1994-95 Advisory Council on Social Security Technical
Panel on Trends and Issues in Retirement Savings
Final Report
EXECUTIVE SUMMARY
Table of Contents
The Panel members were:
Olivia Mitchell, International Foundation of Employee Benefit Plans, Professor
of Insurance and Risk Management, The Wharton School,University of Pennsylvania
(co-chair)
Joseph Quinn, Professor of Economics, Boston College (co-chair)
G. Lawrence Atkins, Director of Health Legislative Affairs,Winthrop,
Stimson, Putnam & Roberts
Richard Burkhauser, Professor of Economics, The Maxwell School, Syracuse
University
Gary Burtless, Senior Fellow, The Brookings Institution
Robert Clark, Professor of Economics and Business, North Carolina State
University
Peter Diamond, Paul A. Samuelson Professor of Economics, Massachusetts
Institute of Technology
John Haley, Watson Wyatt Worldwide, Inc.
Daniel Halperin, Professor of Law, Georgetown University
Eric Hanushek, Professor of Economics and Director, Wallis Institute
of Political Economy, University of Rochester
Diane Macunovich, Associate Professor of Economics, Williams College
Dallas Salisbury, President, Employee Benefit Research Institute
John Shoven, Charles R. Schwab Professor of Economics and Dean, School
of Humanities and Sciences, Stanford University, and
Stephen Zeldes, Professor of Finance, The Wharton School, University
of Pennsylvania.
The Panel met in Washington, D.C. for nine sessions, including two presentations
before the Advisory Council, and produced this Report.
Introduction
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The social security system is not in long-term actuarial balance. The
Social Security Trustees, using their intermediate assumptions, project
that currently legislated Old Age, Survivors, and Disability Insurance
(OASDI) tax revenues will be less than currently legislated benefits after
the year 2013. Projected benefits begin to exceed the sum of OASDI taxes
and interest earned in 2020, resulting in a decline in the OASDI Trust
Funds, and projected depletion in 2030. Over the 75 year long-range planning
horizon, the difference between the projected income and cost flows is
a deficit equal to an annual 2.17 percent of taxable payrolls. Some combination
of benefit decreases and/or revenue increases will be required to close
this gap.
In addition to these social security retirement and disability program
concerns, much more immediate funding problems exist with the Hospital
Insurance component of Medicare, whose Trust Fund is projected to run
out in 2002. Moreover, Congressional Budget Office analysis of the President's
proposed budget for fiscal year 1996 projects continued federal budget
deficits through the year 2000. It is in this context that the Technical
Panel on Trends and Issues in Retirement Savings discusses various social
security options below.
The Executive Summary begins with a section on current and projected
trends in labor markets, employer pensions, savings and the well-being
of the elderly. The Summary then discusses policy options designed to
deal with projected social security fiscal imbalances, as well as selected
other proposals to improve the economic well-being of future retirees.
The Summary includes other conclusions and suggestions that the Panel
thought were useful to convey to the Advisory Council on Social Security
and to the public at large.
The Panel did not seek consensus; rather, its charge was to develop evaluation
criteria and to use them to discuss a range of policy options. The Panel
discussed both incremental and wide- ranging changes in social security
and related programs, changes designed to alleviate both social security's
long run fiscal deficit and the broader problem of potentially inadequate
retirement income for future generations of retirees. On many of the issues
discussed, Panel members were not unanimous, although on some issues they
did all agree. Available evidence and supporting arguments are contained
in the body of the Final Report.
Some topics were beyond the Panel's charge and therefore are not discussed
in detail in this Report. One is the central role of the nation's overall
economic health, which has a major impact on the social security system's
fiscal health. To the degree that social security encourages, or at least
does not discourage, work and savings, it enhances the prospects for economic
growth. The Panel also did not examine how changes in the medical care
and health insurance markets will interact with the Medicare and Disability
Insurance programs. These two components of the social security system
were the subjects of reports by previous Social Security Advisory Councils,
and were beyond this Panel's purview.
