Can We Get The Nerve To Raise The Eligibility Age ?
One of the commonly known but often unspoken secrets of the current battle over health care reform is the fact that we are in desperate need of entitlement reform. When Social Security was first passed in the 1930′s we had 3 workers for every person going on the system while today that ratio is reversed and the numbers are headed in the wrong direction.
Indeed current stats show that the average family is producing 2.1 children which basically means a growth rate of 0% because they are just replacing themselves. Thus the future demographics are likely to be worse.
The obvious solution (aside from forced breeding) is to look at raising the entitlement age which would lower the number of people on the system while raising the number of people supporting it. But of course any mention of this brings howls of protest from the various interest groups.
Something that many of those people ignore is the fact that with lifespans increasing we would actually just be keeping pace with the original intent of the system.
Did you ever wonder, for example, why retirement age was set at 65 ?
Why not 64 or 66 or 60 ?
The answer is that the Social Security program was based on a welfare program started by Bismark in Germany during the 19th century. He started it so the more socially liberal legislators would support his more conservative military programs.
But before he proposed the system he went to a group of actuarial experts. He got them to run the numbers and determine an age low enough to sound plausable to most people yet high enough that statistically 99% of them would be dead.
That age was 65.
And indeed when Social Security began during the 1930′s, it was not that common for people to live into their 60′s or 70′s. The average lifespan as late as 1950 was 68.2 years (stats here). So the average person got 3 years worth of benefits. Even in 1980 they only got about 8-9 years. Today it is closer to 15. That kind of growth just is not going to be sustainable.
We need to look at accepting the reality of increasing life spans. It doesn’t mean 20 yrs in Boca, it means working longer because you have more time to work.
23 Responses to “Can We Get The Nerve To Raise The Eligibility Age ?”
Patrick, I've written the truth about this numerous times, and the response has been disappointing, though at least not as low as it has been elsewhere, whenever the truth about this is presented.
65 years is an arbitrary age that is long obsolescent.
Onset of disability due to aging normally happens in the seventies now. Mild disability onset is in the early seventies, and severe disability onset is typically in the mid- to late seventies. That's where retirement age belongs, if disability due to aging remains a criterion for government retirement (welfare) benefits. Life span changes also need to be taken into consideration; some have advocated indexing retirement benefits to life spans.
In addition to the reality about aging, the demographics of our aging society, and the problems of the dependency ratio changes to come, as well as the growing costs of retirement-related programs have long been known.
Facing reality is fought hard by defenders of the entitlement status quo (the real, correct use of this term disparagingly, unlike the case with health care “reform'), and by politicians who cannot stand to have to say “No” to many people whose votes they have been buying, and who fear saying “No” or exposing them to unpleasantness of any kind. They respect no limits to how badly they'll argue and behave in the attempt to prevent reform.
Worst of all is the sub-normal subset of people who actually expect an ever-decreasing retirement age and ever-longer retirement, with government benefits. These people, some of them ignorant about the reality of human health and life nowadays, and about the nature of work, seem to be stuck in the union stereotype of the 1950s and 1960s-70s (as if they were in the Detroit bubble and ignored the real world of automobiles for thirty years or more), and may actually insist on ever-earlier retirement, still, with an ideal corresponding to retirement at the age (often outdated, too soon) corresponding to menopause in women, which is seen by some as a threshold to older age. (It's noteworthy that I have never encountered a single early-retirement firebrand who showed enough intelligence to present a physical basis more detailed or reasoned than “too old and tired to work” for an early retirement age.)
“working longer because you have more time to work”
And yes, age discrimination is a problem, but doesn't refute the obvious fact here.
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“Even in 1980 they only got about 8-9 years. Today it is closer to 15.”
If you want to know more, read on. What matters is expected remaining years of life at a given age. Average life span is a bogus stat used by status-quo defenders who say certain people die younger, without accounting for higher mortality in youth (due to violent crime, for example) or other causes. What matters is expected remaining years of life at given ages, which in our case would be at what should be a normal retirement age (at least seventy nowadays).
