Wednesday, November 17, 2010

Social Security

I wish I had more to add on this topic but the debate already seems to be hitting most of the sensible options.  All I've got to add is that I don't like the idea of raising the retirement age because average life expectancy hasn't increased much for lower income workers.  Also, increasing life expectancy at age 65 is the proper number for calculating social security, much of the increase in overall life expectancy is do to better treatment of conditions that killed before 65, such as cardiovascular disease, only part of it is do to increased life expectancy after 65.

My only suggestion to make the program better is to change the different benefit calculations for early and late retirement to include caps.  That way manual workers, who probably can't work later in life and are likely to have lower life expectancy, won't see their benefits cut if they have to retire earlier.  Workers that enjoy better wages and less physically demanding jobs would have to work longer if they want to receive their full benefit.  Given the complexity of Social Security calculations, it would probably be necessary to make benefit payments either the cap or the old calculation, whichever is lower.  After taking a brief look at the numbers, I realized calculating the changes would take far more time than its worth so I don't know precisely how close to solvency this would get us.  Still, by using gradually increasing benefit caps there would be at least some room to allow for those lower on the income scale to retire early with full benefits while being able to raise the retirement age for those better off while retaining the broad based nature of the program.  I have something in mind like capping benefits at age 62 to $6000 a year, increasing the cap gradually to $12000 at 67 and then the maximum benefit available somewhere around 70.

As an addition, Social Security should embark on a program to encourage gradual retirement so that workers are paying in longer.  I have doubts about the government's ability to effectively change culture so won't spend too much time on this but the program would certainly be more solvent if workers continued to pay in through their jobs past 65 by gradually transitioning to a partial work schedule.  There's only so much that can be done but shifting the cultural norm from an absolute shift from work to retirement to one of shifting from full to part time with a gradually declining work schedule would be beneficial to more than just Social Security.

Along similar lines, I have some issues with the decline in SSI/SSDI benefits with relatively low levels of income.  The numbers being simpler, but still enough that I need some time with them, I'll go into more details at a later date.

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