Social Security Wealth, Inequality, and Lifecycle Saving
John Sabelhaus and Alice Henriques Volz #27110
Abstract:
Wealth inequality in the US is high and rising, but Social Security is generally not considered in those wealth measures. Social Security Wealth (SSW) is the present value of future benefits that an individual will receive less the present value of future taxes they will pay. When an individual enters the labor force, they generally face a lifetime of taxes to pay before they will receive any benefits, and thus their initial SSW is generally low or negative. As an individual works and pays into the system their SSW grows and generally peaks somewhere around typical Social Security benefit claim ages. The accrual of SSW over the working life is most important for lower-income workers because the progressive Social Security benefit formula means that taxes paid while working are associated with proportionally higher benefits in retirement. We estimate SSW for individuals in the Survey of Consumer Finances (SCF) for 1995 through 2016 and use a pseudo-panel approach to empirically demonstrate those lifecycle patterns. We also show that including SSW in a comprehensive wealth measure generally reduces estimated levels of wealth inequality but does not reverse the upward trend in top wealth shares.
Posts
1 comment:
Social Security takes the first dollar and keeps workers from using it efficiently when the most need capital; education, starting out after leaving home, buying items for an apartment or home, etc. This leads to borrowing at far higher rates than that paid to the Social Security Trust fund.
What makes this even worse is that for those born after 1985, the best they can do is 29 cents in SS-OASI benefits for each combined employee/employer payroll tax credited at the US Treasury rate.
So why does it make sense to earn zero or even a negative return from SS-OASI while paying on a car loan, mortgage, college, etc?
Again it is inefficient use of capital. What makes it worse, SS-OASI states that starting in 2035 they can pay but 75% of benefits. If course if they cannot pay full benefits, they cannot pay COLA.
Every time the payroll tax went up, savings went down and more workers were disenfranchised from participating in the growing US economy.
Repeal Social Security and kick the addiction!
www/justsayno.50megs.com/ss.html
Post a Comment