Social Security Wealth, Inequality, and Lifecycle Saving,This chapter is a preliminary draft unless otherwise noted. It may not have been subjected to the formal review process of the NBER. This page will be updated as the chapter is revised.
Chapter in forthcoming NBER book Measuring Distribution and Mobility of Income and Wealth, Raj Chetty, John N. Friedman, Janet C. Gornick, Barry Johnson, and Arthur Kennickell, editors Social Security Wealth (SSW) is the present value of future benefits that an individual will receive less the present value of future taxes they will pay. When an individual enters the labor force, they generally face a lifetime of taxes to pay before they will receive any benefits, and thus their initial SSW is generally low or negative. As an individual works and pays into the system their SSW grows and generally peaks somewhere around typical Social Security benefit claim ages. The accrual of SSW over the working life is most important for lower-income workers because the progressive Social Security benefit formula means that taxes paid while working are associated with proportionally higher benefits in retirement. We estimate SSW for individuals in the Survey of Consumer Finances (SCF) for 1995 through 2019 using detailed labor force history and expectations modules. We use a pseudo-panel approach to empirically demonstrate lifecycle patterns of SSW accumulation and drawdown. We also show that including SSW in a comprehensive wealth measure generally reduces estimated levels of U.S. wealth inequality but does not reverse the upward trend in top wealth shares. This paper is available as PDF (1051 K) or via email
Supplementary materials for this chapter: Machine-readable bibliographic record - MARC, RIS, BibTeX This chapter first appeared as NBER working paper w27110, Social Security Wealth, Inequality, and Lifecycle Saving, John Sabelhaus, Alice Henriques Volz |
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