Friday, October 24, 2014

CRFB: Social Security Getting Harder to Fix

The Committee for a Responsible Federal Budget blogs that the tax of fixing Social Security solvency is getting tougher:

A hypothetical solution that would have closed the shortfall last year now only closes about 95 percent of the shortfall. Previously, a 2.9 percentage point tax increase (raising the combined payroll tax from 12.4% to 15.3%) would be enough to solve the shortfall. Now, that increase would need to be 3.1 percent. Similarly, a 17.5 percent reduction in all benefits would have addressed the shortfall last year, but it would need to be 18.4 percent this year. Furthermore, these options assume the changes are made immediately. Waiting 20 years requires changes to be 50 percent larger.

Check out their full blog here.

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New papers from the Social Science Research Network

"The Retention Effects of High Years of Service Cliff-Vesting Pension Plans"

JESSE M. CUNHA, Naval Postgraduate School, Naval Postgraduate School
Email: jcunha@nps.edu
AMILCAR ARMANDO MENICHINI, Naval Postgraduate School
Email: aamenich@nps.edu
ADAM CROCKETT, University of New South Wales (UNSW) - Australian Defence Force Academy
Email: adam.j.crockett@gmail.com

We study the retention effects of the Australian military’s decision to remove a 20-year cliff-vesting requirement from their retirement system in 1991. We follow to the present individuals who self-selected into and out of the 20-year cliff-vesting plan, as well as those who were forced out of the plan. Eliminating the high years of service cliff-vesting provision leads to consistently higher attrition over time.

"Early Retirement Across Europe. Does Non-Standard Employment Increase Participation of Older Workers?"
Netspar Discussion Paper No. 10-2014-044

JIM BEEN, Leiden University - Department of Economics, Netspar
Email: j.been@law.leidenuniv.nl
OLAF VAN VLIET, Leiden University - Leiden Law School, Leiden University - Department of Economics
Email: o.p.van.vliet@law.leidenuniv.nl

In many European countries, the labor market participation of older workers is considerably lower than the labor market participation of prime-age workers. This study analyzes the variation in labor market withdrawal of older workers across 13 European countries over the period 1995-2008. We seek to contribute to existing macro-econometric studies by taking non-standard employment into account, by relating the empirical model more explicitly to optional value model theory on retirement decisions and by using a two-step IV-GMM estimator to deal with endogeneity issues. The analysis leads to the conclusion that part-time employment is negatively related to labor market withdrawal of older men. This relationship is less strong among women. Additionally, we find that part-time employment at older ages does not decrease the average actual hours worked. Furthermore, the results show a positive relationship between unemployment among older workers and early retirement similar to previous studies.

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Wednesday, October 22, 2014

Social Security Announces 1.7 Percent Benefit Increase for 2015

Print Version

Monthly Social Security and Supplemental Security Income (SSI) benefits for nearly 64 million Americans will increase 1.7 percent in 2015, the Social Security Administration announced today.

The 1.7 percent cost-of-living adjustment (COLA) will begin with benefits that more than 58 million Social Security beneficiaries receive in January 2015.  Increased payments to more than 8 million SSI beneficiaries will begin on December 31, 2014. The Social Security Act ties the annual COLA to the increase in the Consumer Price Index as determined by the Department of Labor’s Bureau of Labor Statistics.

Some other changes that take effect in January of each year are based on the increase in average wages.  Based on that increase, the maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $118,500 from $117,000.  Of the estimated 168 million workers who will pay Social Security taxes in 2015, about 10 million will pay higher taxes because of the increase in the taxable maximum.

Information about Medicare changes for 2015 is available at www.Medicare.gov.

The Social Security Act provides for how the COLA is calculated.  To read more, please visitwww.socialsecurity.gov/cola.

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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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