Fixing Social Security

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We all know that the Social Security program is heading for trouble. According to the SSA, the trust fund will be exhaused in 2040. However, the trust fund is a myth. Currently, we pay more in FICA taxes than is paid in benefits. The surplus goes into the "trust fund," which holds nothing but government bonds. The amount we are overtaxed goes into the general fund in return for those bonds. As soon as that surplus becomes a deficit (in 2017 by current projections), the Social Security Administration will have to start redeeming some bonds. That money will have to come back out of the general fund, which is already several trillion dollars in the hole.

Any business owner who tried to set up a similar retirement system for his employees would soon find himself playing golf in a government-run country club.

The real problem with Social Security is that we are, as a nation, getting older. Our medical advances have increased our longevity, and we are, on average, having fewer children. The result of this aging is that the ratio of working-age people to retirees is expected decline drastically. Now that the problem is identified, the solution is obvious: freeze that ratio.

Here's how it would work. According to the 2000 U.S. Census, 12.4% of the population was 65 years old or older. So, let's assume that when the 2010 Census is released, we find that the oldest 12.4% is over 65 years and 10 months. Then in each of the next ten years, we raise the retirement age by one month, and repeat the process with the next Census.

The real beauty of this solution is that it only has to be passed once.

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11 Comments

Kevin said:

A fair assumption that many of you are getting old. You also can't ignore that industry is moving towards a lower paying service industry rather than career building living wage paying pension giving industry. Also, there's at least one problem with your equation, if the baby boom created a HUGE generation then you're likely to see the number jump from 12.4% to (and maybe this is exaggerated, I'm not industrious enough to look it up) to 25% in a relatively short amount of time. Not to mention that you pointed out less people will be paying into it. And you may be 90 yourself before you are able to retire, even worse if you are actually a younger lad.

I'm sure you can come up with a less simple solution.

Jack said:

Kevin:

You're missing the point. The oldest 12.4% would be allowed to collect full social security. That would be locked down, and cannot go to 25%. That way, we keep essentially the same ratio of tax-payers and beneficiaries.

Even in a worst-case scenario, the age of people in the top 12.4% cannot be expected to increase by more than a couple of years per decade.

Kevin said:

I don't know, you might have to spell that out because I was never good at math.

Jack said:

OK, let me try again. The oldest eighth of the population would be eligible for social security. We would use the census data to figure out who was part of that oldest eighth.

One way or another it's going to be harder to qualify to collect anything at all.

Jack said:

That's why I'm stuffing everything I can into my retirement plan. (And owning a house in Northern Virginia is doing wonders for my balance sheet!)

Stay Puft Marshmallow Man said:

there's another way to balance working population to retired: more immigration

that way, everyone can be a winner in the global economy!

charles said:

Minor correction, the social security retirement age has been raised for those born after 1950 I believe. So for example I think I have to wait until I am 67 years 10 months before I can retire with full SS benefits.

I get to start collecting in 2027, giving me 15 years before it goes broke.

You young ones aught to be SCREAMING for private accounts, because there's no way you are getting anything out of the program the way it is today, and you will go broke covering the cost for us old people.

charles said:

Oh, and for some of you that can't get married, private accounts assigned to you would be YOURS, and you could leave them in your will to your partners.

So you should support private accounts as well.

Ted said:

Minor correction on when you can collect full Soc Sec retirement benefits:

Born between 1938 and 1943, the age to draw full Soc Sec retirement benefits starts at 65 and increases to age 66 for those born in 1943.

For those born between 1943 and 1954 it stays at 66.

It gradually increases again for those born between 1955 and 1960 until it hits 67.

For everyone born in 1960 or later it is 67.

Everyone can still draw reduced benefits at age 62 if they have enough quarters of credited work.

Jack said:

Thanks, Ted, but I did not want to confuse the issue unnecessarily. The CURRENT retirement age to receive "full" Social Security benefits is 65. My proposal would scrap the rest of the age breakdown, so I did not mention it.

I also did not mention that those aged 62 can apply for reduced benefits. The propopsal would work for that, too, but the oldest 15%, not 12.4%, would be eligible.

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