Friday, September 20, 2019

New paper: “Promoting Economic Growth through Social Security Reform”

From Marc Goldwein, Maya MacGuineas and Chris Towner of the Committee for a Responsible Federal Budget.

Here’s the summary, but you can read the full paper here.

Summary of Recommendations for Pro-Growth Social Security Reform

Recommendation #1: Increase the Retirement Ages while Insulating Vulnerable Workers with an Age 62 Poverty Protection Benefit (62-PPB). One way to increase the size of the economy is to promote work among older Americans. Workers today face mixed retirement signals that often draw them into early retirement and treat retirement itself as a binary choice. To encourage longer and more flexible working lives, we propose phasing in an increase to Social Security’s early and normal retirement ages and then indexing them to growth in life expectancy. Understanding that many workers are unable to continue to work, we also propose offering all workers a 62-PPB benefit designed to insulate low-income workers from the financial effects of the age increases and ensure that anyone can retire at 62 without slipping into poverty.

Recommendation #2: Calculate Benefits Based on Each Year of Work Rather than Lifetime 35-Year Average Earnings. Higher labor force participation among workers of all ages can help to strengthen the economy. Yet the current Social  Security benefit formula imposes a significant implicit tax on those who work less than ten years and on workers later in their careers – especially after 35 years of work. To reward each year of work, we propose counting every year of earnings toward Social Security benefits and applying Social Security’s benefit formula to annual, rather than average, earnings through a formula known as “mini-PIA.”

Recommendation #3: Automatically Enroll Workers into a “Supplemental Retirement Account” (SRA) on top of Social Security, with the Choice to Opt Out. Increasing the national savings rate would boost overall investment, increasing capital stock and economic growth. Unfortunately, many workers lack access to retirement savings vehicles, or are saving too little for retirement. To increase savings and investment, we recommend enrolling workers into add-on SRAs and automatically contributing 2 to 3 percent of their wages unless a worker chooses to discontinue contributions. SRAs could be invested into one of several well-diversified, low-fee funds and would be owned by the worker, who could access the funds upon retirement.

Recommendation #4: Make Social Security Sustainably Solvent Through a Combination of Progressive Tax and Benefit Changes. Reducing federal borrowing can promote economic growth by reducing “crowd out” of private investment, while improving policy certainty can significantly improve saving and investment choices. Unfortunately, Social Security is running large and rising deficits, which increase federal debt and leave the program on course to exhaust its trust fund reserves by 2035. To make the program sustainably solvent, we suggest a package of progressive revenue and benefit adjustments that would protect low-income seniors, phase in gradually, and ultimately bring the program’s costs and revenues in line. We also suggest that the precise composition of this package be decided as part of a political negotiation.

We also suggest lawmakers consider other pro-growth reforms – as part of and to supplement Social Security reform – in order to maximize potential growth effects.

Read more!

Tuesday, September 17, 2019

Social Security Advisory Board announces meeting to review the 2019 Technical Panel final report

On Friday, September 27th the Social Security Advisory Board ("Board") will host a public meeting to review the 2019 Technical Panel on Assumptions and Methods' ("Technical Panel") report to the Board. The Board convened the independent, expert panel to review the assumptions and methods used to develop the annual report of the Social Security Trustees on the financial status of the Old-Age, Survivors, and Disability Insurance trust funds. The 2019 Technical Panel is the sixth quadrennial panel the Board has commissioned since 1999.

The 2019 Technical Panel is comprised of experts in the fields of demography, economics and actuarial science. The report reflects solely the views of the Technical Panel. The Board convened the Technical Panel, as well as past panels, in the hope that the work provides an important service to the public—an outside and expert review of the methods used to project Social Security financing.

The meeting will be held from 10:30 AM – 12:30 PM in Room 215, Dirksen Senate Office Building at 50 Constitution Avenue NE, Washington, DC 20002. Please email events@ssab.gov to RSVP if you plan to attend. The report will be available in electronic format only and will be posted on the Board’s website at least 48 hours in advance of the meeting.

Read the full announcement

Read more!

Monday, September 16, 2019

Savings and Retirement Foundation with Guest Sandy Mackenzie

Savings and Retirement Foundation

For a Lunch Meeting with Guest Speaker:

Sandy Mackenzie,

Founding editor

Journal of Retirement

September 24th, 2019

Noon-1:00 p.m.

RSVP

The Tax Foundation

1325 G Street NW

Washington DC 

Sandy Mackenzie is the founding editor of the Journal of Retirement and an experienced economic consultant and editor with a demonstrated history of working in non-profits, editorial supervision and economic policy, with an emphasis on fiscal policy. He has substantial experience with nonprofit organizations and skilled in the economics and finances of retirement, lecturing on fiscal, monetary and retirement issues, writing, and policy analysis. He holds a Master of Philosophy  in Economics from Oxford University.

Read more!

Thursday, September 12, 2019

CBO’s 2019 Long-Term Projections for Social Security: Additional Information

In lieu of publishing a separate report providing additional information about CBO’s long-term projections for Social Security, the agency is publishing the data that it would have presented in that report.

View Document

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Thursday, August 29, 2019

Social Security Bulletin, Vol. 79, No. 3

Released August 2019.

Download entire publication

The Social Security Windfall Elimination Provision: Issues and Replacement Alternatives

by Glenn R. Springstead

The Windfall Elimination Provision (WEP) reduces the Social Security benefits of individuals who would otherwise receive a full benefit based on earnings in Social Security–covered employment as well as pension income from noncovered employment. Since the WEP was established in 1983, critics have asserted that it overcorrects the would-be windfall for affected beneficiaries and is difficult to administer. This article considers two WEP replacement options that would modify the benefit calculation methodology. It compares the current WEP with the two options and discusses some of the possible effects of changing the current law.

Social Security Disability Insurance and Supplemental Security Income Beneficiaries with Multiple Impairments

by Elisa Walker and Emily Roessel

This article uses data from the Social Security Administration's National Beneficiary Survey and agency administrative records to estimate the number and examine the characteristics of adult disability-program beneficiaries with multiple impairments. In the survey, most beneficiaries report conditions in more than one impairment category. Beneficiaries with multiple impairments tend to have more activity limitations and poorer health than those reporting one impairment. They also tend to be older and to have higher household incomes than those with one impairment, and are less likely to have work-related goals and expectations. Administrative data contain fewer impairments per beneficiary and do not necessarily reflect the condition(s)that the beneficiary considers most limiting. Administrative data are complete for their purpose, but they may underrepresent the totality of disability that beneficiaries experience, and thus may be less predictive of employment and other outcomes than survey data.

