1994 - 1996 Advisory Council
1994-95 Advisory Council on Social Security Technical Panel on Trends and Issues in Retirement Savings
II. Trends in labor markets, pensions, savings and the
well-being of the elderly
III. Policy Options for Dealing with Projected
Social Security Imbalances
IV. Timing and Implementation of Policy Options
V. Benefit Decreases versus Revenue Increases
VI. Alternative Types of Benefit Decreases
VI. Alternative Types of Revenue Increases
VII. The OASI Trust Fund
VIII. Individual Accounts within Social Security
IX. Other Retirement System Changes
X. SSA Policy Modeling and Research
The charge of the Technical Panel on Trends and Issues in Retirement Savings
(TIRS) was to "assist the 1994-95 [Social Security] Advisory Council
with respect to its charge to analyze the relative roles of the public
and private sectors in the provision of retirement income, particularly
how underlying policies of public and private programs, including relevant
tax laws, affect retirement decisions and the economic status of the elderly."
The Panel members were:
Olivia Mitchell, International Foundation of Employee Benefit Plans, Professor
of Insurance and Risk Management, The Wharton School,University of Pennsylvania
Joseph Quinn, Professor of Economics, Boston College (co-chair)
G. Lawrence Atkins, Director of Health Legislative Affairs,Winthrop, Stimson, Putnam & Roberts
Richard Burkhauser, Professor of Economics, The Maxwell School, Syracuse University
Gary Burtless, Senior Fellow, The Brookings Institution
Robert Clark, Professor of Economics and Business, North Carolina State University
Peter Diamond, Paul A. Samuelson Professor of Economics, Massachusetts Institute of Technology
John Haley, Watson Wyatt Worldwide, Inc.
Daniel Halperin, Professor of Law, Georgetown University
Eric Hanushek, Professor of Economics and Director, Wallis Institute of Political Economy, University of Rochester
Diane Macunovich, Associate Professor of Economics, Williams College
Dallas Salisbury, President, Employee Benefit Research Institute
John Shoven, Charles R. Schwab Professor of Economics and Dean, School of Humanities and Sciences, Stanford University, and
Stephen Zeldes, Professor of Finance, The Wharton School, University of Pennsylvania.
The social security system is not in long-term actuarial balance. The Social Security Trustees, using their intermediate assumptions, project that currently legislated Old Age, Survivors, and Disability Insurance (OASDI) tax revenues will be less than currently legislated benefits after the year 2013. Projected benefits begin to exceed the sum of OASDI taxes and interest earned in 2020, resulting in a decline in the OASDI Trust Funds, and projected depletion in 2030. Over the 75 year long-range planning horizon, the difference between the projected income and cost flows is a deficit equal to an annual 2.17 percent of taxable payrolls. Some combination of benefit decreases and/or revenue increases will be required to close this gap.
In addition to these social security retirement and disability program concerns, much more immediate funding problems exist with the Hospital Insurance component of Medicare, whose Trust Fund is projected to run out in 2002. Moreover, Congressional Budget Office analysis of the President's proposed budget for fiscal year 1996 projects continued federal budget deficits through the year 2000. It is in this context that the Technical Panel on Trends and Issues in Retirement Savings discusses various social security options below.
The Executive Summary begins with a section on current and projected trends in labor markets, employer pensions, savings and the well-being of the elderly. The Summary then discusses policy options designed to deal with projected social security fiscal imbalances, as well as selected other proposals to improve the economic well-being of future retirees. The Summary includes other conclusions and suggestions that the Panel thought were useful to convey to the Advisory Council on Social Security and to the public at large.
The Panel did not seek consensus; rather, its charge was to develop evaluation criteria and to use them to discuss a range of policy options. The Panel discussed both incremental and wide- ranging changes in social security and related programs, changes designed to alleviate both social security's long run fiscal deficit and the broader problem of potentially inadequate retirement income for future generations of retirees. On many of the issues discussed, Panel members were not unanimous, although on some issues they did all agree. Available evidence and supporting arguments are contained in the body of the Final Report.
Some topics were beyond the Panel's charge and therefore are not discussed in detail in this Report. One is the central role of the nation's overall economic health, which has a major impact on the social security system's fiscal health. To the degree that social security encourages, or at least does not discourage, work and savings, it enhances the prospects for economic growth. The Panel also did not examine how changes in the medical care and health insurance markets will interact with the Medicare and Disability Insurance programs. These two components of the social security system were the subjects of reports by previous Social Security Advisory Councils, and were beyond this Panel's purview.
