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Another way to fix Social Security

By Jennie L. Phipps ·
Tuesday, July 26, 2011
Posted: 1 pm ET

While Congress proposes to fiddle with Social Security, Jerry Golden, an actuary and widely recognized expert in annuities -- which is what Social Security really is -- has come up with a plan to save money painlessly.

Golden believes that as the population grows and the boomer generation passes on, Social Security's funding problems will largely solve themselves. In the meantime, he proposes some changes that he thinks would buy time, save money and make the system more retirement planning friendly for the greatest number of people.

Here are his proposals:

  • Make Social Security benefits transparent. Keep all participants posted on the actuarial present value of accumulated benefits, or what it would cost a participant to purchase those benefits in the market. Golden calls this the "Social Security Benefit Value," or SSBV. He thinks knowing what they are going to be entitled to motivates people to save.
  • Give beneficiaries more choices. Allow people to defer part of their benefits or take the payout in more than one way.
  • Add a caregiver income option. This first cousin to long-term care insurance might lower initial payments but raise them if a beneficiary needs care or is unable to perform certain activities of daily living.

Golden thinks that given the option, it is very likely that beneficiaries in the top 10 percent of income brackets would choose to view Social Security as longevity insurance -- letting it sit untouched and growing until they are 85 or so and their other sources of retirement income have been eroded by inflation.

He also predicts that if there were a long-term care insurance option, at least 40 percent of the population would choose that and let part of their benefits sit until they need health care services.

He thinks the lowest earning 50 percent would probably continue to take Social Security much as they do now, although if there was more flexibility to take only part and let the rest grow while continuing to work that would be appealing to some.

"Just from these voluntary actions listed above, we estimate a potential $400 billion in cash savings over the 10 years following adoption of these changes," Golden says.

With this much cash savings, Golden doesn't think there will be any need to change the calculation of Social Security's cost of living increases or raise the normal retirement age.

"Just making the benefits transparent and flexible would result in a natural deferral process," he says.

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August 22, 2011 at 10:26 pm

Think about how much money there would be if we cut off the benefit that the spouse's draw when the husband retires. I know of a case where the wife never worked and draws around $1000.00 a month which is half of her husbands social security, and the same goes with disability as to minor children. Does a minor child really need really need $400.00 or $500.00 a month to support them, mine didn't when I was raising them and working. I feel that if you never worked and paid in you don't draw a check unless it is after your spouse is gone and you should be able to draw half as a survivor benifit.

July 31, 2011 at 8:55 am

My suggestions:

1. Add a week to benefit eligibility date, every 8 weeks, for the next ten years;
2. Double the current cap on income subject to SS tax;
3. Require (not allow - actually require) that 1/2 of the SS taxes collected be invested in stuff, not US Govt debt. E.g., gold, real estate, natural gas, equities, water rights, art, whatever), so there actually is a vault of material value, rather than promises made on behalf of future generations, to fund the benefit obligations under the law.

July 27, 2011 at 12:57 pm

I think they should restore it to the way it was when I originally started to participate. The Government should not be changing it midway through my life. I think the Social Security taxes should be increased for the people who have never participated. They by far would be earning more money at their age then I was at their age. They would have the extra money, as they would be earning a higher wage.

End the Ponzi Scheme
July 27, 2011 at 8:25 am

Perhaps you missed the supreme court ruling that individuals have no vested interest in the "contributions" made to the Ponzi scheme.

It's not an annuity, not even close, there is no invested principal balance. Current workers pay for current recipients, surplus going to the "trust fund" which is currently empty save worthless paper bonds. The money when it actually was still in the trust fund, rather than raided to pay for more "necessary" programs, still wasn't really invested.

How about a real choice, like let me out of the Ponzi scheme. I get to keep my ~12% contribution to invest as I see fit going forward. I pass on future ability to collect, and I never have to pay another dime into or supporting the Ponzi scheme.

It'll never happen, because the scheme needs people who are working and responsible to pay for the ones who fail to plan. You know the evil rich that work for their money, and aren't waiting for their monthly check to show up.