The Time Between Disability Onset and Application for Benefits: How Variation among Disabled Workers May Inform Early Intervention Policies

by Matt Messel and Alexander Strand

This article examines how much time typically passes between disability onset and application for disability-program benefits, by age at onset and diagnosis. Among eventual applicants, certain subgroups might be suitable targets for employment-support interventions. Using Social Security administrative data, the authors find that the median period from onset to application is 7.6 months. Younger applicants tend to have waited longer, particularly those diagnosed with back impairments or arthritis. Among both younger and older applicants, individuals diagnosed with intellectual disability or other mental disorders are potential targets for early intervention programs because those groups wait the longest to apply and are the most likely to continue working in the interim.

Read more!

Tuesday, August 27, 2019

New paper: “The Effects of Differential Income Replacement and Mortality on U.S. Social Security Redistribution”

The Effects of Differential Income Replacement and Mortality on U.S. Social Security Redistribution

By Li Tan and Cory Koedel

PDF:

PDF icon WP 17-01

WORKING PAPER NUMBER:

ABSTRACT:

We study redistribution via the United States Social Security retirement system for cohorts of men born during the second half of the 20th century. Our focus is on redistribution across race and education groups. The cohorts we study are younger than cohorts studied in previous, similar research and thus more exposed to recent increases in earnings inequality. All else equal, this should increase the degree of progressivity of Social Security redistribution due to the structure of the benefit formula. However, we find that redistribution is only modestly progressive for individuals born as late as 1980. Differential mortality rates across race and education groups are the primary explanation. While black-white mortality gaps have narrowed some in recent years, they remain large and dull progressivity. Mortality gaps by education level are also large and unlike the gaps by race, they are widening, which puts additional regressive pressure on Social Security redistribution.

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New paper from the NBER: “Using Vignettes to Improve Understanding of Social Security and Annuities”

Using Vignettes to Improve Understanding of Social Security and Annuities

By Anya Samek, Arie Kapteyn, and Andre Gray #26176

Abstract:
Evidence shows that people have difficulty understanding complex aspects of retirement planning, which leads them to under-utilize annuities and claim Social Security benefits earlier than is optimal. To target this problem, we developed vignettes about the consequences of different annuitization and claiming decisions. We evaluated our vignettes using an experiment with a representative online panel of nearly 2,000 Americans. In our experiment, respondents were either assigned to a control group with no vignette, to a written vignette, or to a video vignette. They were then asked to give advice to hypothetical persons on annuitization or Social Security claiming, and were asked factual questions about these concepts. We found evidence that being exposed to vignettes led respondents to give better advice. For example, the gap between advised claim age for a relatively healthy person versus a relatively sick person was larger by nearly a year in the vignette treatments versus! the control group. Further, the vignettes increased financial literacy related to these concepts by 10-15 percentage points. Interestingly, the mode of communication did not have a significant impact – the video and written vignettes were equally effective.

Read more!

Tuesday, July 30, 2019

New papers from the American Economic Journal

Life-Cycle Consumption Patterns at Older Ages in the United States and the United Kingdom: Can Medical Expenditures Explain the Difference?

James Banks, Richard Blundell, Peter Levell and James P. Smith

This paper documents significantly steeper declines in nondurable expenditures at older ages in the United Kingdom compared to the United States, in spite of income paths being similar. Several possible causes are explored, including different employment paths, housing ownership and expenses, levels and paths of health status, number of household members, and out-of-pocket medical expenditures. Among all the potential explanations considered, those relating to health care—differences in levels and age paths in medical expenses and medical expenditure risk—can fully account for the steeper declines in nondurable consumption in the United Kingdom compared to the United States.

Full-Text Access | Supplementary Materials

Estimating the Value of Public Insurance Using Complementary Private Insurance

Marika Cabral and Mark R. Cullen

The welfare associated with public insurance is often difficult to quantify because the demand for coverage is unobserved and thus cannot be used to analyze welfare. However, in many settings, individuals can purchase private insurance to supplement public coverage. This paper outlines an approach to use data and variation from private complementary insurance to quantify welfare associated with counterfactuals related to compulsory public insurance. We then apply this approach using administrative data on disability insurance. Our findings suggest that public disability insurance generates substantial surplus for the sample population, and there may be gains to increasing the generosity of coverage.

Full-Text Access | Supplementary Materials

Read more!

Monday, July 8, 2019

Upcoming event: “African American Economic Security and the Role of Social Security”

Elevate The Debate

Urban Institute Events

African American Economic Security
and the Role of Social Security

Wednesday, July 24, 2019, 9:00 a.m. to 11:00 a.m.
Registration and breakfast available at 8:30 a.m.

Urban Institute
500 L'Enfant Plaza SW
Washington, DC 20024


Social Security has evolved to become an integral part of the economic security of African American families, but this was not always the case. At its inception, Social Security did not cover domestic or agricultural work, in addition to other occupations, in which two-thirds of African Americans were employed. Changes to the program over subsequent decades have made it nearly universal. But racial and gender discrimination persists in the labor market and results in higher levels of unemployment, occupational segregation, and lower wages for African Americans, especially African American women. These structural barriers preclude many African American workers from jobs with pension coverage and sufficient income to save for retirement. And these labor market disparities result in Social Security benefit levels that leave a disproportionate share of African Americans in poverty.
The Urban Institute and the Center on Budget and Public Policy Priorities will release a brief that addresses these issues, and invite you to an event where participants will discuss the following:

  • Social Security’s history and the reasons domestic and farm workers initially were not covered
  • structural barriers that affect the employment and health outcomes of African American workers and result in greater use of disability and survivors insurance and lower Social Security benefits, despite the program’s progressive benefit formula
  • proposals to reform Social Security and their projected effects on African American families’ economic well-being

REGISTER HERE

Registration is required to attend the event.

