OECD’s Misleading Retirement Replacement Income Statistic for the United States

December 23, 2020

National Academy of Social Insurance

December 7, 2020

According to the Organisation for Economic Cooperation and Development’s influential Pensions at a Glance, the United States has a gross retirement income replacement rate for average-income workers of 70.3 percent (see table 5.3). On the face of it, a 70.3 percent replacement rate is impressive. It matches the 70 percent replacement rate that most financial advisors consider to be the goal of retirement planning strategies. That will surprise those who believe there is a growing retirement crisis in this country. Given the prestige of the OECD, it would seem to be prima face evidence that the retirement crisis is a myth.

But is that statistic valid? Will typical workers receive 70.3 percent of their preretirement income when they leave work?

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What’s Missing from the Social Security Expansion Proposals

February 12, 2020

Democrats, looking forward to possible Congressional and White House victories in 2020, have embraced expanding Social Security after years of defensively fending off privatization and cutback threats. The Social Security 2100 Act, with 209 co-sponsors, is waiting in the wings. It would make needed revenue increases, including raising the cap on labor income taxed, to stabilize Social Security’s finances for seventy-five years. It would also mildly expand benefits.

On the campaign trail, all of the Democratic Party candidates have addressed Social Security. Elizabeth Warren has proposed going beyond the Social Security 2100 bill by adding a tax to investment income, which is a bigger portion of the income of the rich than labor income.

What’s missing, though, from the Democratic proposals is a way for people to use their 401(k), IRA, and other retirement savings to increase their Social Security benefits.

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