Social Security has a big retirement planning problem. It isn't bringing in enough tax dollars to pay benefits to the millions of baby boomers who will be retiring shortly.
Warren Sanderson, an economics professor at Stony Brook University and co-author of recent research on stabilizing retirement systems worldwide, sees keeping baby boomers on the job as key to fixing Social Security's problems. He says that the longer baby boomers stay in the labor force, the more money they continue to pay into the Social Security system, helping to finance their own retirements and the retirements of others.
Sanderson thinks that unless something is done to shore up the Social Security system pretty soon, the only really viable solution will be to raise the Social Security retirement age to 70 or 71. Currently, full retirement age is 66 and it's already slated to go to 67 for those born in 1960 or later. Sanderson believes that moving the age even higher won't be necessary if we could keep more people working. "People don't realize how high the Social Security claiming ages are going to have to go if we are going to continue supporting retired people," he says. "But if we get rid of disincentives for older people who want to work and kept more of them working, it could save us from having to raise the Social Security retirement age by a year or two."
In particular, Sanderson would:
- Pass and enforce strong anti-age discrimination laws.
- Change the rules for those between the ages of 62 and 66 so that they can earn as much money as they want while still collecting Social Security. The amount of money people collect during those years is already reduced to reflect the fact that they'll be collecting longer. Sanderson says, "It is a silly policy that encourages people to take Social Security and not work when they should be working."
- Reform tax policy so the lower earner in a couple -- often the wife -- isn't deterred from working because her income for tax-calculation purposes is added to her husband's income. "It is a distortion that discourages older women from working," Sanderson says.
- Carefully manage Social Security disability so people who could work are encouraged to do so.
What Sanderson suggests sounds good to me. How do you feel about it?