Saturday, November 18, 2017

New paper: “US municipal yields and unfunded state pension liabilities”

U.S. municipal yields and unfunded state pension liabilities
by Zina Lekniῡtė, Roel Beetsma and Eduard Ponds


We present empirical evidence that municipal bond yields are increasing in the pension debt towards U.S. state civil servants. However, positive yield effects of both pension and explicit debt are found only for the period since the start of the crisis, suggesting that the crisis triggered awareness of budgetary sustainability. The marginal yield effect of higher pension debt is smaller than that of higher explicit debt, but still economically meaningful. The effect of higher pension debt seems stronger when using market values of pension assets than actuarial values, suggesting that investors pay more attention to market values.

The full paper is available here.

Read more!

Friday, November 17, 2017

Social Security Advisory Board Releases Research Roundtable Summary

Social Security Advisory Board Releases Research Roundtable Summary: Participants' views on a long-range research agenda for the Social Security Administration

Today the Social Security Advisory Board announces the release of a new document: “Research Roundtable Summary: Participants’ views on a long-range research agenda for the Social Security Administration.”

In August 2017, the board held a roundtable discussion in Washington, DC with scholars from around the country who were asked to suggest ideas for a long-range Social Security research agenda and to discuss the data needs they think are required to carry out that agenda. Additional scholars who did not attend the meeting submitted written suggestions. The document being released today summarizes thoughts and recommendations from over 30 individuals who participated in this process. The points made in this report do not necessarily reflect or represent the views of individual board members and are not exhaustive of all the important insights that other researchers and experts may have to offer. Still, they highlight a number of issues the board hopes the public and the Social Security Administration will find useful to consider.

Most participants emphasized the need for additional investments in data infrastructure and greater access to and sharing of the administrative data necessary to address key research questions. Some recommended continuing the development of policy evaluation models and suggested a number of topics that could be addressed through demonstration projects. Among the numerous issues identified, some notable examples include the need to better understand:

  • what factors contribute to the economic security or insecurity of retirees,
  • how changing patterns of work, health, retirement, asset and debt accumulation and decumulation will affect the economic security of today’s workers,
  • how SSA’s communication with the public affects decision-making by workers, claimants and beneficiaries,
  • how disabilities develop, how SSA determines eligibility for benefits and what conditions are necessary for individuals to keep working or to return to work, and
  • the reasons for and implications of recent downward trends in disability applications and awards.

To read the full report click here

Read more!

Monday, November 13, 2017

Upcoming event: "What’s Next for Tax and Entitlement Reform”

National Economists Club

Featuring Marc Goldwein of the Committee for a Responsible Federal Budget

Chinatown Garden Restaurant 618 H St NW Washington DC
Date: 16 Nov 2017 12:00 PM

Marc Goldwein

Senior Vice President & Policy Director

Committee for a Responsible Federal Budget

"What’s Next for Tax and Entitlement Reform”

Marc Goldwein is the Senior Vice President and Senior Policy Director for the Committee for a Responsible Federal Budget, where he guides and conducts research on a wide array of topics related to fiscal policy and the federal budget. He is frequently quoted in a number of major media outlets and works regularly with Members of Congress and their staffs on budget-related issues.

In 2010, Marc served as Associate Director of the National Commission on Fiscal Responsibility and Reform (The Fiscal Commission), and in 2011 he was a senior budget analyst on the Joint Select Committee on Deficit Reduction (The Super Committee).  He has also conducted research for the Government Accountability Office, the World Bank, the Historian's Office at the Social Security Administration, and the Institute of Governmental Studies at UC Berkeley. In addition to his work at the Committee, Marc teaches economics at the University of California DC and at Johns Hopkins University, where he was the 2013 recipient of Excellence in Teaching Award. In 2011, Marc was featured in the Forbes "30 Under 30" list for Law & Policy.

Note: Registration is open through Wednesday, 11-8-17. 

Press: Please email with your attendance status and the date of attendance. It will be assumed that lunch is NOT requested.   If lunch is requested, please contact me in advance, prior to the date of the event, for registration and payment instructions.

Credit Card payment is non refundable but you may substitute someone in your place for attendance.

Visit for registration information.

Read more!

Thursday, November 9, 2017

Smith: Three Myths About Fixing Social Security

Writing for, Brenton Smith outlines three myths about Social Security’s funding health:

Social Security is the largest, and arguably most important, program in the federal government. It is a life-line for millions. For the rest of us the program is a set of never-ending, polarizing arguments.

The contentiousness is caused in large part by the number and conflicting nature of the urban legends surrounding the system. Everyone has a fact that is someone else’s myth.

These convictions about the program shape who voters elect, and seriously limit what candidates are willing to say to the electorate. These beliefs have so penetrated the public conscience that actual policy makers are left herding unicorns.

Check out the whole article here.

Read more!

Saturday, November 4, 2017

CBO Projects Small Improvement in Social Security Financing

The Congressional Budget Office released new projections of Social Security's long-term financial health. While still showing a much larger funding deficit than the figures released by Social Security's Trustees, the CBO shows a small improvement relative to last year's figures. Over 75 years, the CBO projects a shortfall equal to 4.5 percent of employee payroll, versus a 4.7 percent gap in the office's 2016 projections.

