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Bulletin on Retirement and Disability
2020, No. 3                                             A free publication of the NBER                                                Subscribe

The 22nd Annual Meeting of the Retirement and Disability Research Consortium

The Social Security Administration (SSA) virtually convened its 2020 Retirement and Disability Research Consortium (RDRC) Meeting on August 6th. This year's meeting was organized by the Center for Retirement Research at Boston College, with participants attending digitally via a platform supported by the National Press Club in Washington, DC.

The meeting was organized around thematic panels and featured research funded through the NBER RDRC as well as through the other RDRC centers based at Boston College, the University of Michigan, and the University of Wisconsin.

In her opening remarks, Katherine N. Bent, Associate Commissioner of Office of Research, Evaluation and Statistics at the SSA, highlighted a 2019 paper previously funded through the NBER RDRC for its policy relevance. In What Drives Prescription Opioid Abuse? Evidence from Migration (NBER RDRC paper NB19-02) NBER Research Associates Amy Finkelstein, Matthew Gentzkow, and Heidi Williams investigate the role of person-specific and place-specific factors in the opioid epidemic. They analyze cross-county migration of disabled Medicare recipients, finding that roughly 30 percent of the gap in opioid abuse between geographic areas at the 25th and 75th percentile of abuse is due to place-specific factors. More generally, Associate Commissioner Bent noted that the SSA holds the "RDRC research in very high regard and strongly considers it when [they] devise, develop, and later test policy changes and innovations."

In Panel 1: Social Security Benefits and Demographic Trends, NBER Faculty Research Fellow Damon Jones presented Misperceptions of the Social Security Earnings Test and the Actuarial Adjustment: Implications for LFP and Earnings, co-authored with Alexander Gelber, Ithai Lurie, and Daniel Sacks. A puzzling behavior exhibited by many Old-Age and Survivors Insurance beneficiaries is that they intentionally curtail their earnings to stay just below the Earnings Test exempt amount — so-called "left bunching" — even though only marginal earnings beyond this Test amount are taxed and earned income beyond the Test amount does not cause a loss in lifetime benefits. The researchers find that individuals overwhelmingly left-bunch, particularly those whose earnings just prior to reaching retirement age were substantially above the exempt amount. The researchers present evidence for an explanation — "spotlighting," where, even though the Earnings Test applies only to marginal earnings above the exempt amount, individuals may believe the Test also applies to earnings below the exempt amount, creating the perception of a discrete loss of income at the exempt amount.

In Panel 3: Health Risks for Work and Finances, Lauren Schmitz presented The Interaction of Health, Genetics, and Occupational Demands in SSDI Determinations, co-authored with Amal Harrati. The researchers investigate the extent to which health and job demands contribute to SSDI application and receipt. They find that structural and social inequities that influence access to opportunity, including race and childhood socioeconomic status, are more strongly associated with the probability of SSDI application than workplace demands. The exception is a positive psychosocial work environment that gives individuals greater control over how to best meet the demands of their jobs, which is negatively associated with SSDI application.

In Panel 4: State and Local Labor Markets, NBER Research Associate Gopi Shah Goda presented The Prevalence of COLA Adjustments in Public Sector Retirement Plans, co-authored with Maria Fitzpatrick. In an attempt to shore up their retirement plans' funding shortfalls, many states have reduced or even eliminated actuarial cost-of-living adjustments (COLAs) for retirees who are receiving pension benefits. Over the 2005–18 period, the researchers document that approximately 43 percent of workers in the sample experienced a change in any one year. The effect of these adjustments on a retiree's lifetime benefits can be large; for a public sector worker who starts work at age 22 and continues for 30 years with average mortality for the 1950 birth cohort and a 3-percent discount rate, the researchers estimate that eliminating a 3-percent COLA would reduce their retirement wealth by approximately 35 percent.

In Panel 6: Retirement Finances, NBER Research Associate James Choi presented Comparing Trends in Late-Life Income across Data Sets, co-authored with Lucas Goodman, Justin Katz, David Laibson, and Shanthi P. Ramnath. The researchers examine how well three widely used US household surveys — the Health and Retirement Study, the Survey of Income and Program Participation, and the Current Population Survey — capture levels of and trends in late-life financial well-being, by comparing survey estimates with IRS tax records. Their analysis shows the surveys overestimate the decline in income during the transition to retirement at and above median from age 58 to age 68, suggesting that relying on surveys to measure income levels or changes in income as households age within cohorts may paint an overly pessimistic picture of financial well-being. However, when studying cross-cohort trends in retirement income, relying exclusively on survey data will produce an overly optimistic assessment of financial well-being because survey mismeasurements are much more pronounced for earlier cohorts.

Also in Panel 6, Faculty Research Fellow Suzanne Shu presented Broad Framing in Retirement Income Decision Making, co-authored with Hal Hershfield and Stephen Spiller. The researchers test how presenting individuals with a single retirement income value as a sum of their disparate retirement income sources, instead of framing these income streams individually, affects retirement income decisions. In the study, individuals were asked to make a financial plan for decumulation using an online tool. Some users were given a scenario where retirement income decisions were siloed based on the income source, while others were presented with an aggregate estimated wealth outcome. Those who are able to make decisions in aggregate, rather than siloed by income source, had significantly smoother consumption patterns than participants who made decisions separately.

The agenda and summaries of the conference papers are available at:
https://crr.bc.edu/wp-content/uploads/2020/01/2020-RDRC-Meeting-Booklet.pdf

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