Medicare trust fund to be tapped out by 2017

Bond Markets seem to be concerned over the escalating level of U.S. Government debt.  Yields rose during the latest $14 billion auction of U.S. 30-year Treasury Bonds.  This graph shows an ominous budget deficit trend as well.  There seems to be good reason for this.   American’s stimulus plan and entitlement programs are putting an…

Canadian Social Security and Well-Being

Does Social Security work?  By that, I mean does giving elderly individuals a government pension increase their level of income, the amount of goods the can consume, or even their happiness? An NBER working paper by Baker, Gruber and Milligan (2009) tries to answer this question in the Canadian setting. Background Currently, Canadian income transfer…

Who should be responsible for your retirement?

The Economist reports that Argentina has recently passed “a law to nationalise the country’s private pension system.”  Is this a good thing? With the stock market in the tank, many individuals yearn for the security of a government-funded retirement plans compared to private, individual investments in stocks and bonds.  However, public pensions may not be so…

Age Inflation

Medicare was implemented in 1965 to cover the medical costs of the oldest members in society.  In 1965,  the U.S. life expectancy was only 70 years old.  Now, however, life expectancy at birth is over 78 years.  Medicare is now not just covering the oldest of the old, it also covers the “moderately” old since…

Who values the Social Security Annuity?

If you were offered an actuarially fair lump-sum payment, would you give up half of your Social Security benefits? This is the question asked by Brown, Casey and Mitchell in their 2008 NBER working paper. Overall, about 60% of respondents from the HRS data set preferred the lump-sum payment. The authors find the following individuals…

Growth in Social Security Disability Rolls

Over the past two decades, the share of total Social Security spending accounted for by Social Security Disability Insurance (DI) has increased from 10 percent in the 1970s to 17 percent today. In 2005, cash payment to DI beneficiaries topped $85 billion. Authors David Autor and Mark Duggan try to explain this phenomenon in their…

Notional Defined Contribution Model

Recently I came across a paper by John Williamson describing a Notional Defined Contribution Model as a replacement for state pension system. Countries who have adapted the Notional Defined Contribution (NDC) model include Sweden (1994), Italy (1995), Latvia (1996), the Kyrgyz Republic (1997), Poland (1999), and Mongolia (2000). The model is in essence a pay-as-you-go…