Monday, July 16, 2018

Smith: Fixing Social Security starts with the voters

Writing for Market Watch, Brenton Smith argues that the responsibility for the failure to enact Social Security reform isn’t merely Congress’s fault; rather, it’s due to voters who don’t have a strong understanding of the program and the problems it faces:

Here’s a hard truth: Politicians are not problem solvers. They are consensus builders, distilling a range of ideas into actionable legislation. It is their job to shake hands and scratch backs until sufficient agreement emerges that a proposal is generally acceptable to voters.

In order for that process to thrive, there has to be some fabric of fact on which to build consensus. Today that foundation does not exist. Instead, the discussion of Social Security has devolved into a contentious shouting match in which hyperbole and myth frequently pass for truth. No sensible politician will attempt to build agreement in that forum of discussion.

I think Smith is partly true. Yes, voters don’t understand Social Security policy very well. Guess what? Members of Congress don’t understand it too well either.

But I think they both understand it well enough. The root of the problem, as I see it, is that – for all the talk of  helping our grandchildren – both voters and politicians selfish. Voters, or at least the median voter, would prefer to stick tomorrow’s generation with the tough decisions rather than having to bear those costs today. Politicians would rather acquiesce to that than lose re-election.

This, I think, is a major reason why educational campaigns on Social Security (or Medicare, or the debt) haven’t succeeded. The problem isn’t a lack of knowledge, although that knowledge deficit surely exists. It’s human nature, a desire to favor yourself over other people, even if those other people are your grandchildren.

Read more!

Thursday, June 14, 2018

Commentary on the 2018 Social Security Trustees Report

On June 5 the Social Security Trustees released their 2018 report on the program’s finances. Not much change: the 75-year actuarial deficit increased by a minute amount to 2.84% of wages while the date of the trust fund’s projected insolvency remained steady at 2034.

Following are some articles commenting or providing insight onto the Trustees Report.

The Trustees summary of their report.

  • A letter from the two former public trustees, Chuck Blahous and Robert Reischauer.
  • Marc Goldwein: As Demagogues Squawk, Clock is Ticking on Social Security.
  • Video of the Committee for a Responsible Federal Budget’s event on the Trustees Report.
  • Elizabeth Bauer: Who's Afraid Of The Big, Bad Old Age Dependency Ratio? and Against Social Security Anti-Chicken-Little-ism (On The Social Security Trustees' Report)
  • Andrew Biggs: Social Security Reform, Back Where We Started.
  • Alicia Munnell: Social Security’s Financial Outlook: The 2018 Update in Perspective.
Read more!

Thursday, May 31, 2018

SSA Policy Job Openings!

The Social Security Administration (SSA) is looking for two individuals to serve in leadership roles within its Office of Research, Evaluation, and Statistics (ORES) as the Office’s Associate Commissioner (AC) and Chief Research and Data Officer (CRDO). The AC will report directly to the Deputy Commissioner and Assistant Deputy Commissioner for the Office of Retirement and Disability Policy (ORDP), while the CRDO will report directly to the AC for ORES. The office has locations in Woodlawn, MD and Washington DC. Duty location will be determined based on the selectee for the position; however, regular travel between the two offices is expected.

The AC for ORES has responsibility for the broad research, evaluation, and statistical programs of SSA, including the:

· Study of problems of poverty and insecurity;

· Examination of expected or projected outcomes from current or modified program rules; and

· Evaluation of proposed solutions to such problems by social insurance and related programs.

The AC is also responsible for:

· Advising senior Agency officials on research findings relating to Social Security reform;

· Responding to information requests from Agency, Administration and Congressional policy makers; and

· Participating in formulating Agency-level policy and program planning.

S/he represents the research, evaluation, and statistical interests of SSA at meetings or on committees with other Government agencies, including the Interagency Council on Statistical Policy colleges and universities, research centers, and other professional organizations. As such, the incumbent makes commitments concerning research, evaluation and statistical projects and activities to be carried out, and the products to be supplied. 

