Retirement Security

Federal deficits are at historic highs, price inflation is rearing its head, and lawmakers are progressively losing control over

Social Security’s inflation-protected lifelong benefits are critical for old-age economic security. These benefits will become

There is a widespread perception that Americans aren’t saving enough for retirement. Some policymakers propose to increase the

Social Security’s trustees first reported program underfunding in 1992, and since then virtually every annual trustees report to

The fear that Americans are inadequately prepared for retirement has led to many policy ideas and some new financial products to

Mercatus Center Senior Research Fellow Mark J. Warshawsky discusses the shortcomings of the Urban Institute model and suggests areas for improvement.

This paper reviews how reverse mortgages work, with a focus on costs, taxation, and possible use in enhancing lifetime

My testimony focuses on two key issues. First, I will explain how the current-law Windfall Elimination Provision (WEP) is overly complex and unfair. Second, I will discuss how reforming the Social Security benefit formula would improve the simplicity and fairness of the WEP, while still maintaining the original public policy purpose. Additionally, though most of my testimony focuses on the WEP, a related provision, the Government Pension Offset (GPO), has similar complexity and fairness problems that should be addressed.

A new study for the Mercatus Center at George Mason University examines both the overall financial condition of state and local pension plans and the legal impediments to pension reform. It argues that reform proposals that assume the federal government will bail out state and local pen- sions are politically and economically unworkable and unfair. Instead, it presents a two-pronged reform proposal: (1) require state and local authorities to disclose the financial condition of their pension plans to beneficiaries in plain language and using standardized conservative accounting assumptions, and (2) allow state and local governments to offer beneficiaries a choice between accepting the uncertain and risky future benefits originally promised or receiving a discounted lump-sum benefit right away.

Social Security Disability Insurance program outlays have increased rapidly, roughly doubling in real terms over the past fifteen years.Participation in program (as % of labor-force) has doubled over the past twenty years. Determining the cause of this rapid rate of growth is essential for setting the program on a sustainable, long-term responsible path.

As I underscored in two recent charts, the Social Security Disability Insurance (SSDI) program is financially unsustainable, and to save it, policymakers need to rein in benefits, which have exploded in recent years. This week’s charts add two important points: first, that SSDI has turned into a quasi-unemployment program, and second, that the good intentions that prompt the creation of federal programs are not enough to prevent poor and costly outcomes.

It will be tempting for policymakers to avoid the politically difficult decision to rein in benefits by a temporary fix, like raising payroll taxes or shifting “assets” from the regular Social Security trust fund to the DI component. These short-term fixes would worsen the Social Security system’s long-term structural imbalance, while inflicting damage on the US economy.

A new study for the Mercatus Center at George Mason University is the first to rigorously assess the details of the proposed regulation using empirical methodology widely accepted in the financial industry and comparing the proposed illustration to the Social Security statement. The regulation would require all defined contribution plans to inform their participants of the life annuity income equivalents of the current and projected balances in their individual accounts. The study examines several changes the Department of Labor can make to improve its proposal.