Older Americans On The Go: How Often, Where, and Why?

The lore on whether older Americans move is mixed. On the one hand, the stereotype of retirement is that people flock to a warm climate such as Florida or Arizona. On the other hand, researchers have found that the home equity of older Americans changes very little over time, suggesting that they tend to stay put. To date, researchers have seldom directly addressed the migration patterns of older Americans. Understanding such patterns can be useful in assessing the social and economic circumstances of the elderly. Therefore, this brief – the first in a two-part series – uses the Health and Retirement Study to examine how often older households move, where they move, and why they move. The brief is organized as follows. The first section covers the prevalence of moving and the geographic locations of the moves. The second section analyzes the reasons that households give for moving and explores whether these reasons suggest different types of movers. The third section concludes by setting the stage for the next brief, which will explore the determinants and consequences of moving.

Older Americans On The Go: Financial and Psychological Effects of Moving

Moving is an important decision for any homeowner, requiring one to weigh the familiar comforts of a home and neighborhood against the uncertain potential of a new location. A move decision may be even more challenging for an older person. On the one hand, older people often have a decades-long attachment to their current residence. On the other hand, they may face new opportunities (ample leisure time) or challenges (the loss of a spouse) that affect their desire or ability to stay where they are. This brief is the second of two examining moving decisions among older Americans. The first brief covered how often older households move, where they move, and their stated reasons for moving. An initial analysis of these reasons indicated two general types of movers: those who are able to affirmatively plan a move (“Planners”) and those who react to a change in their circumstances that may force them to relocate (“Reactors”). Given the different stated motivations of these movers, the determinants and consequences of their move decisions may vary. This brief tests these hypotheses, using the Health and Retirement Study. The first section introduces the sample of households used in the analysis. The second section analyzes what characteristics influence a decision to move. The third section looks at the impact of moving on home equity, while the fourth section considers the impact on psychological well-being. The final section concludes.

Why Are Older Workers At Greater Risk of Displacement?

The conventional wisdom says that older workers are less likely to be displaced than younger workers. While true in the past, the conventional wisdom is no longer true today; the advantage that older workers had has disappeared. This loss of relative job security is troubling. Once displaced, older workers are less likely to be reemployed, have less time to adjust their retirement plans, and are more likely to retire prematurely. Given the contraction of the nation’s retirement income system and rising longevity, these adverse effects make displacement increasingly injurious to older workers. This brief analyzes changes in the displacement of older and prime-age workers since the mid-1990s and the effect of three factors – tenure, educational attainment, and employment in manufacturing – identified as having a significant effect on displacement risk. The results show that all three factors contributed to the rising dislocation risk older workers face and their rising risk vis-à-vis prime-age workers. The brief proceeds as follows. The first section presents the three factors identified in the literature as affecting displacement. The second section reviews the data and methodology used to analyze the effects of these factors on the changing displacement risk of older and prime-age workers. The third section reports the findings, and the fourth section concludes.

