New CRR fact sheet: “The NRRI and Annuities”

The Center for Retirement Research at Boston College has released a new Fact Sheet:

"The NRRI and Annuities"

The Fact Sheet's
key findings are:

• The NRRI assumes that households buy an annuity at retirement.
  
• The NRRI (the percent of households 'at risk' in retirement) increases from 51 percent to
  
  • 53 percent if households withdraw 4 percent per year; or
    
  • 60 percent if households live off their interest.
    
• Not annuitizing hurts high-income households the most, because they rely more on their nest eggs in retirement.
  
• While few buy annuities today, annuities could improve retirement security for future retirees.
  

The Fact Sheet is available here.

 

Read more!

Academy of Actuaries says: Raise the Social Security Retirement Age

Actuaries to Fiscal Commission: Increase the Retirement Age for Social Security

WASHINGTON – 25 Oct. 2010 – The American Academy of Actuaries is urging the National Commission on Fiscal Responsibility and Reform to address the financial condition of Social Security and to restore actuarial balance to the program by including an increase in the retirement age in its final recommendations. The actuaries said that increasing life expectancy has led to an expansion of lifetime benefits and system costs, but that an increase in the retirement age would help curb this cost growth.

"Longevity has increased and continues to increase meaning retirees will be spending more time collecting benefits in the system than prior generations," wrote Tom Terry, chairperson of the American Academy of Actuaries Public Interest Committee.  "Increasing the retirement age can contribute significantly to stemming this trend and make the program solvent and sustainable."

The actuaries said that workers could still retire with approximately the same degree of retirement security, if a change in the retirement age causes workers to delay retirement. They recommend that an increase in the retirement age be phased in gradually over an extended time frame to accommodate the changes in retirement behavior that would be necessary to make the policy successful. The actuaries acknowledged that there is potential for certain populations to be adversely affected, but that changes to Social Security can be coupled with other policy options to address these concerns.

The complete letter from the American Academy of Actuaries Public Interest Committee to the fiscal commission is available at: http://www.actuary.org/pdf/Fiscal_Commission_Retirement_Age_102510.pdf

The actuaries have been advocating for increasing the retirement age since August 2008, when it released its first position statement on behalf of the U.S. actuarial profession. The statement is available at: http://actuary.org/pdf/socialsecurity/statement_board_aug08.pdf

Read more!

CBO releases new Social Security projections

The Congressional Budget Office has released new projections for the Social Security program's long-term finances. Here's how CBO summarizes the current situation:

In calendar year 2010, Social Security's outlays will exceed tax revenues (that is, the trust funds' receipts excluding interest) for the first time since the enactment of the Social Security Amendments of 1983. Over the next few years, the Congressional Budget Office (CBO) projects, the program's tax revenues will be approximately equal to its outlays. However, as more of the baby-boom generation (that is, people born between 1946 and 1964) enters retirement, outlays will increase relative to the size of the economy, whereas tax revenues will remain at an almost constant share of the economy. Starting in 2016, CBO projects, outlays as scheduled under current law will regularly exceed tax revenues.

Looking at the longer term, here's a chart showing possible paths for Social Security's net cash flow – that is, its tax income minus the benefits the program owes. The middle line is CBO's "best guess," while the upper and lower lines represents what CBO thinks could happen in the 10^th and 90^th percentiles of a distribution of possible outcomes. In other words, there's around a 10 percent chance that Social Security's cash flows could be better than the upper line and a 10 percent chance they'll be worse than the lower line. (For what it's worth, this approach is FAR better than the "low cost" and "high cost" scenarios used by SSA, since it assigns a probability to different outcomes rather than rather arbitrarily calling them "low" and "high.")

So while there's around a 10 percent chance that long-term deficits won't be so bad, there's also a 10 percent chance they'll be really bad – think 2.5 percent of GDP as of 2050. Most people would want to insure against the really bad outcomes by fixing the program today. If we end up with a really good outcome we can give everyone a tax cut or a benefit increase, which is better than having to give everyone a sudden tax increase or benefit cut if things turn out badly.

Read more!

Coons and O'Donnell Debate Social Security

From the Wall Street Journal, Delaware Senate Candidates Chris Coons and Christine O'Donnell talk Social Security reform:

Read more!

Video: Former CBO director Rudy Penner explains Social Security COLAs

From the Urban Institute, Rudy Penner explains why we won't be seeing a Social Security Cost of Living Adjustment this year.

Read more!

The Economist: “A gold-plated burden”

The Economist has a nice write-up of the problems facing public sector pensions and how their fishy accounting plays into things, including a few quotes from me and a link to some of my work with Eileen Norcross of the Mercatus Center at George Mason. It's a good summary of the accounting debate and how it affects how we view pension funding levels. Check it out here.

Read more!

Now THAT'S what I call taking Social Security reform "off the table"

I usually kind of like Russ Feingold. He's about a dozen notches to the left of me, but seems like an honest guy and doesn't pretend he's something he isn't (until recently, being a Senator from Wisconsin allowed you that luxury).

But today he's down in the polls relative to his challenger, businessman Ron Johnson, and Feingold's new ad on Social Security reform goes just a little bit over the top.


So you'd really take everything off the table? Given that the system is going insolvent -- just in time for the retirements of people like, say, me? -- doesn't rejecting everything seem a bit extreme? Probably, but that's what happens in the end of a campaign when someone is far behind.

But Feingold's opponant Johnson isn't pulling any punches either. His own ad doesn't back down at all from his claim that Social Security is a "ponzi scheme." Check him out.


Say what you will about either of these guys, these are both pretty good ads. Sure beats the usual "Congressman [insert name] voted with [disliked party leader] 96% of the time..."
Read more!