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Boomers should help fix Social Security

The baby boom generation, instead of raising Social Security taxes on itself, kicked the problem of underfunding down the road.

By MSN Money Partner Apr 27, 2012 1:07PM

This post comes from Alicia Munnell at partner site SmartMoney.


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Someone asked whether any of the reforms enacted by state and local pension funds seeking to solve their funding crises could be applied to Social Security. Some states reduced or temporarily suspended their yearly cost-of-living adjustments -- COLAs -- for their retirees, a solution that seems fair to me.


This approach raises the inevitable question of whether the traditional notion of protecting those 55 and older from benefit cuts under Social Security is appropriate. (Post continues below.)

Many states and localities face substantial shortfalls in their pension funding. Experts argue about the extent that sponsors are at fault, but the fact is that public plans held substantial equities and were hit hard by the financial collapse of 2008. At the same time, the recession decimated state and local budgets by simultaneously reducing tax revenues and increasing demand for services.

Because sponsoring governments could not make up for the drop in asset values, they enacted increases in pension contributions for both current and future workers, benefit cuts for new hires, the introduction of defined contribution plans, and -- in six states -- modifications of the COLAs for current retirees.


Image: Social Security Card (© Comstock)In all six states, the COLA modifications have been challenged in court. In two of the states -- Colorado and Minnesota -- courts upheld the changes. In both cases, the judges found that the COLA was not a core benefit that participants could expect to receive for life, and in Minnesota the judge ruled that the COLA modification was necessary to prevent the long-term fiscal deterioration of the pension plan.


In the case with which I am most familiar -- Rhode Island -- suspending the COLA and then linking future COLAs to the investment returns was an essential part of the solution. Retirees vastly outnumbered current workers, so making changes only for current and future workers would have had little impact on the state's dire fiscal situation. Therefore, everyone needed to contribute to the solution.


So, how can it be fair for retirees to help solve the pension problem in Rhode Island and the other states and yet, when thinking about Social Security reform, tell those 55 and older that they will not be expected to contribute to the nation's long-term solution to future funding problems?


The conventional argument for protecting Social Security participants is that older workers and retirees do not have the flexibility to adjust to benefit cuts. That is true, and these individuals should not be forced to endure drastic cuts. But the argument for leaving them completely untouched also does not seem compelling.


It could be argued that in the case of Social Security, the over-55 crowd actually misbehaved. It has been very clear since the early 1990s that Social Security would need additional money to maintain current benefits. Yet, the baby boom generation, instead of raising taxes on itself, kicked the can down the road. Now that many of its members are over 55, they want to foist the burden on younger generations. That does not seem fair.

This idea may seem heretical, but I currently think that some sort of COLA suspension or modification should be part of any package to fix Social Security. Such an approach has a precedent: The 1983 amendments delayed the COLA for six months when the program needed money immediately.


Any change to the COLA would have to be applied judiciously. Many older people depend completely on their Social Security check for income in retirement. The vulnerable would need to be protected. Thus, COLA changes would have to be implemented on a sliding scale, perhaps based on family benefits. But leaving all those 55 and older untouched no longer seems like the right answer.


Alicia Munnell is the director of the Center for Retirement Research at Boston College.


More on SmartMoney and MSN Money:

Apr 29, 2012 5:31PM
One sure way to fix the SS is to put Congress on SS and it will be fixed yesterday....
May 9, 2012 9:52AM

SS can be fixed in 1 quick easy move = STOP PAYING TO PEOPLE WHO NEVER PAID IN !!!

Ther are literally millions of people that are getting disability benefits fron SS that never paid into it.

SS was meant to be a retirement supplement not a catch all.

ALSO STOP loaning money to our corrupt gov't members to keep the gov't afloat. Make them do their job by passion laws for a flat rate tax and a balanced budget -STOP giving them a free run with our retirement.


May 9, 2012 8:22AM

Solution: Strip/cut/do-away-with pensions of the past congressional members. Make the current and future congress and senate positions non-paid positions...these so called "Statesmen" are doing nothing. If it's an unpaid position we could get truely good people as our and women that are truely there to help the state of the nation.


Just a thought.

May 9, 2012 9:56AM

Why should the boomers have to fix something the corrupt gov't broke.

We are the people who paid MOST of the money into it.

 It was not broke until the greedy congress got a hold of it and the ILLEGAL aliens are getting a free ride from it..

Give me back what I have paid in over the past 40 years and I will have a good retirement from my own investments NOT from a crooked politician stealing me blind.