Candidates for the AC position must have professional experience at a senior level (equivalent to the GS-15 in either the General Schedule (GS) or a comparable pay plan) and demonstrate via their resume and application their level of experience for each of the Executive Core Qualifications (ECQs) that are included in the job posting.

The CRDO meanwhile will oversee the technical aspects of the office's comprehensive research and statistics program to support social security policy development and inform policymakers, the public and external stakeholders on a spectrum of critical social security issues. Responsibilities for the position include:

· Developing the agency's portfolio of short and long-term research projects;

· Ensuring the scientific integrity of SSA’s intramural and extramural research products, developing program data used to inform policy decisions, authoring peer-reviewed articles on research project findings in professional journals, and improving the use of research results in decision making throughout the agency;

· Advising management regarding the statistical processes/practices the organization is responsible for engaging in as a formally recognized federal statistical agency producing statistics on SSA's social welfare programs;

· Presenting agency research projects before Congress, the Office of Management and Budget, the Interagency Council on Statistical Policy, colleges and universities, research centers, other professional organizations, and external monitoring authorities such as the Government Accountability Office, the Social Security Advisory Board, and the Office of Inspector General; and

· Fostering research, evaluation and statistical projects that tie into the Social Security research program via extramural mechanisms.

Applicants to the CRDO position must possess progressive research experience at a senior analytical/scientific level, including substantial specialized experience managing extramural social science research programs, and demonstrated experience and ability designing a portfolio of internal social science research projects. Typically, experience of this nature will have been gained at or above the GS-15, comparable pay band or level above in the federal government; or comparable position with a state or local government, or private sector organization. Applicants are required to address each of the mandatory technical qualifications (TQ) statements included in the job posting to substantiate their technical knowledge and abilities.

The complete vacancy announcement for both jobs can be found on USAJOBS; direct link below. Interested applicants may apply to one or both of the vacancies:

Associate Commissioner                   SSA-EX-500

Chief Research and Data Officer       SSA-SL-004

Read more!

Tuesday, May 29, 2018

New paper: “What Explains the Widening Gap in Retirement Ages by Education?”

“What Explains the Widening Gap in Retirement Ages by Education?”

by Matthew S. Rutledge

The brief's key findings are:

  • The increase in the average retirement age has been driven almost solely by those with more education.
  • Those with less education have:
    • seen less improvement in health;
    • faced more physically demanding jobs and less flexible work schedules;
    • experienced slower increases in lifespans, meaning less to gain from delaying Social Security; and
    • seen steeper drops in marriage rates, providing less incentive to work longer in order to retire with a younger spouse.
  • These trends make it harder for those with less education to achieve a secure retirement.

This brief is available here. Read more!

Thursday, May 24, 2018

New paper: “Modernizing Social Security: An Overview”

Modernizing Social Security: An Overview

by Alicia H. Munnell and Andrew D. Eschtruth
IB#18-9

The brief’s key findings are:

  • Many policy experts support targeted changes to Social Security benefits for vulnerable groups, such as caregivers, widows, the very old, and low earners
  • Several of these changes have been endorsed by bipartisan groups, which indicates the potential for widespread support.
  • Such changes, by themselves, would raise Social Security’s long-term deficit.
  • But if the cost increases were offset by reducing other benefits, Social Security could be modernized in a way that is both effective and cost-neutral.
  • Further briefs in this series will evaluate the policy options for specific groups in more detail, including potential offsets to cover the costs.

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Monday, May 21, 2018

New papers from the National Bureau of Economic Research

Labor Force Participation of the Elderly in Japan by Takashi Oshio, Emiko Usui, Satoshi Shimizutani - #24614 (AG PE)

Abstract:

Japan experienced increases in labor force participation (LFP) of the elderly in recent years, as have other advanced countries.

