Citation URL: http://www.urban.org/CoriEUccello

The conversion of traditional defined benefit plans to cash balance plans is among the most controversial aspects of pension policy today. Because the controversy has focused on the treatment of older workers, however, the debate has generally ignored the long-term implications for retirement security. In fact, cash balance plans can often provide more retirement security than traditional defined benefit plans or defined contribution plans, especially for workers who change jobs frequently.

Even the best-laid plans can go awry as people prepare for retirement. This brief shows that about 7 in 10 Americans in their 50s and 60s develop health problems and disabilities, lose their jobs, or lose spouses to death or divorce over a 10-year period. These shocks substantially erode retirement savings, especially for unmarried people cannot turn to their spouses for support. The findings highlight the limitations of the safety net when things go wrong in late midlife.

Health problems and job layoffs are common as people approach retirement, though most Americans lack adequate protection when such disaster strikes. This brief shows that the onset of work disabilities reduces household wealth by 30 percent for older single people, and job layoffs reduce wealth by 23 percent. Repercussions are smaller but still serious for married people. Workers need to consider these risks as they develop their retirement plans.

The risks of falling into poor health, losing the ability to work or live independently, and becoming widowed increase with age and threaten financial security. Over a 10-year period, more than three-quarters of adults age 51 to 61 at the beginning of the period experience job layoffs, widowhood, divorce, new health problems, or the onset of frailty among parents or in-laws. More than two-thirds of adults age 70 and older experience at least one negative shock over a nine-year period. Financial consequences are especially serious for older adults who develop work disabilities or long-term care needs, or who become unemployed.

This brief provides new evidence on the adequacy of boomers' retirement resources using the Urban Institute's DYNASIM model. Our findings show that boomers will accumulate more wealth and receive more income at retirement than previous generations. Nevertheless, boomers may need to increase their savings now or work longer to maintain their real living standards at retirement. [View the corresponding press release]

The cost of long-term care, which already strains government and family budgets, is expected to soar in a few decades when the Baby Boomers begin to reach their 80s. Private insurance is often touted as a possible solution to the looming crisis. This brief describes private long-term care insurance and some of the advantages and disadvantages of coverage. Despite ongoing efforts to promote private long-term care insurance, widespread coverage faces a number of significant hurdles, including the affordability of coverage, uncertainty about future premium increases, and the disincentives created by the availability of Medicaid coverage.

This project explores distributional consequences of Plan 2 of the President's Commission to Strengthen Social Security using dynamic microsimulation. This plan includes: voluntary personal account "carve outs," minimum benefits, widow(er)s benefit increases, and initial benefit formula shifts (from wage- to price-indexing). The analysis develops a baseline using Office of the Chief Actuary assumptions regarding portfolio allocation, rates of return, administrative costs, and annuitization. We compare results with promised benefits and current-law adjusted to match costs of the baseline without accounts. We test the estimates' sensitivity to assumptions using historical data, values from the literature, and models estimated from SCF data.

This paper provides new evidence on the adequacy of boomers' retirement resources using the Urban Institute's DYNASIM model. Our findings, which show that boomers will be wealthier at retirement than previous generations, are more optimistic than those of some other studies that have assessed the adequacy of retirement savings. A key difference between DYNASIM projections and other estimates is that DYNASIM projects a broader measure of income that includes Social Security and private pension benefits, as well as earnings and income from assets. Even with this more comprehensive income measure, our results suggest that boomers need to increase their savings or work longer to maintain their real living standards.

In this study we project the long-term effects of a proposal that carves out some Social Security contributions to pay for personal accounts. We compare the distributional outcomes to the current system and examine how different strategies for annuitizing personal account balances might change these outcomes. We find that personal accounts would reduce some of the redistribution in the current system by tying benefits more closely to work histories. However, annuitization of balances and options such as joint and survivor protection, period certain payouts, and cash refunds also would affect the distributional outcomes.

Retirees in traditional pension plans must generally choose between single life annuities, which provide regular payments until death, and joint and survivor annuities, which pay less each month but continue to make payments to the spouse after the death of the retired worker. This study examines the payout decision by married pensioners. The results indicate that 28 percent of married men and 69 percent of married women decline survivor protection. Men whose spouses have pension coverage from their own employers and men with small pensions and limited household wealth are more likely than other men to reject survivor protection.

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