|How Does Local Cost-of-Living Affect Retirement for Low and Moderate Earners?
|Year of Publication
|Quinby, LD, Wettstein, G
|Center for Retirement Research at Boston College
|cost-of-living, Low income, moderate income, Retirement
This paper uses the Health and Retirement Study to explore how local cost-of-living affects Social Security replacement rates and household behavior. In theory, labor markets with high cost-of-living also offer more compensation. If this compensating differential is paid in wages, rather than benefits, it reduces the share of earnings replaced by Social Security due to the progressive benefit structure. This paper examines how important the cost-of-living penalty is, in practice, and whether it impacts households’ saving or labor supply.