Consumption, retirement and social security: Evaluating the efficiency of reform that encourages longer careers

Abstract

This paper proposes and analyzes a Social Security reform in which individuals no longer face the OASI payroll tax after, say, age 54 or a career of 34 years, and their subsequent earnings have no bearing on their benefits. We first estimate parameters of a life–cycle model. Our specification includes non-separable preferences and possible disability. It predicts a consumption–expenditure change at retirement. We use the magnitude of the expenditure change, together with households’ retirement–age decisions, to identify key structural parameters. The estimated magnitude of the change in consumption–expenditure depends importantly on the treatment of consumption by adult children of the household. Simulations indicate that the reform could increase retirement ages one year or more, equivalent variations could average more than $4,000 per household, and income tax revenues per household could increase by more than $14,000.

Effects of Social Security Policies on Benefit Claiming, Retirement and Saving

“…To provide a few examples, Song and Manchester (2007), Mastrobuoni (2009), andCoe, Kahn andRutledge (2013) examine the effects of changing the full retirement age using cohort differences. Laitner and Silverman (2012) examine the effects of increasing the payroll tax in a basic life cycle model. Coile, Diamond et al (2002) examine claiming outcomes.…”

Revisiting the effect of household size on consumption over the life-cycle

“…Livshits, MacGee, and Tertilt (2007), Attanasio, Low, and SanchezMarcos (2008) set δ(N t ) = 1 such that in each period the household planer maximizes per-capita utility or alternatively the household planer does not have any altruism towards the remaining household members. Fuchs-Schündeln (2008) and Laitner and Silverman (2012) Heathcote, Storesletten, and Violante (2012) use the number of adults in the household and Domeij and Klein (2012) the total number of household members. Attanasio, Banks, Meghir, and Weber (1999), and Gourinchas and Parker (2002) employ CRRA preferences and use a more general taste…”

Exchanging Delayed Social Security Benefits for Lump Sums: Could This Incentivize Longer Work Careers?

“…His work provided some preliminary evidence that claiming probabilities could rise in response. Fetherstonhaugh and Ross (1999) reported that for 80 percent of their survey respondents, a lump-sum payment instead of an increase in annual benefit amounts due to delayed claiming 1 See Feldstein and Leibman (2002) for a review, and most recently, Laitner and Silverman (2012). 2 See Kotlikoff and Viceira (2008), Chai, Horneff, Maurer, andRogalla (2012).…”