Assumptions

Estimated Retirement Benefits in the Social Security Statement

Alternate Measures of Replacement Rates for Social Security Benefits and Retirement Income

Replacement rates are common and useful tools used by individuals and policy analysts to plan for retirement and assess the sufficiency of Social Security benefits and overall retirement income. Because the calculation and meaning of replacement rates differs depending on the definition of preretirement earnings, this article examines four alternative measures: final preretirement earnings, constant income payable from the present value of lifetime earnings (PV payment), wage-indexed average of lifetime earnings, and inflation-adjusted average of lifetime earnings (CPI average). The article also calculates replacement rates for Social Security beneficiaries aged 64–66 in 2005.

Incorporating Immigrant Flows into Microsimulation Models

Complementing the second paper's focus on forecasting immigrant earnings and emigration in a "closed system" for a given population, the last article of the trilogy explores how to project immigrant earnings for an "open system"—a system that includes future immigrants. A simple method to project future immigrants and their earnings is presented.

Adding Immigrants to Microsimulation Models

Given immigration's recent resurgence as an important demographic fact in the U.S. economy, U.S. policy modelers are just beginning to grapple with how best to integrate immigrants into policy models. Building on the research reviewed in the first article of this series, this article puts forth a conceptual basis for incorporating immigration into a key type of policy model—microsimulation—with a focus on the projection of immigrant earnings.

Research on Immigrant Earnings

As the first in a trio of articles devoted to incorporating immigration into policy models, this article traces the history of research on immigrant earnings. It focuses on how earnings trajectories of immigrants differ from those of U.S. natives, vary across immigrant groups, and have changed over time. The highlighted findings underscore key lessons for modeling immigrant earnings and pave the way for representing the earnings trajectories of immigrants in policy models.

Trends in Mortality Differentials and Life Expectancy for Male Social Security-Covered Workers, by Socioeconomic Status

This article presents an analysis of trends in mortality differentials and life expectancy by socioeconomic status for male Social Security-covered workers aged 60 or older. Mortality differentials, cohort life expectancies, and period life expectancies by average relative earnings are estimated. Period life expectancy estimates for the United States are also compared with those of other Organisation for Economic Co-operation and Development (OECD) countries.

Literature Review of Long-Term Mortality Projections

The Board of Trustees of the Federal Old-Age and Survivors Insurance and Disability Insurance (OASDI) Trust Funds reports on the current and projected future financial status of the trust funds annually. The Trustees project trust fund finances 75 years into the future. Mortality is one key demographic assumption that feeds into these long-range projections. This article reviews a range of predictions about long-term mortality improvement and assesses where the Trustees' 75-year mortality projection falls within this range. In general, the predictions of future mortality declines in the 2004 Social Security Trustees Report tend to be in the mainstream of professional actuarial and international official government opinion and to be lower than the majority of the small group of demographers who produce comparable estimates.

Income Growth and Future Poverty Rates of the Aged

This paper estimates effects on elderly poverty rates of a steady growth in incomes for 50 years. It assumes that the poverty threshold continues to be adjusted for inflation but not for increases in real incomes. Simulations with the March 1998 Current Population Survey indicate that if Social Security and Supplemental Security Income (SSI) benefit rules are not changed and if earnings and other incomes grow by 1 percent per year (the growth rate in earnings assumed in the Social Security Trustees' Report intermediate scenario) in an otherwise unchanging population, poverty among the elderly will decrease from 10.5 percent to about 7.7 percent in 2020 and to 4.8 percent in 2047. Those projected poverty rates are quite sensitive to the earnings growth rate assumption and to the assumption that benefits are not further reduced to maintain solvency. The paper quantifies the sensitivity to these assumptions and discusses several other aspects that might affect future poverty rates—changes in other income components like SSI, earnings, and pensions; changes in longevity and marital patterns; and changes in the distribution of earnings.

A Guide to Social Security Money's Worth Issues

This paper discusses some of the major issues associated with the question of whether workers receive their money's worth from the Social Security program. An effort is made to keep the discussion as nontechnical as possible, with explanations provided for many of the technical terms and concepts found in the money's worth literature. Major assumptions, key analytical methods, and money's worth measures used in the literature are also discussed. Finally, the key findings of money's worth studies are summarized, with some cautions concerning the limitations and appropriate usage of money's worth analyses.