In the present study, we overview the employment trend of the elderly in Japan, and examine what factors have contributed to its increase since the early 2000s. Improved health and longevity, increasing education levels, and a shift towards less physically demanding jobs have allowed the elderly to stay longer in the labor force. However, elderly employment rebound and its timing are more closely linked to changes in social security incentives, especially increases in the eligibility age for public pension benefits. More broadly, reduced generosity in social security programs since the mid-1980s has been a key driver of the long-term trend change in elderly employment. A series of social security reforms have helped utilize the elderly's potential work capacity, accumulated due to improving health conditions and other favorable factors for LFP in the elderly.

http://papers.nber.org/papers/w24614?utm_campaign=ntw&utm_medium=email&utm_source=ntw

Long-run Trends in the Economic Activity of Older People in the UK by James Banks, Carl Emmerson, Gemma Tetlow - #24606 (AG)

Abstract:

We document employment rates of older men and women in the UK over the last forty years. In both cases growth in employment since the mid 1990s has been stronger than for younger age groups. On average, older men are still less likely to be in work than they were in the mid 1970s although this is not true for those with low education. We highlight issues with using years of schooling as a measure of educational achievement for analysing labour market trends at older ages, not least because a large proportion of men who left school at young ages without any formal qualifications, have subsequently acquired some.

Reforms - such as the abolition of the earnings test and rises in the female State Pension Age, have pushed up employment rates.

But other factors - such as the shift from defined benefit to defined contribution pensions being offered by private sector employers and the growth in employment rates at younger ages among successive cohorts of women - are also important. We discuss the role of other cohort and economy-wide trends, highlighting that the proportion of older men and women employed in professional, managerial and technical occupations has been particularly strong.

http://papers.nber.org/papers/w24606?utm_campaign=ntw&utm_medium=email&utm_source=ntw

Early Social Security Claiming and Old-Age Poverty: Evidence from the Introduction of the Social Security Early Eligibility Age by Gary V. Engelhardt, Jonathan Gruber, Anil Kumar - #24609 (AG HC LS PE)

Abstract:

Social Security faces a major financing shortfall. One policy option for addressing this shortfall would be to raise the earliest age at which individuals can claim their retirement benefits. A welfare analysis of such a policy change depends critically on how it affects living standards. This paper estimates the impact of the Social Security early entitlement age on later-life elderly living standards by tracing birth cohorts of men who had access to different potential claiming ages. The focus is on the Social Security Amendments of 1961, which introduced age 62 as the early entitlement age (EEA) for retired-worker benefits for men. Based on data from the Social Security Administration and March 1968-2001 Current Population Surveys, reductions in the EEA in the long-run lowered the average claiming age by 1.4 years, which lowered Social Security income for male-headed families in retirement by 1.5% at the mean, 3% at the median, and 4% at the 25th percentile of the Social Security income distribution. The increase in early claiming was associated with a decrease in total income, but only at the bottom of the income distribution. There was a large associated rise in elderly poverty and income inequality; the introduction of early claiming raised the elderly poverty rate by about one percentage point. Finally, for the 1885-1916 cohorts, the implied elasticity of poverty with respect to Social Security income for male-headed families is 1.6−. Overall, we find that the introduction of early claiming was associated with a reduction in income and an increase in the poverty rate in old age for male-headed households.

http://papers.nber.org/papers/w24609?utm_campaign=ntw&utm_medium=email&utm_source=ntw

Pauvrete, Egalite, Mortalite: Mortality (In)Equality in France and the United States by Janet Currie, Hannes Schwandt, Josselin Thuilliez - #24623 (AG CH HC HE)

Abstract:

We develop a method to compare levels and trends in inequality in mortality in the United States and France in a similar framework.

The comparison shows that while income inequality has increased in both the United States and France, inequality in mortality in France remained remarkably low and stable. In the United States, inequality in mortality increased for older groups (especially

women) while it decreased for children and young adults. These patterns highlight the fact that despite the strong cross-sectional relationship between income and health, there is no necessary connection between changes in income inequality and changes in health inequality.

http://papers.nber.org/papers/w24623?utm_campaign=ntw&utm_medium=email&utm_source=ntw

Changes in Nutrient Intake at Retirement by Melvin Stephens Jr., Desmond Toohey - #24621 (AG LS PE AP)

Abstract:

While the literature finding a decrease in food expenditures at retirement suggests households do not adequately save for retirement, subsequent evidence that nutrient intake is unaffected by retirement has tempered these concerns. We further examine nutrient intake changes at retirement both by analyzing a much wider range of datasets, including longitudinal data, and by improving upon the empirical methodology used in earlier work.

