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from DB to DC pensions is accelerated under theU.K. scenario, only 7 percent of first-wave boomers,8 percent of second-wave boomers, 9 percentof third-wave boomers, and 11 percent of last-waveboomers would see their retirement incomes increase.There are many more who would lose under theU.K. scenario—12 percent of first-wave boomers,18 percent of second-wave boomers, 22 percent ofthird-wave boomers, and 26 percent of last-waveboomers. Boomers in high socioeconomic groupsare most likely to win and lose because they are thepeople with pension benefits in the baseline scenariothat may potentially be frozen. For example,12 percent of last-wave boomers in the highest incomequintile are projected to be winners, compared withonly 6 percent of their counterparts in the lowestincome quintile; and 48 percent of last-wave boomerswith the highest incomes are projected to be losers,compared with only 8 percent of those with the lowestincomes (Chart 1). All in all, 60 percent of last-waveboomers in the highest income quintile will experiencea change (either positive or negative) in theirper capita family income because of the change inpension schemes. Note that the percentage affectedis higher than the 54 percent of last-wave boomersin the highest income quintile who are projectedto have family DB pension benefits in the baselinescenario (see Table 4). This apparent discrepancyoccurs because some individuals (especially thosewith higher income) wait until after age 67 to retireand collect their DB pensions. These individuals willappear as winners in Table 7 because the increase inDC retirement account income has not yet been offsetby the lower future DB pension income. Also, weassume workers who are not vested under the baselinescenario become immediately vested under a pensionfreeze, thereby gaining DB pension income. Manyof the people who would gain pension coverage as aresult of the freeze under the U.K. scenario may havepreviously changed jobs or dropped out of the laborforce at a relatively young age because of a disabilityand have not become vested under the baseline.It is also worth noting that among last-waveboomers, there are about four times as many losersthan winners in the highest income quintile, butonly slightly more losers than winners in the lowestquintile. High-income workers are significantlymore likely than low-income workers to lose underthe U.K. scenario because they are more likely to beChart 1.Percent of last-wave boomers who win and lose income at age 67 between the baseline and U.K.scenarios, by income quintilePercent50454048WinnersLosers35302526253020191510511 108612 13120AllBottomquintile2ndquintile3rdquintile4thquintileTopquintileIncome quintileSOURCE: Authors' computations of MINT5 (see text for details).NOTE: Projections exclude individuals with family wealth in the top 5 percent of the distribution. Winners and losers are defined as having atleast a $10 change in income between the baseline and U.K. scenarios.14 Social Security Bulletin • Vol. 69 • No. 3 • 2009
constrained by the statutory contribution thresholds in401(k) plans, which limit their ability to replace lostDB pension wealth. These thresholds will increasein the future with changes in prices per the PensionProtection Act of 2006. Because wages are projectedto increase faster than prices, later cohorts of workerswill be more constrained by the statutory contributionthresholds in 401(k) plans than earlier cohorts, andthese constraints will mostly affect higher-incomeworkers who are the ones far most likely to contributethe maximum. Furthermore, many DB plans providehigher accrual rates for workers with earnings abovethe Social Security taxable maximum, so the loss ofDB benefits is also especially high for some highincomeworkers. These highly compensated workerswho are affected by DB pension freezes replace theirrelatively generous DB plan with a more constrainedDC plan.The percentage of those who lose relatively largeamounts of income under the U.K. scenario is alsoconcentrated among the highest income quintiles. TheU.K. scenario reduces income at age 67 by 5 percentor more for 15 percent of last-wave boomers in thetop income quintile, but by only 3 percent of those inthe bottom quintile (Chart 2). In contrast, the shareof large winners is fairly evenly distributed amongincome quintiles. The population subgroups leastlikely to gain large amounts of income under the U.K.scenario