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Should we raise the Social Security age to 70?

I'm not surprised to hear there's energy behind pushing the retirement age at which you get full Social Security benefits back to 70. It's the sort of idea that seems like a no-brainer to pundits and politicians who would happily pay you if you'd allow them to keep working to age 70, and in fact beyond. It also has a weird sort of currency in Washington: It shows you're willing to make painful sacrifices in order to balance the budget, even though the people advocating this change aren't the ones who would be making the sacrifice. Tellingly, there's no similar groundswell for raising the FICA cap, which would mean wealthy people pay more to support the program.

But I've never liked it. The customary justification is that when Social Security was created, people died younger, and so it was never meant to stretch this far in the first place. But that argument works in the other direction, too: Our country has become far richer than the architects of Social Security could have possibly imagined. It would make perfect sense for us to give ourselves more leisure time, if we chose to take it, at the end of our lives.

This is where our sacred cows really begin to gall: Our willingness to accept an inefficient health-care system that costs twice the OECD average, leaves 50 million people uninsured and doesn't deliver obviously superior results, for instance. Say what you will about Britain's National Health Service, but if we were spending $3,129 per person, as they are, rather than $7,538 per person, as we are, we could retire quite a bit earlier. Or take defense: If were accounting for 20 percent of the world's defense spending, rather than 46 percent, well, that would be a lot of money we could use to better our lives.

One of the ironies of America is that we've become really, really rich, but that's also allowed us to disregard an enormous amount of inefficiency and waste in our midst. Letting people retire at 65 rather than 70 costs money, but it at least serves a distinct purpose. Spending twice as much as other countries for health care without getting better results doesn't, and bearing half the world's defense spending on our shoulders is a questionable priority, as well. I'd be a lot more open to raising the Social Security age if there wasn't so much obvious fat to cut first.

By Ezra Klein  |  July 8, 2010; 10:50 AM ET
Categories:  Budget  
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Comments

Ezra, why is raising the retirement age getting such a big push and not raising (or even eliminating) the cap on payroll taxes? The latter would seem to have much fewer downsides.

It's one thing to tell people to keep working jobs until they're 70, it's another for there to actually be jobs for them to work.

Posted by: lol-lol | July 8, 2010 10:56 AM | Report abuse

I tend to agree with lol-lol on this. Removing the cap on payroll taxes (particularly if they pay a lower percentage, over a certain amount, but still continue to pay something on their full income) seems like a no-brainer way to solve any social security solvency issues.

Posted by: Kevin_Willis | July 8, 2010 11:00 AM | Report abuse

The "living longer" argument for raising the retirement age is flawed. Life expectancy AT BIRTH is now substantially longer than it was when Social Security was created (about 14 years for men and 15 for women), but life expectancy AT RETIREMENT is only about 4 years longer for men and 5 years longer for women than it was in 1940, and 2 years of that increase has already been 'recaptured' by the increase in full retirement age to 67 for future retirees. In other words, people are not collecting benefits for a far greater number of years than they did in 1940, it's just that a far greater number of people are living to the age when they can collect benefits. Decreases in infant mortaility and premature death have increased overall life expectancy, but even our vast spending on Medicare has not increased life expectancy at retirement all that much.

As you said, politicians and pundits think working until 70 is a great idea. I would have been glad to keep 'working' if all I had to do was sit on my tush and spout idea. Unfortunately, like most people, I had a real job, and I was very tired of it. And while I like to feel I was still pretty good at my job when I retired, I can't say that I feel the same about a number of the senior management in my agency who chose to work to 70 and beyond, and basically became an impediment to getting anything useful done because they had lost the ability to absorb and respond to new information and changes in the way our programs were actually functioning in the real world.

Posted by: exgovgirl | July 8, 2010 11:09 AM | Report abuse

Part of the reason Social Security has enjoyed such wide support is that it is NOT designed to redistribute wealth. There is a correlation between what you put in and what you get out. If the cap is removed, it becomes just another way for lower income people to be subsidized by higher income people.

