1118 lines
No EOL
63 KiB
HTML
1118 lines
No EOL
63 KiB
HTML
<!doctype html>
|
|
<html lang="en" class="no-js">
|
|
<head>
|
|
<meta charset="UTF-8" />
|
|
<meta http-equiv="X-UA-Compatible" content="IE=edge,chrome=1" />
|
|
<meta name="viewport" content="width=device-width, initial-scale=1" />
|
|
<title>Distributional Effects of Reducing the Cost-of-Living Adjustments</title>
|
|
<meta name="DCTERMS:dateCreated" content="2008-11" />
|
|
<meta name="DCTERMS:contentOffice" content="ORDP:ORES" />
|
|
<meta name="DCTERMS:contentOwner" content="publications@ssa.gov" />
|
|
<meta name="DCTERMS:coderOffice" content="ORDP:ORES:OD" />
|
|
<meta name="DCTERMS:coder" content="op.webmaster@ssa.gov" />
|
|
<meta name="DCTERMS:dateCertified" content="2025-01-01" />
|
|
<meta name="description" content="Social Security Administration Research, Statistics, and Policy Analysis" />
|
|
<meta property="og:site_name" content="Social Security Administration Research, Statistics, and Policy Analysis"/>
|
|
<link rel="stylesheet" href="/policy/styles/doc.css" />
|
|
<link rel="stylesheet" href="/policy/styles/global.css" />
|
|
<!-- SSA INTERNET HEAD SCRIPTS -->
|
|
<script src="https://code.jquery.com/jquery-3.7.1.min.js" integrity="sha256-/JqT3SQfawRcv/BIHPThkBvs0OEvtFFmqPF/lYI/Cxo=" crossorigin="anonymous"></script>
|
|
<script src="/framework/js/ssa.internet.head.js"></script>
|
|
|
|
<script>(window.BOOMR_mq=window.BOOMR_mq||[]).push(["addVar",{"rua.upush":"false","rua.cpush":"false","rua.upre":"false","rua.cpre":"false","rua.uprl":"false","rua.cprl":"false","rua.cprf":"false","rua.trans":"SJ-3a3bb884-f513-47e3-a86c-84bab05e21dc","rua.cook":"true","rua.ims":"false","rua.ufprl":"false","rua.cfprl":"false","rua.isuxp":"false","rua.texp":"norulematch","rua.ceh":"false","rua.ueh":"false","rua.ieh.st":"0"}]);</script>
|
|
<script>!function(e){var n="https://s.go-mpulse.net/boomerang/";if("False"=="True")e.BOOMR_config=e.BOOMR_config||{},e.BOOMR_config.PageParams=e.BOOMR_config.PageParams||{},e.BOOMR_config.PageParams.pci=!0,n="https://s2.go-mpulse.net/boomerang/";if(window.BOOMR_API_key="LERZW-HECFS-R8H4E-23UQ7-ERMQB",function(){function e(){if(!o){var e=document.createElement("script");e.id="boomr-scr-as",e.src=window.BOOMR.url,e.async=!0,i.parentNode.appendChild(e),o=!0}}function t(e){o=!0;var n,t,a,r,d=document,O=window;if(window.BOOMR.snippetMethod=e?"if":"i",t=function(e,n){var t=d.createElement("script");t.id=n||"boomr-if-as",t.src=window.BOOMR.url,BOOMR_lstart=(new Date).getTime(),e=e||d.body,e.appendChild(t)},!window.addEventListener&&window.attachEvent&&navigator.userAgent.match(/MSIE [67]\./))return window.BOOMR.snippetMethod="s",void t(i.parentNode,"boomr-async");a=document.createElement("IFRAME"),a.src="about:blank",a.title="",a.role="presentation",a.loading="eager",r=(a.frameElement||a).style,r.width=0,r.height=0,r.border=0,r.display="none",i.parentNode.appendChild(a);try{O=a.contentWindow,d=O.document.open()}catch(_){n=document.domain,a.src="javascript:var d=document.open();d.domain='"+n+"';void(0);",O=a.contentWindow,d=O.document.open()}if(n)d._boomrl=function(){this.domain=n,t()},d.write("<bo"+"dy onload='document._boomrl();'>");else if(O._boomrl=function(){t()},O.addEventListener)O.addEventListener("load",O._boomrl,!1);else if(O.attachEvent)O.attachEvent("onload",O._boomrl);d.close()}function a(e){window.BOOMR_onload=e&&e.timeStamp||(new Date).getTime()}if(!window.BOOMR||!window.BOOMR.version&&!window.BOOMR.snippetExecuted){window.BOOMR=window.BOOMR||{},window.BOOMR.snippetStart=(new Date).getTime(),window.BOOMR.snippetExecuted=!0,window.BOOMR.snippetVersion=12,window.BOOMR.url=n+"LERZW-HECFS-R8H4E-23UQ7-ERMQB";var i=document.currentScript||document.getElementsByTagName("script")[0],o=!1,r=document.createElement("link");if(r.relList&&"function"==typeof r.relList.supports&&r.relList.supports("preload")&&"as"in r)window.BOOMR.snippetMethod="p",r.href=window.BOOMR.url,r.rel="preload",r.as="script",r.addEventListener("load",e),r.addEventListener("error",function(){t(!0)}),setTimeout(function(){if(!o)t(!0)},3e3),BOOMR_lstart=(new Date).getTime(),i.parentNode.appendChild(r);else t(!1);if(window.addEventListener)window.addEventListener("load",a,!1);else if(window.attachEvent)window.attachEvent("onload",a)}}(),"".length>0)if(e&&"performance"in e&&e.performance&&"function"==typeof e.performance.setResourceTimingBufferSize)e.performance.setResourceTimingBufferSize();!function(){if(BOOMR=e.BOOMR||{},BOOMR.plugins=BOOMR.plugins||{},!BOOMR.plugins.AK){var n="false"=="true"?1:0,t="cookiepresent",a="eyd7g6aaiaaamjqacqdfqaaaabt3moxg-f-37540afee-clienttons-s.akamaihd.net",i="false"=="true"?2:1,o={"ak.v":"39","ak.cp":"1204614","ak.ai":parseInt("728289",10),"ak.ol":"0","ak.cr":3,"ak.ipv":6,"ak.proto":"h2","ak.rid":"c9ba61","ak.r":19138,"ak.a2":n,"ak.m":"dsca","ak.n":"essl","ak.bpcip":"2607:f378:40:6::","ak.cport":40614,"ak.gh":"184.50.26.202","ak.quicv":"","ak.tlsv":"tls1.3","ak.0rtt":"","ak.0rtt.ed":"","ak.csrc":"-","ak.acc":"","ak.t":"1739995878","ak.ak":"hOBiQwZUYzCg5VSAfCLimQ==ARaZZu5Da6g/s13xynnDFFuihY1TL4JJ2hlMCqEK4yTtSYNxb1bgMcOnsEGKEJrcDkdFeh/iaFJnnQor7hCmthBHdb2cLC7q2cSzfo7Up65laRj8qpJpIaq2Wc3qm0Y5qrDBeUAHL7esBYSLXK3AuK/RHJmh918xTZI66dvi3bNOYRAi+ZUn1pXmYGbsf4wmPPx/Pc5XhZlupZogYTHm8ukXafn6FC47mZ/DJJqPqjGDnPEmPPqFWNVTWi+JjBtVPF98hE4kOE4BXpnvrb/YR6P1zr/PW6DwXd+/BDAiu/oMqPyTgwYm/mwD4OgpTu8eydcKpKk5wFJ7Qg/tI5kA9Mjq4wlLnYSodGn077BF67ZOILiAWTbS7e4vBkAsj3e+S6gAmkepRbdito+/rLPV1N7ViR/eCEfp27XpGJ4CAjY=","ak.pv":"98","ak.dpoabenc":"","ak.tf":i};if(""!==t)o["ak.ruds"]=t;var r={i:!1,av:function(n){var t="http.initiator";if(n&&(!n[t]||"spa_hard"===n[t]))o["ak.feo"]=void 0!==e.aFeoApplied?1:0,BOOMR.addVar(o)},rv:function(){var e=["ak.bpcip","ak.cport","ak.cr","ak.csrc","ak.gh","ak.ipv","ak.m","ak.n","ak.ol","ak.proto","ak.quicv","ak.tlsv","ak.0rtt","ak.0rtt.ed","ak.r","ak.acc","ak.t","ak.tf"];BOOMR.removeVar(e)}};BOOMR.plugins.AK={akVars:o,akDNSPreFetchDomain:a,init:function(){if(!r.i){var e=BOOMR.subscribe;e("before_beacon",r.av,null,null),e("onbeacon",r.rv,null,null),r.i=!0}return this},is_complete:function(){return!0}}}}()}(window);</script></head>
|
|
<body class="research">
|
|
<article itemscope itemtype="http://schema.org/ScholarlyArticle">
|
|
<meta itemprop="datePublished" content="2008-11" />
|
|
<header>
|
|
<div id="hLogo"><a class="navLogo" href="/policy/index.html">Social Security</a><a class="navSearch" href="https://search.ssa.gov/search?affiliate=ssa">SEARCH</a></div>
|
|
<div id="hRedBar">
|
|
<div id="hDocInfo">
|
|
<h1 itemprop="headline">Distributional Effects of Reducing the Cost-of-Living Adjustments</h1>
|
|
<div id="hByline">by <span itemprop="author">Anya Olsen</span><br>Policy Brief <abbr title="Number">No.</abbr> 2008-03 (released November 2008)</div>
|
|
</div>
|
|
</div>
|
|
</header>
|
|
<nav>
|
|
<div id="breadcrumbs" itemscope itemtype="http://schema.org/BreadcrumbList">You are here: <span itemprop="itemListElement" itemscope itemtype="http://schema.org/ListItem"><a href="/" itemprop="item"><span itemprop="name">Social Security Administration</span></a><meta itemprop="position" content="1" /></span> > <span itemprop="itemListElement" itemscope itemtype="http://schema.org/ListItem"><a href="/policy/index.html" itemprop="item"><span itemprop="name">Research, Statistics & Policy Analysis</span></a><meta itemprop="position" content="2" /></span> > <span itemprop="itemListElement" itemscope itemtype="http://schema.org/ListItem"><a href="/policy/research.html?type=Policy%20Brief" itemprop="item"><span itemprop="name">Policy Briefs</span></a><meta itemprop="position" content="3" /></span></div>