Since last year, CBO has made changes to its projections of five key inputs: productivity in the economy, interest rates, the population, the labor force participation rate, and the share of earnings that is subject to Social Security payroll taxes. The changes to the first three of those inputs worsen the Social Security system’s projected finances, whereas the changes to the last two improve them. Moreover, an additional year of deficit—2091—is now included in the calculation of the actuarial balance, which worsens the 75-year outlook.
CBO projects larger deficits in Social Security’s finances than do the Social Security Trustees. That difference is largely explained by CBO’s and the trustees’ different projections of several major inputs into estimates of the system’s finances: earnings subject to the Social Security payroll tax, components of GDP growth, the population, and real interest rates (that is, interest rates adjusted to remove the effects of inflation).
Nevertheless, while the CBO projects a small improvement relative to its 2016 figures, the longer-term trend has been troubling. In the mid-2000s, progressives and Congressional Democrats often cited the CBO's projections in preference to the Trustees' figures, because the CBO showed a smaller deficit and this seemingly weakened the case for reform. Since that time, however, the CBO's projected long-term deficit has more than tripled. Both parties should pay attention to the CBO's projections. If the office proves to be correct, the Social Security shortfall will be far larger than either party's preferred policy changes could tackle.

Read more!

Monday, October 30, 2017

New article from the CBO: "Measuring Retirement Income Adequacy"

The Congressional Budget Office has a very nice new study titled "Measuring Retirement Income Adequacy: A Primer," which outlines the economic theory behind retirement income adequacy and the choices of calculation you need to make when applying that theory to data.

The study hits on a number of issues I've discussed in how to measure replacement rates, which are a key shorthand for measuring retirement income adequacy. I appreciate that the CBO cites my work in a couple of places.

The basic theory of retirement saving is the so-called "life cycle model," which -- in simplified terms -- predicts that people will tend to spend the same amount from year to year.

Two key points I'd make regarding how to measure replacement rates, which represent Social Security benefits or total retirement income as a percent of pre-retirement earnings.

First, pre-retirement earnings should be calculated in real, inflation-adjusted terms. These allow you to compare the buying power of retirement income to the purchasing power that the retiree had when he was working. That's how the life cycle model would tend to see things. Social Security's actuaries, by contrast, compare retirement benefits to the "wage-indexed" average of pre-retirement earnings. This overstates the real purchasing power of the retiree's pre-retirement earnings and inappropriately raises the bar on what counts as an adequate retirement income.

Second, if you're calculating replacement rates using administrative data -- meaning, real earning records rather than stylized earners -- you're faced with the issue of whether to include years of zero earnings in the measure of average pre-retirement earnings. The life cycle model says that you should: if people smooth their consumption across years, that means that their average spending will be a function of all their years of earnings, including years of zero earnings. The SSA actuaries include 'zero years' when they calculate replacement rate relative to career-average earnings. But when they calculate replacement rates relative to 'final earnings' -- meaning, earnings in the years approaching retirement -- they exclude zero years. Doing so raises the measure of pre-retirement earnings, and so makes Social Security replacement rates look lower. The actuaries' argument is that there are too many 'zero years' in the years approaching retirement. But as I showed using the actuaries' own data, zero years aren't that much more common in the years immediately preceding retirement than they are earlier in life, when people may leave the workforce due to education, unemployment or child raising.

Where does the rubber meet the road? Well, if you were to ask SSA, they'd tell you that the average person receives a Social Security replacement rate of about 40% and that they need a replacement rate of about 70% in order to maintain their standard of living in retirement. Properly measured, I believe the average Social Security replacement rate isn't 40% but something in the 50-55% range. That helps explain why most retirees say they're doing well, even if they don't seem to have much savings on top of their Social Security.

In any case, the new CBO primer is highly recommended. Many commentators and journalists write about how much is "enough" retirement income, but the reality is that you can't really know what your opinion is until you wrestle with the sorts of choices that the CBO lays out. Read more!

Tuesday, October 17, 2017

Upcoming event: “How employer-sponsored rainy day savings accounts can help workers prepare for emergencies”

Join us Oct. 26 for a discussion of practical steps to increase workers' savings.

Brookings Event Invitation

How employer-sponsored rainy day savings accounts can help workers prepare for emergencies

Thursday, October 26, 2017, 10:30 a.m. – 12:00 p.m.
The Brookings Institution, Falk Auditorium, 1775 Massachusetts Avenue, N.W.
Washington, DC 20036

RSVP to attend in person

RSVP for the webcast

Many Americans live paycheck to paycheck, carry credit card debt, and have little or no money set aside for emergencies such as sickness, car or home repairs, job loss, or economic downturns. One consequence of this financial vulnerability is that many individuals use a portion of their retirement savings during their working years. Research suggests that for every $1 that flows into 401(k)s and similar accounts, between 30¢ and 40¢ leaks out before retirement. Helping American households build up their emergency savings would increase their financial security today and in retirement, and one innovative policy idea for doing that is an employer-sponsored rainy day savings account.
On October 26, the Retirement Security Project at Brookings will host a discussion on the practical considerations and challenges of helping households accumulate rainy day savings for use during their working years. The event will feature a presentation of forthcoming research by David John and Brigitte Madrian on the possibility of using employer-sponsored rainy day savings accounts to help workers prepare for an emergency. Following a presentation of the research, a panel of experts reflect on these options and next steps for policymakers and employers. The speakers will take questions from the audience.
Join the conversation on Twitter using #RainyDaySavings.

Presentation of research

David C. John, Deputy Director, Retirement Security Project
Brigitte C. Madrian, Aetna Professor of Public Policy and Corporate Management, Harvard Kennedy School; Research Associate, National Bureau of Economic Research

Panel discussion

Moderator: William G. Gale, Arjay and Frances Fearing Miller Chair in Federal Economic Policy and Director, Retirement Security Project, The Brookings Institution
Diane Garnick, Chief Income Strategist, TIAA
David C. John, Deputy Director, Retirement Security Project
Brigitte C. Madrian, Aetna Professor of Public Policy and Corporate Management, Harvard Kennedy School; Research Associate, National Bureau of Economic Research
David Newville, Director, Federal Policy, Prosperity Now

Read more!