In this section, the Panel discusses recent and probable future trends likely to affect the economic well-being of future retirees. Here the Panel assumes no major changes in the institutional environment, even though it realizes that changes in the largest program, social security, are absolutely necessary. Given its importance to older Americans, significant changes in social security may well affect the trends discussed here.
Labor force participation rates of older Americans (especially men) declined dramatically between 1950 and the mid- 1980s. This decline coincided with expanded coverage, increased real benefits and earlier ages of eligibility for retirement benefits in both social security and many employer pension plans. Since the mid-1980s, however, this early retirement trend has abated or stopped.
In the absence of major institutional change, but given the already legislated change in the Normal Retirement Age for social security from 65 to 66, and then to 67, the Panel anticipates a slow and modest reduction in early retirement, with Americans retiring slightly later over the next several decades.
The American labor market is changing in significant ways. Traditional manufacturing employment is declining, and service jobs are on the rise. Some evidence suggests that the quality of jobs is becoming more bimodal, with job growth among low-skilled, low-paid service workers and high-skilled, high-paid technical and professional employees. This pattern of job growth is reflected in the changing American income distribution, which is becoming more unequal.
Employer pensions are also in flux. After increasing rapidly during the 1950s and 1960s, the proportion of workers participating in an employer pension has leveled off, with slight increases appearing in 1993 and 1994 for the first time in years. About half of the full-time civilian labor force is participating at any given time. Participation rates increase significantly with age, job tenure and earnings level, suggesting that the proportion of workers covered at some time during their work lives will be higher than indicated in any cross-sectional snapshot. Vesting in plans has grown, meaning that entitlement to benefits has increased. There is a movement away from traditional employer-managed and directed plans (often with defined benefits) to more individualistic plans, with faster vesting, more elective contributions and participant-directed investments.
Barring major institutional change, it is unlikely that pension coverage will increase significantly over the next several decades. Benefit entitlement will grow because of faster vesting, and the trend toward more participant-directed, defined- contribution plans will continue. Below, the Panel discusses policy options that might be adopted to encourage additional pension coverage.
Private and aggregate national saving in the United States are low by international and by the nation's own historical standards. Many Americans reach retirement age with little personal savings beyond equity in a home. Little professional agreement exists on what public policies short of mandates would encourage a significant change in American savings habits.
The Panel is not optimistic about any dramatic turnaround in U.S. saving rates, although there is some expectation of modest increases in private savings if future social security benefits were decreased.
The economic status of elderly Americans has improved significantly over the past several decades. Median incomes of the elderly have risen relative to those of the rest of the population, and elderly poverty rates have fallen precipitously, even as fewer and fewer older Americans remained at work. Much of the credit for this improvement goes to federal programs -- especially social security -- and to the growth of employer based pensions. Around these encouraging averages, however, remain significant pockets of economic distress, with poverty much more prevalent among elderly who are very old, living alone, female, Black or Hispanic. The financial costs associated with long-term care remain a major economic risk, even for middle- and upper- middle income Americans.
Evaluation of the retirement prospects of the current generation of middle-aged workers, the baby boomers, depends on the point of comparison. Their income and asset accumulation experiences thus far suggest that current workers, especially those at the upper end of the income distribution, will approach retirement with more resources than their parents did, but without enough to maintain the standards of living that they themselves enjoyed prior to retirement. The baby boomers are unlikely to enjoy the dramatic increases in the value of their real estate or the legislated real increases in social security benefits that their parents did; in fact, social security benefits have been cut (through legislated delays in the Normal Retirement Age and the taxation of some benefits), and additional decreases may be legislated in the future. The groups of elderly now disproportionately at risk of poverty are likely to remain so. An important unknown is the rate of growth of real wages over the next several decades. Some analysts extrapolate from the dismal record of the past two decades, and foresee only very modest growth in the future. Others point to demographic changes on the horizon (smaller entry level cohorts), and anticipate real wage growth more in line with long-term trends.
Life expectancy is expected to continue to increase. Although life expectancy and health status do not always move in lock step, recent evidence suggests that the health status of the elderly is improving on average and will continue to do so in the future.
