New paper: “The Role of Social Security in Overall Retirement Resources: A Distributional Perspective”

The Role of Social Security in Overall Retirement Resources: A Distributional Perspective

Sebastian Devlin-Foltz¹, Alice Henriques, and John Sabelhaus

During recent decades, the US employer-sponsored retirement system has undergone a major shift from primarily defined benefit (DB)-type plans to primarily defined contribution (DC)-type plans. Furthermore, in the past decade, participation in employer retirement plans has fallen, particularly for younger and lower-income families. In light of this, there is growing concern that wealth accumulation through employer-provided pension plans is falling short, especially for the bottom half of the income distribution. However, focusing only on employer-sponsored pensions provides an incomplete picture; it has left the public pension, Social Security, out of the discussion. Social Security provides near universal coverage and calculates benefits progressively, leaving lower-income households with much higher replacement rates relative to their pre-retirement income. Claims to future Social Security benefits are a key component of retirement wealth, and thus failure to include Social Security leads to a biased assessment of the overall distribution of retirement wealth.

Read the whole paper here.

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New papers from the NBER

“A Structural Analysis of the Effects of the Great Recession on Retirement and Working Longer by Members of Two-Earner Households”

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

Abstract:

This paper uses data from the Health and Retirement Study to estimate a structural model of household retirement and saving. It applies that model to analyze the effects of the Great Recession on the work and retirement of older couples who were both employed full-time at the beginning of the recession. We analyze the effects of job loss, changes in wealth and changes in expectations.

The largest overall effects of the Great Recession are observed for 2009 and 2010. In 2009, an additional 2.5 percent of all 55 to 59 year old husbands were not working full-time as result of the Great Recession, amounting to a reduction of 3.2 percent in full-time work. In 2010, 2.8 percent of 55 to 59 year old husbands were not working full-time as a result of the Great Recession, amounting to a 3.8 percent reduction in full-time work. For wives the reductions in full-time work due to the Great Recession were 1.7 percent and 2.2 percent of those who initially held a job, or reductions of full-time work of 2.3 and 3.0 percent respectively. For those 60 to 64, the reductions were 1.2 percent of men and 0.9 percent of women. Having been laid off in the last three years reduces full-time work by 30 percent.

There also are lingering effects of layoff on the probability of working longer. Having been laid off three or more years in the past reduces full-time employment in the current year by about 12 percent. This reflects the reduced work incentives for full-time work arising from lower earnings due to the loss of job tenure with a layoff as well as the additional earnings penalty from a layoff.

The effect on own work of a spouse having been laid off is much smaller. The reason is that, as found in the estimation of our structural model, having one spouse not working increases the value of leisure for the other. In contrast, when one member of the household loses their job, the value of consumption increases relative to leisure. For recent layoffs, these effects are roughly offsetting.

All told, the effects of the Great Recession on retirement seem relatively modest. These findings are consistent with our earlier descriptive analyses.

http://papers.nber.org/papers/w22984?utm_campaign=ntw&utm_medium=email&utm_source=ntw

“The Hidden Resources of Women Working Longer: Evidence from Linked Survey-Administrative Data”

by C. Adam Bee, Joshua Mitchell - #22970 (AG LS PE)

Despite women’s increased labor force attachment over the lifecycle, household surveys such as the Current Population Survey Annual Social and Economic Supplement (CPS ASEC) do not show increases in retirement income (pensions, 401(k)s, IRAs) for women at older ages.

We use linked survey-administrative data to demonstrate that retirement incomes are considerably underreported in the CPS ASEC and that women’s economic progress at older ages has been substantially understated over the last quarter century. Specifically, the CPS ASEC shows median household income for women age 65-69 rose 21 percent since the late 1980s, while the administrative records show an increase of 58 percent. Survey biases in women’s own incomes appear largest for women with the longest work histories.

We also exploit the panel dimension of our data to follow a cohort of women and their spouses (if present) as they transition into retirement in recent years. In contrast to previous work, we find that most women do not experience noticeable drops in income up to five years after claiming social security, with retirement income playing an important role in maintaining their overall standard of living. Our results pose a challenge to the literature on the “retirement consumption puzzle” and suggest total income replacement rates are high for recent retirees.

http://papers.nber.org/papers/w22970?utm_campaign=ntw&utm_medium=email&utm_source=ntw

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CBO Projects Larger Social Security Shortfall

The Congressional Budget Office released updated projections of Social Security's long-term financing, finding an even larger long-term deficit than in the Office’s previous calculations.

The new figures, released December 21, find Social Security’s combined retirement and disability trust funds running out in the year 2029, after which benefits would be cut across the board by 29 percent.

Over the full 75-year measurement period, Social Security is projected to run an actuarial deficit of 4.68 percent of taxable payroll, meaning that Social Security is underfunded by 25 percent over the next 75 years. In the CBO’s previous figures, calculated in late 2015, the 75-year shortfall was 4.4 percent of payroll. Social Security’s trustees and actuaries project a smaller 75-year deficit of 2.66 percent of taxable payroll.

One way to think of the actuarial deficit is the size of the payroll tax rate increase – taking place immediately and staying in effect permanently – that would keep Social Security’s trust fund solvent for 75 years. So, if we immediately raised the payroll tax rate from the current 12.4 percent to 17.08 percent, that would be enough to keep the program solvent for 75 years.

Alternately, we could reduce benefits – again, immediately and permanently – by about 25 percent. Or we could rely upon a range of other policy changes, such as raising or eliminating the $127,200 payroll tax ceiling, increasing the retirement age, lowering Cost of Living Adjustments, and so on. The effects of some of these policies are calculated in CBO’s recent publication on options to reduce the federal deficit.

Many reformers have a difficult time fixing Social Security’s funding gap even under the more forgiving projections from Social Security’s trustees. Using CBO numbers, which show a long-term deficit 75 percent higher than the trustees, the challenge is even greater. One strategy: take all reforms you favor and all the reforms you hate, then put them together. Combined they might fix the problem.

