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   EMPLOYEE BENEFITS, COMPENSATION & PENSION LAW ABSTRACTS
             Sponsored by Pension Governance, LLC
                Vol. 8, No. 14: April 19, 2007

Editor:     PAMELA J. PERUN
              Policy Director, Initiative on Financial Security,
              Aspen Institute
              PAMELA@PLANETNOW.COM
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                     Topic of This Issue:
                      Retirement Income
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T A B L E    O F    C O N T E N T S

"Cracking Open the Nest Egg: IRA Withdrawals and Retirement
 Finance"
    PAUL A. SMITH
        Federal Reserve Board of Governors
    ANDREW BERSHADKER
        Government of the United States of America - Department
        of the Treasury

"Do Households Have Enough Retirement Wealth?"
    DAVID A. LOVE
        Williams College - Department of Economics
    PAUL A. SMITH
        Federal Reserve Board of Governors
    LUCY C. MCNAIR
        Board of Governors of the Federal Reserve System

"Measuring Dissaving Out of Retirement Wealth"
    DAVID A. LOVE
        Williams College - Department of Economics
    PAUL A. SMITH
        Federal Reserve Board of Governors

"Simplification and Saving"
    JOHN BESHEARS
        Harvard University - Department of Economics
    JAMES J. CHOI
        Yale School of Management, National Bureau of Economic
        Research (NBER)
    DAVID LAIBSON
        Harvard University - Department of Economics, National
        Bureau of Economic Research (NBER)
    BRIGITTE C. MADRIAN
        Harvard University - John F. Kennedy School of
        Government, National Bureau of Economic Research (NBER)

"Pension Income of the Elderly and Characteristics of Their
 Former Employers"
    CRAIG COPELAND
        Employee Benefit Research Institute (EBRI)

"Retirement Annuity and Employment-Based Pension Income, Among
 Individuals Age 50 and Over: 2005"
    KENNETH J. MCDONNELL
        Employee Benefit Research Institute (EBRI)

"New Evidence on Earnings and Benefit Claims Following Changes in
 the Retirement Earnings Test in 2000"
    JAE SONG
        U.S. Social Security Administration
    JOYCE MANCHESTER
        U.S. Social Security Administration
_________________________________________________________________

"Cracking Open the Nest Egg: IRA Withdrawals and Retirement
 Finance"

 Contact:  PAUL A. SMITH
             Federal Reserve Board of Governors
   Email:  paul.a.smith@frb.gov
Auth-Page:  http://ssrn.com/author=341316

Co-Author:  ANDREW BERSHADKER
             Government of the United States of America -
             Department of the Treasury
Auth-Page:  http://ssrn.com/author=122048

Full Text:  http://ssrn.com/abstract=968424

ABSTRACT: In this paper we analyze income sources in retirement,
particularly the role played by withdrawals from Individual
Retirement Accounts. IRAs comprise a relatively small but rapidly
growing source of retirement income. Using a cross-section of tax
returns from tax year 2002, we find that roughly half of all
primary taxpayers aged 70 to 75 had IRA withdrawals that year.
This percentage is likely to rise as self-funded and rollover
IRAs become even more common. Second, using a ten-year panel of
taxpayers aged 57 to 63 in 1987 we find roughly 42 percent of IRA
owners first tap their accounts within a two-year window before
or after retirement. These on-time tappers make fairly consistent
withdrawals after retirement, accounting for about eight percent
of income, on average. About 12 percent of IRA owners tap their
accounts at least two years prior to retirement. While these
early tappers do not seem to deplete their accounts immediately,
there is some evidence of account depletion within the ten years
following a first withdrawal. Finally, we find that about 45
percent of taxpayers wait to tap their accounts until at least
two years after retirement, and often until required to do so by
law. These late tappers evidently have sufficient income and
assets to finance at least the early years of retirement using
non-IRA sources of income. These households are most likely
wealthier than the average retiree household, and are maximizing
the IRA's tax benefit by keeping assets in the IRA as long as
possible.
______________________________

"Do Households Have Enough Retirement Wealth?"