|
|
<div id="rspaUtil"><ul><li id="mail"><a class="js-ga-event" href="#" rel="nofollow" data-event="outbound-link" data-event-action="click" data-event-label="email-this">Email</a></li><li id="print"><a href="#" rel="nofollow">Save/Print</a></li></ul></div>
|
|
</nav>
|
|
<div class="innards">
|
|
<div id="relatedInline">
|
|
<h4>Related Content</h4>
|
|
<div class="rcItems">
|
|
<p>Policy Option Projections: <a href="/policy/docs/projections/policy-options/colas.html"><abbr>COLA</abbr> Changes</a></p>
|
|
</div>
|
|
</div>
|
|
<div class="introBox">
|
|
<p id="synopsis" itemprop="description">Each year, Social Security benefits increase automatically with the cost-of-living adjustment (<abbr>COLA</abbr>), which is based on the rise in the consumer price index for urban wage earners and clerical workers (<abbr class="spell">CPI-W</abbr>). The analysis uses Modeling Income in the Near Term (<abbr>MINT</abbr>) projections to compare the distributional effects of three policy options discussed by the Social Security Advisory Board to improve system solvency: (1) reduce the <abbr>COLA</abbr> by 0.5 percentage points, (2) reduce the <abbr>COLA</abbr> by 1 percentage point, or (3) reduce the <abbr>COLA</abbr> by using the chained-<abbr class="spell">CPI</abbr> instead of the <abbr class="spell">CPI-W</abbr>. The effect of the <abbr>COLA</abbr> reductions would be cumulative over time, causing benefit reductions to increase the longer benefits are received. Certain groups of beneficiaries who tend to receive benefits for longer than average—including older beneficiaries, women, whites, <span class="nobr">widow(er)s</span>, those with higher levels of education and income, and retired disabled individuals—will experience larger benefit reductions.</p>
|
|
<hr />
|
|
<div class="eightypercent">
|
|
<p>Questions about the analysis should be directed to the author at <span class="nobr">202-358-6342</span>.</p>
|
|
<p>The findings and conclusions presented in this brief are those of the author and do not necessarily represent the views of the Social Security Administration.</p>
|
|
</div>
|
|
</div>
|
|
<h2>Summary</h2>
|
|
<p>This policy brief analyzes the distributional and solvency effects of reducing the annual Social Security cost-of-living adjustment (<abbr>COLA</abbr>). Social Security's <abbr>COLA</abbr> is based on increases in the consumer price index for urban wage earners and clerical workers (<abbr class="spell">CPI-W</abbr>) and is intended to ensure that benefits maintain their purchasing power over time. This analysis compares the three <abbr>COLA</abbr> options set forth by the Social Security Advisory Board in its report, <i>Social Security: Why Action Should be Taken Soon</i>:</p>
|
|
<ol>
|
|
<li>reduce the <abbr>COLA</abbr> by 0.5 percentage points (half-point option),</li>
|
|
<li>reduce the <abbr>COLA</abbr> by 1 percentage point (one-point option), and</li>
|
|
<li>reduce the <abbr>COLA</abbr> by using the “superlative” or “chained” consumer price index (chained-<abbr class="spell">CPI</abbr>) instead of the <abbr class="spell">CPI-W</abbr> (chained-<abbr class="spell">CPI</abbr> option). <sup><a href="#mn1" id="mt1">1</a></sup></li>
|
|
</ol>
|
|
<p>The distributional analysis for each <abbr>COLA</abbr> option is based on the Social Security Administration's (<abbr class="spell">SSA</abbr>'s) Modeling Income in the Near Term (<abbr>MINT</abbr>) projections, and the results pertain to Social Security beneficiaries aged 62 or older in the years 2030, 2050, and 2070. <sup><a href="#mn2" id="mt2">2</a></sup> The benefits under each <abbr>COLA</abbr> option are compared with the benefits scheduled under current law (scheduled benefits). In addition, the actual benefits that could be paid without any changes to current law (payable benefits) are compared with scheduled benefits as an additional reference point. Solvency estimates are from <abbr class="spell">SSA</abbr>’s Office of the Chief Actuary (<abbr class="spell">OACT</abbr>), and both the distributional and solvency results are based on the <abbr>COLA</abbr> changes beginning December 2006. <sup><a href="#mn3" id="mt3">3</a></sup></p>
|
|
<h2>Major Findings</h2>
|
|
<ul>
|
|
<li>The effect of the <abbr>COLA</abbr> reductions would be cumulative over time, causing benefit reductions to increase the longer benefits are received. Therefore, certain groups of beneficiaries who tend to receive benefits longer than average would experience larger benefit reductions. These groups include older beneficiaries, women, whites, those with higher levels of education, those with higher income, <span class="nobr">widow(er)s</span>, and retired disabled individuals. For example, under the half-point option in 2070, those beneficiaries aged 62–69 would experience a 2.9 percent benefit reduction while those aged 80–89 would experience a 10.9 percent benefit reduction compared with scheduled benefits. Under payable benefits, all beneficiaries would experience the same percentage reduction, regardless of how long they received benefits.</li>
|
|
<li>Poverty rates would increase under the policy options, but would be largest for the oldest old, blacks, the never married, and those with lower levels of education and income. For example, under the half-point option in 2070, the beneficiary poverty rate more than doubles from 0.5 percent under scheduled benefits to 1.2 percent for those aged 90 or older. Poverty increases would be greater under payable benefits, as this option results in larger benefit reductions compared with scheduled benefits than do the <abbr>COLA</abbr> options.</li>
|
|
<li>The <abbr>COLA</abbr> options would improve system solvency by reducing scheduled benefits. Reducing the <abbr>COLA</abbr> by 0.5 percentage points would eliminate about 40 percent of the long-range actuarial balance; reducing the <abbr>COLA</abbr> by 1 percentage point would eliminate about 78 percent of the actuarial balance; and using the chained-<abbr class="spell">CPI</abbr> instead of <abbr class="spell">CPI-W</abbr> for the <abbr>COLA</abbr> would eliminate about 18 percent of the actuarial balance. Although the three <abbr>COLA</abbr> options would not achieve solvency on their own, payable benefits would do so by reducing scheduled benefits to only pay benefits that are equal to incoming revenues.</li>
|
|
</ul>
|
|
<h2>Current Law <abbr>COLA</abbr> is Based on the <abbr class="spell">CPI-W</abbr></h2>
|
|
