Trends in inequalities in the prevalence of dementia in the United States.

This paper presents estimates of the prevalence of dementia in the United States from 2000 to 2016 by age, sex, race and ethnicity, education, and a measure of lifetime earnings, using data on 21,442 individuals aged 65 y and older and 97,629 person-year observations from a nationally representative survey, the Health and Retirement Study (HRS). The survey includes a range of cognitive tests, and a subsample underwent clinical assessment for dementia. We developed a longitudinal, latent-variable model of cognitive status, which we estimated using the Markov Chain Monte Carlo method. This model provides more accurate estimates of dementia prevalence in population subgroups than do previously used methods on the HRS. The age-adjusted prevalence of dementia decreased from 12.2% in 2000 (95% CI, 11.7 to 12.7%) to 8.5% in 2016 (7.9 to 9.1%) in the 65+ population, a statistically significant decline of 3.7 percentage points or 30.1%. Females are more likely to live with dementia, but the sex difference has narrowed. In the male subsample, we found a reduction in inequalities across education, earnings, and racial and ethnic groups; among females, those inequalities also declined, but less strongly. We observed a substantial increase in the level of education between 2000 and 2016 in the sample. This compositional change can explain, in a statistical sense, about 40% of the reduction in dementia prevalence among men and 20% among women, whereas compositional changes in the older population by age, race and ethnicity, and cardiovascular risk factors mattered less.

Saving Regret and Procrastination.

In countries, where a substantial proportion of retirement income rests on savings, there is much concern that a sizeable fraction of the population reaches retirement with insufficient financial resources. We define saving regret as the wish in hindsight to have saved more earlier in life. We measured saving regret and possible determinants in a survey of U.S. households in which respondents were aged 60-79. We find high levels of saving regret, affirmed by some 58%. Saving regret exhibits significant and plausible correlations with personal characteristics and wealth: Married, older, healthier and wealthier respondents are less likely to report saving regret, suggesting the measure's validity. We find only weak evidence for correlations between saving regret and measures of procrastination: persons with traits associated with procrastination express saving regret about as often as those without those traits.

The Age Profile of Life Satisfaction After Age 65 in the U.S.

Although income and wealth are frequently used as indicators of well-being, they are increasingly augmented with subjective measures such as life satisfaction to capture broader dimensions of the well-being of individuals. Based on large surveys of individuals, life satisfaction in cross-section often is found to increase with age beyond retirement into advanced old age. It may seem puzzling that average life satisfaction does not decline at older ages because older individuals are more likely to experience chronic or acute health conditions, or the loss of a spouse. Accordingly, this empirical pattern has been called the "paradox of well-being." We examine the age profile of life satisfaction of the U.S. population age 65 or older in the Health and Retirement Study (HRS), and find that in cross-section it increases between age 65 and 71 and is flat thereafter; but based on the longitudinal dimension of the HRS, life satisfaction significantly declines with age and the rate of decline accelerates with age. We reconcile the cross-section and longitudinal measurements by showing that both differential mortality and differential non-response bias the cross-sectional age profile upward: individuals with higher life satisfaction and in better health tend to live longer, and, among survivors, individuals with higher life satisfaction are more likely to remain in the survey, masking the decline in life satisfaction experienced by individuals as they age. We conclude that the optimistic view about increasing life satisfaction at older ages based on cross-sectional data is not warranted.

Distribution of lifetime nursing home use and of out-of-pocket spending.

Reliable estimates of the lifetime risk of using a nursing home and the associated out-of-pocket costs are important for the saving decisions by individuals and families, and for the purchase of long-term care insurance. We used data on up to 18 y of nursing home use and out-of-pocket costs drawn from the Health and Retirement Study, a longitudinal household survey representative of the older US population. We accumulated the use and spending by individuals over many years, and we developed and used an individual-level matching method to account for use before and after the observation period. In addition, for forecasting, we estimated a dynamic parametric model of nursing home use and spending. We found that 56% of persons aged 57-61 will stay at least one night in a nursing home during their lifetimes, but only 32% of the cohort will pay anything out of pocket. Averaged over all persons, total out-of-pocket expenditures looking forward from age 57 were approximately $7,300, discounted at 3% per year. However, the 95th percentile of spending was almost $47,000. We conclude that the percentage of people ever staying in nursing homes is substantially higher than previous estimates, at least partly due to an increase in nursing home episodes of short duration. Average lifetime out-of-pocket costs may be affordable, but some people will incur much higher costs.

