@article {5847, title = {Distributional Effects of Means Testing Social Security: An Exploratory Analysis}, number = {Working Paper No. 22424}, year = {2016}, pages = {1-28}, institution = {Cambridge, MA, National Bureau of Economic Research}, abstract = {This paper examines the distributional implications of introducing additional means testing of Social Security benefits where proceeds are used to help balance Social Security{\textquoteright}s finances. Benefits of the top quarter of households ranked according to the relevant measure of means are reduced using a modified version of the Social Security Windfall Elimination Provision (WEP). The replacement rate in the first bracket of the benefit formula, determining the Primary Insurance Amount (PIA), would be reduced from 90 percent to 40 percent of Average Indexed Monthly Earnings (AIME). Four measures of means are considered: total wealth; an annualized measure of AIME; the wealth value of pensions; and a measure of average indexed lifetime W2 earnings. The empirical analysis is based on data from the Health and Retirement Study. These means tests would reduce total lifetime household benefits by 7 to 9 percentage points. We find that the basis for means testing Social Security makes a substantial difference as to which households have their benefits reduced, and that different means tests may have different effects on the benefits of families in similar circumstance. We also find that the measure of means used to evaluate the effects of a means test makes a considerable difference as to how one would view the effects of the means test on the distribution of benefits.}, keywords = {Net Worth and Assets, Public Policy, Social Security}, author = {Alan L Gustman and Thomas L. Steinmeier and N. Tabatabai} } @article {5888, title = {The Great Recession, Retirement and Related Outcomes}, year = {2015}, institution = {Cambridge, MA, National Bureau of Economic Research}, abstract = {This paper uses data from the Health and Retirement Study to examine retirement and related labor market outcomes for the Early Boomer cohort, those in their mid-fifties at the onset of the Great Recession. Outcomes are then compared with older cohorts at the same age. The Great Recession increased their probability of being laid off and the length of time it took to find other full-time employment. Differences in layoffs between those affected by the recession and members of older cohorts in turn accounted for almost the entire difference between cohorts in employment change with age. The Great Recession does not appear, however, to have depressed the wages in subsequent jobs for those who experienced a layoff. In 2010, 17 percent of the Early Boomers were Not Working and Not Retired or Partially Retired, and 6 percent were unemployed, leaving at least 9 percent who were not working and not unemployed but not retired or only partially retired. At the recession s peak, half of those who experienced a layoff ended up in the Not Retired or Partially Retired, Not Working category. But only a quarter of those who declared themselves to be Not Retired or Partially Retired, and were Not Working, had experienced a layoff. Most of the jump in Not Retired or Partially Retired, Not Working appears to reflect a change in expectations about the potential or need for future work, a change that is not the result of an actual job loss.}, keywords = {Employment and Labor Force, Expectations, Public Policy}, author = {Alan L Gustman and Thomas L. Steinmeier and N. Tabatabai} } @article {8218, title = {Retirement and the Great Recession}, journal = {Journal of Retirement}, volume = {3}, year = {2015}, pages = {87-106}, publisher = {3}, abstract = {This article uses data from the Health and Retirement Study to examine retirement and related labor market outcomes for the Early Boomer cohort, those in their mid-fifties at the onset of the Great Recession. Outcomes are then compared with older cohorts at the same age. The Great Recession increased their probability of being laid off and the length of time needed to find other full-time employment. Differences in layoffs between those affected by the recession and members of older cohorts in turn accounted for almost the entire difference between cohorts in employment change with age. However, The Great Recession does not appear to have depressed wages in subsequent jobs for those who experienced a layoff. In 2010, 17 of the Early Boomers were Not Working and Not Retired or Partially Retired, and 6 were unemployed, leaving at least 11 percent who were not unemployed but not retired or only partially retired. At the recession s peak, half of those who experienced a layoff ended up in the Not Retired or Partially Retired, Not Working category. But only a quarter of those who declared themselves to be Not Retired or Partially Retired, and were Not Working, had experienced a layoff. Most of the jump in Not Retired or Partially Retired, Not Working appears to reflect a change in expectations about the potential or need for future work, a change that is not the result of an actual job loss.}, keywords = {Employment and Labor Force, Public Policy, Retirement Planning and Satisfaction}, doi = {10.3905/jor.2015.3.1.087}, author = {Alan L Gustman and Thomas L. Steinmeier and N. Tabatabai} } @article {5850, title = {The Great Recession, Decline and Rebound in Household Wealth for the Near Retirement Population}, year = {2014}, institution = {Cambridge, MA, National Bureau of Economic Research}, abstract = {This paper uses data from the Health and Retirement Study to examine the effects of the Great Recession on the wealth held by the near retirement age population from 2006 to 2012. For the Early Boomer cohort (ages 51 to 56 in 2004), real wealth in 2012 remained 3.6 percent below its 2006 value. This is a modest decline considering the fall in asset values during the Great Recession. Much of the decline in wealth over the 2006 to 2010 period was cushioned by wealth originating from Social Security and defined benefit pensions. For the most part, these are stable sums that ensured