Phillips, John W.R.

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  • Publication
    Retirement Wealth and Lifetime Earnings Variability
    (2003-01-01) Mitchell, Olivia S; Phillips, John W.R.; Au, Andrew; McCarthy, David
    This paper explores understand how earnings variability influences peoples’ retirement preparedness by influencing their accumulated wealth levels as of retirement age. Prior research has demonstrated that the US average household nearing retirement would need to save substantially more in order to preserve consumption in old age. While some socioeconomic factors have been suggested that might explain shortfalls, previous studies have not assessed the role of earnings variability over the lifetime as a potential explanation for poor retirement prospects. Thus two workers having identical levels of average lifetime earnings might have had very different patterns of earnings variability over their lifetimes. Such differences could translate into quite different retirement wealth outcomes. We evaluate the effect of earnings variability on retirement wealth using information supplied by respondents to the Health and Retirement Study (HRS). This is a rich and nationally representative dataset on Americans on the verge of retirement, with responses linked to administrative records from the Social Security Administration. Our research illuminates key links between lifetime earnings variability and retirement wealth.
  • Publication
    Modeling Lifetime Earnings Paths: Hypothetical Versus Actual Workers
    (2004-01-01) Mitchell, Olivia S; Au, Andrew; Phillips, John W.R.
    To assess the distributional effects of social security reform proposals, it is essential to have good information on real-world workers’ lifetime earnings trajectories. Until recently, however, policymakers have relied on hypothetical earnings profiles for policy analysis. We use actual lifetime earnings data from the Health and Retirement Study (HRS) to compare actual workers’ covered earnings profiles to these hypothetical profiles. We show that the hypothetical profiles do not track earnings patterns of current retirees; thus lifetime pay levels are much higher than for most HRS workers. Therefore, using hypothetical profiles could misrepresent benefits paid and taxes collected under such reforms.
  • Publication
    Social Security Replacement Rates For Alternative Earnings Benchmarks
    (2006-01-01) Mitchell, Olivia S; Phillips, John W.R.
    Social Security reform proposals are often presented in terms of their differential impacts on hypothetical or ‘example’ workers. Our work explores how different benchmarks produce different replacement rate outcomes. We use the Health and Retirement Study (HRS) to evaluate how Social Security benefit replacement rates differ for actual versus hypothetical earner profiles, and we examine whether these findings are sensitive to alternative definitions of replacement rates. We find that workers with the median HRS profile would be estimated to receive benefits worth 55% of lifetime average earnings, versus 48% for the SSA medium scaled profile. Since US policymakers tend to prefer a replacement rate measure tied to workers’ own past earnings, using these metrics would yield higher replacement rates compared to commonlyused scaled illustrative profiles. However, benchmarks that use population as opposed to individual earnings measures to compare individual worker benefits to pre-retirement consumption produce lower replacement rates for HRS versus hypothetical earners.