Trends in labor markets, pensions, savings and
the well-being of the elderly
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In this section, the Panel discusses recent and probable future trends
likely to affect the economic well-being of future retirees. Here the
Panel assumes no major changes in the institutional environment, even
though it realizes that changes in the largest program, social security,
are absolutely necessary. Given its importance to older Americans, significant
changes in social security may well affect the trends discussed here.
Labor force participation rates of older Americans (especially men) declined
dramatically between 1950 and the mid- 1980s. This decline coincided with
expanded coverage, increased real benefits and earlier ages of eligibility
for retirement benefits in both social security and many employer pension
plans. Since the mid-1980s, however, this early retirement trend has abated
or stopped.
In the absence of major institutional change, but given the already legislated
change in the Normal Retirement Age for social security from 65 to 66,
and then to 67, the Panel anticipates a slow and modest reduction in early
retirement, with Americans retiring slightly later over the next several
decades.
The American labor market is changing in significant ways. Traditional
manufacturing employment is declining, and service jobs are on the rise.
Some evidence suggests that the quality of jobs is becoming more bimodal,
with job growth among low-skilled, low-paid service workers and high-skilled,
high-paid technical and professional employees. This pattern of job growth
is reflected in the changing American income distribution, which is becoming
more unequal.
Employer pensions are also in flux. After increasing rapidly during the
1950s and 1960s, the proportion of workers participating in an employer
pension has leveled off, with slight increases appearing in 1993 and 1994
for the first time in years. About half of the full-time civilian labor
force is participating at any given time. Participation rates increase
significantly with age, job tenure and earnings level, suggesting that
the proportion of workers covered at some time during their work lives
will be higher than indicated in any cross-sectional snapshot. Vesting
in plans has grown, meaning that entitlement to benefits has increased.
There is a movement away from traditional employer-managed and directed
plans (often with defined benefits) to more individualistic plans, with
faster vesting, more elective contributions and participant-directed investments.
Barring major institutional change, it is unlikely that pension coverage
will increase significantly over the next several decades. Benefit entitlement
will grow because of faster vesting, and the trend toward more participant-directed,
defined- contribution plans will continue. Below, the Panel discusses
policy options that might be adopted to encourage additional pension coverage.
Private and aggregate national saving in the United States are low by
international and by the nation's own historical standards. Many Americans
reach retirement age with little personal savings beyond equity in a home.
Little professional agreement exists on what public policies short of
mandates would encourage a significant change in American savings habits.
The Panel is not optimistic about any dramatic turnaround in U.S. saving
rates, although there is some expectation of modest increases in private
savings if future social security benefits were decreased.
The economic status of elderly Americans has improved significantly over
the past several decades. Median incomes of the elderly have risen relative
to those of the rest of the population, and elderly poverty rates have
fallen precipitously, even as fewer and fewer older Americans remained
at work. Much of the credit for this improvement goes to federal programs
-- especially social security -- and to the growth of employer based pensions.
Around these encouraging averages, however, remain significant pockets
of economic distress, with poverty much more prevalent among elderly who
are very old, living alone, female, Black or Hispanic. The financial costs
associated with long-term care remain a major economic risk, even for
middle- and upper- middle income Americans.
Evaluation of the retirement prospects of the current generation of middle-aged
workers, the baby boomers, depends on the point of comparison. Their income
and asset accumulation experiences thus far suggest that current workers,
especially those at the upper end of the income distribution, will approach
retirement with more resources than their parents did, but without enough
to maintain the standards of living that they themselves enjoyed prior
to retirement. The baby boomers are unlikely to enjoy the dramatic increases
in the value of their real estate or the legislated real increases in
social security benefits that their parents did; in fact, social security
benefits have been cut (through legislated delays in the Normal Retirement
Age and the taxation of some benefits), and additional decreases may be
legislated in the future. The groups of elderly now disproportionately
at risk of poverty are likely to remain so. An important unknown is the
rate of growth of real wages over the next several decades. Some analysts
extrapolate from the dismal record of the past two decades, and foresee
only very modest growth in the future. Others point to demographic changes
on the horizon (smaller entry level cohorts), and anticipate real wage
growth more in line with long-term trends.
