TY - JOUR
T1 - Social security benefit valuation, risk, and optimal retirement
AU - Ali, Yassmin
AU - Fang, Ming
AU - Sota, Pablo A.Arrutia
AU - Taylor, Stephen
AU - Wang, Xun
N1 - Publisher Copyright:
© 2019 by the authors. Licensee MDPI, Basel, Switzerland.
PY - 2019/12
Y1 - 2019/12
N2 - We develop valuation and risk techniques for the future benefits of a retiree who participates in the American Social Security program based on their chosen date of retirement, the term structure of interest rates, and forecasted life expectancy. These valuation methods are then used to determine the optimal retirement time of a beneficiary given a specific wage history and health profile in the sense of maximizing the present value of cash flows received during retirement years. We then examine how a number of risk factors including interest rates, disease diagnosis, and mortality risks impact benefit value. Specifically, we utilize principal component analysis in order to assess both interest rate and mortality risk. We then conduct numerical studies to examine how such risks range over distinct income and demographic groups and finally summarize future research directions.
AB - We develop valuation and risk techniques for the future benefits of a retiree who participates in the American Social Security program based on their chosen date of retirement, the term structure of interest rates, and forecasted life expectancy. These valuation methods are then used to determine the optimal retirement time of a beneficiary given a specific wage history and health profile in the sense of maximizing the present value of cash flows received during retirement years. We then examine how a number of risk factors including interest rates, disease diagnosis, and mortality risks impact benefit value. Specifically, we utilize principal component analysis in order to assess both interest rate and mortality risk. We then conduct numerical studies to examine how such risks range over distinct income and demographic groups and finally summarize future research directions.
KW - Pension risk
KW - Principal component analysis
KW - Social security
UR - http://www.scopus.com/inward/record.url?scp=85077275000&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=85077275000&partnerID=8YFLogxK
U2 - 10.3390/risks7040124
DO - 10.3390/risks7040124
M3 - Article
AN - SCOPUS:85077275000
VL - 7
JO - Risks
JF - Risks
IS - 4
M1 - 124
ER -