  Author:  DAVID A. LOVE
             Williams College - Department of Economics
   Email:  dlove@williams.edu
Auth-Page:  http://ssrn.com/author=548346

 Contact:  PAUL A. SMITH
             Federal Reserve Board of Governors
   Email:  paul.a.smith@frb.gov
Auth-Page:  http://ssrn.com/author=341316

Co-Author:  LUCY C. MCNAIR
             Board of Governors of the Federal Reserve System
   Email:  lucy.c.mcnair@frb.gov
Auth-Page:  http://ssrn.com/author=764764

Full Text:  http://ssrn.com/abstract=968412

ABSTRACT: Dramatic structural changes in the U.S. pension system,
along with the impending wave of retiring baby boomers, have
given rise to a broad policy discussion of the adequacy of
household retirement wealth. We construct a uniquely
comprehensive measure of wealth for households aged 51 and older
in 2004 that includes expected wealth from Social Security,
defined benefit pensions, life insurance, annuities, welfare
payments, and future labor earnings. Abstracting from the
uncertainty surrounding asset returns, length of life and medical
expenses, we assess the adequacy of wealth using two expected
values: an annuitized value of comprehensive wealth and the ratio
of comprehensive wealth to the actuarial present value of future
poverty lines. We find that most households in these older
cohorts can expect to have sufficient total resources to finance
adequate consumption throughout retirement, taking as given
expected lifetimes and current Social Security benefits. We find
a median annuity value of wealth equal to $32,000 per person per
year in expected value and a median ratio of comprehensive wealth
to poverty-line wealth of 3.56. About 12 percent of households,
however, do not have sufficient wealth to finance consumption
equal to the poverty line over their expected lifetimes, even
after including the value of Social Security and welfare
benefits, and an additional 9 percent can expect to be relatively
close to the poverty line.
______________________________

"Measuring Dissaving Out of Retirement Wealth"

  Author:  DAVID A. LOVE
             Williams College - Department of Economics
   Email:  dlove@williams.edu
Auth-Page:  http://ssrn.com/author=548346

 Contact:  PAUL A. SMITH
             Federal Reserve Board of Governors
   Email:  paul.a.smith@frb.gov
Auth-Page:  http://ssrn.com/author=341316

Full Text:  http://ssrn.com/abstract=968431

ABSTRACT: The approaching retirement of the baby boomers,
accelerating trend from DB to DC pension plans, and growing
uncertainty over the solvency of Social Security all raise
important questions about the ability of households to finance
their retirement years with liquid assets, rather than annuities.
We use data from four waves of the HRS to investigate how
households spend down their retirement wealth, and, in
particular, whether they appear to run down their retirement
accounts too quickly. We find no evidence of excessive dissaving
over the period 1998 to 2004. Indeed, the annuitized value of
total wealth rose for most households over this period,
suggesting that households are not running down their assets too
fast, given their remaining life expectancies.
______________________________

"Simplification and Saving"
    NBER Working Paper No. W12659


  Author:  JOHN BESHEARS
             Harvard University - Department of Economics
   Email:  beshears@fas.harvard.edu
Auth-Page:  http://ssrn.com/author=576924

 Contact:  JAMES J. CHOI
             Yale School of Management, National Bureau of
             Economic Research (NBER)
   Email:  jameschoi@yale.edu
Auth-Page:  http://ssrn.com/author=239442

Co-Author:  DAVID LAIBSON
             Harvard University - Department of Economics,
             National Bureau of Economic Research (NBER)
   Email:  dlaibson@harvard.edu
Auth-Page:  http://ssrn.com/author=20341

Co-Author:  BRIGITTE C. MADRIAN
             Harvard University - John F. Kennedy School of
             Government, National Bureau of Economic Research
             (NBER)
   Email:  brigitte_madrian@harvard.edu
Auth-Page:  http://ssrn.com/author=85592

Full Text:  http://ssrn.com/abstract=940608

ABSTRACT: Many financial decisions that individuals face are
complicated and daunting for those who are not financial experts.
One important consequence of this complexity is that individuals
procrastinate in making these decisions. In this paper, we
evaluate a low-cost intervention designed to simplify the
retirement saving decision. Individuals received the opportunity
to enroll in their workplace savings plan at a pre-selected
contribution rate and asset allocation. By collapsing a
multidimensional set of options into a binary choice between the
status quo and the pre-selected alternative, this intervention
increases participation rates by 10 to 20 percentage points among
affected employees. We find that similar mechanisms can be used
to increase contribution rates among employees who are already
participating.
______________________________

