Why Women Have Lower Retirement Savings: The Australian Case

This study provides empirical evidence of the gender gap in retirement savings trajectories using a large longitudinal Australian database. The persistent trend of retirement income policy over recent decades has been to place responsibility for retirement savings accumulation with the individual employee. These plans are fundamentally linked to employment conditions and individual choices, which shape retirement savings trajectories and outcomes. Australia has a mature compulsory system and thus provides insight for countries embarking on similar paths. This study shows that the gender gap in retirement savings is observable from early on in an individual’s paid working life and persists over time, providing evidence that women are disadvantaged early in their careers, with few signs of improvement. Men, in contrast, are overrepresented in the upper quartile of growth in retirement savings. This study provides important empirical evidence for policymakers concerned with gender differences in retirement outcomes.     

Financial Decision Making and Cognition in a Family Context

In this paper, we studied the association of cognitive traits and in particular numeracy of both spouses on financial outcomes of the family. We found significant effects, particularly for numeracy for financial and non-financial respondents alike, but much larger effects for the financial decision maker in the family. We also examined who makes these financial decisions in the family and why. Once again, cognitive traits such as numeracy were an important component of that decision with larger effects of numeracy for husbands compared to wives.     

退休对认知能力的短期和长期影响*——兼论延迟退休的“健康红利”

本文使用中国健康与养老追踪调查(CHARLS) 2011—2015年3轮调查数据,通过研究退休与认知衰退的关系,探讨了延迟退休对认知能力的影响。估计结果表明,退休在短期能够抑制认知衰退,但是从长期来看退休对认知有负面的影响。具体来说,在退休后3年内,退休对认知衰退有抑制作用,在退休大约3年~4年后,退休对认知的积极影响逐渐变为负面影响。按性别分组的估计结果表明,退休对认知能力的负面长期影响对男性而言更突出。本文的研究揭示了退休对认知能力的短期和长期影响存在差异。从政策的角度讲,适当提高法定退休年龄能够缩短退休持续时间,对抑制认知衰退有积极作用,即延迟退休能够带来认知方面的“健康红利”。     

Retirement expectations, pension reforms, and their impact on private wealth accumulation

We estimate the effect of pension reforms on households' expectations of retirement outcomes and private wealth accumulation decisions exploiting a decade of intense Italian pension reforms as a source of exogenous variation in expected pension wealth. The Survey of Household Income and Wealth, a large random sample of the Italian population, elicits expectations of the age at which workers expect to retire and of the ratio of pension benefits to pre-retirement income between 1989 and 2002. We find that workers have revised expectations in the direction suggested by the reform and that there is substantial offset between private wealth and perceived pension wealth, particularly by workers that are better informed about their pension wealth.     

退休对认知能力的短期和长期影响*——兼论延迟退休的“健康红利”

本文使用中国健康与养老追踪调查(CHARLS) 2011—2015年3轮调查数据，通过研究退休与认知衰退的关系，探讨了延迟退休对认知能力的影响。估计结果表明，退休在短期能够抑制认知衰退，但是从长期来看退休对认知有负面的影响。具体来说，在退休后3年内，退休对认知衰退有抑制作用，在退休大约3年~4年后，退休对认知的积极影响逐渐变为负面影响。按性别分组的估计结果表明，退休对认知能力的负面长期影响对男性而言更突出。本文的研究揭示了退休对认知能力的短期和长期影响存在差异。从政策的角度讲，适当提高法定退休年龄能够缩短退休持续时间，对抑制认知衰退有积极作用，即延迟退休能够带来认知方面的“健康红利”。     

Ageing,cognitive abilities and retirement

We investigate the relationship between ageing, cognitive abilities and retirement using the Survey on Health, Ageing and Retirement in Europe (SHARE), a household panel that offers the possibility of comparing several European countries using nationally representative samples of the population aged 50+. The human capital framework suggests that retirement may cause an increase in cognitive decline, since after retirement individuals lose the market incentive to invest in cognitive repair activities. Our empirical results, based on an instrumental variable strategy to deal with the potential endogeneity of retirement, confirm this key prediction. They also indicate that education plays a fundamental role in explaining heterogeneity in the level of cognitive abilities.     

Non-linearity and Expectations in Niche-Development Trajectories: Ups and Downs in Dutch Biogas Development (1973-2003)

Non-linearity and changes in the direction of technological trajectories, are related to changes in cognitive rules and expectations that guide technical search and development activities. To explain such changes, the article uses the literature on niche development, which highlights interactions between learning processes, network building and expectations. A long-term case study on Dutch biogas development illustrates how these interactions explain non-linearity, but the case study also shows the importance of external regime dynamics. It is concluded that non-linearity and changes in niche expectations are related to both internal learning processes and external developments.     

