House reviews the two most common ways to use your house to boost your income in retirement – downsizing and a reverse mortgage – with clear examples, a discussion of the pros and cons of each approach, and links to tools on the web where you can get estimates of what downsizing or a reverse mortgage can do for you.

Sources of Increasing Differential Mortality Among the Aged by Socioeconomic Status

July 16, 2015 Comments off

Sources of Increasing Differential Mortality Among the Aged by Socioeconomic Status
Source: Center for Retirement Research at Boston College

This paper uses data from the Health and Retirement Study (HRS) to explore the extent and causes of widening differences in life expectancy by socioeconomic status (SES) for older persons. We construct alternative measures of SES using educational attainment and average (career) earnings in the prime working ages of 41-50. We also use information on causes of death, health status and various behavioral indicators (smoking, drinking, and obesity) that are believed to be predictors of premature death in an effort to explain the causes of the growing disparities in life expectancy between people of high and low SES.

The paper finds that:

  • There is strong statistical evidence in the HRS of a growing inequality of mortality risk by SES among more recent birth cohorts compared with cohorts born before 1930.
  • Both educational attainment and career earnings as constructed from Social Security records are equally useful indicators of SES, although the distinction in mortality risk by education is greatest for those with and without a college degree.
  • There has been a significant decline in the risk of dying from cancer or heart conditions for older Americans in the top half of the income distribution, but we find no such reduction of mortality risk in the bottom half of the distribution.
  • The inclusion of the behavioral variables and health status result in substantial improvement in the predictions of mortality, but they do not identify the sources of the increase in differential mortality.

Are Americans of All Ages and Income Levels Shortsighted About Their Finances?

June 24, 2015 Comments off

Are Americans of All Ages and Income Levels Shortsighted About Their Finances?
Source: Center for Retirement Research at Boston College

The brief’s key findings are:

  • A recent CRR analysis of a FINRA Investor Education Foundation survey found that financial satisfaction depends much more on meeting day-to-day, rather than distant, needs.
  • This study explores whether households of all ages and income levels are also shortsighted.
  • The results confirm that distant needs, like retirement saving, consistently take a back-seat to more immediate concerns.
  • The results underscore the importance of making it easy and automatic for Americans to save for distant goals that may otherwise receive little attention.

Trends in Social Security Claiming

May 21, 2015 Comments off

Trends in Social Security Claiming
Source: Center for Retirement Research at Boston College

The brief’s key findings are:

  • Over the past 25 years, the average retirement age for U.S. workers has been rising, a trend that should align with when people first claim Social Security.
  • But the percentage of all initial claimants who are age 62 shows little change until recently.
  • A better metric to capture claiming behavior over time – when the population is aging – is the percentage of workers turning age 62 who claim at 62.
  • This measure, based on unpublished Social Security data, shows a steep decline in claiming at 62 since the mid-1990s: from 56 percent to 36 percent for men.
  • In short, while more than a third of workers still claim right away, a growing number are waiting until their mid-60s or later.

Do Tax Incentives Increase 401(k) Retirement Saving? Evidence from the Adoption of Catch-Up Contributions

March 19, 2015 Comments off

Do Tax Incentives Increase 401(k) Retirement Saving? Evidence from the Adoption of Catch-Up Contributions
Source: Center for Retirement Research at Boston College

The U.S. government subsidizes retirement saving through 401(k) plans with $61.4 billion in tax expenditures annually, but the question of whether these tax incentives are effective in increasing saving remains unanswered. Using longitudinal U.S. Social Security Administration data on tax-deferred earnings linked to the Survey of Income and Program Participation, the project examines whether the “catch-up provision,” which was enacted in 2001 and allows workers over age 50 to contribute more to their 401(k) plans, has been effective in increasing earnings deferrals. Compared with similar workers under age 50, the study finds that contributions increased by $540 more among age-50-plus individuals who had approached the 401(k) tax-deferral limits prior to turning 50, suggesting that the older individuals respond to the expanded tax incentives. For this group, the elasticity of retirement savings to the tax incentive is quite high: a one-dollar increase in the tax-deferred limit leads to an immediate 49-cent increase in 401(k) contributions.

Are Retirees Falling Short? Reconciling the Conflicting Evidence

March 18, 2015 Comments off

Are Retirees Falling Short? Reconciling the Conflicting Evidence
Source: Center for Retirement Research at Boston College
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The brief‘s key findings are:

  • Federal Reserve data show that retirement preparedness has been declining over time, but studies on the level of preparedness offer conflicting assessments.
  • The National Retirement Risk Index (NRRI) finds half of households are “at risk,” while studies of optimal savings suggest less than one-tenth will fall short.
  • The optimal savings results depend crucially on two assumptions:  households spend less when their kids leave home (the NRRI assumes no decline); and households plan for declining consumption in retirement (the NRRI assumes steady consumption).
  • While the issue remains unsettled, the Federal Reserve data are consistent with the NRRI finding that retirement shortfalls are a growing problem.

Why Do SSI and SNAP Enrollments Rise in Good Economic Times and Bad?

February 25, 2015 Comments off

Why Do SSI and SNAP Enrollments Rise in Good Economic Times and Bad?
Source: Center for Retirement Research at Boston College

The number of participants in the Supplemental Security Income Program (SSI) and the Supplemental Nutrition Assistance Program (SNAP) skyrocketed during the Great Recession. But more surprising is that caseloads for both programs increased during the preceding expansion and during the nascent recovery period after the Great Recession. Using both administrative program data and the Survey of Income and Program Participation (SIPP), this project investigates the persistent growth in SSI and SNAP since 2000. Whereas the existing literature on program caseloads in the post-welfare reform era generally excludes the elderly from the analysis, this project is the first to investigate differences in elderly and non-elderly caseloads, allowing for differential responsiveness over time. Preliminary estimates suggest that the correlation between SSI and SNAP caseloads and economic well-being, and, separately, caseloads and health, grew stronger over this time. Coupled with a poverty rate that did not fall along with the unemployment rate, and with an increase in the share of the population reporting poor or fair health, these correlations helped lead to caseloads that remained roughly constant (SSI) or even increased (SNAP) during the most recent expansion, rather than falling as expected. The increases in caseloads stem both from increases in the entry rates among the newly eligible – particularly those in poor health – and from decreases in exit rates among low-income beneficiaries.

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