Saturday, October 18, 2014

Social Security COLA Likely 1.6-1.8%

The Associated Press reports on the Cost of Living Adjustment Social Security beneficiaries are likely to receive in January. The COLA will be announced this Wednesday, but the AP estimates an increase of less than 2 percent, which amounts to about $20 per month for the typical beneficiary. Read more here.

 

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Wednesday, October 15, 2014

New paper from the NBER

The Great Recession, Decline and Rebound in Household Wealth for the Near Retirement Population

Alan L. Gustman, Thomas L. Steinmeier, Nahid Tabatabai

NBER Working Paper No. 20584
Issued in October 2014
NBER Program(s):   AG LS PE

This paper uses data from the Health and Retirement Study to examine the effects of the Great Recession on the wealth held by the near retirement age population from 2006 to 2012. For the Early Boomer cohort (ages 51 to 56 in 2004), real wealth in 2012 remained 3.6 percent below its 2006 value. This is a modest decline considering the fall in asset values during the Great Recession.

Much of the decline in wealth over the 2006 to 2010 period was cushioned by wealth originating from Social Security and defined benefit pensions. For the most part, these are stable sums that ensured a major fraction of total wealth did not decline as a result of the recession.

The rebound in asset values observed between 2010 and 2012 mitigated, but did not erase, the asset losses experienced in the first years of the Great Recession.

Effects of the Great Recession varied with the household’s initial wealth. Those who were in the highest wealth deciles typically had a larger share of their assets subject to the influence of declining markets, and were hurt most severely. Unlike those falling in lower wealth deciles, they have yet to regain all the wealth they lost during the recession.

Recovering losses in assets is only part of the story. The assets held by members of the cohort nearing retirement at the onset of the recession would normally have grown over ensuing years. Members of older HRS cohorts accumulated assets rapidly in the years just before retirement. Those on the cusp of retiring at the onset of the recession would be much better off had they had enjoyed similar growth in assets as experienced by members of older cohorts.

The bottom line is that the losses in assets imposed by the Great Recession were relatively modest. The recovery has helped. But much of the remaining penalty due to the Great Recession is in the failure of assets to grow beyond their initial levels.

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Friday, October 10, 2014

Upcoming event: “Social Security: What Americans Want and Are Willing to Pay For”

National Academy of Social Insurance

Social Security: What Americans Want and Are Willing to Pay For

October 23, 2014, 10:00 am — 11:45 am

Carnegie Endowment for International Peace
1779 Massachusetts Avenue, NW
Choate Room
Washington, DC 20036
United States

With lawmakers considering future changes to Social Security, it’s important to know what their constituents want — across political parties, generations, and income levels. Join the National Academy of Social Insurance for the release of a groundbreaking new public opinion study.

Social Security faces a long-term funding challenge. How do Americans want to deal with it? This survey explores Americans’ views on Social Security and uses an innovative application of trade-off analysis, a technique widely used in market research, to explore the kinds of policy changes that Americans want for Social Security and are willing to pay for. If voters could choose their own policy package, what would it look like? 

Survey participants chose among policy options that would reduce benefits, increase benefits, or raise revenues to put the program on solid footing for future generations. Speakers will present findings from the Academy’s new report — Americans Make Hard Choices on Social Security: A Survey With Trade-Off Analysis — and discuss the implications for policymakers.

Findings:

  • William J. Arnone,  Board Chair, National Academy of Social Insurance
  • Elisa A. Walker, Income Security Policy Analyst, National Academy of Social Insurance
  • Mathew Greenwald, President and CEO, Greenwald & Associates

Observations:

  • Jason Furman, Chairman, Council of Economic Advisers

Implications:

  • Moderator: Mark Miller, Columnist, Reuters
  • Andrea Louise Campbell, Professor of Political Science, MIT
  • Maya MacGuineas, President, Committee for a Responsible Federal Budget
  • Maya Rockeymoore, President and CEO, Center for Global Policy Solutions
  • Virginia P. Reno, Vice President for Income Security Policy, National Academy of Social Insurance

» Register Now

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Thursday, October 9, 2014

FactCheck: Joni Ernst and ‘Privatizing’ Social Security

Social Security has played a big role in the Iowa Senate race between Republican Joni Ernst and Democrat Bruce Braley. FactCheck.org weighs in on some of the claims. Check it out here.

