_________________________________________________________________
E M P L O Y E E B E N E F I T S , C O M P E N S A T I O N
& P E N S I O N L A W
Vol. 6, No. 12: June 16, 2005
_________________________________________________________________
Publisher: Employment, Labor, Compensation & Pension Law Journals
a division of
Social Science Electronic Publishing, Inc. (SSEP)
and Social Science Research Network (SSRN)
Editor: PAMELA PERUN
Urban Institute
Mailto:pamela@planetnow.com
Copyright: SSEP, Inc. 2005. All rights reserved.
Leading Social Science Research Delivered To Your Desktop
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Topic of This Issue:
Retirement
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T A B L E of C O N T E N T S
_________________________________________________________________
NEW and FORTHCOMING ARTICLES
"Benefit Cost Comparisons Between State and Local Governments and
Private-Sector Employers"
EBRI Notes, Vol. 26, No. 4, April 2005
KENNETH J. MCDONNELL
Employee Benefit Research Institute (EBRI)
"Hope We Die Before We Get Old: The Attack on Retirement"
Elder Law Journal, Vol. 12, No. 2, p. 245-325, 2004
PATRICIA DILLEY
University of Florida Levin College of Law
"Encouraging Workers to Save: The 2005 Retirement Confidence
Survey"
EBRI Issue Brief, No. 280, April 2005
RUTH HELMAN
Mathew Greenwald & Associates
DALLAS L. SALISBURY
Employee Benefit Research Institute (EBRI)
VARINY PALADINO
Employee Benefit Research Institute (EBRI)
CRAIG COPELAND
Employee Benefit Research Institute (EBRI)
WORKING PAPERS
"Why Forcing People to Save for Retirement May Backfire"
MONIKA BUETLER
Universität St. Gallen
OLIVIA HUGUENIN
Université de Lausanne - DEEP-HEC
FEDERICA TEPPA
Universita degli Studi di Torino
Center for Research on Pensions and Welfare
Policies (CeRP)
"Social Security Programs and Retirement around the World: Fiscal
Implications, Introduction and Summary"
JONATHAN GRUBER
Massachusetts Institute of Technology (MIT)
Department of Economics
National Bureau of Economic Research (NBER)
DAVID A. WISE
National Bureau of Economic Research (NBER)
Harvard University
John F. Kennedy School of Government
"Betting on Death and Capital Markets in Retirement: A Shortfall
Risk Analysis of Life Annuities"
IVICA DUS
University of Frankfurt
RAIMOND MAURER
University of Frankfurt - Faculty of Business and
Economics
OLIVIA S. MITCHELL
Wharton School
National Bureau of Economic Research (NBER)
"Pathways to Early Retirement in Denmark, 1984-2000"
MONA LARSEN
Danish National Institute of Social Research (SFI)
PEDER J. PEDERSEN
Arhus University - Centre for Labour Market and
Social Research (CLS)
Institute for the Study of Labor (IZA)
S S R N I N F O R M A T I O N
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scholarly discourse.
N E W and F O R T H C O M I N G Articles
_________________________________________________________________
"Benefit Cost Comparisons Between State and Local Governments and
Private-Sector Employers"
EBRI Notes, Vol. 26, No. 4, April 2005
BY: KENNETH J. MCDONNELL
Employee Benefit Research Institute (EBRI)
Document: Available from the SSRN Electronic Paper Collection:
http://papers.ssrn.com/paper.taf?abstract_id=713483
Contact: KENNETH J. MCDONNELL
Email: Mailto:MCDONNELL@EBRI.ORG
Postal: Employee Benefit Research Institute (EBRI)
Suite 600
2121 K Street, NW
Washington, DC 20037-1896 UNITED STATES
Phone: 503-238-3420
Fax: 202-775-6312
ABSTRACT:
This paper examines some of the causes of the differences in
total compensation costs between state and local government
employers and private-sector employers using datasets from the
Bureau of Labor Statistics and from EBRI tabulations of the
March 2004 Current Population Survey by the U.S. Census Bureau.
