A reform of Social Security has to be chief among the considerations that younger workers have as they think about retirement planning.
A reform plan outlined a year ago by President Barack Obama’s fiscal commission is attracting more attention since the deficit-reduction "Super Committee" failed to agree. Last year's bipartisan panel, chaired by Erskine Bowles and Alan Simpson, offers only one of many plans to put Social Security on more stable footing, but Melissa Favreault, senior fellow at the nonprofit, nonpartisan Urban Institute think tank, says it is positioned in the middle -- raising some taxes and cutting some benefits -- and is, therefore, the plan mostly likely to win passage by Congress.
Favreault and a team of economists and actuaries have analyzed the Bowles plan and concluded current recipients and younger people with lower incomes will escape much pain in this reform, but workers who end up with high lifetime earnings who will be considering retirement between 2050 and 2070 could see sharp benefit cuts under this scheme.
Getting your children to think about Social Security reform may be tough. Our own five, who range in age from 26 to 43, don't think this will be an issue for them because they don't believe they will ever retire -- or even get old. But we know that's not true. Age has a way of sneaking up on you.
Favreault says the most important thing young people can do is push for a solution -- Bowles or another -- now rather than five or 10 years from now because if we make changes right away, they won't have to be nearly as draconian as they will if we wait. "Young people have a stake in solving this sooner rather than later because if we fix the problems now, less of the burden is likely to be switched to them," she says.
As both a concerned parent and a member of a generation that watched this problem get worse without doing enough to fix it, I think it's the duty of baby boomers to step up and ensure that we don't allow the Social Security mess to burden our children. Now's the time to hound our kids until they agree to join us in pushing for quick and equitable reform.