Upcoming event: “2017 OECD/AARP Seminar: Preventing Aging Unequally”

2017 OECD/AARP Seminar: Preventing Aging Unequally

Join us on Thursday, October 26, 2017 to mark the release of Preventing Aging Unequally, a new OECD report examining population aging and rising inequalities. The report shows how inequalities result in large differences in lifetime earnings across different groups, and suggests a policy agenda to address inequalities along the life course.


Event Agenda
Thursday, October 26, 2017
3:30 – 4:00 p.m.   Registration and refreshments
4:00 – 5:00 p.m.   Program
Featured Speakers

  • Gary Burtless, John C. and Nancy D. Whitehead Chair and Senior Fellow, Economic Studies, Brookings Institution
  • Maurizio Bussolo, Lead Economist, Europe and Central Asia, World Bank Group
  • Stefano Scarpetta, Director Employment, Labor, and Social Affairs, OECD
  • Ramsey Alwin, Director, Financial Resilience, Thought Leadership, AARP (moderating)

Closing Remarks by Debra Whitman, Chief Public Policy Officer, AARP
AARP The Hatchery

575 7th Street, NW
5th Floor
Washington, DC 20004
Please RSVP by October 24 at

Read more!

2018 Sandell Grant Program and 2018 Dissertation Fellowship Program

The Center for Retirement Research at Boston College announces the 2018 Sandell Grant Program and 2018 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.

- Provides the opportunity for junior scholars or senior scholars in a new area 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, 2018. Grant award recipients will be announced by April 2018. - Visit the Sandell Program website to view the proposal guidelines:

- 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, 2018.
- Visit the Dissertation Fellowship website to view the proposal guidelines:

FURTHER INFORMATION: For questions, please contact: Marina Tsiknis,, 617-552-1092

Read more!

New working papers from the Center for Retirement Research

The Center for Retirement Research has recently released six working papers:

The Behavioral and Consumption Effects of Social Security Changes
Wenliang Hou and Geoffrey T. Sanzenbacher

Dementia, Help with Financial Management, and Well-Being
Anek Belbase and Geoffrey T. Sanzenbacher

Can Knowledge Empower Women to Save More for Retirement?
Drew M. Anderson and J. Michael Collins

How Much Does Out-of-Pocket Medical Spending Eat Away at Retirement Income?
Melissa McInerney, Matthew S. Rutledge, and Sara Ellen King

How Much Does Motherhood Cost Women in Social Security Benefits?
Matthew S. Rutledge, Alice Zulkarnain, and Sara Ellen King

Homeownership, Social Insurance, and Old-Age Security in the United States and Europe
Stipica Mudrazija and Barbara A. Butrica

Read more!

Monday, October 16, 2017

New paper: ““What’s Happening to U.S. Mortality Rates?”

The Center for Retirement Research at Boston College has released a new Issue in Brief:

“What’s Happening to U.S. Mortality Rates?”

by Anqi Chen, Alicia H. Munnell, and Geoffrey T. Sanzenbacher

The brief’s key findings are:

  • Mortality rates, which determine life expectancy, are a key factor in cost projections for the Social Security program.
  • Mortality rates consistently improve over time, but the pace of progress varies by year, by age, and by socioeconomic status.
  • Over the past 40 years, progress has been driven by medical advances, better access to health care, and a decline in smoking, partly offset by rising obesity.
  • Looking to the future, mortality improvements will continue to depend on the same drivers, but the net effects could play out differently.
  • The key debate is whether the future will mirror the past, with average rates of improvement of about 1 percent, or whether the pace of progress will slow.

This brief is available here.

Read more!

Friday, October 13, 2017

Upcoming event: “Bold New Approaches to Social Security Reform in the 21st Century”

PPI Website Banner

Bold New Approaches to Social Security Reform in the 21st Century

The most conducive time for crafting innovative policy is not when policymakers are trying to jam legislation through. It’s when the heat of the political spotlight falls elsewhere. And when one of the nation’s most important and relied-on federal programs is the subject of policy reform, fostering an environment conducive to innovation is crucial. On October 19, a set of fresh ideas under development for more than a year will be on full display for dialogue and discussion—key components of crafting good policy in themselves.

Please join the National Academy of Social Insurance and AARP for a day-long exploration of bold new ideas in Social Security policy. A diverse range of policy experts will describe and debate their innovative ideas, many of which have never before been discussed in a public forum. Proposals presented will include those selected in AARP’s Social Security Policy Innovation Challenge as well as other ideas from retirement security experts.

Bold New Approaches to Social Security Reform in the 21st Century
October 19, 2017, 10:00 am — 3:00 pm
Ronald Reagan Building and International Trade Center
Horizon Ballroom
1300 Pennsylvania Ave NW
Washington, DC 20004

Contact Us

PPI Website

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Thursday, October 12, 2017

New paper: “The Behavioral and Consumption Effects of Social Security Changes”

The Behavioral and Consumption Effects of Social Security Changes

by Wenliang HouandGeoffrey T. Sanzenbacher

Social Security’s Trust Fund is projected to be exhausted in 2034. A variety of changes to the program have been put forward that would either push this date out into the future or delay it indefinitely. Some of these changes would cut benefits – e.g., increasing the Full Retirement Age (FRA) to 69 – while others would increase program revenue – e.g., increasing the payroll tax. While Social Security’s Office of the Chief Actuary projects the financial impact on the program of a wide variety of changes, understanding the impact of these changes on recipients’ behavior and well-being is also a valuable exercise. This paper uses the Gustman and Steinmeier structural model to analyze the effects of four changes to the Social Security program on recipients’ retirement timing and household consumption.

