Working Paper: NBER ID: w14231
Authors: John B. Shoven; Gopi Shah Goda
Abstract: Government policies that are based on age do not adjust to the fact that a given age is associated with a higher remaining life expectancy and lower mortality risk relative to earlier time periods due to improvements in mortality. We examine four possible methods for adjusting the eligibility ages for Social Security, Medicare, and Individual Retirement Accounts to determine what eligibility ages would be today and in 2050 if adjustments for mortality improvement were taken into account. We find that historical adjustment of eligibility ages for age inflation would have increased ages of eligibility by approximately 0.15 years annually. Failure to adjust for mortality improvement implies the percent of the population eligible to receive full Social Security benefits and Medicare will increase substantially relative to the share eligible under a policy of age adjustment.
Keywords: Age Inflation; Mortality Improvement; Social Security; Medicare; Retirement Accounts
JEL Codes: H51; H55; J11; J14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| age inflation (E31) | adjustments to eligibility ages for social security and Medicare (H55) |
| historical improvements in mortality rates (J11) | adjustments to eligibility ages for social security and Medicare (H55) |
| age 65 in 1935 (J14) | mortality risk of over 3% (I12) |
| age 65 in 2004 (J14) | mortality risk of less than 1.5% (I12) |
| adjustments for age inflation (J11) | eligibility for full social security benefits (H55) |
| adjustments for mortality risk (J17) | increases in eligibility ages (J14) |
| historical adjustments for age inflation (J11) | gradual increase in eligibility ages (H55) |