The expected survival data can be found in the USA from the CDC Life Tables, which includes figures which illustrate the concept. (life expectancy at given ages)
http://www.cdc.gov/nchs/products/life_tables.htm
Patrick, I'll yield the floor in a moment, but I'll say in passing that along with knowing the obvious about too-early retirement ages and too-long retirements (there's also a problem to come with too much reliance on the federal government as a source and fraction of retirement income), another thing that will have to be addressed along with too-early retirements is separate attention being paid to benefit cost growth, and one reform I've foreseen is to change the benefit schedule to make it even more regressive than it is now, and to reduce the value at the top of the benefit scale, ideally or ultimately going to a flat benefit, the same, modest amount, for all beneficiaries. That makes the program even worse than the already bad program it is as a fictitious “return on investment” of taxes paid, particularly for those who pay the most taxes (this is true whether or not the payroll tax cap is raised or abolished; that will only postpone the onset of deficits, when the program is honestly seen to have failed, from the late teens next decade into the 2020s), but the program is already a horribly bad “investment” and never should be seen that way. (It's a poverty-prevention welfare program, and should be seen and judged accordingly.)
We need to look at accepting the reality of increasing life spans. It doesn’t mean 20 yrs in Boca, it means working longer because you have more time to work.
It means working longer because you have more time to work, IF you have work. A lot of Americans don't have work right now, and that problem is worse for older Americans. If you are over 65 and jobless, I think it's going to be probably a little hard to find anyone who will hire you in this economy. Part of the reasoning behind the idea of expanding Medicare to the 55-64 age group is that this is the age group that has the hardest time finding a job in this economy, and also the hardest time finding health insurance.
Regardless of how you feel about the Medicare buy-in proposal (and it looks to be dead, anyway), this is an awfully weird time, in my opinion, to be suggesting that we raise the retirement age even further.
Lets see, we have 10% U3 unemployment rate, an 17% U6 unemployment rate, we have 2 to 3% yearly labor productivity growth for the last 50 years, and you want to increase the labor supply? We already have a ridiculous oversupply of labor, what we should be doing is finding ways of shrinking that supply while raising wages. Might I suggest 30 hour work weeks, and 6 weeks paid vacation, some sort of sabbatical during which middle age workers could retain for a new career.
The correct way to do it would be to phase it in though, so that people who are currently close to the longstanding age at which benefits kick in can retire, but people who are 10 or 15 years away can plan accordingly. Presumably there'd still be options, as there are now, to take a reduced monthly stipend at a slightly lower age or wait for full benefits.
The problem with saying that we should expand coverage due to the slow economy is that this makes it a permantly unsustainable situation. Our federal budget already is facing obligations that it can't meet. It's not just individuals and households that are strained by the current economy- the govt doesn't have the funds either, and not by a longshot. Making a long term commitment (rather than assisting people through short term relief) is not really possible.
A bigger point than most would realize. It's been sold as a retirement program, which was a bad idea. There are times that disability comes unexpectedly, where SS can serve as a type of insurance that can't be bought. As a welfare program, it can survive and serve a useful purpose. As a retirement program, it was destroyed by both Democrats and Republicans (if anyone who blames only one, will only prove that they're party blind) when they added onto it and reallocated the slush fund for other purposes.
As other posters have pointed out, the problem remains that the system is broke.
If we don't change things where is the money coming from ?
DLS> “It's a poverty-prevention welfare program, and should be seen and judged accordingly.”
“A bigger point than most would realize. It's been sold as a retirement program, which was a bad idea.”
I'm surprise that more people in this country don't wrongly refer to it as a “pension” program. It never has been a pension program, but that's how many seem to view it, or at least they behave that way.
And just wait until the Baby Boomers and subsequent people get old and want to retire, and expect Social Security to constitute a greater fraction of retirement income than it was meant to be, or ever should be. I believe there will be a large desire among retirees to increase benefit levels or amounts.
“There are times that disability comes unexpectedly, where SS can serve as a type of insurance that can't be bought. As a welfare program, it can survive and serve a useful purpose. As a retirement program, it was destroyed by both Democrats and Republicans (if anyone who blames only one, will only prove that they're party blind) when they added onto it and reallocated the slush fund for other purposes.”
This was never meant to be a pension, or primary (much less sole) source of retirement income. It is not a pension program, was never meant to be. But politicians in Washington stoked as well as responded to greedy demands for ever-increasing benefit levels, creating an atmosphere of rising expectations, in a directly opposite direction to demographic and fiscal as well as other forms of reality. (This is related to the expectation, even today, to early retirement before a too-early standard age of around 65 years, and a desire for even earlier ages — such as appeals to offer Medicare qualification at age 55 in the 1990s as well as currently.) Reality is going to be very harsh, and I'm looking ahead to what kinds of changes to Social Security will be needed to let the program survive. (Aside from raising the retirement age to modern levels, and probably ending early retirement or at least revising the benefits downward to account for modern
life spans, I suspect that short of means testing and ending universality, there might be a more regressive benefit structure in the future, and the ideal case would be a flat benefit for every recipient, the same benefit, which is a step by Social Security farther toward being a partial form of a guaranteed minimum income program.)
the govt doesn't have the funds either, and not by a longshot. Making a long term commitment (rather than assisting people through short term relief) is not really possible.
