It's not exactly Social Security-related, but I have a short piece in AEI's online magazine The American discussing claims that nationalizing health care would make the Big Three automakers more competitive. This view stems from a) the idea that the automakers themselves pay health costs, when in general they would be deducted from the overall compensation of their employees; and b) the view that government provision of health care is necessarily more efficient. It can be, but many of the reforms put forward wouldn't do much to reduce costs. The fight for survival by the not-so-big three Detroit automakers, now effectively owned and managed by Washington, has made them unlikely proponents of government-controlled healthcare. Healthcare costs add more than $1,500 to the cost of each vehicle made by Detroit, it is said, putting them at a significant disadvantage relative to competitors in other nations where healthcare is provided by the government. If healthcare were provided by the federal government, some argue, automakers' costs would decline, their cars would become more competitive, and their business fortunes would improve. It is an attractive argument. Unfortunately, it goes against how most economists think about how healthcare costs are truly paid. The question regards the "incidence" of healthcare costs, meaning that the person who actually bears the cost of healthcare is often not the one that formally pays for it. Whether health costs are financed by employers or by the government, the true cost is actually born by workers. Nationalizing healthcare, which is effectively what most liberals wish to do, would do little to improve automakers' competitiveness. Click here to take a read.
Tuesday, March 31, 2009
New article: Wheeling Out the Latest Contrivance
New paper: The Cost of Low Fertility in Europe
The National Bureau of Economic Research has released a new working paper, "The Cost of Low Fertility in Europe," by David E. Bloom, David Canning, Günther Fink, and Jocelyn E. Finlay. Here's the abstract: We analyze the effect of fertility on income per capita with a particular focus on the experience of Europe. For European countries with below-replacement fertility, the cost of continued low fertility will only be observed in the long run. We show that in the short run, a fall in the fertility rate will lower the youth dependency ratio and increase the working-age share, thus raising income per capita. In the long run, however, the burden of old-age dependency dominates the youth dependency decline, and continued low fertility will lead to small working-age shares in the absence of large migration inflows. We show that the currently very high working-age shares generated by the recent declines in fertility and migration inflows are not sustainable, and that significant drops in the relative size of the working-age population should be expected. Without substantial adjustments in labor force participation or migration policies, the potential negative repercussions on the European economy are large. Put in English, here's roughly what it means: falling fertility first produces income gains, as the cost of supporting children declines, but later produces losses, as the smaller workforce has to support a relatively larger number of retirees.
Wash Post: Recession Puts a Major Strain On Social Security Trust Fund
The Washington Post's Lori Montgomery reports on the recent decline in the Social Security surplus, with some contrasting – though, I think, both correct – views on what it means. The Center for American Progress's Christian Weller says: "This is not a problem for Social Security, it's a problem for fiscal responsibility," said Christian Waller, a public policy professor at the University of Massachusetts at Boston and a senior fellow at the Center for American Progress. He said the new estimates would force President Obama and his budget director, Peter Orszag, "to stay on track in what they have set out to do, and that is rein in deficits." This is a good point. During the reform debate of 2005 folks on my side pointed out that Social Security will begin running deficits in 2017, demanding repayment of the trust fund. I always why the left didn't simply acknowledge this, but then point out that the 2017 date signaled a problem for the rest of the federal budget, not for Social Security, and that this problem was only made worse by tax cuts that put the budget further out of balance. (I'm not saying I fully agree with this, but it's an effective talking point.) In any case, here's what I told the Post: "Over the past 25 years, the government has gotten used to the fact that Social Security is providing free money to make the rest of the deficit look smaller," said Andrew Biggs, a resident scholar at the American Enterprise Institute. "Now they've essentially got to pay their own way, at least a little more fully. "Instead of Social Security subsidizing the rest of the budget," he said, "the rest of the budget will have to subsidize Social Security." For more on the relationship between the trust fund and the rest of the federal budget, see this post: "What does it mean to save the surplus?"
