How the Growing Gap in Life Expectancy May Affect Retirement Benefits and Reforms

Alan J. Auerbach, Kerwin K. Charles, Courtney C. Coile, William Gale, Dana Goldman, Ronald Lee, Charles M. Lucas, Peter R. Orszag, Louise M. Sheiner, Bryan Tysinger, David N. Weil, Justin Wolfers, Rebeca Wong

Research output: Contribution to journalArticle

6 Citations (Scopus)

Abstract

Older Americans have experienced dramatic gains in life expectancy in recent decades, but an emerging literature reveals that these gains are accumulating mostly to those at the top of the income distribution. We explore how growing inequality in life expectancy affects lifetime benefits from Social Security, Medicare and other programmes and how this phenomenon interacts with possible programme reforms. We first project that life expectancy at age 50 for males in the two highest income quintiles will rise by seven to eight years between the 1930 and 1960 birth cohorts, but that the two lowest income quintiles will experience little to no increase over that time period. This divergence in life expectancy will cause the gap between average lifetime programme benefits received by men in the highest and lowest quintiles to widen by US$130,000 (in US$2009) over this period. Finally, we simulate the effect of Social Security reforms such as raising the normal retirement age and changing the benefit formula to see whether they mitigate or enhance the reduced progressivity resulting from the widening gap in life expectancy.

Original languageEnglish (US)
Pages (from-to)1-25
Number of pages25
JournalGeneva Papers on Risk and Insurance: Issues and Practice
DOIs
StateAccepted/In press - Jun 26 2017
Externally publishedYes

Fingerprint

Life expectancy
Retirement
Medicare
Divergence
Income
Social security reform
Social security
Retirement age
Birth cohort
Income distribution
Progressivity
Low income

Keywords

  • demographic trends
  • government expenditures
  • inequality
  • social security

ASJC Scopus subject areas

  • Accounting
  • Business, Management and Accounting(all)
  • Finance
  • Economics and Econometrics

Cite this

How the Growing Gap in Life Expectancy May Affect Retirement Benefits and Reforms. / Auerbach, Alan J.; Charles, Kerwin K.; Coile, Courtney C.; Gale, William; Goldman, Dana; Lee, Ronald; Lucas, Charles M.; Orszag, Peter R.; Sheiner, Louise M.; Tysinger, Bryan; Weil, David N.; Wolfers, Justin; Wong, Rebeca.

In: Geneva Papers on Risk and Insurance: Issues and Practice, 26.06.2017, p. 1-25.

Research output: Contribution to journalArticle

Auerbach, AJ, Charles, KK, Coile, CC, Gale, W, Goldman, D, Lee, R, Lucas, CM, Orszag, PR, Sheiner, LM, Tysinger, B, Weil, DN, Wolfers, J & Wong, R 2017, 'How the Growing Gap in Life Expectancy May Affect Retirement Benefits and Reforms', Geneva Papers on Risk and Insurance: Issues and Practice, pp. 1-25. https://doi.org/10.1057/s41288-017-0057-0
Auerbach, Alan J. ; Charles, Kerwin K. ; Coile, Courtney C. ; Gale, William ; Goldman, Dana ; Lee, Ronald ; Lucas, Charles M. ; Orszag, Peter R. ; Sheiner, Louise M. ; Tysinger, Bryan ; Weil, David N. ; Wolfers, Justin ; Wong, Rebeca. / How the Growing Gap in Life Expectancy May Affect Retirement Benefits and Reforms. In: Geneva Papers on Risk and Insurance: Issues and Practice. 2017 ; pp. 1-25.
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