Speakers:

  • Nancy Altman, President, Social Security Works
  • Kilolo Kijakazi, Institute Fellow, Urban Institute
  • Maya Rockeymore Cummings, President, Global Policy Solutions
  • Margery Turner, Senior Vice President for Program Planning and Management, Urban Institute
  • Sarah Rosen Wartell, President, Urban Institute
  • Kathleen Romig, Senior Policy Analyst, Center on Budget and Policy Priorities (moderator)
Read more!

Wednesday, July 3, 2019

Upcoming webinar: “Spending Patterns of Older Households and Their Financial Planning Implications”

Please join EBRI for a webinar reviewing findings from its latest research on spending behavior of older Americans. EBRI researcher Zahra Ebrahimi will examine how spending varies by retirement status, wealth, and demographic characteristics. We will then hear from Sharon Carson, Retirement Strategist, Executive Director at J.P. Morgan Asset Management, to understand the implications of these findings in assessing retirement income adequacy for financial planning purposes.

Details

  • Date: July 24, 2019
  • Time: 2:00 p.m. – 3:00 p.m. Eastern Time

If you are interested in sponsoring this webinar or a series of webinars, please contact Betsy Jaffe.

Register Today!

Mark Your Calendar

Zahra Ebrahimi, Research Associate, EBRI

Sharon Carson, Executive Director, J.P. Morgan Asset Management, Retirement Team

Moderated by: Lori Lucas, CFA, President and CEO, EBRI

Register Today!

Only EBRI brings together unique and unbiased research, industry thought leaders and all segments of the employee benefits industry to provide unparalleled programming.

Read more!

Wednesday, June 26, 2019

New paper: “Disability Benefits, Consumption Insurance, and Household Labor Supply”

From the American Economic Review.

Disability Benefits, Consumption Insurance, and Household Labor Supply

David Autor, Andreas Kostøl, Magne Mogstad and Bradley Setzler

There is no evaluation of the consequences of Disability Insurance (DI) receipt that captures the effects on households' net income and consumption expenditure, family labor supply, or benefits from other programs. Combining detailed register data from Norway with an instrumental variables approach based on random assignment to appellant judges, we comprehensively assess how DI receipt affects these understudied outcomes. To consider the welfare implications of the findings from this instrumental variables approach, we estimate a dynamic model of household behavior that translates employment, reapplication, and savings decisions into revealed preferences for leisure and consumption. The model-based results suggest that on average, the willingness to pay for DI receipt is positive and sizable. Because spousal labor supply strongly buffers the household income and consumption effects of DI allowances, the estimated willingness to pay for DI receipt is smaller for married than single applicants.

Full-Text Access | Supplementary Materials

Read more!

Wednesday, June 12, 2019

2019 Retirement and Disability Research Consortium Meeting Agenda

2019 Retirement and Disability Research Consortium Meeting

The 2019 Retirement and Disability Research Consortium Meeting will be held on August 1-2, 2019 at the National Press Club in Washington, DC.

View the agenda and register.

Learn more about the Consortium.

Read more!

New working papers from the Center for Retirement Research at Boston College

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

Is the Drop in Fertility Due to the Great Recession or a Permanent Change?
Alicia H. Munnell, Anqi Chen, and Geoffrey T. Sanzenbacher
Will Fewer Children Boost Demand for Formal Caregiving?
Gal Wettstein and Alice Zulkarnain
The Relationship between Occupational Requirements and SSDI Activity
Matthew S. Rutledge, Alice Zulkarnain, and Sara Ellen King

How Does Contingent Work Affect SSDI Benefits?
Matthew S. Rutledge, Alice Zulkarnain, and Sara Ellen King

Read more!

New paper: “Do People Save More After They Marry?”

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

“Do People Save More After They Marry?”

by Geoffrey T. Sanzenbacher and Wenliang Hou

The brief’s key findings are:

  • The question is whether people getting married later has any effect on retirement saving.
  • The analysis focuses on individuals' contributions to a 401(k) plan before and after marriage.
  • The results show that marriage is associated with higher participation and contribution rates for both men and women.
  • These effects are relatively modest, however, so the impact on retirement wealth from delaying marriage is likely to be small.

This brief is available here.

Read more!

New paper: “Social Security’s Financial Outlook: The 2019 Update in Perspective”

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

“Social Security’s Financial Outlook: The 2019 Update in Perspective”

by Alicia H. Munnell

The brief's key findings are:

  • Contrary to media reports, the 2019 Trustees Report shows little change overall:
    • Social Security’s 75-year deficit ticked down from 2.84 percent to 2.78 percent of payroll.
    • Trust fund exhaustion moved out by one year, to 2035, after which payroll taxes still cover about three quarters of promised benefits.
  • This shortfall is manageable, but action should be taken soon to equitably share the burden among cohorts, restore public confidence, and give people time to adjust.
  • The Report did include one noteworthy change: a big improvement in the financial outlook for the Disability Insurance program.

This brief is available here.

Read more!

New paper: “Do Benefit Cuts Encourage Public Employees to Leave?”

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

“Do Benefit Cuts Encourage Public Employees to Leave?”

by Laura D. Quinby and Gal Wettstein

The brief’s key findings are:

  • Financially troubled state and local pensions may need to cut benefits for current workers, but such cuts could also induce some workers to leave.
  • To assess this human resource impact, the analysis looks at a 2005 reform in Rhode Island that reduced benefits for some current workers.
  • The results show that the affected employees were significantly more likely to leave the government over the next four years.
  • Although the direct cost of hiring new workers was relatively small, governments should consider how losing skilled workers affects the quality of public services.

This brief is available here.

Read more!

New paper: "The Implications of Social Security’s 'Missing Trust Fund'"

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

"The Implications of Social Security’s 'Missing Trust Fund'"

by Alicia H. Munnell, Wenliang Hou, and Geoffrey T. Sanzenbacher

The brief’s key findings are:

  • As policymakers consider restoring balance to Social Security, understanding the reason for the shortfall is important.
  • Specifically, the program’s “pay-as-you-go” approach, which dates back to the late 1930s, makes it expensive.
  • Paying full benefits to Depression-era workers essentially gave away the trust fund that would have accumulated, along with the interest on those contributions.
  • To make up for the missing interest, costs are higher than in a funded system.
  • Little rationale, however, exists for burdening today’s workers for the long-ago decision of allowing Depression-era workers to retire with dignity.
  • These additional costs could be funded more equitably through the income tax, rather than the payroll tax.