JEL Classification: J32
______________________________
"Hope We Die Before We Get Old: The Attack on Retirement"
Elder Law Journal, Vol. 12, No. 2, p. 245-325, 2004
BY: PATRICIA DILLEY
University of Florida Levin College of Law
Document: Available from the SSRN Electronic Paper Collection:
http://papers.ssrn.com/paper.taf?abstract_id=719785
Contact: PATRICIA DILLEY
Email: Mailto:dilley@law.ufl.edu
Postal: University of Florida Levin College of Law
P.O. Box 117625
Gainesville, FL 32611-7625 UNITED STATES
Phone: 352-392-2270
Fax: 352-392-7647
ABSTRACT:
The American institution of retirement has sustained numerous
attacks over the last twenty years, to the extent that it may
cease to exist in its current form by the time most of today's
workers reach their mid-sixties. Two of the major components of
the U.S. retirement system, private pensions and Social
Security, have either declined or are under attack, and thus may
not be able to provide support for the elderly in the future,
particularly low and middle income retirees. Changes in
employment policies, volatility in investments available for
retirement savings plans, and proposals to privatize Social
Security threaten the financial basis for retirement itself over
the next twenty years. Human beings have always structured their
societies, dating back to ancient Mesopotamia, to some extent
around sustaining elderly members of the population, but for
almost all elderly people, work into extreme old age and
disability was the norm until the twentieth century. The
innovation of the last century, and specifically of Social
Security, was to make retirement the mechanism for caring for
the elderly, and to make retirement the norm for the elderly of
all income groups. The current debate over privatizing Social
Security, combined with legislative neglect of the weakening
employer-provided pension system, threatens to return the United
States to the pre-20th century methods of caring for the old -
requiring them to work until death or disability makes work
impossible, or allowing responsibility for their care and upkeep
to fall on individual family members or friends. The alternative
is to make moderate revisions in the institution of retirement
itself; phased retirement, increased funding for Social Security
benefits for lower and moderate wage workers, and exploration of
a citizen-based, rather than employment-based, retirement income
system, are all possible avenues to maintain retirement as an
expectation for workers at all income levels.
JEL Classification: H55, G23, J14
______________________________
"Encouraging Workers to Save: The 2005 Retirement Confidence
Survey"
EBRI Issue Brief, No. 280, April 2005
BY: RUTH HELMAN
Mathew Greenwald & Associates
DALLAS L. SALISBURY
Employee Benefit Research Institute (EBRI)
VARINY PALADINO
Employee Benefit Research Institute (EBRI)
CRAIG COPELAND
Employee Benefit Research Institute (EBRI)
Document: Available from the SSRN Electronic Paper Collection:
http://papers.ssrn.com/paper.taf?abstract_id=701302
Contact: RUTH HELMAN
Email: Mailto:RUTHHELMAN@GREENWALDRESEARCH.COM
Postal: Mathew Greenwald & Associates
4201 Connecticut Ave., NW
Suite 620
Washington, DC 20008 UNITED STATES
Phone: 202-686-0300 ext.138
Fax: 202-696-2512
Co-Auth: DALLAS L. SALISBURY
Email: Mailto:SALISBURY@EBRI.ORG
Postal: Employee Benefit Research Institute (EBRI)
Suite 600
2121 K Street, NW
Washington, DC 20037-1896 UNITED STATES
Co-Auth: VARINY PALADINO
Email: Mailto:paladino@asec.org
Postal: Employee Benefit Research Institute (EBRI)
Suite 600
2121 K Street, NW
Washington, DC 20037-1896 UNITED STATES
Co-Auth: CRAIG COPELAND
Email: Mailto:COPELAND@EBRI.ORG
Postal: Employee Benefit Research Institute (EBRI)
Suite 600
2121 K Street, NW
Washington, DC 20037-1896 UNITED STATES
ABSTRACT:
This paper reports findings of the 15th annual Retirement
Confidence Survey (RCS), which points to potential solutions to
the American retirement savings problem, specifically ways that
could help workers save more through their employment-based
retirement plans. The RCS again finds that a strong majority of
Americans are skeptical that Social Security will continue to
provide benefits at least equal to those received by current
retirees (although confidence of the American public in Social
Security has actually risen over the past decade), and helps
pinpoint a number of reasons why Americans may not be preparing
adequately for retirement. The survey was conducted in January
2005 through 20-minute telephone interviews with 1,253
individuals (1,001 workers and 252 retirees) age 25 and older in
the United States. Random digit dialing was used to obtain a
representative cross section of the U.S. population.
