Social Security Bulletin, Vol. 72, No. 2

(released May 2012)
by Hilary Waldron

Several Social Security proposals have included benefit formula changes that apply to earners above a specified percentage of the combined male and female (unisex) lifetime earnings distribution. This study finds that if Social Security's median unisex average indexed monthly earnings (AIME) amount is used to define an earnings threshold below which benefits will be held unreduced, the percentage of fully insured men subject to benefit reductions (70 percent) will exceed the unisex estimate of the population subject to benefit reductions (50 percent) by 20 percentage points. If policymakers wish to adjust future benefits and focus benefit reductions on middle or high primary or full-time wage earners in a household, the male, rather than unisex, AIME would come closer to achieving such a goal.

by Howard M. Iams and Christopher R. Tamborini

Social Security retirement-age benefits in the United States reflect marital histories and lifetime earnings of current and former married couples. We examine women's marital history patterns and spouse and widow benefit eligibility over the past two decades, 1990 and 2009. Our analysis reveals substantial changes in women's marital patterns among the baby boom and generation X cohorts. We find a substantial decline in qualifying marital histories for Social Security spouse and widow benefits. The results reveal considerable variation by race and Hispanic origin.

by William G. Gale, Benjamin H. Harris, and Ruth Levine

Financial illiteracy is prevalent in the United States, and low levels of financial literacy are associated with poor financial choices and negative economic outcomes. We examine previous work on the effect of financial education on household saving and find mixed results. Workplace financial education seminars positively affect household saving, but the size of this effect varies widely across studies. The effects of other financial education initiatives are less clear, highlighting the need for rigorous econometric evaluation of efforts to improve financial literacy.

by Alan L. Gustman, Thomas L. Steinmeier, and Nahid Tabatabai

This article investigates how raising the maximum level of earnings subject to the Social Security payroll tax leads to the "leakage" of portions of the additional revenue into higher benefit payments. Using data from the Health and Retirement Study, the authors simulate the effects of changes in maximum taxable earnings for cohorts approaching retirement age over a 24-year period. They find, roughly, that almost half of the additional tax revenue from having raised the maximum earnings subject to the payroll tax has leaked into higher benefits.

The Board of Trustees reports each year on the current and projected financial condition of the Social Security program, which is financed through two separate trust funds: the Old-Age and Survivors Insurance Trust Fund and the Disability Insurance Trust Fund. The introduction, overview, and full report are available here.