This brief is available here.

Read more!

New paper: “Women, Marriage, and the National Retirement Risk Index”

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

“Women, Marriage, and the National Retirement Risk Index”
by Alicia H. Munnell, Wenliang Hou, and Geoffrey T. Sanzenbacher

The brief's key findings are:

  • Women are spending a growing share of their lives single, so it is useful to consider how their marital history affects their retirement preparedness.
  • While married women have much higher household earnings and wealth, they are more at risk of failing to maintain their standard of living in retirement.
  • This surprising result is driven by two-earner couples who:
    • get less from Social Security relative to their earnings due to the decline of the spousal benefit; and
    • save less in 401(k)s since often only one spouse has coverage.
  • These findings highlight the need for expanding coverage to all households and underscore the value of Social Security to single women.

This brief is available here.

Read more!

Tuesday, June 11, 2019

Four Lessons from the Latest Social Security Trustees’ Report

Courtesy of Chuck Blahous, writing at e21.

  1. Social Security faces a huge financing shortfall.
  2. The shortfall is certain.
  3. We are running out of time to save Social Security, if we haven’t already.
  4. We need public trustees.

Check out the whole article here.

Read more!

Tuesday, June 4, 2019

Coming up! Saving and Retirement Forum with Peter Brady. “Using Form 1099-R Detailed Codes to Better Understand Income from Retirement Plans”

Join us in June!

For a Lunch Meeting with Guest Speaker:

Peter Brady

Senior Economist at Investment Company Institute

Who will discuss his new paper:

Using Form 1099-R Detailed Codes to Better Understand Income from Retirement Plans

Tuesday,
June 11, 2019

Noon-1:00 p.m.

Location:
- The Tax Foundation -
1325 G St NW
Suite 950
Washington, DC

(Lunch will be provided)

RSVP to depinto.patrick@gmail.com

Peter J. Brady, is a Senior Economist in the Retirement and Investor Research Division at the Investment Company Institute (ICI). At the Institute, Mr. Brady focuses on pensions, retirement savings, and the taxation of capital income.  Prior to joining the Institute, Mr. Brady worked as a financial economist in the Office of Tax Analysis at the U.S. Department of Treasury and, prior to working at the Treasury Department, as a staff economist in the Research Division at the Federal Reserve Board. Mr. Brady is a graduate of St. Lawrence University and holds a Ph.D. in economics from the University of Wisconsin.

Read more!

Friday, April 19, 2019

Conference Call The Financial Future of Social Security: Highlights from the Trustees' 2019 Reports

Conference Call
The Financial Future of Social Security: Highlights from the
Trustees' 2019 Reports

Tuesday, April 23, 2019
3:00 p.m. - 4:00 p.m.

Dial-in information provided upon registration

Stephen Goss | Chief Actuary, Social Security Administration
Charles Blahous | J. Fish and Lillian F. Smith Chair and Senior Research Strategist, Mercatus Center, George Mason University; Former Public Trustee of the Social Security and Medicare Trust Funds
Robert Reischauer | Distinguished Institute Fellow and President Emeritus, Urban Institute; Former Public Trustee of the Social Security and Medicare Trust Funds

Moderated by:
Marc Goldwein | Senior Vice President and Senior Policy Director, Committee for a Responsible Federal Budget
Kathleen Romig | Senior Policy Analyst, Center on Budget and Policy Priorities

Next week, the Boards of Trustees for the Social Security Trust Funds will release their annual report on the financial challenges facing the two program. This report is a critical benchmarks for policymakers and the public to understand the state of the trust funds. Their financial futures are critical to the millions of people who pay billions in taxes into the funds and use Social Security as the foundation for a secure retirement.

The Funding Our Future campaign invites you to join us for this call as we host the chief actuary for Social Security and the former public trustees for Social Security and Medicare to discuss key takeaways from the 2019 Social Security and Medicare trustees’ reports.

Read more!

Social Security Advisory Board Conference on Microsimulation

Social Security Advisory Board

The Board Invites You to a Policy Forum on MINT Microsimulation

Based on your past work and interest in microsimulation, the Board is pleased to invite you to attend its upcoming policy forum “Informing Policy: A Review of Social Security’s MINT Microsimulation Model,” which will be held on May 30, 2019. A list of tentative speakers is provided below.

Modeling Income in the Near Term (MINT) helps policymakers understand the effects of changes to benefits and payroll taxes. The microsimulation model is built from Social Security's administrative records matched to the Survey of Income and Program Participation. It projects future retirement income, marital trends, Social Security benefits, income, and poverty as well as the effects of policy changes.

The event will bring together MINT users and microsimulation experts to discuss challenges and opportunities facing MINT and other such models and provide recommendations on MINT’s future development. Public participation will be welcomed.

The forum will take place from 9:00 am – 4:00 pm at the National Union Building located at 918 F Street NW, Washington, DC 20004. Register to attend either in person or the live webcast here.

Tentative Speakers:

  • Andrew Biggs, Resident Scholar, American Enterprise Institute
  • Rick Evans, Director, Open Source Economics Laboratory, University of Chicago
  • Eric J. (Rocky) Feuer, Chief, Statistical Research and Applications Branch, Division of Cancer Control and Population Sciences, National Cancer Institute
  • Jagadeesh Gokhale, Director of Special Projects, Penn-Wharton Budget Model
  • Stephen C. Goss, Chief Actuary, Social Security Administration
  • Laura Haltzel, Research Manager, Income Security, Congressional Research Service
  • Kim Hildred, Chair, Social Security Advisory Board
  • Tom Klouda, Senior Domestic Policy Advisor, Committee on Finance, Democrat Staff, U.S. Senate
  • Kathryn Olson, Staff Director, Subcommittee on Social Security, Committee on Ways and Means, U.S. House of Representatives
  • Kathleen Romig, Senior Policy Analyst, Center on Budget and Policy Priorities
  • Mark Sarney, Acting Director, Office of Research, Office of Research, Evaluation, and Statistics, Social Security Administration
  • Amy Shuart, Republican Staff Director, Subcommittee on Social Security, Committee on Ways and Means, U.S. House of Representatives (invited)
  • Jack Smalligan, Senior Policy Fellow, Income and Benefits Policy Center, Urban Institute 
  • Karen E. Smith, Senior Fellow, Income and Benefits Policy Center, Urban Institute
  • C. Eugene Steuerle, Institute Fellow and Richard B. Fisher Chair, Urban Institute 
  • Julie Topoleski, Chief, Long-Term Analysis Unit, Health, Retirement, and Long-Term Analysis Division, Congressional Budget Office
  • Bryan Tysinger, Director, Health Policy Microsimulation, University of Southern California Schaeffer Center
  • Mark Warshawsky, Deputy Commissioner for Retirement and Disability Policy, Social Security Administration
Read more!

