How Well Are Social Security Recipients Protected From Inflation?
John B. Shoven and
National Tax Journal, 2011, vol. 64, issue 2, 429-49
Social Security is widely believed to protect its recipients from inflation because benefits are indexed to the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). However, the CPI-W may not accurately reflect the experience of retirees for two reasons. First, retirees generally have higher medical expenses than workers, and medical costs, in recent years, have tended to rise faster than the prices of other goods. Second, even if medical costs did not rise faster than the prices of other goods, as retirees aged, their medical spending would still tend to increase as a share of income; that is, each cohort of retirees would still see a decline in the real income available for non-medical spending. We show that, for in the 1918 birth cohort, Social Security benefits net of average out-of-pocket medical expenses have declined relative to a price index for non-medical goods by around 20 percent for men, and by around 27 percent for women. We explore alternative options for indexing Social Security benefits and discuss the impact of these alternatives on Social Security’s long-term finances.
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
Access to most recent volumes (current and past two years) is restricted to subscribers and members of the National Tax Association.
Chapter: How Well Are Social Security Recipients Protected from Inflation? (2011)
Working Paper: How Well Are Social Security Recipients Protected from Inflation? (2010)
Working Paper: How Well Are Social Security Recipients Protected From Inflation? (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:ntj:journl:v:64:y:2011:i:2:p:429-49
Access Statistics for this article
National Tax Journal is currently edited by Stacy Dickert-Conlin and William M. Gentry
More articles in National Tax Journal from National Tax Association, National Tax Journal Contact information at EDIRC.
Bibliographic data for series maintained by Sally Sztrecska ().