Because the social security system is not in long-term actuarial balance, significant adjustments in future contribution levels and/or benefit outlays will be necessary. Social security benefit cuts (either directly or through further delays in retirement ages) are one option. The Panel asked whether there are changes already under way that would offset the effects of potential benefit cuts on the future economic well-being of the elderly. The general answer is no -- the Panel sees no easy solution on the horizon. The Panel anticipates small increases in the average age of retirement, which will help, and some members foresee either higher real wage growth and/or some increase in personal savings. But the Panel believes that far more substantial adjustments than are currently under way will be necessary to compensate for any significant decreases in social security benefits.
What adjustments are most likely? Employer pension coverage? Patterns of personal savings? Labor force participation late in life? The Panel considered policy initiatives to encourage each of these, and discusses them below.
The Panel's consensus, especially given further expected increases in life expectancy, is that the last option - delayed retirement - would be the most likely and easiest response for the majority of older Americans who leave career jobs and the labor market voluntarily and in good health. For others, however, poor health or poor labor market prospects late in life would make this adjustment difficult or impossible.
The Panel stresses that some combination of benefit cuts and/or revenue increases is necessary to restore the social security system to actuarial balance, and urges that appropriate legislation be enacted promptly. Policy options were analyzed in a three step process. First, the Panel developed six criteria against which to judge any specific proposal. Then, a straightforward baseline benefit cut (an across-the-board decrease in the Primary Insurance Amount (PIA) formula for future retirees) was compared with a straightforward baseline revenue increase (an increase in the OASI payroll tax rate). Finally, the Panel compared other means of lowering benefits with the baseline PIA decrease, and other means of raising revenues with the baseline payroll tax increase.
The Panel adopted the following six criteria:
- Adequacy of retirement income, relative to poverty thresholds and to the household's pre-retirement income;
- Insurance against unforeseen income fluctuations (such as those caused by disability, the death of an earner, unanticipated early retirement or unexpected longevity);
- Avoidance of market inefficiencies; in particular, in the labor-leisure choice (the allocation of time during and at the end of the worklife) and in the consumption-savings choice (the allocation of lifetime income between consumption during the worklife, consumption during retirement and bequests);
- Equity of lifetime social security taxes and benefits, both between and within generations;
- Encouragement of private and aggregate national saving; and
- Strengthening the financial integrity of the nation's retirement income systems.
Panel members concur on several issues regarding the timing of legislation and the implementation of whatever social security adjustments are chosen.
The Panel urges that any significant changes in social security benefits be announced with sufficient lead time for workers to adjust their savings, consumption and retirement plans.
The Panel suggests that promptly legislated policy changes combined with some delay in implementation best helps people plan for the future. The desirability of delayed implementation only increases the urgency of prompt legislation.
The Panel urges that any payroll tax increases and benefit reductions be phased-in over time, rather than implemented abruptly. Gradual implementation reduces the magnitudes of notches (different treatment of cohorts close in age) and the perception of unfairness that notches engender.
The Panel acknowledges that the fiscal imbalance facing OASDI is a very serious one, demanding immediate attention, but did not attempt to reach a consensus on the appropriate mix of benefit cuts and revenue increases to address the imbalance. The Panel's focus was to analyze the pros and cons of achieving balance with different mixes of reduced benefits and increased revenues and to compare alternative means of both benefit decrease and revenue increase.
The Panel's criteria do not unequivocally favor either raising taxes or decreasing benefits. Rather, some criteria, such as adequate retirement income, favored tax increases, while others, like equity of lifetime social security taxes and benefits between generations, favored benefit cuts.
Closing the fiscal imbalance with additional revenues rather than benefit decreases is suggested if one emphasizes the first two criteria, adequate retirement income and insurance against unforeseen income fluctuations. Social security benefit cuts would increase the number of Americans with inadequate retirement income, and lower the insurance protection offered to workers, survivors and dependents. Within a generation, the use of tax increases rather than general benefit cuts favors those with the longest life expectancies -- those most likely to receive benefits for a long time -- and those with lower incomes for any given life expectancy.
Closing the fiscal imbalance with benefit decreases rather than tax increases is suggested if one emphasizes the fourth and fifth criteria, equity between generations and the encouragement of private savings. The expected return on social security contributions is already going to be lower for baby boomers than for past, current and near-future recipients (and this return will decline even further when either social security taxes are raised or future benefits are cut). Younger participants would pay the higher taxes for many more years than would older participants planning to retire soon. Lower benefits would also encourage some individuals to offset part of the loss through their own savings behavior.
