Social Security's Five OASI Inflation Indexing Problems
AbstractThis paper examines five problems with the indexing procedures used by the Social Security Administration of the United States in taking inflation into account when calculating Old Age and Survivor Insurance (OASI) Benefits. Because of the commin-gling of unindexed with indexed earnings, a retiree born in 1930 who continued in a high earning career until age 75 receives an annual benefit more than $1,800 larger than would have been generated with full indexing. While the inflation indexing problems identified in this paper do not attract much attention in normal times, they can contribute to serious short-run financial instability for the OASI trust fund in periods of substantial inflation or deflation. They make the percentage increase in your inflation adjusted (CPI-W) benefit if you elect to postpone retirement and the start of OASI benefits depend in part on the pace of inflation. This paper explains how these problems could be resolved in a way that would not hurt and might help resolve Social Security's longrun solvency problems. --
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Bibliographic InfoArticle provided by Kiel Institute for the World Economy in its journal Economics: The Open-Access, Open-Assessment E-Journal.
Volume (Year): 3 (2009)
Issue (Month): 3 ()
Social security; inflation; indexing;
Other versions of this item:
- Michael C. Lovell, 2008. "Social Security’s Five OASI Inflation Indexing Problems," Wesleyan Economics Working Papers 2008-006, Wesleyan University, Department of Economics, revised 30 Oct 2008.
- Lovell, Michael C., 2008. "Social Security's Five OASI Inflation Indexing Problems," Economics Discussion Papers 2008-34, Kiel Institute for the World Economy.
- H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
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