This paper found that:

  • The two policies that reduce benefits – an increase in the FRA to 69 and a reduction in the COLA of 0.5 percentage points – would increase the length of workers’ careers by delaying retirement.
  • The two policies that increase revenues – an increase in the payroll tax to 7.75 percent and an increase in the cap to cover 90 percent of earnings – would have a negligible impact on retirement timing.
  • For the benefit-based policies, the reduction in consumption relative to current policy is relatively high post-retirement, with the COLA adjustment having an increasing effect with time.
  • Policies that increase revenue have little effect on consumption after retirement but have a consistent effect during the working life.

The policy implications of this paper are:

  • Policymakers can expect individuals to delay retirement more in response to Social Security changes that reduce benefits than from changes that increase revenue.
  • In terms of consumption, policymakers considering benefit cuts versus revenue increases face a tradeoff: a sharper reduction in consumption over the shorter span of retirement or a smaller, but more prolonged, reduction in consumption during the working life.

Read more!

Monday, October 9, 2017

Michigan Retirement Research Center's Fall Newsletter

MRRC Newsletter: Volume 17, Issue 3 - September 2017


John Laitner recaps highlights from the 2017 RRC meeting.


The annual Retirement Research Consortium meeting showcases the current crop of research projects from the RRC’s three research centers — Michigan Retirement Research Center, NBER Retirement Research Center, and Center for Retirement Research at Boston College. Video, slides, and papers for all the talks are available on the CRR website.


RRC session examines how family dynamics affect wealth, retirement.


While the working papers for most of the projects presented at the RRC meeting will not be available until later this year, other papers on related subjects are available at MRRC’s website. Some suggestions:


Academic publications, media sightings, and conference presentations from our authors. Read more!

Thursday, October 5, 2017

Upcoming Event: Savings and Retirement Foundation, “A Primer on Household Spending in Retirement.”

Join us the afternoon of
October 11, 2017

For a Lunch Meeting with Guest Speaker:

Sudipto Banerjee

Research Associate
Employee Benefit Research Institute
Who will discuss

“A Primer on Household Spending in Retirement”
October 11, 2017
Noon-1:00 p.m.
Cato Institute
1000 Massachusetts Ave., NW
Washington, DC  20001
(Lunch will be provided)


Read more!

Monday, October 2, 2017

New papers from the Social Science Research Network

"Retirement Timing and Pension Incentives: Evidence from the Teachers Retirement System of Texas"

GABRIEL SALINAS, University of Texas at Austin

I exploit unanticipated reforms to the Texas Teacher's pension plan to estimate the effect of pension incentives on retirement decisions. In 2000 and 2002 the Teacher Retirement System increased the benefit levels of all employees covered by the pension system. The reforms provide plausibly exogenous variation in the incentives to work - which differentially impacted workers due to non-linearities in the pension's benefit schedule. I leverage the reforms coupled with the non-linear benefit schedule in an instrumental variables framework to estimate the effect of pension related incentives on the decision to retire. I find substantial heterogeneity between men and women in their response to a one-year incentive to remain in the labor force. Additionally I find that a 10 percent increase in forward looking incentives decreases the probability of retirement by 1.84 percentage points from a baseline of 11 percent.

"Guardianship and the Representative Payee Program"
CRR WP 2017-8 August 2017

ANEK BELBASE, Boston College - Center for Retirement Research
GEOFFREY SANZENBACHER, Boston College Economics Department

Research suggests that 0.3 percent of all adults have been appointed a legal guardian. While the requirements for being placed into guardianship can vary from state to state, a lack of decision-making capacity is a precondition. As a result, one would expect Social Security beneficiaries who have a guardian to also have their guardian act as a representative payee. Yet little is known about the relationship between guardianship and the Representative Payee Program.
In response to a request from the Social Security Administration, this report uses the Survey of Income and Program Participation (SIPP) linked to the Social Security Master Beneficiary File and the Supplemental Security Record to investigate three questions:
1) how many beneficiaries with representative payees have guardians?;
2) how many beneficiaries have their guardian as their payee?; and
3) what are the characteristics of those with both a payee and a guardian.
Because the SIPP does not include individuals residing in nursing homes, the project also examines data from the Health and Retirement Study, which does include these individuals.
This paper found that:
- Guardianship is more common among those in the Representative Payee Program than in the population writ large, with between 5 percent to 11 percent of those with a representative payee also having a guardian, depending on the program and dataset considered.
- For those with both a representative payee and a guardian, the guardian serves as the payee the vast majority of the time.
- Individuals with a representative payee are more likely to have a guardian if they are older, white, and are not living with their representative payee. The policy implications of this paper are:
- While guardianship could lessen the need for representative payees since it provides a protective legal arrangement, few individuals with a representative payee have one.
- As more representative payees are needed with the aging of the Baby Boomers, pre-existing guardians seem unlikely to fill a large portion of the need.

"Family Transfers with Retirement-Aged Adults in the United States: Kin Availability, Wealth Differentials, Geographic Proximity, Gender, and Racial Disparities"

ASHTON VERDERY, Pennsylvania State University
JONATHAN DAW, Pennsylvania State University
COLIN CAMPBELL, East Carolina University
RACHEL MARGOLIS, University of Western Ontario

This paper examines transfers of time and money between retirees and their children. It uses data from the Panel Study of Income Dynamics to test whether numbers of children, parent-child wealth differentials, geographic proximity, and gender contribute to racial and ethnic differences in transfers of time and money between retirement-aged adults and their children. Critical components of the analysis include measuring kin availability, the spatial and social embeddedness of family networks, supply as well as demand for transfers, and gender. Key limitations are that we exclude those who have no living family members with whom they could transfer, and we do not examine the role of non-familial transfers.
The paper found that:
-There are large racial disparities in family transfers; non-White older adults are less likely to give either time or money transfers to their children than White older adults. Non-White older adults are also less likely to receive time transfers from their children, but they are more likely to receive money transfers from them.
-Having more children is associated with marginal declines in the likelihood of transfer with each child, but an overall increase in the likelihood of transfer with any child.
-Parents who live closer to their children tend to provide more time to them and receive more time from them, while those in the same family provide more money.
-Parents who are relatively wealthier than their children are more likely to give them money and are less likely to receive time or money from them.
-Racial disparities in transfers appear to be growing across parental birth cohorts.
The policy implications of these findings are:
-Challenges regarding retiree financial security and the availability of informal care from family members are likely to grow because adults with fewer children receive less overall support than those with many children, and historical declines in birth rates mean that more older adults increasingly have fewer children.
-Older adults may be more likely to receive instrumental care, but not financial support, from their children in the future, because people are increasingly likely to live close to their children, and closer children are more likely to provide such care.
-There may be especially large unmet financial and instrumental needs for female and non-White population subgroups of retirees.