Life expectancy is expected to continue to increase. Although life expectancy
and health status do not always move in lock step, recent evidence suggests
that the health status of the elderly is improving on average and will
continue to do so in the future.
Because the social security system is not in long-term actuarial balance,
significant adjustments in future contribution levels and/or benefit outlays
will be necessary. Social security benefit cuts (either directly or through
further delays in retirement ages) are one option. The Panel asked whether
there are changes already under way that would offset the effects of potential
benefit cuts on the future economic well-being of the elderly. The general
answer is no -- the Panel sees no easy solution on the horizon. The Panel
anticipates small increases in the average age of retirement, which will
help, and some members foresee either higher real wage growth and/or some
increase in personal savings. But the Panel believes that far more substantial
adjustments than are currently under way will be necessary to compensate
for any significant decreases in social security benefits.
What adjustments are most likely? Employer pension coverage? Patterns
of personal savings? Labor force participation late in life? The Panel
considered policy initiatives to encourage each of these, and discusses
them below.
The Panel's consensus, especially given further expected increases in
life expectancy, is that the last option - delayed retirement - would
be the most likely and easiest response for the majority of older Americans
who leave career jobs and the labor market voluntarily and in good health.
For others, however, poor health or poor labor market prospects late in
life would make this adjustment difficult or impossible.
Policy Options for Dealing with Projected
Social Security Imbalances
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The Panel stresses that some combination of benefit cuts and/or revenue
increases is necessary to restore the social security system to actuarial
balance, and urges that appropriate legislation be enacted promptly. Policy
options were analyzed in a three step process. First, the Panel developed
six criteria against which to judge any specific proposal. Then, a straightforward
baseline benefit cut (an across-the-board decrease in the Primary Insurance
Amount (PIA) formula for future retirees) was compared with a straightforward
baseline revenue increase (an increase in the OASI payroll tax rate).
Finally, the Panel compared other means of lowering benefits with the
baseline PIA decrease, and other means of raising revenues with the baseline
payroll tax increase.
The Panel adopted the following six criteria:
- Adequacy of retirement income, relative to poverty thresholds and
to the household's pre-retirement income;
- Insurance against unforeseen income fluctuations (such as those caused
by disability, the death of an earner, unanticipated early retirement
or unexpected longevity);
- Avoidance of market inefficiencies; in particular, in the labor-leisure
choice (the allocation of time during and at the end of the worklife)
and in the consumption-savings choice (the allocation of lifetime income
between consumption during the worklife, consumption during retirement
and bequests);
- Equity of lifetime social security taxes and benefits, both between
and within generations;
- Encouragement of private and aggregate national saving; and
- Strengthening the financial integrity of the nation's retirement income
systems.
Timing and Implementation of Policy Options
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Panel members concur on several issues regarding the timing of legislation
and the implementation of whatever social security adjustments are chosen.
The Panel urges that any significant changes in social security benefits
be announced with sufficient lead time for workers to adjust their savings,
consumption and retirement plans.
The Panel suggests that promptly legislated policy changes combined with
some delay in implementation best helps people plan for the future. The
desirability of delayed implementation only increases the urgency of prompt
legislation.
The Panel urges that any payroll tax increases and benefit reductions
be phased-in over time, rather than implemented abruptly. Gradual implementation
reduces the magnitudes of notches (different treatment of cohorts close
in age) and the perception of unfairness that notches engender.
