Something I neglected to properly slag on in the column linked below: I referenced in that piece an Economic Policy Institute brief purporting to show how dependent we all are on Social Security by showing what a large percentage of the income of benificiaries it constituted. But, of course, you start getting Social Security when you retire, so incomes for recipients are necessarily from something other than wage labor. But, of course, people generally choose to retire after they’ve been able to save up some sort of nest egg—if they’re able to, anyway. That means lots of people are basically living of accumulated assets, not (primarily) income—which is, then, a big fat ugly red herring.
Retirees Have Low Incomes: Film at 11
May 4th, 2005 · 5 Comments
Tags: Economics
5 responses so far ↓
1 Daniel // May 5, 2005 at 10:26 am
Your point is that retired people are living off accumulated assets, not income. That�s not a flaw in the study, though; while retired people are living off something that derives from accumulated assets, many of them live off interest from investments, which IS income.
This is not to say that the study is good, though. The report includes this point: ââ?¬Å?These data suggest that, for most retirees, cuts in benefits would have a very large effect on living standards. With the rate of savings at historically low levels, there is reason to believe that coming generations of retirees will not be in any better position.ââ?¬Â The logic there is specious, of course. The fact that savings are at historically low levels is no reason to believe that ââ?¬Å?coming generationsââ?¬Â will also save less. If benefits are cut, coming generations will almost certainly save more.
2 Brian Moore // May 5, 2005 at 12:02 pm
Yeah, Daniel, I thought that was pretty funny too.
“With the rate of savings at historically low levels,”
How could THAT have happened? It’s almost like someone was telling them that they’d get some kind of social insurance program when they retired!
I love how that insight is completely lost on people.
3 Brian Moore // May 5, 2005 at 1:17 pm
If people could get one message out of freading Freakonomics, it should be: “Incentives matter.”
I think I’ll get it tattooed on my arm. With a sharpie marker, ’cause you know; I have an incentive for other economists not to beat me up.
4 Christina // May 5, 2005 at 1:35 pm
“you start getting Social Security when you retire, so incomes for recipients are necessarily from something other than wage labor.”
I’m sure this was a simple oversight on your part, but this statement is incorrect. People start receiving Social Security when they hit the Social Security Administration’s age of retirement, not when they retire. My mom started receiving Social Security when she hit 65, but she is still working.
This, in my mind, is a big problem with the existing Social Security scheme. It would make a lot more sense to hold off giving benefits to retirees until they actually retire (or reduce their hours worked to some part-time level).
5 Julian Sanchez // May 5, 2005 at 4:12 pm
Christina-
I think the way it actually works is that up ’till age 70, if you continue working, your benefits are reduced by an amount dependent on how much you’re making. And you can start collecting at 62 if you retire early. But yeah, I should probably word that more precisely.