Retirement Blog

Finance Blogs » Retirement Blog » Social Security — more for less

Social Security — more for less

By Jennie L. Phipps ·
Tuesday, February 26, 2013
Posted: 6 pm ET

Thomas Saving, a professor of economics at Texas A&M University and director of its Private Enterprise Research Center, offers some startling retirement planning statistics.

His analysis of Social Security data shows that men with top earnings -- the highest 10 percent -- are living much longer than they used to. Their life expectancy past age 65 has increased six years in the last three decades. That has led many people -- including some in powerful places -- to think we ought to raise the age of eligibility for Social Security.

But Saving says this ignores the fact that over the past 30 years, life expectancy beyond age 65 for men with below-average incomes has only risen a single year. If the age of Social Security eligibility goes up, then men with low incomes who die at younger ages will get less from Social Security than people who live longer and have a longer time to collect.

Social Security was never envisioned to be a retirement plan, Saving says. From the very beginning, people who earned less and paid in less got a larger percentage back than people who earned more and paid in more. "(Former President Franklin D.) Roosevelt called what people put into the system 'contributions.' No doubt about it, it's a redistributive plan," says Saving, who is himself 79 and personally familiar with how Social Security works.

In a paper written for the National Center for Policy Analysis, a public policy research organization, Saving suggests that if the decision is made to raise the age of Social Security eligibility, then the benefit formula should be changed so that high earners get a still lower percentage return on the money they pay in while lower earners get a better return than they are getting now.

However it is done, Saving believes the Social Security system has to be adjusted to reflect longevity in order to make the system solvent. "Otherwise, we're looking at two workers for every retiree, and the tax is going to have to be 25 percent," he says.

Bankrate wants to hear from you and encourages comments. We ask that you stay on topic, respect other people's opinions, and avoid profanity, offensive statements, and illegal content. Please keep in mind that we reserve the right to (but are not obligated to) edit or delete your comments. Please avoid posting private or confidential information, and also keep in mind that anything you post may be disclosed, published, transmitted or reused.

By submitting a post, you agree to be bound by Bankrate's terms of use. Please refer to Bankrate's privacy policy for more information regarding Bankrate's privacy practices.
April 10, 2013 at 12:19 am

I'm generally to blogging and i honestly appreciate your content. The post has definitely peaks my interest. I am going to bookmark your webpage and keep checking for new specifics.

[URL=]michael kors crossbody[/URL]

April 09, 2013 at 11:54 pm

Spot on with this write-up, I really believe this web site needs much more consideration. I'll possibly be once again to read a lot more, thanks for that info.

[url=]real christian louboutin[/url]

Peter Berry
March 02, 2013 at 9:16 am

I had be interested to learn how this ties in with an Adsense effort...

February 28, 2013 at 10:46 am

@ Sam Heche what makes you think fed workers do not pay into SS nor contribute to a pension plan? As a fed worker, I do both and just like the rest of the country, my check was reduced another 2% when the SS witholding rate went back up. My pension plan is called FERS but I cant tell you the percentage, as I dont know. My LES came out yesterday... OASDI - 123.63 and FERS 16.60. You can find out the percentages based on being a GS-07 Step 10 in the Denver area. Are you telling me I am the only one paying into these?