CBO’s new Social Security publication also includes updated figures on the replacement rates paid by Social Security, which measure Social Security benefits as a percentage of pre-retirement earnings. The CBO’s figures find that for an average retiree, Social Security benefits replace 40-45 percent of substantial earnings in the years approaching retirement. As I argue in this recent working paper, the CBO’s approach effectively compares Social Security benefits to an “average of above-average earnings” in the years preceding retirement.

A better approach, I argue, compares Social Security benefits to the inflation-adjusted average of career-long earnings. Luckily, CBO publishes a data appendix that includes these figures; they find that Social Security replaces from 55 to 65 percent of real career-average earnings.

However, both approaches find that replacement rates are rising for lower-earning participants and falling for high earners. The reason is that Social Security benefits are indexed to rise along with national average wages. The poor have seen their wages stagnate, meaning that Social Security benefits will be higher relative to their pre-retirement earnings. The rich, by contrast, have seen faster wage growth. But the growth of Social Security benefits has not kept up, lowering the replacement rates the receive from the program. This change in replacement rates shows how Social Security has partially offset the increased inequality of pre-retirement earnings.

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New paper from the NBER: “Older Peoples' Willingness to Delay Social Security Claiming”

Older Peoples' Willingness to Delay Social Security Claiming

by Raimond Maurer, Olivia S. Mitchell - #22942 (AG LS PE)

Abstract:

We have designed and fielded an experimental module in the 2014 HRS which seeks to measure older persons' willingness to voluntarily defer claiming of Social Security benefits. In addition, we evaluate the stated willingness of older individuals to work longer, depending on the Social Security incentives offered to delay claiming their benefits. Our project extends previous work by analyzing the results from our HRS module and comparing findings from other data sources which included very much smaller samples of older persons. We show that half of the respondents would delay claiming if no work requirement were in place under the status quo, and only slightly fewer, 46%, with a work requirement. We also asked respondents how large a lump sum they would need with or without a work requirement.

In the former case, the average amount needed to induce delayed claiming was about $60,400, while when part-time work was required, the average was $66,700. This implies a low utility value of leisure foregone of only $6,300, or under 20% of average household income.

http://papers.nber.org/papers/w22942?utm_campaign=ntw&utm_medium=email&utm_source=ntw

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New articles from the Social Science Research Network

"The German Statutory Pension Scheme: Balance Sheet, Cross-Sectional Internal Rates of Return and Implicit Tax Rates"
FZG-Discussion Paper No.63, Research Center for Generational Contracts, University of Freiburg

CHRISTOPH METZGER, University of Freiburg - Institute of Public Finance, Research Center for Generational Contract
Email: chrisipissi@hotmail.com

We present a framework for accounting of the German statutory pension scheme and estimate a balance sheet for the years 2005 until 2012. Extending and applying the methodology proposed by Settergren and Mikula (2005), we estimate the cross-sectional internal rates of return of the German pension scheme over this period. We are able to show that the cross-sectional internal rate of return is mainly financed by increasing contributions and by changing the liabilities not backed by assets. Additionally, our results reveal that from an expenditure perspective, the major part of the internal rate of return is resulting from changing longevity rather than indexation of pension entitlements. Finally, we prove that from a cross-sectional perspective the implicit tax of a pension scheme can mainly be interpreted as an “implicit wealth tax” on pension wealth and subsequently present empirical estimates for these cross-sectional implicit tax rates.

"Employment at Older Ages and Social Security Benefit Claiming"
Social Security Bulletin. 76(4): 1-17

PATRICK J. PURCELL, U.S. Social Security Administration
Email: patrick.purcell@ssa.gov

Eligible workers can claim Social Security retirement benefits at age 62, the earliest eligibility age; however, those who claim benefits before attaining full retirement age receive permanently reduced benefits. Working longer and claiming benefits later can result in higher Social Security benefits and greater financial security in retirement. This article presents data on trends in the labor force participation rate of older Americans and the age at which people claim Social Security retired-worker benefits.

"Poverty Status of Social Security Beneficiaries, by Type of Benefit"
Social Security Bulletin. 76(4): 19-50

BENJAMIN BRIDGES, U.S. Social Security Administration
Email: benjamin.bridges@ssa.gov
ROBERT GESUMARIA, Government of the United States of America - Office of Research, Evaluation and Statistics
Email: robert.gesumaria@ssa.gov

This article examines the 2012 poverty status of Social Security adult type of benefit (TOB) groups using both the official poverty measure and the Supplemental Poverty Measure (SPM). For each TOB group the article compares the SPM estimate with the official poverty measure estimate. In addition, it estimates the effects of various features of the SPM on poverty rates, noting why the SPM estimates differ from official estimates. For each poverty measure, the article also compares poverty estimates across groups.

"A Comparison of Free Online Tools for Individuals Deciding When to Claim Social Security Benefits"
Research and Statistics Note No. 2016-03

PATRICIA P. MARTIN, Government of the United States of America - Social Security Administration
Email: Patricia.P.Martin@ssa.gov
DALE KINTZEL, Government of the United States of America - Social Security Administration
Email: dale.kintzel@ssa.gov

When to claim Social Security retirement benefits is one of the most important financial decisions many people make. The Social Security Administration (SSA) provides a variety of online tools and publications to help individuals decide on their own when to claim benefits, but maintains a neutral stance on when a person should claim. Because SSA remains neutral, other government, nonprofit, academic, and for-profit entities have developed tools to assist the public with their claiming decision. This note analyzes the advantages and limitations of six online benefit calculators. Users of these online tools should consider the source of their information and understand that the benefit estimates they produce are based on different underlying assumptions, which can result in different estimated benefit amounts.

"Social Assistance and Minimum Income Benefits: Benefit Levels, Replacement Rates and Policies Across 26 OECD Countries, 1990-2009"
Jinxian Wang and Olaf van Vliet (2016) Social assistance and minimum income benefits: Benefit levels, replacement rates and policies across 26 OECD countries, 1990-2009. European Journal of Social Security, Vol. 18, No. 4, pp. 333-355.

