Pang, Gaobo

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  • Publication
    The Retirement Decision: Current Influences on the Timing of Retirement among Older Workers
    (2008-02-01) Pang, Gaobo; Warshawsky, Mark; Weitzer, Ben
    This paper investigates the influences on retirement behavior among older workers who were surveyed by the Health and Retirement Study (1992-2004). It is found that increases in all categories of wealth (pension, housing equity and other financial wealth) raise the probability of retiring, while good earnings prospects induce continued employment. Retirement plan types have significant impacts: workers covered by defined benefit (DB) plans are more likely to retire, while the defined contribution (DC) plan coverage significantly delays retirement. Furthermore, the probability and thus timing of retirement for DC plan participants are susceptible to the influence of business cycles through income flow fluctuations that are due to investment performance and interest rate changes. Health insurance (HI), if conditional on employment, strongly defers retirement, while alternative sources of insurance such as employer-sponsored retiree HI, spouse’s HI, public HI or COBRA coverage, encourages labor force exit. The scheduled increases in the full retirement age for Social Security act to encourage younger cohorts to work longer.
  • Publication
    Optimizing the Equity-Bond-Annuity Portfolio in Retirement: The Impact of Uncertain Health Expenses
    (2008-03-01) Pang, Gaobo; Warshawsky, Mark
    This paper derives optimal equity-bond-annuity asset portfolios for households in the retirement phase who, with or without a bequest motive, face stochastic capital market returns, have differential exposures to mortality risk and uncertain uninsured health expenses, and have differential Social Security and defined benefit pension coverage. The numerical results show that the presence of health spending risk drives households to shift their portfolios from risky equities to safer assets and works to enhance the demand for annuities due to their increasingwith-age superiority over bonds as a hedge against life-contingent health spending as well as longevity risks. The safe and higher-return annuities in turn provide a greater leverage for equity investment in the remaining asset portfolios. This health-spending-uncertainty-enhanced optimal annuitization result is compatible with the broader theory about liquidity constraints and precautionary savings.