Reducing cross-wave variability in survey measures of household wealth.

Survey measures of household wealth often incorporate measurement error. The resulting excess variability in the first difference in wealth makes meaningful statistical inference difficult on changes in household-level wealth. We study the effects of two methods intended to reduce this problem: Asset verification confronts respondents with large discrepancies between wealth reports from the current wave and from the previous wave. Cross-wave imputation uses adjacent wave information in the imputation procedures for missing data. In the U.S. Health and Retirement Study, the corrections from asset verification substantially reduced wave-to-wave changes in wealth. The cross-wave imputations also reduced variation, but to a lesser extent.

Trends in Health in Midlife and Late Life.

Gains in life expectancy have recently slowed and mortality inequalities have increased. This paper examines whether trends in health observed at ages 55 to 89 mirror those trends in mortality, which may serve as an early indicator for the future evolution of mortality. We found that many health outcomes have worsened from 1992 to 2016, especially at ages below 70, and that differentials in health between low and high education groups have increased among the more recent cohorts. Overall the findings cast a pessimistic light on the future evolution of mortality rates and mortality inequalities.

Forecasting mortality inequalities in the U.S. based on trends in midlife health.

Recent literature has documented a widening gap in mortality between older individuals of high versus low socioeconomic status (SES) in the U.S. This paper investigates whether this trend will continue. We analyze the health status of successive cohorts of 54-60-year-old U.S. individuals born between 1934 and 1959 and use a rich set of health indicators to forecast life expectancies. The detailed health measures come from the longitudinal Health and Retirement Study. We find that many health indicators have worsened recently. For example, rates of obesity, diabetes, and self-reported levels of pain sharply increased between 1992 and 2016. Directly relevant for mortality, recent cohorts report lower subjective survival probabilities. Using Social Security wealth as an SES indicator, we find strong evidence for increasing health inequalities. We predict overall life expectancy to increase further; but the increase will be concentrated among higher SES individuals and mortality inequality will continue to increase.

Households' joint consumption spending and home production responses to retirement in the US.

We analyze the effect of retirement on households' joint consumption spending and home production decisions using a micro panel with detailed spending and time use categories of US households. For causal identification, we use panel data regressions. Our results suggest that the spending drop at retirement is partially compensated by increases in home production of the retiring household member. Home production can particularly make up for losses in spending categories that are well-substitutable by home production, although only about 12% of total pre-retirement consumption spending, but there is no evidence that households fully replace consumption spending at retirement. In a Life-Cycle Model, we find no empirical evidence for full consumption smoothing at retirement.

The Effects of Job Characteristics on Retirement.

Along with data about actual, desired and anticipated job characteristics, this paper uses a novel data element, the subjective conditional probability of working at age 70, to estimate the causal effects of job characteristics on retirement in the U.S. Having flexible work hours is the most consistent predictor of retirement preferences and expectations: if all current workers had flexible hours, the fraction working at age 70 would be 0.322, but it would be just 0.172 if none had this option. Job stress, physical and cognitive job demands, the option to telecommute, and commuting times were additional predictors of retirement expectations.

Mental Retirement.

Some studies suggest that people can maintain their cognitive abilities through "mental exercise." This has not been unequivocally proven. Retirement is associated with a large change in a person's daily routine and environment. In this paper, we propose two mechanisms how retirement may lead to cognitive decline. For many people retirement leads to a less stimulating daily environment. In addition, the prospect of retirement reduces the incentive to engage in mentally stimulating activities on the job. We investigate the effect of retirement on cognition empirically using cross-nationally comparable surveys of older persons in the United States, England, and 11 European countries in 2004. We find that early retirement has a significant negative impact on the cognitive ability of people in their early 60s that is both quantitatively important and causal. Identification is achieved using national pension policies as instruments for endogenous retirement.

Does home production replace consumption spending? Evidence from shocks in housing wealth in the Great Recession.

