Tuesday, July 7, 2015

New issue brief: “Do Catch-Up Contributions Increase 401(k) Saving?”

The Center for Retirement Research at Boston College has released a new Issue in Brief:

“Do Catch-Up Contributions Increase 401(k) Saving?”
by Qi Guan, Matthew S. Rutledge, April Yanyuan Wu, and Francis M. Vitagliano

The brief’s key findings are:
  • To encourage Americans to save more for retirement, some suggest raising 401(k) contribution limits. 
  • To assess such an option, this analysis estimates the effects of a 2001 increase in 401(k) limits that also introduced a higher “catch-up” limit for those 50 and over.
  • The increase in the limits did boost contributions in 2002-05, but only for those near the prior limits, particularly those eligible to make catch-up contributions.
  • Since few participants – only about 10 percent – are constrained by the limits, raising them does not offer a broad-based solution for low saving rates.
This brief is available here.

Read more!

Monday, July 6, 2015

New working papers from the Center for Retirement Research

The Center for Retirement Research at Boston College has released 12 new working papers:

Alicia H. Munnell, Jean-Pierre Aubry, and Geoffrey T. Sanzenbacher

Alicia H. Munnell and Anthony Webb

Steven A. Sass, Anek Belbase, Thomas Cooperrider, and Jorge D. Ramos-Mercado
Norma B. Coe and Anek Belbase
Anek Belbase, Norma B. Coe, and April Yanyuan Wu
Anek Belbase, Norma B. Coe, and Matthew S. Rutledge
Gary Burtless and Kan Zhang
Barry P. Bosworth

Barry P. Bosworth, Gary Burtless, and Mattan Alalouf
Barry P. Bosworth, Gary Burtless, and Kan Zhang
Nadia S. Karamcheva, April Yanyuan Wu, and Alicia H. Munnell
Anek Belbase, Mashfiqur R. Khan, Alicia H. Munnell, and Anthony Webb Read more!

Wednesday, July 1, 2015

Graham: CBO Pegs Social Security Insolvency for 2029

Investors Business Daily's Jed Graham outlines the CBO's new projections for Social Security, which show an increasing funding shortfalls and a shrinking life for the program's trust funds:

The Congressional Budget Office now projects that Social Security's $2.8 trillion trust fund will run dry in 2029 — less than a decade before the end of the next president's first term. At that point, an automatic benefit cut of 28% would take effect.
Social Security's projected financing hole in 2030 will be at least 1.6% of GDP, or $400 billion (in 2015 dollars). The gap is so huge that addressing it can't be responsibly put off.
Hillary Clinton was reluctant to take any position on Social Security during her 2008 campaign, except to say that benefit cuts or a hike in the retirement age were off the table. But back then, the trust fund's demise was still projected to be more than 30 years away.

Check out the whole article.

Read more!

Thursday, June 25, 2015

Social Security expansion: Like adding more passengers to the Titanic

I have a new op-ed on Social Security over at Real Clear Markets:

"There is bad news to come regarding Social Security - not merely for the "1 percenters" but for ordinary Americans, who must either pay more to Social Security or receive less from it. Expanding Social Security, as some of members of Congress have proposed, isn't rearranging the deck chairs on the Titanic. It is like adding more passengers."
Click here to read the whole piece.

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Friday, June 19, 2015

Reminder: Savings and Retirement Foundation Lunch Forum, June 24

the Employee Health Benefits Excise Tax
(aka The Cadillac Tax)

with Robert Pozen

Links to Pozen on the subject:
Real Clear Markets: Obamacare's 'Cadillac Tax' Will Soon Hit Many Cities and States

Health Affairs: Renegotiating Retiree Health Care Plans After New Supreme Court Guidance
Wednesday, June 24
Noon to 1:00 

Hoover Institution

1399 New York Ave., NW, #500
Washington, D.C. 20005

(Lunch will be provided)

This is a widely attended event.
Robert Pozen is a nonresident senior fellow in Economic Studies at the Brookings Institution.  Since 2004, he has served as the chairman of MFS Investment Management, which manages over $180 billion in assets for over five million investors worldwide. Prior to this position, he was the John Olin Visiting Professor at Harvard Law School in 2002 and 2003, where he taught interdisciplinary courses on corporate governance and financial institutions. He currently serves as a senior lecturer at the Harvard Business School. Read more!