JEL Classification: J26
______________________________
W O R K I N G P A P E R Abstracts
_________________________________________________________________
"Why Forcing People to Save for Retirement May Backfire"
BY: MONIKA BUETLER
Universität St. Gallen
OLIVIA HUGUENIN
Université de Lausanne - DEEP-HEC
FEDERICA TEPPA
Universita degli Studi di Torino
Center for Research on Pensions and Welfare
Policies (CeRP)
Document: Available from the SSRN Electronic Paper Collection:
http://papers.ssrn.com/paper.taf?abstract_id=710945
Paper ID: CESifo Working Paper Series No. 1458; University of
St. Gallen Economics Discussion Paper No. 9
Date: April 2005
Contact: MONIKA BUETLER
Email: Mailto:Monika.Buetler@unisg.ch
Postal: Universität St. Gallen
CH-9000 St.Gallen, SWITZERLAND
Co-Auth: OLIVIA HUGUENIN
Email: Mailto:olivia.huguenin@hec.unil.ch
Postal: Université de Lausanne - DEEP-HEC
BFSH1
Lausanne, 1015 SWITZERLAND
Co-Auth: FEDERICA TEPPA
Email: Mailto:teppa@cerp.unito.it
Postal: Universita degli Studi di Torino
Center for Research on Pensions and Welfare
Policies (CeRP)
Via Real Collegio, 30
10024 Moncalieri, Torino, ITALY
ABSTRACT:
If individuals are unable or unwilling to borrow, a higher than
desired second pillar pension capital may induce people to
retire earlier than they would have in the absence of such a
scheme. Individuals thus leave the workforce as soon as the
retirement income is deemed sufficient and the pension plan
avails withdrawal of benefits. We provide evidence using
individual data from a selection of Swiss pension funds,
allowing us to perfectly control for pension scheme details. Our
findings suggest that affordability is a key determinant in the
retirement decisions. The higher the accumulated pension
capital, the earlier individuals tend to leave the workforce.
JEL Classification: D91, H31, J26
______________________________
"Social Security Programs and Retirement around the World: Fiscal
Implications, Introduction and Summary"
BY: JONATHAN GRUBER
Massachusetts Institute of Technology (MIT)
Department of Economics
National Bureau of Economic Research (NBER)
DAVID A. WISE
National Bureau of Economic Research (NBER)
Harvard University
John F. Kennedy School of Government
Document: Available from the SSRN Electronic Paper Collection:
http://papers.ssrn.com/paper.taf?abstract_id=714062
Paper ID: NBER Working Paper No. W11290
Date: May 2005
Contact: JONATHAN GRUBER
Email: Mailto:gruberj@mit.edu
Postal: Massachusetts Institute of Technology (MIT)
Department of Economics
Room E52-355
50 Memorial Drive
Cambridge, MA 02142 UNITED STATES
Phone: 617-253-8892
Fax: 617-253-1330
Co-Auth: DAVID A. WISE
Email: Mailto:dwise@nber.org
Postal: National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138 UNITED STATES
ABSTRACT:
This is the introduction to and summary of Phase III of an
international research project to study the relationship between
social security provisions and retirement. The project relies on
the work of a large group of economists in 12 countries who
conduct the analysis for each of their countries. The first
phase described the retirement incentives inherent in plan
provisions and documented the strong relationship across
countries between social security incentives to retire and the
proportion of older persons out of the labor force. The second
phase illustrated the large effects that changing plan
provisions would have on the labor force participation of older
workers. This third phase shows the consequent fiscal
implications that extending labor force participation would have
on net program costs - reduced government social security
benefit payments less increased government tax revenues.
The findings are conveyed by simulating the implications of
illustrative reforms. One reform increases benefit eligibility
ages by three years. Another illustrative reform reduces
actuarially benefits received before the normal retirement age.
A common reform prescribes the same provisions in each country.
The financial implications of the illustrative reforms are very
large in many instances, often as much as 20 to 40 percent of
current program costs. The savings amount to as much a 1 percent
or more of country GDP. The results make clear that reforms like
those considered in this volume can have very large fiscal
implications for the cost of social security benefits as well as
for government revenues engendered by changes in the labor force
participation of older workers.