In any case, these proposals are attempting to fix a problem that does not exist. Social Security has been substantially overfunded for a generation and has plenty of assets to meet its obligations for decades into the future. The only funding "problem" is that some politicians want to continue having SS subsidize the rest of the government, instead of spending down the accumulated surplus on benefits as originally intended. There is no SS problem, there's a general fund problem.

Posted by: tl_houston | July 8, 2010 11:13 AM | Report abuse

Any discussion about raising the age of retirement, or otherwise reducing Social Security benefits, should only be made alongside a clear discussion of the obvious alternative, which is raising the cap on income on which the tax is collected.

Many Americans earning less than the $106k cap are not even aware that such a cap exists. There needs to be a truly informed debate about the best way to reform Social Security among the competing alternatives.

Posted by: Patrick_M | July 8, 2010 11:17 AM | Report abuse

@tl_houston: I agree that social security is not in immediate danger (30+ years of full benefits with no changes) and that SS has been popular because it is not means tested. But the longer term SS problems with the low ratio of workers to retirees is a demographic problem that does need to be addressed. Gradually raising the cap over time (even just by the rate of inflation) so that the SS tax is slightly less regressive seems like a way to do this without penalizing current or soon to be retirees and without changing the structure of the program too much.

Posted by: srw3 | July 8, 2010 11:30 AM | Report abuse

The cap has been increasing faster than actual wages for many years. In fact, it has more than doubled since 1990. I don't have the figures handy, but I'd bet more people had incomes exceeding the cap in 1990 than do now.

Posted by: tl_houston | July 8, 2010 11:30 AM | Report abuse

Is the proposal to raise the retirement age to 70 really just a way to lower the benefits you get at 62? The math I've seen is that it makes sense to start SS at 62, because you get 3 (for me 5) years of payments at a cost of (for me) 70 % of your check for your life expectancy. I assume if the retirement age goes up, the penalty at 62 goes up and the math changes only a little bit.

Posted by: windshouter | July 8, 2010 11:31 AM | Report abuse

One cannot in good conscience consider raising the SS age to 70 in light of the high unemployment rate for those over 50. It's no wonder that some have taken to calling it the "catfood commission" as in we'll be going back to the days when old folks were so poor they ate catfood.

Folks in the 50-70 age range cannot work all professions, a great many require physical stamana that just isn't there and for some the mind isn't up to full time work either. It's beyond cruel to move the goal posts on retirement when the job market has shortened the amount of years one can realistically expect employment!

Posted by: HokieAnnie | July 8, 2010 11:32 AM | Report abuse

I continue to advocate changing the retirement age for those born after 1980, as well as eliminating Medicare benefits (but not "contributions") for those born after 1980. This allow younger folk to plan the direction of their country... to avoid debt in any manner they choose.

Posted by: rmgregory | July 8, 2010 11:36 AM | Report abuse

Workers are fired for being "too old" at 40 and people wonder why there has been a big increase in suicides among the middle aged.

Posted by: harold3 | July 8, 2010 11:42 AM | Report abuse

Ignoring the fact for the moment that Soc. Security taxes are horribly regressive, wouldn't raising the retirement age also instantly raise the unemployment rate? Won't an oversupply of labor further drive down incomes, increasing poverty levels? OK, we'll make Soc. Sec. more solvent, while at the same time exacerbating our unemployment and poverty problems and costs.

Posted by: AuthorEditor | July 8, 2010 11:52 AM | Report abuse

SS at 70 is a terrible idea.

SS does not need much of a fix or any at all. SS benefits are currently taxed and the taxes go into the SSTF. If any fix is needed, it would be best to tax SS benefits for high income seniors at a slightly higher rate. Then SS would function more like insurance. Those who don't need it would return money to the SSTF. Those who did need would draw full insurance benefits. It would adjust automatically.