Our analysis yields four main results. First, unlike prior work, we find that caloric and nutrient intake fall at retirement in numerous cross-sectional datasets. We can reconcile these contrasting results as being due to well-documented differences and improvements in methodologies used to measure food intake.

Second, using longitudinal data, we also find that intake falls at retirement. Third, we show that a food consumption index used in prior work to capture the relationship between permanent income and foods eaten can severely underestimate the impact of retirement on consumption. We show that a minor methodological revision circumvents this bias and that the revised consumption index falls at retirement. Finally, while unemployment reduces the consumption index, we find, in contrast to prior work, that the impact of retirement on the consumption index is larger.

Overall, we consistently find that retirement reduces food intake.

http://papers.nber.org/papers/w24621?utm_campaign=ntw&utm_medium=email&utm_source=ntw

Read more!

Tuesday, May 15, 2018

New papers from the American Economic Association Conference Proceedings

Disability Saliency and Discrimination in Hiring (#51)
Phillip Armour, Patrick Button and Simon Hollands

Full-Text Access | Supplementary Materials

The Effect of the Disability Insurance Application Decision on the Employment of Denied Applicants (#52)
Mashfiqur R. Khan

Full-Text Access | Supplementary Materials

Return-to-Work Policies and Labor Supply in Disability Insurance Programs (#53)
Arezou Zaresani

Full-Text Access | Supplementary Materials

Time and Money: Social Security Benefits and Intergenerational Transfers (#77)
Anita Mukherjee

Full-Text Access | Supplementary Materials

In Debt and Approaching Retirement: Claim Social Security or Work Longer? (#78)
Barbara A. Butrica and Nadia S. Karamcheva

Full-Text Access | Supplementary Materials

The Changing Face of Debt and Financial Fragility at Older Ages (#79)
Annamaria Lusardi, Olivia S. Mitchell and Noemi Oggero

Full-Text Access | Supplementary Materials

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Thursday, May 10, 2018

New paper: “Working Longer in the U.S.: Trends and Explanations”

Working Longer in the U.S.: Trends and Explanations

Courtney Coile

NBER Working Paper No. 24576
Issued in May 2018
NBER Program(s):Aging

Over the past two decades, labor force participation rates for older men have been rising, reversing a century-long trend towards earlier retirement. Participation rates for older women are rising as well. A number of theories have been put forward to explain the rise in participation at older ages, including improving mortality and health, increasing education and a shift towards less physically demanding work, and changes in employer-provided benefits and Social Security. This paper documents trends in labor force participation and employment at older ages and in the factors that may be contributing to rising participation. A review of these trends and of the relevant literature suggests that increases in education, women’s growing role in the economy, the shift from defined benefit to defined contribution pension plans, and Social Security reforms all likely played some role in the trend towards longer work lives.

http://www.nber.org/papers/w24576

Among the causes of increased labor force participation, as summarized by the Retirement Income Journal:

