503 research outputs found
Pension system solvency – from linguistics to economics
http://kotlikoff.net/articlesFirst author draf
Is Uncle Sam inducing the elderly to retire?
Many, if not most, Baby Boomers appear at risk of suffering a major decline in their
living standard in retirement. With federal and state government finances far too
encumbered to significantly raise Social Security, Medicare, and Medicaid benefits, Boomers
must look to their own devices to rescue their retirements, namely working harder and
longer. However, the incentive of Boomers to earn more is significantly limited by a plethora
of explicit federal and state taxes and implicit taxes arising from the loss of federal and state
benefits as one earns more. Of particular concern is Medicaid and Social Security’s complex
Earnings Test and clawback of disability benefits. This study measures the work disincentives
confronting those age 50 to 79 from the entire array of explicit and implicit fiscal work
disincentives. Specifically, the paper runs older respondents in the Federal Reserve’s 2013
Survey of Consumer Finances through The Fiscal Analyzer -- a software tool designed, in part,
to calculate remaining lifetime marginal net tax rates.
We find that working longer, say an extra five years, can raise older workers’ sustainable living
standards. But the impact is far smaller than suggested in the literature in large part because of
high net taxation of labor earnings. We also find that many Baby Boomers now face or will face
high and, in very many cases, extremely high work disincentives arising from the hodgepodge
design of our fiscal system. A third finding is that the marginal net tax rate associated with a
significant increase in earnings, say 1,000 per year, extra amount of money. This is due to the
various income thresholds in our fiscal system. We also examine the elimination of all transfer
program asset and income testing. This dramatically lowers marginal net tax rates facing the
poor. Another key finding is the enormous dispersion in effective marginal remaining lifetime net
tax rates facing seeming identical households, i.e., households with the same age and resource
level. Finally, we find that traditional, current-year (i.e., static) marginal tax calculations relating
this year’s extra taxes to this year’s extra income are woefully off target when it comes to
properly measuring the elderly’s disincentives to work.
Our findings suggest that Uncle Sam is, indeed, inducing the elderly to retire.http://kotlikoff.net/columnsPublished versio
Private Medical Insurance and Saving: Evidence from the British Household Panel Survey
Private Monetary Transfers and Altruism: An Empirical Investigation on Italian Families
Spend More Today: Using Behavioural Economics to Improve Retirement Expenditure Decisions
- …