a major fraction of total wealth did not decline as a result of the recession. The rebound in asset values observed between 2010 and 2012 mitigated, but did not erase, the asset losses experienced in the first years of the Great Recession. Effects of the Great Recession varied with the household{\textquoteright}s initial wealth. Those who were in the highest wealth deciles typically had a larger share of their assets subject to the influence of declining markets, and were hurt most severely. Unlike those falling in lower wealth deciles, they have yet to regain all the wealth they lost during the recession. Recovering losses in assets is only part of the story. The assets held by members of the cohort nearing retirement at the onset of the recession would normally have grown over ensuing years. Members of older HRS cohorts accumulated assets rapidly in the years just before retirement. Those on the cusp of retiring at the onset of the recession would be much better off had they had enjoyed similar growth in assets as experienced by members of older cohorts. The bottom line is that the losses in assets imposed by the Great Recession were relatively modest. The recovery has helped. But much of the remaining penalty due to the Great Recession is in the failure of assets to grow beyond their initial levels.}, keywords = {Health Conditions and Status, Net Worth and Assets, Public Policy}, author = {Alan L Gustman and Thomas L. Steinmeier and N. Tabatabai} } @article {7987, title = {Mismeasurement of pensions before and after retirement: the mystery of the disappearing pensions with implications for the importance of Social Security as a source of retirement support}, journal = {Journal of Pension Economics and Finance}, volume = {13}, year = {2014}, pages = {1-26}, publisher = {13}, abstract = {A review of the literature suggests that when pension values are measured by the wealth equivalent of promised defined benefit pension benefits and defined contribution balances for those approaching retirement, pensions account for more support in retirement than is suggested when their contribution is measured by incomes received directly from pension plans by those who have already retired. Estimates from the Health and Retirement Study for respondents in their early fifties suggest that pension wealth is about 82 as valuable as Social Security wealth. In data from the Current Population Survey (CPS), for members of the same cohort, measured when they are 65-69, pension incomes are about 58 as valuable as incomes from Social Security. Our empirical analysis uses data from the HRS to examine the reasons for these differences in the contributions of pensions as measured in income and wealth data. Key factors accounting for these differences include: a difference in methodology between surveys affecting what is included in pension income; some pension wealth {\textquoteright}disappears{\textquoteright} at retirement because respondents change their pension into other forms that are not counted as pension income; and the form of annuitization may influence the measure of pension income. A series of caveats notwithstanding, the bottom line is that CPS data on pension incomes received in retirement understates the full contribution pensions make to supporting retirees. PUBLICATION ABSTRACT}, keywords = {Net Worth and Assets, Pensions, Public Policy, Retirement Planning and Satisfaction, Social Security}, author = {Alan L Gustman and Thomas L. Steinmeier and N. Tabatabai} } @article {8012, title = {The Social Security Windfall Elimination and Government Pension Offset Provisions for Public Employees in the Health and Retirement Study}, journal = {Social Security Bulletin}, volume = {74}, year = {2014}, note = {Date revised - 2015-04-01 Availability - URL:http://www.ssa.gov/policy/docs/ssb/ Publisher{\textquoteright}s URL}, pages = {55-69}, publisher = {74}, abstract = {This article uses Health and Retirement Study data to investigate the effects of Social Security{\textquoteright}s Windfall Elimination Provision (WEP) and Government Pension Offset (GPO) on Social Security benefits received by households. The provisions reduce benefits for individuals or the dependents of individuals whose work histories include jobs for which they were entitled to a pension and were not subject to Social Security payroll taxes ( noncovered employment). We find that about 3.5 percent of households are subject to either the WEP or the GPO, and that the provisions reduce the present value of their Social Security benefits by roughly one-fifth. Households affected by both provisions experience benefit reductions of about one-third. Under the WEP, the Social Security benefit reduction is capped at one-half of the amount of the pension from noncovered employment, which substantially reduces the WEP penalty and prevents the WEP adjustment from falling disproportionately on households in the lowest earnings category.}, keywords = {Employment and Labor Force, Income, Pensions, Public Policy, Retirement Planning and Satisfaction, Social Security}, author = {Alan L Gustman and Thomas L. Steinmeier and N. Tabatabai} } @article {5960, title = {The Social Security Windfall Elimination and Government Pension Offset Provisions for Public Employees in the Health and Retirement Study}, year = {2013}, institution = {Ann Arbor, The University of Michigan}, abstract = {This paper uses data from the Health and Retirement Study to investigate the effects of Social Security s Windfall Elimination Provision (WEP) and Government Pension Offset (GPO) provision on Social Security benefits received by individuals and households. WEP reduces the benefits of individuals who worked in jobs covered by Social Security and also worked in uncovered jobs where a pension was earned. WEP also reduces spouse benefits. GPO reduces spouse and survivor benefits for persons who worked in uncovered government employment where they also earned a pension. Unlike previous studies, we take explicit account of pensions earned on jobs not covered by Social Security, a key determinant of the size of WEP and GPO adjustments. Also unlike previous studies, we focus on the household. This allows us to incorporate the full effects of WEP and GPO on spouse and survivor benefits, and to evaluate the effects of WEP and GPO on the assets accumulated by affected families. Among our specific findings: About 3.5 percent of households are subject to either WEP or to GPO. The present value of their Social Security benefits is reduced by roughly one fifth. This amounts to five to six percent of the total wealth they accumulate before retirement. Households affected by both WEP and GPO lose about one third of their benefit. Limiting the Social Security benefit to half the size of the pension from uncovered employment reduces the penalty from WEP for members of the original HRS cohort by about 60 percent.