"Pension Plan Heterogeneity and Retirement Behavior"

NEHA BAIROLIYA, Harvard University

This paper examines the role of the shift in pension plans — from Defined Benefit to Defined Contribution — in explaining the recent increase in labor supply of older workers. A structural model of consumption, savings, Social Security, and pension plan heterogeneity is estimated using data from the Health and Retirement Study. Model simulations indicate that changes in pension plan composition can explain 10% to 30% percent of the recent increase in labor force participation of the age group 65-69, while changes in Social Security rules can explain less than a quarter of the increase in labor supply for this group.

Read more!

CBPP: “Understanding the Trust Funds.”

The Center on Budget and Policy Priorities has published a “Policy Basics” article providing background on the Social Security Trust Funds and how they work.

Few budgetary concepts generate as much unintended confusion and deliberate misinformation as the Social Security trust funds. Despite being described by some as “funny money,” or “IOUs,” the Social Security trust funds are invested in Treasury securities that are just as sound as the U.S. government securities held by investors around the globe; investors regard those securities as being among the world’s safest investments. Although Social Security has a long-term financial shortfall that must be closed, the program’s combined trust funds will not be depleted until around 2034, which gives policymakers time to develop a carefully crafted solvency plan.

You can read the whole document here.

It’s a good piece as far as it goes, but a casual reader of the Center’s article wouldn’t come out understanding why there’s much controversy regarding the funds and whether they’re “real.”

I tried to provide some background on that issue in this 2008 post, one of the first I made to this blog. I think it’s helpful in making the controversy over the trust funds easier to understand.

Read more!

Wednesday, September 27, 2017

Pelosi Appoints Nancy Altman to Social Security Advisory Board

Washington, D.C. – Democratic Leader Nancy Pelosi announced that she will appoint Nancy Altman to the Social Security Advisory Board.  The Board is a bipartisan, independent federal government agency established to advise the President, the Congress, and the Commissioner of Social Security on matters of policy and administration of the Old-age, Survivors and Disability Insurance and the Supplemental Security Income programs.
“Nancy Altman is a widely respected voice on the need to protect and strengthen Social Security for future generations,” said Leader Pelosi. “Nancy brings the strength of expertise forged in decades of experience and strategic advocacy.  She understands the threats facing this vital pillar of Americans’ retirement security, and its enormous importance to the lives of seniors and their families.  Nancy will be a wise and tough champion for our seniors on the Social Security Advisory Board.”
Altman is the co-founder and president of the Strengthen Social Security Coalition and Social Security Works, and served on the faculty of Harvard University.  She is a graduate of Harvard and the University of Pennsylvania Law School.
Read more!

Tuesday, September 26, 2017

New paper: “What’s Happening to U.S. Mortality Rates?”

The Center for Retirement Research at Boston College has released a new Issue in Brief:

“What’s Happening to U.S. Mortality Rates?”

by Anqi Chen, Alicia H. Munnell, and Geoffrey T. Sanzenbacher

The brief’s key findings are:

  • Mortality rates, which determine life expectancy, are a key factor in cost projections for the Social Security program.
  • Mortality rates consistently improve over time, but the pace of progress varies by year, by age, and by socioeconomic status.
  • Over the past 40 years, progress has been driven by medical advances, better access to health care, and a decline in smoking, partly offset by rising obesity.
  • Looking to the future, mortality improvements will continue to depend on the same drivers, but the net effects could play out differently.
  • The key debate is whether the future will mirror the past, with average rates of improvement of about 1 percent, or whether the pace of progress will slow.
This brief is available here. Read more!

Monday, September 18, 2017

Did the Social Security Deficit Sneak Up On Us?

Writing for MarketWatch, Alicia Munnell of Boston College explains why the long-term Social Security deficit has been increasing, arguing that it’s not that Social Security’s financing has been worsening so much as that the way we’re measuring Social Security’s finances will naturally lead to a larger deficit over time.

“In 1983 — the last year for any major legislation — the Trustees projected was a small surplus over the 75-year period (1983-2057). Almost immediately after that legislation, however, deficits appeared and increased markedly in the early 1990s, then dipped for a while, and then rose to around 2.7% where it has remained in the last six years.”

“The question is why the program moved from a 75-year surplus of 0.02% of taxable payroll in 1983 to today’s 75-year deficit of 2.83%. As shown in the table below, the major reason for this swing is the impact of changing the valuation period. That is, the 1983 report looked at the system’s finances over the period 1983-2057; the projection period for the 2017 report is 2017-2091. Since Social Security costs are rising with the retirement of the baby boomers, each time the valuation period moves out one year it picks up a year with a large negative balance. This moving the period forward is responsible for the bulk of today’s deficit — 1.97 of the 2.83% of taxable payroll.”

Munnell is correct, but I think she misses an important point. Policy analysts have long been aware of this “measurement window” problem: if you measure Social Security’s finances over the next 75 years, then with every passing year you’ll be picking up a new 75th year. And since those distant years are ones with big deficits, each year the 75-year Social Security deficit will increase. So in that sense, a rising Social Security deficit is entirely predictable.