Becker's theory of home production suggests substitutability between consumption spending and home production. Using panel data with detailed information on spending and time use, we analyze house-holds' ability to replace consumption spending by home produced counterparts. Keeping wages fixed and changing lifetime resources by the shock to housing wealth during the Great Recession we estimate an elasticity of substitution that is consistent with a Life-Cycle Becker model. However, we estimate that only about 11% of total spending is replaceable by home production, which, in contrast to prior literature, makes it unlikely that home production fully mitigates the consequences of wealth shocks to well-being.

The Relationship Between Lifetime Out-of-pocket Medical Expenditures, Dementia, and Socioeconomic Status in the U.S.

Dementia is one of the most expensive medical conditions. The costs are borne by families, by private insurance and by society via public programs such as Medicaid in the U.S.. There is extensive research on the relationship between dementia and annual medical spending. This paper, instead, estimates cumulative lifetime medical expenditures that can be attributed to the onset of dementia using a nationally representative longitudinal survey from the U.S., the Health and Retirement Study. The lifetime expenditures are estimated by summing any out-of-pocket medical spending reported in the panel from age 65 to death. Censored cases are imputed using a non-parametric matching algorithm called splicing. For example, survivors to the most recent wave are matched to similar individuals from older cohorts who are observed at the relevant ages all the way through death. We find that those who live with dementia for at least half a year pay, on average, $38,540 more out of pocket from age 65 to death when controlling for length of life, demographics, lifetime earnings and comorbidities. The costs of dementia are almost exclusively due to spending on nursing homes. Spending on drugs, doctor visits or hospitals, is not significantly related to dementia. The lifetime costs of dementia are significantly larger for white and rich individuals, perhaps because they use higher quality nursing homes and because they have more financial resources to spend down before becoming eligible for Medicaid support.

The Effect of Housing Wealth Losses on Spending in the Great Recession.

We use panel data on a complete inventory of household spending and assets to estimate the spending response to the sharp and largely unexpected declines in house values that occurred in the Great Recession. Our study complements the existing literature on this topic by relying exclusively on longitudinal micro data on both household wealth and expenditure. Our data span the period 2002-2012, allowing us to separate trends in spending from innovations in response to unexpected wealth changes. We find the marginal propensity to consume out of an unexpected housing wealth change to be six cents per dollar among older American households.

Dementia Prevalence in the United States in 2000 and 2012: Estimates Based on a Nationally Representative Study.

Objectives: Age- and sex-specific rates of dementia are estimated in the U.S. population aged 65 or older in 2000 and 2012 using a large nationally representative dataset, the Health and Retirement Study (HRS), and accounting for mortality selection and specificities of the interview protocol. Method: A latent cognitive ability model is estimated by maximum simulated likelihood. Prevalence of dementia is identified using HRS cognition measures and the Aging, Demographics and Memory Study (ADAMS), a subset of the HRS (n = 856) with clinical assessment for dementia. Different cognitive measures are collected in self and proxy interviews. From 2006 onward, the HRS collected fewer interviews by proxy. Selection into proxy interviews is modeled as well as survival into the ADAMS sample from the previous HRS interview. Results: The prevalence of dementia decreased from 12.0% (SE = 0.48%) in 2000 to 10.5% (SE = 0.49%) in 2012 in the 65+ population, a statistically significant decline of 12.6% (p < .01). The percentage change in prevalence was larger among males (16.6% vs 9.5%), and younger individuals. Discussion: The prevalence of dementia among those 65 or older decreased between 2000 and 2012, although less rapidly than reported in other studies. The difference is primarily due to our modeling selection into proxy interviews.

Changes in Spending and Labor Supply in Response to a Social Security Benefit Cut: Evidence from Stated Choice Data.

We investigate how individuals in the U.S. expect to adjust their labor force participation and savings if Social Security benefits were cut by 30 percent. Respondents were asked directly what they would do under this scenario. Using the resulting stated choice data we find that respondents would on average reduce spending by 18.2 percent before retirement and 20.4 percent after retirement. About 34.1% of respondents state they would definitely work longer and they would postpone claiming Social Security by 1.1 years. We investigate how working longer and claiming Social Security later would compensate partially for the loss in benefits among the individuals who are currently working, under the assumption that individuals retire and claim at the same time. Individuals would increase their Social Security benefits from the post-reform level due to additional earnings entering the benefit calculation and a smaller early claiming penalty (or higher delayed claiming credit). As a result, the Social Security benefit people would receive would drop on average by 21 rather than 30 percent. Still, the net financial loss, even after accounting for additional earnings, is sizeable for individuals in the lowest wealth tertile.

