@conference {10626, title = { Inattentive Households and Consumption Declines during Retirement}, booktitle = {21st Annual SSA Research Consortium Meeting}, year = {2019}, address = {Washington, D.C.}, abstract = {There is little agreement on the question of whether U.S. households are well-prepared for retirement. We revisit this debate using the Consumption and Activities Mail Survey (CAMS) linked to the Health and Retirement Study (HRS) to better understand the dynamics of pre- and post-retirement consumption. We first develop a dynamic model with home production that captures conventional reasons why consumption may decline during retirement: Time preference rates, a decline in work-related expenses, health shocks, and changes in home production. We also consider an additional factor{\textemdash}inattention{\textemdash}that allows for a gradual adjustment to new economic conditions. Even after retirement, households may not realize how much they need for both current and future expenses. Dividing the sample into terciles based on retirement adequacy, we find that differences in consumption paths diverge not immediately at retirement, but over a lengthy period of time; by 10 years post-retirement, those poorly prepared for retirement experienced a drop in consumption roughly one-third greater than those best prepared. This differential decline does not appear to be explained by health status, family size, marital status, time preference, risk aversion, or home production such as cooking at home or shopping for bargains. Instead, these patterns are most consistent with a model of household inattention. }, keywords = {consumption decline, inattentive households}, author = {Sheng Guo and Jonathan S Skinner and Stephen P. Zeldes} } @inbook {5188, title = {Aging and Housing Equity}, booktitle = {Innovations in Retirement Financing}, year = {2002}, note = {ProCite field 6 : In ProCite field 8 : eds.}, publisher = {University of Pennsylvania Press/Pension Research Council}, organization = {University of Pennsylvania Press/Pension Research Council}, address = {Philadephia, PA}, keywords = {Housing}, url = {http://www.nber.org/papers/w7882}, author = {Steven F Venti and David A Wise}, editor = {Zvi Bodie and P. Brett Hammond and Olivia S. Mitchell and Stephen P. Zeldes} } @book {5272, title = {Innovations in Retirement Financing}, year = {2002}, note = {ProCite field 8 : eds.}, publisher = {University of Pennsylvania Press}, organization = {University of Pennsylvania Press}, address = {Philadelphia, PA}, keywords = {Consumption and Savings}, url = {https://pensionresearchcouncil.wharton.upenn.edu/publications/books/innovations-in-retirement-financing/}, author = {Zvi Bodie and P. Brett Hammond and Olivia S. Mitchell and Stephen P. Zeldes} } @conference {8638, title = {Would a Privatized Social Security System Really Pay a Higher Rate of Return?}, booktitle = {First Annual Joint Conference for the Retirement Research Consortium, "New Developments in Retirement Research"}, year = {1999}, month = {05/1999}, abstract = {Many advocates of social security privatization argue that rates of return under a defined contribution individual account system would be much higher for all than they are under the current social security system. This claim is false. The mistake comes from ignoring accrued benefits already promised based on past payroll taxes, and from underestimating the riskiness of stock investments. Confusion arises because three distinct reforms are muddled. By privatization we mean creating individual accounts (which could, for example, be invested exclusively in bonds). By diversification we mean investing in stocks, and perhaps other assets, as well as bonds; diversification might be undertaken either by individuals in their private social security accounts, or by the social security trust fund. By prefunding we mean closing the gap between social security benefits promised to date and the assets on hand to pay for them. Any one of these reforms could be implemented without the other two. If the system were completely privatized, with no prefunding or diversification, the social security system would need to raise new taxes in order to pay benefits already accrued. These added taxes would completely eliminate any rate of return advantage on the individual accounts. If the economy continued to grow at rates comparable to the last 25 years, and if real interest rates remained at levels comparable to their long run historical average, then the new taxes would amount to 3\% of payroll in perpetuity (which is a quarter of today{\textquoteright}s social security taxes). Unlike diversification, prefunding would raise rates of return for later generations, but at the cost of lower returns for today{\textquoteright}s workers. For households able to invest in the stock market on their own, diversification would not raise rates of return, correctly adjusted to recognize risk. Households that are constrained from holding stock, due to lack of wealth outside of social security or to fixed costs from holding stocks, would gain higher risk-adjusted returns and would benefit from diversification. If this group is large, diversification would raise stock values, thus helping current stockholders, but it would lower future stock returns, thus hurting young unconstrained households. Overall, since the number of truly constrained households is probably not that large, privatization and diversification would have a much smaller effect on returns than reformers typically claim.}, url = {https://www0.gsb.columbia.edu/mygsb/faculty/research/pubfiles/474/gmzwd98.pdf}, author = {John Geanakoplos and Olivia S. Mitchell and Stephen P. Zeldes} }