Melissa M. Favreault

Retiring Together or Working Alone: The Impact of Spousal Employment and Disability on Retirement Decisions

Husbands and wives often coordinate retirement decisions, as many married workers withdraw from the labor force at about the same time as their spouses. However, joint retirement behavior may differ for couples in which one spouse retires with health problems. In those cases, the able-bodied spouse may delay retirement to compensate for the earnings lost by the disabled spouse. This paper examines the retirement decisions of husbands and wives and how they interact with spousal health and employment, using data from the 1992-1998 waves of the Health and Retirement Study. The results indicate that both men and women are more likely to retire if their spouses have already retired than if they are still working. However, they are less likely to retire if their spouses appear to have left the labor force because of health problems, especially when spouses are not yet eligible for Social Security retirement benefits. There is no evidence that spousal caregiving demands affect retirement rates.

Interactions between Social Security Reform and the Supplemental Security Income Program for the Aged

Most analyses of Social Security reforms ignore interactions with the Supplemental Security Income (SSI) program. We explicitly consider such interactions using a microsimulation model. The basic reform we examine reduces Social Security benefits by the percentage required to approach 75-year solvency. We then add options for attenuating the effects on low-income beneficiaries, including a minimum Social Security benefit and liberalization of three SSI program parameters. Focusing on the elderly in 2022, we compare the simulated reforms with respect to benefit receipt patterns, poverty rates, and winners and losers. Social Security beneficiaries turn to the SSI program for income support in response to Social Security benefit reductions, but substantial SSI reforms are necessary if the SSI program is to play a more effective income security role. Among the limited set of reform options we consider, Social Security minimum benefit plans would be more effective in reducing poverty among low-income beneficiaries.

Financing Long-Term Services And Supports: Options Reflect Trade-Offs For Older Americans And Federal Spending.

About half of older Americans will need a high level of assistance with routine activities for a prolonged period of time. This help is commonly referred to as long-term services and supports (LTSS). Under current policies, these individuals will fund roughly half of their paid care out of pocket. Partly as a result of high costs and uncertainty, relatively few people purchase private long-term care insurance or save sufficiently to fully finance LTSS; many will eventually turn to Medicaid for help. To show how policy changes could expand insurances role in financing these needs, we modeled several new insurance options. Specifically, we looked at a front-end-only benefit that provides coverage relatively early in the period of disability but caps benefits, a back-end benefit with no lifetime limit, and a combined comprehensive benefit. We modeled mandatory and voluntary versions of each option, and subsidized and unsubsidized versions of each voluntary option. We identified important differences among the alternatives, highlighting relevant trade-offs that policy makers can consider in evaluating proposals. If the primary goal is to significantly increase insurance coverage, the mandatory options would be more successful than the voluntary versions. If the major aim is to reduce Medicaid costs, the comprehensive and back-end mandatory options would be most beneficial.

Minimum Benefits in Social Security

In 1998, the bipartisan National Commission on Retirement Policy advanced a reform proposal that contained a minimum benefit within Social Security. Since then, numerous congressional proposals have included minimum benefits as part of a package of reforms, and a commission President George W. Bush set up during his first term also recommended one. Little effort, however, has been made to develop the rationale for a minimum benefit or to examine alternative designs.1 As a consequence, the design of a minimum benefit — or, for that matter, of almost all redistributive formulas within Social Security — has seldom been based on any theoretical or empirical notion of exactly what goals are sought and what types of formulaic adjustments would best achieve them.

Rising Tides and Retirement: The Aggregate and Distributional Effects of Differential Wage Growth on Social Security

Recent growth in wage inequality has important implications for Social Security solvency and the distribution of benefits. Because only earnings below the taxable maximum are subject to Social Security payroll taxes, wage growth that is concentrated among very high earners will generate lower tax receipts than wage growth that is more evenly distributed. The progressivity of the Social Security benefit formula increases benefit payouts when the share of workers with low wages grows. This study uses a dynamic microsimulation model to examine the aggregate and distributional consequences of alternative scenarios about the distribution of future wage growth among workers. We find fairly marked changes in projected Social Security benefit distributions, poverty, and long-term financing status with relatively modest changes in assumptions about wage differentials.