  • A shift in employer-provided pensions from DB to DC type plans reduced the share of workers facing strong incentives to retire at particular ages, while a decline in retiree health coverage left some workers with no means of obtaining health insurance other than through their job, at least until the Medicare eligibility age of 65; both changes contributed to longer work lives.
  • Changes to the Social Security FRA (full retirement age), DRC (delayed retirement credit) and RET (retirement earnings test) have strengthened the incentive for work past the FRA, contributing to the increase in participation at older ages.
  • Three changes to Social Security – the increase in the FRA, the increase in the DRC above the FRA, and elimination of the RET above the FRA – seem likely to have contributed substantially to the increase in employment at older ages, particularly at ages 65 and above.
  • Each one percentage point increase in the DRC is associated with a roughly one percentage point increase in the employment rate of men ages 65 to 69. This estimate suggests that the five-point increase in the DRC since 1990 could explain up to half of the increase in participation of men ages 65 to 69 over this period.
  • For men ages 60 to 64, participation began to rise in the mid-1990s, growing from 53% in 1994 to 62% in 2016, a 9-point increase. For men ages 65 to 69, the trend began a decade earlier and the increase to date is 12 points, from 25% in 1985 to 37% in 2016.
  • The trend for women is quite different. In all age groups, participation has risen continuously since 1980, increasing by 17 points at ages 55 to 59 and 60 to 64 and by 13 points at ages 65 to 69. In 2016, nearly two-thirds of women ages 55 to 59 and half of women ages 60 to 64 were in the labor force.
  • There are very large differences in participation by education. On average across all years, the participation of college graduates is 25 points higher than that of high school dropouts for both men and women ages 60 to 64; at ages 65 to 69, the participation gap between college graduates and high school graduates is 23 points for men and 15 points for women.
  • Single men participate at rates 10 to 20 points below their married counterparts, depending on the age group, and these differences have been stable or widened slightly over time. In the case of women, single women in 1980 had participation rates 16 to 18 points higher than those of married women at ages 55 to 64 and 8 points higher at ages 65 to 69.
  • Self-employment is fairly popular among men, with 12 to 13% of men ages 55 to 64 and 10% of men ages 65 to 69 engaged in such work in 2016; rates of self-employment among women are about half as large.
  • The fraction of men working part-time (less than 35 hours per work) is low but rises with age, at about 6% of those ages 55 to 59 and 9% of those ages 65 to 69. Part-time work is more common for women, with 11 to 12% of all age groups working part-time in 2016.
  • Health at older ages – as measured by mortality risk – has improved substantially over time. The mortality rate at age 60 has declined by 40% for men and one-third for women since 1980. While better health may have supported longer work lives, there is little evidence that it is a primary driver.
Read more!

Monday, March 19, 2018

Brenton Smith on the “Second-Litter Subsidy”

Over at FedSmith, Brenton Smith writes on the Social Security benefits paid to the children of retirement-age fathers, known as the “second-litter subsidy.” If a person of retirement age has a child, they are allowed to receive a child benefit in addition to their own retirement benefits, regardless of their income.

But as Smith points out, there’s more going on than simply a facet of the benefit formula, including politics and intergenerational fairness. Read on.

Read more!

Elizabeth Bauer, a New Resource on Retirement Policy

Elizabeth Bauer, an actuary who Tweets as Jane the Actuary, has begun writing longer-form piece for Forbes, with an emphasis on retirement policy. You can access here Forbes articles here, and here are direct link to her first batch. Well worth reading.

No, Andrew McCabe Isn't 'Losing His Pension'

(How) Should We Make Social Security Fairer For Moms?

Social Security Isn't Fair - And That's Actually The Point

News Flash: The U.K. Adopts My Social Security Reform Proposal

Take Cover - It's Another Retirement Reform Proposal

Elegy For The Pension Plan

Read more!

New paper: “The Retirement-Consumption Puzzle: New Evidence from Personal Finances”

The Retirement-Consumption Puzzle: New Evidence from Personal Finances
by Arna Olafsson, Michaela Pagel  -  #24405 (AG AP LS)

Abstract:

This paper uses a detailed panel of individual spending, income,
account balances, and credit limits from a personal finance
management software provider to investigate how expenditures,
liquid savings, and consumer debt change around retirement.  The
longitudinal nature of our data allows us to estimate individual
fixed-effects regressions and thereby control for all selection
on time-invariant (un)observables.  We provide new evidence on
the retirement-consumption puzzle and on whether individuals save
adequately for retirement. We find that, upon retirement,
individuals reduce their spending in both work-related and
leisure categories.  However, we feel that it is difficult to
tell conclusively whether expenses are work related or not, even
with the best data. We thus look at household finances and find
that individuals delever upon retirement by reducing consumer
debt and increasing liquid savings.  We argue that these findings
are difficult to rationalize via, for example, work-related
expenses.  A rational agent would save before retirement because
of the expected fall in income, and dissave after retirement,
rather than the exact opposite


http://papers.nber.org/papers/w24405?utm_campaign=ntw&utm_medium=email&utm_source=ntw

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Monday, March 5, 2018

New paper: "The Reintroduction of the Social Security Statement and Its Effect on Social Security Expectations, Retirement Savings, and Labor Supply Across the Age Distribution”