Benefit Decreases versus Revenue Increases
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The Panel acknowledges that the fiscal imbalance facing OASDI is a very
serious one, demanding immediate attention, but did not attempt to reach
a consensus on the appropriate mix of benefit cuts and revenue increases
to address the imbalance. The Panel's focus was to analyze the pros and
cons of achieving balance with different mixes of reduced benefits and
increased revenues and to compare alternative means of both benefit decrease
and revenue increase.
The Panel's criteria do not unequivocally favor either raising taxes
or decreasing benefits. Rather, some criteria, such as adequate retirement
income, favored tax increases, while others, like equity of lifetime social
security taxes and benefits between generations, favored benefit cuts.
Closing the fiscal imbalance with additional revenues rather than benefit
decreases is suggested if one emphasizes the first two criteria, adequate
retirement income and insurance against unforeseen income fluctuations.
Social security benefit cuts would increase the number of Americans with
inadequate retirement income, and lower the insurance protection offered
to workers, survivors and dependents. Within a generation, the use of
tax increases rather than general benefit cuts favors those with the longest
life expectancies -- those most likely to receive benefits for a long
time -- and those with lower incomes for any given life expectancy.
Closing the fiscal imbalance with benefit decreases rather than tax increases
is suggested if one emphasizes the fourth and fifth criteria, equity between
generations and the encouragement of private savings. The expected return
on social security contributions is already going to be lower for baby
boomers than for past, current and near-future recipients (and this return
will decline even further when either social security taxes are raised
or future benefits are cut). Younger participants would pay the higher
taxes for many more years than would older participants planning to retire
soon. Lower benefits would also encourage some individuals to offset part
of the loss through their own savings behavior.
Social security retirement benefits induce some older workers to leave
the labor force earlier than they otherwise would. Benefit cuts, especially
if combined with an increase in the early age of entitlement (now age
62), are likely to reduce this effect. In addition, payroll taxes may
discourage the labor supply of younger workers, a labor market distortion
that is more likely to decline if benefits are cut than if payroll taxes
are increased.
The Panel found little professional consensus on the size of the impact
of social security on private savings. To the extent that social security
benefits substitute for private savings, benefit cuts rather than tax
increases would encourage private savings. But many workers with little
or no savings beyond their home equity are unlikely to make significant
changes in their savings behavior in response to the changes in social
security benefits being contemplated. The Panel concludes that reducing
benefits might have a small positive effect on private savings.
Alternative Types of Benefit Decreases
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The Panel compared the effects of the baseline benefit cut (an across-the-board
decrease in the PIA formula) with those of several alternatives, including
reducing disproportionately the benefits of high-wage workers, delaying
retirement ages, reducing the cost-of-living adjustment and means-testing
benefits.
If benefits are to be reduced, strong arguments suggest increasing the
ages of eligibility for early and normal social security benefits. Most
Panel members believe that delaying these retirement ages is a sensible
response to increases in life expectancy, and one that prevents lifetime
benefits from automatically increasing as recipients live longer.
If benefits are to be reduced, most Panel members believe that the Normal
Retirement Age (NRA) for social security benefits, currently scheduled
to increase to age 67, should be increased further, and that it should
eventually be indexed to life expectancy. Most agree that the scheduled
hiatus between the increases to age 66 (2000-2005) and 67 (2017-2022)
should be eliminated.
Most Panel members believe that the Early Entitlement Age (EEA) for social
security benefits should also be raised, with most supporting a new EEA
of 64 or 65.
The Panel opposed means-testing social security benefits on the basis
of other retirement income or accumulated wealth. To avoid loss of social
security benefits, some workers might reduce their own retirement saving
or persuade employers to shift compensation from pension contributions
to earnings. Either response would lower savings and private retirement
incomes.
If benefits are to be reduced by means other than or in addition to increases
in the NRA and EEA (for example, if the PIA formula becomes less generous),
most Panel members prefer disproportionate cuts at the top to an across-the-board
decrease.
The Panel also discussed how to allocate the burden of benefit reductions
across different cohorts -- those already retired, those about to retire
(for example, within 5 years), and those further away from retirement.
