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Retirement Research Consortium

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the RRC's evolution and research contributions in a series of articles in the Social Security Bulletin.

The Retirement Research Consortium (RRC) consists of three multidisciplinary centers housed in three separate institutions (Boston College, the University of Michigan, and the National Bureau of Economic Research) and is funded through cooperative agreements with the Social Security Administration. The current five-year cooperative agreements run from FY2014 through FY2018.

The RRC has three main goals:

  • Research and evaluate a wide array of topics related to Social Security and retirement policy,
  • Disseminate information on Social Security and retirement issues relevant to policymakers, researchers, and the general public, and
  • Train scholars and practitioners in research areas relevant to Social Security and retirement issues.

To meet these goals, the centers perform many activities. They conduct research, prepare policy briefs and working papers, hold an annual meeting, and provide research and training support for young scholars. Links to recent RRC research are provided below. For further information about RRC activities, affiliated institutions, or individual researchers, please visit the websites of the respective institutions:

Recent RRC Research

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Abstracts:show all / hide all
December 2013

Point of No Return: How Do Financial Resources Affect the Timing of Retirement After a Job Separation?

by Matthew S. Rutledge
SSA Project # BC13-01
Center for Retirement Research at Boston College Working Paper 2013-21

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This project uses the Survey of Income and Program Participation to examine the decision to retire after job separation among the increasing number of older individuals who leave a job between 55 and 70, and how this decision varies by labor market conditions and the resources available to the unemployed. Among individuals whose jobless spells end in retirement, most do so within a year after separation. The availability of resources like Social Security retirement benefits, high net worth, and defined benefit pensions appear to encourage more rapid labor force exit and retirement, rather than supporting job seekers during a long search. Surprisingly, retirement is only modestly more likely when the unemployment rate is high, and a greater duration of unemployment insurance benefits has little effect on retirement timing. Poor health and work-limiting disabilities are also associated with more rapid labor force ex! it and retirement. These results suggest little tolerance for long job searches—regardless of labor market prospects—and indicate that those who can afford to retire will do so rather quickly.
November 2013

Active vs. Passive Decisions and Crowd-Out in Retirement Savings Accounts: Evidence from Denmark

by Raj Chetty, John N. Friedman, Soren Leth-Peteren, Torben Heien Nielsen, and Tore Olsen
SSA Project # NB13-01
National Bureau of Economic Research

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Do retirement savings policies—such as tax subsidies or employer-provided pension plans—increase total saving for retirement or simply induce shifting across accounts? We revisit this classic question using 45 million observations on wealth for the population of Denmark. We find that a policy's impact on wealth accumulation depends on whether it changes savings rates by active or passive choice. Tax subsidies, which rely upon individuals to take an action to raise savings, have small impacts on total wealth. We estimate that each $1 of tax expenditure on subsidies increases total saving by 1 cent. In contrast, policies that raise retirement contributions if individuals take no action—such as automatic employer contributions to retirement accounts—increase wealth accumulation substantially. Price subsidies only affect the behavior of active savers who respond to incentives, whereas automatic contributions increase the savings of passive individuals who do not reoptimize. We estimate that approximately 85% of individuals are passive savers. The 15% of active savers who respond to price subsidies do so primarily by shifting assets across accounts rather than reducing consumption. These individuals are also more likely to offset changes in automatic contributions and have higher wealth-income ratios. We conclude that automatic contributions are more effective at increasing savings rates than price subsidies for three reasons: (1) subsidies induce relatively few individuals to respond, (2) they generate substantial crowd-out conditional on response, and (3) they do not influence the savings behavior of passive individuals, who are least prepared for retirement.

Did Age Discrimination Protections Help Older Workers Weather the Great Recession?

by David Neumark and Patrick Button
SSA Project # UM13-04
Michigan Retirement Research Center Working Paper 2013-287

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We examine whether stronger age discrimination laws at the state level moderated the impact of the Great Recession on older workers. We use a difference-in-difference-in-differences strategy to compare older workers in states with stronger and weaker laws, to their younger counterparts, both before, during, and after the Great Recession. We find very little evidence that stronger age discrimination protections helped older workers weather the Great Recession, relative to younger workers. The evidence sometimes points in the opposite direction, with stronger state age discrimination protections associated with more adverse effects of the Great Recession on older workers. We suggest that this may be because during an experience like the Great Recession, severe labor market disruptions make it difficult to discern discrimination, weakening the effects of stronger state age discrimination protections, or because higher termination costs associated with stronger age discrimination protections do more to deter hiring when future product and labor demand is highly uncertain.