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Wednesday, October 8, 2014

New papers from the Social Science Research Network

"How Does Household Expenditure Change With Age for Older Americans?"
EBRI Notes, Vol. 35, No. 9 (September 2014)

SUDIPTO BANERJEE, Employee Benefit Research Institute (EBRI)
Email: banerjee@ebri.org

Retirement saving involves a lot of unknowns, the most important being not knowing how much money will be needed in retirement. Although it is impossible to predict the retirement expenses of any particular household, the average amounts spent by current retirees can serve as important benchmarks for individual savers as well as for industry experts and policymakers. This paper examines the expenditure pattern of the older segment of the U.S. population. The majority of the households studied here have either reached retirement age or are on the cusp of retirement. The data come from the Health and Retirement Study (HRS) and the Consumption and Activities Mail Survey (CAMS), which is a supplement of the HRS. CAMS contains detailed spending information on 26 nondurable and six durable categories, and it follows the same group of people over time. Using this information coupled with the income information available in the HRS, this study summarizes the consumption behavior of the American elderly. The primary goal is to examine how overall spending and spending in different categories change with age. Home and home-related expenses is the largest spending category for every age group. Health expenses increase steadily with age. In 2011, households with at least one member between ages 50 and 64 spent 8 percent of their total budget on health items, compared with 19 percent for those age 85 or over. Health-related expenses occupy the second-largest share of total expenditure for those ages 75 or older. The two components of household expenditures that show a declining pattern across age groups are transportation expenses and entertainment expenses. Food and clothing expenses (as a share of total expenditure) remain more or less flat across the different age groups. There is a large increase in spending at the 95th percentile for those ages 90 or older, which can be attributed to very high health care expenses.

The PDF for the above title, published in the September 2014 issue of EBRI Notes, also contains the full text of another September 2014 EBRI Notes article abstracted on SSRN: “2014 Health and Voluntary Workplace Benefits Survey: Most Workers Continue to be Satisfied With Their Own Health Plan, but Growing Number Give Low Ratings to Health Care System.”

"Initial Performance of Pension Privatization in Eastern Europe – Are Reform Reversals Justified?"

NIKOLA ALTIPARMAKOV, Serbian Fiscal Council
Email: NALTI@yahoo.com

During first 15 years of their existence, mandatory private pension funds in Eastern Europe have realized rates of return that were lower and more volatile than the corresponding Pay-As-You-Go rates of return, even before the emergence of global financial crisis. Suboptimal investments in domestic government bonds dominated pension portfolios in many countries. Econometric analysis suggests that pension privatization failed to produce anticipated side-effect benefits, such as increased national saving or accelerated economic growth. If pension privatization structural weaknesses are unlikely to be resolved successfully then implementing reform reversals could improve short-term fiscal balance without deteriorating long-term pension sustainability.

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Monday, October 6, 2014

MacGuineas: “A Social Security ‘Fix’ That Falls Short”

Writing in the Wall Street Journal, the Committee for a Responsible Federal Budget’s Maya MacGuinea argues that raising the Social Security payroll tax ceiling, while perhaps justifiable, won’t fix the problem so much as delay it.

“According to the Social Security Administration (SSA), eliminating the cap would close about 70% of the system’s 75-year imbalance. According to Congressional Budget Office accounting, it would close only 45% of the gap.”

I think eliminating the so-called “tax max” would be a bad idea – for a LOT of reasons. Check out my 2011 AEI paper for the gory details…

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Call for Papers: McCrery-Pomeroy SSDI Solutions Initiative

Call for Papers: McCrery-Pomeroy SSDI Solutions Initiative Seeking Proposals to Improve the Social Security Disability Insurance Program

DEADLINE FOR SUBMITTING PROPOSALS: November 1, 2014

The McCrery-Pomeroy SSDI Solutions Initiative is now accepting proposals for papers presenting innovative ideas to improve the Social Security Disability Insurance (SSDI) system.

The SSDI Solutions Initiative is a project co-chaired by former Congressmen Jim McCrery (R-LA) and Earl Pomeroy (D-ND) dedicated to identifying practical and realistic policy changes to improve the SSDI program for its beneficiaries, those contributing to the program, the economy, and society as a whole.

The full call for papers can be read here.

The Social Security Disability Insurance (SSDI) Solutions Initiative is soliciting ideas to improve various aspects of the SSDI program. Proposals are due by November 1, 2014; selected papers will be presented at a conference in Washington, D.C., in mid-2015 and included in a consolidated volume to be disseminated widely and shared with policymakers and experts in advance of the SSDI trust fund's projected 2016 insolvency date.

Though all topics are welcomed, the SSDI Solutions Initiative is particularly looking for papers addressing one or more of the following topics:

  1. Improving the Disability Determination Process
  2. Modernizing Determination Criteria and Program Eligibility
  3. Strengthening Program Integrity and Management
  4. Improving Incentives and Support for Beneficiaries to Return to Work
  5. Encouraging Disabled Workers to Remain in the Workforce
  6. Improving SSDI Program Interaction with Other Federal, State, Local, and/or Private Programs
  7. Moving beyond the Current "All or Nothing" System of Awarding Benefits
  8. Encouraging Employers to Support Disabled Workers

Potential authors may submit a notice of intent to apply, along with any questions, to info@ssdisolutions.org.

Click here to read a detailed description of suggested paper topics, learn how to submit a proposal, and download a submission form.

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