Did the government make a Social Security goof?
Academics warn that agency officials are using outdated calculations and have severely overestimated the money available for retirees.
The fiscal cliff has been averted for the moment, and Congress is continuing its latest game of financial chicken with a new target in sight: the upcoming debt ceiling. But two academics say all this political brawling is taking attention away from another crisis looming on the nation's horizon: Social Security.
Samir Soneji is a demographer and professor at the Dartmouth Institute for Health Policy and Clinical Practice, and Gary King is a professor of government at Harvard. On Sunday, the two boiled down their recent findings in an opinion piece for the New York Times.
According to King and Soneji, the Social Security Administration has grossly underestimated the money it needs for retiring Americans "to the tune of $800 billion by 2031, more than the current annual defense budget."
And if nothing is done, they say, the Social Security trust fund will run out two years ahead of current government predictions.
The professors say two major issues have led to these serious miscalculations.
The government’s forecasting methods for Social Security have barely changed since the program’s creation during the Great Depression -- "even as a revolution in big data and statistics has transformed everything from baseball to retailing."
And that outdated mode of forecasting, the professors note, has failed to take into account crucial factors about longevity -- especially the fact that Americans are living longer and healthier lives. Better treatment of cardiovascular diseases and a dramatic decline in smoking, they say, "are adding years of life that the government hasn’t accounted for."
The professors believe the nation faces some stark choices if Social Security is to be saved. Among the options they suggest are raising the retirement age to as high as 69 or 70, increasing payroll taxes, limiting annual cost-of-living adjustments and reducing benefits.
They also point to new research that suggests that retirement, while popular, may in itself reduce a person’s life span "by breaking lifelong routines and disrupting deep social connections." And with that research in mind, they wonder if retirement should be optional.
Given modern demographics and statistical analysis, professors Soneji and King think now is a great time to open a public debate about Social Security’s future. The constant political bickering in Congress may make this suggestion seem odd, they say -- but "the longer we ignore the problem," they warn, "the more disruptive any change will need to be to keep Social Security alive."
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Make it so no one gets SS if they haven't paid into it for at least 20 years.
Seems like everyone is overlooking the obesity epidemic. This should have a major effect on Social Security's longevity.
I have been paying SS since I was 11 by the time I can collect (if they don't change it which I suspect they will) I will have worked for 56 years. Yet I won't get anymore money per month than someone who averaged the same wage as I did and only worked 10 years. That is a joke!!
When will people understand that Social Security is not funded from a "Trust Fund" at least not on the margins.
It is funded from taxes and spending (i.e. the fed running the printing presses) just like everything else.
There is no magic Social Security "Trust Fund". No magic box that you open up and find your retirement money. If you open that box in Washington with the SSTF label you will find a bunch of IOU's as Washington has been borrowing from the SSTF to finance its insane spending for many years.
SS needs to be slowly dissolved through means testing until the only people who get it are truly elderly and in poverty.
Americans need to be able to keep the amount of tax now being paid to SS out of their paycheck every two weeks and actually invest it themselves. As it is, every penny which has been put into SS so far has been spent and wasted by the federal government.
Eliminate the cap on social security pay. You say you want the wealthiest to pay the most tax? Prove it. Make everybody pay the 6.2% on all of their income. Capped at ~113,000 annual? No more!
And don't say wealthy people don't get SS payments. I'll call you a liar, I know better.
It's time to start cashing them in.
For more than two decades, Social Security collected more money in payroll taxes than it paid out in benefits — billions more each year.
Not anymore. This year, for the first time since the 1980s, when Congress last overhauled Social Security, the retirement program is projected to pay out more in benefits than it collects in taxes — nearly $29 billion more.
Sounds like a good time to start tapping the nest egg. Too bad the federal government already spent that money over the years on other programs, preferring to borrow from Social Security rather than foreign creditors. In return, the Treasury Department issued a stack of IOUs — in the form of Treasury bonds — which are kept in a nondescript office building just down the street from Parkersburg's municipal offices.
Maybe it's time to get this back!
Leave it alone, or give us what congress has. They have a great plan. But no, we won't see anything like that. They take care of themselves only. Our government needs a major overhaul from top to bottom.
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[BRIEFING.COM] The S&P 500 trades flat with one hour remaining in the session. It has been a busy day on the economic front with the release of the GDP report for the second quarter and the latest policy statement from the Fed.
Tomorrow's session will also feature a handful of data points, but neither weekly initial claims (Briefing.com consensus 310K) nor the Chicago PMI report (consensus 61.8) are expected to be met with a noteworthy reaction.
However, on Friday, the ... More
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