Social security retirement benefits induce some older workers to leave the labor force earlier than they otherwise would. Benefit cuts, especially if combined with an increase in the early age of entitlement (now age 62), are likely to reduce this effect. In addition, payroll taxes may discourage the labor supply of younger workers, a labor market distortion that is more likely to decline if benefits are cut than if payroll taxes are increased.
The Panel found little professional consensus on the size of the impact of social security on private savings. To the extent that social security benefits substitute for private savings, benefit cuts rather than tax increases would encourage private savings. But many workers with little or no savings beyond their home equity are unlikely to make significant changes in their savings behavior in response to the changes in social security benefits being contemplated. The Panel concludes that reducing benefits might have a small positive effect on private savings.
The Panel compared the effects of the baseline benefit cut (an across-the-board decrease in the PIA formula) with those of several alternatives, including reducing disproportionately the benefits of high-wage workers, delaying retirement ages, reducing the cost-of-living adjustment and means-testing benefits.
If benefits are to be reduced, strong arguments suggest increasing the ages of eligibility for early and normal social security benefits. Most Panel members believe that delaying these retirement ages is a sensible response to increases in life expectancy, and one that prevents lifetime benefits from automatically increasing as recipients live longer.
If benefits are to be reduced, most Panel members believe that the Normal Retirement Age (NRA) for social security benefits, currently scheduled to increase to age 67, should be increased further, and that it should eventually be indexed to life expectancy. Most agree that the scheduled hiatus between the increases to age 66 (2000-2005) and 67 (2017-2022) should be eliminated.
Most Panel members believe that the Early Entitlement Age (EEA) for social security benefits should also be raised, with most supporting a new EEA of 64 or 65.
The Panel opposed means-testing social security benefits on the basis of other retirement income or accumulated wealth. To avoid loss of social security benefits, some workers might reduce their own retirement saving or persuade employers to shift compensation from pension contributions to earnings. Either response would lower savings and private retirement incomes.
If benefits are to be reduced by means other than or in addition to increases in the NRA and EEA (for example, if the PIA formula becomes less generous), most Panel members prefer disproportionate cuts at the top to an across-the-board decrease.
The Panel also discussed how to allocate the burden of benefit reductions across different cohorts -- those already retired, those about to retire (for example, within 5 years), and those further away from retirement.
If benefits are to be cut, the Panel does not favor entirely exempting people already retired or about to retire. However, the Panel favors smaller benefit reductions for these groups than for future retirees.
Social security benefits are the only fully indexed annuity available to (nearly) all workers. The threat of inflation would be a very serious concern to retirees, especially those with long lives after retirement, if full indexation were eliminated. For this reason, the Panel opposes permanently indexing social security benefits by less than the cost of living. At the same time, the Panel urges that the Bureau of Labor Statistics investigate whether the specific Consumer Price Index currently used to adjust benefits correctly measures the cost of living. If this measure is found to be biased, the Panel would support corrective changes in the method of calculation.
The Panel was split on whether a temporary delay or reduction in the cost-of-living adjustment would be desirable, Some Panel members favored this if benefits were decreased for future retirees, as a way of spreading some of the burden to current and near-future retirees.
The Panel is concerned about the well-being of workers in poor health if the Early Entitlement Age (EEA) were raised from age 62. Under current law, individuals can apply for Disability Insurance (DI) before age 65, and those deemed eligible receive benefits equal to 100 percent of their PIAs. If the EEA were raised, some people who would have opted for early social security benefits at or after age 62 would instead seek DI benefits. Some would be found ineligible, and others would not even apply. In the case of an increase in the EEA, the Panel discussed whether DI rules should be relaxed for people aged 62 and older and whether the age of entitlement for Supplemental Security Income (SSI) should be lowered from age 65 to age 62. Both DI and SSI might experience large increases in applications if the age-of- eligibility rules were changed, highlighting the fact that altering one piece of the social security benefit structure can have profound effects on other components of social security and on other programs.
The discussion persuaded some Panel members that persons as young as 62 should be allowed to apply for SSI benefits or face relaxed DI rules if the EEA is raised, to provide a safety net for those unable to support themselves until eligible for retirement benefits under the new EEA rules. Some members think that DI benefits should continue to equal 100 percent of PIA, regardless of the age of the disabled recipient, while others feel that DI benefits should be set equal to the early retirement amount, to avoid increased incentives to seek DI benefits if early retirement benefits are reduced. Others are concerned about the effect of such a reduction on the well-being of young and old disabled beneficiaries.
