Skip to content
CRR logo
Submit Search
Advanced Search
Join E-mail List | Contact Us
  • Topics
  • Publications
  • Initiatives
  • Data
  • Sponsors
  • Opportunities
  • About Us

Reform Model Two of the President’s Commission to Strengthen Social Security: Distributional Outcome

August 1, 2004
Share
Mobile Share Email Facebook Twitter LinkedIn

Abstract

This project uses dynamic microanalytic simulation techniques to explore the distributional consequences of Plan 2 of the President’s Commission to Strengthen Social Security. This plan includes a voluntary personal account that would be “carved out” of currently-scheduled benefit contributions, a new minimum benefit, and an increase in widow(er)s benefits. It also shifts the current wage-indexed initial benefit formula to a price-indexed formula to address most of the current system’s long-term solvency problem. The analysis begins by adopting the assumptions of the Office of the Chief Actuary (OCACT) regarding portfolio allocation, rates of return, administrative costs, and mandatory annuitization of personal account balances to develop a baseline of Model 2. We compare the distributional results with current-law promised benefits and a current-law scenario adjusted to match the revenues we estimate are required to fund the OCACT baseline in 2050 exclusive of the private account provisions. Subsequently, we test the sensitivity of our baseline estimates to different assumptions about participation in personal accounts, investment patterns, administrative costs, variation in market returns across the life cycle, and rates of return on investments. To simulate likely participation patterns in voluntary private accounts and participants’ portfolio allocation choices, we estimate models using recent data from the Survey of Consumer Finances. The results from our core and sensitivity analyses bracket the likely outcomes of the reform plan and demonstrate how this type of reform might affect subgroups of the future elderly population.

June,1,,2019,,Brazil.,In,This,Photo,Illustration,The,Social
June,1,,2019,,Brazil.,In,This,Photo,Illustration,The,Social
Author(s)
Headshot of Melissa M. Favreault
Melissa M. Favreault
Headshot of Joshua H. Goldwyn
Joshua H. Goldwyn
Headshot of Karen E. Smith
Karen E. Smith
Headshot of Lawrence H. Thompson
Lawrence H. Thompson
Headshot of Cori E. Uccello
Cori E. Uccello
Headshot of Sheila R. Zedlewski
Sheila R. Zedlewski
Downloads
PDF Version
Executive Summary
Citation

Favreault, , Joshua H. Goldwyn, Karen E. Smith, Lawrence H. Thompson, Cori E. Uccello and Sheila R. Zedlewski. 2004. "Reform Model Two of the President's Commission to Strengthen Social Security: Distributional Outcome" Working Paper 2004-19. Chestnut Hill, MA: Center for Retirement Research at Boston College.

Copy citation to clipboard
Topics
Social Security
Publication
Working Paper
Publication Number
WP#2004-19
Related Articles
Wooden figures on different size coin stacks

There Are Only Two Ways to Fix Social Security: Part Two

MarketWatch Blog by Alicia H. Munnell

February 28, 2023
Silhouette of scale with coins

There Are Only Two Ways to Fix Social Security: Part One

MarketWatch Blog by Alicia H. Munnell

February 22, 2023
Senior man reading newspaper

Why Are Republicans Telling Voters They Want to Cut Social Security?

MarketWatch Blog by Alicia H. Munnell

November 7, 2022
About us
Contact
Join email list
Facebook Twitter LinkedIn YouTube RSS

© 2023 Trustees of Boston College, Center for Retirement Research|Terms of Use|Privacy Policy|Accessibility

This website uses cookies to improve your experience. We also use IP addresses, domain information and other access statistics to administer the site and analyze usage trends. If you prefer to opt out, you can select Update settings. Read our Privacy Policy. Accept
Privacy & Cookies Policy

Privacy Overview

This website uses cookies to improve your experience while you navigate through the website. Out of these cookies, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may have an effect on your browsing experience.
Necessary
Always Enabled
Necessary cookies are absolutely essential for the website to function properly. This category only includes cookies that ensures basic functionalities and security features of the website. These cookies do not store any personal information.
Non-necessary
Any cookies that may not be particularly necessary for the website to function and is used specifically to collect user personal data via analytics, ads, other embedded contents are termed as non-necessary cookies. It is mandatory to procure user consent prior to running these cookies on your website.
SAVE & ACCEPT