Evidence of Increasing Differential Mortality: A Comparison of the HRS and SIPP

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Recent research indicates that life expectancy is rising more rapidly for workers in the upper portions of the earnings distribution. This suggests that lifetime Old-Age and Survivors Insurance (OASI) benefits are becoming less progressive as the retirement age is increased, but the effect may be mitigated by the expansion of the disability program. The proposed study will evaluate the magnitude of the effect of differential increases in average lifespans on the distribution of Old-Age, Survivors, and Disability Insurance (OASDI) benefits for high- and low-earnings workers. The analysis will be based on empirical results from existing studies of the relationship between earnings and life expectancy and between earnings and disability. The study will explore the implications of alternative approaches to adjusting the Social Security benefit formula to reflect rising life expectancy, assuming one objective of the reform is to maintain the relative generosity of benefits for low- and high-wage workers. Among the alternatives to be considered are simple changes in the basic primary insurance amount formula, inclusion of years of covered employment as a determinant of full benefit entitlement, and full or partial means testing of OASDI pensions based on recipients’ current incomes.