Search Results
Working Paper
Health, Health Insurance, and Retirement: A Survey
The degree to which retirement decisions are driven by health is a key concern for both academics and policymakers. In this paper we survey the economic literature on the health-retirement link in developed countries. We describe the mechanisms through which health affects labor supply and discuss how they interact with public pensions and public health insurance. The historical evidence suggests that health is not the primary source of variation in retirement across countries and over time. Furthermore, declining health with age can only explain a small share of the decline in employment ...
Report
A New Look at Racial Disparities Using a More Comprehensive Wealth Measure
Most research measuring disparities in wealth by race relies on data that exclude resources that are disproportionately important to low-wealth and non-white families, namely defined benefit (DB) pensions and Social Security. This paper finds that once these resources are included, disparities in wealth between white families and Black and Hispanic families are substantially smaller and that they are not rising over time. The powerful equalizing roles of DB pensions and Social Security highlighted here are further motivation for maintaining their fiscal health. This paper also presents ...
Newsletter
Retirement Account Basics: Why You’re Never Too Young to Start Thinking About Retirement
In this February 2024 Issue of Page One Economics: Focus on Finance, we’ll explore the most common retirement savings plans and other things to consider as you begin thinking about retirement. We will compare employer-based defined-benefit and defined-contribution plans, as well as options available to individuals. Understanding the basics of retirement savings accounts can help you feel empowered to start making decisions today for your retirement!
Working Paper
Old, sick, alone, and poor: a welfare analysis of old-age social insurance programs
Poor health, large acute and long-term care medical expenses, and spousal death are significant drivers of impoverishment among retirees. We document these facts and build a rich, overlapping generations model that reproduces them. We use the model to assess the incentive and welfare effects of Social Security and means-tested social insurance programs such as Medicaid and food stamp programs, for the aged. We find that U.S. means-tested social insurance programs for retirees provide significant welfare benefits for all newborn. Moreover, when means-tested social insurance benefits are of the ...
Working Paper
Wealth Distribution and Retirement Preparation among Early Savers
This paper develops a new combined-wealth measure by augmenting data on net worth from the Survey of Consumer Finances with estimates of defined benefit (DB) pension and expected Social Security wealth. We use this concept to explore retirement preparation among two groups of households in pre-retirement years (aged 40 through 49 and 50 through 59), and to explore the concentration of wealth. We find evidence of moderate, but rising, shortfalls in retirement preparation. We also show that including DB pension and Social Security wealth results in markedly lower measures of wealth ...
Report
An Aggregate Model for Policy Analysis with Demographic Change
Many countries are facing challenging fiscal financing issues as their populations age and the number of workers per retiree falls. Policymakers need transparent and robust analyses of alternative policies to deal with demographic changes. In this paper, we propose a simple framework that can easily be matched to aggregate data from the national accounts. We demonstrate the usefulness of our framework by comparing quantitative results for our aggregate model with those of a related model that includes within-age-cohort heterogeneity through productivity differences. When we assess proposals ...
Decomposing an Economic Impact into Its Local and Spillover Effects
An analysis of cost-of-living increases for Social Security shows a strong direct effect on income within a state where the recipient lives but little evidence of a spillover effect in other states.
Working Paper
The Effects of Collecting Income Taxes on Social Security Benefits
Since 1983, Social Security benefits have been subject to income taxation, a provision that can significantly increase the marginal income tax rate for older individuals. To assess the impact of this tax, we construct and calibrate a detailed life-cycle model of labor supply, saving, and Social Security claiming. We find that in a long-run stationary environment, replacing the taxation of Social Security benefits with a revenue-equivalent increase in the payroll tax would significantly increase labor supply, consumption and welfare. From an ex-ante perspective an even more desirable reform ...
Working Paper
Optimal Paternalistic Savings Policies
We study optimal savings policies when there is a dual concern about undersaving for retirement and income inequality. Agents differ in present bias and earnings ability, both unobservable to a planner with paternalistic and redistributive motives. We characterize the solution to this two-dimensional screening problem and provide a decentralization using realistic policy instruments: mandatory savings at low incomes but a choice between subsidized savings vehicles at high incomes?resembling Social Security, 401(k), and IRA accounts in the US. Offering more savings choice at higher incomes ...
Briefing
Can We Tax Social Security Benefits More Efficiently?
Many seniors pay taxes on their Social Security benefits due to a provision in the program's 1983 reform, under which the portion of benefits that's taxable rises with total income. This tax structure can impose high marginal rates on seniors even if their other income sources are modest. These high marginal rates, in turn, can determine whether beneficiaries decide to keep working or retire. Research suggests that several policy alternatives are more likely to keep seniors in the workforce and to generate more revenue for the Social Security Trust Fund.