Monday, January 23, 2017
Upcoming event: “Improving opportunity for people with disabilities: Understanding trends and effective return-to-work strategies”
New paper: "Would Reducing the Price of Employing an Older Worker Improve Labor Market Outcomes by Socioeconomic Status? Evidence from Health Insurance Premium Restrictions"
Delaying retirement improves retirement preparedness, but older workers cannot work longer if employers do not hire or retain them. This study examines one way in which public policy potentially makes older workers more attractive to employers: state regulatory restrictions on how much employer premiums are permitted to increase at small firms with older, unhealthier workforces. The study uses data from the Current Population Survey from 1989-2013 to compare older individuals’ overall employment, small-firm employment, and earnings in states with varying degrees of premium regulation, and among workers of different educational backgrounds. The analysis shows mixed results. Stronger premium regulations were not effective in increasing employment: employment at small firms, which are most sensitive to premium increases, saw no statistically significant increase, and overall employment for older workers at both large and small firms increased only slightly. The earnings gap between large and small firms is also smaller in states with tighter restrictions, but older workers were not helped appreciably more than younger workers. These results suggest that indirect efforts to lower the price of hiring an older worker are not likely to be effective in improving their job prospects.Read more!
New paper: “Optimal Social Security Claiming Behavior under Lump Sum Incentives: Theory and Evidence”
Optimal Social Security Claiming Behavior under Lump Sum Incentives: Theory and Evidence
by Raimond Maurer, Olivia S. Mitchell, Ralph Rogalla, Tatjana Schimetschek
People who delay claiming Social Security receive higher lifelong benefits upon retirement. We survey individuals on their willingness to delay claiming later, if they could receive a lump sum in lieu of a higher annuity payment. Using a moment-matching approach, we calibrate a lifecycle model tracking observed claiming patterns under current rules and predict optimal claiming outcomes under the lump sum approach. Our model correctly predicts that early claimers under current rules would delay claiming most when offered actuarially fair lump sums, and for lump sums worth 87% as much, claiming ages would still be higher than at present.Read more!
Tuesday, January 17, 2017
Monday, January 16, 2017
CBO’s Long-Term Projections of Labor Force Participation
By Joshua Montes, Xiaotong Niu, and Julie Topoleski. January 13, 2017.
This article outlines one of the underlying assumptions for the CBO’s Social Security projections, and explains one reason why CBO projects a larger long-term funding shortfall than do the Social Security trustees.
Check it out here.
Friday, January 13, 2017
January 2017, No. 17-02
The Effects of Collecting Income Taxes on Social Security Benefits
John Bailey Jones and Yue Li, Federal Reserve Bank of Richmond
Since 1983, Social Security benefits have been subject to income taxation, a provision that can significantly increase the marginal income tax rate for older individuals. To assess the impact of this tax, we construct and calibrate a detailed life-cycle model of labor supply, saving, and Social Security claiming. We find that in a long-run stationary environment, replacing the taxation of Social Security benefits with a revenue-equivalent increase in the payroll tax would significantly increase labor supply, consumption and welfare. From an ex-ante perspective an even more desirable reform would be to make the portion of benefits subject to income taxes completely independent of other income.Read more!
Over at MarketWatch, Alicia Munnell writes of what she calls “a very simple” proposal for a minimum Social Security benefit, something the program currently lacks. The idea is based on a proposal from Steve Sass of the Center for Retirement Research, of which Munnell is the director.
The idea is a little technical, but is worth thinking about. You can read Munnell’s article here.Read more!
Chuck Blahous of the Mercatus Center writes on Social Security reform for e21:
Reasonable people can and do make different value judgments about how best to stabilize Social Security finances. But for those who want to avoid tax increases, who wish to correct problematic work disincentives, and who wish to protect low-wage workers while requiring those with higher incomes to bear the cost of achieving financial stability, the [Rep. Sam] Johnson proposal shows how these goals can be achieved.
Read the whole article here.Read more!
Tuesday, January 10, 2017
A long-term budget for entitlements and required revenues
Entitlement programs in America have a long-term effect on the country’s fiscal and economic condition, but today’s budget-making procedures fail to provide an orderly pathway for helping to resolve disputes about long-term fiscal goals and commitments to Americans.
In “A long-term budget for entitlements and required revenues,” Stuart M. Butler and Maya MacGuineas propose a procedure to establish a long-term budget for entitlements, and revenues to sustain them, as part of a reformed federal budget process. The procedure for enacting and revising the long-term budget would have two elements:
- Element 1: Congress would enact a 25-year spending plan for the major entitlements, along with a clear funding plan to cover their cost. A long-term budget would also include tax expenditures. The funding plan could include dedicated taxes (e.g., a payroll tax), other revenues, or specified savings from other programs. The long-term budget would be the default for these areas of spending and revenues unless Congress made explicit changes during a formal review conducted every four years after a presidential election.
- Element 2: To maintain the long-term budget as the default, we propose an “inside-outside” approach. A commission chosen by Congress and the president would regularly design and implement a package of spending and/or revenue adjustments to keep the long-term budget on track; but a bipartisan and bicameral congressional super-committee could develop an alternative package which would take effect if enacted using an expedited procedure.
Wednesday, January 4, 2017
I write about trends in retirement saving over at Forbes.
We can't know what the "right" level of retirement saving is for any given household. But the trends are toward more Americans saving more for retirement. If you're concerned about undersaving for retirement, the 401(k) revolution is looking to be a success.
Check it out here.Read more!