February 26, 2015
January 27, 2015
January 22, 2015
Eligible individuals can start receiving Social Security benefits as young as 62 but if they waited until age 70, monthly benefits would rise 76%. Yet most Americans retire before the age of 65.
In their new paper “Will They Take the Money and Work? An Empirical Analysis of People’s Willingness to Delay Claiming Social Security Benefits for a Lump Sum” Raimond Maurer, Ralph Rogalla, Tatjana Schimetschek, and Olivia S. Mitchell, Wharton Professor of Insurance/Risk Management & Applied Economics/Policy, and Director of the Pension Research Council, found that people would claim Social Security benefits later by about half a year if they could get a lump sum equal in actuarial value to their future benefit increases. This would rise to two-thirds of a year if they could only get a lump sum after age 67, their Full Retirement Age. Moreover, those who currently claim at the youngest age would also delay the most.
One pundit predicted that the US could expect an increase in GDP due to increased labor force participation as a result of lump sum incentives.
To read more about this story click here.
January 14, 2015
As 2015 unfolds, let’s recall some of the major retirement-related news items from 2014:
January: The federal government announced myRAs, a new Roth IRA permitting workers without employer-sponsored retirement plans save for retirement cost-effectively.
July: The Treasury Department and IRS issued long-awaited rules on the use of longevity annuities.
October: The Treasury Department and IRS approved the use of deferred-income annuities in target-date funds (TDFs) in 401(k) plans, including as a default investment. “One aspect of defined contribution plans which many have critiqued in the past is their inability to protect against longevity risk,” said Olivia S. Mitchell, Wharton Professor of Insurance/Risk Management and Applied Economics/Policy and Director of the Pension Research Council. “Allowing deferred annuities to become a permissible component of these plans is a long-due innovation.”
November: A divided government will continue for at least the next two years making “disruptive tax and design changes to retirement saving and retirement income and health programs unlikely,” according to Dallas Salisbury, president and CEO of the Employee Benefit Research Institute (EBRI).
December: The government approved legislation to revamp the multiemployer pension insurance program. The measure raises premiums owed to the Pension Benefit Guaranty Corporation from $13 to $26 for each participant, and permits benefit cuts under certain circumstances.
To read more retirement related news from 2014, click here.
January 9, 2015
Many older Americans are electing to downsize from their full-time careers and neighborhoods in steps, rather than abandoning work all at once. Olivia S. Mitchell, Wharton Professor of Insurance/Risk Management & Applied Economics/Policy, and Director of the Pension Research Council, predicts that two-step retirement will become increasingly popular among Baby Boomers.
In previous generations, even when wives worked outside their homes, people expected that they would quit when their husbands retired. Now, more women hold jobs they find “aspirational,” Professor Mitchell said, so they want to delay a major downsizing. Furthermore, as people live longer, they must work longer to afford to retire.
To read more click here.
November 26, 2014
Olivia S. Mitchell, Wharton Professor of Insurance/Risk Management & Applied Economics/Policy, and Director of the Pension Research Council, has a new study on how to get people to claim Social Security later. Her coauthors are Raimond Maurer, Ralph Rogalla, and Tatjana Schimetschek of the Goethe University in Frankfurt.
The authors show that people would voluntarily claim about half a year later if they received a lump sum for claiming after their Early Retirement Age, and about two-thirds of a year later if the lump sum were paid only for those claiming after their Full Retirement Age (as defined by Social Security). Overall, people would work more by one-third to half of the extra months. While the government would not necessarily save a great deal of money, the labor force participation rate would be higher and the tax base would be larger while these individuals remain employed.
October 29, 2014
Many people thinking about Social Security benefits focus only on how soon they can file. But in a new research study, Olivia S. Mitchell, Wharton Professor of Insurance/Risk Management & Applied Economics/Policy and Director of the Pension Research Council, along with colleagues Jingjing Chai, Raimond Maurer, and Ralph Rogalla of Goethe University, have come up with a plan to change the conversation.
“By permitting people to delay their retirement dates with a lump sum option, workers would continue to pay Social Security payroll taxes for more years, which could help return the system to solvency via additional payroll tax collections,” the scholars write. See an article about their study here.
October 23, 2014
Public employers across the country are following Detroit’s lead by withdrawing health insurance coverage for retirees and sending them to healthcare exchanges set up under the Affordable Care Act.
Olivia S. Mitchell, Executive Director of Wharton’s Pension Research Council, notes that “since the passage of the Affordable Care Act, … every public-sector employer is looking at the exchanges as a potential way to get out of the unfunded liabilities that the public sector is bearing.” She adds: “Older people’s healthcare is much more expensive.”
In 1988, two-thirds of private-sector employers offered retiree health care; by 2013, fewer than one-quarter did so. The public sector has been slower to do away with retiree healthcare, in part because unions have continued to negotiate for the benefit. Nearly 80 percent of state and local government organizations still offer retiree healthcare, though the prognosis is not good.
See an article about this study here.
September 17, 2014
The California Public Employee’s Retirement System or Calpers plans to shed nearly $4 billion dollars of hedge fund investments. “Calpers has always been a leader in the public pension space,” says Olivia Mitchell, Wharton Professor of Insurance/Risk Management and Applied Economics/Policy and Director of the Pension Research Council. “Certainly others will take a good look at their hedge fund portfolios.”
August 26, 2014
A recent panel discussed efforts to strengthen retirement planning through financial literacy, given that it is now more important than ever to save for retirement. Unfortunately, many workers are penalized by low levels of financial sophistication resulting in poor financial planning. Panelist Olivia S. Mitchell, Wharton Professor of Insurance/Risk Management and Applied Economics/Policy and Director of the Pension Research Council spoke on these themes, along with Carlos Ramirez, President of the Mexican National Commission for the Pension System. He is responsible for the Commission’s financial literacy initiative and for regulating Mexico’s pensions. Bettina Von Jagow, Chairwoman of My Finance Coach, is a former professor of literary and cultural sciences at the University of Erfurt, Germany; the foundation seeks to improve students’ understanding of finance.
Click here to read the full discussion on financial literacy at ProjectM-Online.com