Posted by: bakho | July 8, 2010 12:00 PM | Report abuse

I'm glad exgovgirl pointed out that life expectancy at retirement has not increased much since 1940, and most of that increase has already been captured by the 1983 reforms. Moreover, there seems to be a built-in assumption here that life expectancy is going to increase. I have my doubts about that. Right now there are a whole lot of people in their 80s, 90s and even 100s from the GI Generation. But what is going to be the effect of nutrition changes since 1950, when processed food really got started, and especially since 1980, with HFC and the start of the obesity epidemic? What about the cumulative effect of chemical pollution since WWII? What about cell phones, where the jury is still out for chronic users? Climate changes that will be felt in 2025? Any or all of these things acting in concert could reduce life expectancy for people born after 1960, maybe by more than 5 years, which makes raising the retirement age even more stupid than it already is.

After all, the budgetary benefits of raising the retirement age won't kick in for another 15-20-25 years. Who knows where we will be by then? It may be that the real aim is to further raise the penalty for taking benefits at 62. But even here, the societal benefits of older people exiting the workforce to make room for younger people makes real sense. Raise the cap a little over the next 10 years. That will take care of all the problems with SS. And look at Medicare, since that's where the real budget problems are. Look seriously at reducing unnecessary treatments and changing reimbursement incentives. But take the boot off the neck of the young.

Posted by: Mimikatz | July 8, 2010 12:02 PM | Report abuse

Raising the retirement age to 70 isn't fair to those with the most stressful, manual jobs.

If got out of high school and entered construction or a factory job you have to put in 51 years of manual labor until you have reached retirement age (19-70).

Conversely, someone with an MBA and an office job might put in something closer to 45 years of comfortable work, assuming 4 years of college and 2 of grad school.

As others have said, what about the 56 year old who lost their job and has been looking for 2 years?

If you're going to redistribute income, this doesn't seem to be a fair way to go about it.

Maybe instead of having TANF, food stamps, unemployment insurance, social security, pell grants, ad nauseum, we should just have a basic income and public hospitals.

$12,000/yr per citizen age 19 and up ($24,000 per married couple) and a flat tax in the 25%-30% range. Enough to keep a single person (or a married couple with two kids) above the poverty line.

Sure, there would be work disincentives but its not as if we don't have those today. If we want a safety net, okay fine lets have one, but let's stop trying to micromanage a dozen social programs and setting arbitrary cutoffs which lets people slide through the cracks.

Posted by: justin84 | July 8, 2010 12:19 PM | Report abuse

@tl: Thanks for the clarification. The cap does need to go up faster than it is going up now.

While it is true that more people had incomes over the cap in 1990. But the trend is that the % of people that are above the cap is much smaller but the % of income not subject to the cap remains high. So now, only about 6% of people are over the cap, but 15% of earnings are above the cap. Before Reagan's tax reform in 1982, these two graphs were fairly closely correlated with % workers always higher than % of earnings. In 1973 this changed, but the real divergence happened when Reagan "fixed" social security and cut taxes on the wealthy. http://blog.american.com/?p=16510

Posted by: srw3 | July 8, 2010 12:21 PM | Report abuse

Raising the SS retirement age to 70 is a nonstarter because, in case you haven't noticed, older workers are already being pushed out of their jobs in favor of younger, cheaper workers. If anything they're having to retire earlier, not because they're so much wealthier but because nobody's clamoring to hire anyone who's much older than 50. Exactly where are the jobs people are supposed to be working at until they turn 70?

There's a perfectly good alternative, which is lifting the income cap for SS withholding. Why is there any cap at all?

Posted by: csdiego | July 8, 2010 12:33 PM | Report abuse

A person can retire at any age she wants. A retirement plan was developed hundreds of years ago that works pretty well. It's called a savings account.

Posted by: kingstu01 | July 8, 2010 12:33 PM | Report abuse

Ezra,

We're a far richer country for a very small slice of our population, the rest either are little different than when Social Security was adopted, or those who were getting marginally ahead (middle class) have been backsliding for the last 20 years. Please reference some of the charts you've had on the increasing gap in income distribution in the US.

More importantly, the issue is MEDICARE costs! Social Security is solvent for the next 40 years and doesn't require major reform, only minor tweaks, at present to ensure it remains so. This sounds like another conservative go-round into regressive income redistribution based on an imaginary issue.

This is a non-issue being pushed by those who have without regard to those who have not.

Posted by: Jaycal | July 8, 2010 12:33 PM | Report abuse

Age discrimination and the difficulty finding working later in life are two major impediments against raising the retirement age ceiling.

