In the first part of the paper we report estimated transfers in the Social Security system for the Retirement History Survey sample.We define transfers to be the difference between the expected presentvalue of benefits less the present value of taxes paid in, where the latter is adjusted for the probability of living to reach retirement age.Unlike previous researchers we, therefore, account for the taxes paid by people who died before retirement, and it turns out this adjustment is important for some groups. The Retirement History Survey cohort will receive large transfers: roughly benefits will be about four times taxes,and the real internal rate of return will be about eight percent. We study how transfers vary by a comprehensive measure of wealth. People in the highest wealth quartile have the largest absolute transfers, and their internal rate of return is as high as that of any wealth quartile.In the second part of the paper we study transfers forsix synthetic cohorts, the heads of which are age 65 in the ten-year intervals 1970 through 2020. Within each cohort 12 families are defined according to earnings levels.We find that transfers are positive and large for the 1970 cohort, and that they decline steadily until they are negative for most groups in the 2020 cohort. Although high earners initially have the largest transfers in the 1970 cohort, they have the largest negative transfers in the 2020 cohort.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
1155.
Length: Date of creation: Jan 1986 Date of revision: Publication status: published relationship to a non-chapter. This should not happen. Please contact NBER. Handle: RePEc:nbr:nberwo:1155
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Martin Feldstein & Jeffrey B. Liebman, 2001.
"Social Security,"
NBER Working Papers
8451, National Bureau of Economic Research, Inc.
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Other versions:
Feldstein, Martin & Liebman, Jeffrey B., 2002.
"Social security,"
Handbook of Public Economics,
in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 32, pages 2245-2324
Elsevier.
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