}, keywords = {Public Policy, Retirement Planning and Satisfaction, Social Security}, url = {http://www.mrrc.isr.umich.edu/publications/papers/pdf/wp288.pdf}, author = {Alan L Gustman and Thomas L. Steinmeier and N. Tabatabai} } @article {7729, title = {Financial Knowledge and Financial Literacy at the Household Level}, journal = {The American Economic Review}, volume = {102}, year = {2012}, pages = {309-313}, publisher = {102}, abstract = {There is evidence of a relation between numeracy and wealth held outside of pensions and Social Security. With pensions and Social Security accounting for half of wealth at retirement, and evidence that those with pensions save more in other forms, one would expect to find knowledge of pensions and Social Security influencing retirement saving. Yet we find no evidence that knowledge of pensions and Social Security is related to nonpension, non-Social Security wealth, to numeracy, or that it plays an intermediate role in the numeracy-wealth relation. Our findings raise questions about policies that would enhance numeracy to increase retirement saving. PUBLICATION ABSTRACT}, keywords = {Net Worth and Assets, Other, Public Policy, Retirement Planning and Satisfaction, Social Security}, doi = {10.1257/aer.102.3.309}, author = {Alan L Gustman and Thomas L. Steinmeier and N. Tabatabai} } @article {7736, title = {The growth in Social Security benefits among the retirement-age population from increases in the cap on covered earnings.}, journal = {Soc Secur Bull}, volume = {72}, year = {2012}, month = {2012}, pages = {49-61}, publisher = {72}, abstract = {

Analysts have proposed raising the maximum level of earnings subject to the Social Security payroll tax (the "tax max") to improve long-term Social Security Trust Fund solvency. This article investigates how raising the tax max leads to the "leakage" of portions of the additional revenue into higher benefit payments. Using Health and Retirement Study data matched to Social Security earnings records, we compare historical payroll tax payments and benefit amounts for Early Boomers (born 1948-1953) with tax and benefit simulations had they been subject to the tax max (adjusted for wage growth) faced by cohorts 12 and 24 years older. We find that 43.2 percent of the additional payroll tax revenue attributable to tax max increases affecting Early Boomers relative to taxes paid by the cohort 12 years older leaked into higher benefits. For Early Boomers relative to those 24 years older, we find 53.5 percent leakage.

}, keywords = {Aged, Cohort Studies, Female, Humans, Insurance Benefits, Male, Middle Aged, Models, Econometric, Public Policy, Salaries and Fringe Benefits, Social Security, Taxes, United States}, issn = {0037-7910}, url = {https://www.ssa.gov/policy/docs/ssb/v72n2/v72n2p49.html}, author = {Alan L Gustman and Thomas L. Steinmeier and N. Tabatabai} } @article {5908, title = {How Did the Recession of 2007-2009 Affect the Wealth and Retirement of the Near Retirement Age Population in the Health and Retirement Study?}, number = {WP 2011-253}, year = {2011}, institution = {Michigan Retirement and Disability Research Center, University of Michigan}, address = {Ann Arbor, MI}, abstract = {This paper uses asset and labor market data from the Health and Retirement Study (HRS) to investigate how the recent Great Recession has affected the wealth and retirement of those in the population who were just approaching retirement age at the beginning of the recession, a potentially vulnerable segment of the working age population. The retirement wealth held by those ages 53 to 58 before the onset of the recession in 2006 declined by a relatively modest 2.8 percentage points by 2010. In more normal times, their wealth would have increased over these four years. Members of older cohorts accumulated an additional 5 percent of wealth over the same age span. To be sure, a part of that accumulation was the result of the upside of the housing bubble. The wealth holdings of poorer households were least affected by the recession. Relative losses are greatest for those who initially had the highest wealth when the recession began.The adverse labor market effects of the Great Recession are more modest. Although there is an increase in unemployment, that increase is not mirrored in the rate of flow out of full-time work or partial retirement. All told, the retirement behavior of the Early Boomer cohort looks similar, at least so far, to the behavior observed for members of older cohorts at comparable ages. Very few in the population nearing retirement age have experienced multiple adverse events. Although most of the loss in wealth is due to a fall in the net value of housing, because very few in this cohort have found their housing wealth under water, and housing is the one asset this cohort is not likely to cash in for another decade or two, there is time for their losses in housing wealth to recover.}, keywords = {Demographics, Employment and Labor Force, Net Worth and Assets, Public Policy, Retirement Planning and Satisfaction}, url = {https://mrdrc.isr.umich.edu/pubs/how-did-the-recession-of-2007-2009-affect-the-wealth-and-retirement-of-the-near-retirement-age-population-in-the-health-and-retirement-study-2/}, author = {Alan L Gustman and Thomas L. Steinmeier and N. Tabatabai} }