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Shoring up Social Security

By Barbara Whelehan · Bankrate.com
Tuesday, May 18, 2010
Posted: 5 pm ET

Next week, French union workers will stage a big protest against their government's plan to raise the retirement age. They don't even know yet what age it will be raised to from its current level of 60. The details won't be released until June.

You've got to love the French for their moxie. They love life, and they have their priorities straight. For instance, the French take 35 vacation days a year, versus 11 for Americans, according to an Expedia survey I wrote about a couple of years ago. Over a working career of four decades, French vacations amount to a whopping 1,400 days, or 3.8 years.

Meanwhile, here in this workaholic country of ours, we often take our Blackberrys and laptops with us when we get away from it all, and keep up with e-mails so that we're not barraged on our return to the office. How screwed up is that?

Our Social Security system, which has been in place now for nearly 75 years, is also set up to encourage us to postpone for as long as possible that everlasting vacation known as retirement. For example, those Americans born in 1960 or later won't get full Social Security benefits until they reach age 67. If they begin drawing benefits early, at age 62, they take a 30 percent pay cut. If they wait until age 65, their benefits are reduced by 13.3 percent. If they wait until age 70, they get a bonus.

Now there's talk of further delaying Americans' retirement ages. The official Senate Special Committee on Aging report on Social Security was released today by Sen. Herb Kohl, D-Wis., committee chairman.  In the 99-page report are 30-odd proposals designed to shore up the Social Security system. Many of these proposals have to do with raising taxes.

Delaying retirement again

Three of the most objectionable solutions, in my opinion, involve raising the retirement age. This already was done during the Reagan administration, back when we were too young to care.

The first "solution" in the new report changes the current schedule. Those born in 1953 wouldn't reach full-retirement age until age 67 (instead of 66). Then gradually, the full-benefit age increases so that those born in 1977 or later would reach full retirement age at 68.

The second solution continues this schedule going forward so that full-retirement age becomes 70 for those born in 2025.

The third solution doesn't change the current schedule (which as I mentioned has age 67 as full-retirement age for those born in 1960 or later), but does increase full-retirement age to "68 for those born in 1984, to 69 for those born in 2008 and to about age 70 for individuals born in 2032," according to the report.

I personally am opposed to the first and second solutions, as they would affect me directly. I'm not too concerned about people born in 2025 or later because, after all, they haven't been promised anything. Heck, they're not even scheduled to be born for another 15 years.

The most radical proposal in the report recommends investing 40 percent of trust fund assets in equities. Yup, the stock market. Maybe that's a fine idea, but after the recent "flash crash," I wonder if this solution to Social Security's solvency problem might wind up deep-sixing the system altogether.

What do you think? Should the full-retirement age for Social Security go as high as 70? Should the trust fund be invested in stocks?  Do you think Social Security will be there for you?

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6 Comments
Richard
June 16, 2010 at 1:46 pm

My grandfather, a retired farmer, chose to work out his life rather than waste away on social security. He worked the day he died- at age 76. Our nation will not fix social security (a bad idea to begin with), until more people are willing to work. Work is the only solution, yet an increasing number of people want to live on the backs of others through government programs, including unemployment and disability.

M. Ryan
June 14, 2010 at 5:30 pm

Slice it, dice it any way you want; the bottome line is that there are only two ways to "fix" SS. The system must either pay out less, or tax more in. It does not matter what you are "owed" if there is not enough there, you won't get it. If Uncle Sam wants to avoid a scene right out of a Greek tragedy, he better get on the move, and do something to avoid that outcome; which is inevitabel unless some politicians grow some cajones.

Interested Spectator
June 01, 2010 at 1:03 am

What do you call an "investment" that pays returns from money paid by subsequent investors? A Ponzi scheme! Of course, if it's government sponsored, it's somehow "different", right?!? We all know where this thing is headed.

Rather than continuing to pour good money after bad, I say we chalk it up as an expensive social experiment, abolish the program, and settle the debt now, even though it may be for pennies on the dollar. Tempting as it may be to hold out hope of getting "everything we are due" by requiring more of future generations, it pains me to saddle my children and grandchildren with this debt!

P.S. And don't even start in on healthcare!

Brent Railey
May 22, 2010 at 5:42 am

Loren: Social Security wasn't successful in the 50's and 60's because of 80% taxes. None of the federal tax revenues went to Social Security. It "worked" because there were far more people working an paying into the system than retired and drawing from it. It's not working now because (1) people are living longer, and (2) people are having significantly less children. You have more people drawing and less people paying into it. Social Security isn't savings, it's wealth redistribution from young to old.

Lynn: Social Security IS a hand-out. Your money was stolen the moment it was withheld from your paycheck. It doesn't go to a savings account, it goes directly to a "beneficiary", after much of it is absorbed by government bureaucracy. Social Security will never provide enough for people to live on. It is the largest swindle in the history of the USA.

Jim, I say the same thing to you: the money has already been stolen. It doesn't exist. It will go bankrupt.

Disinterested Spectator: Raise the payroll tax? Because you want to retire early, you think it's ok to steal from my generation?

The fact that the government promised a hand-out at retirement made an multiple generations live beyond their true means. Because you believed the lie the government told you, you want me to pay for it. At some point, there will not be enough of us youngsters to pay your benefits!

There is no "trust fund." It's a bunch of worthless IOUs from the federal government--you know, the same government who can't pay its year-to-year bill with out borrowing.

Face it. You all have been had by our "benevolent" federal government.

As for Barbara: this article is the most selfish piece of drivel I heard in some time. I can't believe this passes as commentary on a site like http://www.bankrate.com.

Lynn Carroll
May 19, 2010 at 11:15 am

It makes me mad that this is my money they're toying with, not a hand-out. And the past four (at least) presidents, from both parties, have been dipping into it with no plan to put back what they took. How is this different from stealing from your mother's purse?

The other thing that steams me is how little they mete out -- nowhere near enough for anyone single to live on, which is why I have all these friends approaching 70 and still dragging themselves off to work, with no plans to quit.

Disinterested Spectator, Houston
May 18, 2010 at 6:52 pm

The fact that we are living longer does not mean we are capable of working longer. Even the easy jobs (indoors, sitting down, no heavy lifting) may be too much for someone in his late sixties, not to mention the physically demanding jobs (and we can't all be promoted to foreman). Raise the payroll tax, not the retirement age.
And let's keep the trust fund out of the stock market. Social Security should be our socialist hedge against our capitalist 401k plans.