JINXIAN WANG, Leiden University - Department of Tax Law and Economics
Email: j.wang@law.leidenuniv.nl
OLAF VAN VLIET, Leiden University - Leiden Law School, Leiden University - Department of Economics
Email: o.p.van.vliet@law.leidenuniv.nl

Until recently, social assistance and minimum income benefits have received relatively little attention in the comparative welfare state literature. Relying on two new indicators, this paper examines the development of minimum income benefits across 26 EU and other OECD countries. The real benefit level, the first indicator, is relatively easy to interpret, but international comparisons require adjustments for exchange rates and purchasing power, which can introduce variation that is not related to underlying policy changes. In the second indicator, the net minimum income replacement rate, this disadvantage is cancelled out by construction. Our analysis shows that real benefit levels increased in most countries, whilst replacement rates declined on average. A subsequent qualitative analysis of the changes in the benefit levels confirms that the increased benefit levels reflect policy changes and that the lower replacement rates do not reflect benefit cuts, but relatively larger wage increases. Such a widening gap between benefit levels and wages is in line with the policy agenda of ‘making work pay’. Finally, by analysing the extent to which changes in quantitative indicators reflect actual policy changes, this paper seeks to make a methodological contribution to the ongoing debate on the ‘dependent variable problem’ in the welfare state literature.

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Upcoming Event: EBRI's Dec. 15 Policy Forum: Retirement & Health Policy

EBRI's Dec. 15 Policy Forum: Retirement & Health Policy

EBRI will hold its 79th policy forum in Washington, DC, on Thursday, Dec. 15, on the topic: “Retirement and Health Policy Directions in 2017 and Beyond.” The program will run from 8:30 a.m. to 12:45 p.m.
   * The current agenda and list of presenters is online here.
   * You can register for this free event online here.
   * The forum also will be live webcast by the International Foundation of Employee Benefit Plans (IFEBP), online here.

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New Social Security Reform Plan from Rep. Sam Jonson

Over at Forbes, I summarize the new plan from Rep. Sam Johnson (R-TX), which reduces benefits for higher earners, introduces a new minimum benefit for low earners, and establishes new incentives to delay retirement. Check out it here.

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Upcoming event: “35 Years After the Greenspan Commission, Is It Time for a New Social Security Commission?”

35 Years After the Greenspan Commission, Is It Time for a New Social Security Commission?

35 years ago, President Ronald Reagan appointed the National Commission on Social Security Reform, whose recommendations set the stage for bipartisan legislation to extend the life of the Social Security program by 50 years. With Social Security’s trust fund on a rapid path toward insolvency, is it time for another bipartisan commission to shore up its finances?

Join us on as we gather lawmakers and Social Security experts to discuss the Social Security programs past, as well as its future.

Date and time: Wednesday, December 7, 9:15 am - 10:30 am. Breakfast will be served at 9:00 am.

Location: Room HVC - 201AB, United States Capitol Building, Washington D.C. 20004. This is on the House Side of the Capitol Building so please use the South entrance.

Keynote:

• Congressman Tom Cole (R-OK)
• Congressman John Delaney (D-MD)*

Panel Participants Include:

• Dr. Edward Berkowitz, Professor of History and Public Policy and Public Administration, George Washington University
• Jim Kessler, Senior Vice-President for Policy, Thirdway
• Dr. Sylvester Schieber, former Chairman, Social Security Advisory Board
• Maya MacGuineas, President, Committee for a Responsible Federal Budget
• Moderator: Scott Horsley, White House Correspondent, NPR

*Invited Speaker

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Presentation: "Comparing CBO’s Long-Term Projections With Those of the Social Security Trustees"

This can be a bit wonky, but given the large differences between the CBO and Social Security Trustees' projections for the program's finances, it's worth taking a look. One thing that strikes me is that, while most of the gap can be explained through differences in economics and demographic assumptions, there's still a significant difference even after differing assumptions are accounted for. That residual presumably comes down to either more deeply embedded assumptions that CBO didn't analyze or differences in how the two teams put their models together.

Comparing CBO’s Long-Term Projections With Those of the Social Security Trustees

Presentation by Julie Topoleski, Chief of the Long-Term Analysis Unit in CBO’s Health, Retirement, and Long-Term Analysis Division, to the Social Security Advisory Board.

November 18, 2016

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Savings & Retirement Foundation: "How Same Sex Marriage Affect Retirement Income and Government Budgets"

Please join us for a meeting of the Savings and Retirement Foundation with guest speakers Stephen Rose And Karen E. Smith on "How Same Sex Marriage Affect Retirement Income and Government Budgets" They will discuss their new paper on using DYNASIM to estimate the impact of legal same-sex marriage on retirement income and government budgets. Tuesday, November 15, 2016 Noon-1:00 p.m. RSVP Location:   Tax Foundation 1350 G Street #950 Washington D.C. (Lunch will be provided) Dr. Stephen J. Rose is a Research Professor at the George Washington Institute of Public Policy and a nationally-recognized labor economist who has been doing innovative research and writing about the interactions between formal education, training, career movements, incomes, and earnings for the last 35 years.  Karen Smith is a senior fellow in the Income and Benefits Policy Center at the Urban Institute, where she is an internationally recognized expert in microsimulation. Over the past 30 years, she has developed microsimulation models for evaluating Social Security, pensions, taxation, wealth and savings, labor supply, charitable giving, health expenditure, student aid, and welfare reform.   Stephen Rose Research Professor GW Institute of Public Policy Karen Smith Senior Fellow, Urban Institute

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New paper: “The Affordable Care Act as Retiree Health Insurance: Implications for Retirement and Social Security Claiming”

The Affordable Care Act as Retiree Health Insurance: Implications for Retirement and Social Security Claiming

by Alan L. Gustman, Thomas L. Steinmeier, Nahid Tabatabai - #22815 (AG HE LS PE)

Abstract:

Using data from the Health and Retirement Study, we examine the effects of the Affordable Care Act (ACA) on retirement. We first calculate retirements (and in related analyses changes in expected ages of retirement and/or Social Security claiming) between 2010, before ACA, and 2014, after ACA, for those with health insurance at work but not in retirement. This group experienced the sharpest change in retirement incentives from ACA. We then compare retirement measures for those with health insurance at work but not in retirement with retirement measures for two other groups, those who, before ACA, had employer provided health insurance both at work and in retirement, and those who had no health insurance either at work or in retirement. To complete a difference-in-difference analysis, we make the same calculations for members of an older cohort over the same age span. We find no evidence that ACA increases the propensity to retire or changes the retirement expectations of those who, before ACA, had coverage when working but not when retired.