The Panel focused in detail on the status of surviving spouses, because family benefits can fall substantially with the death of a husband or wife. The significant disparity in the poverty rates of elderly couples and those living alone suggest that mechanisms be considered to raise the ratio of survivors to couples benefits. If the early age of entitlement for widows benefits is increased, then the calculation of benefit reductions for widows should be changed to preserve benefit levels or limit benefit cuts for this population.
Alternative Types of Revenue Increases
The Panel compared the effects of the baseline revenue increase (a simple increase in the payroll tax rate) with those of three alternatives: raising the earnings limit on which payroll taxes apply, expanding the definition of taxable income to include employee benefits, and infusing additional general revenues into the Social Security Trust Fund.
If additional revenues are to be raised, most Panel members favor raising the payroll tax rate rather than increasing the taxable earnings threshold. The threshold increase, unless applied only to the employers' portion or combined with a change in the benefit formula, would increase future benefits for those at the upper end of the income distribution, which a payroll tax increase would not.
Panel members expressed little enthusiasm for including employee benefits in the taxable wage base, citing significant measurement problems.
Panel members expressed almost no enthusiasm for additional direct infusion of general revenues, preferring to maintain the link between social security contributions made and benefits received.
The OASI Trust Fund
The OASI program is partially funded. The OASI Trust Fund currently exceeds one year's outlays, and is projected to grow for about two decades, as revenues exceed benefit payments. The Panel discussed whether OASI should remain at least partly funded or revert to a pay-as-you-go system as was in effect before the 1983 amendments.
The Panel believes that OASI should continue to be at least partly funded, meaning that the Trust Fund should maintain a significant and stable margin over annual expenditures over the foreseeable future.
On the assumption that Trust Fund reserves will continue to exist, the Panel discussed how to invest it. The Fund is currently invested in special issue Treasury securities, whose interest and principal are virtually free of default risk. The Panel examined whether part of the Trust Fund should be invested in private capital markets, with the expectation that investments would earn a higher rate of return than if invested solely in Treasury securities.
The Panel believes that a judgment on this proposal should depend on an assessment of its opportunities and its costs. If investing the Trust Fund in stocks carried no risk and provided a higher expected return, the stock portfolio would obviously be preferable. However, there is a risk-return tradeoff which must be examined and assessed in light of social security objectives. A related issue involves who bears the risk if equities perform poorly - future social security recipients, future social security contributors, or general taxpayers?
Panel discussions raised other questions. To what extent would investing the Trust Fund in equities increase national saving? How might it change perceptions about the size of the government deficit and increase political pressure to reduce it? How much would the inclusion of equities in the Trust Fund alter private household saving decisions? To what extent would this proposal expose future beneficiaries to additional political risk, because government officials might encourage the selection of private equity investments using criteria other than pure risk and return?
The Panel did not reach a consensus on the proposal to invest some of the Trust Fund reserves in equities, and concluded that the issue deserves additional study.
Individual Accounts within Social Security
The Panel discussed the pros and cons of converting all or part of the Social Security Trust Fund (or the annual surplus) to individual social security accounts, over which participants would exercise some investment discretion. In considering this proposal, the Panel noted that distributing the annual surpluses to individual accounts would require additional adjustments to benefits and/or taxes beyond what would be required to achieve system solvency without this distribution.
The Panel identified several attractive features of this proposal. Participants could allocate their funds as they preferred. Personal control might reduce uncertainty about the future politics of social security and increase public confidence in the system. It would probably be easier to increase social security taxes if the increases were directed to individual accounts. Moving these funds off-budget might create pressure to reduce the deficit, and thereby increase national saving.
Panel members also raised concerns about introducing individual accounts within social security. Would people manage these retirement assets prudently, and understand the risk and return tradeoffs inherent in private investment holdings? Would additional regulatory structures be necessary? Should the government offer a market index fund as a low-cost option? Would the administrative expenses of an individualized system substantially exceed those of the current Social Security Administration? Should participants be permitted to access the funds prior to retirement, or lump sum payouts at retirement? Would these accumulations be considered "assets" for means-tested assistance programs? Can they be bequeathed?
Despite these questions and concerns, many Panel members find promising the proposal to convert part of the Social Security Trust Fund to individual accounts, if the remainder of the social security system can still be made solvent. The Panel recognizes the need to coordinate the pattern of any benefit cuts with the pattern of benefits that would be received from these individual accounts.
