Monday, May 16, 2005

Social Security: Old, Tired and Going Broke


Recently had an employee benefits fair where I work. I confess I don't usually sit around and think a whole lot about retirement and Social Security. However, when the fair rolls around I start thinking a bit more about that retirement program which in my case is a 403b account as I work at a non-profit. I did fill out the form to increase my contribution into the program so I'm trying to be good about it.

This event led me to think about the Federal government program Social Security. I'm in the age group that has had the age for full benefits raised to 67. I will hit that age in 2030. Okay, so now everyone in the blogosphere knows how old I am.

According to this report, the program begins to go into deficit by 2017 and exhausts by 2041. They also indicate that the Medicare program runs out of money by 2020. Oddly, we don't hear much talk about that in the news!

Anyway, Social Security reform is in the news. Seems to me the three general views are: don't mess with it, privatize the whole thing and somewhere in between.

I often like to drop by Kaus at Slate to see what he has to say about whatever is going on out in the political world to get a center-left take on things to balance my mixture of libertarian and center-right inclinations.

In a recent post he said this:
Discussing Social Security, Paul Krugman writes: [T]o avert the danger of future cuts in benefits, Mr. Bush wants us to commit now to, um, future cuts in benefits. This accomplishes nothing, except, possibly, to ensure that benefit cuts take place even if they aren't necessary.

But Bush isn't proposing a take-it-or-leave-it package. He's calling for a negotiation, in which the Democrats could soften the impact of his proposal by substituting some revenue increases for his proposed benefit cuts. You don't like the Full-Pozen "progressive indexing" scheme? Then do a part-Pozen! Make up the difference by raising the cap on payroll taxes--an option Bush has pointedly left open. ... The question of the moment is whether the Democrats should publicly even enter into such bargaining--whether Bush's plan is, as Krugman puts it, "worth discussing." Krugman's argument appears to be that they shouldn't negotiate because Bush's starting position is unacceptable. It usually is in negotiations!
Seems to me that doing nothing makes no sense!

When I look at my checkbook, I either have to earn more money or spend less! Almost always spend less!! Yet, critics are running around saying we can't cut benefits.

I'm really disappointed that nothing is happening on this issue. Even the Social Security administration in their own report I linked to above says:
Social Security could be brought into actuarial balance over the next 75 years in various ways, including an immediate increase of 15 percent in the amount of payroll taxes or an immediate reduction in benefits of 13 percent (or some combination of the two). To the extent that changes are delayed or phased in gradually, greater adjustments in scheduled benefits and revenues would be required. Ensuring that the system is solvent on a sustainable basis over the next 75 years and beyond would also require larger changes.
The latest proposal out there was to index to wages the benefits of lower income recipients and indexing higher income benefit recipients to cost of living. I wonder how much of the way does that go to balancing the accounts?

So far I haven't heard much on the revenue side of the equation. I wonder how many percent will the tax increase be on top of the indexing of benefits to bring the numbers in line?

My gut feeling about the partial privatization ideas is that it is politically dead. Critics don't think the people can do it without wrecking their own retirement.

I wonder how many percent of the workforce are already taking advantage of 401k, 403b, IRAs and Roth IRAs? If a fair number are using these vehicles then I'd say the public is already making choices about their retirement planning. But I suppose only a small percent are doing so? And how good are they at doing it?

This item seems to say the main problem is that there is participation in 401k programs but the amounts being put away by employees is too low and often not in a diverse way. I have to say I find that amazing given how ubiquitous this woman is on TV!

Time to get organized folks!

Not so young, not so fabulous and don't want to be broke,


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