Publications by Karen E. Smith for Retirement Policy

Women's labor force participation and earnings dramatically increased after World War II. Those changes have important implications for women's Social Security benefits. This article uses the MINT model to examine Social Security benefits for current and future beneficiary wives. The projections show that fewer wives in more recent birth cohorts will be eligible for auxiliary benefits as spouses because their earnings are too high. Most wives will still be eligible for survivor benefits because they typically have lower earnings than their husbands. The share of wives who would be ineligible for widow benefits is projected to double between cohorts.

As national attention turns to the federal deficit, some policymakers have proposed reforms to Medicare, Medicaid, and Social Security that could have significant implications for current and future generations of Americans. This data brief describes the income and assets of the current Medicare population, and examines the extent to which income and assets are likely to be higher for the next generation of beneficiaries. For most of the next generation of Medicare beneficiaries, average incomes will be moderately higher than the incomes of the current beneficiaries, after adjusting for inflation; however, the projected growth is concentrated in the upper incomes.

Proposals to raise premiums for higher-income Medicare beneficiaries are currently being discussed along with other options to reduce federal spending on Medicare. This brief describes current law with respect to the income-related Medicare Part B and Part D premiums. It also describes how new proposals would increase the share of beneficiaries who would pay the higher premium, and the amounts that they would pay. Given the relatively low incomes of most people on Medicare, significant savings from such proposals are only possible by going relatively far down the income scale to reach a sizeable share of beneficiaries.

This article examines how retirement income is likely to change for boomers and persons born in generation X compared with current retirees. We use the MINT model to project retirement income, poverty rates, and replacement rates for current and future retirees at age 67. We find that retirement incomes will increase over time, and poverty rates will fall. Projected income gains are larger for higher than for lower socioeconomic groups, leading to increased income inequality among future retirees. Boomers and GenXers are less likely to have enough postretirement income to maintain their preretirement standard of living compared with current retirees.

Minority and divorced women have historically experienced double-digit poverty rates in retirement, and demographic trends will increase their representation in future retiree populations. We might expect an increase in the proportion of economically vulnerable divorced women in the future. Factors associated with higher retirement incomes include having a college degree; having strong labor force attachment; receiving Social Security benefits; and having pensions, retirement accounts, or assets, regardless of race and ethnicity. Because divorced minority women are less likely than divorced white women to have these attributes, their projected average retirement incomes are lower than those of divorced white women.

Older divorced women are more likely to be poor than other older women, and historical divorce and remarriage trends suggest that in the future a larger share of retired women will be divorced. This article uses the MINT model to project the retirement resources and well-being of divorced women. We find that Social Security benefits and retirement incomes are projected to increase for divorced women and that their poverty rates are projected to decline, due to women's increasing lifetime earnings. However, not all divorced women will be equally well off; economic well-being in retirement varies by Social Security benefit type.

This paper provides a brief overview of the Urban Institute's Dynamic Simulation of Income Model (DYNASIM3). DYNASIM3 is a dynamic microsimulation model that projects the population and analyzes the long-run distributional consequences of retirement and aging issues. The model starts with a representative sample of individuals and families and ages the data year by year, simulating demographic and economic events including all key components of retirement income. Recent uses of DYNASIM3 include distributional analysis of Social Security reform options, the 2008 stock market crash, the Great Recession, and the impact of increased female labor force participation on retirement income.

The lackluster economy, eroding traditional pensions, and volatile stock market suggest that baby boomers - those born between 1945 and 1965 - face increasingly uncertain retirements. Our projections show that lower - and moderate-income boomers will continue to rely on Social Security for most of their retirement income. While the projections reflect some good news - women will reap the rewards of working and earning more than previous generations - they also raise alarms. Between 30 and 40 percent of boomers will not have enough income at age 70 to replace 75 percent of their preretirement earnings, a common standard for measuring retirement income adequacy.

Economists frequently assume that employees “pay for” employer-provided fringe benefits, such as contributions to retirement plans, in the form of reduced wages. This paper challenges these assumptions. Because low-income employees receive little tax benefit from saving in qualified retirement plans, they may not be willing to accept a one dollar reduction in their wage in return for an additional dollar contributed to their 401(k) plan. We find that employers reduce wages of high-income workers by 90 to 99 cents for every dollar contributed to a 401(k) plan, but they reduce wages of low-income workers by only 11 to 29 cents.

Economists frequently assume that employees “pay for” employer-provided fringe benefits, such as contributions to retirement plans, in the form of reduced wages. This paper challenges these assumptions. Because low-income employees receive little tax benefit from saving in qualified retirement plans, they may not be willing to accept a one dollar reduction in their wage in return for an additional dollar contributed to their 401(k) plan. We find that employers reduce wages of high-income workers by 90 to 99 cents for every dollar contributed to a 401(k) plan, but they reduce wages of low-income workers by only 11 to 29 cents.

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