Distributional implications of social security reform for the elderly: Theimpact of revising COLAs, the normal retirement age, and the taxation of benefits

Several reform plans have been proposed to reduce the financial strain on S ocial Security. Many proposals under consideration, however, would exacerba te the inequality of income among the elderly Using data from the Current P opulation Survey, this paper finds that reducing cost-of-living escalators, even when the reforms are designed to protect low-income beneficiaries, wo uld generally worsen inequality over time and increase the number of elders with income below the poverty level. Raising the retirement age would gene rate similar results. However, increasing taxes on retirement benefits woul d improve the financial outlook for Social Security without imposing additi onal hardships on the poorest elderly.