How Effective is Redistribution Under the Social Security Benefit Formula?

Abstract

This paper uses earnings histories from the Social Security Administration, linked to the survey responses for participants in the Health and Retirement Study, to investigate redistribution under the current social security benefit formula. As advertised, own benefits are significantly redistributed from individuals with high to those with low lifetime earnings. However, redistribution is roughly halved when spouse and survivor benefits are taken into account and redistribution is measured among families. When families are arrayed by total earnings during years when both spouses are engaged in substantial work, there is very little redistribution from families with high to low earnings capacity. Reprinted from Journal of Public Economics, Volume 82, Gustman and Steinmeier, How Effective is Redistribution Under the Social Security Benefit Formula?, pp. 1-28, 2001, with permission from Elsevier Science.

Keywords: Social security, Wealth distribution, Retirement income

JEL Classification: H55, J14, J26, D31