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Trends in retirement and retirement income choices by TIAA participants: 2000–2018
- Jeffrey R. Brown, James M. Poterba, David P. Richardson
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- Journal:
- Journal of Pension Economics & Finance , First View
- Published online by Cambridge University Press:
- 10 May 2023, pp. 1-22
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This paper documents trends over the last two decades in retirement behavior and retirement income choices of participants in TIAA, a large and mature defined contribution plan. From 2000 and 2018, the average age at which TIAA participants stopped contributing to their accounts, which is a lower bound on their retirement age, rose by 1.2 years for female and 2.0 years for male participants. There is considerable variation in the elapsed time between the time of the last contribution to and the first income draw from plan accounts. Only 40% of participants take an initial income payment within 48 months of their last contribution. Later retirement and lags between retirement and the first retirement income payout led to a growing fraction of participants reaching the required minimum distribution (RMD) age before starting income draws. Between 2000 and 2018, the fraction of first-time income recipients who took no income until their RMD rose from 10% to 52%, while the fraction of these recipients who selected a life-contingent annuitized payout stream declined from 61% to 18%. Among those who began receiving income before age 70, annuitization rates were significantly higher than among those who did so at older ages. Aggregating across all income-receiving beneficiaries at TIAA, not just new income recipients, the proportion with a life annuity as part of their payout strategy fell from 52% in 2008 to 31% in 2018. By comparison, the proportion of all income recipients taking an RMD payment rose from 16% to 29%. About one-fifth of retirees received more than one type of income; the most common pairing was an RMD and a life annuity. In the later years of our sample, the RMD was becoming the de facto default distribution option for newly retired TIAA participants.
6 - Recent Developments in and Future Prospects for Public Economics
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- By James M. Poterba, Mitsui Professor Public Finance and Corporate Finance, Massachusetts Institute of Technology
- Edited by Michael Szenberg, Pace University, New York, Lall Ramrattan, University of California, Berkeley
- Foreword by Paul A. Samuelson
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- New Frontiers in Economics
- Published online:
- 06 July 2010
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- 06 September 2004, pp 185-202
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Public economics is the study of the government's role in the economy. Because that role is constantly changing, public economics is a constantly evolving field. Some of the field's core questions – such as how the tax rates on different goods should be set – transcend generations, whereas others, such as how best to reform the aging Social Security systems in many developed nations, have recently emerged as central topics. New insights from theoretical and empirical advances in many other subfields of economics help to inform long-standing issues in public economics. In turn, the emerging issues within the field often provide the stimulus for new theoretical and applied research.
The last few decades have been a period of very rapid advancement in public economics. Important new theoretical and empirical discoveries have substantially advanced our understanding of the efficiency and incidence of various taxes, as well as the economic effects and optimal design of social insurance programs. There has been substantial progress in both the economic theory that relates to public economics, and in the empirical analysis that supports detailed policy evaluations.
Different parts of public economics have advanced at different rates. In the early 1970s, the major research advances involved the application of economic theory to the second-best problems of tax design. In the late 1970s and 1980s, the advent of household-level and firm-level databases permitted new exploration of how tax incentives and other factors affected the behavior of economic agents.
AN INTERVIEW WITH MARTIN FELDSTEIN
- James M. Poterba
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- Journal:
- Macroeconomic Dynamics / Volume 7 / Issue 2 / April 2003
- Published online by Cambridge University Press:
- 16 January 2003, pp. 291-312
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Martin Feldstein is one of the most influential empirical economists of the late twentieth century. In the 1960's, as a research fellow at Oxford University, where he earned a D.Phil. in Economics, he pioneered the empirical analysis of production functions for hospitals and for other health care providers. In the process, he helped to launch the modern field of health economics. In the 1970's, shortly after moving from Oxford to Harvard, his research expanded from health economics to a broader range of social insurance programs, particularly Social Security and unemployment insurance. He developed theoretical models for analyzing how these programs affected the incentives facing households and firms, and then marshaled empirical evidence to document the substantive importance of these program-induced distortions. Feldstein's work sparked an active public policy debate on the economic effects of these programs, and this debate continues to the present day.
Feldstein was one of the first to use household-level data from surveys and administrative records to analyze how taxes and government transfer programs affect household behavior. His research contributions, and his pedagogical role in training dozens of graduate students, accelerated the diffusion of new empirical strategies in the field of applied economics. Researchers in public finance still make widespread use of the TAXSIM computer model, a household-level program for computing tax liabilities, which Feldstein began to build during the 1970's.
In the early 1980's, Feldstein spent two years as the Chairman of the Council of Economic Advisers. During that time, he warned frequently of the long-term economic costs of large budget deficits, even though this was a very unpopular view on political grounds. Feldstein's time in Washington expanded his interests still further, to encompass international economic policy issues as well as domestic questions. When he returned to Harvard and the NBER in the mid-1980's, Feldstein directed several projects on the sources of, and policy responses to, international economic crises.
Throughout the late 1980's and early 1990's, Feldstein continued to make central contributions to his primary field of public finance. In a series of papers on how taxable income responds to changes in marginal tax rates, Feldstein developed a new framework for evaluating the efficiency cost of income taxation. These papers also contributed in a very significant way to the debate on how congressional tax analysts should compute the revenue effects of tax reforms. He also continued his long-standing interest in social insurance policy. His 1995 Ely Lecture to the American Economic Association was a clarion call drawing economic researchers to the analysis of Social Security reform proposals, and it anticipated the very active policy debate of the last half decade.
