Working Paper: NBER ID: w19583
Authors: Andreas Hubener; Raimond Maurer; Olivia S. Mitchell
Abstract: Household decisions are profoundly shaped by a complex set of financial options due to Social Security rules determining retirement, spousal, and survivor benefits, along with benefit adjustments that vary with the age at which these are claimed. These rules influence optimal household asset allocation, insurance, and work decisions, given life cycle demographic shocks such as marriage, divorce, and children. Our model generates a wealth profile and a low and stable equity fraction consistent with empirical evidence. We also confirm predictions that wives will claim retirement benefits earlier than husbands, while life insurance is mainly purchased by younger men. Our policy simulations imply that eliminating survivor benefits would sharply reduce claiming differences by sex while dramatically increasing men's life insurance purchases.
Keywords: Social Security; Life Cycle Portfolio; Family Status; Demographic Shocks; Insurance Decisions
JEL Codes: D1; D13; G11; H55; J12; J22; J26
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| family status (J12) | household financial decisions (G50) |
| social security rules (H55) | household financial decisions (G50) |
| marital status (J12) | claiming behavior (D91) |
| presence of children (J13) | investment decisions (G11) |
| eliminating survivor benefits (J32) | life insurance purchases by men (G52) |
| eliminating survivor benefits (J32) | claiming behavior (D91) |
| eliminating survivor benefits (J32) | work hours for women (J22) |