Monday, March 30, 2009
New article: Full Faith and Overextended Credit
I have an article in AEI's online magazine The American thinking about how the budget deficit might resolve itself over the long-term (or the short-term, if we're not careful). Who do you think is more reliable—the full faith and credit of the United States backing up Treasury bonds, or the McDonald's Corporation, backed only by "billions and billions served"? By some market measures it is the latter, and for good reason. The price of credit defaults swaps guaranteeing payment on 10-year Treasury bonds has risen by 1000 percent since December 2007, with an implied 12 percent probability of default on government debt over the next decade. In the view of the markets, this makes U.S. government bonds a more risky proposition than debt issued by McDonald's. Why? Trillion dollar annual short-term budget deficits due to the recession and financial crisis will soon merge with even larger deficits generated by government entitlement programs like Social Security, Medicare, and Medicaid. While a large short-term deficit to stimulate the economy can be absorbed, large deficits running for decades simply cannot be. Over the next decade, the combined costs of the big three entitlement programs will rise by 2.1 percent of gross domestic product; over the following decade, entitlement costs will increase by an additional 3.1 percent of GDP, with costs continuing to grow thereafter. Click here to read the whole article.
Hassett: Recession Bites Into Social Security’s Surplus
Following up on Thursday's post on the shrinking Social Security surplus, Kevin Hassett of AEI writes for Bloomberg: Something extraordinarily important was revealed in mid- March and received almost no news coverage. If you typed in the words "Social Security" on Google's news service last Friday, the top hit was a New York story about a man who kept his dead mother in a freezer ever since she died back in 2007, just so he could continue to collect her benefit checks. Almost as gruesome is the news about Social Security's finances. Hassett discusses work by Chuck Blahous on whether the Social Security Trustees projections have been pessimistic, why surpluses may not recover as strongly as some think, and recommends a bipartisan commission similar to that in 1983.
Thursday, March 26, 2009
New Social Security papers from the Social Science Research Network
SOCIAL SECURITY, PENSIONS & RETIREMENT INCOME ABSTRACTS "Are All Americans Saving 'Optimally' for Retirement?" Michigan Retirement Research Center Research Paper No. 2008-189 JOHN KARL SCHOLZ, University of Wisconsin - Madison - Department of Economics, National Bureau of Economic Research (NBER) Email: Jkscholz@wisc.edu Many people fear that Americans are preparing poorly for retirement. But developing rigorous evidence on this issue is difficult. In this paper we briefly discuss evidence on the adequacy of retirement wealth accumulation. We conclude that existing descriptive evidence does not seem consistent with dire assessments of poor financial preparation. We then extend the straightforward, but computationally complex dynamic programming approach used in our earlier work to assess the adequacy of retirement wealth preparation of Americans born before 1954. We find only 4 percent of HRS households have net worth below their optimal targets in 2004, though this percentage is somewhat higher for more recent HRS cohorts. While our work is preliminary, we find little evidence that Americans born before 1954 have prepared poorly for retirement. "Comparing Strategies for Retirement Wealth Management: Mutual Funds and Annuities" GAOBO PANG, Watson Wyatt Worldwide Email: Gaobo.Pang@watsonwyatt.com We compare wealth management strategies for individuals in retirement, focusing on trade-offs regarding wealth creation and income security. Systematic withdrawals from mutual funds generally give opportunities for greater wealth creation at the risk of large investment losses and income shortfalls. Fixed and variable life annuities forgo bequest considerations and distribute the highest incomes. A variable annuity with guaranteed minimum withdrawal benefit (VA GMWB) somewhat addresses both income need and wealth preservation. Mixes of mutual funds and fixed life annuities deliver solutions broadly similar to and even more flexible than a VA GMWB strategy. "Dynamic Lifecycle Strategies for Target Date Retirement Funds" ANUP K. BASU, Queensland University of Technology Email: a.basu@qut.edu.au Lifecycle funds offered to retirement plan participants gradually reduce their exposure to stocks as they approach the target date of retirement. We show that such deterministic switching rules produce inferior wealth outcomes for the investor compared to strategies that dynamically alter the allocation between growth and conservative assets based on cumulative portfolio performance relative to a set target. The dynamic allocation strategies proposed in this paper exhibit almost stochastic dominance (ASD) over strategies that switch assets unidirectionally without consideration of portfolio performance. "Calculating Savings Rates in Working Years Needed to Maintain Living Standards in Retirement" GAOBO PANG, Watson Wyatt Worldwide Email: Gaobo.Pang@watsonwyatt.com We establish an empirically based lifecycle model to gauge savings and replacement rates for maintaining a steady living standard over life. We consider a variety of scenarios and demonstrate that savings rates vary substantially with individuals' economic and demographic situations as well as retirement plan provisions. This result highlights that meaningful retirement planning must be specific to individuals or households and be based on a comprehensive knowledge of living means and needs. TIBOR JAKUBIK, affiliation not provided to SSRN Since January 2005, pensions in Slovakia are operated by a three-pillar system. This paper concentrates on the mandatory, fully funded second pillar. We recall the dynamic stochastic accumulation model proposed in [9]. Pension asset managers are very cautious and hold low stocks proportions in the pension funds. We discuss the sensitivity of the level of savings with respect to the proportion of stocks in the portfolios. Furthermore, we perform the sensitivity analysis with respect to correlation between stock and bond returns and risk aversion. Finally, we prove linearity of the level of savings with respect to the contribution rate.
