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Modeling Income in the Near Term 5

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Document date: November 05, 2007
Released online: November 19, 2007

The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.

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Abstract

This report describes the work the Urban Institute performed to generate the Model of Income in the Near Term, Version 5 (MINT5). MINT is a tool developed for The Division of Policy Evaluation (DPE) of the Social Security Administration (SSA) to analyze the distributional consequences of Social Security reform proposals. MINT is a micro-level data file of individuals born between 1926 and 2018. It starts with a rich set of income and demographic characteristics from the 1990 to 1996 Survey of Income and Program Particpation (SIPP) data linked to SSA data on earnings and benefits. MINT then projects these characteristics until death or the year 2099.


Introduction

This report describes the work the Urban Institute performed to generate the Model of Income in the Near Term, Version 5 (MINT5). MINT is a tool developed for The Division of Policy Evaluation (DPE) of the Social Security Administration (SSA) to analyze the distributional consequences of Social Security reform proposals. MINT is a micro-level data file of individuals born between 1926 and 2018. It starts with a rich set of income and demographic characteristics from the 1990 to 1996 Survey of Income and Program Particpation (SIPP) data linked to SSA data on earnings and benefits. MINT then projects these characteristics until death or the year 2099.

MINT1, produced by the Urban Institute, The Brookings Institution, and The Rand Corporation, is described in Toder et. al. (1999) and Panis and Lillard (1999). MINT3 is described in Toder et. al. (2002), and MINT4 is described in Smith et. al. (2005). Each subsequent version of MINT enhances the earlier version by adding more recent data and adding more detail in the projection methods.

MINT5 enhances MINT4 in the following ways:

  • Updates marriage, divorce, and mortality projections;
  • Revises immigration targets;
  • Adds fertility history to the final MINT file;
  • Updates the wealth accumulation and annuity calculations;
  • Substantially revises and enhances the tax module and adds after-tax retirement income to the final MINT file;
  • Updates the SSI eligibility estimates;
  • Revises the labor force participation and earnings estimates after age 50 until initial benefit receipt;
  • Updates the earnings estimates to reflect the elimination of the retirement earnings test between the normal retirement age (NRA) and 69;
  • Updates and revises estimates and projections of retirement and labor force participation;
  • Refines the defined benefit pension estimates;
  • Updates the projections of extended MINT cohorts through birth year 2018;
  • Updates projections of retirement income, based on changes in the model.

1. Updates of Marriage, Divorce, and Mortality Projections

The marriage and divorce projections in earlier versions of MINT were estimated on the 1990 and 1991 SIPP data (Panis and Lillard, 1999). The estimation sample was based on the marriage history topical module data, updated for observed marital changes during the panel. Regressors included age splines, race, Hispanicity, education, marriage/divorce duration, number of marriages, and a measure of permanent income. Spousal attributes were not included because they were not available on the estimation sample, which included only retrospective marriage histories. Number of children was not included because MINT1 did not project it.

Marriage patterns have changed over time, with individuals in later cohorts less likely to marry and more likely to get divorced than earlier cohorts. In order to ensure that MINT captured the most recent trends in marriage patterns, we reestimated the MINT1 marriage and divorce hazard models using pooled 1990 to 2001 SIPP data. The updated estimates and results are described in Chapter 2 of this report.

MINT mortality projections are done separately for deaths up to and after age 65. The pre-65 mortality is a by-product of the earnings splicing and is calibrated to OCACT targets (Toder et. al. 2002 Chapter 2). The post-65 mortality projections are based on estimated equations from the Panel Study of Income Dynamics (PSID) (Panis and Lillard 1999). Regressors include age, race, education, marital status, calendar year, and a measure of permanent income. These estimated equations were anchored to Vital Statistics data from 1901-1994. Earlier versions of MINT projected considerably lower mortality rates after age 65 for both men and women than did OCACT (Toder et. al. 2002, Chapter 8). The PSID has a small sample size and suffers from sample selection problems due to attrition over time. Both factors adversely affected the quality of the PSID-based mortality estimates..

In MINT 5, we calibrate the mortality projections so that they match 2006 OCACT projections by age, sex, and cohort. This calibration is done by adjusting coefficients of the Panis and Lillard model to hit OCACT targets. We adjust the intercept, add mortality differentials between ever and never disabled workers, adjust the age slope, and adjust the calendar year time trend. The updated mortality model is described in Chapter 2 of this report.

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Topics/Tags: | Retirement and Older Americans


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