Yoonkyung Yuh

Determinants of planned retirement age

Abstract Determinants of planned retirement age are analyzed. The prediction equation indicates that planned retirement age increases substantially as people get older, and increases somewhat with higher noninvestment income. Social Security reform should recognize that the capacity to continue working and the ability to afford to retire both influence the age at which people plan to retire. The range of planned retirement ages suggests that research on the adequacy of retirement preparation should focus on planned retirement age. Financial planners should consider the finding that planned retirement age increases with age.

Mean and pessimistic projections of retirement adequacy

Abstract Retirement adequacy is estimated using a 1995 United States sample of households. Based on mean lognormal portfolio projections and current contribution rates, 52% of households are adequately prepared for retirement. Based on pessimistic projections, only 42% of households are adequately prepared. A regression of the ratio of projected wealth to needs at retirement shows that adequacy increases with stock share (mean projection) and the impact increases with time until retirement. With pessimistic projections, there is no significant relationship between stock share and the adequacy ratio. Planned retirement age and household spending behavior are each significantly related to the adequacy ratio.

Financial Ratio Analysis of Korean Households

The purpose of this study is to explore the usefulness and limitations of six family financial ratio guidelines developed in the United States in assessing the financial situation of households in South Korea. The ratios examined are debt safety, debt service, solvency, liquidity, savings, and capital accumulation. Guidelines for the first three ratios tend to be enforced by lenders and have similar patterns in both countries, but Korean households are much more likely to meet savings and liquidity guidelines than are U.S. households, and are much less likely to meet the capital accumulation guideline. Multivariate logistic regression analyses show complex patterns of effects of demographic variables on whether Korean households meet each guideline. In four out of six logistic regressions, having a graduate or professional degree has a negative effect on meeting the guideline, raising questions about the appropriateness of the guidelines.

Homeownership and Financial Strain Following the Collapse of the Housing Market: A Comparative Study on Loan Delinquencies Between Black and White Households

The objectives of this study were to evaluate the extent to which homeownership contributed to household financial strain as measured by loan delinquency after the onset of the recent housing market crash, and to examine if the impact of homeownership on household financial strain differed for Black and White households. Using data from the 2010 Survey of Consumer Finances, we found that, after controlling for other factors, a households housing preferences had a potential effect on the likelihood of experiencing financial strain following the collapse of residential housing prices. In addition, Black homeowners were more likely to have experienced financial strain following the housing collapse than were White homeowners, regardless of the time period in which the home was purchased. The implications of the findings for public policy, personal financial planning and education, and further research are presented.

Private Pensions Demand of Korean and U.S. Households

Abstract Using the most recent dataset of Korea and U.S. household finance, this study analyzed demand and adequacy of private pensions for pre-retirees. For this purpose, 2013 Korean Retirement and Income Study (KReIS) of national pension research institute in Korea and 2013 SCF (Survey of Consumer Finances) of FRB in U.S. were used. For comprehensive comparisons of the two countries, this study classified the private pension into sub-categories such as personal pension, corporate pension, and retirement benefits , and used three different criteria including ownership, accumulated present value of each pension, and income replacement ratio of each pension. After controlling for other factors, educational level of householder and household income were critical determinants of size and adequacy of private pension in both countries. Different from Korean househ olds, householders’ gender, marital status, and health status had an important effect on the private pension size and adequacy in the U.S. In addition, home ownership significantly increased only private pension adequacy in Korea, and also increased ownership rate, size, and adequacy of private pension in the U.S. Results of this study provide us eful implications for future pension system and policy in Korea.

Optimal annuity planning and longevity risk: evidence from Korea

This study examines annuity planning using an optimization framework. An optimization problem is formulated with the objective of maximizing the lifetime utility of consumption and bequestable wealth, and benchmark cases for Korean households are applied. We extend the optimization model suggested in Gupta and Li (2007) by incorporating realistic constraints, such as installment premium contracts, deferred annuity payments and the possibility of borrowing. Further, we have considered a variety of longevity cases. The results confirmed that an annuity is an effective tool for managing longevity risk, and annuitization timing is crucial for the maximization of lifetime utility.