ANANTH SESHADRI, University of Wisconsin - Madison - Department of Economics Email: ASESHADR@SSC.WISC.EDU
MARK J. WARSHAWSKY, Watson Wyatt Worldwide Email: mark.warshawsky@watsonwyatt.com
ALISTAIR BYRNE, University of Edinburgh - Business School Email: alistair.byrne@ed.ac.uk
MICHAEL E. DREW, Griffith University Email: michael.drew@griffith.edu.au
MARK J. WARSHAWSKY, Watson Wyatt Worldwide Email: mark.warshawsky@watsonwyatt.com
IGOR MELICHERCIK, Comenius University - Faculty of Mathematics, Physics and Informatics; Department of Applied Mathematics and Statistics Email: igor.melichercik@fmph.uniba.sk
DANIEL SEVCOVIC, Comenius University - Faculty of Mathematics, Physics and Informatics Email: sevcovic@fmph.uniba.sk
Forbes: Social Security retirement math
I have an article in the latest issue of Forbes summarizing my earlier work on how Social Security accounts might have fared in the current market environment. While the numbers are the most surprising part, the conclusion is what's more important. The point here isn't that stocks are a free lunch. In an efficient market the higher returns paid to stocks are nothing more than compensation for their higher risk, and we don't know that future market returns will be as good as those in the past. But accounts do provide a valuable tool to prefund future retirement income and reduce cost burdens on tomorrow's workers. And these numbers put the lie to President Obama's exaggerations of the risks of investing retirement savings in the market. Click here to read the whole piece.
Slowdown Slashes Social Security Surplus
I should be a headline writer. For a tabloid. In any case, this story on the Nightly Business Report featuring Chuck Blahous, Mark Warshawky and Barbara Kennelly discusses how the recession is hurting tax receipts, with the result that the Social Security surplus – which was supposed to have lasted until 2017 – is close to disappearing right now, at least temporarily. Here's a link to the report; the story begins around 2:40 into the program. I've pasted in below data from the Social Security actuaries on program revenues and costs during February, the latest data publicly available. Total cash revenues in February were $54.41 billion, versus total outlays of $55.76 billion. Looks like the surplus is a deficit, at least for now. Both SSA and CBO project at least small surpluses over the course of the year so it's likely Social Security's finances will recover at least somewhat, but this does complicate matters for the federal budget. The good news? At least we finally found a way to "stop the raid" on Social Security… Trust Fund Data March 26, 2009 February 2009 Description of Income, Outgo, or Assets OASI DI Total Income Employment taxes $46,504 $7,897 $54,401 Income from taxation of benefits 13 0 13 Interest on investments 75 16 92 Other income 0 0 0 Total income 46,592 7,914 54,505 Outgo Benefit payments 45,781 9,480 55,261 Administrative expenses 286 213 499 Transfer to Railroad Retirement 0 0 0 Total outgo 46,067 9,693 55,760 Assets Assets at start of month 2,219,059 216,189 2,435,248 Net increase in fund 525 -1,779 -1,255 Assets at end of month 2,219,583 214,409 2,433,993 Notes: 1. OASI refers to the Old-Age and Survivors Insurance Trust Fund, and DI refers to the Disability Insurance Trust Fund. These two funds comprise the Social Security Trust Funds.
(Amounts in millions)
2. The net increase in assets is total income less total outgo.
3. A table total is not necessarily equal to the sum of its rounded components.
Wednesday, March 25, 2009
RGE Monitor: US Pension reform: Lessons from other countries
RGE Monitor gives a good summary of new work by Martin Neil Baily and Jacob Funk Kirkegaard looking at pension reform abroad and what it might say for us in the U.S. The whole article is worth reading, but their main goals for reform are: These are goals I could live with. Click here to read the whole article.
Fact Check.org debunks Social Security emails
Because I work on Social Security I'm constantly being forwarded emails with rumors of various sorts about the program. (Often the same people forward me the same emails repeatedly; if you're reading this, it's ok to stop sending them.) Fact Check.org, with a big assist from SSA historian Larry DeWitt, goes through the most common Social Security email in great detail. While most emails are at least a mix of facts and legend, in this case pretty much every claim made in the Social Security chain email is false. Just shows you can't trust everything you read on the internet. Check out the debunking here.
