IDEAS home Printed from https://ideas.repec.org/p/mrr/papers/wp010.html
   My bibliography  Save this paper

Stochastic Rates of Return for Social Security Under Various Policy Scenarios

Author

Listed:
  • Michael Anderson

    (Mountain View Research)

  • Hisashi Yamagata

    (Department of Dermography, UC Berkeley)

  • Shripad Tuljapurkar

    (Standford University)

Abstract

In this paper, we compute distributions of rates of return by cohort for the Social Security retirement system, using a combination of historical data and stochastic forecasts of productivity and mortality rates. Since our forecasts of productivity and mortality are stochastic, the rate-ofreturn estimates themselves are stochastic; that is, we compute an entire distribution of rates for each cohort. We repeat these calculations under a variety of policy scenarios designed to bring the trust fund into future solvency with roughly 50% probability. This allows us to examine the impact of various schemes on different cohorts. Policies which delay reform the longest and impact taxpayers the greatest dramatically concentrate the impact of reform on the youngest cohorts. Reforms which are more immediate and focused on retirees tend to spread the cost of reform across generations more evenly. Authors’ Acknowledgements This research was funded by a grant from the Michigan Retirement Research Center, which is in turn supported by the Social Security Administration. Some closely related research was also supported by the Center for the Economics and Demography of Aging at U.C. Berkeley, which is supported by the National Institutes of Health.

Suggested Citation

  • Michael Anderson & Hisashi Yamagata & Shripad Tuljapurkar, 2001. "Stochastic Rates of Return for Social Security Under Various Policy Scenarios," Working Papers wp010, University of Michigan, Michigan Retirement Research Center.
    • Handle: RePEc:mrr:papers:wp010
    as

