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Fix Social Security rationally

By Jennie L. Phipps · Bankrate.com
Tuesday, October 25, 2011
Posted: 3 pm ET

An expected 3 million Europeans are preparing to take to the streets in protest next month over government plans to raise the age of public pension eligibility and rejigger how pensions are calculated in a way that will reduce what most people get or would get.

The Financial Times points out that life expectancy is the real issue. In the 1980s, the FT calculated pensioners could expect to spend one-third of their lives in retirement. Now they spend about 45 percent of their lives retired. It quotes Dexia Asset Management's projections that the ratio of older nonworking people to workers will double by 2050. It's retirement planning math that doesn't add up.

The situation in the U.S. isn't much different with any suggestion of Social Security reform meeting with anger and resentment. In a Wall Street Journal/NBC poll last February, 77 percent said it would be unacceptable to trim Social Security at all to balance the budget.

I don't think it's hard to understand why so many of us are opposed to fixing a program that has worked so well. Most of us who are about to claim Social Security or have done so recently have paid into the system for at least 45 years. One of the reasons we think we should get what we paid for is that during those 45 years we have witnessed remarkable changes in the economic well-being of the elderly. Between 1960 and 2010, the poverty rate of those aged 65 and over has fallen from 35 percent to 10 percent.

As of 2010, Social Security paid an average of $13,968 per year to retired individuals, while the U.S. Census Bureau's poverty threshold for people older than 65 years of age is $10,289. Retired couples get an average of $22,704 per year from Social Security, while the poverty level is $12,982. It's not a princely amount of money, but it's lots more than our grandparents -- at least my grandparents -- struggled to get by on.

When we talk about Social Security, we seem to hear mostly from the protestors in the margins. Whether they are advocating a vastly different program or lobbying for large increases in the system, I don't think what they say reflects the opinions of most of us in the middle. If we heard reasonable suggestions for putting Social Security on a more stable footing without radical changes to the program, most of us -- including those who are close to receiving our own benefits -- probably could be supportive. But we have to hear it from people who can explain the changes without ranting and without using the word Ponzi.

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3 Comments
Homeless
November 04, 2011 at 12:05 pm

There are simply too many people people living too long for SS to continue as it was originally set up. Also, it was set up to keep people from being at poverty level, to cover basic necessities. The fact that someone can retire with a cushy pension, retirement assets they saved themselves AND collect SS is not what the plan was meant to do.

Yes, the current seniors have paid in for most of their lives and I am not sure I agree with major changes for THEM, however, it needs to be changed for futre generations...as you state the math just does not add up.

The other MAJOR drain on SS is the silly death benefit that covers NOTHING relating to a funeral costs (except maybe a floral arrangement) AND payments to children whose parents pass away AND disability.

The payments to minors should be removed, term insurance is cheap and as people age, they should be saving and investing to create coverage for the needs of their children. It's called PLANNING.

The same can be done with disability insurance...let people buy their own to take care of their needs if they become disabled. If they can't be bothered with those basic pieces of a financial plan, that is there problem, why do I have to foot the bill. Regardless of ANY financial state I have been in I never let anything happen to my life insurance or disability insurance...to me they are as necessary as food and shelter, to be able to protect my family.

Ted
October 26, 2011 at 8:42 am

Am I being irrational if I say I want out of SS?

In a Ponzi scheme participants can use their better judgment to not get involved. SS is worse in that I will ultimately go to jail if I act on my desire to opt out.

Wolverine
October 26, 2011 at 7:02 am

#1:
"One of the reasons we think we should get what we paid for is..."

If you were to get what you paid for, wouldn't you be getting a lot LESS? Might want to rephrase that sentence there, because I'm sure anyone receiving a monthly check of $1000 did NOT pay $1000 out of their paycheck every single month.

Then you wonder why people mention the word "Ponzi" when it comes to Social Security.

#2: Here's the problem with Social Security. It was an entitlement that now has become a necessity. A lot of people are hitting retirement age and all of a sudden wondering what happened to that wonderful SS package they were going to get and then... it's not what it cracked up to be, specially for seniors who didn't get those cushy pensions or didn't save up for retirement. They just thought they were going to be magically taken care of and all would be well. Reality is a harsh teacher.

#3: And of course we are getting more than our grandparents, didn't you try to hammer that point with that ridiculous inflation article a few days ago? What was it 4.4% inflation over 40 years? In the end, it's all relative. You might be getting more than your grandparents, but how does it compare to the cost of living back in the day? Just comparing rough numbers is irresponsible.

#4: You argue that seniors should DEFINITELY get Social Security... by using the argument that they need it more because senior citizens aren't as poor as they used to be 50 years ago? You sure you're not arguing against it?