Center for Retirement Research
The goals of the Center for Retirement Research are to promote research on retirement issues, to transmit new findings to a broad audience, to help train new scholars, and to expand access to valuable data resources.
Selected Issue Briefs
Why do State Disability Application Rates Vary Over Time?, Center for Retirement Research, January 2012
- The brief's key findings are:
- Application rates for federal Disability Insurance (DI) have risen since the late-1990s.
- The economy is a key driver; rising unemployment and declining labor force participation lead to higher DI application rates.
- Interestingly, states with strict health insurance regulations have lower application rates, a finding that merits further exploration.
How Would GASB Proposals Affect State and Local Pension Reporting?, Center for Retirement Research, November 2011
- States and localities account for pensions in their financial statements according to standards laid out by the Governmental Accounting Standards Board (GASB). Under these standards, state and local plans generally follow an actuarial model and discount their liabilities by the long-term yield on the assets held in the pension fund, roughly 8 percent. Most economists contend that the discount rate should reflect the risk associated with the liabilities and, given that benefits are guaranteed under most state laws, the appropriate discount factor is closer to the riskless rate. The point is not that liabilities should be larger or smaller, but rather that the discount rate should reflect the nature of the liabilities; the characteristics of the assets backing the liabilities are irrelevant...
How Much to Save for a Secure Retirement, Center for Retirement Research, November 2011
- One of the major challenges facing Americans today is how to prepare for a secure retirement. While market ups and downs are unpredictable, people do have control over work and saving decisions that can significantly improve their retirement prospects. This brief uses a simple model to estimate what percent of earnings an individual must save to ensure a financially secure retirement depending on he starts saving, he retires, and how he invests his retirement savings...
How Prepared are State and Local Workers for Retirement?, Center for Retirement Research, October 2011
- A widespread perception is that state-local government workers receive high pension benefits which, combined with Social Security, provide more than adequate retirement income. The perception is consistent with multiplying the 2-percent benefit factor in most plan formulae by a 35- to 40-year career and adding a Social Security benefit. But this calculation assumes that individuals spend enough of their career in the public sector to produce such a retirement outcome. This brief summarizes the results of a paper that uses the Health and Retirement Study (HRS) and actuarial reports published by state and local pension systems to test the hypothesis that state-local workers have more than enough money for retirement.
An Update on Locally-Administered Pension Plans, Center for Retirement Research, July 2011
- The financial crisis and ensuing recession have had an enormous impact on state-administered pension plans. Funded levels declined sharply, the Annual Required Contribution (ARC) increased to make up for the fall in funding, and the percent of ARC paid declined as the bottom fell out of state revenues. In response, states have increased employer and employee contributions, cut employment, slowed wage growth, and lowered benefits for new employees (and in a few instances reduced COLAs for current employees, but these initiatives have been challenged and are currently in the courts). Less is known about how locally-administered plans have fared in the last four years. This brief attempts to fill that gap.
A Role for Defined Contribution Plans in the Public Sector, Center for Retirement Research, April 2011
- In the wake of the financial crisis, policymakers have been talking about shifting from defined benefit plans to defined contribution plans in the public sector. Three states – Georgia, Michigan, and Utah – have taken action, joining the 10 states that had introduced some form of defined contribution plans before 2008. Interestingly, these new plans are “hybrids” that combine elements of both defined benefit plans and defined contribution plans. Such an approach spreads the risks associated with the provision of retirement income between the employer and the employee. This brief provides an update on defined contribution initiatives in the public sector and then discusses whether the hybrids that have been introduced are the best way to combine the two plan types, sometimes referred to as a "stacked" plan.
The Impact of Public Pensions on State and Local Budgets, Center for Retirement Research, October 2010
- State and local pensions have been headline news since the financial collapse reduced the value of their assets, leaving a substantial unfunded liability. The magnitude of that liability depends on the interest rate used to discount future benefit promises but, regardless of the assumptions, states and localities are going to have to come up with more money. This brief looks at the size of the additional funding relative to state budgets.