Pension expectations,reforms and macroeconomic downturn in Italy. What can microdata tell us?

We use different years of the Bank of Italy’s Survey on Household Income and Wealth (SHIW) to explore how Italian workers’ expectations regarding their future level of pension benefits and retirement age changed from 2000 to 2014. Comparing expected and statutory values for future pension benefits and retirement ages, we find that knowledge of the pension system and its rules are not evenly distributed among workers. Some sections of the population, in particular, younger workers, women and the self-employed, are less precise in estimating their future pension benefits. As for retirement age, a large share of the working population still has not completely assimilated the implications of the linkage with the evolution of lifetime expectations at 65. Expectations in the final part of the period observed are dominated by increasing pessimism, which may be related to the macroeconomic crisis of the Italian economy and to the approval of a severe pension reform in 2011. Checking whether a household’s total wealth is consistent with lifetime consumption, we find that households where the head overestimates the future value of the pension benefit accumulate fewer resources than the remaining part of the population.     

Schooling, Literacy, Numeracy and Labour Market Success

The present paper uses data from the 1996 Australian Aspects of Literacy survey to examine the effects on labour market outcomes of literacy, numeracy and schooling. The survey includes a range of literacy and numeracy variables that are highly intercorrelated. A 'general to specific' approach identifies the most relevant literacy and numeracy variables. Including the others adds little explanatory power. Among males and females separately, approximately half of the total effect of schooling on labour force participation and on unemployment can be attributed to literacy and numeracy (the indirect effect) and approximately half to the direct effect of schooling. There is apparently no indirect effect of labour market experience through literacy and numeracy on participation or unemployment. The direct and total effects of experience are the same. Similarly, the direct and total effects of literacy and numeracy are reasonably similar to each other.     

Strategic Responses: A Survey Experiment on Opposition to Pension Reforms*

The responses given in opinion polls on future policy reforms reflect both subjective expectations and preferences. We disentangle these factors using data from a controlled survey experiment conducted in Germany. At the time of the experiment, an increased retirement age had been proposed as part of a pension reform. Thus, the survey respondents faced an incentive to give biased responses. By understating their expected work ability at the age of retirement, they could make the increase of the retirement age a less attractive policy option. We find evidence for such strategic response behavior, and this strategic bias appears to be stronger in former communist East Germany.     

Should I stay or should I go? An econometric analysis of retirement decisions by couples

This article analyses retirement decisions from a household perspective, treating the retirement timing of spouses as potentially interdependent choices. To identify the determinants of retirement decisions by couples and the effects of spousal retirement, this research estimates bivariate probit models in a multi-country setting. The results show a significant joint retirement trend: both men and women are more likely to retire if their spouse already has retired. Strong asymmetric behaviours arise by gender though, with high crosscountry heterogeneity, reflecting institutional differences in both pension and public health systems.     

Pension profile preferences: the influence of trust and expected expenses

This paper studies the influence of people’s expectations about expenses during retirement and trust in pension funds on preferences for different pension arrangements. Although most workers prefer a flat-rate annuity, many workers want to deviate from it. The most popular option is a high/low, annuity-based profile, followed by a partial lump sum payment. Workers who expect declining expenses during retirement are more likely to opt for a high/low annuity-based pension and/or a lump sum payment at retirement. Furthermore, workers and pensioners who do not trust their pension fund are more likely to prefer a lump sum over annuity-based arrangements.     

The decision to seek advice in the self-directed retirement fund industry

This article examines the influence of investor knowledge and the cognitive bias that arises from overconfidence on the advice-seeking behaviour of investors managing their own retirement funds. Specifically, we trace whether overestimating one’s own technical and financial abilities can hinder the willingness to seek advice, particularly when it would be in the investors’ best interest to do so. We identify a subset of investors who are not knowledgeable and yet do not seek advice. These investors exhibit overconfidence in their ability to manage a fund, despite holding under-diversified and less sophisticated portfolios relative to their peers. Given the global rise in investors choosing to manage their own retirement funds and the importance of seeking advice in this context, there are direct policy implications from these results. They suggest a need to identify and target investors who display overconfidence since they are most likely to be managing underperforming retirement investments in the longer term.     

Retirement Expectations and Satisfaction with Retirement Provisions

This paper investigates the relationship between subjective expectations regarding the replacement rate of income at retirement and several measures of pension satisfaction. We use panel data on Dutch employees, analyzed with fixed effects models, allowing for correlation between unobserved heterogeneity in satisfaction and optimism or pessimism in expectations. The level of the expected replacement rate is found to be positively related to satisfaction: respondents who revise their expectations of the level of their replacement rate upwards tend to become more satisfied with their pension provisions, in particular with the level of the expected benefits. We do not find robust evidence for a relationship between uncertainty and pension satisfaction.     

