Research by Author & Topic

Publications by Eric Toder on Elderly

Urban Institute projections suggest the stock market collapse will have small effects on most Americans' retirement incomes. It's estimated that 37 percent of Americans born between 1941 and 1965 owned no stocks when the market crashed in 2008 and that income from assets will account for a small share of retirement income, even for those with stocks. For most retirees, Social Security provides the majority of income. Had Social Security been invested in private accounts with equities, the impact of the crash would have been much larger—positive or negative, depending on one's birth cohort and on future market performance.

The one-third drop in the S&P 500 index between year-end 2007 and 2008 raises concerns about retirement security since Americans now hold more equities through their retirement plans. Those near retirement will fare the worst because they have no time to recoup their losses. Midcareer workers will fare better because they have more time to rebuild their wealth. They may even gain income if they buy stocks at low prices and get above-average rates of return. High-income groups will be the most affected because they are most likely to have financial assets and to be invested in the stock market.

This report compares projections of income and assets from the Model of Income in the Near Term (MINT) with data from the Survey of Income and Program Participation (SIPP), the Health and Retirement Study (HRS), the Survey of Consumer Finances (SCF), and the Current Population Survey (CPS). The comparison reveals a fair amount of variability in population characteristics and reported income and assets among these data files. There is no "right" answer, but rather a range of possible answers. For most statistics we compare, MINT's projected values fall between the highest and lowest values among the survey data.

Over the last three decades there has been a steady shift from DB to DC pensions. The Pension Protection Act of 2006 may accelerate this trend. This paper examines the impact of an accelerated freeze on the retirement income of boomers. Simulations suggest that such a scenario would produce more losers than winners and reduce average retirement incomes. Income changes will be substantial among high-income workers, who have the highest DB coverage and pension incomes. Late boomers will experience the largest impacts, as they lose their high DB accrual years and have inadequate time to accumulate DC wealth before retirement.

Low-wage workers find it difficult to save for retirement. Without savings, they will have to rely on Social Security and pensions. Yet these income sources are based on earnings, which means that low-wage workers will have lower Social Security and pension benefits than higher-wage workers. This brief assesses whether boomers with low earnings between ages 22 and 62 are destined for low income at age 67. We find that nearly two-thirds of this group will end up with low income at retirement, but more than one-third will manage to defy the odds and escape being among the lowest-income older Americans.

In April 2008, the Urban Institute convened an expert panel of researchers inside and outside of government agencies to discuss how best to perform distributional analyses of proposals to reform Social Security and private pensions. The panel discussed key technical issues, including how to measure the baseline income distribution and characterize current policies, how to address changes that alter the timing of taxes and benefits, and how to measure and report gains and losses from policy interventions. The group revealed diverse viewpoints, but we conclude that current methods used in recent UI research fall within the range of reasonable alternatives.

This study uses the Urban Institute's DYNASIM model to project wealth and income at retirement for low-income boomers. The findings suggest that most with low lifetime earnings will also have low incomes at older ages unless they either continue working or move in with others who help support them financially. Saving more, working more consistently over their lifetime, and delaying retirement is projected to improve outcomes for low-earning boomers, but none of these actions will increase retirement living standards dramatically.

Boomers will probably want to work longer than earlier cohorts, but their continued work requires that employers hire and retain them. Employers value older workers for their maturity, experience and work ethic, but worry about out of date skills and high costs. Slower overall labor supply growth will increase demand for older workers and occupations with higher shares of older workers will increase modestly as a share of all jobs. Future jobs will require less physical demands and more cognitive and interpersonal skills, trends that favor educated older workers, but job opportunities for less educated older workers may remain limited.

Increasing older people's employment rates could reduce the economic pressures of an aging population, and many older adults say they want to delay retirement. Yet, numerous public policies and private practices continue to encourage early retirement. The Urban Institute, with support from the Alfred P. Sloan Foundation, sponsored an October 2007 roundtable to examine the value of older adults' work. Researchers, practitioners, employers, and policymakers discussed the potential supply of and demand for older workers, the benefits of working longer, barriers to continued employment, and policy solutions to encourage work at older ages. This document summarizes the issues and discussion.

Income tax provisions affect the buildup of retirement assets during workers' careers and after-tax income following retirement. This paper uses the Urban Institute's DYNASIM model to simulate how potential changes in the tax treatment of retirement saving, Social Security benefits, and income from assets outside retirement accounts may affect boomers' retirement incomes. Changes in the income thresholds for taxing Social Security benefits have the largest impact on middle-income boomers, while changes in contribution limits for retirement saving plans and tax rates on capital gains and dividends have the largest impact on the highest-income boomers.