Rather than talking about raising eligibility limits, we should talk more seriously about simplifying the tax code (e.g. closing the Hedge Fund managers loop-holes) and require a pay-in even above a high-income threshold.

Posted by: JPRS | July 8, 2010 1:11 PM | Report abuse


the idea that social security taxes are "regressive" seems apparent on the surface, but also 1. belies the forced savings character of the program to overcome adverse selection issues in annuities markets and 2. isn't necessarily true across the board if you take into account the AIME and PIA.

indeed, there is a strong argument that ss taxes aren't regressive at all: http://www.nber.org/chapters/c10923.pdf (National Bureau of Economic Research pub. showing that low earners earn a 5.19% internal rate of return on their contributions to Social Security, while high earners get just 0.54%. They also measure the effective Social Security tax rate—the tax which represents a pure tax rather than a claim on a future benefit. From that perspective Social Security taxes actually look fairly progressive. On average 67 cents of every Social Security tax dollar is a pure tax, but the pure tax rate is negative for low-income earners and 79 cents for high earners). (plus, if you count ssdi it's even more progressive, but i try not to lump that in)

anyway, this analysis is complicated (for example, since certain populations die faster on average, like african americans, the system can burden them), and there are plenty of counter analysis (Citizens for Tax Justice for example also hits this regressive issue), but the point is that it's a bit more complicated than just proclaiming that ss is "regressive" IMO...

Posted by: stantheman21 | July 8, 2010 1:18 PM | Report abuse

While it's true that the SS tax is a flat rate, the benefit levels are quite progressive, so it's really not accurate to say SS is regressive. There is no tax on income above the cap, but there is also no benefit paid. Income in excess of the cap simply doesn't exist as far as SS is concerned.

I don't remember the exact numbers, but SS replaces 90% of income below about $10K/year, about 1/3 of income between $10K and about $50K, 15% of income between $50K and the cap, and zero for income above the cap. Given that the SS tax is 15% in the first place, the 15% benefit between $50K and the cap is actually a net loss to the "beneficiary", assuming the money could have been invested in something paying more interest than a mattress.

Posted by: tl_houston | July 8, 2010 1:23 PM | Report abuse

Ezra,

Since when does defense spending or health care spending have anything to do with Social Security's finances? Social Security is a self-supporting system financed by payroll taxes.

In Social Security, every American has a greater probability of the actuarial present value of benefits exceeding their actuarial present value of contributions. The more an individual contributes to Social Security, the more benefits an individual receves, although the benefits replace a progressively lower percentage of a person's income as income rises. This is what makes Social Security so popular. If you subject more wages to the payroll tax, then you have to credit those contributions with greater benefits. Because of this, subjecting 90 percent of wages to the payroll tax, and crediting it for benefits fills only one-third of the current shortfall (based on a 75-year projection).

That said, I don't believe the Social Security shortfall is enough of a problem at this point to justify it as a high priority. It will still be 30 years before Social Security cannot pay its full benefits. The bigger problem is Medicare and our long-term budget deficit -- let alone health care affordability and the threat of global warming.

Posted by: moronjim | July 8, 2010 1:27 PM | Report abuse

First off, Social Security is an anti-poverty program. It is not designed to be generous nor allow for extravagent displays of leisure, no matter the underlying riches. If you want to have a program to extend leisure time then go implement that program. Social Security is not, as presently structured, that program.

I think raising the retirement age is a good idea. I don't support it as a means of solving some imaginary insolvency issue. I think no such issue exists. Rather I support it as a necessary change to an evolving system whose governing inequalities are fast moving outside the scope of their original intent: a purely technocratic need. I would hope free thinkers be open to ideas on exactly how it would be done. Could you add a voluntary component? A rolling opt-in/opt-out choice until some later mandatory choice?

Regardless of the actual implementation, I'm a trifle disappointed in the reactions of my fellow liberals: knee-jerk antipathy to any changes whatsoever. The fact that proponents on the 'other side' are bone-headed nincompoops bent on destruction isn't sufficient excuse to do nothing. I say we ignore them altogether and simply work to make a good system better.