Sure, it's possible. Expanding Medicare to 55 to 64-year-olds would lower costs, not increase them. It would lower them even more if Medicare were expanded to all Americans.
Anyway, I'm sure you know as well as anyone else that it's possible to find the money for anything we decide is a priority. Certainly, if the U.S. was able to make a long-term commitment to the Iraqi people and if it's able now to make a long-term commitment to the Afghan people, then it must be possible to make a long-term commitment to the American people.
Dontcha think?
Then we keep operating with a broken system, Patrick. We've been doing that for years with our military, and war supporters aren't complaining (except to say we should do more of it), so what's the problem?
And yes, this is a flippant answer, but I'll keep on giving it until people who think as you and as Christine and as DLS and Leonidas and as so many more do, stop asking where the money is going to come from for ALL of our national priorities, not just the ones that might be helpful to the American people..
If it's a welfare program, Prof. Elwood, then I want the government to give me and every other American who's ever held a job all the money back that we paid into it with our paychecks.
You and millions of others, Kathy. I would also like congress to stop spending money on wars, pet programs, bailouts and corporate giveaways. But we can't get out money back from any of them. The fact is, with our extending lifespans, Social Security is promising to give back far more than it can collect, even if the population were stable. Maybe you'd like to reveal what you were paying in Social Security when you were young, compared to what young people are paying today.
Perhaps *you* would like to reveal your thoughts on what would have happened to all the Americans 65 and over in the past six decades if they had not had that money to count on in their old age. Perhaps you would like to reveal your thoughts on what would have happened to all the Americans past and near retirement age when de-regulated Wall Street went bottoms up if former Pres. Bush had succeeded in privatizing Social Security?
Perhaps you would like to reveal whether my hunch is correct that you have a well-paying job with health insurance and a pension plan and a secure future with or without Social Security.
Here is my revelation, which I'm happy to give you: I have had relatively low-paying jobs my entire working life (well under the midpoint of the five-figure range), in significant part because of a disability that seriously affected my productivity and ability to hold a job. The disastrous economy of the past few years plus my age made these difficulties even worse. If it had not been for Social Security's disability program, I would be homeless now. And that is the unvarnished truth.
I don't know yet what my daughter's earning power will be, since she's still in college, but whatever it is, I pray that Social Security will still be there for her as a publicly funded government program when she retires, either by volition or necessity.
History of the Social Security Trust Fund
Broke?
The “if” argument. The fact is, there's no way to tell, but it's probably not a bad as you are trying to imply, and not as good as I would think. Social Security, from what I understand, was meant to get rid of the county poor houses. In that regard, it was a tremendous success. Up to your generation, retirees have received more than they paid into Social Security, but simple math says that that period had to end sometime, and the Social Security trustees report has been warning about that for a long time. Social Security is a great example of why congress can't be trusted with money.
More than likely, Social Security would have turned into a more obvious welfare program, as those who saved their own money would escape the worst of the coming reckoning, even with this recession/depression. If the current generation had been able to keep their money out of the reach of congress, they would also have been in far better shape, even after the market crash. Also, congress wouldn't have been able to pull their current accounting tricks to hide the nations true debt.
Not a home run, but a least a double. My pay would be bad in New York or Los Vegas, but in the midwest, I'm able to support a full-time wife, and two kids and have no debts outside of my mortgage, which is still right-side up. My dad also raised me to live below my income, no matter what that income was, so I also lived without a car, and even in my car before. Like most places, my job does have a very minimal health care plan, but no retirement. We've saved for retirement because there's no way that my generation can get the deal that your generation got. My savings, by the way, did take a hit in this first downturn, but I've already recovered most of it, and I'm currently betting against the market.
Frankly, the only reason that I pay my taxes because I have to — I have no intentions on depending on the government if I can avoid it and no illusions that it will help financially if I needed it. I would happily give up everything that I've paid into Social Security and Railroad Retirement (which is a proper and better run retirement program that I'm six months away from being vested in, if I could get another railroad job), if I knew that my kids would not have to worry about having their money raided by politicians of any stripe.
