Promising Editorial On SS "Are Benefits Safe" from AARP Bulletin 11-2018

[Independent]

Hopefully, the across the board cut can be restored by the time today's youth retire since by then there could be a more favorable balance between workers and geezer SS collectors. Boomers will be rapidly falling off the SS payroll by then.........

My father had full benefits at 65. I got them at 66, so I didn't get the deal my dad did. I expect my children's deal will be slightly worse than mine - full benefits in the area of 68 to 70. What else is new? That's one reason I initiated the 'Daddy Match' to their Roth IRA contributions.

But... based on average longevity if you start at FRA then you will collect retirement benefits longer than your Dad did and your children start at 68 or 69 then they will likely collect benefits longer than you.... and it is those number of years collecting benefits that strains the system.

IOW, is the more relevant way to look at FRA the number of years one works or the number of years that one is collecting benefits? Given changes in longevity, I think the latter is a better way to define FRA.

I want to highlight a couple issues with the demographics.

Social Security is facing demographic issues arising from falling birth rates and from increasing longevity. Of the two, birth rates are the bigger problem.

Our near term problem is not due to the Baby Boom. All those post-WWII babies could have been absorbed easily by our current formulas if they had only followed in their parents footsteps and averaged 3 children per couple. Instead, the Boomers had 2. That fertility change, all by itself, means that Boomers should expect to get 67% of the benefits their parents got, or the Boomers kids should expect to pay 150% of the taxes the Boomers paid.

We should not expect SS's problems to go away when the Boomers die off. Gen X, the Millenials, and Gen Z, and .... are all expected to stay with 2 (or fewer) children. So they will have the same "shortage" of taxpayers.

Extending the FRA makes sense over the long run, but it is less powerful than many people believe. For example, the actuaries tested the following index rule

After the normal retirement age (NRA) reaches 67 for those age 62 in 2022, index the NRA to maintain a constant ratio of expected retirement years (life expectancy at NRA) to potential work years (NRA minus 20).

That closes part of the gap. Their projection says 19% of the average gap over the next 75 years, and 36% of the annual gap in the 75th year.

I believe the rest of the gap is essentially the fertility issue that we haven't fully addressed.

 

[Huston55]

I look at other programs that help the "everybody", not just the needy - Medicare, schools, police. None of these have special formulas to make sure the people who pay more tax get more benefits. I don't think SS should be the exception.

This seems to be the inception of our differing views on how best to restore fiscal soundness to SS. In my view, anyone who has this belief would, by definition, want to make cardinal changes to the current SS system regardless of its fiscal condition. I understand that some folks might have that view; it’s just not one I do or ever will share.

BTW, even though it’s a political calculation, moving in the direction you suggest could very likely kill SS.

 

[GravitySucks]

Gen X and Millennials have been pumping out only 1.6 kids per woman. The SS situation is going to get worse if nothing changes.

Not sure who's going to want to buy the 5 bedroom McMansions when it's time to downsize. Maybe they'll be repurposed into duplexes.

 

[ShokWaveRider]

Gen X and Millennials have been pumping out only 1.6 kids per woman. The SS situation is going to get worse if nothing changes.

Not sure who's going to want to buy the 5 bedroom McMansions when it's time to downsize. Maybe they'll be repurposed into duplexes.

I get your point, but 5 bedrooms does not a McMansion make. One of my neighbors has 7,500 sqft and only 3 actual bedrooms.

 

[Independent]

This seems to be the inception of our differing views on how best to restore fiscal soundness to SS. In my view, anyone who has this belief would, by definition, want to make cardinal changes to the current SS system regardless of its fiscal condition. I understand that some folks might have that view; it’s just not one I do or ever will share.

BTW, even though it’s a political calculation, moving in the direction you suggest could very likely kill SS.

Thanks for narrowing this down to a core difference.

Yes, even if we had no unfavorable trends, I would say that SS would be a better system if we cut the payroll tax rate and offset that with a cut in the high income benefits. Since we're forced to make some changes anyway, this seems like a good time to move in that direction.

(Similarly, if I had to sell my house and buy a new one, I'd look at changes I've always wanted to make and try to include them in the new house.)

Yes, I know this is politically unpopular. If flatter benefits were politically popular, the change would have been made by now.

But, I can think of things that I supported that were politically DOA 30 years ago, that are becoming law today. That happened because the minority eventually became a majority. I can always hope. I'd like to try to persuade you, but I think the bold says I shouldn't.