An analysis based on a structural retirement model suggests that eventually ACA will increase the probability of retirement by those who initially had health insurance on the job but did not have employer provided retiree health insurance. But the retirement increase is quite small, only about half a percentage point at each year of age. The model also suggests that much of the effect of ACA on retirement will be realized within a few years of the change in the law.

http://papers.nber.org/papers/w22815?utm_campaign=ntw&utm_medium=email&utm_source=ntw

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New working papers from the Center for Retirement Research.

The Center for Retirement Research at Boston College has recently released eight working papers:

The Mortality Effects of Retirement: Evidence from Social Security Eligibility at Age 62

Maria D. Fitzpatrick and Timothy J. Moore

The Labor Supply of Disabled Veterans: 1995-2014

Matthew S. Rutledge, Geoffrey T. Sanzenbacher, and Caroline V. Crawford

How Does Student Debt Affect Early-Career Retirement Saving?

Matthew S. Rutledge, Geoffrey T. Sanzenbacher, and Francis M. Vitagliano

What Are the Effects of Doubling Up on Retirement Income and Assets?

Deirdre Pfeiffer, Katrin B. Anacker, and Brooks Louton

An Overview of the Pension/OPEB Landscape

Alicia H. Munnell and Jean-Pierre Aubry

Cognitive Impairment and Social Security’s Representative Payee Program

Anek Belbase and Geoffrey T. Sanzenbacher

Do Late-Career Wages Boost Social Security More for Women than Men?

Matthew S. Rutledge and John E. Lindner

Calculating Expected Social Security Benefits by Race, Education, and Claiming Age

Geoffrey T. Sanzenbacher and Jorge D. Ramos-Mercado

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Upcoming Webinar, Nov. 17: “Replacing the Replacement Rate: How Much is ‘ENOUGH’ Retirement Income?”

Live Webinar Thursday, November 17th with expert instructor Bonnie-Jeanne MacDonald.

LIVE WEBINAR with Dr. Bonnie-Jeanne MacDonald, PhD FSA Replacing the Replacement Rate: How Much is "ENOUGH" Retirement Income? Thursday, November 17, 2016, 1:00 – 2:15 PM EST 1.5 Hours SOA CPD, CAS CE, Core EA CE Credit This webinar can fulfill requirements for organized credit. The “final earnings replacement rate” (where 70% is often advocated as the “right” target) has been the longstanding and widespread measure of retirement income adequacy - financial planners use this benchmark, as do actuaries (and other pension plan advisors), academics, and public policy analysts.  It underlies our pension systems, drives the research that determines whether populations are prepared or not prepared for retirement, and is the backbone of retirement planning software. But does it do the job that it is supposed to do? Will 70% of a worker’s final annual employment earnings sustain living standards after retirement? This presentation examines whether workers who hit this target actually can expect to maintain their living standards in retirement.  I also discuss an alternative, more accurate, basis for assessing how well a worker’s living standards are maintained after retirement - the Living Standards Replacement Rate. Based on ten years of research and analysis in industry, academia, and government, this presentation answers the often posed but never answered question "how much is ENOUGH retirement income?" This award-winning work has been published in a prestigious peer-reviewed academic journal, which can be downloaded without fee: http://dx.doi.org/10.1017/asb.2016.20.  Learning Objectives Learn an alternative, and more accurate, way to measure retirement income adequacy Discover the validity of the conventional final earnings replacement rate Understand Retirement Income Adequacy Who Should Attend? Actuaries, public policy analysts, pension plan sponsors, financial planners, and academics who work within the field of pensions, state retirement income systems or retirement financial planning Register for this Webinar > Can't attend the live webinar? Email us and we'll notify you when a recording is available. Instructor Bonnie-Jeanne MacDonald, PhD, FSA is a Fellow of the Society of Actuaries and an academic researcher in Halifax, Canada. Her research focuses on financial security for an aging population, asking pertinent questions from a holistic perspective by incorporating and integrating the often-ignored elements such as home ownership, medical expenses, the financial circumstances of family members, and the government's complex tax and transfer system. Building on best practices from the academic world, while combining innovative research with industry need, her goal is to improve the retirement financial security of people in practice (and not just in theory). She received the 2001 Gold Medal in Actuarial Science (Hon BSc) at the University of Western Ontario in Canada, a PhD in Actuarial Mathematics at Heriot-Watt University in Scotland, a Postdoctoral Fellowship in Actuarial Sciences at the University of Waterloo, and a Postdoctoral Fellowship in Economics at Dalhousie University. In 2011, she was selected as one of the top 'young economists' by the Canadian government to attend the Lindau Nobel Laureate Meeting in Germany. She is a regularly invited guest speaker, and her ideas are increasingly being adopted by industry, government, and academia, in both Canada and abroad. The work that she will be presenting won the 2014 Pension, Benefits and Social Security Scientific Committee Award Prize for Best Paper at the 30th International Congress of Actuaries in April 2014. Pricing Early pricing ends on Thursday, November 3rd 2016 for this webinar. The registration fee includes access to the webcast recording and supplemental materials for up to 180 days. Participants Terminals Early Registration Regular Registration 1-2 1 Terminal $59.00 $69.00 3-9 1 Terminal $169.00 $199.00 10+ 1 Terminal $249.00 $289.00 10+ 2-100 Terminals $499.00 $499.00 EA Credit Information: The Joint Board for the Enrollment of Actuaries (JBEA) has approved ACTEX as a qualifying sponsor of continuing professional education (CPE) programs for enrolled actuaries. ACTEX believes in good faith that you may earn continuing professional education (CPE) non-core non-ethics credits under the Joint Board for the Enrollment of Actuaries (JBEA) rules for attending this webinar. The JBEA makes the final determination about what constitutes core, non-core, ethics, or non-ethics CPE and the number of CPE credit hours allocated. Discount for Full-Time Students Students with current enrollment as a full-time student at any college/university are eligible for a 50% discount. In order to access this discount, please email proof of enrollment using your college/university e-mail address to Support@ActexMadRiver.com. Examples of enrollment proof would be a copy of your registration information, or an unofficial transcript. Discount for Educators Faculty members of any accredited higher-education institution are eligible for a 20% discount. In order to access this discount, please contact us via email (Support@ActexMadRiver.com) using your college/university e-mail address. Discount for Regulatory Actuaries Regulatory Actuaries (Regulators) are eligible for a 30% discount. In order to access this discount, please contact us via email (Support@ActexMadRiver.com) using your government email address.