<p>The Social Security cost-of-living adjustments have been in effect since 1975, with benefits payable in December (received by the beneficiary in January) of each year. <sup><a href="#mn4" id="mt4">4</a></sup> <abbr>COLA</abbr>s are based on changes to the <abbr class="spell">CPI-W</abbr> from the third quarter of the prior year to the corresponding quarter of the current year. These data are published annually by the Bureau of Labor Statistics. The Social Security Advisory Board developed three different options that would each reduce the annual <abbr>COLA</abbr> by different amounts. <sup><a href="#mn5" id="mt5">5</a></sup> The first two <abbr>COLA</abbr> options would reduce the <abbr class="spell">CPI-W</abbr> by 0.5 percentage points and 1 percentage point, respectively. The third option for <abbr>COLA</abbr> reduction would replace the <abbr class="spell">CPI-W</abbr> with the chained consumer price index for all urban consumers (chained-<abbr class="spell">CPI</abbr>). The <abbr class="spell">CPI-W</abbr> is based on a market basket of goods and services and measures the average price changes of those goods and services over time. In contrast, the chained-<abbr class="spell">CPI</abbr> allows for substitutions within item categories, accounting for the fact that consumers switch to lower priced goods as the prices of other goods increase (for example, buying chicken if the price of beef goes up). The Office of the Chief Actuary determined that the effect of using the chained-<abbr class="spell">CPI</abbr> in place of the <abbr class="spell">CPI-W</abbr> would amount to a 0.22 percentage point decrease in the <abbr>COLA</abbr>. <sup><a href="#mn6" id="mt6">6</a></sup></p>
|
|
<h2><abbr>COLA</abbr> Reductions are Cumulative Over Time</h2>
|
|
<p>The effect of reducing the <abbr>COLA</abbr> under each of the three options would be cumulative over time for individual beneficiaries. This means that those beneficiaries who receive benefits the longest would have the largest reductions. There are several main groups that fall into this category: older beneficiaries, women, whites, those with higher levels of education, those with higher income, <span class="nobr">widow(er)s</span>, and the retired disabled population. As chart 1 shows, older beneficiaries have much larger benefit reductions than those in the younger age categories. For example, in 2070 under all three options, beneficiaries in the 90 or older age group would experience benefit reductions that are between 5.2 and 5.7 times greater than those aged 62–69 compared with scheduled benefits. Under payable benefits, all of the groups in 2070 would receive the same 31.2 percent benefit reduction compared with scheduled benefits. <sup><a href="#mn7" id="mt7">7</a></sup></p>
|
|
<div class="chartCenter">
|
|
<div class="chart700" id="chart1">
|
|
<div class="title">Chart 1.<br>Average individual benefit difference as a percentage of scheduled benefits for beneficiaries aged 62 or older in 2070, by policy option and age group</div>
|
|
<div class="scrollChart"><img src="pb2008-03c1.gif" width="695" height="283" alt="Line chart with tabular version below." /></div>
|
|
<div class="table altTable"><a class="altToggle" href="">Show as table</a>
|
|
<table>
|
|
<caption><span class="tableNumber">Table equivalent for Chart 1 </span>Average individual benefit difference as a percentage of scheduled benefits for beneficiaries aged 62 or older in 2070, by policy option and age group</caption>
|
|
<colgroup span="1" style="width:10em"></colgroup>
|
|
<colgroup span="4" style="width:10em"></colgroup>
|
|
<thead>
|
|
<tr>
|
|
<th class="stubHeading" scope="col">Age</th>
|
|
<th scope="col">Chained-<abbr class="spell">CPI</abbr></th>
|
|
<th scope="col">Half-point</th>
|
|
<th scope="col">One-point</th>
|
|
<th scope="col">Payable</th>
|
|
</tr>
|
|
</thead>
|
|
<tbody>
|
|
<tr>
|
|
<th class="stub0 nobr" scope="row">62–69</th>
|
|
<td>-1.3</td>
|
|
<td>-2.9</td>
|
|
<td>-5.6</td>
|
|
<td>-31.2</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub0 nobr" scope="row">70–79</th>
|
|
<td>-2.9</td>
|
|
<td>-6.5</td>
|
|
<td>-12.5</td>
|
|
<td>-31.2</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub0 nobr" scope="row">80–89</th>
|
|
<td>-5.0</td>
|
|
<td>-10.9</td>
|
|
<td>-20.6</td>
|
|
<td>-31.2</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub0" scope="row">90 or older</th>
|
|
<td>-7.4</td>
|
|
<td>-16.0</td>
|
|
<td>-29.3</td>
|
|
<td>-31.2</td>
|
|
</tr>
|
|
</tbody>
|
|
<tfoot>
|
|
<tr>
|
|
<td class="noNotes" colspan="5"> </td>
|
|
</tr>
|
|
</tfoot>
|
|
</table>
|
|
</div>
|
|
<div class="firstNote">SOURCE: Author's calculations using Modeling Income in the Near Term (<abbr>MINT</abbr>) data.</div>
|
|
<div class="lastNote">NOTE: <abbr class="spell">CPI</abbr> = consumer price index.</div>
|
|
</div>
|
|
</div>
|
|
<p>Because women tend to live longer than men, they will be more likely to receive Social Security benefits for a longer period of time, which equates to larger benefit reductions for women under all three <abbr>COLA</abbr> options. <sup><a href="#mn8" id="mt8">8</a></sup> As table 1 shows, women have been receiving benefits for an average of 3.7 years longer than men, and under the half-point option in 2070, women would receive an 8.5 percent benefit reduction, while men would receive a 6.4 percent benefit reduction compared with scheduled benefits. In addition, whites, persons with higher levels of education, and those in the higher current-income quintiles tend to receive benefits longer than other groups, resulting in larger benefit reductions. For example, in 2070 under the half-point option, individuals with graduate degrees have been receiving benefits for an average of 15.3 years and experience a 7.7 percent benefit reduction, while those with less than a high school diploma have been receiving benefits for an average of 14.2 years and experience a 6.9 percent reduction compared with scheduled benefits.</p>
|
|
<div class="table" id="table1">
|
|
<table>
|
|
<caption><span class="tableNumber">Table 1. </span>Average individual benefit difference as a percentage of scheduled benefits and average length of benefit receipt for beneficiaries aged 62 or older in 2070 </caption>
|
|
<colgroup span="1" style="width:12em"></colgroup>
|
|
<colgroup span="3" style="width:6em"></colgroup>
|
|
<colgroup span="1" style="width:6em"></colgroup>
|
|
<colgroup span="1" style="width:12em"></colgroup>
|
|
<thead>
|
|
<tr>
|
|
<th class="stubHeading" rowspan="2" scope="colgroup">Beneficiary characteristic and benefit type</th>
|
|
<th class="spanner" colspan="3" scope="colgroup">Policy option</th>
|
|
<th rowspan="2" scope="colgroup">Payable benefits</th>
|
|
<th rowspan="2" scope="colgroup">Average length of benefit receipt (years)</th>
|
|
</tr>
|
|
<tr>
|
|
<th scope="col">Chained-<abbr class="spell">CPI</abbr></th>
|
|
<th scope="col">Half-point</th>
|
|
<th scope="col">One-point</th>
|
|
</tr>
|
|
</thead>
|
|
<tbody>
|
|
<tr>
|
|
<th class="stub0" scope="rowgroup">Sex</th>
|
|
<td colspan="5"></td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub1" scope="row">Men</th>
|
|
<td>-2.9</td>
|
|
<td>-6.4</td>
|
|
<td>-12.2</td>
|
|
<td>-31.2</td>
|
|
<td>13.0</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub1" scope="row">Women</th>
|
|
<td>-3.9</td>
|
|
<td>-8.5</td>
|
|
<td>-16.0</td>
|
|
<td>-31.2</td>
|
|
<td>16.7</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub0" scope="rowgroup">Race/ethnicity</th>
|
|
<td colspan="5"></td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub1" scope="row">White</th>
|
|
<td>-3.7</td>
|
|
<td>-8.0</td>
|
|
<td>-15.2</td>
|
|
<td>-31.2</td>
|
|
<td>16.0</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub1" scope="row">Black</th>
|
|
<td>-3.4</td>
|
|
<td>-7.4</td>
|
|
<td>-13.9</td>
|
|
<td>-31.2</td>
|
|
<td>15.0</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub1" scope="row">Hispanic</th>
|
|
<td>-3.0</td>
|
|
<td>-6.7</td>
|
|
<td>-12.7</td>
|
|
<td>-31.2</td>
|
|
<td>14.3</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub1" scope="row">Other</th>
|
|
<td>-3.3</td>
