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Vive le Social Security

By Barbara Whelehan · Bankrate.com
Friday, October 22, 2010
Posted: 1 pm ET

If I somehow manage to strike it rich in the next 10 years, my retirement planning objectives will change. I will buy an apartment in Paris (where property costs are very dear). Once settled, I will spend afternoons at a sidewalk cafe, order "un café au lait, si'l vous plait," and listen to snippets of melodic conversations among Parisian passersby. When I'm overcome by ennui, I will ask the waiter for the check. "Garcon, l'addition, si'l vous plait!"

I know enough French to ask for directions to the train station and airport, but over the past couple months, many of the country's public transportation systems were gridlocked. The people of France have been throwing a collective temper tantrum, protesting government plans to raise the retirement age for the country's pension system from 60 to 62.

Photo credit: Reuters

Is the French populace spoiled or what?

Working helps the brain
In last week's blog, I presented one case for working longer. It can make a big difference in your quality of life if you postpone retirement and work for a few extra years. Then again, it can arguably make a big difference in your quality of life if you hasten retirement a few extra years.

In a study called "Mental Retirement," the authors found a correlation between early retirement and cognitive decline. They looked at test scores in the U.S. and a dozen European countries. The population was divided among people in their early 50s and people in their early 60s, and it was noted whether they were working or retired.

As it turns out, those people in the U.S., Denmark, Sweden and Switzerland, where a large percentage of the 60- to 64-year-old subjects remained in the work force, performed remarkably better on the test relative to those of the same age in Austria, Belgium, France and the Netherlands, where the subjects were mostly retired. Conclusion:  A stimulating, challenging work environment can keep your mind sharp.

Tax the rich
There are other ways to save pension systems besides raising the retirement age. As I pointed out on two previous occasions, the Special Committee on Aging came up with 30-plus solutions to fix Social Security. My favorite solution is to eliminate the cap on Social Security taxes. Right now, only earnings up to $106,800 are taxed. If the cap is eliminated, high earners would get a smaller check (so what?), and Social Security would remain solvent over the next 75 years.

This solution can be taken a step further. In a recent Wall Street Journal opinion piece, Ken Langone, a co-founder of Home Depot, suggested that rich people shouldn't get Social Security checks at all. "It makes little sense to send Treasury checks to high-net-worth people in the form of Social Security," he writes. "I guarantee you that many millionaires and billionaires will gladly forgo it. …"

Hey -- this is not my idea. It's coming straight from the mind of a wealthy capitalist.

Honestly, though, if I were to strike it rich in the next 10 years, I might forgo that Social Security check, too. But right now I am really counting on it.

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6 Comments
End the Ponzi Scheme
October 25, 2010 at 1:32 pm

Standard liberal drivel. Tax the rich. We're already funding the shortfall through income tax, now you want even more.

Until the beast is starved of cash, and the Fed can't print money, we're stuck in this downward spiral.

Put an end date on benefits, make it 30-40 years out, then turn off the tap, that's it, no more. It will be painful for a time getting through the overload of baby boomers draining the taxpayers (note this is different from workers, or even less than retirement age folks), but the long term consequences are far worse if this thing is allowed to continue with fewer and fewer paying in. At some point we have to shake the leaches from the system, or there won't be anything worth saving.

TL
October 25, 2010 at 1:07 pm

Horrible, horrible idea. Oh it might work for a little while...but over time rates would have to be raised again...and again..and again.

The government cannot stop its spending unless we stop funding it...and even then it doesn't stop!

A much better solution is to REQUIRE every American to contribute to a 401K beginning at age 25. Of course, if you don't make enough to contribute, the government would have to kick in your contribution. Oh, wait, that's Obamacare...

At least invest the money so that it grows...rather than being spent!

ADAM SALEM
October 23, 2010 at 11:04 am

THAT'S RIGHT FOLKS !! Stay in school , work hard ,stay out of trouble so you can pay for those who didn't !! thanks for nothing Barbara !

pk
October 22, 2010 at 6:21 pm

Removing cap on income to tax Social security means, 6.5% additional tax on people earning about $104000 annually.It is a Tax hike for middle class. With employer also paying additional 6.5% is 13% windfall to Govt.; who can't seem to stop spending all the money she gets and more!
How about reducing Social Security Tax to say,2% and then making budget neutral to 1 Million income.Now you have tax cut to poor and Middle class and more for wealthy.Then be prepared to get less at 65-67 as you have paid smaller amount in funding.That means lesser liability for future. Start saving early and don't rely on Govt.

Jay
October 22, 2010 at 5:34 pm

I would love to get rid of SS. What a waste of hard earned money. I could save for my own retirement better if were allowed to keep my own money...

JF
October 22, 2010 at 4:58 pm

Ha... well Barbara, if you ever strike it rich, avoid calling the waiter "garçon." They don't do that over here, anymore. (It's like saying, "Boy, bring me the check...").

Also, just to add, the protests -- which are indeed, in my opinion, ridiculous -- are not just about the raising of the retirement age. The other factor is that they are seeking to include a mandatory working career of 40+ years before anyone can collect. That's maybe more of a legit beef, as it's hard on, say, mothers who raised children for years and then went back to work.

Still, we're looking at the possibility of not getting our flight Stateside on Sunday because protesters might be blocking the airports. And even the local French are tiring of the half Metro service, etc. They might just opt, in the end, to lump it even if they don't like it.

Personally, I'm hoping I won't need Social Security by the time comes (I'm 44 with seven-figure savings, but just barely that, so it may or may not be enough given inflation etc.) But even if I do, I don't quite expect it to be there. The math is grim.

I'm also thinking, though, that I'm not sure I'm really interested in retirement. Maybe a few longer trips, etc. But I like being engaged in something. Will I feel that way 20-30 years from now? I don't know. But hopefully, I'll have the health and energy to have the luxury of that decision.

'til then... hope to see you in Paris sometime!