The Reintroduction of the Social Security Statement and Its Effect on Social Security Expectations, Retirement Savings, and Labor Supply Across the Age Distribution

Philip Armour Cornell University

Michigan Retirement Research Center Research Paper No. 2017-373

Abstract:

This paper examines how the 2014 reintroduction of the Social Security statement, staggered by every fifth birth year, affected American Life Panel respondents’ Social Security expectations, savings behavior, and labor supply. The rich panel design of the ALP allows for controls for prior Social Security knowledge and behavior, and a specialized module fielded to ALP respondents elicited recall of the Statement and use of alternate information. The majority of individuals who were sent a Statement recall receiving one, with high rates of nonrecall concentrated among younger respondents. Statement recipients and my Social Security account holders highly value the information therein for retirement planning. Recipients measurably increased their likelihood of expecting future benefits, especially disability benefits, and were less pessimistic about future cuts to the program. Recipients were more likely to work after receipt, especially younger workers, although those already working more than 40 hours per week decreased their hours worked on the intensive margin. There were no statistically significant effects on retirement savings, although additional research is required for estimating heterogeneous effects.

View on SSRN

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Monday, February 12, 2018

New paper: "How Persistent Low Expected Returns Alter Optimal Life Cycle Saving, Investment, and Retirement Behavior"

How Persistent Low Expected Returns Alter Optimal Life Cycle Saving, Investment, and Retirement Behavior


by Vanya Horneff, Raimond Maurer, Olivia S. Mitchell

This paper explores how an environment of persistent low returns 
influences saving, investing, and retirement behaviors, as compared to what in the past had been thought of as more "normal" financial conditions.  Our calibrated lifecycle dynamic model with realistic tax, minimum distribution, and Social Security benefit rules produces results that agree with observed saving, work, and claiming age behavior of U.S. households. In particular, our model generates a large peak at the earliest claiming age at 62, as in the data.  Also in line with the evidence, our baseline results show a smaller second peak at the (system-defined) Full Retirement Age of 66. In the context of a zero return environment, we show that workers will optimally devote more of their savings to non-retirement accounts and less to 401(k) accounts, since the relative appeal of investing in taxable versus tax-qualified retirement accounts is lower in a low return setting. Finally, we show that people claim Social Security benefits later in a low interest rate environment.

http://papers.nber.org/papers/w24311?utm_campaign=ntw&utm_medium=email&utm_source=ntw Read more!

New paper: "Intergenerational Spillovers in Disability Insurance"

Intergenerational Spillovers in Disability Insurance


by Gordon B. Dahl, Anne C. Gielen  -  #24296 (CH LS PE)

Does participation in a social assistance program by parents have
spillovers on their children's own participation, future labor
market attachment, and human capital investments? While
intergenerational concerns have figured prominently in policy
debates for decades, causal evidence is scarce due to nonrandom
participation and data limitations.  In this paper we exploit a
1993 policy reform in the Netherlands which tightened disability
insurance (DI) criteria for existing claimants, and use rich
panel data to link parents to children's long-run outcomes.  The
key to our regression discontinuity design is that the reform
applied to younger cohorts, while older cohorts were exempted
from the new rules.  We find that children of parents who were
pushed out of DI or had their benefits reduced are 11% less
likely to participate in DI themselves, do not alter their use of
other government safety net programs, and earn 2% more in the
labor market as adults.  The combination of reduced government
transfers and increased tax revenue results in a fiscal gain of
5,900 euros per treated parent due to child spillovers by 2014. 
Moreover, children of treated parents complete an extra 0.12
years of schooling on average, an investment consistent with an
anticipated future with less reliance on DI.  Our findings have
important implications for the evaluation of this and other
policy reforms:  ignoring parent-to-child spillovers understates
the long-run cost savings of the Dutch reform by between 21 and
40% in present discounted value terms.

http://papers.nber.org/papers/w24296?utm_campaign=ntw&utm_medium=email&utm_source=ntw Read more!