Gender difference in the impact of retirement on cognitive abilities: Evidence from urban China

This paper examines the impact of retirement on cognitive functioning by gender in urban China and investigates the underlying mechanisms. Based on data from the China Health and Retirement Longitudinal Study, the paper uses the mandatory retirement ages and different policy enforcement between the public and private sectors as instruments for retirement status. The analysis finds substantial gender heterogeneity in the effect of retirement on cognition, with a positive and significant effect for males, but a negative and less significant effect for females. The beneficial effects on cognition are stronger for male blue-collar workers, who are likely to pursue a more active lifestyle at retirement. Further investigation shows that the results are partly driven by differential behavioral changes at retirement, and the gender difference in retirement ages may also play a potential role.     

Current account composition and sustainability of external debt

This paper presents and tests a model of expectations of retirement, using data from a developing country. Using three stage least-squares, the expected amount of labour force participation at age 55 is shown to be positively related to current hours worked per week and to education. Current illness has little effect on quantity of employment at age 55. The effects of non-labour income sources are variable in sign and significance. The lack of significance is probably due to differences in the relevant time periods.     

Financial incentives and retirement: evidence from federal civil service workers

We examine the retirement behavior of federal civil service workers employed by the Department of Defense. These workers provide an interesting population for studying retirement because they face relatively simple financial incentives, high quality administrative data are available, and they are not covered by the Social Security system. We find that these workers respond to their financial incentives in a similar manner to what others have found when analyzing much different retirement systems. We also find no evidence of “excess retirement” at key ages of the Social Security system, which does not support the existence of societal-wide norms regarding retirement.     

DEFINED CONTRIBUTION PLANS, DEFINED BENEFIT PLANS, AND THE ACCUMULATION OF RETIREMENT WEALTH

The private pension structure in the United States, once dominated by defined benefit (DB) plans, is currently divided between defined contribution (DC) and DB plans. Wealth accumulation in DC plans depends on a participant's contribution behavior and on financial market returns, while accumulation in DB plans is sensitive to a participant's labor market experience and to plan parameters. This paper simulates the distribution of retirement wealth under representative DB and DC plans. It uses data from the Health and Retirement Study (HRS) to explore how asset returns, earnings histories, and retirement plan characteristics contribute to the variation in retirement wealth outcomes. We simulate DC plan accumulation by randomly assigning individuals a share of wages that they and their employer contribute to the plan. We consider several possible asset allocation strategies, with asset returns drawn from the historical return distribution. Our DB plan simulations draw earnings histories from the HRS, and randomly assign each individual a pension plan drawn from a sample of large private and public defined benefit plans. The simulations yield distributions of both DC and DB wealth at retirement. Average retirement wealth accruals under current DC plans exceed average accruals under private sector DB plans, although DC plans are also more likely to generate very low retirement wealth outcomes. The comparison of current DC plans with more generous public sector DB plans is less definitive, because public sector DB plans are more generous on average than their private sector DB counterparts.     

Two studies of women's retirement incomes in Australia: assessing some outcomes of pluralism in economic research

To illustrate the potential use of plural research methods,two studies of Australian women's retirement incomes are examined.The first study employed quantitative microsimulation techniques.Its outcomes emphasised low lifetime earnings as a cause ofwomen's lower retirement incomes. The second study used an inductiveapproach known as grounded theory, and its conclusions emphasisedhousehold decision-making processes as a cause of both women'slow lifetime earnings and lower retirement incomes. Using Runde'scriteria for assessing causal explanations, a comparison ismade of the outcomes of the two studies. The conclusion is that,rather than being seen as competing accounts, the outcomes ofthe two varying research methods can be viewed as complementary.By demonstrating the different insights afforded by contrastingresearch methods, this paper provides some support for pluralismof research methods within the discipline of economics.     

Only the smartest? Motivating job characteristics for all ability levels and their impact on job satisfaction

Using Program for the International Assessment of Adult Competencies data, we explore the relation between cognitive ability, proxied by an explicit test of individual numeracy level and the reported satisfaction of individuals with their job. The paper identifies a relation of individual cognitive ability on job satisfaction interacting with some characteristics of the job related to job complexity, namely job autonomy and learning opportunity in the workplace. We found that individuals with different levels of cognitive ability exhibit different levels of job satisfaction depending on how much learning and job autonomy allows their employment. Individuals with low level of cognitive ability enjoy more their job autonomy than individuals in the top of the ability distribution. The learning effect brings the most profits to the utility of workers from the middle quartiles. Finally, planning is most enjoyed at the top of the distribution. We discuss the implication of these findings from a practical perspective.