Pensions, Social Security, Wealth and Lifetime Earnings: Evidence from the Health and Retirement Study

43 Pages Posted: 12 Dec 2008

See all articles by William G. Gale

William G. Gale

Brookings Institution

John W. R. Phillips

National Institutes on Aging

Date Written: August 2006

Abstract

Using data from the Health and Retirement Study (HRS), we calculate the relationship between socio-economic status and a utility based measure of annuity value. We find considerable variation between groups once we take account of not only socio-economic differences in mortality, but also pre-annuitized wealth and longevity risk pooling in marriage.

Using HRS data on subjective survival probabilities, we then construct a subjective life table for each individual in the HRS. We show that these tables vary appropriately between groups and aggregate closely to group level averages. We calculate the value each household would place on annuitization, based on the husband and wife's subjective life tables, and the household's degree of risk-aversion and proportion of pre-annuitized wealth. A significant minority would perceive themselves as suffering a net loss from mandatory annuitization.

Suggested Citation

Gale, William G. and Phillips, John W. R., Pensions, Social Security, Wealth and Lifetime Earnings: Evidence from the Health and Retirement Study (August 2006). Available at SSRN: https://ssrn.com/abstract=1313312 or http://dx.doi.org/10.2139/ssrn.1313312

William G. Gale (Contact Author)

Brookings Institution ( email )

1775 Massachusetts Avenue, NW
Washington, DC 20036
United States
202-797-6148 (Phone)
202-797-6181 (Fax)

John W. R. Phillips

National Institutes on Aging ( email )

Building 31, Room 5C27
31 Center Drive, MSC 2292
Bethesda, MD 20892
United States

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