| Working for a Good Retirement |
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WP#2006-8 AbstractWorkers drain national resources in two ways when they retire – they begin collecting Social Security and Medicare benefits and they stop paying federal income and payroll taxes. Policies that encourage workers to delay retirement and increase labor supply could generate more gains to individuals, the retirement system, and the economy than other types of Social Security reforms. Drawing on the Urban Institute’s Dynamic Simulation of Income model (DYNASIM3), this report examines how delaying retirement for non-disabled workers would affect individual retiree benefits, the solvency of the Social Security trust fund, and general revenues. The results suggest that delaying retirement by itself does not generate enough additional revenue to make Social Security solvent by 2045. That is, even if everyone delayed their retirement by five years, benefit cuts or supplementary funding sources will be necessary to achieve solvency. However, the size of the benefit cuts or tax increases could be minimized if individuals worked longer. This additional work also substantially increases worker’s retirement well-being. Lower-income workers, to the extent they can work longer, have the most to gain from their additional labor. Policy changes that encourage work at older ages will substantially improve both economic and personal wellbeing in the future. For executive summary in PDF For full paper in PDF Barbara A. Butrica is a senior research associate at the Urban Institute. Karen E. Smith is a senior research associate at the Urban Institute. C. Eugene Steuerle is a senior fellow at the Urban Institute. The research reported herein was performed, in part, pursuant to a grant from the U.S. Social Security Administration (SSA) funded as part of the Retirement Research Consortium. The findings and conclusions expressed are solely those of the authors and do not represent the views of SSA, any agency of the Federal Government, the Urban Institute or Boston College. The authors thank Richard Johnson for his advice on this and related projects. |