The Impact of Changing Earnings Volatility on Retirement Wealth

Over the last several decades, the volatility of family income has increased markedly, and own earnings volatility has remained relatively flat. Volatility may affect retirement wealth, depending on whether volatility affects accrued pension contributions or withdrawals or earnings credited toward future Social Security benefits. This project assesses the effect of the volatility of individual and family earnings on asset accumulation and projected retirement wealth using survey data matched to administrative earnings records.

Modeling Health Care Spending Growth of Older Adults.

OBJECTIVE To forecast out-of-pocket health care spending among older adults. Long-term forecasts allow policy makers to explore potential impacts of policy scenarios, but existing microsimulations do not incorporate details of supplemental insurance coverage and income effects on health care spending. DATA SOURCES Dynamic microsimulation calibrated to survey and administrative data. STUDY DESIGN We augment Urban Institutes Dynamic Simulation of Income Model (DYNASIM) with modules that incorporate demand responses and economic equilibria, with dynamics driven by exogenous technological change. A lengthy technical appendix provides details of the microsimulation model and economic assumptions for readers interested in applying these techniques. PRINCIPAL FINDINGS The model projects total out-of-pocket spending (point of care plus premiums) as a share of income for adults aged 65 and older. People with lower incomes and poor health fare worse, despite protections of Medicaid. Spending rises 40 percent from 2012 to 2035 (from 10 to 14 percent of income) for the median beneficiary, but it increases from 5 to 25 percent of income for low-income beneficiaries and from 23 to 29 percent for the near poor who are in fair/poor health. CONCLUSIONS Despite Medicare coverage, near-poor seniors will face out-of-pocket spending that would render them, in practical terms, underinsured.

Living Arrangements and Supplemental Security Income Receipt Among the Aged

Declines in health and financial resources lead many older Americans to turn to coresidence and the Supplemental Security Income (SSI) program for support. A growing literature examines coresidence choices and SSI participation, stressing the importance of each for vulnerable aged persons. Little research, however, considers how these processes intersect. Because SSI provides Medicaid access but reduces benefits if one shares a residence, the program alters both the necessity of and the incentives for coresidence. We explore interactions between SSI participation and living arrangements by developing two joint models of the two decisions for members of the SSI-eligible population. In these models, we express the probability of SSI receipt and living with kin and joint SSI-living arrangement states as functions of individual and family attributes. We estimate model parameters using data from the 1990 to 1993 panels of the Survey of Income and Program Participation (SIPP) matched to administrative records on earnings and program participation. Our results provide tentative support for the hypothesis that these two processes should be considered jointly.

Forecasting Incidence of Work Limitations, Disability Insurance Receipt, and Mortality in Dynamic Simulation Models Using Social Security Administrative Records: A Research Note

In examining a number of important research questions related to the reform of the Social Security program, it is helpful to understand patterns of participation in the Disability Insurance (DI) program. DI beneficiaries comprise a large fraction, approximately 15 percent, of the pool of workers who receive Social Security benefits (Social Security Administration, 2001: Table 5.A16). They are a particularly vulnerable group in later life, with poverty rates more than twice as high as those for recipients of retirement or survivor benefits from Social Security (Thompson and Smith, 2002: Table A9-13c). Those who receive DI also have very different mortality experiences than those who do not (Zayatz, 1999), so careful modeling of the overlap between mortality and disability is essential when trying to determine the lifetime distributional consequences of Social Security reform. In addition, the larger disabled population, consisting of those who report work limitations but do not necessarily receive DI benefits, is also at higher risk of poverty and death than those who do not report work limitations. This research note explores these important intersections by presenting estimates from multivariate analyses of self-reported disability status, observed mortality, and reports of DI participation from administrative data. In our analyses, we use data from the 1990 through 1993 panels of the Survey of Income and Program Participation (SIPP) matched to the Social Security Administrations Summary Earnings Records (SER), Master Beneficiary Records (MBR), and Death Master File (from the Social Security number identification file, or Numident). Using administrative data allows us to improve upon several previous studies, as research consistently demonstrates that self-reports of earnings and disability benefit receipt are unreliable. Individuals often round up or down when reporting their earnings, particularly if they are asked about the distant past, and they frequently misreport social insurance and social assistance benefit types because they misunderstand the reasons that they receive benefits (see, for example, Huynh, Rupp, and Sears, 2002).