Below are the first 10 and last 10 pages of uncorrected machine-read text (when available) of this chapter, followed by the top 30 algorithmically extracted key phrases from the chapter as a whole.
Intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text on the opening pages of each chapter. Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.
Do not use for reproduction, copying, pasting, or reading; exclusively for search engines.
OCR for page R1
A ~ ~ - ~ ~ ~ 51~7 ~llEl~S Ion [11. D~t~, Re~e~r~, Const~cc F. Ciao and Edc A. Ha~shok, Motors Paw on Rch~cmcut Income ~odchng Com~Ucc on N~ona1 St~isUcs Com~s~on on Bcb~vior~ and Social Scicncos ad Dacron Neons Rcsc~cb CouncH NATIONAL ACADEMY PRESS Washington, D.~. 1997
OCR for page R2
NATIONAL ACADEMY PRESS · 2101 Constitution Avenue, NW · Washington, DC 20418 NOTICE: The project that is the subject of this report was approved by the Governing Board of the National Research Council, whose members are drawn from the councils of the National Academy of Sciences, the National Academy of Engineering, and the Institute of Medicine. The members of the committee responsible for the report were chosen for their special competencies and with regard for appropriate balance. This report has been reviewed by a group other than the authors according to procedures approved by a Report Review Committee consisting of members of the National Academy of Sci- ences, the National Academy of Engineering, and the Institute of Medicine. The project that is the subject of this report is supported by funds from the Pension and Welfare Benefits Administration of the U.S. Department of Labor, the National Institute on Aging of the U.S. Department of Health and Human Services, the Pension Benefit Guaranty Corporation, the Social Security Administration, and TIAA-CREF. Library of Congress Cataloging-in-Publication Data Assessing policies for retirement income: needs for data, research, and models / Constance F. Citro and Eric A. Hanushek, editors Panel on Retirement Income Modeling, Committee on National Statistics, Commission on Behavioral and Social Sciences and Education, National Research Council. p. cm. Includes bibliographical references and index. ISBN 0-309-05627-6 1. Retirementincome Forecasting Research United States. 2. Pensions Forecasting Research United States. 3. Social security Forecasting Research United States. 4. Insurance, Health Forecasting Research United States. I. Citro, Constance F. (Constance Forbes), 1942- . II. Hanushek, Eric Alan, 1943- . III. National Research Council (U.S.). Panel on Retirement Income Modeling. HD7125.A78 1997 331.25'2'072073 dc21 Additional copies of this book are available from National Academy Press 2101 Constitution Avenue, NW Box 285 Washington, DC 20055 Call 800-624-6242 or 202-334-3313 (in the Washington Metropolitan Area). http://www.nap.edu Copyright 1997 by the National Academy of Sciences. All rights reserved. Printed in the United States of America 96-51696 CIP
OCR for page R3
PANEL ON RETIREMENT INCOME MODELING ERIC A. HANUSHEK (Chair), W. Allen Wallis Institute of Political Economy, University of Rochester HENRY J. AARON, The Brookings Institution, Washington, D.C. ALAN J. AUERBACH, Department of Economics, University of California, Berkeley CHRISTOPHER BONE, Actuarial Sciences Associates, Somerset, New Jersey PETER DIAMOND, Department of Economics, Massachusetts Institute of Technology MICHAEL HURD, Department of Economics, State University of New York, Stony Brook OLIVIA S. MITCHELL, Department of Insurance and Risk Management, The Wharton School, University of Pennsylvania SAMUEL H. PRESTON, Population Studies Center, University of Pennsylvania JOHN P. RUST, Department of Economics, Yale University TIMOTHY M. SMEEDING, Center for Policy Research, Syracuse University JAMES P. SMITH, The RAND Corporation, Santa Monica, California CONSTANCE F. CITRO, Study Director NANCY L. MARITATO, Research Associate CANDICE S. EVANS, Project Assistant . . .
