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How the Growing Gap in Life Expectancy May Affect Retirement Benefits and Reforms

Author

Listed:
  • Alan J. Auerbach
  • Kerwin K. Charles
  • Courtney C. Coile
  • William Gale
  • Dana Goldman
  • Ronald Lee
  • Charles M. Lucas
  • Peter R. Orszag
  • Louise M. Sheiner
  • Bryan Tysinger
  • David N. Weil
  • Justin Wolfers
  • Rebeca Wong

Abstract

Older Americans have experienced dramatic gains in life expectancy in recent decades, but an emerging literature reveals that these gains are accumulating mostly to those at the top of the income distribution. We explore how growing inequality in life expectancy affects lifetime benefits from Social Security, Medicare, and other programs and how this phenomenon interacts with possible program reforms. We first project that life expectancy at age 50 for males in the two highest income quintiles will rise by 7 to 8 years between the 1930 and 1960 birth cohorts, but that the two lowest income quintiles will experience little to no increase over that time period. This divergence in life expectancy will cause the gap between average lifetime program benefits received by men in the highest and lowest quintiles to widen by $130,000 (in $2009) over this period. Finally we simulate the effect of Social Security reforms such as raising the normal retirement age and changing the benefit formula to see whether they mitigate or enhance the reduced progressivity resulting from the widening gap in life expectancy.

Suggested Citation

  • Alan J. Auerbach & Kerwin K. Charles & Courtney C. Coile & William Gale & Dana Goldman & Ronald Lee & Charles M. Lucas & Peter R. Orszag & Louise M. Sheiner & Bryan Tysinger & David N. Weil & Justin W, 2017. "How the Growing Gap in Life Expectancy May Affect Retirement Benefits and Reforms," NBER Working Papers 23329, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:23329
    Note: AG HC PE
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    References listed on IDEAS

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    Cited by:

    1. Haan, Peter & Kemptner, Daniel & Lüthen, Holger, 2017. "The Rising Longevity Gap by Lifetime Earnings: Distributional Implications for the Pension System," IZA Discussion Papers 11121, Institute for the Study of Labor (IZA).
    2. Peter H. Lindert, 2017. "The Rise and Future of Progressive Redistribution," Commitment to Equity (CEQ) Working Paper Series 73, Tulane University, Department of Economics.

    More about this item

    JEL classification:

    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • J10 - Labor and Demographic Economics - - Demographic Economics - - - General

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