Assessing Policies for Retirement Income Needs for Data, Research, and Models (1997) / Chapter Skim
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Appendix C: Examples of Retirement-Income-Related Projection Models
Appendix C: Examples of Retirement-Income-Related Projection Models
Pages 193-198
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From page 193... ...
Processes modeled include fertility, immigration, mortality; first marriage, remarriage, divorce, custody of children, leaving home, education level; weeks worked and earnings; employment-related transfer income, welfare-related transfer income, pension-related transfer income; Social Security payroll taxes, federal and state income taxes, property taxes, estate taxes; family earned income, family transfer income, family asset income; consumption, savings; home ownership, market value, mortgage debt; ownership of other assets, market value, debt; asset changes from savings, asset changes from appreciation, asset transfers at death, asset transfers at divorce, income from assets; smoking, alcohol, diabetes. Being expanded and enhanced by the Canadian government as DYNACAN; additions include simulation of the Canadian public and private pension systems; enhancements include making it possible to compare a baseline program and a policy alternative in one instead of two runs 193
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From page 194... ...
(Johnson and Zedlewski, 1982; Johnson et al., 1983; Zedlewski, 1990~: Dynamic microsimulation model of people and households; projects life histories for people of all ages, year by year; first version completed in 1975; redesigned version completed in the early 1980s with elements of original DYNASIM, the PENSIM model developed by James Schulz to simulate private pension alternatives, and other features for analyzing retirement-income-related policy issues; written in FORTRAN; operates on mainframes and minicomputers; recently rewritten to operate on desktop personal computers. Processes modeled include death, birth, marriage, divorce, disability, leaving home, education level, migration; labor force participation, annual hours of participation, hourly wage, whether unemployed, proportion of labor force hours unemployed; job change, industry, pension coverage, plan participation; pension eligibility, type of plan, benefit formula, plan constants, benefit computation; Social Security retirement benefit eligibility, retirement benefit computation, disability benefit, spouse benefit, children's benefit; participation in Individual Retirement Account (IRA)
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From page 195... ...
Processes modeled include death, birth, marriage, divorce, education level, disability; annual hours of work, hourly wage; job change, industry, pension coverage, pension plan assignment; decision to retire and accept pension, decision to retire and accept Social Security; IRA adoption, contributions; employer pension benefit computation; Social Security retirement benefit eligibility, retirement benefit computation, disability benefit, spouse benefit, children's benefit; IRA distribution; SSI eligibility, benefits, participation; federal and state income tax, Social Security payroll tax. The long-term care module uses the basic PRISM model, with some modifications, to project family structure, employment, income, assets, and private health insurance coverage for the elderly; the module simulates disability status of the elderly, their use of and expenditures for nursing home and home care services, and their accumulation and spending down of assets to gain Medicaid eligibility.
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From page 196... ...
, and total payroll for defined benefit and defined contribution plans, separately for private employer, state and local, and federal plans. Uses the Social Security Office of the Actuary's projections of the population by age, sex, and work force participation for each year; distributes the work force into private, state and local, and federal employment by tenure and pension participation status; accounts for mortality, job leaving, job entrance, and job change; projects employer and employee contributions using the Social Security Office of the Actuary' s assumptions about real wage growth.
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From page 197... ...
: Dynamic and stochastic cell-based model of the Social Security system; written using the object-oriented capabilities of the C++ language; input data on starting values of population and economic variables as well as policy and behavioral assumptions organized as a relational database; developed to operate on a personal computer platform. Monte Carlo methods are used to characterize uncertainty about the future course of thirteen key demographic and economic input variables used in the Social Security actuarial cost model, as well as uncertainty about future asset returns.
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From page 198... ...
Model has been used to address such issues as how much Social Security contribution rates must be increased to maintain current benefit levels; effects on national saving rates and real wages of changing population age structure; effects on international capital flows of changes in saving rates and real wages; effects on overall well-being of people in different generations of economic changes associated with demographic transition; effects on economic performance and generational welfare of reductions in Social Security benefits. Differs from the Aaron, Bosworth, and Burtless model in modeling household saving and labor supply behavior as endogenous, based on an optimizing life-cycle model and the assumption of perfect foresight.
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