Emma Aguila

Changes in Consumption at Retirement: Evidence from Panel Data

Previous empirical literature has found a sharp decline in consumption during the first years of retirement, implying that individuals do not save enough for their retirement. This phenomenon is called the retirement consumption puzzle. We find no evidence of the retirement consumption puzzle using panel data from 1980 to 2000. Consumption is defined as nondurable expenditure, a more comprehensive measure than only food used in many of the previous studies. We find that food expenditure declines at retirement, which is consistent with previous studies.

Changes in Consumption at Retirement

Previous empirical literature has found a sharp decline in consumption during the first years of retirement implying that individuals do not save enough for their retirement. This phenomenon has been called the retirement consumption puzzle. In contrast to some of the previous studies, the authors find no evidence of the retirement consumption puzzle during the first years of retirement. Consumption is defined as nondurable expenditure, a more comprehensive measure than only food used in many previous studies. Food expenditure at retirement decreases. The latter could be explained by a reallocation of the budget shares after retirement to adjust to a new stage in the life cycle. These results suggest that food expenditure is not an accurate measure to test the Life Cycle Model.

Effects of income supplementation on health of the poor elderly: The case of Mexico

Significance Effects of income support on well-being and health of the poor elderly especially in low-income country settings is uncertain as experiments that increase incomes and evaluate their impacts on health among the elderly population are almost nonexistent around the world. In our experiment in the Mexican state of Yucatan, we find strong evidence that income supplements for the poor elderly in low- and middle-income settings can have significant health benefits even in the short run. Additional experiments should be conducted around the world as our experience indicates that these experiments are operationally feasible. We use an income supplementation experiment we designed in the state of Yucatan in Mexico for residents 70 y and older to evaluate health impacts of additional income. Two cities in the State of Yucatan, Valladolid (treatment) and Motul (control), were selected for the income supplementation experiment. Elderly residents of Valladolid were provided the equivalent of an additional

Health Status and Behavioral Risk Factors in Older Adult Mexicans and Mexican Immigrants to the United States

67 per month, a 44% increase in average household income. We designed a survey given to residents of both cities before and 6 mo after the income supplement about their health and other aspects of overall well-being. Both baseline and follow-up surveys collect self-reported data on health, physical functioning, and biomarkers. Anthropometric measurements for every age-eligible respondent, including height, weight, and waist circumference, were collected. We also collected lung capacity, grip strength, a series of balance tests, and a timed walk. Our results show significant health benefits associated with the additional income. Relative to the control site, there was a statistically significant improvement in lung function and an improvement in memory. These improvements are equivalent to a reduction in age of 5–10 y. Residents used their extra income to go to the doctor, buy their medications, and alleviate their hunger. The fear that this extra income could be undone by reduced transfers from other family members or unwise expenditures by the poor elderly appears to be unfounded.

Male labor force participation and social security in Mexico

Objectives: Investigate the “salmon-bias” hypothesis, which posits that Mexicans in the U.S. return to Mexico due to poor health, as an explanation for the Hispanic health paradox in which Hispanics in the United States are healthier than might be expected from their socioeconomic status. Method: Sample includes Mexicans age 50 years or above living in the United States and Mexico from the 2003 Mexican Health and Aging Study and the 2004 Health and Retirement Study. Logistic regressions examine whether nonmigrants or return migrants have different odds than immigrants of reporting a health outcome. Results: The salmon-bias hypothesis holds for select health outcomes. However, nonmigrants and return migrants have better health outcomes than immigrants on a variety of indicators. Discussion: Overall, the results of this study do not support the salmon-bias hypothesis; other explanations for the paradox could be explored.

Costs of Extending the Noncontributory Pension Program for Elderly: The Mexican Case

Labor-force participation among Mexican males in their early retirement years (60 to 64 years of age) has decreased in recent decades, from 94.6 percent in 1960 to 65.2 percent in 2010. Similar trends are evident elsewhere in Latin America, and have occurred in the developed world. Such trends pose challenges to financial sustainability of social security systems as working-age populations decrease and those in retirement increase both because of demographic trends and decisions to take early retirement. In this study, we find that the Mexican social security system provides incentives to retire early. The retirement incentives of the Mexican social security system affect retirement behavior, and may be one of the main contributors to early retirement decisions, particularly for lower-income populations. We simulated the effect of the reform from a Pay-As-You-Go (PAYG) to the new Personal Retirement Accounts (PRA) system and we find that the PRA system also provides incentives to early retirement. Further analysis is needed to assess the financial sustainability of the social security system and financial security in old age for the largest cohorts in Mexico that will begin to retire by 2040.

Pension Reform in Mexico: The Evolution of Pension Fund Management Fees and Their Effect on Pension Balances

ABSTRACT Population aging coupled with high poverty rates among older persons and a lack of access to social-security benefits or traditional support systems have led governments in low and middle-income countries to introduce non-contributory pension programs for the elderly. This article reviews a non-contributory pension program introduced in Mexico in 2007 that has since expanded greatly. We use a variety of sources to estimate current and future costs of this program.

Retirement Planning Among Hispanics: In God’s Hands?

In 1997 Mexico introduced Personal Retirement Accounts (PRAs) which, after a transition phase, will completely replace the pay-as-you-go (PAYG) system. We give a detailed overview of the relevant institutional framework, the market of PRA providers and how it has evolved since the 1997 reform. We use administrative data obtained from CONSAR, the regulatory agency of the PRA system to assess how pension fund management fees affect pension accumulations. We find that fees can drain up to a quarter of individuals’ pension savings.

Social Security Contributions and Return Migration Among Older Male Mexican Immigrants

ABSTRACT We conducted a qualitative study on retirement preparedness among middle-aged and older low-income Hispanics in Los Angeles. Data were derived from four focus groups conducted in the greater Los Angeles area. Findings demonstrate how behavioral and cultural factors—family experiences, religiosity, and denial of retirement—explain the lack of savings and preparedness for retirement. Findings also indicate that the majority of participants want to be economically independent and to keep working until they are unable to do so. Participants helped their parents financially but did not feel comfortable asking their own children for help. Instead, participants placed their survival in retirement “in God’s hands.”

Culturally Competent Informed-Consent Process to Evaluate a Social Policy for Older Persons With Low Literacy

For decades scholars have attempted to understand the effects of immigration on the U.S. Social Security system. To date, this research has been primarily limited to migrants in the U.S. and does not consider those who return to their countries of origin. Immigrants often pay OASDI taxes using illegitimate Social Security numbers and may return to their home countries without collecting U.S. Social Security benefits. In this study, we analyze the socioeconomic and labor characteristics, health, migration histories, and transitions to retirement of male Mexican return migrants who contributed to the U.S. Social Security system. Using the 2003 and 2012 Mexican Health and Aging Study (MHAS), we find that in 2012, 32 percent of male return migrants reported having contributed to the U.S. Social Security system but only five percent of those who contributed, received or expected to receive benefits. Those who reported having contributed were more likely to have completed college, spent more years in the U.S., and were more likely to be U.S. citizens or legal permanent residents than those who did not contribute. We also find that return migrants who spent one to nine years in the U.S. had a lower probability of transitioning to retirement between 2003 and 2012 than those had never been to the U.S. In contrast, those who spent 20 or more years in the U.S. had a higher probability of transitioning to retirement.