Wednesday, April 17, 2019

New paper: “Social Security Replacement Rates and Other Benefit Measures: An In-Depth Analysis”

The Congressional Budget Office has issued a comprehensive look at measuring “replacement rates” for Social Security, a measure that compares Social Security benefits to pre-retirement earnings and serves as an indicator of the adequacy of retirement benefits.

CBO’s paper might be a bit of a deep dive for those who haven’t looked at the issue before, and it doesn’t come out with a clear recommendation. But readers will at the least come to understand that how you measure retirement income adequacy is at least as important as the earnings and benefits that you measure.

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Tuesday, April 16, 2019

Upcoming event: “Can retirement plans provide safe income?” April 18

Running out of money in retirement is one of Americans’ greatest financial fears. Converting retirement saving balances into reliable income is one of the most complex financial decisions people must make. Most 401k and similar plans are not structured to provide lifetime income. Can retirement plans be reformed to provide safe income for the duration of retirees’ lives?

On Thursday, April 18, the Retirement Security Project at Brookings will host an event to explore ways to create lifetime income for people with 401k-type plans. Join Nobel laureate Richard Thaler and several other noted experts as they discuss new Brookings research.

Click here for more details.

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Friday, April 5, 2019

SSAB Technical Panel Meeting Agenda, April 12, 20919

2019 Technical Panel on Assumptions and Methods 
Meeting Agenda 
April 12th, 2019 

The meeting will be held in the offices of the Social Security Advisory Board: 400 Virginia Avenue SW, Suite 625, Washington DC 20024. 

Friday, April 12, 2019


  • 10:00am-11:30am Beneficiary and average benefit projections Office of the Chief Actuary, SSA 
  • 11:30am-12:30pm Labor force participation and employment projections Gary Burtless, Brookings Institution and member of the 2017 Labor Force Technical Panel 
  • 12:30pm-1:00pm Lunch 
  • 1:00pm-2:30pm Economic assumptions and methods: Interest rates, real wage growth components Louise Sheiner, Technical Panel member
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Friday, March 15, 2019

New issue brief: “How Much Would It Take?”

EBRI Issue Brief

How Much Would It Take? Achieving Retirement Income Equivalency Between Final-Average-Pay Defined Benefit Plan Accruals and Automatic Enrollment 401(k) Plans in the Private Sector

Feb 7, 2019, 22 pages

by Jack VanDerhei

Summary

  • A rapidly growing public policy concern facing the United States is whether future generations of retired Americans, particularly those in the Baby Boomer and Gen X cohorts, will have adequate retirement incomes. There have been several policy studies in recent years that suggest that the decreasing relevance of defined benefit (DB) plans relative to defined contribution plans (such as 401(k) plans) since the 1980s will have a negative impact on the percentage of future retirees who will achieve a specified level of retirement income adequacy.
  • Previous EBRI research reported on a comparative analysis of future benefits from private-sector, voluntary enrollment (VE) 401(k) plans and stylized, final-average-pay defined benefit plans.
  • The current research expands the previous research by computing the actual final-average DB accrual that would be required to provide an equal amount of retirement income at age 65 as would be produced by the annuitized value of the projected sum of the 401(k) and IRA rollover balances under automatic enrollment (AE) 401(k) plans.
  • Assuming historical rates of return as well as annuity purchase prices reflecting average bond rates over the period from 1986 to 2013, the analysis shows that:
  • For males, defined benefit “break-even” rates — or the percentage accrual rate that would be required in order for a DB plan to generate the same retirement income that is projected to come from 401(k) plan participation for a given worker cohort — are rarely less than 1.5 percent of final pay: in only 2 of the 16 combinations of wage quartiles and years of plan eligibility for males are defined benefit “break-even” rates less than 1.5 percent of final pay per years of service.
  • In the case of females, only 5 of the 16 combinations have “break-even” rates under 1.5 percent.
  • When these findings are subjected to the scrutiny of various “stress tests” both by reducing the rate of return assumptions by 200 basis points as well as utilizing current annuity purchase prices, results show that in many cases the AE 401(k) plans lose their comparative advantage to the stylized, final-average DB plans, especially for lower-paid employees as demonstrated by the lower “break-even” accrual rates.

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New Working Paper: “How Will Retirement Saving Change By 2050? Prospects for the Millennial Generation”

How Will Retirement Saving Change By 2050? Prospects for the Millennial Generation

William Gale, Hilary Gelfond and Jason Fichtner

WORKING PAPER*, MAR 15, 2019

We consider prospects for retirement saving for members of the millennial generation, who will be between ages 54 and 69 in 2050. Adequacy of retirement saving preparation among current and near-retirees is marked by significant heterogeneity, a characteristic that will likely hold for Millennials as well. In preparing for retirement, Millennials will have several advantages relative to previous generations, such as more education, longer working lives, and more flexible work arrangements, but also several disadvantages, including having to take more responsibility for their own retirement plans and marrying and bearing children at later ages. The millennial generation contains a significantly higher percentage of minorities than previous generations. We find that minority households have tended to accumulate less wealth than whites in the past, even after controlling for income, education, and marital status, and the difference appears to be growing over time for black households relative to whites. Whether these trends persist is central to understanding how the Millennials will fare in retirement.

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Friday, March 8, 2019

Urban Institute: “Has Society Gotten Older or Younger?”

Has Society Gotten Older or Younger?

Why Conventional Wisdom is Largely Wrong

C. Eugene Steuerle and Damir Cosic

February 27, 2019

Two powerful demographic processes—the falling birth rate and increasing life expectancy—are reshaping the US population. Longer life expectancy leads to a healthier population, greater capacity to work, and a more active lifestyle, but it also raises the share of the population over age 65—a traditional measure of population aging. This measure overstates aging problems and leads policymakers to misallocate government resources. We construct alternative population aging measures based on the share of the population whose life expectancy is less than a certain number of years. These measures indicate that the population is aging much more slowly than conventional measures indicate.

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Report: “Enhancing work incentives for older workers: Social Security and Medicare proposals to reduce work disincentives”

In “Enhancing Work Incentives for Older Workers: Social Security and Medicare Proposals to Reduce Work Disincentives” (PDF), Robert L. Clark and John B. Shoven offer three reform proposals that would remove the disincentives for Social Security beneficiaries to remain in the labor force. First, the authors consider the impact of eliminating the earnings test for participants between age 62, the early retirement age (ERA), and the full retirement age (FRA), which is currently 66 and 6 months but will increase to 67 by 2022. Second, they examine the effects of creating a paid-up status for Social Security, a point at which employees and employers would no longer be required to pay the payroll tax and earnings would not alter future benefits. Third, the authors offer a similar proposal for a paid-up status for Medicare, coupled with a policy shift for Medicare that would return the program to its original status as the primary payer for covered expenditures rather than its current status as the secondary payer.

Read the full paper here.

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