Most Panel members would prohibit access to the funds for any reason other than retirement, and would mandate that the benefits be wholly or in part distributed in the form of an annuity, rather than permitting a 100 percent lump sum cashout. The Panel was divided on whether the annuity could be best managed by the government or the private sector.
Other Retirement System Changes
The Panel considered other issues related to the nation's retirement system, public and private.
The Panel identified strong arguments for including all new state and local employees in the social security system.
The Panel reviewed the range of ages currently used in retirement income policy, and concluded that much more coherent and integrated policy is needed. These ages include several discussed above (the NRA, the EEA and the ages at which people can apply for SSI and DI) as well as the age at which surviving spouses can apply for survivor benefits and the maximum age of the social security earnings test. In addition, the Panel noted that ages specified in IRS tax code for tax-qualified pension plans should be coordinated with any new ages recommended for social security purposes. For example, tax law specifies that employer- provided pension benefits under qualified plans may not exceed a certain dollar level when the worker attains the social security NRA, and an actuarially reduced amount at earlier ages. These linkages should be considered as the NRA increases. Similarly, tax law requires that workers receive minimum distributions from their private retirement accounts once they attain age 70.5. This age should probably be reevaluated in light of other proposed reforms and increasing life expectancies.
The Panel favors a more coherent policy on the ages the IRS uses in the tax code and the SSA uses in social security regulations.
Many Americans save very little and many workers reach retirement with little or no employer pension benefits. To remedy this situation, some have advocated mandatory private pensions outside the social security system, or proposed additional tax inducements to save or simplified pension regulations to reduce the regulatory burden. The Panel discussed these issues concerning retirement saving, both inside and outside employer pension plans.
The Panel overwhelmingly opposes mandated employer- pensions at the present time. This contrasts with the Panel's openness to individual accounts within social security.
The Panel favors simplification of the tax rules under which employer pension plans operate. Differences arose regarding the precise ways in which the tax code and nondiscrimination legislation should be reformed. Some members favor raising the contribution and benefit limits covering employer-provided pensions, and/or coordinating the very different benefit levels for different types of defined-contribution vehicles. Many members also support the idea of having streamlined regulations that companies can follow when establishing a tax-qualified defined-benefit or defined-contribution plan.
Most Panel members favor increasing the incentives for private savings, such as raising the limits on Individual Retirement Accounts.
A valuable attribute of social security benefits is that they are the only life annuities that are fully inflation- protected and available to (almost) all workers in the United States. The Panel urges the federal government to consider issuing inflation-indexed bonds which firms or individuals could buy to generate private sector retirement annuities protected from inflation.
The Panel favors the government issue of Treasury bonds indexed to price inflation, recognizing that some phasing in of this new credit instrument would be necessary.
SSA Policy Modeling and Research
The Panel urges the Social Security Administration to take advantage of its new independent agency status to re-structure its policy analysis and forecasting functions, making more use of the expertise in the policy community. Some Panel members suggest that the Social Security Administration would benefit from more frequent interactions with academic and practicing experts outside the government to advise SSA on issues of assumptions and methods, and also on broader issues facing the nation's retirement income system.
The Panel urges SSA to make available to the research and policy community the actuarial and economic models it uses for forecasting and analysis. Computer programs, documentation and research reports should be more widely available.
The Panel also urges that the data used in modeling social security system outcomes be made available to the research and policy community, in ways that preserve confidentiality while permitting analysts outside SSA to evaluate forecasts and simulate alternative policy scenarios. We note that implementation of these recommendations would have resource implications for the SSA research offices.
Many questions that the Panel struggled with require up- to-date, sophisticated modeling and data sets. The Social Security Administration's longitudinal Retirement History Survey (1969-79) played a major role in augmenting our understanding of retirement processes in the 1970s. The current longitudinal Health and Retirement Survey will do the same in the 1990s. The Panel urges that the Social Security Administration increase its support of data gathering and analysis efforts as a means of answering the policy questions raised in this report and others that will confront the system as it continues to evolve.
The social security program in the United States has been extremely successful and popular since its inception, and has been instrumental in improving the well-being of millions of American retirees and their dependents and survivors. When fiscal problems have been forecast in the past, adjustments have been made to address them. The same is needed now. The earlier the necessary adjustments are legislated, the better, because early notification of impending changes gives people time to adjust their savings and retirement plans accordingly. The fiscal problems currently anticipated with the graying of the baby boom generation are manageable, and the Panel strongly urges policymakers and politicians to decide promptly on the appropriate mix of benefit decreases and revenue increases to return social security's fiscal house to order.