Posted by: swedock | July 8, 2010 1:41 PM | Report abuse

ti_houston,

You are correct about the benefits being progressive. The replacement ratio rates are 90% for income below $761/mo. ($9,132/yr.), 32% for income between $761/mo. and $4,586/mo. ($55,032/yr.), and 15% for income above $4,586/mo. ($55,032/yr.). And keep in mind, that like Medicare, this is for one person -- not an entire family.

Here's the relevant website (http://www.ssa.gov/pubs/10070.html).

Posted by: moronjim | July 8, 2010 1:46 PM | Report abuse

Oh, and one more thing Ezra,

"Spending twice as much as other countries for health care without getting better results doesn't." Would you mind telling that to my wonderful co-worker, who had her baby (and is about to have her second baby) delivered at Brigham & Women's Hospital? Would you mind telling that to my aunt's friend whose three children were all neonatal births? [Only here in Massachusetts is that affordable as an insurance policy is required to cover and at low cost-sharing unlimited attempts at in vitro fertilization.]

So spending extra on health care serves a purpose -- just not one which I believe (and I obviously won't say this to my wonderful co-worker) the costs outweigh the benefits.

Posted by: moronjim | July 8, 2010 1:54 PM | Report abuse

@Bakho: "SS does not need much of a fix or any at all. SS benefits are currently taxed and the taxes go into the SSTF. "

This is not strictly true, only the surplus goes into the SSTF... because the amount of money taxed today is larger than the amount of benefits payed out today, there is a surplus. The so-called 'insolvency problem' is actually just the point where that surplus is gone and government has to fund SSI (by law the taxes and benefits are really only formally correlated) and pay out benefits against a deficit if need be. That's because the program was designed by strong men who don't get all weak in the knees at the word 'deficit'.

Strictly speaking it would be a better outcome if we never reached that point of deficit spending but hardly the end of the world if couldn't avoid it.

Posted by: swedock | July 8, 2010 2:25 PM | Report abuse

Ezra writes: "Our country has become far richer than the architects of Social Security could have possibly imagined. It would make perfect sense for us to give ourselves more leisure time, if we chose to take it, at the end of our lives."

First of all I'd say that SS is not in such terrible shape that we need to be focused on strengthening it. But that aside, it is not accurate to say "give ourselves more leisure time". We're billing future generations for our desire for more leisure time. Every last bit of leisure time you have that is financed by social security means a worker somewhere is giving up part of his/her paycheck to provide it. Does those people in the future get any say in how much leisure time you think you're entitled to?

Posted by: ab_13 | July 8, 2010 2:44 PM | Report abuse

swedock: "That's because the program was designed by strong men who don't get all weak in the knees at the word 'deficit'."

Unless, im reading you wrong, you're saying the 1981-1983 Greenspan Commission "didn't get all weak in the knees" at word deficit, when the whole point of the commission and trust fund structure was to prevent reaching this inflection point. this is confusing...?

Posted by: stantheman21 | July 8, 2010 2:44 PM | Report abuse

"Tellingly, there's no similar groundswell for raising the FICA cap, which would mean wealthy people pay more to support the program."

Yes, it is telling. But that is easily explained.

I can guarantee you the vast majority of the country isn't aware that the cap on paying taxes into Social Security is currently $106,800 a year. They aren't even aware there is a cap at all. The reason is obvious why that information isn't well known or discussed. Because if it was known you would have people saying why not raise the cap to $150,000 or $200,000 a year or even worse yet, why not get rid of the cap completely?

And that simply cannot be allowed to happen. The discussion isn't honest at all from the start and that is on purpose. The rich don't want to pay more and they will withhold information and have a dishonest "debate" so they can continue not paying more.

As for Ezra's points on "defense" spending and health care they are also taboo subjects. One is a taboo because the answer is obvious which is a public option or single payer system and the other is obvious in that we spend way too much money and for what and to protect us from what country?

This is a great and simple post on the subject by Ezra that punches holes in all the arguements made by people who have wanted to get rid of Social Security because of ideology (not because it doesn't work but because it does work and is popular) and can't wait to start chipping away at it as soon as possible. Or even better, get rid of it completely.

