How Family Status and Social Security Claiming Options Shape Optimal Life Cycle Portfolios

50 Pages Posted: 11 Jan 2014

See all articles by Andreas Hubener

Andreas Hubener

Goethe University Frankfurt

Raimond Maurer

Goethe University Frankfurt - Finance Department

Olivia S. Mitchell

University of Pennsylvania - The Wharton School; University of Pennsylvania - The Wharton School, Pension Research Council; National Bureau of Economic Research (NBER)

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Date Written: October 1, 2013

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 claiming, retirement planning, retirement savings, life insurance

Suggested Citation

Hubener, Andreas and Maurer, Raimond and Mitchell, Olivia S., How Family Status and Social Security Claiming Options Shape Optimal Life Cycle Portfolios (October 1, 2013). Michigan Retirement Research Center Research Paper No. 2013-293, Available at SSRN: https://ssrn.com/abstract=2376497 or http://dx.doi.org/10.2139/ssrn.2376497

Andreas Hubener

Goethe University Frankfurt ( email )

Grüneburgplatz 1
Frankfurt am Main, 60323
Germany

Raimond Maurer (Contact Author)

Goethe University Frankfurt - Finance Department ( email )

Theodor-W.-Adorno-Platz 3
House of Finance
Frankfurt, 60323
Germany

Olivia S. Mitchell

University of Pennsylvania - The Wharton School ( email )

Philadelphia, PA 19104-6365
United States

University of Pennsylvania - The Wharton School, Pension Research Council ( email )

3302 Steinberg Hall-Dietrich Hall
3620 Locust Walk
Philadelphia, PA 19104-6302
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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