|
|
<td>-7.2</td>
|
|
<td>-13.6</td>
|
|
<td>-31.2</td>
|
|
<td>13.3</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub0" scope="rowgroup">Education</th>
|
|
<td colspan="5"></td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub1" scope="row">Graduate</th>
|
|
<td>-3.5</td>
|
|
<td>-7.7</td>
|
|
<td>-14.5</td>
|
|
<td>-31.2</td>
|
|
<td>15.3</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub1" scope="row">Bachelor</th>
|
|
<td>-3.5</td>
|
|
<td>-7.8</td>
|
|
<td>-14.7</td>
|
|
<td>-31.2</td>
|
|
<td>15.3</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub1" scope="row">Associate</th>
|
|
<td>-3.6</td>
|
|
<td>-7.8</td>
|
|
<td>-14.8</td>
|
|
<td>-31.2</td>
|
|
<td>15.7</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub1" scope="row">High school</th>
|
|
<td>-3.4</td>
|
|
<td>-7.6</td>
|
|
<td>-14.3</td>
|
|
<td>-31.2</td>
|
|
<td>15.1</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub1" scope="row">Less than 12 years</th>
|
|
<td>-3.2</td>
|
|
<td>-6.9</td>
|
|
<td>-13.1</td>
|
|
<td>-31.2</td>
|
|
<td>14.2</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub0" scope="rowgroup">Current-income quintile</th>
|
|
<td colspan="5"></td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub1" scope="row">Highest </th>
|
|
<td>-3.8</td>
|
|
<td>-8.4</td>
|
|
<td>-15.7</td>
|
|
<td>-31.2</td>
|
|
<td>16.3</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub1" scope="row">Second highest </th>
|
|
<td>-3.4</td>
|
|
<td>-7.5</td>
|
|
<td>-14.2</td>
|
|
<td>-31.2</td>
|
|
<td>14.5</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub1" scope="row">Middle </th>
|
|
<td>-3.3</td>
|
|
<td>-7.3</td>
|
|
<td>-13.8</td>
|
|
<td>-31.2</td>
|
|
<td>14.4</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub1" scope="row">Second lowest </th>
|
|
<td>-3.4</td>
|
|
<td>-7.5</td>
|
|
<td>-14.2</td>
|
|
<td>-31.2</td>
|
|
<td>15.2</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub1" scope="row">Lowest </th>
|
|
<td>-3.5</td>
|
|
<td>-7.6</td>
|
|
<td>-14.2</td>
|
|
<td>-31.2</td>
|
|
<td>15.7</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub0" scope="rowgroup">Benefit type</th>
|
|
<td colspan="5"></td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub1" scope="row">Retired-worker</th>
|
|
<td>-2.8</td>
|
|
<td>-6.3</td>
|
|
<td>-12.1</td>
|
|
<td>-31.2</td>
|
|
<td>12.3</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub1" scope="row">Spousal and worker</th>
|
|
<td>-2.6</td>
|
|
<td>-5.8</td>
|
|
<td>-11.0</td>
|
|
<td>-31.2</td>
|
|
<td>10.9</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub1" scope="row">Spousal-only</th>
|
|
<td>-2.8</td>
|
|
<td>-6.3</td>
|
|
<td>-11.9</td>
|
|
<td>-31.2</td>
|
|
<td>9.7</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub1" scope="row">Survivor and worker</th>
|
|
<td>-5.4</td>
|
|
<td>-11.8</td>
|
|
<td>-21.9</td>
|
|
<td>-31.2</td>
|
|
<td>21.9</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub1" scope="row">Survivor-only</th>
|
|
<td>-5.8</td>
|
|
<td>-12.6</td>
|
|
<td>-23.3</td>
|
|
<td>-31.2</td>
|
|
<td>21.9</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub1" scope="row">Retired disabled</th>
|
|
<td>-4.6</td>
|
|
<td>-10.1</td>
|
|
<td>-18.8</td>
|
|
<td>-31.2</td>
|
|
<td>24.4</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub1" scope="row">Current disabled</th>
|
|
<td>-2.3</td>
|
|
<td>-5.1</td>
|
|
<td>-9.8</td>
|
|
<td>-31.2</td>
|
|
<td>11.5</td>
|
|
</tr>
|
|
</tbody>
|
|
<tfoot>
|
|
<tr>
|
|
<td class="firstNote" colspan="6">SOURCE: Author's calculations using Modeling Income in the Near Term (<abbr>MINT</abbr>) data.</td>
|
|
</tr>
|
|
<tr>
|
|
<td class="lastNote" colspan="6">NOTE: <abbr class="spell">CPI</abbr> = consumer price index.</td>
|
|
</tr>
|
|
</tfoot>
|
|
</table>
|
|
</div>
|
|
<p>Under the half-point option in 2070, the survivor-only group would experience a benefit reduction that would be twice as large as that for the retired-worker group (see table 1). Beneficiaries who receive survivor benefits, either independently or in addition to a worker benefit, tend to be mostly women and older than those in other beneficiary categories. As stated previously, women, on average, will receive Social Security benefits for a longer period of time than persons in other beneficiary categories. In 2070, women would make up one-half of the projected retired-worker group, while the projected survivor-only group would be comprised of about 92 percent women. Also, the average survivor-only beneficiary would receive benefits for almost 22 years compared with only about 12 years for retired workers. This equates to roughly 10 additional years of being subjected to the <abbr>COLA</abbr> reductions for the survivor group, resulting in larger benefit reductions.</p>
|
|
<p>Because disabled persons can collect benefits at earlier ages than retirees, those who survive to older ages would have more years of being subjected to the <abbr>COLA</abbr> reductions, also resulting in larger benefit reductions (see table 1). <sup><a href="#mn9" id="mt9">9</a></sup> Individuals who receive disability benefits can begin collecting them at any age, as long as they meet specific requirements. <sup><a href="#mn10" id="mt10">10</a></sup> In 2070, the average age of beneficiaries in the retired disabled group is projected to be about 77 years old, compared with 75.5 for the retired-worker group. <sup><a href="#mn11" id="mt11">11</a></sup> However, the average benefit-start age for those in the retired disabled beneficiary group in the same year is projected to be about 53, compared with about 63 for retired-worker beneficiaries. Although beneficiaries in these two groups would have similar average ages in 2070, the much younger average start age for the retired disabled group would result in more years of receiving Social Security benefits and more years of <abbr>COLA</abbr> reductions.</p>
|
|
<p>Although the effects of the <abbr>COLA</abbr> reductions for individuals are cumulative over time, for the overall beneficiary population aged 62 or older around 2045, average benefit differences from scheduled benefits would begin to level off at -3.5 percent for the chained-<abbr class="spell">CPI</abbr> option, -7.6 percent for the half-point option, and -14.4 percent for the one-point option (see chart 2). The reductions would level off over time because the plans become fully implemented—meaning all new and current beneficiaries would be subjected to the <abbr>COLA</abbr> reductions. <sup><a href="#mn12" id="mt12">12</a></sup> As older beneficiaries with larger benefit reductions pass on, younger beneficiaries with smaller benefit reductions would be added to the rolls, keeping the benefit reductions level over time. Under the payable benefits reference point, benefits would be reduced substantially for all beneficiaries after the combined Old-Age and Survivors Insurance (<abbr class="spell">OASI</abbr>) and Disability Insurance (<abbr class="spell">DI</abbr>) Trust Funds are projected to be exhausted.</p>
|
|
<div class="chartCenter">
|
|
<div class="chart700" id="chart2">
|
|
<div class="title">Chart 2.<br>Average benefit reductions compared with scheduled benefits level off over time for the overall beneficiary population aged 62 or older, by policy option</div>
|
|
<div class="scrollChart"><img src="pb2008-03c2.gif" width="695" height="286" alt="Line chart with tabular version below." /></div>