    Download full text from publisher

    File URL: http://mrdrc.isr.umich.edu/publications/Papers/pdf/wp010.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. repec:bla:revinw:v:27:y:1981:i:4:p:401-21 is not listed on IDEAS
    2. Ronald Lee & Shripad Tuljapurkar, 1998. "Stochastic Forecasts for Social Security," NBER Chapters, in: Frontiers in the Economics of Aging, pages 393-428, National Bureau of Economic Research, Inc.
    3. Edward N. Wolff, 1988. "Social Security, Pensions and the Life Cycle Accumulation of Wealth: Some Empirical Tests," Annals of Economics and Statistics, GENES, issue 9, pages 199-226.
    4. Ronald D. Lee & Michael W. Anderson & Shripad Tuljapurkar, 2003. "Stochastic Forecasts of the Social Security Trust Fund," Working Papers wp043, University of Michigan, Michigan Retirement Research Center.
    5. Boskin, Michael J. & Kotlikoff, Lawrence J. & Puffert, Douglas J. & Shoven, John B., 1986. "Social Security: A Financial Appraisal Across and Within Generations," CEPR Publications 244432, Stanford University, Center for Economic Policy Research.
    6. repec:adr:anecst:y:1988:i:9:p:10 is not listed on IDEAS
    7. Richard V. Burkhauser & Jennifer L. Warlick, 1981. "Disentangling The Annuity From The Redistributive Aspects Of Social Security In The United States," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 27(4), pages 401-421, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Afonso, Luís Eduardo & Fernandes, Reynaldo, 2005. "Uma Estimativa dos Aspectos Distributivos da Previdência Social no Brasil," Revista Brasileira de Economia - RBE, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil), vol. 59(3), July.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Michael D. Hurd, 1989. "Issues and Results from Research on the Elderly I: Economic Status (Part I of III Parts)," NBER Working Papers 3018, National Bureau of Economic Research, Inc.
    2. Jeffrey B. Liebman, 2002. "Redistribution in the Current U.S. Social Security System," NBER Chapters, in: The Distributional Aspects of Social Security and Social Security Reform, pages 11-48, National Bureau of Economic Research, Inc.
    3. Afonso, Luís Eduardo & Fernandes, Reynaldo, 2005. "Uma Estimativa dos Aspectos Distributivos da Previdência Social no Brasil," Revista Brasileira de Economia - RBE, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil), vol. 59(3), July.
    4. Alan J. Auerbach & Ronald Lee, 2009. "Notional Defined Contribution Pension Systems in a Stochastic Context: Design and Stability," NBER Chapters, in: Social Security Policy in a Changing Environment, pages 43-68, National Bureau of Economic Research, Inc.
    5. Auerbach, Alan J. & Lee, Ronald, 2011. "Welfare and generational equity in sustainable unfunded pension systems," Journal of Public Economics, Elsevier, vol. 95(1), pages 16-27.
    6. Casey B. Mulligan & Xavier Sala-i-Martin, 1999. "Social Security in Theory and Practice (I): Facts and Political Theories," NBER Working Papers 7118, National Bureau of Economic Research, Inc.
    7. Wade D. Pfau & Vararat Atisophon, 2009. "Impact of the National Pension Fund on the Suitability of Elderly Pensions in Thailand," Asian Economic Journal, East Asian Economic Association, vol. 23(1), pages 41-63, March.
    8. Casey B. Mulligan & Xavier Sala-i-Martin, 1999. "Social security in theory and practice (II): Efficiency theories, narrative theories and implications for reform," Economics Working Papers 385, Department of Economics and Business, Universitat Pompeu Fabra.
    9. Serrano, Carlos, 1999. "Social security reform, income disribution, fiscal policy, and capital accumulation," Policy Research Working Paper Series 2055, The World Bank.
    10. Nelissen, Jan H. M., 1995. "Lifetime income redistribution by the old-age state pension in The Netherlands," Journal of Public Economics, Elsevier, vol. 58(3), pages 429-451, November.
    11. Richter, Andreas & Weber, Frederik, 2009. "Mortality-Indexed Annuities," Discussion Papers in Business Administration 10994, University of Munich, Munich School of Management.
    12. Martin S. Feldstein & Jeffrey B. Liebman, 2002. "The Distributional Effects of an Investment-Based Social Security System," NBER Chapters, in: The Distributional Aspects of Social Security and Social Security Reform, pages 263-326, National Bureau of Economic Research, Inc.
    13. Jeffrey R. Brown & Julia Lynn Coronado & Don Fullerton, 2009. "Is Social Security Part of the Social Safety Net?," NBER Chapters, in: Tax Policy and the Economy, Volume 23, pages 37-72, National Bureau of Economic Research, Inc.
    14. Martin Feldstein & Andrew Samwick, 1998. "The Transition Path in Privatizing Social Security," NBER Chapters, in: Privatizing Social Security, pages 215-264, National Bureau of Economic Research, Inc.
    15. John Geanakoplos & Olivia S. Mitchell & Stephen P. Zeldes, "undated". "Social Security Money's Worth," Pension Research Council Working Papers 97-20, Wharton School Pension Research Council, University of Pennsylvania.
    16. Martin Feldstein & Elena Ranguelova & Andrew Samwick, 2001. "The Transition to Investment-Based Social Security When Portfolio Returns and Capital Profitability Are Uncertain," NBER Chapters, in: Risk Aspects of Investment-Based Social Security Reform, pages 41-90, National Bureau of Economic Research, Inc.
    17. Jagadeesh Gokhale & Laurence J. Kotlikoff, 2002. "Social Security's Treatment of Postwar Americans. How Bad Can It Get?," NBER Chapters, in: The Distributional Aspects of Social Security and Social Security Reform, pages 207-262, National Bureau of Economic Research, Inc.
    18. Hans Fehr & Christian Habermann, 2008. "Risk Sharing and Efficiency Implications of Progressive Pension Arrangements," Scandinavian Journal of Economics, Wiley Blackwell, vol. 110(2), pages 419-443, June.
    19. 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.
    20. Gilles Le Garrec & Stéphane Lhuissier, 2011. "Life expectancy, heavy work and the return to education: lessons for the social security reform," SciencePo Working papers Main hal-01069511, HAL.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mrr:papers:wp010. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MRRC Administrator (email available below). General contact details of provider: https://edirc.repec.org/data/isumius.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.