Research by Author & Topic

Publications by Rudolph G. Penner on Retirement/Pensions

This paper estimates the ratio of post- to pre-retirement consumption to explore how well boomers are prepared for retirement. I show that some of the poorest households are best prepared because they can maintain consumption by relying almost solely on Social Security while many of the most affluent households are poorly prepared because they will experience a decline in consumption upon retiring. Nonetheless, affluent households will be able to maintain a consumption level many times that of poor households. The paper discusses whether equalization of pre- and post-retirement consumption provides a useful adequacy yardstick at all income levels.

Pittsburgh Post-Gazette op-ed, September 28, 2008. The current financial crisis poses a severe threat to the economy, but it also creates a tremendous opportunity, writes Rudolph Penner in the Pittsburgh Post-Gazette. It gives politicians cover for undertaking painful actions to get the long-run deficit under control-actions that should have been taken long ago.

Older men who expect high health care costs for themselves or their spouses after age 65 retire about 13 months later than those who expect low costs. The difference for women is 12 months. For those receiving health insurance from their employers, continued work reduces the risk of high out-of-pocket health care costs. Working longer also increases retirement incomes, making health care costs more affordable.

Rising health care costs threaten financial security at older ages and lead many older Americans to delay retirement. Continued work reduces the risk of high out-of-pocket health care costs for workers receiving health benefits from their employers. Working longer also increases retirement incomes, making health care costs more affordable. This report shows that men with very high expected health care costs after age 65 retire 11 months later than those with very low health care costs. For women, the difference is 12 months.

International Perspectives on Social Security Reform looks at public pension revision in six countries that, like the United States, are members of the OECD and have a long tradition of social security threatened by population aging. Canada, Sweden, Japan, Germany, the United Kingdom, and Italy have much to teach the United States about what works well—and what works badly. A substantive analysis of each country's reforms is augmented in commentary by distinguished economists, who offer their own opinions. Ideas examined include private accounts, notional accounts, incentives to delay retirement, and automatic systems of pension adjustment.

Will soaring health costs and high future tax rates lead people to delay retirement? This study assesses potential impacts by comparing retirement incomes under two different scenarios. The high-burden scenario assumes that health costs grow rapidly and tax rates rise nearly enough to balance the federal budget. The alternative assumes that burdens remain at their 2000 levels. Moderate-income couples retiring in 2030 would have to work an additional 2.5 years under the high-burden scenario to receive the same income in the first year of retirement, net of taxes and out-of-pocket health spending, as they would receive under the low-burden scenario.

Older workers could be induced to work longer, as improved health has accompanied longer longevity and as jobs that require hard physical labor have declined in relative importance. Many older workers have suggested that more flexible work arrangements, such as shorter hours and longer vacations, would enhance the attractiveness of working longer.

Budget rules are both necessary and arbitrary, apply one-time or over time, and are frequently associated with some numerical target. The Budget Enforcement Act (BEA) rules of 1990 worked primarily because they enforced an agreement already made, backing up a broad political consensus with much of the explicit deficit cutting legislated up front. Conditions today are very different. No political consensus now exists, yet the task is even harder: some control over existing entitlement growth is required, e.g., through automatic adjustments. Various other issues, such as sunsets, rule suspensions, and technical feasibility are also examined.

In 1995 the Bipartisan Commission on Entitlement and Tax Reform concluded, "If we do not plan for the future, entitlement spending promises will exceed financial resources in the next century..." (U.S. Congress 1995). Now, well into the next century, we have still failed to act. Yet the problem not only remains, but in many ways has intensified simply because we are years closer to the day of reckoning. Relative to both available revenues and societal needs, we have promised more than we can afford to an elderly and fairly well-off near-elderly population that will soon grow very rapidly as the baby boomers retire and life expectancy continues to increase.

Within 10 years the retirement of the baby boomers will cause the economy to lose large numbers of experienced workers. Currently there are a number of institutional and legal arrangements in place that encourage early retirement and limit the ability of employers and employees to negotiate approaches to partial retirement. The brief suggests a number of legal and regulatory reforms that would increase the ability of older workers to stay on the job longer without losing protection against age and economic discrimination.