|
|
<div class="table altTable"><a class="altToggle" href="">Show as table</a>
|
|
<table>
|
|
<caption><span class="tableNumber">Table equivalent for Chart 2 </span>Average benefit reductions compared with scheduled benefits level off over time for the overall beneficiary population aged 62 or older, by policy option</caption>
|
|
<colgroup span="1" style="width:4em"></colgroup>
|
|
<colgroup span="4" style="width:10em"></colgroup>
|
|
<thead>
|
|
<tr>
|
|
<th class="stubHeading" scope="col">Year</th>
|
|
<th scope="col">Half-Point</th>
|
|
<th scope="col">One-Point</th>
|
|
<th scope="col">Chained-<abbr class="spell">CPI</abbr></th>
|
|
<th scope="col">Payable</th>
|
|
</tr>
|
|
</thead>
|
|
<tbody>
|
|
<tr>
|
|
<th class="stub0" scope="row">2025</th>
|
|
<td>-5.20</td>
|
|
<td>-10.00</td>
|
|
<td>-2.30</td>
|
|
<td>0.00</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub0" scope="row">2026</th>
|
|
<td>-5.40</td>
|
|
<td>-10.40</td>
|
|
<td>-2.40</td>
|
|
<td>0.00</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub0" scope="row">2027</th>
|
|
<td>-5.50</td>
|
|
<td>-10.70</td>
|
|
<td>-2.50</td>
|
|
<td>0.00</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub0" scope="row">2028</th>
|
|
<td>-5.70</td>
|
|
<td>-11.00</td>
|
|
<td>-2.60</td>
|
|
<td>0.00</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub0" scope="row">2029</th>
|
|
<td>-5.80</td>
|
|
<td>-11.20</td>
|
|
<td>-2.60</td>
|
|
<td>0.00</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub0" scope="row">2030</th>
|
|
<td>-6.00</td>
|
|
<td>-11.50</td>
|
|
<td>-2.70</td>
|
|
<td>0.00</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub0" scope="row">2031</th>
|
|
<td>-6.10</td>
|
|
<td>-11.80</td>
|
|
<td>-2.80</td>
|
|
<td>0.00</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub0" scope="row">2032</th>
|
|
<td>-6.20</td>
|
|
<td>-11.90</td>
|
|
<td>-2.80</td>
|
|
<td>0.00</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub0" scope="row">2033</th>
|
|
<td>-6.40</td>
|
|
<td>-12.20</td>
|
|
<td>-2.90</td>
|
|
<td>0.00</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub0" scope="row">2034</th>
|
|
<td>-6.50</td>
|
|
<td>-12.40</td>
|
|
<td>-2.90</td>
|
|
<td>0.00</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub0" scope="row">2035</th>
|
|
<td>-6.60</td>
|
|
<td>-12.70</td>
|
|
<td>-3.00</td>
|
|
<td>0.00</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub0" scope="row">2036</th>
|
|
<td>-6.70</td>
|
|
<td>-12.90</td>
|
|
<td>-3.00</td>
|
|
<td>0.00</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub0" scope="row">2037</th>
|
|
<td>-6.80</td>
|
|
<td>-13.10</td>
|
|
<td>-3.10</td>
|
|
<td>0.00</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub0" scope="row">2038</th>
|
|
<td>-6.90</td>
|
|
<td>-13.20</td>
|
|
<td>-3.10</td>
|
|
<td>0.00</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub0" scope="row">2039</th>
|
|
<td>-7.00</td>
|
|
<td>-13.40</td>
|
|
<td>-3.20</td>
|
|
<td>0.00</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub0" scope="row">2040</th>
|
|
<td>-7.10</td>
|
|
<td>-13.60</td>
|
|
<td>-3.20</td>
|
|
<td>0.00</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub0" scope="row">2041</th>
|
|
<td>-7.20</td>
|
|
<td>-13.80</td>
|
|
<td>-3.30</td>
|
|
<td>0.00</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub0" scope="row">2042</th>
|
|
<td>-7.30</td>
|
|
<td>-13.90</td>
|
|
<td>-3.30</td>
|
|
<td>-18.50</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub0" scope="row">2043</th>
|
|
<td>-7.40</td>
|
|
<td>-14.00</td>
|
|
<td>-3.30</td>
|
|
<td>-26.90</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub0" scope="row">2044</th>
|
|
<td>-7.40</td>
|
|
<td>-14.10</td>
|
|
<td>-3.40</td>
|
|
|
|
<td>-26.90</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub0" scope="row">2045</th>
|
|
<td>-7.50</td>
|
|
<td>-14.20</td>
|
|
<td>-3.40</td>
|
|
<td>-26.90</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub0" scope="row">2046</th>
|
|
<td>-7.50</td>
|
|
<td>-14.30</td>
|
|
<td>-3.40</td>
|
|
<td>-27.00</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub0" scope="row">2047</th>
|
|
<td>-7.60</td>
|
|
<td>-14.40</td>
|
|
<td>-3.40</td>
|
|
<td>-27.00</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub0" scope="row">2048</th>
|
|
<td>-7.60</td>
|
|
<td>-14.40</td>
|
|
<td>-3.50</td>
|
|
<td>-27.10</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub0" scope="row">2049</th>
|
|
<td>-7.60</td>
|
|
<td>-14.50</td>
|
|
<td>-3.50</td>
|
|
<td>-27.10</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub0" scope="row">2050</th>
|
|
<td>-7.70</td>
|
|
<td>-14.50</td>
|
|
<td>-3.50</td>
|
|
<td>-27.20</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub0" scope="row">2051</th>
|
|
<td>-7.70</td>
|
|
<td>-14.50</td>
|
|
<td>-3.50</td>
|
|
<td>-27.40</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub0" scope="row">2052</th>
|
|
<td>-7.70</td>
|
|
<td>-14.50</td>
|
|
<td>-3.50</td>
|
|
<td>-27.60</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub0" scope="row">2053</th>
|
|
<td>-7.70</td>
|
|
<td>-14.50</td>
|
|
<td>-3.50</td>
|
|
<td>-27.70</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub0" scope="row">2054</th>
|
|
<td>-7.60</td>
|
|
<td>-14.40</td>
|
|
<td>-3.50</td>
|
|
<td>-27.90</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub0" scope="row">2055</th>
|
|
<td>-7.60</td>
|
|
<td>-14.40</td>
|
|
<td>-3.50</td>
|
|
<td>-28.10</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub0" scope="row">2056</th>
|
|
<td>-7.60</td>
|
|
<td>-14.40</td>
|
|
<td>-3.50</td>
|
|
<td>-28.30</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub0" scope="row">2057</th>
|
|
<td>-7.60</td>
|
|
<td>-14.40</td>
|
|
<td>-3.50</td>
|
|
<td>-28.60</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub0" scope="row">2058</th>
|
|
<td>-7.60</td>
|
|
<td>-14.40</td>
|
|
<td>-3.50</td>
|
|
<td>-28.80</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub0" scope="row">2059</th>
|
|
<td>-7.60</td>
|
|
<td>-14.40</td>
|
|
<td>-3.50</td>
|
|
<td>-29.00</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub0" scope="row">2060</th>
|
|
<td>-7.60</td>
|
|
<td>-14.40</td>
|
|
<td>-3.50</td>
|
|
<td>-29.20</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub0" scope="row">2061</th>
|
|
<td>-7.60</td>
|
|
<td>-14.40</td>
|
|
<td>-3.50</td>
|
|
<td>-29.40</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub0" scope="row">2062</th>
|
|
<td>-7.60</td>
|
|
<td>-14.40</td>
|
|
<td>-3.50</td>
|
|
<td>-29.60</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub0" scope="row">2063</th>
|
|
<td>-7.60</td>
|
|
<td>-14.40</td>
|
|
<td>-3.50</td>
|
|
<td>-29.80</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub0" scope="row">2064</th>
|
|
<td>-7.60</td>
|
|
<td>-14.40</td>
|
|
<td>-3.50</td>
|
|
<td>-30.00</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub0" scope="row">2065</th>
|
|
<td>-7.60</td>
|
|
<td>-14.40</td>
|
|
<td>-3.50</td>
|
|
<td>-30.20</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub0" scope="row">2066</th>
|
|
<td>-7.60</td>
|
|
<td>-14.40</td>
|
|
<td>-3.50</td>
|
|
<td>-30.40</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub0" scope="row">2067</th>
|
|
<td>-7.60</td>
|
|
<td>-14.40</td>
|
|
<td>-3.50</td>
|
|
<td>-30.60</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub0" scope="row">2068</th>
|
|
<td>-7.60</td>
|
|
<td>-14.40</td>
|
|