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Research Funding Opportunity: 2017 Sandell Grant Program and 2017 Dissertation Fellowship Program

Boston College Center for Retirement Research
2017 Sandell Grant Program and 2017 Dissertation Fellowship Program

2017 Sandell Grant Program and 2017 Dissertation Fellowship Program
The Center for Retirement Research at Boston College announces the 2017 Sandell Grant Program and 2017 Dissertation Fellowship Program for research in areas such as retirement income, older workers, or well-being in retirement. These programs are funded by the U.S. Social Security Administration.

2017 STEVEN H. SANDELL GRANT PROGRAM:
- Provides the opportunity for junior scholars to pursue projects on retirement income and policy issues. The program is open to scholars in all academic disciplines.
- Awards up to five grants of $45,000 for one-year projects.
- The submission deadline for grant proposals is January 31, 2017. Grant award recipients will be announced by April 2017.
- Visit the Sandell Program website to view the proposal guidelines: http://crr.bc.edu/about-us/grant-programs/steven-h-sandell-grant-program-2

2017 DISSERTATION FELLOWSHIP PROGRAM:
- Supports doctoral candidates writing dissertations on retirement income and policy issues. The program is open to scholars in all academic disciplines.
- Awards up to five fellowships of $28,000.
- The submission deadline for proposals is January 31, 2017.
- Visit the Dissertation Fellowship website to view the proposal guidelines: http://crr.bc.edu/about-us/grant-programs/dissertation-fellowship-program-2

FURTHER INFORMATION: For questions, please contact: Marina Tsiknis tsiknis@bc.edu, 617-552-1092

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Research Job Opening at Social Security

The Social Security Administration (SSA) is looking for an executive to lead its Office of Research, Demonstration and Employment Support as the Associate Commissioner (AC) responsible for providing leadership and accountability over the program analysis and research development activities that support SSA’s disability and income security programs. The AC provides executive direction to an organization with approximately 100 employees and is responsible for ensuring programs under his/her purview are administered in an effective and efficient manner and align with the SSA mission and strategic objectives. The AC reports directly to the Deputy Commissioner and Assistant Deputy Commissioner for Retirement and Disability Policy; the position’s duty station is either Washington, DC or the agency’s Headquarters campus in Woodlawn, Maryland.

The AC is responsible for maintaining awareness of issues concerning broad program policy environments, including Congress, the private sector, and other government agencies to ensure that SSA's policy and research agendas consider and reflect these points of view.  S/he directs studies of program policy issues related to the development and evaluation of SSA Disability and Supplemental Security Income (SSI) program initiatives and legislative and policy proposals. S/he identifies trends in the SSI and Disability programs and compiles and analyzes data on various aspects of those programs. S/he designs, implements and evaluates demonstration projects to target special populations and/or program issues.  S/he formulates agency policy regarding crosscutting programs or issues related to disability and/or income assistance programs and interacts with other government agencies, including the Departments of Health and Human Services, Education, and Labor.

The applicant should have a broad knowledge of Social Security laws, regulations, and policies, senior level experience with a wide array of research and demonstration projects, return to work initiatives in the public or private sector, and demonstrated senior level experience in planning, directing, managing and overseeing a large, fast-paced organization. Activities also include human resources management, collaboration with multiple internal and external customers, knowledge of congressional legislation, assessing political and operational impact of decisions with a high degree of quality, and providing first class service to the public being served.

The complete vacancy announcement can be found on USAJOBS; direct link is below.

Associate Commissioner for Research, Demonstration, and Employment Support:  SSA-EX-480

Applicants should address the leadership and technical requirements of the position, describe work accomplishments, how they have exercised leadership to deliver significant results, experience collaborating/communicating and cooperating to achieve goals, and experience leading strategic change and overcoming obstacles to effectuate those changes.

Sincerely,

J. Jioni Palmer
Associate Commissioner for External Affairs
(T) 410-965-1804
@SSAOutreach

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New paper: “The Role of Social Security in Overall Retirement Resources: A Distributional Perspective”

The Role of Social Security in Overall Retirement Resources: A Distributional Perspective

by Sebastian Devlin-Foltz, Alice Henriques, and John Sabelhaus.

Median retirement wealth in the bottom 50 is substantially lower than in the top 50. However, when one accounts for Social Security, the differences in total retirement wealth across the distribution are much less severe. To think about retirement readiness, we examine the ratio of retirement assets to usual income (final two columns). The main takeaway message on retirement readiness is that Social Security goes a long way towards explaining why differences in DB and DC retirement wealth do not translate into dramatic shocks to living standards across the income distribution as a given cohort crosses over into retirement. Median total retirement wealth (including Social Security) is much lower for the bottom half of the usual income distribution, but relative to median income, it is roughly the same as for the next 45 percent income group, and more than double the same ratio for the top 5 percent.