Posted by: popworld7 | July 8, 2010 3:28 PM | Report abuse

How many people will die between the old and new cutoff dates, and thus never receive a penny of that which was stolen from them all their working lives?

There's only one way out of the ongoing Ponzi scheme, and that's to abolish it. There is no SS surplus. The pols already spend all the money. If I'm not mistaken, current checks are being sucked out of other revenue, and it can only get worse, even with the desperate fiddling around the edges.

kingstu01 has the right idea: Better to look out for number one all your life. Of course, the working poor can't do that, because the government forces them to cough up the money they could otherwise put aside.

But, hey, let the collectivists kibbitz away, trying to figure out how to beat a system built on their own stupidity.

Posted by: msoja | July 8, 2010 3:38 PM | Report abuse

What would happen to the Medicare eligibility age if the age for receiving full SS benfits went up to 70? Isn't this the elephant in the room?

Posted by: Beagle1 | July 8, 2010 3:44 PM | Report abuse

@ti_houston,

One more thing -- the figures you cite are marginal replacement ratios. Someone earning below $9,132/yr. over the average of their highest 35 years of wage-indexed earnings will have 90% of their income replaced. Someone earning $50,000/yr. over the average of their highest 35 years of wage-indexed earnings will have ((0.9*$9,132+0.32*($55,032-$50,000))/$50,000, or 42.6% of their wages replaced (or receive $21,297/yr. in benefits). Someone earning $100,000/yr. over the average of their highest 35 years of wage-indexed earnings will have ((0.9*$9,132+0.32*($55,032-$9,132)+0.15*($100,000-$55,032))/$100,000, or 29.7% of their wages replaced (or receive $29,652/yr. in benefits). So that 29.7% replacement ratio implies a much higher rate of return than having the money sit on a mattress. Also, higher income Americans on average have larger expected future lifetimes at age 65 than do those with lower lower incomes (another reason the benefits should remain progressive as they are), which of course increases their actuarial present value of benefits.

Posted by: moronjim | July 8, 2010 3:53 PM | Report abuse

swedock, what kind of job do you have?

I have a feeling that most folks who think raising the retirement age to 70 do not work at physical labor but instead have inside, sit down jobs.
Of course I guess once a person is too physically old to do the job they have had all their life they can just go be a door greeter at WalMart until they die or are lucky enough to make it to 70.

Posted by: vintagejulie | July 8, 2010 5:42 PM | Report abuse

moronjim: you said that "So that 29.7% replacement ratio implies a much higher rate of return than having the money sit on a mattress"

the effective real rate of return for higher earners averaged across demographic levels according to National Bureau of Economic Research is less than .6%.

Moreover, according the SSA analysis, the internal real rate of return is indeed negative for many high earners, especially if you are single and born recently (see generally http://www.ssa.gov/OACT/NOTES/ran5/an2004-5.html).

While sticking the money under a pillow might see it get eaten up by inflation, the rate of return for high earners isn't much better...ss is a raw deal from a savings position. (for example, a 10 yr TIPS offers yields over 3%)

Posted by: stantheman21 | July 8, 2010 5:43 PM | Report abuse

Ezra, Thanks, I really enjoyed your article, especially the part about using military spending to "pay" for SS... and I do think that adjusting the SS retirement age to reflect todays longer life expectancy is logical.

However, one thing no one is talking about is the CROOKS that RAIDED the Social Security Funds in the first place. These guys should be identified, and then prosecuted to the fullest extent of the law.

If we put all the CROOKS who inhabit Washington DC in Jail, without possibility of parole... we could clean up this mess and funding Social Security, Medicare, and Medicaid would not be an issue.

Posted by: btrask3 | July 8, 2010 5:59 PM | Report abuse

in 1930, 54% of men over the age of 65 participated in the workforce

in 1950, this percentage was down to 45.8%

by 2008, the percentage was down to 17%.

while there are obviously numerous factors involved here, most public fiscal economists acknowledge that social security has played a huge part. See Public Finance by Harvey S. Rosen, Ted Gayer (seminal textbook on public fisc issues, concluding that SS "depresses both saving and work effort" but also stating that this might not be a bad thing depending on your views on income security/leisure for the elderly etc).