<td>-3.50</td>
|
|
<td>-30.80</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub0" scope="row">2069</th>
|
|
<td>-7.60</td>
|
|
<td>-14.40</td>
|
|
<td>-3.50</td>
|
|
<td>-31.00</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub0" scope="row">2070</th>
|
|
<td>-7.60</td>
|
|
<td>-14.40</td>
|
|
<td>-3.50</td>
|
|
<td>-31.20</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub0" scope="row">2071</th>
|
|
<td>-7.60</td>
|
|
<td>-14.40</td>
|
|
<td>-3.50</td>
|
|
<td>-31.30</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub0" scope="row">2072</th>
|
|
<td>-7.60</td>
|
|
<td>-14.40</td>
|
|
<td>-3.50</td>
|
|
<td>-31.50</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub0" scope="row">2073</th>
|
|
<td>-7.70</td>
|
|
<td>-14.50</td>
|
|
<td>-3.50</td>
|
|
<td>-31.60</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub0" scope="row">2074</th>
|
|
<td>-7.70</td>
|
|
<td>-14.50</td>
|
|
<td>-3.50</td>
|
|
<td>-31.80</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub0" scope="row">2075</th>
|
|
<td>-7.70</td>
|
|
<td>-14.50</td>
|
|
<td>-3.50</td>
|
|
<td>-31.90</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub0" scope="row">2076</th>
|
|
<td>-7.70</td>
|
|
<td>-14.50</td>
|
|
<td>-3.50</td>
|
|
<td>-32.10</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub0" scope="row">2077</th>
|
|
<td>-7.70</td>
|
|
<td>-14.50</td>
|
|
<td>-3.50</td>
|
|
<td>-32.30</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub0" scope="row">2078</th>
|
|
<td>-7.70</td>
|
|
<td>-14.50</td>
|
|
<td>-3.50</td>
|
|
<td>-32.40</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub0" scope="row">2079</th>
|
|
<td>-7.70</td>
|
|
<td>-14.40</td>
|
|
<td>-3.50</td>
|
|
<td>-32.60</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub0" scope="row">2080</th>
|
|
<td>-7.70</td>
|
|
<td>-14.40</td>
|
|
<td>-3.50</td>
|
|
<td>-32.70</td>
|
|
</tr>
|
|
</tbody>
|
|
<tfoot>
|
|
<tr>
|
|
<td class="noNotes" colspan="5"> </td>
|
|
</tr>
|
|
</tfoot>
|
|
</table>
|
|
</div>
|
|
<div class="firstNote">SOURCE: Author's calculations using Modeling Income in the Near Term (<abbr>MINT</abbr>) data.</div>
|
|
<div class="lastNote">NOTE: <abbr class="spell">CPI</abbr> = consumer price index.</div>
|
|
</div>
|
|
</div>
|
|
<h2>Poverty Rates Increase the Most for the Oldest Old and for Those with Higher Poverty Rates Under Scheduled Benefits</h2>
|
|
<p>Although poverty rates would increase under each of the three <abbr>COLA</abbr> options, certain groups would be more vulnerable than others. For example, those in the older age groups would experience larger increases in poverty than those in the younger age groups because they would receive benefits for a longer period of time, subjecting them to more years of <abbr>COLA</abbr> reductions. As table 2 shows, those in the 80–89 age group in 2070 would have received benefits for an average of 22 years, while those in the 90 or older age group would have received benefits for almost 34 years. Under the half-point option in 2070, the percent of beneficiaries aged 90 or older in poverty would more than double from 0.5 percent (62,000 in poverty) under scheduled benefits to 1.2 percent (137,000 in poverty). Under the one-point option, the percent of those aged 90 or older in poverty would increase even more to 2.0 percent (229,000 in poverty). Under payable benefits, poverty would increase more than under the <abbr>COLA</abbr> options compared with scheduled benefits. Because benefit reductions would be equal for all groups, poverty rates would be fairly similar across the age groups.</p>
|
|
<div class="table" id="table2">
|
|
<table>
|
|
<caption><span class="tableNumber">Table 2. </span>Poverty rate (in percent) and average length of benefit receipt for beneficiaries aged 62 or older in 2070, by age group and policy option</caption>
|
|
<colgroup span="1" style="width:6em"></colgroup>
|
|
<colgroup span="1" style="width:6em"></colgroup>
|
|
<colgroup span="3" style="width:6em"></colgroup>
|
|
<colgroup span="1" style="width:6em"></colgroup>
|
|
<colgroup span="1" style="width:12em"></colgroup>
|
|
<thead>
|
|
<tr>
|
|
<th class="stubHeading" rowspan="2" scope="colgroup">Age group</th>
|
|
<th rowspan="2" scope="colgroup">Scheduled benefits</th>
|
|
<th class="spanner" colspan="3" scope="colgroup">Policy option</th>
|
|
<th rowspan="2" scope="colgroup">Payable benefits</th>
|
|
<th rowspan="2" scope="colgroup">Average length of benefit receipt (years)</th>
|
|
</tr>
|
|
<tr>
|
|
<th scope="col">Chained-CPI </th>
|
|
<th scope="col">Half-point </th>
|
|
<th scope="col">One-point </th>
|
|
</tr>
|
|
</thead>
|
|
<tbody>
|
|
<tr>
|
|
<th class="stub0" scope="row"><span class="nobr">62–69</span></th>
|
|
<td>0.6</td>
|
|
<td>0.7</td>
|
|
<td>0.7</td>
|
|
<td>0.9</td>
|
|
<td>2.1</td>
|
|
<td>5.1</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub0" scope="row"><span class="nobr">70–79</span></th>
|
|
<td>0.6</td>
|
|
<td>0.7</td>
|
|
<td>0.7</td>
|
|
<td>1.0</td>
|
|
<td>1.9</td>
|
|
<td>12.7</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub0" scope="row"><span class="nobr">80–89</span></th>
|
|
<td>0.6</td>
|
|
<td>0.7</td>
|
|
<td>1.0</td>
|
|
<td>1.6</td>
|
|
<td>2.8</td>
|
|
<td>22.1</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub0" scope="row">90 or older</th>
|
|
<td>0.5</td>
|
|
<td>0.9</td>
|
|
<td>1.2</td>
|
|
<td>2.0</td>
|
|
<td>2.1</td>
|
|
<td>33.6</td>
|
|
</tr>
|
|
</tbody>
|
|
<tfoot>
|
|
<tr>
|
|
<td class="firstNote" colspan="7">SOURCE: Author's calculations using Modeling Income in the Near Term (<abbr>MINT</abbr>) data.</td>
|
|
</tr>
|
|
<tr>
|
|
<td class="lastNote" colspan="7">NOTE: <abbr class="spell">CPI</abbr> = consumer price index.</td>
|
|
</tr>
|
|
</tfoot>
|
|
</table>
|
|
</div>
|
|
<p>In addition to the oldest old, other groups would experience larger increases in poverty rates compared with scheduled benefits. These groups include blacks, the never married, those with less than 12 years of education, and those in the lowest current-income quintile (see table 3). Each of the three <abbr>COLA</abbr> options would reduce benefits compared with the rise in the cost of living, while poverty thresholds would continue to increase based on the <abbr class="spell">CPI</abbr>. This could cause those who were near poverty under scheduled benefits to fall into poverty because of the <abbr>COLA</abbr> reductions. In addition, although individuals in these groups would receive smaller benefit reductions under each of the <abbr>COLA</abbr> options, as shown in table 1, Social Security would represent a larger share of their total income. Therefore, the reductions in benefits would affect their total income more adversely than the other groups, resulting in higher poverty rates. For example, under the half-point option in 2070, individuals in the lowest current-income quintile would receive a 6.2 percent reduction in total income compared with scheduled benefits, while those in the highest current-income quintile would only receive a 1 percent reduction in total income from the <abbr>COLA</abbr> reduction.</p>
|
|
<div class="table" id="table3">
|
|
<table>
|
|
<caption><span class="tableNumber">Table 3. </span>Poverty rate for beneficiaries aged 62 or older in 2070 (in percent)</caption>
|
|
<colgroup span="1" style="width:15em"></colgroup>
|
|
<colgroup span="2" style="width:9em"></colgroup>
|
|
<thead>