The problem is that we don’t have to measure Social Security’s finances over only 75 years. Beginning in 2003, Social Security’s Trustees included in their report a measurement of the program’s finances over the “infinite horizon.” This found a substantially larger long-term long-term deficit – 3.5% of payroll in the 2004 Trustees Report, versus 1.8% over 75-years.

But the infinite horizon actuarial balance has the advantage of not rising simply due to the passage of time. So the current infinite horizon shortfall of 4.2% measured in the 2017 Trustees Report represents changes not to the measurement period, meaning either negative experiences since 2004 or more pessimistic assumptions about future economic or demographic variables.

So why don’t policymakers rely principally on the infinite horizon measure? It’s mainly not because it’s less accurate: most of the supposedly “infinite" funding shortfall is actually accounted for by things that already have happened or are predicted to occur during the next 75 years. The main reason policymakers don’t use the infinite horizon figure is that it makes the Social Security funding problem seem larger, and a larger problem is harder to solve. And elected officials don’t like hard problems.

Read more!

Monday, September 11, 2017

CRFB: “Are Today's Seniors Facing a ‘Retirement Crisis?’”

The Committee for a Responsible Federal Budget has a nice write-up of a recent AEI event on retirement incomes, which showed that retirees of all income levels are substantially better off and have lower poverty rates than you’d guess by reading official U.S. government statistics.

An event last Wednesday at the American Enterprise Institute showcased two new studies that use actual tax data from the IRS—rather than flawed survey data—to  get a better idea of how retirees are doing financially.

The first paper, authored by economists at the Investment Company Institute and the IRS, used data from a large sample of taxpayers to examine what happened to individuals’ inflation-adjusted disposable income up to three years after they claim Social Security retirement benefits. On average, individuals’ work-related income (wages, Social Security benefits, and retirement income from pensions, annuities and savings accounts) net of federal taxes stays roughly constant in three years after they claim Social Security; gross work-related income drops about 10 percent, but lower federal income and payroll taxes offset about 80 percent of this decline.

In fact, mean net incomes actually rise slightly for the lowest income groups, and are basically maintained for all but the highest-earners (who still enjoy sizeable incomes). This is true even among individuals who are no longer working.

Click here to read the whole article – it’s a great summary of what’s going on with retirement incomes.

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Smith: “How Would Dismantling Obamacare Impact Social Security?”

Writing at, Brenton Smith looks at how repealing the Affordable Care Act might impact Social Security:

Why? The ACA added about $1 trillion of projected revenue to the program in 2010 (see the comments for details). At the time, economists believed that this legislation would cause paychecks to rise as healthcare costs are reduced. This sequence is great for Social Security because compensation will shift from healthcare premiums that are exempt from payroll taxes to wages that are taxable.

I am not saying that the ACA was smart legislation, nor that laws by themselves will control the cost of healthcare. The point here is that the Trustees assume that it would push the cost of health insurance down and consequently the paychecks of workers higher.

I agree with the theory. I’ve argued in the past that rising employer health costs have eaten away at employee wages, especially for low and middle earners, thereby reducing the wages taxed by Social Security. If we can reduce employer health costs, that should increase wages and tax revenues.

Obviously, whether the ACT actually will reduce health costs, and by how much, isn’t really known. But if Congress repealed the ACA, you could expect the Social Security Trustees to project a somewhat larger long-term deficit. 

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Upcoming event: RAND Behavioral Finance Forum 2017

RAND Behavioral Finance Forum 2017

Promoting Consumer Competence in Financial Decision-Making

Tuesday, October 24, 2017, 8:30 a.m. – 5:15 p.m. ET

The Pew Charitable Trusts
901 E Conference Center
901 E Street, NW
Washington, D.C.


The RAND Behavioral Finance (BeFi) Forum brings together academic, financial, and government leaders to share cutting-edge behavioral research in financial decision making and related topics through an annual conference and webinar series.

This year's forum will focus on financial decision-making as it relates to aging, debt and credit, retirement planning, and investments and disclosure. Presentations include a mix of studies from academics, policy makers, and industry working to better understand financial decisions.

BeFi Forum Program

Agenda is subject to change. All times are Eastern.


8:30 - 9:00 a.m.


RAND Corporation and the Pew Charitable Trusts

9:00 - 9:15 a.m.


9:15 - 10:15 a.m.

Aging and Decision-Making Competence
Wändi Bruine de Bruin, Leeds University Business School


10:15 - 10:30 a.m.


Using Behavioral Insights to Support Retirement Planning

10:30 - 11:45 a.m.

Costly Zero Bias in Target Retirement Fund Choice
Xiao Liu, New York University

A Community Based Randomized Controlled Trial on an Educational Intervention “YoPlaneoMiRetiro” to Promote Retirement Saving Among Hispanics
Luisa Blanco, Pepperdine University

Improving engagement with pension decisions: evidence from a randomised controlled trial
Elisabeth Costa, The Behavioral Insights Team


11:45 - 12:15 p.m.


12:15 - 1:00 p.m.

Borrowing to Save? The Impact of Automatic Enrollment on Debt
Brigitte Madrian, Harvard Kennedy School


Consumer Credit Behavior

1:00 - 2:15 p.m.

Status Goods: Experimental Evidence from Platinum Credit Cards
Martin Kanz, World Bank

Do Prize-Linked Incentives Promote Positive Financial Behavior? Evidence from a Debt Reduction Intervention
Jeremy Burke University of Southern California

Don't Watch Me Read: Effects of Mandatory Waiting Periods and Observer Presence on Consumer Responses to Disclosures
Alycia Chin, Consumer Financial Protection Bureau


2:15 - 2:30 p.m.


Providing Information to Investors

2:30 - 3:45 p.m.