Tuesday, March 24, 2009
CBO explains why future GDP growth will be slower than in the past
It's a very common argument on the left that the Social Security Trustees underestimate future rates of economic growth, and that if only the economy would grow in the future as fast as it did in the past then Social Security's solvency would be assured. (I mean you, Economic Policy Institute; and you, American Prospect; and you, David Langer.) I've tried to explain elsewhere why the Social Security Trustees project lower economic growth in the future. This difference comes down to the fact that the Trustees don't think about "GDP growth" as a single thing, but break it down into its components and project how those components will change over time. In fact, despite Langer's claim that "The Gross Domestic Product (GDP) is the key economic assumption in estimating costs," it actually plays no direct part in estimating Social Security's finances: Social Security doesn't collect taxes based on GDP, nor does it pay benefits based on GDP. Projections of GDP growth are really a byproduct of the other estimates the Trustees and actuaries do; they could easily project Social Security's finances without ever calculating future GDP. In any case, since my explanations are apparently tainted, here's how CBO director/blogger Doug Elmendorf explained their projections for future GDP growth: Projected growth from 2015 to 2019 is also below historical average growth rates, a difference that is more than accounted for by slower growth in the labor force because of the retirement of the baby boom generation. Over the postwar period, the labor force grew at an average annual rate of 1.6 percent; by contrast, we project it to grow only 0.4 percent per year in the period from 2015 through 2019. As a result, potential GDP grew 3.4 percent per year on average in the postwar period, but CBO expects that it will grow by only 2.4 percent annually (allowing for a tad more productivity growth) in the 2015-2019 period. In other words, the economy will grow more slowly in the future because the labor force will grow more slowly in the future. No conspiracy needed. Click here to read Elmendorf's full blog post. Update: For those interested in playing around with the economic/demographic assumptions to see how they'll affect Social Security's long-term financing, a while back I put together a simple Excel-based model that lets you choose your own inputs. You can read about it and download the file here.
Social Security and living with Grandma
The New York Times summarizes some interesting research on the living arrangements of older Americans. Traditionally, as individuals grew older – and particularly when one spouse died – the surviving spouse would move in with one of their children. Economists Robert F. Schoeni of the University of Michigan and Kathleen McGarry of Dartmouth analyzed the living arrangements of older Americans using Census data. They showed that the decline in older parents living with their children began in 1940, the year that Social Security first began paying out benefits. This indicates that older parents did not desire to live with their children – or the children did not desire to live with their parents -- but were forced to by need. As Social Security alleviated that need, older parents continued to live independently. Now, some pretty random thoughts: While there's certainly some merit to this, independent living does not come without a cost. Using a standard method for calculating economies of scale in household size, adding an additional adult to a household consisting of two parents and two children increases total household costs by less than half as much as it would cost that person to live alone. In the early years of Social Security this increased cost might have been acceptable to bear, in part because early benefits were so generous relative to contributions, but I'm not sure the question is so clear cut today. I think of this because when I discuss reducing future Social Security benefits to restore solvency I'm sometimes questioned by someone asking whether I would like to have my retired parents living with me. The answer to that question depends, at least in part, on how I would have to pay for them to be with me versus living independently.
Wednesday, March 18, 2009
Social Security Merits Support, Not Disdain
Phillip Moeller, writing for U.S. News & World Report, argues against recent poll findings showing that Americans lack faith in the Social Security program. Given the Swiss-cheese appearance of private investment accounts and pensions, it's understandable that we've had multiple Congressional hearings about the adequacy of 401(k)'s and IRAs. But restoring confidence in consumers about their financial futures could be more effectively and appropriately achieved if we made sure that Social Security would be dependable for the next 75 years. Having done this, we then need to pound this point home to consumers and help educate them about financial responsibility and Social Security's role in a successful retirement system. Click here to read the whole story.
New paper: "Strange But True: Free Loan From Social Security"
The Center for Retirement Research at Boston College has released a new Issue in Brief titled "Strange But True: Free Loan From Social Security," by Alicia H. Munnell, Alex Golub-Sass, and Nadia Karamcheva. The brief's key findings are: This brief is available here.