"Pension Income of the Elderly and Characteristics of Their
 Former Employers"
    EBRI Notes, Vol. 28, No. 3, March 2007


 Contact:  CRAIG COPELAND
             Employee Benefit Research Institute (EBRI)
   Email:  COPELAND@EBRI.ORG
Auth-Page:  http://ssrn.com/author=255137

Full Text:  http://ssrn.com/abstract=973837

ABSTRACT: Retirees' receipt of pension income significantly
affects their ability to maintain a standard of living similar to
that of their preretirement years. Whether a retiree receives
this type of income depends on characteristics of both the
individuals and their former employers. This paper examines the
characteristics of retirees and their former employers in
relation to pension income recipiency. The Retirement and Pension
Plan Coverage Topical Module of the 2001 Survey of Income and
Program Participation (SIPP) is the dataset used for this
analysis. Although the data are from 2003, they provide the most
recent extensive information available on the characteristics of
retirees' former employers and pension income.

The PDF for the above title, published in the March 2007 issue of
EBRI Notes, also contains the fulltext of another March 2007 EBRI
Notes article abstracted on SSRN: "Retirement Annuity and
Employment-Based Pension Income, Among Individuals Age 50 and
Over: 2005."
______________________________

"Retirement Annuity and Employment-Based Pension Income, Among
 Individuals Age 50 and Over: 2005"
    EBRI Notes, Vol. 28, No. 3, March 2007


 Contact:  KENNETH J. MCDONNELL
             Employee Benefit Research Institute (EBRI)
   Email:  MCDONNELL@EBRI.ORG
Auth-Page:  http://ssrn.com/author=297121

Full Text:  http://ssrn.com/abstract=973851

ABSTRACT: This paper looks at one slice of the income pie of the
older population: retirement annuities and employment-based
pensions. It analyzes the population age 50 and over in order to
take into account the prevalence of early retirement options
available to individuals beginning at age 50. Recent data from
the March 2006 Current Population Survey, conducted by the U.S.
Census Bureau, confirm earlier findings that gender, marital
status, age, education, and other demographic variables have a
significant impact on the likelihood of a worker receiving a
retirement annuity and/or employment-based pension income in
retirement. There may also be a strong correlation between these
same variables and the amount of pension income received from
employment-based retirement plans.

The PDF for the above title, published in the March 2007 issue of
EBRI Notes, also contains the fulltext of another March 2007 EBRI
Notes article abstracted on SSRN: "Pension Income of the Elderly
and Characteristics of Their Former Employers."
______________________________

"New Evidence on Earnings and Benefit Claims Following Changes in
 the Retirement Earnings Test in 2000"
    Journal of Public Economics, Vol. 91, pp. 669-700, 2007


 Contact:  JAE SONG
             U.S. Social Security Administration
   Email:  jae.song@ssa.gov
Auth-Page:  http://ssrn.com/author=81600

Co-Author:  JOYCE MANCHESTER
             U.S. Social Security Administration
   Email:  joyce.manchester@ssa.gov
Auth-Page:  http://ssrn.com/author=526246

Full Text:  http://ssrn.com/abstract=975674

ABSTRACT: This paper examines the labor force activity and timing
of benefit claims of workers aged 65-69 in response to the
removal of the retirement earnings test in 2000. We use the 1
percent sample of longitudinal Social Security administrative
data that covers the period from 4 years before to 4 years after
the removal of the test. Using a reduced-form quantile regression
method, we find that effects on earnings are limited to workers
with earnings just around the test threshold and above, as
predicted by economic theory. Our estimated effects suggest that
labor supply elasticities with respect to the net-of-tax rate are
approximately 0.05-0.07 for working primary beneficiaries aged
65-69 whose earnings are between the median and the 80th
percentile. Further, results show that applications for Social
Security benefits following the earnings test removal accelerated
by 2 to 5 percentage points among individuals aged 65-69 and by 3
to 7 percentage points among those reaching age 65.