Apr 28, 2012 1:33PM
Boomers are ALREADY "helping to fix" Social Security, by receiving progressively deteriorating benefits due to numerous factors, such as the government taking so much of it back from retirees later.  Those ages 55 and older have NOT been "untouched," as claimed by the author. The author should have done more research before writing this article, because:

    a)  Social Security taxes have indeed progressively gone up -- it's nearly double the 3.6% tax rate in 1965.  During much of the boomers' working years, they've paid 6.2% in payroll taxes (temporarily reduced to 4.2% in 2011).  In the same period, maximum earnings eligible for SS taxation have also increased from $4,800 (equivalent to about $34,500 in 2011 dollars) to $106,800.

    b)  The government also takes back Social Security benefits from retirees through taxation.  From the start, SS income was not intended to be taxed.  But the government changed that in the 1980s, so that now up to 85% of SS is counted as taxable income -- another form of double taxation.

    c)  Full SS payments for earlier generations used to start at age 65.  But the full retirement age was later increased, so boomers must be age 66 or older, depending on their birth year.

    d)  The yearly CPI is so manipulated that the COLA has progressively gotten more out of whack from true inflation.  The government itself admits this discrepancy by using different measures to calculate Medicare premium increases.  From 2001 to 2010, Medicare premiums rose much faster than Social Security benefits, taking increasingly larger amounts from SS income.  Part B premiums increased 121% (12.1% per year), while SS benefits only rose 31% (3.1% per year).  "Which inflation measure is more realistic, and which is most dishonest?  The one that taketh, or the one that giveth?"  (source:  AssetBuilder, Scott Burns, 11/04/11)

    e) The Social Security Administration saves multi-millions of dollars each year by declaring thousands of still-living retirees "dead" and stopping their payments, then make it extremely difficult for retirees to get it started again.  (Maybe the SSA is trying to cancel out the multi-millions of erroneous payments they send to those who are actually deceased -- source:  CNN, 09/07/11 and 08/17/11, articles by Blake Ellis).  Not to mention all the waste and fraud within the Medicare system.
May 9, 2012 10:01AM
Wait just a minute!  The boomer generation contributed more money than any other generation in history to the SS fund.  Why is it they should take the hit for the shortfall.   So you are saying it's our fault because of the politicians that we elected over the years decimated the fund ???  How ignorant is that!  I claim that ANY politician that was elected would have in all liklihood ignored the SS shortfall during his/her time in office. It's politically incorrect to mess with SS.  
Apr 27, 2012 5:00PM
The puddwacker that {loosely put} wrote this article ought to at least do some research before writing such BS. The money was TAKEN from the fund by polititians who have NO concept of fiscal control. I do long for the day that someone gets fed up enough and starts burning these elected criminals at the stake. ALL OF THEM.
May 8, 2012 9:19PM
Give me a break already! What a crazy and misinformed article! The government plunders the SS fund, and officials blame the problem on the retired? Then they pour salt on the wound by asking boomers to help fix a problem they had nothing to do with? It reminds me of corporate executives who raid pension funds for huge multi-million dollar bonuses and golden parachutes, and then turn around and tell retiree's that their pensions have suffered losses or are currently underfunded, and that they must shoulder the burden, or even risk greater losses if faced with bankrupcy. It seems that everyone at the top is morally corrupt. They rape the system, and then point their finger at their victims...those they are sworn to protect and serve...only to serve themselves.
May 8, 2012 9:27PM
We boomers didn't "break"  social security in the first place Alicia.  Why not write about the trillions of dollars the politicians have stolen from social security money, OUR MONEY!!  If you can make them pay it back, with interest of course, the system will work just fine.  Oh, and if it seems fair to cut the COLA for older Americans on fixed income, then next time you're up for a raise turn it down for two years.  Tell me what you think about it at the end of those two years.  I am fed up reading and hearing so-called money people talking about the SS shortfall.  Start ranting and raving about the politician thieves.  After all, they've set up their own financial lifetime windfall on the back of taxpayers.
May 9, 2012 6:46AM
the bottom line  here is blame your government  BOTH SIDES  for the problem. if they had never  borrowed  money from the  SS there would be enought to pay off the debt  and pleanty left over of  befits . boomers are responable  for  believing our  government was NOT stealing from  SS  THEY NEVER ONCE ASKED THE PEOPLE IF THEY  COULD USE  ss  TO PAY BILLS  GOVERNMENT  CREATED  put the blame where it belongs    our goverment  who sold us all down the drain
May 9, 2012 4:14PM
I don't recall ever being asked if I wanted my taxes raised to bail out Social Security. You act like the government actually gives a damn about what the working folks have to say. That being said, here's the deal. I paid into the system for 45 years and now I want my money. It's that simple. If the government can bail out the greedy morons in the banking industry, they can find a way to pay me.
May 8, 2012 10:16PM
Remember when Social Security was referred to as being placed in a TRUST FUND ! What happened to that ? I will tell you , they borrowed it to pay for Welfare programs because the Social Security Trust Fund was FAT . I started paying at the age 15 and i am now 60 with 2 years left to retire if i retire early at a 30% reduced rate or wait till i am 66 for full benefits . Most are looking to retire early as the economy is that no one is looking to hire some one 60 plus unless it's at minimum wage . None of these Welfare Programs ever paid back into the Social Security Trust Fund .
Apr 27, 2012 1:57PM