Click here to read the whole paper.

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Raising Social Security Taxes Means Big Cuts in Other Tax Revenues

Over at Forbes, I look at how increases in Social Security taxes – either eliminating the ceiling on wages subject to payroll taxes or applying Social Security taxes to investment income – could cause reductions in federal income taxes, Medicare payroll taxes, and state income taxes.

Assuming smaller effects of tax rates on taxable incomes, one-third to one half of Social Security revenue gains from eliminating the payroll tax ceiling would be offset by revenue losses elsewhere in the budget. Using assumptions that find a larger behavioral response, eliminating the Social Security tax max would raise only a small fraction of net revenues than is commonly assumed. Non-Social Security losses from Social Security reforms should not be a trivial concern for policymakers.

You can read the whole article here.

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Upcoming event: ““The Potential Impact of Mandated Employer Pension Programs on Retirement Savings”

Please join us for a meeting of the Savings and Retirement Foundation with guest speaker
Barbara Butrica
And
Karen E. Smith

Who will discuss their new paper:
“The Potential Impact of Mandated Employer Pension Programs on Retirement Savings”
Tuesday, October 18, 2016
Noon-1:00 p.m.

RSVP

Location: 

AARP
601 E Street NW
Washington, DC 20005
(Lunch will be provided)

Barbara Butrica is a labor economist with expertise in aging and income dynamics. She studies issues related to the economic security of the baby boom generation, pensions, Social Security, and the engagement of older adults. Butrica has published her research in peer-reviewed journals and has written numerous research reports and briefs for general audiences.

Karen Smith is a senior fellow in the Income and Benefits Policy Center at the Urban Institute, where she is an internationally recognized expert in microsimulation. Over the past 30 years, she has developed microsimulation models for evaluating Social Security, pensions, taxation, wealth and savings, labor supply, charitable giving, health expenditure, student aid, and welfare reform.  

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Upcoming event: “Public Attitudes toward Social Security Reform.”

Please join us October 18 for an event co-hosted by the Committee for a Responsible Federal Budget and Voice of the People focused on where the public stands regarding the need for changes to protect and secure Social Security.

Event Participants Include:

• Dr. Steven Kull (Director, Program for Public Consultation, University of Maryland, School of Public Policy)

• Romina Boccia (Deputy Director and Grover M. Hermann Research Fellow in Federal Budgetary Affairs, The Heritage Foundation)

• Kathleen Romig (Senior Policy Analyst, Center on Budget and Policy Priorities)

• Marc Goldwein (Senior Vice President and Senior Director of Policy, Committee for a Responsible Federal Budget)

Tuesday, October 18

12:00 pm - 1:00 pm

Capitol Building Room HC - 8

(On the House side of the Capitol building - use South Entrance)

Lunch will be served starting at 11:45 am

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New paper from the Federal Reserve: “The Role of Social Security in Overall Retirement Resources: A Distributional Perspective”

The Role of Social Security in Overall Retirement Resources: A Distributional Perspective

By Sebastian Devlin-Foltz, Alice Henriques, and John Sabelhaus

During recent decades, the US employer-sponsored retirement system has undergone a major shift from primarily defined benefit (DB)-type plans to primarily defined contribution (DC)-type plans. Furthermore, in the past decade, participation in employer retirement plans has fallen, particularly for younger and lower-income families. In light of this, there is growing concern that wealth accumulation through employer-provided pension plans is falling short, especially for the bottom half of the income distribution.²

However, focusing only on employer-sponsored pensions provides an incomplete picture; it has left the public pension, Social Security, out of the discussion. Social Security provides near universal coverage and calculates benefits progressively, leaving lower-income households with much higher replacement rates relative to their pre-retirement income. Claims to future Social Security benefits are a key component of retirement wealth, and thus failure to include Social Security leads to a biased assessment of the overall distribution of retirement wealth.

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Social Security Advisory Board Releases Annual Report

Board releases 2015 annual report The Board is pleased to release the 18th Annual Report of the Social Security Advisory Board. The annual report is also available on the Board’s website (www.ssab.gov). It chronicles the events and activities in which the Board engaged in during 2015.

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New papers from the Social Science Research Network

"What's Happening with Retirement Saving and Retirement Incomes? Better Data Tell a Better Story"

ANDREW G. BIGGS, American Enterprise Institute
Email: andrew.biggs@aei.org

Both households and policymakers are concerned about retirement security, amidst widespread perceptions that households are not saving adequately for retirement. But many of the commonly-cited data understate retirement plan availability and participation as well as the income that retirees derive from IRA and 401(k) plans. Moreover, many observers contrast these unduly pessimistic data with a prior "Golden Age" of traditional pensions, when data show that most U.S. workers never participated in such plans and onerous vesting requirements prevented many from receiving substantial benefits. A perception that most Americans are falling far short of their retirement saving goals may cause policymakers to overlook targeted polices to assist the smaller number of households who truly are at risk of an inadequate income in retirement.