OCR for page R4
OCR for page R5
COMMITTEE ON NATIONAL STATISTICS 1995-1996 NORMAN M. BRADBURN (Chair), National Opinion Research Center, University of Chicago JOHN E. ROLPH (Vice Chair), Department of Information and Operations Management, University of Southern California JULIE DaVANZO, The RAND Corporation, Santa Monica, California WILLIAM EDDY, Department of Statistics, Carnegie Mellon University JOHN F. GEWEKE, Department of Economics, University of Minnesota JOEL B. GREENHOUSE, Department of Statistics, Carnegie Mellon University ERIC A. HANUSHEK, W. Allen Wallis Institute of Political Economy, University of Rochester NICHOLAS JEWELL, School of Public Health, University of California, Berkeley CHARLES MANSKI, Department of Economics, University of Wisconsin, Madison WILLIAM NORDHAUS, Department of Economics, Yale University JANET NORWOOD, The Urban Institute, Washington, D.C. EDWARD B. PERRIN, Department of Health Services, University of Washington KEITH F. RUST, Westat, Inc., Rockville, Maryland FRANCISCO J. SAMANIEGO, Division of Statistics, University of California, Davis MIRON L. STRAF, Director MICHELE L. CONRAD, Division Administrator v
OCR for page R6
The National Academy of Sciences is a private, nonprofit, self-perpetuating society of distin- guished scholars engaged in scientific and engineering research, dedicated to the furtherance of science and technology and to their use for the general welfare. Upon the authority of the charter granted to it by the Congress in 1863, the Academy has a mandate that requires it to advise the federal government on scientific and technical matters. Dr. Bruce Alberts is president of the National Academy of Sciences. The National Academy of Engineering was established in 1964, under the charter of the Na- tional Academy of Sciences, as a parallel organization of outstanding engineers. It is autonomous in its administration and in the selection of its members, sharing with the National Academy of Sciences the responsibility for advising the federal government. The National Academy of Engineering also sponsors engineering programs aimed at meeting national needs, encourages education and research, and recognizes the superior achievements of engineers. Dr. William A. Wulf is interim president of the National Academy of Engineering. The Institute of Medicine was established in 1970 by the National Academy of Sciences to secure the services of eminent members of appropriate professions in the examination of policy matters pertaining to the health of the public. The Institute acts under the responsibility given to the National Academy of Sciences by its congressional charter to be an adviser to the federal government and, upon its own initiative, to identify issues of medical care, research, and education. Dr. Kenneth I. Shine is president of the Institute of Medicine. The National Research Council was organized by the National Academy of Sciences in 1916 to associate the broad community of science and technology with the Academy's purposes of furthering knowledge and advising the federal government. Functioning in accordance with general policies determined by the Academy, the Council has become the principal operating agency of both the National Academy of Sciences and the National Academy of Engineering in providing services to the government, the public, and the scientific and engineering communities. The Council is administered jointly by both Academies and the Institute of Medicine. Dr. Bruce Alberts and Dr. William A. Wulf are chairman and interim vice chairman, respectively, of the National Research Council.
OCR for page R7
Contents ACKNOWLEDGMENTS EXECUTIVE SUMMARY INTRODUCTION Retirement Income Security, 11 The Report, 14 X1 10 CONSIDERATIONS IN RETIREMENT INCOME PROJECTIONS 17 The Concern for Income Security, 17 Current Status, 17; Future Prospects, 19 Near-Term Policy Options, 25 Social Security, 26; Employer Pensions, 27; Other Personal Savings and Wealth, 29; Health Care Needs and Costs, 30 Outcome Criteria, 31 Challenges to Projection Modeling, 34 Outcomes, 34; Program Interactions, 34; Heterogeneity, 35; Time Horizon, 36; Knowledge About Behavior, 37; Uncertainty, 38 . . vat
OCR for page R8
. . . vial 3 KEY RESEARCH ISSUES Employer Behavior, 42 Choices of Families and Individuals, 46 Savings and Consumption, 46; Labor and Leisure, 49 Demographic Variables, 52 Size and Composition of the Population, 52; Family History, 53; Health Status, 55 Health Care Costs, 56 Conclusion, 57 4 DATA NEEDS The Lesson from Health Care Reform, 62 Dimensions of Databases, 68 Panel Data on Individuals, 70 Features of Long-Term Panel Surveys, 72; Features of Other Surveys, 89; Directions for the Future, 91; Recommendations, 96 Data on Employers, 96 r. Government Sources, 97; Private Sources, 103; Problems with Employer Surveys, 107; Directions for the Future, 110; Recommendations, 119 Expanded Use of Administrative Data, 120 Records on Individuals, 121; Records on Employers, 123; Recommendations, 124 Data Validation, 124 Validation Methods, 125; Validation Needs, 129; Recommendation, 131 5 DEVELOPMENT OF PROJECT MODELS Current Models and Their Uses, 133 Types of Models, 133; Dimensions of Models, 135; Assessment, 138 Looking to the Future, 140 Employer Models, 140; Recommendation, 142; Microsimulation Models of Individuals and Families, 142; Recommendation, 153 Validation, 153 Validation Goals and Methods, 153; SSA Model Validation, 156; Recommendation, 159 Near-Term Modeling Strategies, 159 The CBO Approach, 160; Improvements to Existing Models, 162; Recommendations, 163 CONTENTS 39 61 132