New working papers from the Center for Retirement Research

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

Is the Drop in Fertility Due to the Great Recession or a Permanent Change?
Alicia H. Munnell, Anqi Chen, and Geoffrey T. Sanzenbacher
Will Fewer Children Boost Demand for Formal Caregiving?
Gal Wettstein and Alice Zulkarnain
The Relationship between Occupational Requirements and SSDI Activity
Matthew S. Rutledge, Alice Zulkarnain, and Sara Ellen King

How Does Contingent Work Affect SSDI Benefits?
Matthew S. Rutledge, Alice Zulkarnain, and Sara Ellen King

Read more!

Wednesday, April 17, 2019

New paper: “Social Security Replacement Rates and Other Benefit Measures: An In-Depth Analysis”

The Congressional Budget Office has issued a comprehensive look at measuring “replacement rates” for Social Security, a measure that compares Social Security benefits to pre-retirement earnings and serves as an indicator of the adequacy of retirement benefits.

CBO’s paper might be a bit of a deep dive for those who haven’t looked at the issue before, and it doesn’t come out with a clear recommendation. But readers will at the least come to understand that how you measure retirement income adequacy is at least as important as the earnings and benefits that you measure.

Read more!

Tuesday, April 16, 2019

Upcoming event: “Can retirement plans provide safe income?” April 18

Running out of money in retirement is one of Americans’ greatest financial fears. Converting retirement saving balances into reliable income is one of the most complex financial decisions people must make. Most 401k and similar plans are not structured to provide lifetime income. Can retirement plans be reformed to provide safe income for the duration of retirees’ lives?

On Thursday, April 18, the Retirement Security Project at Brookings will host an event to explore ways to create lifetime income for people with 401k-type plans. Join Nobel laureate Richard Thaler and several other noted experts as they discuss new Brookings research.

Click here for more details.

Read more!

Friday, April 5, 2019

SSAB Technical Panel Meeting Agenda, April 12, 20919

2019 Technical Panel on Assumptions and Methods 
Meeting Agenda 
April 12th, 2019 

The meeting will be held in the offices of the Social Security Advisory Board: 400 Virginia Avenue SW, Suite 625, Washington DC 20024. 

Friday, April 12, 2019


  • 10:00am-11:30am Beneficiary and average benefit projections Office of the Chief Actuary, SSA 
  • 11:30am-12:30pm Labor force participation and employment projections Gary Burtless, Brookings Institution and member of the 2017 Labor Force Technical Panel 
  • 12:30pm-1:00pm Lunch 
  • 1:00pm-2:30pm Economic assumptions and methods: Interest rates, real wage growth components Louise Sheiner, Technical Panel member
Read more!

Friday, March 15, 2019

New issue brief: “How Much Would It Take?”

EBRI Issue Brief

How Much Would It Take? Achieving Retirement Income Equivalency Between Final-Average-Pay Defined Benefit Plan Accruals and Automatic Enrollment 401(k) Plans in the Private Sector

Feb 7, 2019, 22 pages

by Jack VanDerhei

Summary

  • A rapidly growing public policy concern facing the United States is whether future generations of retired Americans, particularly those in the Baby Boomer and Gen X cohorts, will have adequate retirement incomes. There have been several policy studies in recent years that suggest that the decreasing relevance of defined benefit (DB) plans relative to defined contribution plans (such as 401(k) plans) since the 1980s will have a negative impact on the percentage of future retirees who will achieve a specified level of retirement income adequacy.
  • Previous EBRI research reported on a comparative analysis of future benefits from private-sector, voluntary enrollment (VE) 401(k) plans and stylized, final-average-pay defined benefit plans.
  • The current research expands the previous research by computing the actual final-average DB accrual that would be required to provide an equal amount of retirement income at age 65 as would be produced by the annuitized value of the projected sum of the 401(k) and IRA rollover balances under automatic enrollment (AE) 401(k) plans.
  • Assuming historical rates of return as well as annuity purchase prices reflecting average bond rates over the period from 1986 to 2013, the analysis shows that:
  • For males, defined benefit “break-even” rates — or the percentage accrual rate that would be required in order for a DB plan to generate the same retirement income that is projected to come from 401(k) plan participation for a given worker cohort — are rarely less than 1.5 percent of final pay: in only 2 of the 16 combinations of wage quartiles and years of plan eligibility for males are defined benefit “break-even” rates less than 1.5 percent of final pay per years of service.
  • In the case of females, only 5 of the 16 combinations have “break-even” rates under 1.5 percent.
  • When these findings are subjected to the scrutiny of various “stress tests” both by reducing the rate of return assumptions by 200 basis points as well as utilizing current annuity purchase prices, results show that in many cases the AE 401(k) plans lose their comparative advantage to the stylized, final-average DB plans, especially for lower-paid employees as demonstrated by the lower “break-even” accrual rates.

VIEW FULL CONTENT

Read more!

