Providing guarantees in Social Security

Smith

Karen E.

Smith, Karen E.

Author

Steuerle

C. Eugene

Steuerle, C. Eugene

Author

Montagnes

Pablo

Montagnes, Pablo

Author

text

working paper

Chestnut Hill, Mass. Center for Retirement Research at Boston College20042004monographic

Chestnut Hill, Mass.

Center for Retirement Research at Boston College

2004

monographic

Englisheng

English

eng

electronicapplication/pdfborn digital

electronic

application/pdf

born digital

Some Social Security reforms would provide guarantees that individuals would not receive less under a reformed system than would be provided by current law. However, the current law benefit formula increases benefits when wages rise. Any reform successfully adding to economic growth, therefore, would affect those promised levels of benefits, as well as revenues and the interest rates that determine what could be earned and paid out of individual accounts. This paper concludes that guarantees could add significantly to the costs of Social Security, reduce any reduction in budget imbalance achieved through other parts of a reform, and add to taxes, direct or implicit, that must be paid to cover those costs. Stock and bond market variation, as well as variation in returns on individual accounts, also add to costs when reform contains a guarantee, as government bears mainly downside risks. A variety of examples are provided for one generic type of reform.

Karen E. Smith, C. Eugene Steuerle, and Pablo Montagnes.

CRR WP2004-21

CRR WP

2004-21

http://crr.bc.edu/images/stories/Working_Papers/wp_2004-21.pdf

MChBEnglisheng

MChB

Englisheng

English

eng