Tuesday, March 17, 2009
Monday, March 16, 2009
New paper: Cohort Changes in the Retirement Resources of Older Women
The latest issue of the Social Security Bulletin has an interesting new paper, "Cohort Changes in the Retirement Resources of Older Women," by Howard M. Iams, John W. R. Phillips, Kristen Robinson, Lionel Deang, and Irena Dushi. The paper compares the retirement preparedness of current women aged 55 to 64 to women of the same ages 10 and 20 years ago: Dramatic changes in life expectancy, women's roles in the labor market, the structure of the workforce, and pension systems have occurred in recent decades, all influencing the well-being of future retirees. This article uses different sources of U.S. data to focus on the retirement resources of women aged 55–64. By comparing the resources for this age group in 2004 to their counterparts in 1994 and 1984, this analysis provides some indication of changes in the retirement preparedness of three different cohorts of women. Our findings indicate that notable changes have occurred with women's pathways into retirement that are due to increased education and lifetime work experience. As a consequence, there are marked differences in potential retirement outcomes. We find that women aged 55–64 today are better prepared in several respects than their counterparts of the same age 10 or 20 years ago. Click here to read the whole paper.
Tuesday, March 10, 2009
New working papers from the Center for Retirement Research
The Center for Retirement Research at Boston College has released 13 new working papers. I'll have some short comments on some of them in separate posts. Health Care, Health Insurance, and the Relative Income of the Elderly and Nonelderly by Gary Burtless and Pavel Svaton Do Health Problems Reduce Consumption at Older Ages? by Barbara A. Butrica, Richard W. Johnson, and Gordon B.T. Mermin Financial Hardship Before and After Social Security's Early Eligibility Age by Richard W. Johnson and Gordon B.T. Mermin Rising Tides and Retirement: The Aggregate and Distributional Effects of Differential Wage Growth on Social Security by Melissa M. Favreault Retirement and Social Security: A Time Series Approach by Brendan Cushing-Daniels and C. Eugene Steuerle Evaluating Micro-Survey Estimates of Wealth and Saving by Barry P. Bosworth and Rosanna Smart The Disappearing Defined Benefit Pension and its Potential Impact on the Retirement Incomes of Boomers by Barbara A. Butrica, Howard M. Iams, Karen E. Smith, and Eric J. Toder The following 6 papers were completed by Sandell Grant awardees: Sources of Support for Pension Reform: A Cross-National Perspective by Michelle Dion and Andrew Roberts Economic Restructuring and Retirement in Urban China by John Giles Elderly Immigrants' Labor Supply Response to Supplemental Security Income by Neeraj Kaushal Portfolio Choice in Retirement: Health Risk and the Demand for Annuities, Housing and Risky Assets by Motohiro Yogo Accounting for the Heterogeneity in Retirement Wealth by Fang Yang Labor Supply Elasticity and Social Security Reform by Selahattin Imrohoroglu and Sagiri Kitao
WILL "FIXING" ENTITLEMENTS MEAN NEW TAXES?
The NCPA Daily Policy Digest summarizes a short article I write for the Heritage Insider. Here's the scoop: WILL "FIXING" ENTITLEMENTS MEAN NEW TAXES? The major entitlement programs -- Social Security, Medicare and Medicaid -- constitute 40 percent of total federal spending. As entitlement spending increases, each year without action raises the cost of reform, says Andrew Biggs, a resident scholar with the American Enterprise Institute. Take Social Security for example: Medicare and Medicaid, on the other hand, face one more additional challenge: rapid increases in health care costs, says Biggs: Yet, while health and pension reform is a daunting task, if the Obama administration works in good faith with Congressional Republicans and outside stakeholders, then progress on fixing the major entitlement programs is possible, says Biggs. Source: Andrew G. Biggs, "Will 'Fixing' Entitlements Mean New Taxes?" In "13 Questions That Advocates of Free Markets and Limited Government Should Be Asking," The Insider, Winter 2009. For text: http://www.insideronline.org/feature.cfm?id=245 For more on Welfare Issues: http://www.ncpa.org/sub/dpd/index.php?Article_Category=44
Charleston Post & Courier: Opposition not enough for GOP
The Charleston, SC Post and Courier, whose editorial board has had a long interest in Social Security reform, weighs in on President Obama's plans to reform Medicare: President Obama's major entitlement-reform offensive strikes on the Medicare front. He proposed, in his speech to Congress, to deliver "quality, affordable health care for every American" while also bringing runaway costs under control. That challenging goal contradicts the president's contention, in the same speech, that he doesn't believe in "bigger government." But just as Democrats, including then-Sen. Obama, shouldn't have rejected President George W. Bush's Social Security reform proposals without offering coherent counterproposals, Republicans who oppose President Obama's health-care ideas should offer tangible counterproposals on Medicare reform, too. In 2005, there was little public or media pressure on Democrats to put their own Social Security reform plan on the table; it was sufficient that they merely oppose President Bush's plan. I suspect the same won't be true for Obama's health proposals, so those who wish to take a different path on health care shouldn't be complacent that opposition is enough.
