Urban InstituteRetirement Policy Center

Briefs: Older Americans' Economic Security



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How Pension Reforms Neglect States' Recruitment and Retention Goals (Policy Briefs)
Richard W. Johnson, C. Eugene Steuerle, Caleb Quakenbush

To control rising pension costs, many states are reducing the generosity of the retirement plans they offer their employees, partly by increasing required employee contributions. These reforms, however, ignore the employee recruitment and retention problems created by traditional pension plans. Using New Jersey as a case study, this brief shows how state retirement plans discourage younger workers from joining the state's workforce, lock in middle-aged workers even if a job is not a good fit, and push older workers into retirement. Recent reforms make these plans even less appealing to a modern, mobile workforce.

Posted: July 16, 2012Availability: HTML | PDF

State Pension Reforms: Are New Workers Paying for Past Mistakes? (Policy Briefs)
Richard W. Johnson, C. Eugene Steuerle, Caleb Quakenbush

When state pension plans are underfunded, someone eventually has to pay for the shortfall. Many recent reforms designed to improve plan finances shift burdens to the young, particularly by making many new employees net contributors to—rather than beneficiaries of—these plans. Using New Jersey as a case study, this brief shows how states require higher levels of employee contributions, invest them in somewhat risky assets, and then, like a bank or financial intermediary, pay back many employees less in benefits than what they contributed and expected to earn on those contributions.

Posted: July 16, 2012Availability: HTML | PDF

How Will the Great Recession Affect Future Retirement Incomes? (Series/Older Americans' Economic Security)
Barbara Butrica, Richard W. Johnson, Karen E. Smith

The financial impact of the 2007–2009 recession will reverberate into retirement for many working families, even those who did not lose their jobs. Average wages grew very slowly during the downturn, reducing lifetime earnings. Lower earnings leave less income to set aside for retirement and depress future Social Security and pension incomes. Although unusually strong wage growth in coming years could bail out younger workers, there is little recourse for workers now approaching traditional retirement ages. For those age 55 to 59 in 2008, the Great Recession will reduce average age-70 incomes by 5 percent.

Posted: May 26, 2011Availability: HTML | PDF

Who Purchases Long-Term Care Insurance? (Series/Older Americans' Economic Security)
Richard W. Johnson, Janice Park

Most Americans will eventually need long-term care, which is often expensive and not usually covered by public programs until recipients have nearly exhausted their savings. In 2009, 5.2 million Americans age 65 and older not living in institutions had long-term care needs. Yet, only about 1 in 10 Americans age 55 and older had private long-term care insurance in 2008. Coverage rates were nearly twice as high among those with annual incomes in excess of $100,000. Private insurance covered only 7 percent of the $240 billion in U.S. long-term care costs in 2009. Nearly a fifth were paid out of pocket.

Posted: April 06, 2011Availability: HTML | PDF

Lifetime Benefits and Taxes in Social Security: The Effect of Different Discount Rates on Present Value Calculations (Series/Older Americans' Economic Security)
Stephanie Rennane, C. Eugene Steuerle

It is often useful to compute contributions and benefits over a lifetime when studying policies for retirement and Social Security. However, these calculations are complicated by factors like economic growth and inflation, which change the relative value of investments over time. The fact that $1 in the bank today might accrue enough interest to be worth $1.03 next year leads economists, accountants, and actuaries to find ways to equate the two amounts at a point in time. This fact sheet explains how the discount rate affects present value calculations.

Posted: February 22, 2011Availability: HTML | PDF

Can Unemployed Older Workers Find Work? (Series/Older Americans' Economic Security)
Richard W. Johnson, Janice Park

Job loss during the Great Recession is upending retirement savings plans for many older workers. Fewer than a quarter of workers age 50 and older who lost their jobs between mid-2008 and the end of 2009 found work within 12 months, much lower than the reemployment rate for younger workers. Older displaced workers who find jobs must often accept deep pay cuts. These challenges highlight the need for more training and employment services for those 50 and older.

Posted: January 12, 2011Availability: HTML | PDF

How Quickly Do Older Adults Spend Their Wealth? (Policy Briefs/Retirement Project Brief Series)
Rudolph G. Penner, Karen E. Smith

Although the shift from defined benefit pension plans to defined contribution plans raises concerns that some retirees may outlive their assets, most spend their wealth cautiously. High income retirees continue to accumulate wealth until age 85. Net worth for middle-income retirees begins declining after age 70, but only very slowly. Low-income retirees never accumulate much wealth and spend their limited assets quickly, however, leaving most dependent on Social Security.

Posted: April 22, 2010Availability: HTML | PDF

Disability Just Before Retirement Often Leads to Poverty (Policy Briefs)
Richard W. Johnson, Melissa M. Favreault, Corina Mommaerts

A patchwork of public programs, including Social Security Disability Insurance, workers’ compensation, Supplemental Security Income, and veterans’ benefits, provides income supports to people with health problems who are unable to work. Yet, many Americans who develop disabilities in their fifties or early sixties fall into poverty. With millions of boomers entering their sixties—when work disability rates peak—it’s time to fix the social insurance safety net for disabled workers.

Posted: January 15, 2010Availability: HTML | PDF

Delaying Retirement an Additional Year Could Offset Stock Market Losses (Series/Older Americans' Economic Security)
Barbara Butrica, Karen E. Smith, Eric Toder

The sharp decline in the stock market in 2008 placed the retirement security of many Americans at risk. Although the market has rebounded this year after bottoming out in March 2009, as of mid-October 2009 the S&P 500 Index remained 30 percent below its peak level two years earlier. This brief simulates the impact of the 2008 stock market crash on future retirement savings under alternative scenarios. The results show that by delaying retirement one additional year, many mid- and late-career workers could increase their income at age 67 enough to offset some or all of their stock market losses.

Posted: January 14, 2010Availability: HTML | PDF

Does Autoenrollment Affect Employer Contributions? (Series/Older Americans' Economic Security)
Barbara Butrica, Mauricio Soto

Automatic enrollment, a 401(k) feature that enrolls employees as soon as they become eligible, is growing in popularity because it has been shown to significantly increase pension participation rates. However, higher participation rates increase costs for employers that match employee contributions. This brief evaluates the extent to which firms adjust their 401(k) contributions to offset the higher costs associated with automatic enrollment. We find that employer match rates are 7 percentage points lower among firms with autoenrollment than among those without it, suggesting that automatic enrollment may not promote retirement savings as effectively as some advocates have claimed.

Posted: December 16, 2009Availability: HTML | PDF

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