If benefits are to be cut, the Panel does not favor entirely exempting
people already retired or about to retire. However, the Panel favors smaller
benefit reductions for these groups than for future retirees.
Social security benefits are the only fully indexed annuity available
to (nearly) all workers. The threat of inflation would be a very serious
concern to retirees, especially those with long lives after retirement,
if full indexation were eliminated. For this reason, the Panel opposes
permanently indexing social security benefits by less than the cost of
living. At the same time, the Panel urges that the Bureau of Labor Statistics
investigate whether the specific Consumer Price Index currently used to
adjust benefits correctly measures the cost of living. If this measure
is found to be biased, the Panel would support corrective changes in the
method of calculation.
The Panel was split on whether a temporary delay or reduction in the
cost-of-living adjustment would be desirable, Some Panel members favored
this if benefits were decreased for future retirees, as a way of spreading
some of the burden to current and near-future retirees.
The Panel is concerned about the well-being of workers in poor health
if the Early Entitlement Age (EEA) were raised from age 62. Under current
law, individuals can apply for Disability Insurance (DI) before age 65,
and those deemed eligible receive benefits equal to 100 percent of their
PIAs. If the EEA were raised, some people who would have opted for early
social security benefits at or after age 62 would instead seek DI benefits.
Some would be found ineligible, and others would not even apply. In the
case of an increase in the EEA, the Panel discussed whether DI rules should
be relaxed for people aged 62 and older and whether the age of entitlement
for Supplemental Security Income (SSI) should be lowered from age 65 to
age 62. Both DI and SSI might experience large increases in applications
if the age-of- eligibility rules were changed, highlighting the fact that
altering one piece of the social security benefit structure can have profound
effects on other components of social security and on other programs.
The discussion persuaded some Panel members that persons as young as
62 should be allowed to apply for SSI benefits or face relaxed DI rules
if the EEA is raised, to provide a safety net for those unable to support
themselves until eligible for retirement benefits under the new EEA rules.
Some members think that DI benefits should continue to equal 100 percent
of PIA, regardless of the age of the disabled recipient, while others
feel that DI benefits should be set equal to the early retirement amount,
to avoid increased incentives to seek DI benefits if early retirement
benefits are reduced. Others are concerned about the effect of such a
reduction on the well-being of young and old disabled beneficiaries.
The Panel focused in detail on the status of surviving spouses, because
family benefits can fall substantially with the death of a husband or
wife. The significant disparity in the poverty rates of elderly couples
and those living alone suggest that mechanisms be considered to raise
the ratio of survivors to couples benefits. If the early age of entitlement
for widows benefits is increased, then the calculation of benefit reductions
for widows should be changed to preserve benefit levels or limit benefit
cuts for this population.
Alternative Types of Revenue Increases
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The Panel compared the effects of the baseline revenue increase (a simple
increase in the payroll tax rate) with those of three alternatives: raising
the earnings limit on which payroll taxes apply, expanding the definition
of taxable income to include employee benefits, and infusing additional
general revenues into the Social Security Trust Fund.
If additional revenues are to be raised, most Panel members favor raising
the payroll tax rate rather than increasing the taxable earnings threshold.
The threshold increase, unless applied only to the employers' portion
or combined with a change in the benefit formula, would increase future
benefits for those at the upper end of the income distribution, which
a payroll tax increase would not.
Panel members expressed little enthusiasm for including employee benefits
in the taxable wage base, citing significant measurement problems.
Panel members expressed almost no enthusiasm for additional direct infusion
of general revenues, preferring to maintain the link between social security
contributions made and benefits received.
The OASI Trust Fund
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The OASI program is partially funded. The OASI Trust Fund currently exceeds
one year's outlays, and is projected to grow for about two decades, as
revenues exceed benefit payments. The Panel discussed whether OASI should
remain at least partly funded or revert to a pay-as-you-go system as was
in effect before the 1983 amendments.