New Working Paper: “How Will Retirement Saving Change By 2050? Prospects for the Millennial Generation”

How Will Retirement Saving Change By 2050? Prospects for the Millennial Generation

William Gale, Hilary Gelfond and Jason Fichtner

WORKING PAPER*, MAR 15, 2019

We consider prospects for retirement saving for members of the millennial generation, who will be between ages 54 and 69 in 2050. Adequacy of retirement saving preparation among current and near-retirees is marked by significant heterogeneity, a characteristic that will likely hold for Millennials as well. In preparing for retirement, Millennials will have several advantages relative to previous generations, such as more education, longer working lives, and more flexible work arrangements, but also several disadvantages, including having to take more responsibility for their own retirement plans and marrying and bearing children at later ages. The millennial generation contains a significantly higher percentage of minorities than previous generations. We find that minority households have tended to accumulate less wealth than whites in the past, even after controlling for income, education, and marital status, and the difference appears to be growing over time for black households relative to whites. Whether these trends persist is central to understanding how the Millennials will fare in retirement.

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Friday, March 8, 2019

Urban Institute: “Has Society Gotten Older or Younger?”

Has Society Gotten Older or Younger?

Why Conventional Wisdom is Largely Wrong

C. Eugene Steuerle and Damir Cosic

February 27, 2019

Two powerful demographic processes—the falling birth rate and increasing life expectancy—are reshaping the US population. Longer life expectancy leads to a healthier population, greater capacity to work, and a more active lifestyle, but it also raises the share of the population over age 65—a traditional measure of population aging. This measure overstates aging problems and leads policymakers to misallocate government resources. We construct alternative population aging measures based on the share of the population whose life expectancy is less than a certain number of years. These measures indicate that the population is aging much more slowly than conventional measures indicate.

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Report: “Enhancing work incentives for older workers: Social Security and Medicare proposals to reduce work disincentives”

In “Enhancing Work Incentives for Older Workers: Social Security and Medicare Proposals to Reduce Work Disincentives” (PDF), Robert L. Clark and John B. Shoven offer three reform proposals that would remove the disincentives for Social Security beneficiaries to remain in the labor force. First, the authors consider the impact of eliminating the earnings test for participants between age 62, the early retirement age (ERA), and the full retirement age (FRA), which is currently 66 and 6 months but will increase to 67 by 2022. Second, they examine the effects of creating a paid-up status for Social Security, a point at which employees and employers would no longer be required to pay the payroll tax and earnings would not alter future benefits. Third, the authors offer a similar proposal for a paid-up status for Medicare, coupled with a policy shift for Medicare that would return the program to its original status as the primary payer for covered expenditures rather than its current status as the secondary payer.

Read the full paper here.

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Friday, March 1, 2019

Social Security: Welfare or Insurance?

Writing for FedSmith, Brenton Smith tackles the question, with a focus on House Democrats’ Social Security 2100 Act.

I personally think Social Security is a combination of welfare (say, low earners receiving higher replacement rates); insurance (the disability and survivors components); and forced savings (the retirement program for most middle and upper-income households).

But you be the judge!

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Sign up for the Social Security Policy Innovations Challenge!

The Social Security Policy Innovations Challenge: Ensuring Adequacy for Workers is open to individuals, teams of individuals, or organizations concerned about workers with limited employment opportunities who lack the financial security to postpone claiming Social Security benefits until they reach full retirement age.

Under the current Social Security benefit structure, early claimants receive substantially reduced monthly benefits throughout their lifetimes. Given that the average retirement benefit is only slightly above the federal poverty level for income, and that most beneficiaries rely on their Social Security benefits as their principal or only source of income, this reduction in benefits likely leaves early claimants without adequate income for the remainder of their lives.

The National Academy of Social Insurance, in collaboration with AARP, seeks to identify three-to-five innovative ideas for addressing the income adequacy needs of older workers, who must claim Social Security retirement benefits before their full retirement age due to ill health, an inability to continue to perform physically demanding jobs, or other factors. Each winning proposal will receive an award of up to $20,000-$25,000.

Read the press release.
Download the RFP.

Interested in participating?
Step 1: Sign-up to follow this Challenge. You will receive regular updates about the application process and each stage of the competition.
Step 2: Stay tuned for your invitation to join a facilitated discussion (to be held March 5, 2019) to learn more about Social Security and older workers. Participation in this training event is a requirement for competing in the Challenge.

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Thursday, February 28, 2019

New paper: “Why Has Poverty Declined for Widows?”

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

“Why Has Poverty Declined for Widows?”

by Alicia H. Munnell, Geoffrey T. Sanzenbacher, and Alice Zulkarnain

The brief’s key findings are:

  • Since the mid-1990s, the poverty rate for widows has dropped sharply.
  • Potential reasons include rising levels of education and work experience for women generally and a higher marriage rate among women with more education.
  • The findings show that, so far, the drop in widows’ poverty has primarily been driven by the general increase in women’s education and work experience.
  • Going forward, the poverty rate should continue to fall not only because of education and work patterns but also because of marriage selection.
  • Despite the progress, widows will remain at greater risk of poverty than married women.

This brief is available here. Read more!

Monday, February 25, 2019

New NBER Working Papers on Retirement

Retirement Implications of a Low Wage Growth, Low Real Interest Rate Economy

Jason Scott, John B. Shoven, Sita Slavov, John G. Watson

NBER Working Paper No. 25556
Issued in February 2019
NBER Program(s):Aging

We examine the implications of persistent low real interest rates and wage growth rates on individuals nearing retirement. We begin by reviewing the concept of r star – the long-term real, safe interest rate that is neither expansionary nor contractionary – and presenting recent estimates suggesting that this value has declined. We then examine the implications of low returns and low wage growth for individuals currently aged 45 and 55. We find that low returns and low wage growth have substantial welfare effects, with compensating variations that are often in the hundreds of thousands of dollars. Low returns increase optimal Social Security claiming ages and the marginal benefit of working longer, while low wage growth decreases the marginal benefit of working longer. Low economy-wide wage growth has a much larger welfare effect than low individual wage growth due to wage indexation of the initial benefit and the progressivity of the Social Security benefit formula. When individual wage growth alone is low, wage indexation is unchanged, and the progressivity of the benefit formula provides insurance. When economy-wide wage growth is low, wage indexation is less generous and there is no insurance benefit from progressivity as average wages fall along with individual wages.