Sunday, March 8, 2009
New paper: The Impact of the Recent Financial Crisis on 401(k) Account Balances
The Employee Benefit Research Institute has released a new paper by Jack VanDerhei titled The Impact of the Recent Financial Crisis on 401(k) Account Balances. During 2008, major U.S. equity indexes were sharply negative, with the S&P 500 Index losing 37.0 percent for the year, which translated into corresponding losses in 401(k) retirement plan assets. But how individual 401(k) participants are affected by the crisis is largely determined by their account balance, age, and job tenure. This paper estimates changes in average 401(k) balances from Jan. 1, 2008, to Jan. 20, 2009, using the EBRI/ICI 401(k) database of more than 21 million participants. Not surprisingly, how the recent financial market losses affect individual 401(k) account balances is strongly affected by the size of a participant's account balance. Those with low account balances relative to contributions experienced minimal investment losses that were typically more than made up by contributions: Those with less than $10,000 in account balances had an average growth of 40 percent during 2008, since contributions had a bigger impact than investment losses. However, those with more than $200,000 in account balances had an average loss of more than 25 percent. This analysis also calculates how long it might take for end-of-year 2008 401(k) balances to recover to their beginning-of-year 2008 levels, before the sharp stock market declines. Because future performance is unknown, this analysis provides a range of equity returns: At a 5 percent equity rate-of-return assumption, those with longest tenure with their current employer would need nearly two years at the median to recover, but approximately five years at the 90th percentile. If the equity rate of return is assumed to drop to zero for the next few years, this recovery time increases to approximately 2.5 years at the median and nine to 10 years at the 90th percentile. Click here to read the whole paper.
New paper: Retirement Plan Participation: Survey of Income and Program Participation (SIPP) Data, 2006
The Employee Benefit Research Institute has released a new paper by Craig Copeland, entitled Retirement Plan Participation: Survey of Income and Program Participation (SIPP) Data, 2006. This paper presents results from the latest Survey of Income and Program Participation (SIPP) data on retirement plan participation. SIPP is conducted by the U.S. Census Bureau to examine Americans' participation in various government and private-sector programs that relate to their income and well-being. These latest data are from Topical Module 7 of the 2004 Panel fielded from January-April 2006. The SIPP data have the advantage of providing relatively detailed information on the retirement plans that workers participate in, but they also have the drawback of being fielded only once every three to five years. In comparison, the Census Bureau's Current Population Survey (CPS) provides overall participation levels of workers on an annual basis but does not provide information on the plan types in which the workers are participating. Click here to read the whole paper.
This paper provides "top-line" results from the latest SIPP data on retirement plan participation. A later paper will provide more detailed breakdowns of these data. The overall participation by all workers and nonagricultural wage and salary workers is presented with breakdowns by workers' age and income. The next section investigates the plan type (defined benefit versus defined contribution) that retirement participants regard as their primary (most important) plan. The last section examines participation in and contributions to salary reduction plans (401(k)-type plans). The workers in this study include those from both the private and the public sectors.
