Posted on February 29, 2008 by Jason
Center for retirement research at Boston College, February 2008
As the baby boomers begin to retire, a great deal remains unknown about
the evolution of wealth toward the end of life. In this paper, we
develop a new measure of household resources that converts total
financial, nonfinancial, and annuitized assets into an expected annual
amount of wealth per person. We use this measure, which we call
“annualized comprehensive wealth” to investigate spend-down behavior
among older households in the Health and Retirement Study. Our analysis
indicates that, in (real) dollar terms, the median household’s wealth
declines more slowly than its remaining life expectancy, so that real
annualized wealth actually tends to rise with age over retirement.
Comparing the estimated age profiles for annualized wealth with
profiles simulated from several different life cycle models, we find
that a model that takes into account uncertain longevity, uncertain
medical expenses, and (for higher-income retirees) intended bequests
lines up best with the HRS data.
Read more of this article
NewRetirement Retirement Calculator: Assess your retirement plan with the NewRetirement Retirement Calculator.
Posted on February 29, 2008 by Jason
Center for retirement research at Boston College, March 2008
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 of retirement accounts may
affect boomers’ retirement incomes. Results show that 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.
Read more of this article
NewRetirement Retirement Calculator: Assess your retirement plan with the NewRetirement Retirement Calculator.
Posted on February 29, 2008 by Jason
Center for retirement research at Boston College, December 2007
The official poverty measure in the United States fails to reflect
modern day economic resources and spending needs. The official measure
is based only on cash income and does not include in-kind transfers,
capital gains and losses, taxes, out-of-pocket health spending, the
value of owner-occupied housing, or the potential income from financial
assets. Also, the official poverty thresholds that define minimal
needs, set back in 1963 and updated to changes in the CPI, do not
capture current spending patterns. These shortcomings especially
pertain to adults age 65 and older because their resources, needs, and
health expenses differ most dramatically from the assumptions reflected
in the official measure.
This paper uses data from the 2004 Health and Retirement Study to
demonstrate how the poverty rate of adults age 65 and older changes
using alternative resource and threshold measures. Results show that
alternative measures that account for health spending produce higher
poverty rates than the official measure, even those that include the
value of housing and financial assets. Poverty remains concentrated
among singles (disproportionately women), blacks and Hispanics, and
adults age 85 and older regardless of how it is measured because these
populations have relatively little housing equity or financial assets.
Higher alternative poverty rates among older adults show the importance
of protecting low-income groups when considering government reforms
that include benefit cuts or higher cost shares to improve Social
Security and Medicare solvency.
Read more of this article