New paper: "Earnings Test, Non-actuarial Adjustments and Flexible Retirement"

Earnings Test, Non-actuarial Adjustments and Flexible Retirement


by Axel H. Boersch-Supan, Klaus Haertl, Duarte N. Leite  -  #24294 (AG PE)

In response to the challenges of increasing longevity, an obvious policy response is to gradually increase the statutory eligibility age for public pension benefits and to shut down pathways to early retirement such as special rules for women. This is, however, very unpopular. As an alternative, many countries have introduced "flexibility reforms" which allow combining part-time work and partial retirement.  A key measure of these reforms is the abolishment of earnings tests.  It is claimed that these reforms increase labor supply and therefore, also the sustainability of pension systems.  We show that these claims may not be true in the circumstances of most European countries.

To this end, we employ a life-cycle model of consumption and labor supply where the choices of labor force exit and benefit claiming age are endogenous and potentially separate.  Earnings tests force workers to exit the labor market when claiming a pension.  After abolishing the earnings test, workers can claim their benefits and can keep on working, potentially increasing labor supply.  Our key result is that the
difference between exit and claiming age strongly depends on the actuarial neutrality of the pension system and can become very large.  Abolishing an earnings test as part of a "flexibility reform" may therefore create more labor supply but at the same time, reduce the average claiming age when adjustments remain less than actuarial, thereby worsening rather than improving the sustainability of public pension systems.

http://papers.nber.org/papers/w24294?utm_campaign=ntw&utm_medium=email&utm_source=ntw Read more!

Friday, January 26, 2018

New paper: “Will Millennials Be Ready for Retirement?”

“Will Millennials Be Ready for Retirement?”

By Alicia H. Munnell and Wenliang Hou

The brief’s key findings are:

  • Millennials – despite high education levels – are behind previous cohorts on many indicators that help boost retirement preparedness.
  • Having entered the labor market in tough times, Millennials have lower wages and fewer fringe benefits than Gen-Xers and late Baby Boomers did as young adults.
  • This difficult start, combined with high levels of student debt, has delayed them from getting married and buying a home. 
  • Not surprisingly, then, Millennials have less wealth than previous cohorts, even though they will need more due to longer lifespans and reduced Social Security.
  • The one piece of good news is that retirement is still a long way off, so they have time to get back on track.

This brief is available here.

Read more!

New paper: “The Welfare Cost of Perceived Policy Uncertainty: Evidence from Social Security”

The Welfare Cost of Perceived Policy Uncertainty: Evidence from Social Security

Erzo F. P. Luttmer and Andrew A. Samwick

Policy uncertainty reduces individual welfare when individuals have limited opportunities to mitigate or insure against the resulting consumption fluctuations. We field an original survey to measure the degree of perceived policy uncertainty in Social Security benefits and to estimate the impact of this uncertainty on individual welfare. Our central estimates show that on average individuals are willing to forgo 6 percent of the benefits they are supposed to get under current law to remove the policy uncertainty associated with their future Social Security benefits. This translates to a risk premium from policy uncertainty equal to 10 percent of expected benefits.

Full-Text Access | Supplementary Materials

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Monday, January 15, 2018

Social Security Advisory Board Recommends Improvements to Rep Payee Programs at SSA and Across Government

Social Security Advisory Board Recommends Improvements to Rep Payee Programs at SSA and Across Government

Today, the Social Security Advisory Board (board) is releasing the culmination of two years’ work pertaining to the Social Security Administration’s (SSA’s) representative payee (rep payee) program. The report, Improving Social Security’s Representative Payee Program, outlines concrete steps to protect vulnerable Social Security beneficiaries and recipients.

The report includes recommendations for Congress, the Office of Management and Budget and SSA to strengthen the current administrative process, create better monitoring and explore comprehensive, government-wide coordination and cross-agency reform of rep-payee processes. A link to these recommendations may be found here.

To accompany the report, an interactive chart collection has been published on the board's website. The chart collection highlights data related to the administration of the program and emphasizes the growing need for rep payees in the future.

The board is proud of its efforts to advance the discussion around these vital programs. If you or your organization would like to discuss the report, please contact the board. 

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Thursday, January 11, 2018

Are Grandparents Stealing From their Grandchildren?