Household Responses to Transfers and Liquidity: Evidence from Social Security's Survivors Benefits

Itzik Fadlon, Shanthi P. Ramnath, Patricia K. Tong

NBER Working Paper No. 25586
Issued in February 2019
NBER Program(s):Aging, Labor Studies, Public Economics

We use administrative tax data that cover the U.S. population to identify the causal effects of Social Security’s survivors benefit receipt on American families’ behavior and financial well-being. We analyze over a quarter of a million widowed households in which the husband died between 2002-2007, and we exploit a sharp age discontinuity in benefit eligibility to study the responses of financially vulnerable households to government transfers. We first study how households respond to unanticipated benefit receipt in the immediate periods following a large financial shock to investigate the protective role of transfers. We find significant impacts of the program on newly-widowed families’ net income and labor supply behavior, which points to considerable allocative inefficiencies in the life insurance market and to a high valuation of survivors benefits in protecting Americans against mortality shocks. Second, to investigate the particular role of liquidity and benefit timing, we then study how already-widowed women’s labor supply responds to anticipated survivors benefit receipt. We find considerable responses to cash-on-hand via benefit availability that underscore allocative inefficiencies in the credit market and the value of liquidity itself provided by government transfers. These responses and their heterogeneity highlight mechanisms that underlie the labor supply behavior of older vulnerable households, and they point to liquidity constraints, rather than myopia or benefit-schedule misperceptions, as the likely operative channel. Our results have implications for survivors benefits in the U.S., and, more generally, for retirement behavior and response mechanisms to transfers among older vulnerable populations.

Employer Concerns and Responses to an Aging Workforce

Robert L. Clark, Steven Nyce, Beth Ritter, John B. Shoven

NBER Working Paper No. 25572
Issued in February 2019
NBER Program(s):Aging

Economist and public policy analysts have devoted considerable research to examining the work and retirement decisions of employees. Much less effort has been spent on understanding the concerns and challenges of employers if their workers delay retirement and remain on the job until older ages. In this study, we report findings from three employer surveys with the objective of learning how organizations are responding to the aging of their workforces. The surveys provide several important observations. First, employer concerns about workforce aging vary considerably across the economy. To some firms, these demographic changes are of immediate concern and are viewed as a significant risk to the organization while other firms remain more concerned about potential productivity and cost effect of an older labor force. Second, most employers expect the importance of workforce aging to increase in the next five years. In response, a significant proportion of organizations are making changes to working conditions and compensation policies. Third, firms remain reluctant to adopt formal phased retirement policies but are more willing to offer part-time employment, return to work, and other policies on a case by case basis.

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Washington Post endorses “progressive price indexing” for Social Security

In an editorial, the Washington Post opposed Social Security expansion and endorsed a Bush-era reform to reduce benefits for middle and income retirees in the future.

The Social Security 2100 Act, co-sponsored by over 200 House Democrats, would

divert scarce resources toward a vast majority of Social Security recipients who are not only not poor but, in many cases, perfectly comfortable. We are all for making the overall tax system more progressive than it already is, including by taxing high earners, as the Social Security 2100 Act would do. You can tap “the rich” only so many times, however; and the priority should be to use that money for children, who are almost twice as likely to be poor as senior citizens.

Instead, the Post argues, we should consider a proposal that was part of President George W. Bush’s Social Security reform proposals, so-called “progressive price indexing.”

There is an alternative proposal to make Social Security both protective of the elderly poor and more solvent over the long term. The plan would retain Social Security’s current benefit formula for the 30 percent of workers with the lowest lifetime earnings, while reducing the growth rate of initial benefits for the top 70 percent. Phased in over the next 30 years, it would save a relatively modest $77 billion in the first decade. Savings would accumulate more quickly thereafter, though, to reduce Social Security’s total claim on national output in 2048 from 6.3 percent under current law to 5.7 percent, according to the Congressional Budget Office. The CBO refers to the proposal as “progressive price indexing.” Given that it allocates the nation’s limited retirement-income resources to those who need them most, instead of promising more benefits to practically everyone, the “progressive” label does indeed apply.

I certainly wouldn’t oppose a reform package based on progressive price indexing. At the same time, it’s a proposal that’s very difficult for the public to understand and doesn’t have any end goal of what we want our Social Security program to look like. Progressive price indexing says simply that we’re going to reduce benefit growth for middle and high earners, not what we (as a society or as policymakers) think the appropriate benefit levels are for Americans of different means.

That’s why over time I came to favor a different, and more radical approach: a flat dollar benefit that provides a true guarantee against poverty in old age, while requiring middle and high earners to save more for retirement. This flat dollar benefit approach is similar to New Zealand’s retirement system, along with reforms that have been enacted in the U.K.

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Monday, February 18, 2019

Social Security expansion could be a disappointment for the poor.

Over at National Review Online, I write on how Social Security expansion as proposed by Rep. John Larson and his 200 House co-sponsors and Sen. Bernie Sander’s separate bill may end up disappointing poor retirees, the ones you think would most need the extra benefits.

On paper, plans like the Social Security 2100 Act offer very large benefit increases to very low earners, who make up about the poorest fifth of retirees. The SSA actuarial memos for these plans offer examples showing benefit increases of up to 44%.

But these examples look at individuals who work a full career and receive benefits based on their own earnings. But that’s not always the reality for low-income retirees. Many failed to work a full career; a short working career is the easiest route to a low income in retirement. Others low-wage workers end up being “dually-entitled” in retirement, meaning that they receive a benefit based upon their own earnings plus an additional “auxiliary benefit” based on the earnings of a higher-earning spouse. Their total benefit is capped at half of the higher-earning spouse’s check. Social Security expansion might boost a retirees’ own earned benefit, but in most cases that would simply result in a lower auxiliary benefit. While higher-earning retirees would be eligible for much smaller benefit increases, because these high earners don’t receive auxiliary benefits they might be more likely to receive what they’ve been promised.

Social Security expansion also favors high earners in a another way: they live longer. This counts not just for increases in initial retirement benefits, but also in the higher COLAs that Social Security expansion plans offer.

I’ve argued for boosting benefits for low-income retirees. We’re a rich nation and can afford to keep seniors out of poverty. But since Social Security is a complex program, we should think carefully about how we go about doing it.

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Tuesday, February 12, 2019

New study: “Retiring Earlier than Planned: What Matters Most?”

