Social Security Wealth, Inequality, and Life-Cycle Saving. Sabelhaus, J. & Volz, A. H. In Chetty, R., Friedman, J. N., Gornick, J. C., Johnson, B., & Kennickell, A., editors, Measuring Distribution and Mobility of Income and Wealth, volume 80, of National Bureau of Economic Research Studies in Income and Wealth, pages 249–286, Chicago, 2022. University of Chicago Press. ![Social Security Wealth, Inequality, and Life-Cycle Saving [link]](https://bibbase.org/img/filetypes/link.svg "link")
Link doi abstract bibtex Social Security Wealth (SSW) is the present value of future benefits that an individual will receive less the present value of future taxes they will pay. When an individual enters the labor force, they generally face a lifetime of taxes to pay before they will receive any benefits, and thus their initial SSW is generally low or negative. As an individual works and pays into the system their SSW grows and generally peaks somewhere around typical Social Security benefit claim ages. The accrual of SSW over the working life is most important for lower-income workers because the progressive Social Security benefit formula means that taxes paid while working are associated with proportionally higher benefits in retirement. We estimate SSW for individuals in the Survey of Consumer Finances (SCF) for 1995 through 2019 using detailed labor force history and expectations modules. We use a pseudo-panel approach to empirically demonstrate lifecycle patterns of SSW accumulation and drawdown. We also show that including SSW in a comprehensive wealth measure generally reduces estimated levels of U.S. wealth inequality but does not reverse the upward trend in top wealth shares.
@inproceedings{SabelhausVolz2022,
title = {Social Security Wealth, Inequality, and Life-Cycle Saving},
booktitle = {Measuring Distribution and Mobility of Income and Wealth},
author = {Sabelhaus, John and Volz, Alice Henriques},
editor = {Chetty, Raj and Friedman, John N. and Gornick, Janet C. and Johnson, Barry and Kennickell, Arthur},
year = {2022},
series = {National {{Bureau}} of {{Economic Research}} Studies in Income and Wealth},
volume = {80},
pages = {249--286},
publisher = {University of Chicago Press},
address = {Chicago},
doi = {10.7208/chicago/9780226816043.001.0001},
url = {https://doi.org/10.7208/chicago/9780226816043.003.0010},
abstract = {Social Security Wealth (SSW) is the present value of future benefits that an individual will receive less the present value of future taxes they will pay. When an individual enters the labor force, they generally face a lifetime of taxes to pay before they will receive any benefits, and thus their initial SSW is generally low or negative. As an individual works and pays into the system their SSW grows and generally peaks somewhere around typical Social Security benefit claim ages. The accrual of SSW over the working life is most important for lower-income workers because the progressive Social Security benefit formula means that taxes paid while working are associated with proportionally higher benefits in retirement. We estimate SSW for individuals in the Survey of Consumer Finances (SCF) for 1995 through 2019 using detailed labor force history and expectations modules. We use a pseudo-panel approach to empirically demonstrate lifecycle patterns of SSW accumulation and drawdown. We also show that including SSW in a comprehensive wealth measure generally reduces estimated levels of U.S. wealth inequality but does not reverse the upward trend in top wealth shares.},
isbn = {978-0-226-81604-3},
keywords = {Determinants of Wealth and Wealth Inequality,Methods of Estimation of Wealth Inequality},
chapter = {9}
}
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