Tuesday, November 17, 2015

New paper: “The Potential Effect of Offering Lump Sums in the Social Security Program”

Authors: Raimond Maurer, PhD; Olivia S. Mitchell, PhD; Ralph Rogalla, PhD; and Tatjana Schimetschek, MSc

  • Political debate has focused on the question of whether Social Security solvency should be achieved by larger benefit cuts or higher taxes, which in effect asks which people—current or future generations—should bear the greater burden of fixing the system.
  • But new research reframes this debate, offering a budget-neutral, actuarially fair lump sum payment, instead of the current delayed retirement credit, as a way to encourage people to delay claiming their Social Security benefits and work longer.
  • Under one of the lump sum alternatives presented here, survey participants indicated a willingness to delay claiming Social Security by up to eight months, on average, compared to the status quo, and to continue working for four of them.
  • Delayed claiming would mean additional months or years of Social Security payroll tax contributions, which could modestly improve the program’s solvency. Other benefits are possible as well: improved physical and mental health among the elderly from extended labor force participation, which could reduce the strain on health care programs like Medicare and Medicaid and help offset the macroeconomic costs of an aging population.

Click here to read the whole paper.


JoeTheEconomist said...

Andrew, Did the paper talk about adverse selection? This just sounds like a trainwreck. Today deferred benefit claims are managed on a schedule that is 30 years old. The government has no idea how to manage risk. This is something that should be handled by the private sector.

Retirement should be fixed, and let the individual argue with annuity companies about how to restructure their benefits.

WilliamLarsen said...

We are all in this boat together.
"Actually, it's today's retirees who are sitting on the deck with mint juleps in hand, while the boomers and X'ers are below in the galley rowing like slaves to the command of stroke, stroke, stroke. Seniors would like the galley slaves to continue to believe the hoax that one day they too will have the opportunity to sit on the deck with their feet propped up. Only problem is, when it's finally the galley slaves turn on the deck, the ship will long since have sunk. The slaves are just now realizing the cruel hoax perpetrated upon them, and are about to ban together to stop the ship dead in the water and use their oars as clubs."

The SS Social Security is taking on more liabilities each and every day at an ever faster rate. Why are we trying to save Social Security? Who are we saving it for? If you speak to any person under age 46 they will tell you they would rather opt out right now and forgo any future SS benefits just to be able to stop paying the Social Security payroll tax.

None of my nieces, nephews or my one children support social security as a program. Even my in-laws who are in their late 50's and 60's do not support social security. Prohibition was repealed and so can Social Security.

Too bad Social Security is not on the election ballot as a national referendum. I bet voter turn out would be huge!!

Written by Karl A Sweetman 10/25/98

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FonnesbeckL1 said...

Making summary around the social security program and also there has been such ideas which will even create more instances by the time, looking forward to comply more details for the time. summarizing an article