"Do Savings Increase in Response to Salient Information About Retirement and Expected Pensions?"
ZEW - Centre for European Economic Research Discussion Paper No. 16-059

MATHIAS DOLLS, Centre for European Economic Research (ZEW), Institute for the Study of Labor (IZA)
Email: dolls@zew.de
PHILIPP DOERRENBERG, Centre for European Economic Research (ZEW), Institute for the Study of Labor (IZA), CESifo Institute
Email: doerrenberg@zew.de
ANDREAS PEICHL, Centre for European Economic Research (ZEW), University of Mannheim - School of Economics (VWL), Institute for the Study of Labor (IZA), University of Essex - Institute for Social and Economic Research (ISER)
Email: peichl@zew.de
HOLGER STICHNOTH, Centre for European Economic Research (ZEW)
Email: stichnoth@zew.de

How can retirement savings be increased? We explore a unique policy change in the context of the German pension system to study this question. As of 2004, the German pension authority started to send out annual letters providing detailed and comprehensible information about the pension system and individual expected pension payments. This reform did not change the level of pensions, but only manipulated the knowledge about and salience of expected pension payments. Using German tax return data, we exploit two discontinuities in the age cutoffs of receiving such a letter to study their effects on private retirement savings. Our results show that the letters increase private retirement savings. The effects are fairly sizable and persistent over several years. We further show that the letter increases labor earnings, and that the increase in savings partly crowds out charitable donations. Moreover, we present evidence suggesting that both information and salience drive the savings effect. Our paper adds to a recent literature showing that policies that go beyond the traditional neoclassical reasoning can be powerful to increase savings rates.

"How Does Student Debt Affect Early-Career Retirement Saving?"
CRR WP 2016-9

MATTHEW S. RUTLEDGE, Boston College, Center for Retirement Research
Email: rutledma@umich.edu
GEOFFREY SANZENBACHER, Boston College Economics Department
Email: geoffrey.sanzenbacher.1@bc.edu
FRANCIS M. VITAGLIANO, Boston College - Center for Retirement Research
Email: vitaglif@bc.edu

This paper examines the relationship between student loans and retirement saving behavior by 30-year-old workers. Total outstanding student loan debt in the United States has quintupled since 2004. Rising student debt levels mean that young workers must reduce either their consumption or their saving. To what extent do these workers cut back on retirement saving? Existing studies have lacked adequate data or controls for studying this issue: conventional financial datasets include too few younger households; the study samples used include older households whose student debt may be from their children’s education instead of their own; and many studies lack important controls to capture differences between attendees with more or less student debt. This study uses the National Longitudinal Survey of Youth 1997 Cohort, a larger sample of workers turning 30, and includes detailed controls including school quality, parental background, and the underlying ability of the college attendee. The analysis focuses on participation in an employer-sponsored retirement plan and retirement assets as of age 30.
This paper found that:
- The estimated relationship between student debt and participating in a retirement plan – whether or not their employer offers one – is small and statistically insignificant, and we can rule out any large negative correlation.
- Contrary to expectations, individuals with a large loan balance who were offered a plan are more likely to accept it, though the estimated relationship is small.
- Some evidence indicates that bachelor’s degree-holders who have student loans have lower retirement assets at age 30, though the estimates are statistically insignificant, and retirement assets levels are unrelated to the size of their student loan balances.
The policy implications of this paper are:
- Though young workers’ balance sheets are clearly hurt by student debt, the preliminary results indicate that they do not substantially reduce retirement saving to compensate.
- This lack of a relationship between student loans and retirement plan saving suggests that the detrimental effect of student debt manifests itself either through reduced consumption or other reductions in net worth, such as credit card debt.
- Despite these findings, it will be worth watching future cohorts to determine whether a stronger relationship between student debt and retirement savings will emerge in the future, as those who built up even more debt move toward financial and economic maturity.

"What are the Effects of Doubling Up on Retirement Income and Assets?"
CRR WP 2016-10

DEIRDRE PFEIFFER, Arizona State University (ASU) - School of Geographical Sciences and Urban Planning
Email: dap624@gmail.com
KATRIN B. ANACKER, George Mason University - School of Policy, Government, and International Affairs
Email: kanacker@gmu.edu
BROOKS LOUTON, Arizona State University (ASU) - School of Criminology & Criminal Justice
Email: Brooks.Louton@asu.edu

The Great Recession has amplified the increase in socioeconomic instability and inequality in the United States. While much work has been conducted on retirement income and assets, not much work has been undertaken on seniors moving in with their adult children and grandchildren, possibly to save on housing costs. Utilizing Survey of Income and Program Participation (SIPP) 1996, 2001, 2004, and 2008 data for seniors 65 and older, we conducted descriptive statistics and three types of models. First, we used discrete-time event history modeling to analyze the effect of changes in retirement income, assets, debt, and social welfare program participation between the current and previous interview on the propensity of moving into a multigenerational household, controlling for other factors. Then, we used logistic and linear regression to understand the effect of living in a multigenerational household on changes in seniors’ retirement income, assets, debt, and program participation, controlling for other factors. We also expanded our analyses to control for household type, i.e., a senior moving in with their adult children or grandchildren or vice versa, and for time, i.e., whether the recession impacts our results.
The paper found that:
- Experiencing economic distress increased the odds that a senior would move into a multigenerational household over the previous year or previous four months.
- Seniors living in multigenerational households were more economically disadvantaged than seniors not living in multigenerational households.
- Seniors living in multigenerational households were more likely to enroll in a social welfare program over the past four months than seniors not living in multigenerational households.
- The relationships between seniors’ multigenerational household formation and economic outcomes did not change much during the recession.
The policy implications of the findings are:
- Living in a multigenerational household may have a potentially destabilizing effect on seniors’ economic well-being.
- Policymakers may want to target financial education and counseling to seniors living in multigenerational households.

"Adequacy, Fairness and Sustainability of Pay-as-You-Go-Pension-Systems: Defined Benefit Versus Defined Contribution"

JENNIFER ALONSO-GARCÍA, University of New South Wales (UNSW) - ARC Centre of Excellence in Population Ageing Research (CEPAR)
Email: j.alonsogarcia@unsw.edu.au
MARÍA EL CARMEN BOADO-PENAS, University of Liverpool
Email: carmen.boado@liverpool.ac.uk
PIERRE DEVOLDER, Catholic University of Louvain
Email: devolder@fin.ucl.ac.be

There are three main challenges facing public pension systems. First, pension systems need to provide an adequate income for pensioners in the retirement phase. Second, participants wish a fair level of benefits in relation to the contributions paid. Last but no least, the pension system would need to be financially sustainable in the long run. In this paper, we analyse defined benefit versus defined contribution schemes in terms of adequacy, fairness and sustainability jointly. Also, risk sharing mechanisms, that involve changes in the key variables of the system, are designed to restore the financial sustainability at the same time that we study their consequences on the adequacy and fairness of the system.

