IDEAS home Printed from https://ideas.repec.org/a/cup/nierev/v194y2005ip82-93_8.html
   My bibliography  Save this article

Stochastic Infinite Horizon Forecasts for US Social Security Finances

Author

Listed:
  • Lee, Ronald
  • Anderson, Michael

Abstract

Even over a 75-year horizon, forecasts of PAYGO pension finances are misleadingly optimistic. Infinite horizon forecasts are necessary, but are they possible? We build on earlier stochastic forecasts of the US Social Security trust fund which model key demographic and economic variables as historical time series, and use the fitted models to generate Monte Carlo simulations of future fund performance. Using a 500-year stochastic projection, effectively infinite with discounting, we find a fund balance of −5.15 per cent of payroll, compared to the −3.5 per cent of the 2004 Trustees‘ Report, probably reflecting different mortality projections. Our 95 per cent probability bounds are −10.5 and −1.3 per cent. Such forecasts, which reflect only ‘routine’ uncertainty, have many problems but nonetheless seem worthwhile.

Suggested Citation

  • Lee, Ronald & Anderson, Michael, 2005. "Stochastic Infinite Horizon Forecasts for US Social Security Finances," National Institute Economic Review, National Institute of Economic and Social Research, vol. 194, pages 82-93, October.
    • Handle: RePEc:cup:nierev:v:194:y:2005:i::p:82-93_8
    as

    Download full text from publisher

    File URL: https://www.cambridge.org/core/product/identifier/S0027950100011157/type/journal_article
    File Function: link to article abstract page
    Download Restriction: no
    ---><---

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Alex Armstrong & Nick Draper & Ed Westerhout, 2008. "The impact of demographic uncertainty on public finances in the Netherlands," CPB Discussion Paper 104, CPB Netherlands Bureau for Economic Policy Analysis.
    2. Alex Armstrong & Nick Draper & Ed Westerhout, 2008. "The impact of demographic uncertainty on public finances in the Netherlands," CPB Discussion Paper 104.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    3. Dr Martin Weale, 2011. "Generational Accounts for the United Kingdom," National Institute of Economic and Social Research (NIESR) Discussion Papers 377, National Institute of Economic and Social Research.
    4. Ermisch, John, 2008. "Population ageing: crisis or opportunity?," ISER Working Paper Series 2008-38, Institute for Social and Economic Research.
    5. L. Randall Wray, 2006. "The Burden Of Aging: Much Ado About Nothing, Or Little To Do About Something?," Economics Policy Note Archive 06-5, Levy Economics Institute.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cup:nierev:v:194:y:2005:i::p:82-93_8. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Kirk Stebbing (email available below). General contact details of provider: https://edirc.repec.org/data/niesruk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.