Does Changing How Fees Are Displayed Nudge Investors Away From Overpriced Index ETFs?: Evidence from Two Experiments
Ray Sin, Morningstar, Inc.

Can Financial Disclosures Be More Effective If They Are Interactive?
TBD, New York University

Learning and Confirmation Bias: How First Impressions and Ambiguous Signals Influence Perceptions of Financial Ad
Julie Agnew, College of William and Mary


3:45 - 4:00 p.m.


The Impact of Peers on Financial Decisions

4:00 - 5:15 p.m.

Peer Advice on Financial Decisions: A case of the blind leading the blind?
Sandro Ambuehl, University of Toronto

Raising Anchor for Behavioral Interventions: Evidence in Favor of Peer Effects
Pieter Verhallen, Maastricht University

Prompting Savings Behavior through Social Comparison
Martina Raue, Massachusetts Institute of Technology


5:15 p.m.

Register for this Program

Please register for this event online.

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Friday, September 8, 2017

New papers from the Social Science Research Network

"Hispanics’ Understanding of Social Security and the Implications for Retirement Security: A Qualitative Study" Free Download
Social Security Bulletin: 77(3): 1-14 (2017)

LILA RABINOVICH, Center for Economic and Social Research (CESR)
JANICE PETERSON, California State University
BARBARA A. SMITH, Government of the United States of America, Social Security Administration, Office of Retirement Policy

This article discusses why effective outreach to Hispanics is important to improve their understanding of Social Security and enhance their retirement security. It examines Social Security literacy and preferred ways of receiving information about the program by using focus groups of three ancestries (Mexican, Puerto Rican, and Cuban) and of English and Spanish speakers. This article is one of the first to research between-group differences and discuss their implications.

"The Rotten Deal: Managed Mutual Funds and Retirement Income" Free Download

DAVID W. RASMUSSEN, Pepper Institute on Aging and Public Policy

About 70 percent of mutual fund assets are in managed funds. These funds seek to earn an above average return for investors but, because of the up-front loads, fees and other costs, they generally earn less than the low cost index funds that only seek to get a return equal to that of the stock market. Investors can expect their retirement savings to be reduced by 25 percent or more by favoring managed funds over index funds. The costs imposed on investors in managed funds result in tens of billions of dollars in profit for the industry. Compromised retirement savings is of public concern if government programs are going to support elderly households in need. Two policy options are explored. One is focused on educating investors about the rotten deal offered by managed funds while the other is to impose a fiduciary responsibility on the industry that requires them to act in the best interests of its clients. There is ample evidence that the industry will vigorously combat such efforts.

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Thursday, September 7, 2017

Ways and Means Hearing on Disability Backlogs

On September 6, the Social Security Subcommittee of he House Ways and Means Committee held a hearing titled

“Determining Eligibility for Disability Benefits: Challenges Facing the Social Security Administration.”

The hearing video is available at the Subcommittee’s webpage, while you can download the written testimony below.

Witness List

Bea Disman
Acting Chief of Staff, Social Security Administration

Kathryn Larin
Director of Education, Workforce, and Income Security Issues, Government Accountability Office

Elizabeth McLaren
Bureau Chief, Iowa Disability Determination Services on behalf of National Council of Disability Determination Directors

Marilyn Zahm
President, Association of Administrative Law Judges

Lisa Ekman
Director of Government Affairs, National Organization of Social Security Claimants’ Representatives on behalf of the Consortium for Citizens with Disabilities Social Security Task Force

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Tuesday, September 5, 2017

Social Security Advisory Board Releases Annual Report

Social Security Advisory Board

Board releases 2016 annual report

The Board is pleased to release the 19th Annual Report of the Social Security Advisory Board. The annual report is also available on the Board’s website ( It chronicles the events and activities in which the Board engaged in during 2016.

The Board continued its study of representative payees and published the report A Call to Action outlining the growing need for payees and a thorough review of Social Security Administration (SSA) policy and procedures. In its Supplemental Security Income (SSI) statement (published in SSA’s Annual Report of the SSI Program), the Board continued discussing payee issues and concerns, highlighting growing awareness of a model that supports, rather than replaces, a person’s financial decision making authority.

Following the Board sponsored report of the 2015 Technical Panel on Assumptions and Methods, the Board decided to explore in more detail how the Social Security trustees project labor force participation and the effect of those projections on trust fund finances. In the spring of 2016, the Board commissioned an independent technical panel of five eminent labor economists to focus on explaining trends in labor force participation and the methods used to project participation rates into the future. The panel’s completed report was issued in 2017.

The passage of the 2015 Bipartisan Budget Act included a requirement for SSA to field a  demonstration project to study the effects on earnings of a voluntary offset of disability benefits  offered to beneficiaries who attempt work. The Board commissioned a report to differentiate and discuss the new demonstration project with an earlier demonstration project. The independent report was released in the spring of 2016.

In July, the Board held a public forum to discuss some of the complexity inherent in the SSI program. The event, held in Washington, D.C., brought together experts in the field to discuss resource limits and in-kind support and maintenance rules as well as the experiences of young recipients navigating the program. The forum generated some surprising bipartisanship around the need for a less complex program, automatic cost of living increases and stronger incentives for both youth and adult recipients to attempt work and earnings.

Throughout the year, the Board met month-by-month in furtherance of its mission to understand and report on the administrative challenges facing the agency and how those challenges impact program beneficiaries and the public writ large. The Board met with the Acting Commissioner of Social Security, SSA executives, and staff, with policymakers on Capitol Hill, and advocates. The Board traveled to San Francisco for meetings with regional management and employees from the field, hearing office and processing center operations as well as local stakeholders to learn firsthand how policy made in Washington and Baltimore translates on the ground and in the lives of real people.