"Initiate Deficits to Strengthen Public Finances: The Role of Private Pensions"

ALES S. BERK, University of Ljubljana - Faculty of Economics
Email: ales.berk@ef.uni-lj.si
DRAGAN JOVANOVIĆ, Independent
Email: d.jovanovic@t-2.net
JOZE SAMBT, University of Ljubljana - Faculty of Economics
Email: joze.sambt@ef.uni-lj.si

In this paper we use our comprehensive pension system model calibrated to the real demographic, employment and retirement data, measure transition costs of implementing mandatory private second-pillar into the pension landscape and consider fiscal sustainability of pension system. We report sensitivity to the most relevant parameters both within a second-pillar and a pay-as-you-go, and argue that fiscal sustainability and improved (higher) accrual rates are not incompatible policy goals if only pension reform is properly designed and implemented early enough. The introduction of a private pension pillar has to be implemented in times when public debt burden remains manageable and has to be accompanied by further parametric reform within the pay-as-you-go system that keeps the system fiscaly stable, as well as that further improves net accrual rates. We call for reconsideration of pension policy reversals that happened after 2008 in quite some coutries.

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Upcoming event: “Disability and Retirement Security: New Research and Next Steps”

Disability and Retirement Security: New Research and Next Steps

WHEN: Thursday, October 20, 2016 10:30 a.m. to 12:00 p.m. ET

WHERE: Bipartisan Policy Center, 1225 Eye St. NW, Suite 1000, Washington, DC, 20005

➤ REGISTER NOW

Experiencing a disability is a life-changing event, affecting work, family, and finances, but too little attention has been given to the impact of disability on retirement security. The ongoing transition to defined contribution retirement plans has increased the urgency of this challenge. While many defined benefit pensions include features to address disability risk, these provisions are rare in 401(k) plans because they were not allowed until a recent regulatory change.

Join us on October 20 as we discuss new research from the Employee Benefit Research Institute on how retirement security is affected by disability, and what can be done to address this risk.

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Keynote remarks by:

Sen. Mark Warner (D-VA)
@MarkWarnerVA

Opening remarks by:

Rick McKenney
President and Chief Executive Officer, Unum Group

Participants:

Winthrop Cashdollar
Executive Director, Product Policy, America’s Health Insurance Plans

Lisa Ekman
Director of Government Affairs, National Organization of Social Security Claimants’ Representatives

Joshua Gotbaum
Guest Scholar, Economic Studies, Brookings Institution
@JoshGotbaum

Andrew Peterson
Senior Staff Fellow, Retirement Systems, Society of Actuaries

Jack VanDerhei
Research Director, Employee Benefit Research Institute

Aliya Wong
Executive Director, Retirement Policy, U.S. Chamber of Commerce

REGISTER NOW

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Testimony and Video from Ways and Means Committee Hearing on Understanding Social Security’s Solvency Challenge

Hearing on Understanding Social Security’s Solvency Challenge

Witness List

Stephen C. Goss
Chief Actuary, Social Security Administration
Testimony

Keith Hall, Ph.D.
Director, Congressional Budget Office
Testimony

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Smith: Less to Social Security Expansion Than Meets the Eye

Writing for Fedsmith.com, Brenton Smith writes that

Expanding Social Security has become a dividing line in many Congressional races where supporters want to create a visible separation with the GOP which largely offers nothing but benefit cuts far in the distant future.

Unfortunately for Americans who are excited about Social Security expansion, there’s less in it for many of them that it seems. Read the whole article here.

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Upcoming event: Ways and Means Hearing on “Understanding Social Security’s Solvency Challenge”

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Johnson Announces Hearing on “Understanding Social Security’s Solvency Challenge”   September 14, 2016 EMILY SCHILLINGER LAUREN ARONSON (202) 226-4774   WASHINGTON, D.C. – House Ways and Means Social Security Subcommittee Chairman Sam Johnson (R-TX) announced today that the Subcommittee will hold a hearing entitled “Understanding Social Security’s Solvency Challenge” on Wednesday, September 21, at 10:00 AM in room B-318 of the Rayburn House Office Building. This hearing will focus on the differences between the estimates of Social Security’s finances produced by the Congressional Budget Office and those produced by the Social Security Trustees, as well as what these differences mean for efforts to address Social Security’s solvency. At the hearing, Members will hear from Dr. Keith Hall, the Director of the Congressional Budget Office, and Steve Goss, the Social Security Administration’s Chief Actuary. The witnesses will discuss how their organizations arrive at their projections of Social Security’s solvency and what accounts for the differences between their projections. Upon announcing the hearing, Chairman Johnson said: “Everyone knows Social Security is in trouble, but how much trouble depends on who you ask. Even the numbers experts at the Congressional Budget Office and Social Security’s Trustees disagree on the size of Social Security’s shortfall. These are well-respected organizations, but they can’t both be right. I look forward to getting answers on why the CBO and the Trustees see Social Security’s future so differently. This hearing is an important step towards making sure our children and grandchildren can count on Social Security, just like today’s seniors do.” BACKGROUND Both the Social Security Board of Trustees (Trustees) and the Congressional Budget Office (CBO) evaluate the condition of Social Security’s long-term finances annually. They base their projections on a variety of demographic and economic assumptions, including life expectancy, productivity, and interest rates. In recent years, the Trustees’ and CBO’s estimates of Social Security’s financial status have begun to diverge. In 2016, the Trustees estimated a 75-year shortfall of 2.66 percent of taxable payroll, while CBO’s estimate was 4.7 percent. Similarly, the Trustees estimate that the combined Trust Funds will be exhausted in 2034, while CBO estimates that this will occur in 2029. ###

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