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Social Security — more for less

By Jennie L. Phipps · Bankrate.com
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.

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65 Comments
Steve O
February 27, 2013 at 4:54 pm

Hey Steve... we may not be able to cheat death but we could mess with your investment in cemeteries.... 1 word... cremation ! pretty cheap to get that done and the cemeteries don't make much on that !

Dave Colliau
February 27, 2013 at 4:53 pm

61 years old Maxed out on SS but still paying in? WHY.. I could use that money every Week/Month/Year to add to my retirement savings that really needs help.. Sure wish all the politicians punched time clocks and made about 17k a year to start with a week vacation. maybe they would actually work for us ?

Dave Colliau
February 27, 2013 at 4:53 pm

61 years old Maxed out on SS but still paying in? WHY.. I could use that money every Week/Month/Year to add to my retirement savings that really needs help.. Sure wish all the politicians punched time clocks and made

Kathy
February 27, 2013 at 4:44 pm

Steve, FYI I am 56 yrs old and I am a baby boomer and I must work until I am 66.5 yrs old before I can retire with full benefits. It is not just the generation X people. By the way, I have worked full time for the last 34 yrs and have paid into SS all along. While people may now refer to SS by it's dirty little word "entitlement", they sure did not call it that when they stole from my check every week! I do not have the luxury of time like you have to build up my retirement fund. And by the way, not all of us have a desk job that we can still work at until 70. Some of us do real physical jobs and will be lucky if we can do it till 65. And please spare me and do not talk about re-training for a different job, companies do not want to touch you today if you are over 55, no matter what your educational level is.

jimothy
February 27, 2013 at 4:41 pm

All the president's men told us how mitt was so evil. Now they are going to spend the next 4 years trying to convince us by proxy (through outlets like comcast) that raising the age and lowering the benefit is in our collective best interest. We are a nation full of chumps.

John
February 27, 2013 at 4:39 pm

It's time to raise the cap on the income taxed by Social Security. Right now the payroll tax is collected only on income earned up to about 105,000 dollars. Whatever is made above that is not taxed. Thus, the people who are making over the payroll tax cap are paying less of a percentage of their income into Social Security.

tom
February 27, 2013 at 4:38 pm

if the government did not rade ss over the last 40 years their would be plenty of money in it.if you payed in to ss you have every right to collect it.if a proivet company took money from
your retirement.they woiuld be locked up.it's time to clean house
get rid of all gov dead weight.send them packing with no pension
after what the they did to this country.tom d

Lauren
February 27, 2013 at 4:35 pm

By the way Steve, do not count on my husband and I we are being cremated and scattered in the wilderness so we do not take up valuable space.

Toni
February 27, 2013 at 4:31 pm

Social Security is running out of funds for one major reason.
Non-citizens collecting the benefits. One does not have to be a citizen of the US to collect Social Security at age 65! Thank Jimmy Carter.
In addition disability benefits are given out like halloween candy. Individuals that are fit to work are collecting. Have you had contact with Social Security Disability benefit Doctors? I have and they are shadtree doctors.
Cleaning up the system and only paying the social Security benefits to the actual contributors is one answer.

cynthia
February 27, 2013 at 4:26 pm

everyone knew the baby boomers were coming. politians did not care. just kept spending my money and know you want to cheat us out of what is rightfully ours.