|
|
<tr>
|
|
<th class="stubHeading" scope="col">Beneficiary characteristic and benefit type</th>
|
|
<th scope="col">Scheduled benefits</th>
|
|
<th scope="col">Half-point option</th>
|
|
</tr>
|
|
</thead>
|
|
<tbody>
|
|
<tr>
|
|
<th class="stub0" scope="rowgroup">Race/ethnicity</th>
|
|
<td colspan="2"></td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub1" scope="row">White</th>
|
|
<td>0.3</td>
|
|
<td>0.5</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub1" scope="row">Black</th>
|
|
<td>1.5</td>
|
|
<td>2.1</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub1" scope="row">Hispanic</th>
|
|
<td>0.7</td>
|
|
<td>1.0</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub1" scope="row">Other</th>
|
|
<td>1.2</td>
|
|
<td>1.2</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub0" scope="rowgroup">Marital status</th>
|
|
<td colspan="2"></td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub1" scope="row">Married</th>
|
|
<td>0.1</td>
|
|
<td>0.1</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub1" scope="row">Widowed</th>
|
|
<td>0.2</td>
|
|
<td>0.6</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub1" scope="row">Divorced</th>
|
|
<td>0.7</td>
|
|
<td>1.1</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub1" scope="row">Never Married</th>
|
|
<td>3.9</td>
|
|
<td>4.7</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub0" scope="rowgroup">Education</th>
|
|
<td colspan="2"></td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub1" scope="row">Graduate</th>
|
|
<td>0.0</td>
|
|
<td>0.0</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub1" scope="row">Bachelor</th>
|
|
<td>0.0</td>
|
|
<td>0.0</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub1" scope="row">Associate</th>
|
|
<td>0.7</td>
|
|
<td>0.9</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub1" scope="row">High school</th>
|
|
<td>0.6</td>
|
|
<td>0.9</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub1" scope="row">Less than 12 years</th>
|
|
<td>2.7</td>
|
|
<td>3.5</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub0" scope="rowgroup">Current-income quintile</th>
|
|
<td colspan="2"></td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub1" scope="row">Highest</th>
|
|
<td>0.0</td>
|
|
<td>0.0</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub1" scope="row">Second highest </th>
|
|
<td>0.0</td>
|
|
<td>0.0</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub1" scope="row">Middle </th>
|
|
<td>0.0</td>
|
|
<td>0.0</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub1" scope="row">Second lowest </th>
|
|
<td>0.0</td>
|
|
<td>0.0</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub1" scope="row">Lowest </th>
|
|
<td>3.1</td>
|
|
<td>4.3</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub0" scope="rowgroup">Benefit type</th>
|
|
<td colspan="2"></td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub1" scope="row">Retired-worker</th>
|
|
<td>0.7</td>
|
|
<td>0.8</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub1" scope="row">Spousal and worker</th>
|
|
<td>0.0</td>
|
|
<td>0.0</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub1" scope="row">Spousal-only</th>
|
|
<td>0.0</td>
|
|
<td>0.0</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub1" scope="row">Survivor and worker</th>
|
|
<td>0.1</td>
|
|
<td>0.3</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub1" scope="row">Survivor-only</th>
|
|
<td>0.9</td>
|
|
<td>2.0</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub1" scope="row">Retired disabled</th>
|
|
<td>1.1</td>
|
|
<td>1.9</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub1" scope="row">Current disabled</th>
|
|
<td>1.0</td>
|
|
<td>1.2</td>
|
|
</tr>
|
|
</tbody>
|
|
<tfoot>
|
|
<tr>
|
|
<td class="onlyNote" colspan="3">SOURCE: Author's calculations using Modeling Income in the Near Term (<abbr>MINT</abbr>) data.</td>
|
|
</tr>
|
|
</tfoot>
|
|
</table>
|
|
</div>
|
|
<p>It is worth noting that the number of persons in poverty and the poverty rates under scheduled benefits and the three <abbr>COLA</abbr> options would decline over time. This is not because of any change in Social Security policy or any proposals to change it, but because the poverty threshold grows with inflation while household income grows at the generally higher rate of wage growth.</p>
|
|
<h2><abbr>COLA</abbr> Reductions Would Improve System Solvency</h2>
|
|
<p>As measured by the actuarial balance, the <abbr>COLA</abbr> reduction options would improve system solvency by reducing scheduled benefits. The actuarial balance is the amount that the Social Security payroll tax would have to be increased today to eliminate the <span class="nobr">75-year</span> funding shortfall. The <span class="nobr">one-point</span> option is the largest reduction and would improve system solvency the most, improving the actuarial balance of -1.92 to -0.43, as opposed to the chained-<abbr class="spell">CPI</abbr> option, which only improves the actuarial balance to -1.58 (see table 4). By definition, payable benefits would fix 100 percent of the actuarial imbalance by paying out benefit levels equal to tax receipts.</p>
|
|
<div class="table" id="table4">
|
|
<table>
|
|
<caption><span class="tableNumber">Table 4. </span>Effect of reducing the cost-of-living adjustment on system solvency</caption>
|
|
<colgroup span="1" style="width:28em"></colgroup>
|
|
<colgroup span="3" style="width:6em"></colgroup>
|
|
<thead>
|
|
<tr>
|
|
<th class="stubHeading" rowspan="2" scope="colgroup"></th>
|
|
<th class="spanner" colspan="3" scope="colgroup">Policy option</th>
|
|
</tr>
|
|
<tr>
|
|
<th scope="col">Chained-CPI </th>
|
|
<th scope="col">Half-point </th>
|
|
<th scope="col">One-point </th>
|
|
</tr>
|
|
</thead>
|
|
<tbody>
|
|
<tr>
|
|
<th class="stub0" scope="row">Change in actuarial balance as a percentage of taxable payroll</th>
|
|
<td>0.34</td>
|
|
<td>0.76</td>
|
|
<td>1.49</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub0" scope="row">Percentage of long-range actuarial imbalance, fixed</th>
|
|
<td>17.70</td>
|
|
<td>39.60</td>
|
|
<td>77.60</td>
|
|
</tr>
|
|
<tr>
|
|
<th class="stub0" scope="row">Percentage of annual shortfall in the 75th year, fixed</th>
|
|
<td>9.50</td>
|
|
<td>21.10</td>
|
|
<td>40.40</td>
|
|
</tr>
|
|
</tbody>
|
|
<tfoot>
|
|
<tr>
|
|
<td class="firstNote" colspan="4">SOURCE: Memo from the Social Security Office of the Chief Actuary, Estimated <abbr class="spell">OASDI</abbr> Long-Range Financial Effects of Several Provisions Requested by the Social Security Advisory Board, available at <a href="/oact/solvency/advisoryboard_20050810.pdf">http://www.ssab.gov/documents/advisoryboardmemo--2005tr--08102005.pdf</a>.</td>
|
|
</tr>
|
|
<tr>
|
|
<td class="lastNote" colspan="4">NOTE: <abbr class="spell">CPI</abbr> = consumer price index.</td>
|
|
</tr>
|
|
</tfoot>
|
|
</table>
|
|
</div>
|
|
<div id="notes">
|
|
<h2>Notes</h2>
|
|
<p> <a href="#mt1" id="mn1">1</a> The report, <i>Social Security: Why Action Should be Taken Soon</i>, by the Social Security Advisory Board is available at <a href="https://www.ssab.gov/research/social-security-why-action-should-be-taken-soon/">http://www.ssab.gov/documents/WhyActionShouldbeTakenSoon.pdf</a>.</p>
|
|
