Search

Most government employees have access to retiree health coverage, which provides them with group health coverage even if they retire before Medicare eligibility. We study the impact of retiree health coverage on the labor supply of public sector workers between the ages of 55 and 64. We find that retiree health coverage raises the probability of stopping full time work by 4.3 percentage points (around 38 percent) over two years among public sector workers aged 55–59, and by 6.7 percentage points (around 26 percent) over two years among public sector workers aged 60–64. In the younger age group, retiree health insurance mostly seems to facilitate transitions to part-time work rather than full retirement. However, in the older age group, it increases the probability of stopping work entirely by 4.3 percentage points (around 22 percent). [ABSTRACT FROM AUTHOR]

We examine retirement saving for young adults in a life cycle model. We find that optimal retirement saving is zero for liquidity‐constrained young adults who anticipate significant earnings growth. With a plausible age‐earnings profile for college‐educated workers, retirement saving does not begin until the late 30s or early 40s. Workers facing a flat earnings profile begin saving much sooner. Participating may be optimal for younger workers facing steep earnings profiles if they anticipate switching jobs and cashing out after 1–2 years. Our results suggest that automatically enrolling workers, regardless of age, is not consistent with a life cycle model. [ABSTRACT FROM AUTHOR]

We use a lifecycle model to examine the implications of persistent low real interest rates and low wage growth for individuals nearing retirement. We find that low returns and low wage growth affect welfare substantially, often producing large compensating variations. Low economywide wage growth has a much larger welfare effect than low individual wage growth, largely because the Social Security benefit formula is progressive and incorporates wage indexing. Low economywide wage growth undercuts the effects of wage indexation as average wages fall along with individual wages. Low returns raise the optimal Social Security claiming age and the marginal benefit of working longer, while low wage growth decreases the marginal benefit of working longer. Low returns also increase the relative price of consumption during retirement, suggesting that individuals may wish to reduce future consumption relative to current consumption. We also compare these results with standard financial planning advice. [ABSTRACT FROM AUTHOR]

Nearly all life-cycle models adopt Yaari's (1965) assumption that individuals know the survival probabilities that they face. Given that an individual's exact survival probabilities are likely unknown, we explore the implications of relaxing this assumption. If there is no annuity market, then the welfare cost of survival ambiguity is large and regressive. Ambiguity neutral individuals would pay as much as 1% of total lifetime consumption for immediate resolution of ambiguity and the bottom income quintile is 4 times worse off than the top quintile. Alternatively, with the availability of competitive annuity contracts, survival ambiguity is welfare improving because it allows competitive insurance companies to pool risk across survival types. Even though Social Security and annuities share some properties, Social Security does not help to hedge survival ambiguity. [ABSTRACT FROM AUTHOR]

Abstract: Despite the presence of Medicare, out-of-pocket medical spending is a large expenditure risk facing the elderly. While women live longer than men, elderly women incur higher out-of-pocket medical spending than men at each age. In this paper, we examine whether differences in marital status and living arrangements can explain this difference. We find that out-of-pocket medical spending is approximately 24 percent higher when an individual becomes widowed, a large portion of which is spending on nursing homes. Our results suggest a substantial role of living arrangements in out-of-pocket medical spending. Our estimates combined with differences in rates of widowhood across gender suggest that marital status can explain about one third of the gender difference in total out-of-pocket medical spending, leaving a large portion unexplained. On the other hand, gender differences in widowhood more than explain the observed gender difference in out-of-pocket spending on nursing homes. [Copyright &y& Elsevier]