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Publications by Lawrence H. Thompson for Retirement Policy

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U.S. Retirement Income System (Article)
Lawrence H. Thompson

Increased life expectancy and large numbers of baby boomers reaching retirement age will challenge the U.S. retirement income system. This article summarizes sources of retirement income and the importance of Social Security in providing income for poorer adults. It also discusses the financial shortfall in the Social Security system. Given the limited support for whole-scale reform, the author highlights options for adjusting Social Security and encouraging greater participation in employer-provided and individual retirement plans. (Oxford Review of Economic Policy 2006; 22(1); 95-112).

Posted: September 26, 2006Availability: HTML

Reform Model Two of the President's Commission to Strengthen Social Security (Research Report)
Melissa M. Favreault, Karen E. Smith, Lawrence H. Thompson, Sheila R. Zedlewski

This project explores distributional consequences of Plan 2 of the President's Commission to Strengthen Social Security using dynamic microsimulation. This plan includes: voluntary personal account "carve outs," minimum benefits, widow(er)s benefit increases, and initial benefit formula shifts (from wage- to price-indexing). The analysis develops a baseline using Office of the Chief Actuary assumptions regarding portfolio allocation, rates of return, administrative costs, and annuitization. We compare results with promised benefits and current-law adjusted to match costs of the baseline without accounts. We test the estimates' sensitivity to assumptions using historical data, values from the literature, and models estimated from SCF data.

Posted: September 30, 2004Availability: HTML | PDF

Social Security Reform and Benefit Adequacy (Policy Briefs/Retirement Project Brief Series)
Lawrence H. Thompson

Over a third of all people retiring in 2001, including more than half of retired women, received Social Security benefits of less than $700 a month, roughly the poverty level for a single individual. Solving the current financing problem solely through benefit reductions could cause over half of all future retirees, and almost 90 percent of the women, to have benefits equally as inadequate. Congress must either significantly increase the age of first eligibility for the program or find substantial additional revenues if Social Security is to provide minimally adequate benefits to future retirees.

Posted: March 01, 2004Availability: HTML | PDF

Simulating the Distributional Consequences of Personal Accounts (Research Report)
Melissa M. Favreault, Karen E. Smith, Lawrence H. Thompson

In this study we project the long-term effects of a proposal that carves out some Social Security contributions to pay for personal accounts. We compare the distributional outcomes to the current system and examine how different strategies for annuitizing personal account balances might change these outcomes. We find that personal accounts would reduce some of the redistribution in the current system by tying benefits more closely to work histories. However, annuitization of balances and options such as joint and survivor protection, period certain payouts, and cash refunds also would affect the distributional outcomes.

Posted: October 01, 2003Availability: HTML | PDF

Modeling Income in the Near Term: Revised Projections of Retirement Income Through 2020 for the 1931-1960 Birth Cohorts (Research Report)
Eric Toder, Lawrence H. Thompson, Melissa M. Favreault, Richard W. Johnson, Caroline Ratcliffe, Karen E. Smith, Timothy Waidmann

This report details the development of a third version of MINT (Modeling Income in the Near Term), a tool for simulating the retirement incomes of members of the Baby Boom and neighboring cohorts. MINT3 can produce projections of economic and demographic characteristics in the year 2020, at the time of retirement, and for other years and ages. It can be used both to construct a baseline using alternative economic and demographic assumptions and to analyze the distributional consequences of a variety of Social Security policy changes.

Posted: June 01, 2002Availability: HTML | PDF

Can Individual Accounts Really Rescue Social Security? (Policy Briefs/Retirement Project Brief Series)
Lawrence H. Thompson

Projections using an actuarial model of the U.S. social security system suggest that diverting two percentage points of the current social security tax into individual accounts is likely to worsen the program's long-range deficit. The conditions necessary to avoid this result include: (1) equity returns in the future at least equal to those of the past, (2) investment of at least half of the account balances in equities, (3) centralized administration and passive investment policies to assure low administrative costs, and (4) recapturing (i.e., taxing away) at least 75 percent of the account balances at retirement. Even if a plan can be introduced that avoids an increase in the long-range deficit, financing the transition costs would require additional government borrowing that peaks at over $6 trillion in today's prices, or equivalent reductions in other government spending. These results suggest that no matter how attractive the idea may be in theory, diverting part of the current payroll tax to individual accounts is not likely to be a very effective solution to today's Social Security financing problem.

Posted: January 01, 2002Availability: HTML | PDF

Sharing the Pain of Social Security and Medicare Reform (Policy Briefs/Retirement Project Brief Series)
Lawrence H. Thompson

This brief explores a couple of these distributional consequences. It focuses first on the impact of Social Security and Medicare financing policies on the distribution of the gains from economic growth and then on the impact these policies would have on intergenerational transfers.

Posted: August 15, 2000Availability: HTML | PDF

Implications of Social Security's Long-Range Financial Projections, The (Policy Briefs/Retirement Project Brief Series)
Lawrence H. Thompson

This brief explores the assumptions about future demographic and economic trends that underlie the current Social Security financing projections and notes some of their implications for Social Security reform.

Posted: July 01, 1999Availability: HTML | PDF

Administrative Aspects of Individual Accounts or The Devil is in the Details and He Could Spear You (Testimony)
Lawrence H. Thompson

Many advocates of individual social security accounts implicitly assume that an acceptable strategy can be developed for implementing their plan. International experience suggests that this is a dangerous assumption. No country has yet successfully implemented individual accounts in a way likely to be acceptable in the U.S. Supporters of individual accounts need to pay more attention to administrative details if they want to avoid another catastrophic health fiasco.

Posted: May 25, 1999Availability: HTML | PDF

Options for Administering Individual Accounts in Social Security (Policy Briefs/Retirement Project Brief Series)
Lawrence H. Thompson

Individual accounts have become a popular feature in Social Security reform proposals during the past several years. However, the precise meaning of "individual accounts" is unclear, as approaches vary greatly in their financing, management, and structure. The diversity of approaches reflects variation in the objectives people have for individual accounts and the assumptions they make about how a given approach will work. This brief draws, in part, on the experience of other countries in exploring the choices facing designers of individual accounts in the United States.

Posted: March 01, 1999Availability: HTML | PDF

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