Earnings Adjustment Frictions: Evidence from the Social Security Earnings Test

by Alexander M. Gelber, Damon Jones, and Daniel W. Sacks
SSA Project # NB13-07
National Bureau of Economic Research

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Using a panel of Social Security Administration microdata on 1 percent of the U.S. population from 1961 to 2006, we study frictions in adjusting earnings to changes in the Social Security Annual Earnings Test (AET). Individuals continue to "bunch" at the convex kink the AET creates even when they are no longer subject to the AET, consistent with the existence of earnings adjustment frictions in the U.S. We specify a model consistent with the evidence that allows us to estimate the elasticity and adjustment cost. Intuitively, inertia due to an adjustment cost leads to residual bunching after a kink in the budget set becomes less pronounced (or disappears altogether). Our primary estimation method uses the degree of such inertia (in combination with the initial amount of bunching at the kink) in estimating the size of the adjustment cost (and elasticity). We estimate in a baseline case that the elasticity of earnings with respect to the implicit net-of-tax share is 0.23, and the ?xed cost of adjustment is $152.08. Our results imply that eliminating the AET would cause a substantial rise in the earnings of many elderly and near-elderly individuals.

How Do the Disabled Cope While Waiting for Disability Insurance Benefits?

by Norma B. Coe, Stehpan Lindner, Kendrew Wong, and April Yanyuan Wu
SSA Project # BC12-18
Center for Retirement Research at Boston College Working Paper 2013-12

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The wait time for a Social Security Disability Insurance (SSDI) award varies from a few months to a several years. Little is known about how applicants fund their consumption during this waiting time, while they receive no income support or medical benefits from the SSDI program. Using the Survey of Income and Program Participation (SIPP) linked to the Social Security Administration's 831 file, this paper is the first to identify the causal effect of a longer waiting time on the use of these coping strategies using an instrumental variable (IV) approach. We find that applicants react to a longer waiting time by using benefits from the Supplemental Nutrition Assistance Program (SNAP) more frequently. They are also less likely to change their address and to receive Unemployment Insurance (UI) benefits. Moreover, when comparing IV to OLS, our results also indicate that while applicants' spouses do not increase their employment due to an exogenous increase in the waiting time, an increase in their employment leads to a longer waiting time for applicants, presumably because applicants with a working spouse are more likely to appeal an initial denial. Together, these results suggest that coping strategies both help applicants to cope with the waiting time and to extend the waiting time to increase their chances of getting into the program.

Life Expectation Judgments, Fairness, and Loss Aversion in the Psychology of Social Security Claiming Decisions

by Suzanne B. Shu and John W. Payne
SSA Project # NB13-05
National Bureau of Economic Research

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This research seeks to better understand the psychological processes underlying Social Security claiming decisions. Specifically, we argue that the decision of when to claim Social Security benefits is affected by individuals' subjective judgments of life expectation as well as psychological value constructs such as loss aversion and fairness. In a series of three online surveys of individuals aged 35–65, we find that individual differences in life expectation judgments, levels of sensitivity to losses, and perceived fairness and/or perceived ownership of SSA benefits jointly lead to predictable differences in individuals' predictions of their own early or late claiming of benefits. We also test several manipulations of information presentation to determine their effects on early versus late claiming.

Recent Changes in the Gains from Delaying Social Security

by John B. Shoven and Sita Nataraj Slavov
SSA Project # NB13-04
National Bureau of Economic Research

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Social Security retirement benefits can be claimed at any age between 62 and 70, with delayed claiming resulting in larger monthly payments. In Shoven and Slavov (2013), we show that claiming later increases the present value of lifetime benefits for most individuals. However, this has not always been the case. During the late 1990s and early 2000s, a number of policy changes increased the gains from delay, particularly for couples. In addition, mortality improved and real interest rates fell substantially over this period, further increasing the attractiveness of delay. We perform simulations to examine the role of these factors in changing the gains from delay. We find that the gains from delay increased substantially after 2000, with changes in the interest rate playing the largest role in driving the increase. Using data from the Health and Retirement study, we show that individuals who turned 62 after 2000 are indeed more likely to delay than those who turned 62 before 2000. However, even in the younger cohort, most individuals still claim benefits soon after turning 62. Moreover, we find no evidence of a relationship between the probability of delay and the individual characteristics (e.g., gender, race, or health status) that affect the gains from delay.