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.