Tuesday, May 25, 2010

New issue brief: “A New Social Security ‘Notch’? Bad News for People Born in 1947”

The Center for Retirement Research at Boston College has released a new Issue in Brief: "A New Social Security 'Notch'? Bad News for People Born in 1947" by Andrew G. Biggs. The brief's key findings are:

  • While Social Security beneficiaries received no COLA this year, they are still ahead of the game.
  • The reason is that they received a larger-than-usual COLA in 2009, which took effect right after prices dropped due to the economic crisis.
  • But individuals who turned 62 in 2009 are not so lucky – their benefits will likely be lower than older and younger recipients due to a quirk in the benefit formula.
  • To prevent such a 'notch,' policymakers could increase benefits for the 1947 group and modify the benefit formula to prevent a recurrence in the future.

The brief is available here.

Last year I wrote on this subject in Forbes, available here. The CRR issue brief goes into much greater detail.


1 comment:

Pops said...

If you suggest a "make-up" for the 1947 cohort, what would you do to reduce benefits for the 1948 cohort, who have obviously "lucked out" in the social security lottery? If you are going to leave the 1948 cohort untouched, you should raise benefits for all the previous cohorts, not just the 1947 cohort.

Looking at Figure 2, 1948 is farther from "the average" than 1947.