I thought these numbers were interesting...

Posted by: stantheman21 | July 9, 2010 1:28 AM | Report abuse

I look forward to 69 year olds hanging on to their manager jobs with a 'get off my lawn, you kids' approach to life.

Or, carrying a stack of shingles up a ladder.

(Yes, some people remain very 'with it' and physically capable late into life, but we don't all manage that well. And, forcing dead weight to hang on for more years is a bad policy -- even from the business perspective.)

And, they would be taking the jobs that our younger generation will need to get into the workforce.

Kudos, for the stupidest idea ever, John "Thank god he's not speaker" Boehner!!!

Posted by: rat-raceparent | July 9, 2010 10:11 AM | Report abuse

How many of the new hires last year at Google or Intel or Microsoft were in their late sixties? How about 0.

Also, the current government workers pension system allows full paid pensions at 58 years old with 30 years of service. If the federal workers union raise their minimum retirement age to 70 I might think about raising it for Social Security, otherwise ... just raise the cap on the payroll tax.

Posted by: cautious | July 10, 2010 8:46 AM | Report abuse

We've "kicked the can down the road" for the solvency of all entitlements so long, every day the problems get larger. For those who want the government out of the retirement funding business, all you need to do is look at how ill-prepared most Americans are for their "golden years", and how, back before Social Security, for most people retirement=living in poverty (after a lifetime of work). Also, for women 65 & older, their Social Security benefit is the majority of what they live on. If you think the private sector is a more-appropriate place for a guaranteed benefit, do yourself a favor and price out a lifetime annuity with an inflation clause and you'll find Social Security is a GREAT deal. The big problem is that we've delayed doing something about it for so long. It'll probably take a combination of funding & benefit changes to put it on the right track. The formula for calculating cost of living increases could be changed to more-accurately reflect retiree's actual purchasing habits, slightly reducing the annual COLA. An increase in the maximum income for contributions could also be raised and a change in the formula for the age for receiving the "full" benefit could be adjusted. Making small changes to all these factors would extend the life of the program. Some say it's "political suicide" to recommend changes for current beneficiaries, but if our elected officials truly love their country, they'll need to take that risk, for the solvency of the program for all of us.

Posted by: Evan.Rosenberg@Gmail.Com | July 10, 2010 10:57 AM | Report abuse

The employers who hire employees and misclassify them as "independent contrators" do not pay employment taxes for those "independent contractors" and do not withhold federal, state, and local taxes from payments made to independent contractors. Independent contractors are not included in an employer's benefits programs, and they are not eligible for unemployment insurance benefits. Independent contractors are also exempt from wage and hour and employment discrimination laws. However, problems arise when individuals who are truly employees are treated by employers as independent contractors. (for Company profits..)
(Examples...Fed-Ex, Comcast, Dishnet, Microsoft, etc., just think how much money these Companies are not paying into social security, medicare, State Comp., U.I., Federal, State, County taxes... and then think about how the "States, Counties, Cities" as well as social security and medi-care are "going broke" and how some of those states are raising your taxes (and cutting back on public "entitlements" like transportation, education, libraries, parks, police and fire department services etc.) to cover Fed-Ex, Comcast, Microsoft, etc., who are NOT paying theirs. (tax shortfalls)

Posted by: susannelsen | July 10, 2010 6:13 PM | Report abuse

Rep. Boehner proposed this two weeks ago as a form of means testing for retirees with retirement income other than Social Security that employee and their employers had already paid for. The commentary now being floated applies to everyone.

Various commentaries allude to a gentle, growing and unusually bipartisan push to extend Social Security benefits to age 70. What we really have is a stampede to steal the FICA Social Security payroll taxes being paid by more than a hundred million Americans and the lifetime of accumulated Social Security payroll taxes paid by more than forty-million Social Security beneficiaries.

