Alternative Methods of Price Indexing Social Security: Implications for Benefits and System Financing

41 Pages Posted: 6 Jul 2005 Last revised: 6 Aug 2014

See all articles by Andrew G. Biggs

Andrew G. Biggs

American Enterprise Institute

Jeffrey R. Brown

University of Illinois at Urbana-Champaign - Department of Finance; National Bureau of Economic Research (NBER); University of Illinois College of Law; University of Illinois at Urbana-Champaign - Institute of Government and Public Affairs (IGPA); University of Illinois at Urbana-Champaign - Department of Economics

Glenn Springstead

Social Security Administration

Multiple version iconThere are 2 versions of this paper

Date Written: June 2005

Abstract

This paper explains four methods of "price indexing" initial Social Security retirement benefits, and discusses the effect of each method on the fiscal sustainability of Social Security, benefit levels and replacement rates, redistribution, and sensitivity of system finances to demographic and economic shocks. Of these methods, PIA Factor Indexing would generate the largest cost savings while reducing benefit growth at approximately an equal rate for all income levels. Methods that index the AIME, the formula "bend points," or both, would reduce benefit growth at a slower rate and would have different effects on benefit distribution and system sustainability.

Suggested Citation

Biggs, Andrew G. and Brown, Jeffrey R. and Springstead, Glenn, Alternative Methods of Price Indexing Social Security: Implications for Benefits and System Financing (June 2005). NBER Working Paper No. w11406. Available at SSRN: https://ssrn.com/abstract=741554

Andrew G. Biggs

American Enterprise Institute ( email )

1150 17th Street N.W.
Washington, DC 20036
United States
202-862-5841 (Phone)

HOME PAGE: http://www.aei.org

Jeffrey R. Brown (Contact Author)

University of Illinois at Urbana-Champaign - Department of Finance ( email )

1206 South Sixth Street
Champaign, IL 61820
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

University of Illinois College of Law ( email )

504 E. Pennsylvania Avenue
Champaign, IL 61820
United States

University of Illinois at Urbana-Champaign - Institute of Government and Public Affairs (IGPA) ( email )

Urbana, IL 61801
United States

University of Illinois at Urbana-Champaign - Department of Economics ( email )

410 David Kinley Hall
1407 W. Gregory
Urbana, IL 61801
United States

Glenn Springstead

Social Security Administration ( email )

Washington, DC 20254
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
39
Abstract Views
781
PlumX Metrics