CDHA CAAR

May 28, 2013

CAAR – National Bureau of Economic Research Working Papers – May 28, 2013

Filed under: Working Papers — Tags: , , , , — admin @ 4:24 pm

A. “Effects of Social Security Policies on Benefit Claiming, Retirement and Saving,” by Alan L. Gustman and Thomas L. Steinmeier (w19071, May 2013, .pdf format, 40p.).

Abstract:

An enhanced version of a structural model jointly explains benefit claiming, wealth and retirement, including reversals from states of lesser to greater work. The model includes stochastic returns on assets. Estimated with Health and Retirement Study data, it does a better job of predicting claiming than previous versions. Alternative beliefs about the future of Social Security affect predicted outcomes. Effects of three potential policies are also examined: increasing the early entitlement age, increasing the full retirement age, and eliminating the payroll tax for seniors. Predicted responses to increasing the full entitlement age are sensitive to beliefs.

www.nber.org/papers/w19071

B. “The Spillover Effects of Medicare Managed Care: Medicare Advantage and Hospital Utilization,” by Katherine Baicker, Michael Chernew, and Jacob Robbins (w19070, May 2013, .pdf format, 39p.).

Abstract:

More than a quarter of Medicare beneficiaries are enrolled in Medicare Advantage, which was created in large part to improve the efficiency of health care delivery by promoting competition among private managed care plans. This paper explores the spillover effects of the Medicare Advantage program on the traditional Medicare program and other patients, taking advantage of changes in Medicare Advantage payment policy to isolate exogenous increases in Medicare Advantage enrollment and trace out the effects of greater managed care penetration on hospital utilization and spending throughout the health care system. We find that when more seniors enroll in Medicare managed care, hospital costs decline for all seniors and for commercially insured younger populations. Greater managed care penetration is not associated with fewer hospitalizations, but is associated with lower costs and shorter stays per hospitalization. These spillovers are substantial – offsetting more than 10% of increased payments to Medicare Advantage plans.

www.nber.org/papers/w19070

C. “Framing Lifetime Income,” by Jeffrey R. Brown, Jeffrey R. Kling, Sendhil Mullainathan, and Marian V. Wrobel (w19063, May 2013, .pdf format, 22p.).

Abstract:

We provide evidence that individuals optimize imperfectly when making annuity decisions, and this result is not driven by loss aversion. Life annuities are more attractive when presented in a consumption frame than in an investment frame. Highlighting the purchase price in the consumption frame does not alter this result. The level of habitual spending has little interaction with preferences for annuities in the consumption frame. In an investment frame, consumers prefer annuities with principal guarantees; this result is similar for guarantee amounts below, at, and above the purchase price. We discuss implications for the retirement services industry and its regulators.

www.nber.org/papers/w19063

April 25, 2013

CAAR – Pensions Institute (Cass Business School, City University of London) [UK] Working Paper – April 25, 2013

Filed under: Working Papers — Tags: — admin @ 4:08 pm

Cohort mortality risk or adverse selection in the UK annuity market?” by Edmund Cannon and Ian Tonks (PI-1304, April 2013, .pdf format, 42p.).

Abstract:

The “money’s worth” measure has been used to assess whether annuities are fairly valued and also as evidence for adverse selection in the annuity market. However, a regulated life assurer with concerns about predicting long-run mortality may price annuities to reduce these risks which will affect the money’s worth. We provide a simple model of the effect of cohort mortality risk on the money’s worth. We demonstrate that cohort mortality risk is quantitatively important, and show that it is not possible to identify the effect of a cohort mortality risk model from that of an adverse selection model.

www.pensions-institute.org/workingpapers/wp1304.pdf

April 8, 2013

CAAR – Pensions Institute (Cass Business School, City University of London) [UK] Working Paper – April 8, 2013

Filed under: Working Papers — Tags: — admin @ 3:57 pm

Adjusted Money’s Worth Ratios In Life Annuities,” by Jaime Casassus and Eduardo Walker (PI-1303, February 2013, .pdf format, 53p.).