Feldstein has been actively involved in both undergraduate and graduate teaching during his 35 years on the Harvard faculty. He has served on the dissertation committees of more than 60 graduate students, and he has trained many of the current leaders in the field of public economics. He currently directs and lectures in Harvard's Principles of Economics course, which is the largest undergraduate course at Harvard.
Martin Feldstein has made landmark contributions in many subfields of applied economics. He has also played a critical role in shaping the direction of economic research more generally in his position as President of the National Bureau of Economic Research, a post he has held since 1977. Feldstein has made the NBER a clearinghouse for a wide range of current policy-relevant economic research, and he has directed numerous research projects that have generated important new economic insights. During Feldstein's tenure as NBER president, yellow-covered NBER working papers and, increasingly, the NBER internet site, www.nber.org, have become standard starting points for researchers investigating many topics in applied economics.
In 1977, Martin Feldstein received the John Bates Clark Medal from the American Economic Association, recognizing him as the outstanding economist under the age of 40. Twenty-five years later, in 2002, he was elected president of that association.
This interview was conducted at Martin Feldstein's office at the NBER. One wall of the small conference room in which we worked is decorated with original drawings of some of the political cartoons that lampooned Feldstein's deficit worries during his time at the Council of Economic Advisers. Outside the conference room, a glass case contains literally hundreds of books that are the results of NBER research studies dating back to 1920. The interview follows a loose chronological pattern.
Public finance and public choice
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- By James M. Poterba, Department of Economics, Massachusetts Institute of Technology, Cambridge, MA 02142-1347 and National Bureau of Economic Research, Cambridge, MA 02138
- Edited by Joel Slemrod, University of Michigan, Ann Arbor
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- Book:
- Tax Policy in the Real World
- Published online:
- 01 June 2010
- Print publication:
- 28 April 1999, pp 429-434
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Abstract - This paper explores the contribution that public choice models can make to the traditional efficiency and distributional analyses of tax policy. It notes the relative lack of attention to political economy issues in public finance, at least in comparison with other policy-oriented subfields in economics. It then discusses two key insights that emerge from public choice models of taxation. The first is the notion that different tax systems may be associated with different opportunities for political rent seeking, and the second is the possibility that actual tax systems equate the marginal political cost of raising revenue from different tax instruments, rather than the marginal efficiency cost. The paper concludes with a brief discussion of the role of traditional efficiency and distributional analyses in contributing to tax policymaking, even in a political world.
Most applied tax policy research addresses the efficiency costs of different tax rules, the behavioral effects of taxation, or the distribution of gains and losses associated with a switch from one tax policy to another. There is usually little accompanying discussion of how and why various tax policies are adopted. While most researchers would readily admit that political factors are a fundamental determinant of the tax system, and some with policymaking experience might say “it's all politics,” the implications of this insight receive relatively little attention.
COMMENTS
- Joel Slemrod, University of Michigan, Ann Arbor
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- Book:
- Tax Progressivity and Income Inequality
- Published online:
- 20 May 2010
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- 29 July 1994, pp 305-308
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This paper has two parts. The first provides new empirical evidence on the pattern of capital gains realizations, both across households and over time for a given set of households. The second develops a simple multiperiod model where households divide their portfolios between a risky asset and a safe security, and uses it to analyze the welfare consequences of various capital gains tax reforms. Both sections provide interesting new insights on capital gains taxation.
The first part of the paper presents new results from a very recent data set, the 1985–89 IRS Sales of Capital Assets Panel. The findings show that most capital gains are realized by the same households, year after year. In this five-year data set, only one-fifth of all net gains were realized by households reporting gains in only one or two years. In contrast, two-thirds of all gains were reported by households with gains in at least four of the five sample years. These statistics confirm findings with similar data sets for earlier periods. Such confirmation is welcome, since the mix of capital gains has changed over time. Gains on equities became a larger share of total gains in the 1980s, while gains on real estate and other physical assets declined relative to previous decades.
The results for the 1985–89 period are also of somewhat special interest, however, because of the major change in realization incentives that was legislated in 1986.
10 - Money in the utility function: an empirical implementation
- Edited by William A. Barnett, Kenneth J. Singleton
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- Book:
- New Approaches to Monetary Economics
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- 04 August 2010
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- 31 July 1987, pp 219-240
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Abstract: This paper studies household asset demands by allowing certain assets to contribute directly to utility. It estimates the parameters of an aggregate utility function that includes both consumption and liquidity services. These liquidity services depend on the level of various asset stocks. We apply these estimates to investigate the long- and short-run interest elasticities of demand for money, time deposits, and Treasury bills. We also examine the impact of open market operations on interest rates, and present new estimates of the welfare cost of inflation.
This paper studies households' demand for different assets by allowing certain assets to contribute directly to household utility. We permit the utility function to capture the “liquidity” services of money, certain time deposits, and even some government securities. Our approach yields estimates of the utility function parameters which can be used to study the effects of a variety of changes in asset returns. We investigate how asset holdings and consumption react to both temporary and permanent changes in returns, and study the effects of government financial policy.
Our approach provides an integrated system of asset demands of the form that Tobin and Brainard (1968) advocate for studying the effects of government interventions in financial markets. It provides a tractable alternative to the atheoretical equations that are commonly used to study the demand for money and other assets. Those equations, which cannot be interpreted as the rational response of any economic agent to changes in the economic environment, are unlikely to remain stable when the supply of various nonmonetary assets changes.