The Panel believes that OASI should continue to be at least partly funded,
meaning that the Trust Fund should maintain a significant and stable margin
over annual expenditures over the foreseeable future.
On the assumption that Trust Fund reserves will continue to exist, the
Panel discussed how to invest it. The Fund is currently invested in special
issue Treasury securities, whose interest and principal are virtually
free of default risk. The Panel examined whether part of the Trust Fund
should be invested in private capital markets, with the expectation that
investments would earn a higher rate of return than if invested solely
in Treasury securities.
The Panel believes that a judgment on this proposal should depend on
an assessment of its opportunities and its costs. If investing the Trust
Fund in stocks carried no risk and provided a higher expected return,
the stock portfolio would obviously be preferable. However, there is a
risk-return tradeoff which must be examined and assessed in light of social
security objectives. A related issue involves who bears the risk if equities
perform poorly - future social security recipients, future social security
contributors, or general taxpayers?
Panel discussions raised other questions. To what extent would investing
the Trust Fund in equities increase national saving? How might it change
perceptions about the size of the government deficit and increase political
pressure to reduce it? How much would the inclusion of equities in the
Trust Fund alter private household saving decisions? To what extent would
this proposal expose future beneficiaries to additional political risk,
because government officials might encourage the selection of private
equity investments using criteria other than pure risk and return?
The Panel did not reach a consensus on the proposal to invest some of
the Trust Fund reserves in equities, and concluded that the issue deserves
additional study.
Individual Accounts within Social Security
The Panel discussed the pros and cons of converting all or part of the
Social Security Trust Fund (or the annual surplus) to individual social
security accounts, over which participants would exercise some investment
discretion. In considering this proposal, the Panel noted that distributing
the annual surpluses to individual accounts would require additional adjustments
to benefits and/or taxes beyond what would be required to achieve system
solvency without this distribution.
The Panel identified several attractive features of this proposal. Participants
could allocate their funds as they preferred. Personal control might reduce
uncertainty about the future politics of social security and increase
public confidence in the system. It would probably be easier to increase
social security taxes if the increases were directed to individual accounts.
Moving these funds off-budget might create pressure to reduce the deficit,
and thereby increase national saving.
Panel members also raised concerns about introducing individual accounts
within social security. Would people manage these retirement assets prudently,
and understand the risk and return tradeoffs inherent in private investment
holdings? Would additional regulatory structures be necessary? Should
the government offer a market index fund as a low-cost option? Would the
administrative expenses of an individualized system substantially exceed
those of the current Social Security Administration? Should participants
be permitted to access the funds prior to retirement, or lump sum payouts
at retirement? Would these accumulations be considered "assets"
for means-tested assistance programs? Can they be bequeathed?
Despite these questions and concerns, many Panel members find promising
the proposal to convert part of the Social Security Trust Fund to individual
accounts, if the remainder of the social security system can still be
made solvent. The Panel recognizes the need to coordinate the pattern
of any benefit cuts with the pattern of benefits that would be received
from these individual accounts.
Most Panel members would prohibit access to the funds for any reason
other than retirement, and would mandate that the benefits be wholly or
in part distributed in the form of an annuity, rather than permitting
a 100 percent lump sum cashout. The Panel was divided on whether the annuity
could be best managed by the government or the private sector.
Other Retirement System Changes
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The Panel considered other issues related to the nation's retirement
system, public and private.
The Panel identified strong arguments for including all new state and
local employees in the social security system.
The Panel reviewed the range of ages currently used in retirement income
policy, and concluded that much more coherent and integrated policy is
needed. These ages include several discussed above (the NRA, the EEA and
the ages at which people can apply for SSI and DI) as well as the age
at which surviving spouses can apply for survivor benefits and the maximum
age of the social security earnings test. In addition, the Panel noted
that ages specified in IRS tax code for tax-qualified pension plans should
be coordinated with any new ages recommended for social security purposes.