That’s the theme of a recent article in The Atlantic, which by its title – “It’s the Grandparents Stealing from the Grandchildren” – gives you the author’s answer. The article is worth a read for context.

But I don’t totally agree with its conclusion. Yes, it used to be the case that retirees received an incredible deal from Social Security, receiving far more in benefits than they paid in taxes. But for people retiring today, expected lifetime benefits are about equal to lifetime taxes, meaning that they’re neither big winners nor big losers.

Still, we know that future retirees will be big losers. Whether it’s via tax increases or benefit cuts, they can’t get the same deal from Social Security that today’s retirees are getting. So, for the sake of fairness and economic efficiency, it makes sense to spread the costs of Social Security’s $10 trillion-plus unfunded liability over as many generations as possible. Putting off reform exempts more cohorts from bearing those costs and puts more of the cost on younger Americans. That’s not right.

Image result for retirees stealing from grandchildren

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New study: “National Retirement Risk Index Shows Modest Improvement in 2016”

National Retirement Risk Index Shows Modest Improvement in 2016

by Alicia H. Munnell,Wenliang Hou and Geoffrey T. Sanzenbacher
IB#18-1

The brief’s key findings are:

  • Between 2013 and 2016, the National Retirement Risk Index improved modestly, dropping from 52 percent to 50 percent of working-age households.
  • The improvement was driven mainly by rising home prices, with stock market gains also contributing.
  • At the same time, Social Security’s rising “Full Retirement Age” and declining interest rates served as a headwind against greater progress.
  • The bottom line is that retirement security remains a major challenge that requires today’s workers to save more and/or work longer.

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Wednesday, January 10, 2018

In Survey, Economists Say to Raise Pension Retirement Age

The University of Chicago Business School’s regular survey of prominent economists touched on whether retirement ages for national pension systems (in Europe, though we can infer that this group would apply the same logic to the U.S.) should increase to account for rising longevity.

Of the group, 77% favored increasing the retirement age; 2% were opposed; and 12 percent were unsure. Read more here.

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Monday, January 8, 2018

New study from GAO: “Social Security Disability: Additional Measures and Evaluation Needed to Enhance Accuracy and Consistency of Hearings Decisions.”

The Government Accountability Office has a new study on the Social Security disability insurance application process.

Allowance rates—the rate at which Social Security Administration (SSA) administrative law judges allowed disability benefits to be paid when claimants appealed—varied across judges, even after holding constant certain characteristics of claimants, judges, hearing offices, and other factors that could otherwise explain differences in allowance rates. Specifically, GAO estimated that the allowance rate could vary by as much as 46 percentage points if different judges heard a typical claim (one that was average in all other factors GAO analyzed). SSA officials said that this level of variation is not surprising, given the complexity of appeals and judicial discretion. Nonetheless, the variation declined by 5 percentage points between fiscal years 2007 and 2015 (see figure), a change officials attributed to enhanced quality assurance efforts and training for judges. GAO also identified various factors that were associated with a greater chance that a claimant would be allowed benefits. In addition to characteristics related to disability criteria, such as the claimant's impairment and age, GAO found that claimants who had representatives, such as an attorney or family member, were allowed benefits at a rate nearly 3 times higher than those without representatives. Other factors did not appear related to allowance rates, such as the percentage of backlogged claims in a hearing office.

You can find the whole study here.

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Wednesday, January 3, 2018

New paper: “The Funded Status of Local Pensions Inches Closer to States”

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

“The Funded Status of Local Pensions Inches Closer to States”

By Jean-Pierre Aubry, Caroline V. Crawford, and Alicia H. Munnell

The brief’s key findings are:

  • Since 2001, the aggregate funded status of local pension plans has lagged behind that of state plans, but the gap has been closing recently for two reasons.
  • First, local plans continue to receive more of their required contributions than state plans and are a bit more likely to use stringent funding methods.
  • Second, in recent years, local plans have earned stronger investment returns than state plans, perhaps partly due to a lower allocation to alternative investments.
  • Despite this progress, many local plans – like their state counterparts – still face significant funding challenges. 

This brief is available here.

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