Thursday, March 5, 2009
New conference: Financial Literacy in Times of Turmoil and Retirement Insecurity
The financial crisis has caused a reported $2 trillion loss in retirement accounts nationwide. A majority of Americans are worried their retirement funds may not be sufficient, and young and old alike are concerned about financial and retirement security. On March 20, the Brookings Institution; the Wharton School's Pension Research Council and Boettner Center; the University of Michigan Retirement Research Center; and The Retirement Security Project will co-sponsor a conference on financial literacy and retirement preparedness. Event Information When Friday, March 20, 2009 Where Falk Auditorium Contact: Brookings Office of Communications E-mail: Phone: 202.797.6105 Participants Welcome Jason Fichtner, Acting Deputy Commissioner of Social Security, Social Security Administration Financial Literacy, Planning and Retirement Saving Chair: J. Mark Iwry, Principal, Retirement Security Project; Nonresident Senior Fellow, Economic Studies Julie Agnew, Assistant Professor of Finance and Economics; The Mason School of Business, The College of William and Mary Annamaria Lusardi, Professor of Economics, Dartmouth College Olivia Mitchell, Executive Director, Pension Research Council Director, Boettner Center for Pensions and Retirement Research, The Wharton School Robert Willis, Professor of Economics, University of Michigan Discussant: David Certner, Director, Legislative Policy, Government Relations and Advocacy, AARP Financial Illiteracy and Retirement Expectations: Prospects for Longevity, Decumulation and Health Chair: Olivia Mitchell, Executive Director, Pension Research Council Director, Boettner Center for Pensions and Retirement Research, The Wharton School Michael Hurd, Director, Center for the Study of Aging, RAND Corporation Erzo F.P. Luttmer, Associate Professor, Harvard Kennedy School Nick Maynard, Director of Innovation and New Product Development, D2D Fund Discussant: Andrew Biggs, Resident Scholar, American Enterprise Institute Keynote Address The Honorable Michael Astrue, Commissioner, Social Security Administration Lunch and Roundtable Discussion of Agency Initiatives Chair: Jason Fichtner, Acting Deputy Commissioner of Social Security Social Security Administration Ted Beck, President and CEO, National Endowment for Financial Literacy Dubis Correal, Director, Office of Financial Education Department of the Treasury John Gannon, Senior Vice President, Office of Investor Education, Financial Industry Regulatory Authority Debra Golding, Deputy Director For Education & Outreach; Department of Labor Office of Participant Assistance Jeanne Hogarth, Program Manager, Consumer Education and Research Section Division of Consumer and Community Affairs, The Federal Reserve Board Kristi Kaepplein, Director of the Office of Investor Education and Advocacy, Securities and Exchange Commission Alternate Approaches to Financial Literacy Chair: Robert Clark, Professor, Department of Economics Management, Innovation and Entrepreneurship, North Carolina State University Shawn Cole, Assistant Professor of Business Administration, Harvard Business School David John, Principal, The Retirement Security Project Senior Research Fellow, The Heritage Foundation J. Mark Iwry, Principal, Retirement Security Project; Nonresident Senior Fellow, Economic Studies Brigitte Madrian, Aetna Professor of Public Policy and Corporate Management, Harvard Kennedy School Discussant: John Phillips, Chief, Population and Social Processes Branch, National Institute on Aging Marching Orders for Research and Policy Chair: Annamaria Lusardi, Professor of Economics, Dartmouth College Angela Hung, Economist, RAND Corporation Sheryl Garrett, Founder, Garrett Planning Network Mike Staten, Director, Take Charge America Institute for Consumer Financial Education and Research William G. Gale, Director, The Retirement Security Project; Vice President and Director, Economic Studies Closing Remarks John Laitner, Professor, Department of Economics, The University of Michigan
The conference will focus on how workers and retirees can better manage saving for retirement, and how they can stay secure during retirement. Participants will identify research and policy directions for the future.
After their presentations, speakers and panelists will take questions from the audience. Lunch will be provided.
8:50 AM to 04:30 PM
The Brookings Institution
1775 Massachusetts Ave., NW
Washington, DC
Map
events@brookings.edu
Tuesday, March 3, 2009
New conference: “Demographics, Development, and Retirement Policy in an Aging Latin America.”
The CSIS Global Aging Initiative will hold a conference on March 24 titled "Demographics, Development, and Retirement Policy in an Aging Latin America." Details follow below: 8:00 REGISTRATION 9:00 CONFERENCE WELCOME 9:15 OPENING PRESENTATIONS Richard Jackson, Director, Global Aging Initiative, CSIS "Prospering While Aging: Meeting the Challenge of Retirement Security in Latin America" Peter DeShazo, Director, Americas Program, CSIS "Beyond the Demographic Transformation: The Economic and Political Currents Reshaping Latin America's Future" 10:15 CONTACT BREAK 10:30 PANEL 1: LATIN AMERICA'S PENSION REVOLUTION AT A CROSSROADS Moderator Richard Hinz, Adviser and Head of the Pension Team, Social Protection and Labor Department, World Bank Speakers Estelle James, International Consultant on Pension Reform "A Report Card: 25 Years of Personal Accounts in Latin America" Segundo Tascon, Regional Practice Leader, Retirement Consulting, Latin America, Watson Wyatt "The Economic Crisis and the Future of Latin America's Funded Pension Systems" Tapen Sinha, Founder & Director, International Center for Pension Research, Autonomous Technological Institute of Mexico (ITAM) "Personal Accounts in Mexico: Is Reform Living Up to Its Promise?" Mario Marcel, Manager, Institutional Capacity and Financial Sector, Inter-American Development Bank (IDB) "Chile's 2008 'Reform of the Reform': A Model for Other Countries?" 12:30 LUNCHEON [Speaker to be determined] 14:00 PANEL 2: BROADER POLICY CHALLENGES FOR AN AGING LATIN AMERICA Moderator Sidney Weintraub, Simon Chair in Political Economy, CSIS Speakers Rafael Rofman, Lead Social Protection Specialist, Latin America and the Caribbean Region, The World Bank "Labor Markets, Inequality, and the Problem of Low Pension Coverage in Latin America" Paulo Saad, Population Affairs Officer, UN Economic Commission for Latin America and the Carribean (ECLAC) "Caring for the Vulnerable Elderly: Poverty, Health, and the Changing Role of the Family" Jorge Roldós, Chief, Western Hemisphere Division, IMF Institute "Pensions, Capital Markets, and the Role of Retirement Policy in Economic Development" Joaquín Vial, Chief Economist for South America and Chile, Research Department, BBVA "Laying the Foundations for a More Competitive Latin America" 16:00 CLOSING REMARKS Richard Jackson, Director, Global Aging Initiative, CSIS Peter DeShazo, Director, Americas Program, CSIS Please R.S.V.P. to Keisuke Nakashima at gai@csis.org or 202-457-8718.
