Friday, September 20, 2019

New paper: “Promoting Economic Growth through Social Security Reform”

From Marc Goldwein, Maya MacGuineas and Chris Towner of the Committee for a Responsible Federal Budget.

Here’s the summary, but you can read the full paper here.

Summary of Recommendations for Pro-Growth Social Security Reform

Recommendation #1: Increase the Retirement Ages while Insulating Vulnerable Workers with an Age 62 Poverty Protection Benefit (62-PPB). One way to increase the size of the economy is to promote work among older Americans. Workers today face mixed retirement signals that often draw them into early retirement and treat retirement itself as a binary choice. To encourage longer and more flexible working lives, we propose phasing in an increase to Social Security’s early and normal retirement ages and then indexing them to growth in life expectancy. Understanding that many workers are unable to continue to work, we also propose offering all workers a 62-PPB benefit designed to insulate low-income workers from the financial effects of the age increases and ensure that anyone can retire at 62 without slipping into poverty.

Recommendation #2: Calculate Benefits Based on Each Year of Work Rather than Lifetime 35-Year Average Earnings. Higher labor force participation among workers of all ages can help to strengthen the economy. Yet the current Social  Security benefit formula imposes a significant implicit tax on those who work less than ten years and on workers later in their careers – especially after 35 years of work. To reward each year of work, we propose counting every year of earnings toward Social Security benefits and applying Social Security’s benefit formula to annual, rather than average, earnings through a formula known as “mini-PIA.”

Recommendation #3: Automatically Enroll Workers into a “Supplemental Retirement Account” (SRA) on top of Social Security, with the Choice to Opt Out. Increasing the national savings rate would boost overall investment, increasing capital stock and economic growth. Unfortunately, many workers lack access to retirement savings vehicles, or are saving too little for retirement. To increase savings and investment, we recommend enrolling workers into add-on SRAs and automatically contributing 2 to 3 percent of their wages unless a worker chooses to discontinue contributions. SRAs could be invested into one of several well-diversified, low-fee funds and would be owned by the worker, who could access the funds upon retirement.

Recommendation #4: Make Social Security Sustainably Solvent Through a Combination of Progressive Tax and Benefit Changes. Reducing federal borrowing can promote economic growth by reducing “crowd out” of private investment, while improving policy certainty can significantly improve saving and investment choices. Unfortunately, Social Security is running large and rising deficits, which increase federal debt and leave the program on course to exhaust its trust fund reserves by 2035. To make the program sustainably solvent, we suggest a package of progressive revenue and benefit adjustments that would protect low-income seniors, phase in gradually, and ultimately bring the program’s costs and revenues in line. We also suggest that the precise composition of this package be decided as part of a political negotiation.

We also suggest lawmakers consider other pro-growth reforms – as part of and to supplement Social Security reform – in order to maximize potential growth effects.

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Tuesday, September 17, 2019

Social Security Advisory Board announces meeting to review the 2019 Technical Panel final report

On Friday, September 27th the Social Security Advisory Board ("Board") will host a public meeting to review the 2019 Technical Panel on Assumptions and Methods' ("Technical Panel") report to the Board. The Board convened the independent, expert panel to review the assumptions and methods used to develop the annual report of the Social Security Trustees on the financial status of the Old-Age, Survivors, and Disability Insurance trust funds. The 2019 Technical Panel is the sixth quadrennial panel the Board has commissioned since 1999.

The 2019 Technical Panel is comprised of experts in the fields of demography, economics and actuarial science. The report reflects solely the views of the Technical Panel. The Board convened the Technical Panel, as well as past panels, in the hope that the work provides an important service to the public—an outside and expert review of the methods used to project Social Security financing.

The meeting will be held from 10:30 AM – 12:30 PM in Room 215, Dirksen Senate Office Building at 50 Constitution Avenue NE, Washington, DC 20002. Please email events@ssab.gov to RSVP if you plan to attend. The report will be available in electronic format only and will be posted on the Board’s website at least 48 hours in advance of the meeting.

Read the full announcement

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Monday, September 16, 2019

Savings and Retirement Foundation with Guest Sandy Mackenzie

Savings and Retirement Foundation

For a Lunch Meeting with Guest Speaker:

Sandy Mackenzie,

Founding editor

Journal of Retirement

September 24th, 2019

Noon-1:00 p.m.

RSVP

The Tax Foundation

1325 G Street NW

Washington DC 

Sandy Mackenzie is the founding editor of the Journal of Retirement and an experienced economic consultant and editor with a demonstrated history of working in non-profits, editorial supervision and economic policy, with an emphasis on fiscal policy. He has substantial experience with nonprofit organizations and skilled in the economics and finances of retirement, lecturing on fiscal, monetary and retirement issues, writing, and policy analysis. He holds a Master of Philosophy  in Economics from Oxford University.