<p> <a href="#mt2" id="mn2">2</a> The simulations of the <abbr>COLA</abbr> policy options use data from the <abbr>MINT</abbr> model and are compared with benefits scheduled to be paid under current law (scheduled benefits) and benefits payable without any other changes to current law (payable benefits). The comparison is a static one with no behavioral response to the policy options' effect on benefits or income. The <abbr>MINT</abbr> model is based on Social Security administrative data matched to the Survey of Income and Program Participation (<abbr>SIPP</abbr>). Work, marriage, retirement, and death are projected for real and imputed individuals based on real earnings, marital histories, and education levels.</p>
|
|
<p> <a href="#mt3" id="mn3">3</a> For the estimated <abbr class="spell">OASDI</abbr> long-range financial effects of the <abbr>COLA</abbr> options and other alternatives, see the August 10, 2005, memorandum from <abbr class="spell">SSA</abbr>’s Office of the Chief Actuary to the Social Security Advisory Board, available at <a href="/oact/solvency/advisoryboard_20050810.pdf">http://www.ssab.gov/documents/advisoryboardmemo--2005tr--08102005.pdf</a>. The actuaries estimate the <abbr>COLA</abbr> options to begin December 2006 based on the intermediate assumptions from the 2005 Trustees Report (the December 2006 benefit is received by the beneficiary in January 2007). <abbr class="spell">SSA</abbr>’s Office of the Chief Actuary has updated its analysis of the Social Security Advisory Board proposals based on the 2008 Trustees Report, which is available at <a href="/OACT/solvency/provisions/index.html">http://www.socialsecurity.gov/OACT/solvency/provisions/index.html</a>.</p>
|
|
<p> <a href="#mt4" id="mn4">4</a> Public Law <span class="nobr">92-336</span> was signed into law by President Richard Nixon on July 1, 1972. It authorized a 20 percent cost-of-living allowance effective September 1972, and the law established the procedures for issuing automatic <abbr>COLA</abbr>s each year beginning in 1975.</p>
|
|
<p> <a href="#mt5" id="mn5">5</a> The changes to the <abbr>COLA</abbr> outlined by the Social Security Advisory Board only affect <span class="nobr">Old-Age</span>, Survivors, and Disability Insurance (<abbr class="spell">OASDI</abbr>) benefits and do not affect Supplemental Security Income (<abbr class="spell">SSI</abbr>) benefits. If <abbr class="spell">OASDI</abbr> <abbr>COLA</abbr>s are changed, but <abbr class="spell">SSI</abbr> <abbr>COLA</abbr>s are not, then <abbr class="spell">SSI</abbr> will hold its participants harmless against reductions in the <abbr class="spell">OASDI</abbr> <abbr>COLA</abbr>. This means that each dollar reduction in the <abbr class="spell">OASDI</abbr> benefit will be offset by an equal increase in the <abbr class="spell">SSI</abbr> benefit.</p>
|
|
<p> <a href="#mt6" id="mn6">6</a> The Social Security Advisory Board notes in their report that many experts believe that the <abbr class="spell">CPI</abbr> currently overstates the rate of inflation. For a discussion of this issue, see <i>Social Security Cost-of-Living Adjustments and the Consumer Price Index,</i> by Clark Burdick and Lynn Fisher, available at <a href="/policy/docs/ssb/v67n3/v67n3p73.html">http://www.socialsecurity.gov/policy/docs/ssb/v67n3/v67n3p73.html</a>. Burdick and Fisher discuss other issues related to the <abbr class="spell">CPI</abbr> and inflation, including a <abbr class="spell">CPI</abbr> measure for the elderly and implementation concerns regarding the chained-<abbr class="spell">CPI</abbr> measure.</p>
|
|
<p> <a href="#mt7" id="mn7">7</a> The payable benefits modeled in <abbr>MINT</abbr> are based on the 2004 Trustees Report, available at <a href="/OACT/TR/TR04/index.html">http://www.ssa.gov/OACT/TR/TR04/index.html</a>.</p>
|
|
<p> <a href="#mt8" id="mn8">8</a> For the current Social Security Trustees Report estimated period and cohort life expectancy figures, see <a href="/OACT/TR/TR08/V_demographic.html#90100">http://www.ssa.gov/OACT/TR/TR08/V_demographic.html#90100</a>.</p>
|
|
<p> <a href="#mt9" id="mn9">9</a> Disabled individuals are less likely than the total population to survive to full retirement age. For disabled persons in the <abbr>MINT</abbr> population born from 1960 through 2017, only 72.5 percent reached full retirement age compared with 88.5 percent of the total population.</p>
|
|
<p><a href="#mt10" id="mn10">10</a> Social Security pays benefits to people who cannot work because they have a medical condition that is expected to last at least 1 year or result in death. Disabled persons must also meet two different earnings tests. For more information on disability benefits, see <a href="/pubs/EN-05-10029.pdf">http://www.ssa.gov/pubs/10029.html#part2</a>.</p>
|
|
<p><a href="#mt11" id="mn11">11</a> A retired disabled beneficiary is one who received disability benefits, but converted to retirement benefits upon reaching full retirement age. A current disabled beneficiary is one who receives disability benefits and has not reached his or her full retirement age. The earliest age at which a retired worker can begin receiving benefits is 62.</p>
|
|
<p><a href="#mt12" id="mn12">12</a> Beneficiaries who are in their first year of eligibility for receiving Social Security benefits (age 62 for retired-worker benefits; whichever is earlier between year of disability onset or attaining age 62 for disability benefits; and whichever is earlier between year of death or reaching age 62 for survivor benefits) are not affected by the <abbr>COLA</abbr> reductions because they have not yet received a <abbr>COLA</abbr>. Beginning in December of their first year of eligibility, the beneficiary's primary insurance amount (<abbr class="spell">PIA</abbr>), upon which monthly benefits are based, will be subject to the first reduced <abbr>COLA</abbr>. For example, if a retired worker was age 62 in March 2012, he or she would receive the first reduced <abbr>COLA</abbr> in December 2012 (this benefit would be received by the beneficiary in January 2013). Therefore, the <abbr>COLA</abbr> reductions would be applied before some beneficiaries actually start receiving benefits. For example, if a retired worker began receiving benefits when he or she turned age 65 in June 2015, his or her benefit would include three annual <abbr>COLA</abbr> reductions starting in December 2012. For the purpose of this policy brief, average length of benefit receipt is used to explain distributional results because that is a reference point that can be more clearly defined than year of first eligibility.</p>
|
|
</div>
|
|
</div>
|
|
</article>
|
|
<footer><div id="footer">
|
|
<div class="important-info"><h4>Important Information:</h4>
|
|
<ul><li><a href="/agency/">About Us</a></li>
|
|
<li><a href="/accessibility/">Accessibility</a></li>
|
|
<li><a href="/foia/">FOIA</a></li>
|
|
<li><a href="/open/">Open Government</a></li>
|
|
<li><a href="/agency/glossary/">Glossary</a></li>
|
|
<li><a href="/privacy/">Privacy</a></li>
|
|
<li><a href="https://oig.ssa.gov/report/">Report Fraud, Waste or Abuse</a></li>
|
|
<li><a href="/agency/websitepolicies.html">Website Policies</a></li></ul>
|
|
</div>
|
|
<p class="align-center margin-top">This website is produced and published at U.S. taxpayer expense.</p>
|
|
</div></footer>
|
|
<!-- SSA INTERNET BODY SCRIPTS -->
|
|
<script src="/policy/js/rspa.doc.js"></script>
|
|
<script src="/policy/js/rspa-shared.js"></script>
|
|
<script src="/framework/js/ssa.internet.body.js"></script>
|
|
</body></html> |