Social Security's Five OASI Inflation Indexing Problems

Michael C. Lovell ()

No 2008-34, Economics Discussion Papers from Kiel Institute for the World Economy

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. --

Keywords: Social Security; inflation; indexing (search for similar items in EconPapers)
JEL-codes: H55 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ias, nep-lab and nep-mac
Date: 2008
View list of references

Downloads: (external link)
http://www.economics-ejournal.org/economics/discussionpapers/2008-34 (application/pdf)

Related works:
Working Paper: Social Security’s Five OASI Inflation Indexing Problems (2008)
Journal Article: Social Security's Five OASI Inflation Indexing Problems (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:zbw:ifwedp:7410

Access Statistics for this paper

More papers in Economics Discussion Papers from Kiel Institute for the World Economy
Contact information at EDIRC.
Series data maintained by ZBW - German National Library for Economics ().