New papers from the Social Science Research Network

CRAIG COPELAND, Employee Benefit Research Institute (EBRI)
The U.S. Census Bureau’s Current Population Survey (CPS) is a primary source of income data for those whose ages are associated with being retired. In response to research showing that the survey has misclassified and underreported certain types of income, the 2014 CPS included a redesigned set of questions aimed at better capturing income from individual retirement accounts (IRAs) and 401(k)-type plans, among other goals. This paper provides a comparison of the income levels from the redesigned questions with those from the traditional questions. The focus in this paper is on the income of those ages 65 or older and on the income categories associated with retiree income to see the impact of the changes in the questions on sources of income in retirement. Particular emphasis is given to the income from individual retirement accounts (IRAs) and 401(k)-type plans, as this appears to be the income type with the most underreporting, given the lump-sum nature of the payments typically found from these plans, instead of regular annuity payments traditionally received from pensions. This analysis finds the new measure of income in the CPS identifies significantly more income (and a much larger percentage of income) coming from IRAs and 401(k)-type plans. Compared with the estimated amount under the traditional-income questions for 2013, the redesigned questions have resulted in an estimated total annual income 9.1 percent larger for those ages 65 or older, an aggregate amount of almost an additional $133 billion. Retirement income is 27.9 percent larger, an aggregate difference of almost $71 billion. However, Social Security remains the overwhelmingly predominant source of income for those ages 65 or older. The redesigned CPS still finds that over 60 percent of individuals in the two lowest-income quartiles receive more than 90 percent of their total income from Social Security.

BEN J. HEIJDRA, University of Groningen - Department of Economics, CESifo (Center for Economic Studies and Ifo Institute), Institute for Advanced Studies (IHS)
Email: b.j.heijdra@rug.nl
University of Groningen
Email: lauriereijnders@gmail.com
The aim of this paper is to study the long-run effects of a longevity increase on individual decisions about education and retirement, taking macroeconomic repercussions through endogenous factor prices and the pension system into account. We build a model of a closed economy inhabited by overlapping generations of finitely-lived individuals whose labour productivity depends on their age through the build-up of labour market experience and the depreciation of human capital. We make two contributions to the literature on the macroeconomics of population ageing. First we show that it is important to recognize that a longer life need not imply a more productive life and that this matters for the affordability of an unfunded pension system. Second, we find that factor prices could move in a direction opposite to the one accepted as conventional wisdom following an increase in longevity, depending on the corresponding change in the age-productivity profile.

CHRISTOPHER R. TAMBORINI, U.S. Social Security Administration
Email: Chris.Tamborini@ssa.gov
U.S. Social Security Administration
Email: patrick.purcell@ssa.gov
There are increasing concerns about whether Americans are saving enough for retirement. Recent research has called for improved understanding of the relationship between family structure and economic preparation for retirement at earlier stages of the life course. Using multiple years of the Federal Reserve Board’s Survey of Consumer Finances, we examined how number of children and marital status were associated with women’s household retirement savings at young and mid-adulthood. Several household-level indicators of retirement preparation were considered: desire to save for retirement, retirement account ownership, eligibility to participate in a defined-contribution plan, participation in defined-contribution plans, and retirement account wealth. Results from regression analyses revealed variation in women’s household financial preparation for retirement at young and mid-adulthood by family context. Additional children were negatively associated with several measures of retirement preparation among single-female households but not for couple households. Overall, we found that low economic preparation for retirement is an additional economic disadvantage facing single mothers at young and mid-adulthood, with potentially long-term implications for their financial security. The results shed light on linkages between family structure and women’s economic status. 
Read more!

Wednesday, June 17, 2015

Social Security: Is the GOP Scared of the Issue?

The Fiscal Times says no,

Social Security is not just a gray hair issue. Millennials are not only a major force as voters, but the massive generation now comprises the majority of the American workforce. And one thing all workers take note of -- all of the deductions from our paychecks. We’re all paying into the Social Security system; the question is: What will we receive in return tomorrow for every dollar that’s taken out of our paycheck today? And when do we get our money back?
Republican presidential candidates are already stirring voters with talk of raising the national retirement age. Presidential candidate and Florida Governor Jeb Bush says Social Security benefits need to be delayed to age 68 or 70.

Click here to read the whole article. Read more!