May 8, 2012 9:16PM
I have worked and paid into SS since I was 16. I am now 58 and still paying into it. How dare law makers or anyone else say when it is time for me to collect that I am a free loader and don't deserve what I worked and paid into. While growing up I was always told if I work hard that hard work would be rewarded. Now all I see around me is me working and young people coming in to free load. I work in a school. We have a kid from Somalia he sits all day and sleeps. When asked why he won't do his work he said when he gets older there is food stamps and social security to collect. This kid is an immigrant. We also have a 14 year old girl that is pregnant and planning to collect welfare. Instead of doing the right thing and give the baby to loving people that can't have a child and could well afford a baby, she prefers to keep it and sponge of me a tax payer. So when it is time for me to collect my social security don't any of you young people sit there and say I don't deserve it. I have paid for so many real freeloaders as many of my peers have paid as well.
May 8, 2012 8:50PM
In 1983 the government said there was a $2.5 trillion surplus in Social Security and they took it and spent it on other things. The government caused the problem by effectively stealing the money we contributed to Social Security for our retirement years. The government needs to put our money back where we intended it to go and we wouldn't have this problem.
Apr 30, 2012 11:00AM
Another MSN article that suggests we should punish the people who have played by the rules all their lives.  I'm eligible to begin drawing SS in one year (age 66).  For the past 46 years, my paycheck has been reduced by varying percentages to fund the SS trust fund under a supposed contract between the federal government and me to fund a portion of my retirement.  Until my 66th birthday, I will not have withdrawn one red cent from said fund.  Why am I responsible for fixing something I didn't break?  When this system was passed by congress and signed into law by an earlier far left leaning president many years ago, it was sold as a retirement program.  Now it funds SSI (disability benefits), survisor benefits and benefits to people who have contributed minimally or not at all as long as they fall into the right nich.  Then there are all the lawyers who promise to "deal with the government" to get you disability benefits, you've seen them.  You know, the putz with the stupid hat.  I'm not begrudging people who fall into the social safety net but don't look to save SS on the backs of those who will soon be or are already retired.  Raise the retirement age, don't begin paying for "early retirement at age 62, pay benefits only to those who have contributed to the system and slightly increase the FICA tax, not reduce it as a political stunt by a president desperate to get reelected.
May 9, 2012 4:06PM
I am 50 years old and have been contribuiting to social security since I was 17. All I expect is to recieve the money that I contributed! fair and simple! All you whiners want to blame someone, well if you put money in, you should recieve those funds when you are eligible. If I don't recieve what I put into the system then I have been robbed by the goverment plain and simple!!!!
May 8, 2012 8:50PM

The truth is SS funds have been raided for general government expenses for years. You know, wars, foreign aid, and bailouts of every kind for everyone it seems. Then they reduced  the payroll tax to spur the economy, and further speed the demise of the SS program. Turning SS into a federal welfare program through SSI was another mistake. There you have it in a nutshell...what is left is a whole bunch of worthless IOU's.

Apr 28, 2012 12:12PM
Eliminate the cap on wages to which SS tax is applied.  Easy solution.  And this is also not a self serving comment that pushes a proposed solution on others.  As one who does, and has earned more than the cap for several years I would fully support this change.
May 9, 2012 4:42PM
This country is going to sh**. How can someone on welfare collect money, have more babies just to get a raise??? If your on welfare and you have another baby, tough shi*. What the hell is wrong. People sit on their **** all day ,pay $8.00 a month for their housing have more babies to get more money while I work my whole life and cant even get my mortgage interest rate lowered?? Obama gave all the banks bailout money and the scumbags never had any intentions to help the people. He should have made all banks lower everyones interest rate to a reasonable value and every american would actually benefit!! I'm tired of getting screwed. I think i'm almost better off quitting my job,collecting welfare,collecting food stamps,get me some of that goverment housing and just go fishing and enjoy my life! Wait I'm white, better just get back to work like I have been for the last 34 years.
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