Author: Alicia Haydock MunnellPublisher:
ISBN:
Category : Consumer price indexes
Languages : en
Pages : 4
Book Description
What Does Price Indexing Mean for Social Security Benefits?
Author: Alicia Haydock MunnellPublisher:
ISBN:
Category : Consumer price indexes
Languages : en
Pages : 4
Book Description
Consumer Price Index Measure Used in Calculating Social Security Cost-of-living Adjustments
Author: United States. Congress. House. Committee on Ways and Means. Subcommittee on Social SecurityPublisher:
ISBN:
Category : Consumer price indexes
Languages : en
Pages : 66
Book Description
Indexing Social Security Benefits
Author: Publisher:
ISBN:
Category :
Languages : en
Pages : 0
Book Description
Under current law, Social Security benefits increase from one generation to the next at the rate that the national average wage rises. In other words, initial Social Security benefits are wage-indexed. Once enrolled in the program, beneficiaries' Social Security checks increase each year at the same rate as the Consumer Price Index (CPI); that is, they are price-indexed. Due to increases in worker productivity, wages tend to rise faster than prices when measured over long periods of time. Consequently, if initial benefits were based on the rate at which prices rise rather than the rate at which wages rise, initial benefits for each succeeding generation of workers would grow more slowly than under current law. The growth of Social Security benefits over time can be measured against either the rate of growth of prices or wages. If benefits grow faster than the rate at which prices rise, the benefits increase in purchasing power, and future retirees will enjoy higher standards of living than today's retirees. If benefits grow at the same rate as prices, purchasing power is unchanged, and future retirees will be able to maintain a standard of living similar to that of today's retirees. Benefit levels that grow more slowly than the rate at which prices rise will decline in purchasing power, resulting in falling standards of living for future retirees. Because Social Security benefits are wage-indexed, the purchasing power of benefits rises from one generation of workers to the next, and the replacement rate -- initial benefits as a percentage of workers' career-average earnings -- remains constant for each successive generation of workers. If benefits were price-indexed, the purchasing power of benefits would remain constant for each generation of workers, and replacement rates would fall. Price-indexing would make small annual reductions in initial benefits, but the cumulative reduction would be substantial when compounded over many years. This could have serious implications for the retirement income of low-wage workers. Price-indexing benefits also would make deeper cuts in benefits if wages grow faster than projected, even as Social Security's financial situation would be improving. Likewise, if wages grow more slowly than projected, price-indexing would make smaller cuts in benefits, leading to a larger financing deficit. One way to preserve benefits for low-wage workers would be to progressively price-index initial benefits. Initial benefits of low-wage workers would continue to be fully wage-indexed, the benefits of average-wage workers would be based on a mix of wage-indexing and price-indexing, and the benefits of high-wage workers would be fully price-indexed. President Bush has suggested that Congress consider progressive price-indexing of Social Security benefits. The Social Security Administration (SSA) has analyzed a method of progressive price-indexing that would continue to wage-index Social Security benefits for workers with careeraverage earnings in the lowest 30% of the earnings distribution. SSA has estimated that this proposal would eliminate about three-fourths of the program's 75-year unfunded liability. One consequence of this method of progressive price-indexing would be that, eventually, all workers with earnings in the top 70% of the earnings distribution would receive the same benefit. This report will not be updated.
Social Security
Author: United States. General Accounting OfficePublisher:
ISBN:
Category : Cost and standard of living
Languages : en
Pages : 44
Book Description
Alternative Methods of Price Indexing Social Security
Author: Andrew G. BiggsPublisher:
ISBN:
Category :
Languages : en
Pages : 0
Book Description
This paper explains four methods of "price indexing" initial Social Security retirement benefits, and discusses the effect of each method on the fiscal sustainability of Social Security, benefit levels and replacement rates, redistribution, and sensitivity of system finances to demographic and economic shocks. Of these methods, PIA Factor Indexing would generate the largest cost savings while reducing benefit growth at approximately an equal rate for all income levels. Methods that index the AIME, the formula "bend points," or both, would reduce benefit growth at a slower rate and would have different effects on benefit distribution and system sustainability.
Social Security Cost-of-Living Adjustments and the Consumer Price Index
Author: Clark A. BurdickPublisher:
ISBN:
Category :
Languages : en
Pages : 0
Book Description
Social Security - Old-Age, Survivors, and Disability Insurance (OASDI) - benefits are indexed for inflation to protect beneficiaries from the loss of purchasing power implied by inflation. In the absence of such indexing, the purchasing power of Social Security benefits would be eroded as rising prices raise the cost of living. Recently, the consumer price index used to calculate the cost-of-living-adjustment (COLA) for Social Security (OASDI) benefits has come under increased scrutiny. Some argue that the current index does not accurately reflect the inflation experienced by seniors and that COLAs should be larger. Others argue that the measure of inflation underlying the COLA has technical limitations that cause it to overestimate changes in the cost of living and that COLAs should be smaller. This article discusses some of the issues involved with indexing Social Security benefits for inflation and examines the ramifications of potential changes to COLA calculations.
Progressive Price Indexing of Social Security Benefits
Author: Patrick J. PurcellPublisher:
ISBN:
Category : Price indexes
Languages : en
Pages : 13
Book Description
Consumer Price Index Measure Used in Calculating Social Security Cost-of-living Adjustments
Author: United States. Congress. House. Committee on Ways and Means. Subcommittee on Social SecurityPublisher:
ISBN:
Category : Consumer price indexes
Languages : en
Pages : 72
Book Description
Seesaws and Social Security Benefits Indexing
Author: Matthew WeinzierlPublisher:
ISBN:
Category : Social security
Languages : en
Pages : 38
Book Description
The price indexation of Social Security benefit payments has emerged in recent years as a flashpoint of debate in the United States. I characterize the direct effects that changes in that price index would have on retirees who differ in their initial wealth at retirement and mortality rates after retirement. I propose a simple but flexible theoretical framework that converts benefits reform first into changes to retirees' consumption paths and then into a net effect on social welfare. I calibrate that framework using recently-produced data on Social Security beneficiaries by lifetime income decile and both existing and new survey evidence on the normative priorities Americans have for Social Security. The results suggest that the value retirees place on protection against longevity risk is an important caveat to the widespread enthusiasm for a switch to a slower-growing price index such as the chained CPI-U.
Indexing Social Security
Author: Robert S. KaplanPublisher:
ISBN:
Category : Political Science
Languages : en
Pages : 80
Book Description