OCR for page R9
CONTENTS 6 FURTHERING COORDINATION FOR DATA COLLECTION, RESEARCH, AND MODELING Organizational Issues, 165 Coordination Mechanisms, 167 Data Collection, 167; Projection Modeling, 169; Recommendation, 170 Involving the Private Sector and Academia, 170 Data Collection, 170; Projection Modeling, 171, Recommendation, 172 APPENDICES A CONTENTS, ASSESSING KNOWLEDGE OF RETIREMENT BEHAVIOR B RETIREMENT-INCOME-RELATED DATA SETS C EXAMPLES OF RETIREMENT-INCOME-RELATED PROJECTION METHODS D MAJOR ASPECTS OF DYNASIM2 AND PRISM REFERENCES BIOGRAPHICAL SKETCHES OF PANEL MEMBERS AND STAFF INDEX Six 165 175 180 193 199 213 228 233
OCR for page R10
OCR for page R11
Acknowledgments At the outset, I wish to thank the members of the Panel on Retirement Income Modeling for their generous contributions of time and expert knowledge. Panel members took responsibility for summarizing the state of knowledge and identi- fying the needs for data, research, and modeling in particular subject areas. Sev- eral members also reviewed elements of existing retirement-income-related projection models. The members thought and worked hard to develop recom- mendations that would enhance the quality of data, research, and models and thereby the quality of national debate about retirement income security policy issues. The fruits of their labors will be evident in reading the report, but I feel it is necessary to go beyond that. This panel was unusual in the extraordinary knowledge, intelligence, and motivation it brought to our work. It has been a genuine pleasure to work with them. At the same time, it is also evident that the best panel may not produce its best possible report unless it has the right study director. We did. Connie Citro, who has worked on many influential National Research Council reports, was the invaluable catalyst and driving force behind our work. She has the ability to decipher the real intent and conclusions of a panel when others see only chaotic discussion. She has the skill of keeping a panel directed toward producing results. And Job has nothing on her when it comes to dealing with the report review process. She is surely a model for what any chair would want in a study director. The panel is greatly indebted to the people who presented and discussed papers at the panel's Conference on Modeling the Impact of Public and Private Policies on Retirement Behavior and Income: What Do We Know and What Do x~
OCR for page R12
xt! ACKNOWLEDGMENTS We Need to Know? The six papers that were prepared for the conference repre- sent comprehensive reviews of the literature in areas that are important to under- stand for retirement income policy analysis. They were subsequently revised on the basis of discussants' and panel members' comments and published in Hanushek and Maritato (1996; see Appendix A for contents). The panel also thanks Kevin Hollenbeck, W. E. Upjohn Institute for Employment Research, who prepared a background paper on existing retirement-income-related projection models, and Marilyn Moon, The Urban Institute, who prepared a background paper on factors in health care costs. Both were useful to the panel in its delibera- tions. The panel thanks the staff of our sponsor agencies, the Pension and Welfare Benefits Administration in the U.S. Department of Labor, the National Institute on Aging in the U.S. Department of Health and Human Services, the Pension Benefit Guaranty Corporation, the Social Security Administration, and TIAA- CREF, for their help and guidance throughout the project. In particular, the panel is grateful to Richard Hinz and David McCarthy, Pension and Welfare Benefits Administration, and to Richard Suzman, National Institute on Aging. The panel also acknowledges the contributions of staff members of many federal agencies and private organizations who gave generously of their time to provide back- ground information for the panel on data sources and models and to offer insight- ful comments at the panel's conference and other meetings. The panel is grateful to Eugenia Grohman, Associate Director for Reports of the Commission on Behavioral and Social Sciences and Education (CBASSE), for her fine technical editorial work, which contributed greatly to the readability of this report. Nancy Maritato, research associate with CBASSE, assisted the panel in some of its meetings and played an invaluable role in working with the authors to complete the volume of conference papers. Candice Evans and Agnes Gaskin served ably as project assistants for the panel. Agnes made admirable logistical arrangements for the panel' s first meet- ing and conference. Candice arranged the panel's third, fourth, and fifth meet- ings and coped cheerfully and competently with multiple rounds of revisions to this report, to the volume of conference papers, and to the panel' s interim report (released in June 1995~. Overall, the panel was ably assisted in its endeavors at every stage of the process by many people, whom we are honored to thank. Eric A. Hanushek, Chair Panel on Retirement Income Modeling
OCR for page R13
OCR for page R14