The concept is a puff piece by those perfectly willing to destroy the U.S. economy and work force. The proponents of this idea also support the elimination of jobs, reducing and eliminating health care, wiping out the value of investment and savings accounts, reducing the values of IRA and 401-k retirement accounts, and reducing and/or eliminating pensions. The newest target is now set on your Social Security benefits.

Rep. Boehner tells us “…We made promises our kids and grandkids can't afford”. No you didn’t. What Mr. Boehner and the rest of Congress did was to steal and spend the payroll taxes Americans paid to fund the Social Security program. The people who preached fiscal integrity spent money that did not and does not belong to them.

Mr. Boehner and the people trying to destroy and eliminate Social Security tell us that allowing the Social Security to redeem the U.S. Treasuries it has purchased will bankrupt the Federal Government. At the same time, Wall Street and the U.S. Treasury extol the safety and security of the U.S. Treasuries purchased by the Chinese and Saudis.

Why is Rep. Boehner willing to redeem the U.S. Treasury securities sold to the Saudi oil princes and the Chinese government, but is not willing to redeem the U.S. Treasury securities sold to the Social Security Trust Fund (representing the lifetime payroll tax contributions of approximately 150-million Americans)?

What the unnamed proponents of delaying Social Security eligibility to age 70 also don’t want to tell us is that increasing the Social Security tax from 12.2% to 14.7% would enable the present retirement age to be left unchanged indefinitely with no further expected increases.

The delay in benefits also neglects to mention that the millions of people who die before age 70 will never collect any Social Security. Gee, if they raised the eligibility to age 120, they wouldn’t have to ever pay out any Social Security (perhaps they will float that proposal in 2020).

Denying Social Security benefits until age to 70 also ignores the significant drop in earned income opportunities for people in the age 50 – 70 group that is further complicated by the fact that less than 20% of retirees have defined benefit pension plans and less than 25% of retirees have 401-k plans or IRAs that will provide retirement income.

Posted by: ThoseWhoServe | July 10, 2010 7:44 PM | Report abuse

Given that I was born in the late 1970s and my parents were born in the mid 1940s, I'm starting to understand this issue more and more. I like the idea of raising the cap from $106,500 to something like $250,000, especially since there is no cap on the Medicare withholding tax. After a certain point, really high-income people are not earning traditional wages anyway, so they probably don't literally pay withholding on every dollar they earn in stock options, etc.

As for the independent contractor issue -- those big companies (as well as small businesses employing contractors) still must issue 1099s which state how much money they paid out.

So the workers have to make sure to fill out their Schedule C and Schedule SE on their taxes properly each year, so they DO in fact get credit for Social Security and Medicare tax. It works out that you get a deduction on your 1040 for 50% of the self-employment tax you pay, and there's some other complicated calculations which TurboTax or H&R Block software makes relatively easy. I've done this for several years on my self-employment income with no problems. Of course, I already make enough from my W-2 job(s) to get my minimum quarterly payments based on the handy statements SSA sends me each year. Actually, I think I just this year hit the minimum quarterly pay-in so that I'll actually qualify for some benefits once I do retire.

Since the real problem is Medicare though, why not go ahead and increase that withholding rate, currently set at 1.45%? Something like 1.75% could increase revenues quite a lot, and have relatively limited impact on individual workers. A worker making $25,000 a year would pay an extra $75 per year, which works out to $2.88 per pay period for biweekly pay, or $6.25 per month for monthly pay. That's still less than Federal minimum hourly wage of $7.25.

Raising the retirement age to 70 would be bad for me, and bad for any other Gen-Xers out there ... who may or may not be paying attention, just as the Baby Boomers were not paying attention 27 years ago when the increase to 66 and 67 were enacted.

Also, I think if you raise it to 70, you'll piss off enough people that they'll just go ahead and take the lesser payout at 62, but keep working part-time. Actually, I think that's already started with the folks who are not supposed to retire until 66 -- they're getting laid off, taking Social Security at 62, and trying to find part-time gigs.

Say you were born July 11, 1948. You're 62 today. Would you really want to wait until July 11, 2014, or go ahead and file for benefits today?

Posted by: drjoefrank | July 11, 2010 10:35 PM | Report abuse

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