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

“Retiring Earlier than Planned: What Matters Most?”

by Alicia H. Munnell, Matthew S. Rutledge, and Geoffrey T. Sanzenbacher

The brief's key findings are:

  • More than a third of older workers retire earlier than planned: the question is why?
  • This study looks at: 1) the impact of unexpected changes in health, employment, family, and finances on early retirement; and 2) the prevalence of these shocks.
  • The findings suggest that:
    • Health shocks play the largest role, mainly because they are widespread.
    • Job loss without finding a new job, while not as prevalent, is also important.
    • Family transitions have a modest impact, while financial shocks appear to have little effect.
  • A key caveat is that all the shocks combined explain only about a quarter of earlier-than-planned retirements, so clearly other factors are also at play.

This brief is available here. Read more!

Wednesday, January 16, 2019

Meeting of the 2019 Technical Panel on Assumptions and Methods

The 2019 Social Security Technical Panel on Assumptions and Methods will hold its third public meeting Friday, January 25th, 2019 from 9:30am to 2:30pm. The meeting will be held at Social Security Administration Headquarters in Baltimore(6401 Security Blvd.; Gwynn Oak, MD 21207

Room: 1700A Robert M. Ball Building). The meeting agenda is attached to this invitation.

Because of security considerations at SSA and space limitations, those wishing to attend in person should RSVP to the Social Security Advisory Board staff: joel.feinleib@ssab.gov , call our office at 202-475-7700 or reply to this email by Friday, January 18. Additional details for entry to SSA facilities and parking will communicated next week.

For those who cannot attend in person, there will be a teleconference line available for the entirety of the meeting 9:30am-2:30. Please RSVP with a request for the teleconference information. Material presented to the panel at the meeting will be made available by the meeting time on the panel’s public information page (see below).

Information on the 2019 Technical Panel on Assumptions and Methods can be found on the panel’s public information page. Meeting agendas will be posted to the site approximately one week before meeting dates and material presented at meetings, such as handouts or presentation slides will posted following the meeting.

Attendees who require a reasonable accommodation,  should please call 202-475-7700 at least three days before the meeting date.

Meeting Agenda

9:30am -11:00am Economic assumptions and methods
Presentation: Office of the Chief Actuary

11:00am-12:30pm Trends in economic inequality and implications for Social Security
Presentation: David Deming, Professor of Public Policy, Harvard
Kennedy School; Professor of Education and Economics, Harvard
Graduate School of Education

12:30pm-1:00pm Lunch

1:00pm-2:30pm Technology and the future of work and employment
Presentation: Michael Chui, Partner, McKinsey and Company,
and McKinsey Global Institute

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Thursday, January 3, 2019

New Issue Brief: “What Financial Risks Do Retirees Face in Late Life?”

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

What Financial Risks Do Retirees Face in Late Life?

by Matthew S. Rutledge and Geoffrey T. Sanzenbacher
IB#19-1

The brief’s key findings are:

  • As life expectancy rises, more retirees will face late-life financial risks, including: high health costs, financial mistakes due to cognitive decline, and widowhood.
  • To date, the research literature suggests that these risks severely affect only a minority of retirees, but the impact may become more widespread in the future.
  • The reasons include growing health costs; the rise of 401(k)s, which can be more vulnerable to fraud; and the declining role of Social Security’s widow benefits.

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Wednesday, January 2, 2019

Does Early Retirement Cause Earlier Death?

Early Retirement and Mortality Rates of Blue-Collar Men

For blue-collar male workers in Austria, an extra year of early retirement, induced by a policy change, was associated with an increase in the probability of death before age 73 of 1.85 percentage points.

Many workers dream of retiring as early as possible to pursue travel, leisure, sport, and other pursuits. But the research findings in Fatal Attraction? Extended Unemployment Benefits, Labor Force Exits, and Mortality (NBER Working Paper No. 25124), a study by Andreas Kuhn, Stefan Staubli, Jean-Philippe Wuellrich, and Josef Zweimüller, suggest that some individuals, particularly men, might want to postpone retirement if possible. Studying a temporary change in unemployment insurance rules in Austria which allowed workers to retire early, they find that men who retired before the normal retirement age experienced an increased risk of premature death. They do not find any statistically significant effect of early retirement on women.

Many nations are grappling with aging populations and the strains that pension and medical-care obligations place on government budgets. Some are considering changes to retirement programs, such as raising the age of eligibility or reducing benefits. The effect of such changes on the health and well-being of the elderly is a subject of ongoing debate.

To shed light on this question, the researchers analyze a unique public program in Austria in the late 1980s and early 1990s that was adopted when that nation's steel sector underwent dramatic downsizing. The shock affected tens of thousands of workers and their family members, and to cushion the economic blow to older workers, the Austrian government implemented the Regional Extended Benefits Program (REBP). This program effectively allowed workers to take early retirement via disability insurance or old-age pension programs. The program was only available in some regions of the country.
Using information from the Austrian Social Security Database, the researchers were able to compare the employment histories, incomes, gender, age, retirement dates, and age at death of those who took early retirement and those who were eligible but did not. They ultimately compiled information on 310,440 men and 144,532 women — excluding those from the steel sector — and compared data from REBP — eligible regions and nearby non-REBP regions.

The program induced a significant increase in early retirement. When the researchers examined the mortality rates of those who took early retirement, they found that an additional year in early retirement increased a man's probability of death before age 73 by 1.85 percentage points — equivalent to a relative increase of 6.8 percent — and reduced the age at death by 0.2 years. For women, early retirement was not associated with elevated mortality, a finding that is in line with previous research by others.

Men in blue-collar occupations, men with low work experience, and men who had some pre-existing health impairment displayed higher mortality effects than men in white-collar occupations. An additional year in early retirement increased the probability of death before age 73 by 1.91 percentage points for blue-collar men, 3.45 percentage points among men who have spent some time on sick leave, and by 2.42 percentage points among men with low work experience.

To check the robustness of their findings, the researchers analyzed data from before and after the early retirement program and found no differences in mortality and early retirement trends between those two periods. They also found that the changes in lifetime income associated with early retirement were negligible, particularly when generous government old-age benefits were counted, and that they could not explain the increased mortality among certain groups of the population. The researchers suggest that lifestyle changes may explain the study's mortality findings.

Jay Fitzgerald

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