Social Security’s Five OASI Inflation Indexing Problems
This paper examines five problems with the inflation indexing procedures used by the Social Security Administration in taking inflation into account when calculating Old Age and Survivors Insurance (OASI) Benefits. Several of these problems have capricious distributional consequences. For example, as a result of Problems #2 and #4 your OASI check will be larger if wage inflation happens to be extra high in your 60th year or if price inflation is exceptionally low in your 61st year. And because of Problem #1, the size of the benefit increase you will receive if you elect to postpone retirement and the start of OASI benefits depends in part on the pace of inflation. While indexing problems do not attract much attention in normal times, they can contribute to serious short-run financial instability for the OASI trust funds in periods of substantial inflation.
|Date of creation:||Jul 2008|
|Date of revision:||30 Oct 2008|
|Publication status:||Published on-line at economics http://www.economics-ejournal.org/|
|Note:||Earlier versions available at http://repec.wesleyan.edu/pdf/mlovell/2008006_lovell.pdf , http://repec.wesleyan.edu/pdf/mlovell/2008006rev0908_lovell.pdf and http://repec.wesleyan.edu/pdf/mlovell/2008006rev1008_lovell.pdf|
|Contact details of provider:|| Postal: |
Web page: http://www.wesleyan.edu/econ/
More information through EDIRC
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.:
- Alicia H. Munnell & Dan Muldoon, 2008. "The Impact of Inflation on Social Security Benefits," Issues in Brief ib2008-8-15, Center for Retirement Research, revised Oct 2008.
- Alan L. Gustman & Thomas L. Steinmeier, 2000.
"How Effective is Redistribution Under the Social Security Benefit Formula?,"
NBER Working Papers
7597, National Bureau of Economic Research, Inc.
- Gustman, Alan L. & Steinmeier, Thomas L., 2001. "How effective is redistribution under the social security benefit formula?," Journal of Public Economics, Elsevier, vol. 82(1), pages 1-28, October.
- Alan L. Gustman & Thomas L. Steinmeier, 2000. "How Effective is Redistribution Under the Social Security Benefit Formula?," Working Papers wp005, University of Michigan, Michigan Retirement Research Center.
- James E. Duggan & Robert Gillingham & John S. Greenlees, 1996. "Distributional Effects of Social Security: the Notch Issue Revisited," Public Finance Review, , vol. 24(3), pages 349-370, July.
- Martin Feldstein, 2005.
"Rethinking Social Insurance,"
American Economic Review,
American Economic Association, vol. 95(1), pages 1-24, March.
- Andrew G. Biggs & Jeffrey R. Brown & Glenn Springstead, 2005.
"Alternative Methods of Price Indexing Social Security: Implications for Benefits and System Financing,"
NBER Working Papers
11406, National Bureau of Economic Research, Inc.
- Biggs, Andrew G. & Brown, Jeffrey R. & Springstead, Glenn, 2005. "Alternative Methods of Price Indexing Social Security: Implications for Benefits and System Financing," National Tax Journal, National Tax Association, vol. 58(3), pages 483-504, September.
- Song, Jae G. & Manchester, Joyce, 2007. "New evidence on earnings and benefit claims following changes in the retirement earnings test in 2000," Journal of Public Economics, Elsevier, vol. 91(3-4), pages 669-700, April.
- Richard Rogerson & Johanna Wallenius, 2007.
"Micro and Macro Elasticities in a Life Cycle Model With Taxes,"
NBER Working Papers
13017, National Bureau of Economic Research, Inc.
- Rogerson, Richard & Wallenius, Johanna, 2009. "Micro and macro elasticities in a life cycle model with taxes," Journal of Economic Theory, Elsevier, vol. 144(6), pages 2277-2292, November.
When requesting a correction, please mention this item's handle: RePEc:wes:weswpa:2008-006. 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: (Manolis Kaparakis)
If references are entirely missing, you can add them using this form.