How Well Are Social Security Recipients Protected From Inflation?
Social Security is widely believed to protect its recipients from inflation because benefits are indexed to the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). However, the CPI-W may not accurately reflect the experience of retirees for two reasons. First, retirees generally have higher medical expenses than workers, and medical costs, in recent years, have tended to rise faster than the prices of other goods. Second, even if medical costs did not rise faster than the prices of other goods, as retirees aged, their medical spending would still tend to increase as a share of income; that is, each cohort of retirees would still see a decline in the real income available for non-medical spending. We show that, for in the 1918 birth cohort, Social Security benefits net of average out-of-pocket medical expenses have declined relative to a price index for non-medical goods by around 20 percent for men, and by around 27 percent for women. We explore alternative options for indexing Social Security benefits and discuss the impact of these alternatives on Social Security’s long-term finances.
Volume (Year): 64 (2011)
Issue (Month): 2 (June)
|Contact details of provider:|| Postal: 725 15th St. NW #600. Washington, D.C. 20005-2109|
Fax: (202) 737-7308
Web page: http://www.ntanet.org/
More information through EDIRC
References listed on IDEAS
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.:
- Mariacristina De Nardi & Eric French & John Bailey Jones, 2009.
"Why do the elderly save? the role of medical expenses,"
Working Paper Series
WP-09-02, Federal Reserve Bank of Chicago.
- Mariacristina De Nardi & Eric French & John B. Jones, 2010. "Why Do the Elderly Save? The Role of Medical Expenses," Journal of Political Economy, University of Chicago Press, vol. 118(1), pages 39-75, 02.
- Mariacristina De Nardi & Eric French & John Bailey Jones, 2009. "Why do the Elderly Save? The Role of Medical Expenses," NBER Working Papers 15149, National Bureau of Economic Research, Inc.
- Bart Hobijn & David Lagakos, 2003. "Social security and the consumer price index for the elderly," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 9(May).
- Michael J. Boskin & Michael D. Hurd, 1982. "Are Inflation Rates Different for the Elderly?," NBER Working Papers 0943, National Bureau of Economic Research, Inc.
- Julian P. Cristia, 2007. "The Empirical Relationship Between Lifetime Earnings and Mortality: Working Paper 2007-11," Working Papers 19096, Congressional Budget Office.
When requesting a correction, please mention this item's handle: RePEc:ntj:journl:v:64:y:2011:i:2:p:429-49. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Charmaine Wright)
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.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.