Abstract:

The Money’s Worth Ratio (MWR) measures an annuity’s actuarial fairness. It is calculated as the discounted present value of the annuity’s expected future payments divided by its cost. We argue that, this measure may overestimate the value-for-money obtained by annuitants, since it does not adjust for liquidity or risk factors. Measuring these factors is challenging, requiring detailed knowledge of the annuity provider’s assets, liabilities, and of the stochastic processes followed by them. Using a multi-factor continuous-time model and option pricing theory, we propose a simple solution for an Adjusted MWR (AMWR), which does consider illiquidity and default risk. We implement this solution for the competitive Chilean annuity market, which offers unadjusted MWRs above 1, finding that indeed these ratios are biased upward 7 percent on average. We also present estimates of default option values, asset insufficiency probabilities and implied credit spreads for each annuity provider.

www.pensions-institute.org/workingpapers/wp1303.pdf

April 2, 2013

CAAR – Pension Research Council, Wharton School, University of Pennsylvania Working Papers – April 2, 2013

Filed under: Working Papers — Tags: , — admin @ 4:47 pm

A. “The Economic Importance of Financial Literacy: Theory and Evidence,” by Annamaria Lusardi and Olivia S. Mitchell (WP2013-02, March 2013, .pdf format, 63p.). Note: Links to the abstract and full-text can be found at:

www.pensionresearchcouncil.org/publications/document.php?file=1040

B. “Complexity as a Barrier to Annuitization: Do Consumers Know How to Value Annuities?” by Jeffrey R. Brown, Arie Kapteyn, Erzo F. P. Luttmer, and Olivia S. Mitchell (WP2013-01, March 2013, .pdf format, 50p.). Note: Links to the abstract and full-text can be found at:

www.pensionresearchcouncil.org/publications/document.php?file=1040

January 9, 2013

CAAR – US Government Accountability Office Report – January 9, 2013

Filed under: Reports and Articles — Tags: — admin @ 4:27 pm

Retirement Security: Annuities with Guaranteed Lifetime Withdrawals Have Both Benefits and Risks, but Regulation Varies across States,” (GAO-13-75, December 2012, .pdf format, 37p.).

www.gao.gov/products/GAO-13-75

November 30, 2012

CAAR – National Bureau of Economic Research Working Papers – November 30, 2012

Filed under: Working Papers — Tags: , , — admin @ 4:48 pm

A. “Active vs. Passive Decisions and Crowdout in Retirement Savings Accounts: Evidence from Denmark,” by Raj Chetty, John N. Friedman, Soren Leth-Petersen, Torben Nielsen, and Tore Olsen (w18565, November 2012, .pdf format, 74p.).

Abstract:

Do retirement savings policies – such as tax subsidies or employer-provided pension plans – increase total saving for retirement or simply induce shifting across accounts? We revisit this classic question using 45 million observations on savings for the population of Denmark. We find that a policy’s impact on total savings depends critically on whether it changes savings rates by active or passive choice. Tax subsidies, which rely upon individuals to take an action to raise savings, have small impacts on total wealth. We estimate that each $1 of tax expenditure on subsidies increases total saving by 1 cent. In contrast, policies that raise savings automatically even if individuals take no action – such as employer-provided pensions or automatic contributions to retirement accounts – increase wealth accumulation substantially. Price subsidies only affect the behavior of active savers who respond to incentives, whereas automatic contributions increase savings of passive individuals who do not reoptimize. We estimate that 85% of individuals are passive savers. The 15% of active savers who respond to price subsidies do so primarily by shifting assets across accounts rather than reducing consumption. These individuals also o set changes in automatic contributions and have higher wealth-income ratios. We conclude that automatic contributions are more effective at increasing total retirement savings than price subsidies for three reasons: (1) subsidies induce relatively few individuals to respond, (2) they generate substantial crowdout conditional on response, and (3) they do not influence the savings behavior of passive individuals, who are least prepared for retirement.

www.nber.org/papers/w18565

B. “What Makes Annuitization More Appealing?” by John Beshears, James J. Choi, David Laibson, Brigitte C. Madrian, and Stephen P. Zeldes (w18575, November 2012, .pdf format, 25p.).

