April 16, 2015
Will Boomers Delay Social Security?
A 1983 reform to Social Security is now in full swing for baby boomers: they must wait at least until their 66th birthday to claim their full pension benefits.
But is the gradual increase in the program’s so-called full retirement age – it was 65 for prior generations – having any effect on when boomers retire?
Why people decide to retire when they do is complicated, and economists have tried for years to understand this. Americans are working slightly longer than they did in the mid-1990s, with the average retirement age rising from 62 to 64 for men and from 60 to 62 for women (though this trend may be stalling). Myriad possible explanations for retiring later include the decline of traditional pensions, greater longevity, healthier older workers, and a more educated labor force.
Another reason could be the 1983 reform delaying the age at which baby boomers in this country are allowed to claim their full Social Security pensions, a reason supported by a new study of similar reforms to Switzerland’s government pensions.
The researchers found that a one-year increase in Switzerland’s full retirement age, or FRA, for women is associated with a half-year delay in when women retire and when they claim their full government pensions. …Learn More
February 12, 2015
Immigrant Flows Impact Social Security
Manuel Carvallo immigrated from Mexico at age 40 and became a U.S. citizen at 51. The Georgia pension consultant just reached another milestone, accumulating the 10 years of U.S. work experience required to receive a small Social Security pension when he retires.
Millions of immigrants from around the world who work here illegally could get the same opportunity as Carvallo under President Obama’s executive actions on immigration, which propose to give many of them temporary legal work papers and Social Security numbers. Great uncertainty remains about where U.S. immigration policy is heading as Congress actively seeks to reverse the president’s administrative actions
What is clear is that when undocumented immigrants – farm workers, hotel workers, and household and restaurant staff lacking green cards or other legal status – do pay into Social Security, they often have little prospect of ever receiving benefits. In 2010, some 3 million such workers with fake or expired Social Security numbers added a $12 billion bonus to the Social Security Trust Fund, the U.S. Social Security Administration estimated. …Learn More
November 6, 2014
Taxes and Social Security Progressivity
Social Security’s old-age pensions were designed to replace more of the earnings of retired low-wage workers than of higher-wage workers.
But how is this progressivity affected by the federal income taxes paid by all workers and retirees? A study by economists at the Center for Retirement Research, which sponsors this blog, analyzed this complex issue and found that income taxes have not had any real impact on the overall progressivity of the Social Security program.
To reach this conclusion, the researchers used the actual experiences of older American households contained in survey data linked to their lifetime earnings. There were several different tax effects to consider.
First, the payroll tax that funds Social Security is shared by workers and employers, with differing effects. Although the workers’ payroll tax is deducted from their paychecks, workers must still pay income taxes on that amount.
The payroll tax paid by employers, on the other hand, is transferred directly to the federal government, and no income tax is paid. Although the amount transferred is effectively part of workers’ compensation, they do not have to pay income tax on this portion of their compensation. This reduces the taxable income of all workers, but it is more valuable to higher income workers who pay higher tax rates: a one dollar employer contribution costs a taxpayer in the 35-percent bracket just 65 cents, compared with 90 cents for a lower-paid worker in the 10-percent bracket.
Many low-wage workers pay no income taxes or even receive an Earned Income Tax Credit. But a negative tax rate – in the form of a credit for the lowest-wage workers – means they can’t benefit from the tax exemption implicit in employers’ contributions to Social Security on their behalf. …Learn More
June 24, 2014
Social Security: Vale La Pena Esperar
Waiting to claim Social Security is good for retirees’ financial health – none more so than the U.S. Latino population.
This message is delivered in Spanish in the above video, “El Seguro Social: Vale la Pena Esperar.” The video was produced by the National Academy of Social Insurance, a policy research non-profit, and Squared Away found it on the website of Latinos & Economic Security.
Latinos & Economic Security, which is part of UCLA’s Center for Policy Research on Aging, said Latinos make up 7 percent of the U.S. population age 65 and older. But due to their lower incomes during their working years, Latinos are more reliant on Social Security than are Asian-American, African-American and white, non-Latino retirees, the organization said.
Its research also shows that Social Security provides at least 90 percent of the income of well over 40 percent of elderly Latino couples. So it pays to delay and increase the size of that monthly pension check. …Learn More
June 10, 2014
Social Security at 62 but Fairly Healthy
Are people who claim their Social Security retirement benefits when they’re 62 too sick or impaired to work?
Fast forward three years, to when these early claimers turn 65. They’re about as healthy as those who decided to wait until age 65 to start receiving their Social Security retirement benefits, according to preliminary findings from a study using Medicare spending data as a proxy for health. The early claimers are also far healthier than people who left the labor force early to go on federal disability.
Some 8,500 older Americans were in the study’s sample, and they fell into four different groups: those who claimed a reduced Social Security pension soon after turning 62; those who claimed a larger pension at 65; those who were awarded a Social Security disability benefit before turning 62; and those who applied for disability but were denied and then claimed their retirement benefit after age 62. …Learn More
April 17, 2014
Social Security 101
As a young adult starting my career in Chicago in the 1980s, I didn’t have a clue how Social Security worked or why money was being taken out of my scrawny paycheck.
But trust me on this: the Social Security retirement program becomes a lot more interesting to workers as they age and their retirement horizon comes into sharp focus. It affects just about every American – and most of us pay into it.
It is not only the bedrock of retirement for millions of Americans and their spouses, but it’s also a source of income for their survivors, including children, and workers who become disabled.
In this video, officials from the U.S. Social Security Administration explain what its programs do and why they matter. Learn More
September 26, 2013
Social Security Claiming and Psychology
It’s common for people to begin collecting their Social Security benefits soon after they turn 62, ignoring the financial planners and retirement experts urging them to postpone and increase the size of their monthly checks.
A new study has uncovered four powerful psychological traits that influence this decision: the individual’s expected longevity, his fear of loss, whether he perceives the Social Security system as fair, and patience.
The study surveyed some 3,000 people, primarily in their 40s and 50s. This is a good age to ask about Social Security, because claiming the benefit is a few years away, “but they’re thinking more about it,” researcher Suzanne Shu said when presenting the findings at an August meeting of the Retirement Research Consortium in Washington.
In an online survey, Shu, who is from the University California at Los Angeles, and John Payne, from Duke University, posed a series of questions designed to understand the psychology of the individuals they were studying. They also asked when they planned to claim their Social Security and then determined which psychological traits were linked to those who said they planned to file early.
Four influences on claiming came out of their preliminary findings:
Fear of loss. People who have a stronger aversion to financial loss also tended to say they would claim earlier. To them, the researchers said, a delay in receiving their benefit checks “looks like a potential loss.” …Learn More