Reform Model Two of the President's Commission to Strengthen Social SecurityDistributional outcome

Reform Model Two of the President's Commission to Strengthen Social Security

Distributional outcome

Favreault

Melissa M.

Favreault, Melissa M.

Author

Goldwyn

Joshua H.

Goldwyn, Joshua H.

Author

Smith

Karen E.

Smith, Karen E.

Author

Thompson

Lawrence H.

Thompson, Lawrence H.

Author

Uccello

Cori E.

Uccello, Cori E.

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

This project uses dynamic microanalytic simulation techniques to explore the distributional consequences of Plan 2 of the President's Commission to Strengthen Social Security. This plan includes a voluntary personal account that would be "carved out" of currently-scheduled benefit contributions, a new minimum benefit, and an increase in widow(er)s benefits. It also shifts the current wage-indexed initial benefit formula to a price-indexed formula to address most of the current system's long-term solvency problem. The analysis begins by adopting the assumptions of the Office of the Chief Actuary (OCACT) regarding portfolio allocation, rates of return, administrative costs, and mandatory annuitization of personal account balances to develop a baseline of Model 2. We compare the distributional results with current-law promised benefits and a current-law scenario adjusted to match the revenues we estimate are required to fund the OCACT baseline in 2050 exclusive of the private account provisions. Subsequently, we test the sensitivity of our baseline estimates to different assumptions about participation in personal accounts, investment patterns, administrative costs, variation in market returns across the life cycle, and rates of return on investments. To simulate likely participation patterns in voluntary private accounts and participants' portfolio allocation choices, we estimate models using recent data from the Survey of Consumer Finances. The results from our core and sensitivity analyses bracket the likely outcomes of the reform plan and demonstrate how this type of reform might affect subgroups of the future elderly population.

Melissa M. Favreault, Joshua H. Goldwyn, Karen E. Smith, Lawrence H. Thompson, Cori E. Uccello.

CRR WP2004-19

CRR WP

2004-19

http://crr.bc.edu/images/stories/Working_Papers/wp_2004-19.pdf

MChBEnglisheng

MChB

Englisheng

English

eng