Abstract:

We conduct and analyze two large surveys of hypothetical annuitization choices. We find that allowing individuals to annuitize a fraction of their wealth increases annuitization relative to a situation where annuitization is an ‘all or nothing’ decision. Very few respondents choose declining real payout streams over flat or increasing real payout streams of equivalent expected present value. Highlighting the effects of inflation increases demand for cost of living adjustments. Frames that focus on flexibility, control, and investment risk significantly reduce annuitization. A majority of respondents prefer to receive an extra ‘bonus’ payment during one month of the year that is funded by slightly lower payments in the remaining months. Concerns about later-life income, spending flexibility, and counterparty risk are the most important self-reported motives that influence the annuitization decision, whereas the desire to leave a bequest has little influence on this decision.

www.nber.org/papers/w18575

October 30, 2012

CAAR – Center for Economic Studies/Ifo Institute for Economic Research (CESifo) [Munich, Bavaria, Germany] Working Paper – October 30, 2012

Filed under: Working Papers — Tags: , — admin @ 4:16 pm

Behavioral Biases and Long Term Care Annuities: A Political Economy Approach,” by Philippe De Donder and Marie-Louise Leroux (CESifo Working Paper No. 3972, October 2012, .pdf format, 38p.). Note: Links to the abstract and full-text can be found at:

www.cesifo-group.de/ifoHome/publications/working-papers/CESifoWP/CESifoWPdetails?wp_id=19068534

October 10, 2012

CAAR – AARP Report – October 10, 2012

Filed under: Reports and Articles — Tags: — admin @ 4:32 pm

Do Default and Longevity Annuities Improve Annuity Take-Up Rates? Results from an Experiment,” by Robert Gazzale, Sandy Mackenzie, and Lina Walker (October 2012, .pdf format, 28p.).

www.aarp.org/work/retirement-planning/info-10-2012/do-default-and-longevity-annuities-improve-annuity-take-up-rates-AARP-ppi-econ-sec.html

September 14, 2012

CAAR – Pension Research Council, Wharton School, University of Pennsylvania Working Papers – September 14, 2012

Filed under: Working Papers — Tags: , — admin @ 4:48 pm

Note: PRC requires free registration before providing working papers.

A. “The Evolution of Workplace Advice,” by Christopher L. Jones and Jason S. Scott (WP2012-10, September 2012, .pdf format, 28p.). Note: Links to the abstract and full-text can be found at:

www.pensionresearchcouncil.org/publications/document.php?file=1026

B. “The Role of Guidance in the Annuity Decision Making Process,” by Kelli Hueler and Anna Rappaport (WP2012-11, September 2012, .pdf format, 38p.). Note: Links to the abstract and full-text can be found at:

www.pensionresearchcouncil.org/publications/document.php?file=1027

August 16, 2012

CAAR – C.D. Howe Institute Brief – August 16, 2012

Filed under: Reports and Articles — Tags: — admin @ 4:28 pm

Annuities and Your Nest Egg: Reforms to Promote Optimal Annuitization of Retirement Capital,” by Norma L. Nielson (Commentary 358, August 2012, .pdf format, 24p.).

www.cdhowe.org/annuities-and-your-nest-egg-reforms-to-promote-optimal-annuitization-of-retirement-capital/18601

July 19, 2012

CAAR – Pension Research Council, Wharton School, University of Pennsylvania Working Paper – July 19, 2012

Filed under: Reports and Articles — Tags: — admin @ 1:06 pm

Note: PRC requires free registration before providing working papers. “Participating Payout Life Annuities: Lessons from Germany,” by Raimond Maurer, Ralph Rogalla, and Ivonne Siegelin (WP2012-03, July 2012, .pdf format, 32p.). Note: Links to the abstract and full-text can be found at:

www.pensionresearchcouncil.org/publications/document.php?file=1017

June 19, 2012

CAAR – AARP Reports – June 19, 2012

Filed under: Reports and Articles — Tags: , — admin @ 4:14 pm

A. “Older Americans’ Ambivalence Toward Annuities,” by Sandy Mackenzie (June 2012, .pdf format, 30p.).

www.aarp.org/work/retirement-planning/info-06-2012/older-americans-ambivalence-toward-annuities-AARP-ppi-econ-sec.html

B. “Medicare Part D’s Medication Therapy Management: Shifting from Neutral to Drive,” by N. Lee Rucker (June 2012, .pdf format, 12p.).

www.aarp.org/health/medicare-insurance/info-06-2012/medicare-part-d-mtm-AARP-ppi-health.html

March 22, 2012

CAAR – Rand Corporation Working Paper – March 22, 2012

Filed under: Working Papers — Tags: — admin @ 3:51 pm

Do Consumers Know How to Value Annuities? Complexity as a Barrier to Annuitization,” by by Jeffrey R. Brown, Arie Kapteyn, Erzo F.P. Luttmer, and Olivia Mitchell (WR-924, 2011, .pdf format, 42p.). Note: Links to the abstract and full-text can be found at:

www.rand.org/pubs/working_papers/WR924.html

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