Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/27470 
Year of Publication: 
2008
Series/Report no.: 
Economics Discussion Papers No. 2008-34
Publisher: 
Kiel Institute for the World Economy (IfW), Kiel
Abstract: 
This paper examines five problems with the inflation indexing procedures used by the Social Security Administration of the United States in taking inflation into account when calculating Old Age and Survivors Insurance (OASI) Benefits. Because of Problem #1, the commingling of unindexed with indexed earnings, a retiree born in 1930 who continued in a high earning career until age 75 receives an annual benefit more than $1,800 larger than would have been generated with full indexing. As a result of Problems #2 and #4 your OASI check will be larger if wage inflation happens to be extra high in your 60th year or if price inflation is exceptionally low in your 61st year. Because of the indexing problems, the percentage increase in your inflation (CPI-W) adjusted benefit if you elect to postpone retirement and the start of OASI benefits will depend in part on the pace of inflation. While inflation indexing problems do not attract much attention in normal times, they can contribute to serious short-run financial instability for the OASI trust fund in periods of substantial inflation or deflation.
Subjects: 
Social Security
inflation
indexing
JEL: 
H55
Creative Commons License: 
cc-by-nc Logo
Document Type: 
Working Paper

Files in This Item:
File
Size
501.39 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.