Assessing Knowledge of Retirement Behavior (1996) / Chapter Skim
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1 INTRODUCTION
1 INTRODUCTION
Pages 1-10
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With the aging of the population, with increasing uncertainty about the solvency of the Social Security system, and with growing concern about the availability of adequate private pensions, retirement income policy is likely to be the focus of increasing attention. In some respects, the information necessary to formulate sound retirement income policy is more difficult to obtain than the information needed for health care reform.
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living standards, the effects of those provisions on savings behavior must be projected over at least a generation. The long time horizon for many retirement-income-related policy projections greatly increases the uncertainty of the estimates compared with, say, the 5-year projections that are typically prepared for tax law and welfare policy proposals.
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; and · estimating the overall effects of policy changes on future retirement income security in a context that includes the macroeconomic effects of government tax and transfer policies (Gary Burtless)
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A majority of research on private pensions approaches the issue in terms of individual behavior. On the employer side, Gustman and Juster do not find a model with sufficient structure that can be used to predict the effects of government policies on employers' decisions about pension benefit levels, other plan characteristics, insurance features, or other outcomes that would be useful in understanding how pension policies affect retirement incomes and wealth.
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survey provide essential data for much of the modeling of individual behavior that is needed. As just one example, HRS will allow researchers to sort out the effects of earlier savings decisions on the retirement decision by providing panel data on detailed asset accumulation before retirement.
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For example, information on pension plan provisions collected from sample members' employers will make it possible to develop more sophisticated models of the retirement decision. Also, repeated measures of health status and employment and earnings for middle-aged workers as they age should help answer the question of whether poor health status reduces employment opportunities and earnings or whether poor job prospects and earnings impair health.
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An important issue, which is a recurring theme throughout the papers, is that individual heterogeneity is central to much of the analysis and policy debate, but appropriately incorporating such heterogeneity is a very difficult analytical task. For those individuals managing to reach retirement age with a significant level of wealth, a lingering question in the literature is the rate of accumulation or decumulation of that wealth.
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To begin, Lee and Skinner examine mortality rates because it is important to have good forecasts of mortality to determine how long people are likely to draw Social Security or private pension benefits or how long their personal savings are likely to last. Lee and Skinner find that there are large differentials in mortality forecasts, which lead to
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His proposed analytical strategy rests on a microsimulation model that would project labor force status, job tenure and turnover, private pension and Social Security accrual, and household saving. Aggregate predictions from this model could be calibrated to predictions of the Social Security actuarial model.
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From page 10... ...
Second, while various analytical models could play this integrative role, microsimulation models have distinct advantages in the context of retirement modeling because they are designed to explicitly incorporate the heterogeneity of the population. As noted above the central nature of individual heterogeneity is a recurring theme in all the papers.
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