For example, tax law specifies that employer- provided pension benefits
under qualified plans may not exceed a certain dollar level when the worker
attains the social security NRA, and an actuarially reduced amount at
earlier ages. These linkages should be considered as the NRA increases.
Similarly, tax law requires that workers receive minimum distributions
from their private retirement accounts once they attain age 70.5. This
age should probably be reevaluated in light of other proposed reforms
and increasing life expectancies.
The Panel favors a more coherent policy on the ages the IRS uses in the
tax code and the SSA uses in social security regulations.
Many Americans save very little and many workers reach retirement with
little or no employer pension benefits. To remedy this situation, some
have advocated mandatory private pensions outside the social security
system, or proposed additional tax inducements to save or simplified pension
regulations to reduce the regulatory burden. The Panel discussed these
issues concerning retirement saving, both inside and outside employer
pension plans.
The Panel overwhelmingly opposes mandated employer- pensions at the present
time. This contrasts with the Panel's openness to individual accounts
within social security.
The Panel favors simplification of the tax rules under which employer
pension plans operate. Differences arose regarding the precise ways in
which the tax code and nondiscrimination legislation should be reformed.
Some members favor raising the contribution and benefit limits covering
employer-provided pensions, and/or coordinating the very different benefit
levels for different types of defined-contribution vehicles. Many members
also support the idea of having streamlined regulations that companies
can follow when establishing a tax-qualified defined-benefit or defined-contribution
plan.
Most Panel members favor increasing the incentives for private savings,
such as raising the limits on Individual Retirement Accounts.
A valuable attribute of social security benefits is that they are the
only life annuities that are fully inflation- protected and available
to (almost) all workers in the United States. The Panel urges the federal
government to consider issuing inflation-indexed bonds which firms or
individuals could buy to generate private sector retirement annuities
protected from inflation.
The Panel favors the government issue of Treasury bonds indexed to price
inflation, recognizing that some phasing in of this new credit instrument
would be necessary.
SSA Policy Modeling and Research
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The Panel urges the Social Security Administration to take advantage
of its new independent agency status to re-structure its policy analysis
and forecasting functions, making more use of the expertise in the policy
community. Some Panel members suggest that the Social Security Administration
would benefit from more frequent interactions with academic and practicing
experts outside the government to advise SSA on issues of assumptions
and methods, and also on broader issues facing the nation's retirement
income system.
The Panel urges SSA to make available to the research and policy community
the actuarial and economic models it uses for forecasting and analysis.
Computer programs, documentation and research reports should be more widely
available.
The Panel also urges that the data used in modeling social security system
outcomes be made available to the research and policy community, in ways
that preserve confidentiality while permitting analysts outside SSA to
evaluate forecasts and simulate alternative policy scenarios. We note
that implementation of these recommendations would have resource implications
for the SSA research offices.
Many questions that the Panel struggled with require up- to-date, sophisticated
modeling and data sets. The Social Security Administration's longitudinal
Retirement History Survey (1969-79) played a major role in augmenting
our understanding of retirement processes in the 1970s. The current longitudinal
Health and Retirement Survey will do the same in the 1990s. The Panel
urges that the Social Security Administration increase its support of
data gathering and analysis efforts as a means of answering the policy
questions raised in this report and others that will confront the system
as it continues to evolve.
Conclusion
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The social security program in the United States has been extremely successful
and popular since its inception, and has been instrumental in improving
the well-being of millions of American retirees and their dependents and
survivors. When fiscal problems have been forecast in the past, adjustments
have been made to address them. The same is needed now. The earlier the
necessary adjustments are legislated, the better, because early notification
of impending changes gives people time to adjust their savings and retirement
plans accordingly. The fiscal problems currently anticipated with the
graying of the baby boom generation are manageable, and the Panel strongly
urges policymakers and politicians to decide promptly on the appropriate
mix of benefit decreases and revenue increases to return social security's
fiscal house to order.
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