August 2022
11Aug

Labor Supply Flexibility and Portfolio Selection with Early Retirement Option

By Junkee Jeon & Jehan Oh In this paper, we study an optimal consumption and investment problem of an economic agent who can choose flexible labor supply and an option to early retire in the existence of mandatory retirement date. We model the agent's preference as the Cobb-Douglas utility, which is a function of consumption and leisure, and consider the agent's unit wage rate as a stochastic process. The optimization problem has a feature of combining both stochastic control and...

August 11, 2022
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05Aug

On the Impact of Low Interest Rates on Common Withdrawal Rules in Old Age

By An Chen, Stefan Schelling & Nils Sørensen Ensuring a desired standard of living in retirement has been strongly challenged by increasing life expectancy, and simultaneously by the current and possibly long-lasting low interest environment. In contrast to literature in this field which claims annuitization of wealth being a vital part of retirement planning, many people manage their retirement savings and withdrawal policy during the retirement period independently. To this end, several easily applicable self-managed withdrawal rules are commonly recommended...

August 5, 2022
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05Aug

The Misery of Spending Down the Nest Egg: The Effect of Annuitization on Consumption and Wellbeing

By Yu Gao, George Loewenstein & Xianghong Wang We study the effects of annuitization compared to spending down a lump-sum on consumption and subjective wellbeing. Analyzing longitudinal data on UK retirees before and after the pension reform that provided greater freedom to draw down savings, we find that annuitization increased retirees’ consumption and life satisfaction. To further examine the behavioral channel of these effects, we conducted a field experiment with college students, giving them a flow or lump-sum payment. As...

August 5, 2022
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July 2022
28Jul

Wait Your Turn: Pension Incentives, Workplace Rules and Labor Supply Among Philadelphia Municipal Workers

By David McCarthy & Po Lin Wang Little academic work has examined the labor supply response to pension incentives at the intensive margin. We explore this issue using individual-level administrative and pension data for Philadelphia city employees, where workers have some choice about whether or not to perform overtime, which is pensionable. We document large variation across workers in the incentives to do overtime provided by pension rules. Although standard regressions show that worker overtime is positively associated with own...

July 28, 2022
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22Jul

New Evidence on the Demand for Advice within Retirement Plans

By Jonathan Reuter & David P. Richardson. We study demand for advice within defined contribution retirement plans offered by 23 institutions where TIAA is sole recordkeeper. Advice seeking increases with age, account balance, annual contribution level, web access, and changes in marital status. More provocatively, participants who invest solely through target date funds—the dominant default investment option—are significantly less likely to seek any form of advice throughout the age distribution, raising the possibility that reliance upon defaults crowds out advice...

July 22, 2022
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June 2022
30Jun

A Multi-State Model for Sick Leave and Its Impact on Partial Early Retirement Incentives: The Case of the Netherlands

By Sophie de Mol van Otterloo & Jennifer Alonso-García We investigate the effect of part time and full time work on health using a Markov framework and generalized linear models to smooth the resulting crude rates. The Chapman-Kolmogorov equations are used for a general solution. We apply this model to assess a partial early retirement incentive in the Netherlands, known as "the generation pact''. The smoothed rates imply that working part time does not necessarily mean a better health for...

June 30, 2022
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24Jun

Greening Pensions: A Behavioural Perspective

By Alice Farrell, Kristina Londakova, Izzy Brennan, Jake Reynolds & Toby Park Through their pensions, the vast majority of people in the UK are investors, with pension pots collectively amounting to over £2.6 trillion.1 Investing a greater portion of this money sustainably - i.e. in businesses who have positive or neutral impacts on the environment and green technologies – could significantly accelerate our transition to a low-carbon society. While 68% of people say they would like their investments to be responsible...

June 24, 2022
Books, Investment, Pension design, Pension Management, , , , ,
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24Jun

Financial Literacy, Gender and Investment Choices

By Xin Wen, Zhiming Cheng & Massimiliano Tani Over the past thirty years Chinese households have enjoyed substantive increases in income and savings and witnessed a rapidly developing financial market offering investment choices and risks away from bank deposits – the traditional form of financial investment. We explore whether this evolving landscape has been advantageous to every investor or mainly those with better financial literacy, by focusing on the portfolio decisions of the household head, by gender. Using data from...

June 24, 2022
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17Jun

Do Retirees Want to Consume More, Less or the Same as they Age?

By Anqi Chen & Alicia H. Munnell Whether households prefer a constant, increasing, or decreasing path of consumption in retirement has important implications for our understanding of retirement adequacy. Financial planners and researchers often assume that retirees would like to maintain a constant standard of living. Similarly, Social Security benefits are based on the premise that people want steady inflation-adjusted benefits. However, several studies suggest that retired households actually decrease their consumption over time. This brief, which reports the results of...

June 17, 2022
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10Jun

LGBT: Retirement Preparations Amid Social Progress

By AEGON LGBT: Retirement Preparations Amid Social Progress is a collaboration between Aegon Center for Longevity and Retirement, and nonprofits Transamerica Center for Retirement Studies® (US), and Instituto de Longevidade Mongeral Aegon (Brazil). The report focuses on the retirement aspirations and plans among the LGBT community, and highlights findings from LGBT survey respondents from nine of the 15 surveyed countries comprising the 6th Annual Aegon Retirement Readiness Survey. Many of the traditional patterns of family and working life, including the way...

June 10, 2022
Adequacy, Books, Pension design, System Characterization, , ,
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