Personality and Employment Transitions at Older Ages: Direct and Indirect Effects through Non-Monetary Job Characteristics.

We study whether individuals with different personality traits systematically exhibit different retirement trajectories. We find weak direct associations between personality and employment transitions. On the other hand, personality does contribute indirectly to these transitions by moderating the effects of non-monetary job characteristics. Specifically, workers with different traits are observed to follow different retirement paths when faced with similar physical demands, computer skills requirements, job flexibility and age discrimination in the workplace. Contrary to other economic domains, conscientiousness does not have the strongest association with retirement; the other components of the Big Five personality traits show more salient patterns.

How Do Management Fees Affect Retirement Wealth under Mexico's Personal Retirement Accounts System?

In 1997, Mexico transformed its pay-as-you-go social security system to a fully funded system with personal retirement accounts, including management fees. This article examines changes in retirement wealth resulting from this new system. It shows that management fees have drained a significant proportion of individuals' retirement wealth and have increased the number of persons claiming a government-subsidized minimum pension, particularly from the time the system was introduced in 1997 until adjustment to management fees in 2008. Since 2008, retirement wealth accumulation has been similar to that of the previous system. En 1997, México transformó su sistema de pensiones basado en cotizaciones individuales a uno de ahorro para el retiro que incluyen cuotas por la administración de las cuentas. El presente estudio examina los cambios en el monto de las pensiones como resultado de la introducción del nuevo sistema. Los resultados muestran que las cuotas de administración han drenado una proporción significativa del ahorro para el retiro de los individuos por lo que ha aumentado el número de personas que solicita la pensión mínima garantizada subsidiada por el gobierno desde que se introdujo el sistema en 1997 hasta que se hicieron ajustes en las cuotas de administración de los fondos de pensiones en 2008. A partir de 2008, la acumulación del ahorro para el retiro ha sido similar que la del sistema anterior.

Heterogeneity in spending change at retirement.

The simple one-good model of life-cycle consumption requires that consumption be continuous over retirement; yet prior research based on partial measures of consumption or on synthetic panels indicates that spending drops at retirement, a result that has been called the retirement-consumption puzzle. Using panel data on total spending, nondurable spending and food spending, we find that spending declines at small rates at retirement, rates that could be explained by mechanisms such as the cessation of work-related expenses, unexpected retirement due to a health shock or by the substitution of time for spending. We find substantial heterogeneity in spending change at retirement: in the upper half of the wealth distribution spending increased. In the low-wealth population where spending did decline at higher rates, the main explanation for the decline appears to be early retirement due to poor health, possibly augmented by a short planning horizon by a minority of the population.

The Displacement Effect of Public Pensions on the Accumulation of Financial Assets.

The generosity of public pensions may depress private savings and provide incentives to retire early. While there is plenty of evidence supporting the latter effect, there remains considerable controversy whether public pensions crowd out private savings. This paper uses international micro-datasets collected over recent years to investigate whether public pensions displace private savings. The identification strategy relies not only on cross-country differences in generosity but also on differences in the progressivity or non-linearity of pension formulas across countries. We estimate that an extra dollar of pension wealth depresses accumulated financial assets around the time of retirement by 22 cents. An extra ten thousand dollars in public pension wealth reduces the average retirement age by roughly one month which implies an elasticity of retirement years with respect to pension wealth of -0.15.

Measurement error in earnings data: Using a mixture model approach to combine survey and register data.

Survey data on earnings tend to contain measurement error. Administrative data are superior in principle, but they are worthless in case of a mismatch. We develop methods for prediction in mixture factor analysis models that combine both data sources to arrive at a single earnings figure. We apply the methods to a Swedish data set. Our results show that register earnings data perform poorly if there is a (small) probability of a mismatch. Survey earnings data are more reliable, despite their measurement error. Predictors that combine both and take conditional class probabilities into account outperform all other predictors.