The Board saw significant changes in its membership in 2016, as Dorcas Hardy and Alan Cohen finished their terms, and Kim Hildred joined the Board in September. The Board is grateful to Alan and Dorcas for their service and innumerable contributions to the work of the Board. 

The Board is proud of its bipartisan work and looks forward to continued efforts to improve Social Security programs for the American people. 

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Friday, September 1, 2017

New paper: “Social Security Claiming Decisions: Survey Evidence”

Social Security Claiming Decisions: Survey Evidence

John B. Shoven, Sita Nataraj Slavov, David A. Wise

NBER Working Paper No. 23729
Issued in August 2017
NBER Program(s):   AG PE

While research shows that there are large gains in lifetime wealth from delaying claiming Social Security, most people claim at or before full retirement age. We fielded an original, nationally representative survey to gain insight into people’s rationales for their Social Security claiming decisions, their satisfaction with their past claiming decisions, and how they financed any gap between retirement and claiming. Common rationales for claiming Social Security before full retirement age include stopping work, liquidity, poor health, and concerns about future benefit cuts due to policy changes. Claiming upon stopping work and claiming at full retirement age appear to be viewed as social norms. But while Social Security claiming is strongly associated with stopping work, the roughly quarter of the sample who have a gap of two or more years between retirement and claiming used employer-sponsored pensions and other saving to finance the delay. Individuals who claimed at full retirement age are more satisfied with their claiming decisions than individuals who claimed early or delayed. There is little evidence that claiming decisions and rationales for claiming are correlated with financial literacy or knowledge of Social Security rules.

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Friday, August 25, 2017

Memo to Trump: There Is No Looming ‘Retirement Crisis’

I have a piece in today’s Wall Street Journal looking at new research showing that retiree’s incomes are substantially higher than previously thought. I’ve argued in other pieces that household surveys, in which respondents are asked how much income they receive from various sources, significantly underestimate the incomes retirees receive from private retirement plans like DB pensions and 401(k)s. As a result, incomes seem lower, poverty rates higher, and retirees more dependent on Social Security benefits.

But new research from two Census Bureau economists instead uses IRS tax data, which is much more accurate. They find a number of very interesting facts with regard to retirement incomes:

  • Incomes are substantially higher you’d think from relying on the usual household survey data.
  • The percentage of Americans who are receiving private retirement plans benefits is increasing, and those benefits are rising.
  • Most retirees have incomes that very closely match their pre-retirement incomes, far exceeding the 70% “replacement rate” that financial advisors recommend.

You can find some of the article here at AEI’s webpage; the full piece will be posted there in a few days.

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New papers from the Social Science Research Network

"Welfare Implications of a Flexible Retirement Policy"

ZHENHUA FENG, Tsinghua University - Institute of Economics
JAIMIE W. LIEN, The Chinese University of Hong Kong (CUHK) - Department of Decision Sciences & Managerial Economics
JIE ZHENG, Tsinghua University - School of Economics & Management

Facing lengthening lifespans and economic concerns, workers and governments are increasingly considering the possibility of delayed retirement ages. However, the postponement of retirement may not be universally feasible, since not all workers may be willing and able to continue working past the standard retirement age, due to health status and other factors. We model this uncertain retirement problem in an overlapping generations general equilibrium framework with flexible retirement, where members of the older generation continue working with some probability, and otherwise retire. Comparing the policies of flexible retirement and mandatory retirement, we find that the consumption and welfare consequences depend largely on the labor intensity of the production function. Higher labor intensity of production tends to yield favorable social welfare results for the flexible retirement policy compared to the mandatory policy. We discuss policy insights and possible implications in China and other demographically shifting countries.

"Funding Life Insurance Contracts with Guarantees: How Can We Optimally Respond to the Policyholder's Needs?"

AN CHEN, University of Ulm
PETER HIEBER, University of Ulm - Department of Mathematics and Economics
THAI NGUYEN, University of Ulm - Institute of Insurance Science

Due to the increasing solvency requirements for return guarantees and a general decrease in interest rate levels, the attractiveness of equity-linked life insurance contracts with guarantee has recently substantially decreased. To regain competitiveness for these products, insurance companies need to be more flexible in their contract design and think of tailor-made retirement products that still satisfy the policyholder's needs. One such possibility is to adapt the investment strategy of the premium pool according to the policyholder's preferences. In this article, we determine the investment strategy that maximizes the expected utility of the policyholder's insurance contract payoff. Taking into account that retirement products are usually tax-privileged, we find that fairly priced guarantee contracts that follow this optimal investment strategy lead to a higher expected utility than asset investments.

"What Happens When Investors Have More Choices?"

CLAIRE YURONG HONG, Hong Kong University of Science & Technology (HKUST) - Department of Finance

This paper studies pension funds' responses when investors are given more choices. Hong Kong launched the Employee Choice Arrangement in November 2012, which dramatically expanded investors' choice set. I find that funds charge lower fees, exhibit lower fee dispersion, and are less active after the reform. Further analysis suggests that a fund's decision to reduce fee or be active is driven by investors' demand – funds cater to investors by reducing fees when flows are less sensitive to activeness but more sensitive to fee. Importantly, a larger investor choice set improves investors' wealth mainly indirectly through endogenous fund responses, rather than through participants' better capital allocations.

"Human Capital, Social Security, and Asset Allocation"

GORDON IRLAM, Independent

Numerical stochastic dynamic programming is used to explore the effects of stochastic human capital and Social Security on optimal asset allocation and consumption decisions over the lifecycle for typical individuals. Optimal asset allocations are very stock heavy pre-retirement, and quite stock heavy post retirement. Individuals should adopt declining equity allocations while employed, and level to slightly rising equity allocations during a stochastic retirement. Early in the working years almost the entire income should be consumed. Consumption should typically continue to increase until late in retirement, when it will be forced to fall.

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