Association for Public Policy Analysis & Management

We make use of the Modeling Income in the Near Term (MINT) microsimulation model to examine Old Age and Survivors Insurance (OASI) lifetime benefits (i.e., lifetime Social Security retirement benefits) and the impact of potential adjustments that offset the effects of differential changes in life expectancy. We consider two different adjustments that allow beneficiaries to enjoy the gains associated with average increases in life expectancy while offsetting the differentials resulting from these improvements in life expectancy. One approach alters individual benefits to the increase in life expectancy that occurred for the average individual. The other approach adjusts individual benefits to offset differences in life expectancy within a generation. We calculate these adjustments for four successive cohorts of Americans, those born in the 1940s, 1950, 1960s and 1970s.

We consider several measures of well-being in the analysis, including initial monthly benefits, lifetime benefits, and poverty status. We first simulate benefits as scheduled under current law to demonstrate the widening receipt of lifetime benefits across groups with different life expectancy at age 65. Then we simulate the two potential adjustments to retirement benefits, which have the practical impact of raising (lowering) benefits for those who have low (high) lifetime earnings. The adjustments lead to reductions in projected poverty among benefit recipients in the lower deciles of the distribution of lifetime earnings and no increase for those in higher deciles. The adjustments also narrow the gap in lifetime benefits among those in the highest and lowest lifetime earnings deciles.