The Employment of Older Workers

Thesis advisor: Alicia H. MunnellThis thesis focuses on the employment of older workers and addresses the following questions: how people make their retirement decision, how changes in the Social Security benefit rules can encourage older workers to stay in the labor force longer, and what impediments older workers face on the labor market that can prevent them from working longer and interrupt their retirement plans. As the U.S. population ages, retirement and Social Security claiming decisions of older workers will have a significant impact on the U.S. economy. By the year of 2030 about 20 percent of the population will be 65 years old or older. The national retirement system generates less income in retirement than it did in the past. Rising Full Retirement Age, the shift of the private pension system from predominantly defined benefit to predominantly defined contribution pension plans, and increasing longevity will have to force older workers to stay in the labor force in the future to provide adequate income in retirement. Chapter one presents a dynamic stochastic retirement model that incorporates observed heterogeneity in educational attainment level. The assumption is that educational attainment level is highly correlated with the characteristics, such as preferences for work, types of jobs, and financial planning horizon that determine timing of retirement. A parsimonious model that incorporates heterogeneity in educational attainment level and stochastic earnings and health predicts the labor force participation rates and Social Security rates by age accurately. This model provides intuition for why college graduates tend to claim Social Security benefits and exit labor force later in life - longer life expectancy, non-physically demanding jobs, longer financial planning horizon, and deriving positive utility from work encourage college graduates to retire later. Chapter two develops and tests a policy rule regarding the availability of reduced early Social Security retirement benefits that would encourage older workers to stay in the labor force longer without amplifying the hardship on the more vulnerable population. The availability of Social Security retirement benefits at the current Earliest Eligibility Age (EEA) is considered the main impediment to longer working lives. Raising the EEA is thus considered the most powerful channel to raise the labor force participation rate. But raising the EEA would create hardship among workers with low private savings who are unable to work or find employment until the higher eligibility age. This study proposes and analyzes a new approach to setting each worker's EEA based on an individual's average lifetime earnings--an Elastic EEA. Low average lifetime earnings will likely reflect either poor health or spotty work histories, both of which are associated with weak employment prospects and limited financial resources at age 62. Tying the EEA to the average lifetime earnings could thus protect many of these vulnerable workers while encouraging longer working lives and increasing Social Security monthly benefits for workers more capable of remaining in the labor force. Simulations suggest that an Elastic EEA would achieve its goal in providing higher employment rates and levels of consumption in retirement compared to the status quo. These simulations also demonstrate the limitations of structural retirement models used to estimate the effect of raising the EEA. By assuming the same probabilities of losing and finding a job for all individuals, these models underestimate the adverse effect of raising the EEA on the more vulnerable population. Although some older workers may like to stay longer in the labor force, they may have hard time holding on to their jobs due to displacement. Chapter three is devoted to the trends in displacement of older workers. Conventional wisdom says older workers are less likely to be displaced. However, the difference in displacement rates between younger and older workers disappeared in the 2006 Displaced Worker Survey (DWS). The increased vulnerability of older workers appears to be the reason for this convergence. To better understand the age-displacement relationship, this study takes advantage of the availability of job tenure information and consistent design of the DWS since 1996. Using a Blinder--Oaxaca decomposition, it analyzes the effect of changes in tenure, industry mix, and educational attainment on the displacement rates of younger and older workers. The results show that older workers are now more likely to be displaced than prime-age workers, conditional on education, manufacturing industry, and tenure.Thesis (PhD) — Boston College, 2009.Submitted to: Boston College. Graduate School of Arts and Sciences.Discipline: Economics

Do State Economics or Individual Characteristics Determine Whether Older Men Work?

The difference in labor force participation rates of men aged 55-64 across the United States is astounding. For example, West Virginia has a participation rate below 60 percent, while South Dakota has a participation rate approaching 90 percent (see Figure 1). This fact in itself has significant implications for the pressures that states will face as the baby boom starts to retire in the face of a contracting retirement income system, declining housing prices, and a lackluster stock market. Despite these marked differences, little is known about the reasons for such variations in work patterns. An earlier brief, using the Current Population Survey for the period 1977-2007, demonstrated that the differences in the labor force participation of older men were related to labor market conditions, the nature of employment, and the employee characteristics in each state as well as to a “pseudo replacement rate.” These variables explained more than one-third of the total variation...

Determinants and Consequences of Moving Decisions for Older Homeowners

The lore on whether older Americans move is mixed. While the familiar stereotype is that retirees flock to Florida or Arizona, prior studies have found that their home equity rises modestly over time, suggesting that they tend to stay put. This paper examines moving trends, determinants, and consequences using the original cohort of the Health and Retirement Study (HRS). We find that a full 30 percent of homeowners in the HRS cohort move over the 1992-2004 period, but most moves occur close to home. Overall, two types of movers emerge from the analysis ?ñ those who affirmatively plan to move and those who react to changing circumstances. As proxies for these two types, this study uses the presence or absence of a negative shock, such as death of a spouse or entry into a nursing home. Our results show that the factors that help determine a move are similar for both groups, while the consequences of a move vary. Homeowners with shocks are more likely to discontinue homeownership and reduce net equity, supporting the hypothesis that households may view housing wealth as insurance against catastrophic events. Finally, while movers in both groups of homeowners experience improvements in psychological well-being, movers with shocks are impacted most by the shocks themselves.

