From Lynn Sweet
She lays out the basic issues very well. One that hasn’t gotten a lot of attention is number 4.
4. Retirement ages are not written in stone, though any change would be politically unpopular. At present, limited benefits can start at age 62. Folks born between 1943 and 1954 have to work until age 66 for the full benefit. People born after 1967 have to work until age 67. Should we need to work longer in order to retire with full benefits? No way around it — upping the retirement age is a benefit cut.
And this is a question we need to grapple with that is very difficult. Can we realistically increase the age? I know in the case of both of my parents health would have prohibited reaching 70. My father climbed launch pads for a living and now at 66 he had to have his knee replaced. He retired with full benefits as it is, but what would he have done otherwise? He might have been able to do a desk job, but given the type of hands on work he did, that might not have been possible. He could have gone on disability, but that has societal costs too. One question I’ve never seen answered about this particular problem is that if the retirement age is 70, what about SSI benefits and state disability costs?
This is a serious question, has anyone estimated the costs of raising the age to 70? Because the gap matters between the extra disability and what is saved/added to the system. Certainly there would be a net pickup, but is that net pickup adequate?
For years I’ve favored tying the retirement age to live expectancy. As the Census Bureau determines life expectancy goes up the retirement age goes up.
This gets away from sticking it to people arbitrarily.
But Carl, that doesn’t deal with what tradeoffs we are making. There are a lot of people who realistically can’t work to 70. If I had to do my Dad’s job I’d never make it–my knees are worse than his at the same age and I’m white collar compared to blue collar. I’ll be okay because I dont’ have to climb for a living.
I don’t think picking an age is necessarily arbitrary if you look at relative health of people as they age and for how long they can realistically work.
How’s the system take care of people that can’t work until 65?
That’s the question–would the savings be reduced significantly if disability goes up? Or is the proportion high enough that we can say, you know, at that age it’s time to retire.
Not such a good column.
A few points-
She states that the trust fund will be exhausted in 2042 according to “nonpartisan analysis” unless something is changed, by which she means benefits cut, retirement age changed or revenues increased. First off that is the intermediate projection of the trustees who are not exactly nonpartisan anymore, and even when they were, their optimistic projection consistently proved more accurate. The CBO projects the trust fund lasts until 2055.
Which gets to the point in 50 years everything will have changed. 50 year financial projections are dependent on getting the growth rates exactly right, even a tenth off makes a huge difference compounded over 50 years. What will our life expectancy be in 2055, what will interest rates and wages be? We can’t project GDP growth within half a point for the previous 3 months so taking as a done deal a projection for the next fifty years is silly.
By making benefits taxable and rolling the proceeds back into the system already you do a lot that raising the retirement age would accomplish without hurting people who physically cant keep working and are too old to transition to new careers. As we live longer people will choose to continue working and paying into the system beyond the statutory age combined with taxed benefits and you don’t really have such a big problem.
Raise the cap, make all benfits taxable and you probably eliminate the problem which brings me to the biggest thing that you need to know. If you get the system to be just solvent in perpetuity, income from the trust fund ends up providing about 20% of the system cost after 2050. That 73% of benefits number is the take from the dedicated payroll tax assuming the trust fund is exhausted. The “reformers” all demand that the system balance without the trust fund money, cause that is what “must happen in the long run, but any changes that occur gradually and have dedicated tax revenues and benefits in balance by 2050 or so would almost certainly guarantee that the trust fund keeps right on growing … and generating trillions of dollars that under those plans would never be spent (or more accurately would represent a permanent transfer from workers who pay primarily paryroll taxes to the wealthy individuals who pay most income taxes).