are high school dropouts, those with less than20 years of labor force experience, and those in thebottom quintile of lifetime earnings (Table 8).The amounts that winners gain and losers lose atage 67 are generally greater for last-wave boomersthan those in the first-wave because last-wave boomershave more years to compound gains or loses in DCaccounts and accrue benefits in DB accounts beforereaching age 67. The differences do not monotonicallyrise by cohort because of the nonlinear DB accrualpatterns by age. Among winners, average per capitafamily incomes are projected to increase by $2,100for first-wave boomers and by $2,800 for last-waveboomers (Table 9). Among losers, average per capitafamily incomes are projected to decline by $2,600for first-wave boomers and by $4,200 for last-waveboomers (Table 9). Boomers in high socioeconomicgroups, who are most likely to have pensions and whohave the most benefits at risk, are projected to experiencethe largest absolute gains and losses, althoughChart 2.Percent of last-wave boomers who win and lose 5 percent or more income at age 67 between the baselineand U.K. scenarios, by income quintilePercent16141415WinnersLosers1212101098642333332 20AllBottomquintile2ndquintile3rdquintile4thquintileTopquintileIncome quintileSOURCE: Authors' computations of MINT5 (see text for details).NOTE: Sample includes individuals with a change of $10 in per person family income at age 67 between the baseline and U.K. scenarios.Projections exclude individuals with family wealth in the top 5 percent of the distribution. Winners and losers are defined as having a5 percent or more change in income between the baseline and U.K. scenarios.Social Security Bulletin • Vol. 69 • No. 3 • 2009 15
Page 1 and 2: Social SecuritySocial SecurityBulle
Page 3: Social SecurityBulletin Vol. 69, No
Page 6 and 7: Perspectives77 An Empirical Study o
Page 8 and 9: Selected Abbreviations—continuedM
Page 10: within the next few years (Aglira 2
Page 14 and 15: coverage varies significantly by ra
Page 16 and 17: non-Hispanic white, and college edu
Page 18 and 19: same groups (Table 6). For the last
Page 22 and 23: Table 8.Percent of individuals who
Page 24 and 25: not necessarily the largest gains a
Page 26 and 27: shoring-up DB plans before those pl
Page 28 and 29: Table B-1.Percent change in mean pe
Page 30 and 31: Table B-3.Percent of individuals wh
Page 32 and 33: ReferencesAaronson, Stephanie, and
Page 35 and 36: Social Security Administration’s
Page 37: Chart 1.Historical expansion of Soc
Page 40 and 41: self-employment information for the
Page 42 and 43: (Cronin 1985). The final earnings r
Page 44 and 45: prior to 1950, first year of earnin
Page 46 and 47: average indexed monthly earnings (A
Page 48 and 49: 13For an explanation of how the sel
Page 50 and 51: Kopczuk, Emmanuel Saez, and Jae Son
Page 53 and 54: Occupations of SSI Recipients Who W
Page 55 and 56: on the differences between the occu
Page 57 and 58: prediction models. Table A-1 lists
Page 59 and 60: Occupational Distributions of theEm
Page 61 and 62: similar, only 4 percent of the popu
Page 63 and 64: Table 5.Estimated occupational dist
Page 65 and 66: Table 7.Predicted Herfindahl-Hirsch
Page 67 and 68: Table 9.Estimated occupational dist
Page 69 and 70: Table 11.Average annual wages of wo
Page 71 and 72:
Table A-2.Means and standard errors
Page 73 and 74:
Table A-3.Coefficients and standard
Page 75 and 76:
Page 77 and 78:
Page 79 and 80:
management, professional, and relat
Page 81:
Stapleton, David C., Nanette Goodma
Page 84 and 85:
Selected Abbreviations—continuedO
Page 86 and 87:
The 1983 Amendments to the Social S
Page 88 and 89:
Chart 1.Proportion of new claimants
Page 90 and 91:
Table 4.The evolution of the ARF an
Page 92 and 93:
for the test of equality of means b
Page 94 and 95:
Table 8.Average monthly Social Secu
Page 96 and 97:
in the chart, especially for men, t
Page 98 and 99:
6This is a very important character
Page 100 and 101:
Benítez-Silva, Hugo, Berna Demiral
Page 103 and 104:
OASDI and SSI Snapshot andSSI Month
Page 105 and 106:
Monthly Statistical Snapshot, Augus
Page 107 and 108:
Table 2.Recipients, by eligibility
Page 109 and 110:
SSI Federally Administered Payments
Page 111 and 112:
Table 7.Average monthly payment, by
Page 113:
Awards of SSI Federally Administere
Page 116 and 117:
Copyright—Authors are responsible
Page 119 and 120:
Program Highlights, 2009Old-Age, Su
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