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Thursday, September 12, 2019

CBO’s 2019 Long-Term Projections for Social Security: Additional Information

In lieu of publishing a separate report providing additional information about CBO’s long-term projections for Social Security, the agency is publishing the data that it would have presented in that report.

View Document

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Thursday, August 29, 2019

Social Security Bulletin, Vol. 79, No. 3

Released August 2019.

Download entire publication

The Social Security Windfall Elimination Provision: Issues and Replacement Alternatives

by Glenn R. Springstead

The Windfall Elimination Provision (WEP) reduces the Social Security benefits of individuals who would otherwise receive a full benefit based on earnings in Social Security–covered employment as well as pension income from noncovered employment. Since the WEP was established in 1983, critics have asserted that it overcorrects the would-be windfall for affected beneficiaries and is difficult to administer. This article considers two WEP replacement options that would modify the benefit calculation methodology. It compares the current WEP with the two options and discusses some of the possible effects of changing the current law.

Social Security Disability Insurance and Supplemental Security Income Beneficiaries with Multiple Impairments

by Elisa Walker and Emily Roessel

This article uses data from the Social Security Administration's National Beneficiary Survey and agency administrative records to estimate the number and examine the characteristics of adult disability-program beneficiaries with multiple impairments. In the survey, most beneficiaries report conditions in more than one impairment category. Beneficiaries with multiple impairments tend to have more activity limitations and poorer health than those reporting one impairment. They also tend to be older and to have higher household incomes than those with one impairment, and are less likely to have work-related goals and expectations. Administrative data contain fewer impairments per beneficiary and do not necessarily reflect the condition(s)that the beneficiary considers most limiting. Administrative data are complete for their purpose, but they may underrepresent the totality of disability that beneficiaries experience, and thus may be less predictive of employment and other outcomes than survey data.

The Time Between Disability Onset and Application for Benefits: How Variation among Disabled Workers May Inform Early Intervention Policies

by Matt Messel and Alexander Strand

This article examines how much time typically passes between disability onset and application for disability-program benefits, by age at onset and diagnosis. Among eventual applicants, certain subgroups might be suitable targets for employment-support interventions. Using Social Security administrative data, the authors find that the median period from onset to application is 7.6 months. Younger applicants tend to have waited longer, particularly those diagnosed with back impairments or arthritis. Among both younger and older applicants, individuals diagnosed with intellectual disability or other mental disorders are potential targets for early intervention programs because those groups wait the longest to apply and are the most likely to continue working in the interim.

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Tuesday, August 27, 2019

New paper: “The Effects of Differential Income Replacement and Mortality on U.S. Social Security Redistribution”

The Effects of Differential Income Replacement and Mortality on U.S. Social Security Redistribution

By Li Tan and Cory Koedel

PDF:

PDF icon WP 17-01

WORKING PAPER NUMBER:

ABSTRACT:

We study redistribution via the United States Social Security retirement system for cohorts of men born during the second half of the 20th century. Our focus is on redistribution across race and education groups. The cohorts we study are younger than cohorts studied in previous, similar research and thus more exposed to recent increases in earnings inequality. All else equal, this should increase the degree of progressivity of Social Security redistribution due to the structure of the benefit formula. However, we find that redistribution is only modestly progressive for individuals born as late as 1980. Differential mortality rates across race and education groups are the primary explanation. While black-white mortality gaps have narrowed some in recent years, they remain large and dull progressivity. Mortality gaps by education level are also large and unlike the gaps by race, they are widening, which puts additional regressive pressure on Social Security redistribution.

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New paper from the NBER: “Using Vignettes to Improve Understanding of Social Security and Annuities”

Using Vignettes to Improve Understanding of Social Security and Annuities

By Anya Samek, Arie Kapteyn, and Andre Gray #26176

Abstract:
Evidence shows that people have difficulty understanding complex aspects of retirement planning, which leads them to under-utilize annuities and claim Social Security benefits earlier than is optimal. To target this problem, we developed vignettes about the consequences of different annuitization and claiming decisions. We evaluated our vignettes using an experiment with a representative online panel of nearly 2,000 Americans. In our experiment, respondents were either assigned to a control group with no vignette, to a written vignette, or to a video vignette. They were then asked to give advice to hypothetical persons on annuitization or Social Security claiming, and were asked factual questions about these concepts. We found evidence that being exposed to vignettes led respondents to give better advice. For example, the gap between advised claim age for a relatively healthy person versus a relatively sick person was larger by nearly a year in the vignette treatments versus! the control group. Further, the vignettes increased financial literacy related to these concepts by 10-15 percentage points. Interestingly, the mode of communication did not have a significant impact – the video and written vignettes were equally effective.

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