Why Do More Older Men Work in Some States?

With increasing pressure on the nation’s retirement systems, questions about how long people stay in the labor force and why they decide to retire are of great importance. The big unknown going forward is whether the contraction of the retirement income system will cause workers to continue working at older ages. The literature to date suggests that the availability of benefits has a larger impact than the level of benefits on people’s decision to retire. Indeed, 55 percent of men and 59 percent of women who claimed Social Security benefits in 2005 were 62 — the earliest age of eligibility. If availability of benefits is the main driver of retirement, future workers will be relatively insensitive to the coming decline in replacement rates from Social Security and employer-sponsored pension plans. On the other hand, if the level of benefits has a significant impact, future declines could trigger increased work. One avenue of investigation not previously explored is the variation in labor force activity of older workers across different states. In South Dakota, nearly 90 percent of men aged 55-64 are in the labor force compared to only 40 percent in West Virginia. The question is the extent to which this variation can be explained by differences in replacement rates — benefits relative to pre-retirement income — across states...

Adjusting Social Security for Increasing Life Expectancy: Effects on Progressivity

Achieving long-run Social Security solvency requires addressing rising life expectancy. Increasing the Full Retirement Age (FRA), while holding the Early Entitlement Age (EEA) fixed, could be effective but eventually will result in replacement rates that are viewed by many as too low. A possible policy to prop up replacement rates is to raise the EEA, which has been age 62 for more than 40 years. However, an increase in the EEA introduces unfairness because the variation in life expectancy across socioeconomic groups is positively correlated with lifetime income. Using data from the Health and Retirement Study to investigate how earnings relate to mortality risk and health limitations, this project explores the possibility of constructing a flexible FRA that could preserve or even enhance the progressivity of Social Security benefits. If life expectancy were correlated with lifetime income, Social Security policy could use the AIME (Average Indexed Monthly Earnings) to target policies that are more equitable for people with both lower lifetime income and lower life expectancy. Unfortunately, we find that while life expectancy is strongly correlated with AIME for men, it is only weakly correlated for women, and when pooling the genders the correlation disappears. We then investigate whether targeting could be done by the max AIME, which is the AIME for single persons and the maximum of the husband‘s or wife‘s AIME for married couples. We find that the max AIME, which is a household measure of lifetime income, could be used for constructing a flexible FRA because it is negatively correlated with mortality risk and also negatively correlated with other measures of economic vulnerability or inability to work at older ages. With a flexible FRA, individuals in households with a low max AIME would have a lower FRA than other individuals.

How Much Do State Economics and Other Characteristics Affect Retirement Behavior?

Economic conditions and labor force participation vary significantly across the states of the Union. Despite these marked differences, little is known about the reasons for such variations in retirement patterns. Using the Current Population Survey for the period 1977-2007, this paper demonstrates that the differences in the labor force participation of men age 55-64 are related to the labor market conditions, the nature of employment, and the employee characteristics in each state as well as a pseudo replacement rate. These variables explain more than one-third of the total variation. Even moving to a fixed-effects model only cuts the explanatory power by half. The question remains, however, whether these relationships reflect different populations or unique aspects of the state. To answer that question we turn to the Health and Retirement Study (HRS). We estimate equations for the probability of working and for the expected retirement for men in their late fifties and early sixties. In each case, the first equation includes just the state-level variables and the second the state-level variables and the HRS demographic and economic information for each individual. The results show that the state-level variables explain almost none of the variation in the probability of working or the expected retirement age, but most of the state-level variables are statistically significant both before and after the inclusion of the HRS information.