As I've stated before, independence is the opposite of slavery. It's something we should be avoiding and teaching our kids to avoid.
Don, I believe the problem is that the government has borrowed from the trust fund. So the $2.4 trillion notionally in it is largely IOUs. From the point of view of the social security administration, these are investment-grade assets, and their fund is in good shape. From the point of view of the taxpayer, the government has no money to pay them, so it will have to raise taxes to meet its obligations.
Dr J,
By law, the government cannot invest the trust fund in anything other than government security.
Tough shit!!!
All the millionaires who have enjoyed all the tax breaks they got due to the fact that the Social Security Trust Fund had to buy Government Bonds can now pay back all the tax breaks they got.
I have no idea what that formulation means. But it sounds like we agree that keeping Social Security afloat will require increasing taxes.
Those millionaires, though, will not be the ones paying the bills. You know how slippery millionaires are when it comes to taxes. But it doesn't matter: even if they weren't, there simply aren't there aren't that many of them, and the ones in question will all be dead. The middle class is going to get the short end of the stick yet again.
I pray that Social Security will still be there for [my daughter] as a publicly funded government program when she retires
As well you should. She will have been paying “contributions” into the system her whole life on a promise that she'd get them back after retirement, and she will reasonably expect to do so. Meanwhile, you and other retirees will have been receiving her money as checks and quietly spending it.
Social security is a retirement fund only in the vocabulary it uses. It's really an inter-generational wealth transfer program, a means for us to get back at our children.
You support a full-time wife? What's a full-time wife?
Not a home run, but a least a double.
Okay, so advantage number one for you is that you live in a relatively low-cost area.
I'm going to assume (because reading between the lines I sense it) that you think you have this double because you are hard-working, thrifty, responsible, and self-reliant, and that's really all it takes. You may of course correct me if I'm wrong.
But assuming I'm correct, let me ask you some more questions. And I want to say first that I do not expect you to answer any of these questions, and do not believe you owe me an answer to any of them, and if you don't want to answer any or all of them, I certainly will not draw the least negative of conclusions about that. At minimum, if you choose not to answer them, you can think about what they imply.
Has anyone in your immediate family ever had a serious illness that affected your income in some way?
Do you have a disability or any health condition that prevents you from working full-time or as productively as you might otherwise?
Have you held the same job for most or all of your working life? How did you get your first job? How did you get most of your subsequent jobs?
Have you ever lost a job (for any reason — not necessarily being fired)?
Did you take time off to raise a child?
Did you go through a divorce?
When did you buy your house and what was the economy like at the time?
Did you receive any help to buy the house (meaning, from family)?
Do you work in a high-paid field? Are you good at what you do? Are you good at a lot of things? Are you energetic and ambitious by nature? Do you have strong leadership qualities? Good management skills? Are you comfortable supervising people, and good at it? Are you politically astute (I'm talking office politics here)? Are you good at managing relationships? Are you self-confident? Were you raised to be self-confident? Were you seriously damaged emotionally or psychologically by your childhood or were you greatly (or to any degree) advantaged by it?
Do you believe that personality traits and/or personal skills and talents such as those above can be taught and learned by anyone, or are they innate — or if teachable, to what extent? If a person is determined enough and perseverant enough, can they become any sort of person they want to be? Of course that again raises the question of whether those qualities — of determination and perseverance — are changeable behaviors or inherent traits.
There are many more questions I could ask, but I'll leave it at these for now. Also, I repeat, that you don't have to feel obligated to answer any of them. They are very personal, many of them. I just ask that you think about them, if you don't want to answer them.
I meant full-time mom. The term used to be “stay at home mom”, but she doesn't.
I'm not sure where you're going, but I'll answer what I can tonight, when I can devote more time to it.
Correct me if I am wrong, but I think SS was originally designed as a “safety net”. In the personal insurance business, we called it the third leg of a stool for retirement. The other two being pensions and personal savings.
So the system is broke, needs fixing, and both parties just talk, no action.
I have one modest suggestion (that I would have actually opted for if It were available when I signed up for SS):
Give me the option to delay my starting date for payments (that already exists), but give me an attractive % incentive to do so (the current one is wimpy). Some of the more healthy and well off candidates, will opt to delay their start, and hence there will be more money in the kitty for the less well off. Some of these gamblers will die, and the way SS works, the kitty benefits. Of course the gamblers can always opt in, and each year that they get older, the higher the percentage incentive there is. I am not an actuary, and would love to hear from one even if it's to blast this idea out of the water.