JEL Classification: F0, H0
______________________________
"Betting on Death and Capital Markets in Retirement: A Shortfall
Risk Analysis of Life Annuities"
BY: IVICA DUS
University of Frankfurt
RAIMOND MAURER
University of Frankfurt - Faculty of Business and
Economics
OLIVIA S. MITCHELL
Wharton School
National Bureau of Economic Research (NBER)
Document: Available from the SSRN Electronic Paper Collection:
http://papers.ssrn.com/paper.taf?abstract_id=705591
Paper ID: NBER Working Paper No. W11271
Date: April 2005
Contact: OLIVIA S. MITCHELL
Email: Mailto:mitchelo@wharton.upenn.edu
Postal: Wharton School
Philadelphia, PA 19104-6365 UNITED STATES
Phone: 215-898-7620
Fax: 215-898-0310
Co-Auth: IVICA DUS
Email: Mailto:dus@wiwi.uni-frankfurt.de
Postal: University of Frankfurt
60054 Frankfurt, GERMANY
Co-Auth: RAIMOND MAURER
Email: Mailto:Rmaurer@wiwi.uni-frankfurt.de
Postal: University of Frankfurt - Faculty of Business and Economics
Postfach 81
D-60054 Frankfurt, GERMANY
ABSTRACT:
Retirees must draw down their accumulated assets in an orderly
fashion, so as not to exhaust their funds too soon. We compare
alternative phased withdrawal strategies to a life annuity
benchmark using German data; one particular phased withdrawal
rule seems attractive, as it offers relatively low expected
shortfall risk, good expected payouts for the retiree during his
life, and some bequest potential; results are similar for the US
case. Delayed annuitization may also appeal, as it offers higher
expected benefits with lower expected shortfalls. Requiring
unisex mortality tables in annuity pricing raises women's risks
under a phased withdrawal program.
JEL Classification: G22, G23, J26, J32, H55
______________________________
"Pathways to Early Retirement in Denmark, 1984-2000"
BY: MONA LARSEN
Danish National Institute of Social Research (SFI)
PEDER J. PEDERSEN
Arhus University - Centre for Labour Market and
Social Research (CLS)
Institute for the Study of Labor (IZA)
Document: Available from the SSRN Electronic Paper Collection:
http://papers.ssrn.com/paper.taf?abstract_id=714903
Paper ID: IZA Discussion Paper No. 1575
Date: April 2005
Contact: PEDER J. PEDERSEN
Email: Mailto:PJP@CLS.DK
Postal: Arhus University - Centre for Labour Market and Social
Research (CLS)
DK-8000 Aarhus, DENMARK
Phone: +45 8942 1581
Fax: +45 8613 6334
Co-Auth: MONA LARSEN
Email: Mailto:ml@sfi.dk
Postal: Danish National Institute of Social Research (SFI)
Herluf Trolles Gade 11
DK-1052 Kopenhagen, DENMARK
Paper Requests:
Contact: Mark Fallak, Institute for the Study of Labor (IZA),
P.O. Box 7240, D-53072 Bonn, Germany. Phone:+49-228-3894-0 ext.
223. Fax:+ 49-228-3894-510. Mailto:Fallak@iza.org
ABSTRACT:
This paper describes and analyses the pathways to early
retirement in Denmark. The analyses are based on a 10 per cent
panel sample of the population 45-66 years old followed from
1984 onwards. We use a multinomial logit approach to analyse the
characteristics of individuals that retire through each pathway
compared to those remaining in the labour force. The transition
from work to retirement is complex and far from the conventional
idea of exit typically occurring from a job at the official
pension age. Eight pathways from work to an early retirement
program are identified. One group of pathways is transitions
directly from employment corresponding to 75 per cent of all
transitions in the sample period. The great majority of these
transitions occur to an early retirement program. A second group
consists of pathways dominated by unemployment insurance
benefits (UIB) covering 20 per cent. The remaining 5 per cent of
the transitions occur through pathways dominated by benefit
programs reflecting a low attachment to the labour force in the
period prior to retirement. Overall, availability and/or
generosity of retirement programs are important for early
retirement through the employment and UIB dominated pathways.
For early retirement through other pathways, however, personal
characteristics seem to be at least as important as retirement
programs.