New Social Security Bulletin released
The latest issue of the Social Security Bulletin, the policy journal of the Social Security Administration, has been released. Here are the main papers included in this issue: Cohort Changes in the Retirement Resources of Older Women, by Howard M. Iams, John W. R. Phillips, Kristen Robinson, Lionel Deang, and Irena Dushi This article uses different sources of United States data to focus on the retirement resources of women aged 55–64 in 2004, 1994, and 1984. Notable changes have occurred with women's pathways into retirement resulting from increased education and lifetime work experience. There appear marked cohort differences in potential retirement outcomes. Simplifying the Supplemental Security Income Program: Options for Eliminating the Counting of In-kind Support and Maintenance, by Richard Balkus, James Sears, Susan Wilschke, and Bernard Wixon The Supplemental Security Income (SSI) program's policies for both living arrangements and in-kind support and maintenance (ISM) are intended to direct program benefits toward persons with the least income and support, but they are considered cumbersome to administer and, in some cases, poorly targeted. Benefit restructuring would simplify the SSI program by replacing ISM-related benefit reductions with benefit reductions for recipients living with another adult. This article presents a microsimulation analysis of two benefit restructuring options, showing that the distributional outcomes under both options are inconsistent with a basic rationale of the SSI program. A Legislative History of the Social Security Protection Act of 2004, by Erik Hansen The Social Security Protection Act of 2004 (SSPA), with its administrative remedies and program protections, can be seen as another incremental step in the development of a social insurance program that best meets the evolving needs of American society. This article discusses the legislative history of the SSPA in detail. It also includes summaries of the provisions and a chronology of the modification of these proposals as they passed through the House and Senate, and ultimately to the president's desk.
Monday, March 2, 2009
David Francis: Obama faces larger problems than Social Security shortfalls
David Francis of the Christian Science Monitor Toward the end of his address to Congress last Tuesday, President Obama spoke of beginning a conversation on how to reform the Social Security program. Such a suggestion makes Henry Aaron, a veteran analyst at the centrist Brookings Institution in Washington a bit edgy. Sure, he says, it's desirable to pay attention to Social Security, but "in the right way. It's better to do nothing than the wrong thing." Obama spoke of Social Security right after calling for "comprehensive healthcare reform." Medicare and Medicaid are in far worse financial shape than Social Security. The nation's primary pension system could continue providing full benefits for decades to retirees and the handicapped without running short of money. Economist Aaron worries that some Democrats will not be tough enough in bargaining with conservatives over Social Security changes if a bill comes before Congress. If that were to happen, the final bill could end up with unnecessary benefit reductions, he says. Here's one point that's worth a little comment: Benefits could be made considerably more generous with a relatively small increase in the payroll tax, reckons Bernard Wasow, an economist at the Century Foundation. "I don't know if popular opinion would cotton to that," he says. Um, well, since the program is pay-as-you-go, that means that a dollar of benefit increases requires a dollar of tax increases. Put another way, if we want to increase benefits by a given percentage we also need to increase total taxes by that same amount. So I'm not sure how "considerably more generous" gibes with "relatively small increase in the payroll tax." I suspect these are, shall we way, weighted averages: any increase in taxes counts less than the increase in government spending it would finance.
weighs in on Social Security reform:
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