Providing Guarantees in Social Security
AbstractSome Social Security reforms would provide guarantees that individuals would not receive less under a reformed system than would be provided by current law. However, the “current law” benefit formula increases benefits when wages rise. Any reform successfully adding to economic growth, therefore, would affect those promised levels of benefits, as well as revenues and the interest rates that determine what could be earned and paid out of individual accounts. This paper concludes that guarantees could add significantly to the costs of Social Security, reduce any reduction in budget imbalance achieved through other parts of a reform, and add to taxes, direct or implicit, that must be paid to cover those costs. Stock and bond market variation, as well as variation in returns on individual accounts, also add to costs when reform contains a guarantee, as government bears mainly downside risks. A variety of examples are provided for one generic type of reform.
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Bibliographic InfoPaper provided by Center for Retirement Research in its series Working Papers, Center for Retirement Research at Boston College with number 2004-21.
Length: 25 pages
Date of creation: Aug 2004
Date of revision:
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More information through EDIRC
social security; reform;
Find related papers by JEL classification:
- H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-08-20 (All new papers)
- NEP-LAB-2005-08-20 (Labour Economics)
- NEP-PBE-2005-08-20 (Public Economics)
- NEP-PUB-2005-08-20 (Public Finance)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Martin Feldstein & Andrew Samwick, 2001.
"Potential Paths of Social Security Reform,"
NBER Working Papers
8592, National Bureau of Economic Research, Inc.
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