AIG Chief says retirement age may move to 80

[rodi]

But the problem is that "drawing a line" will always have people resisting reforms if they are on the "wrong side of the line" because they are feeling like they have to sacrifice when others don't. And those others may not need it as much as those asking to (yet again) accept a worse deal in the future.

Unless everyone is willing to share sacrifice, I don't see this getting resolved. Does that mean everyone has to suffer? No. But a "magic number" like someone's age is not sufficient, IMO, without other factors being considered. If someone is over 50 or 60 and has a lower income, one that's highly indicative of needing every dollar of their benefit? Spare them. I don't think an affluent person should be spared because they are 52 while a struggling household is told to wait longer or accept a lower benefit because they are 48. Again, I think that invites generational warfare that helps none of us.

One of the more talked about reform plans is the "Roadmap for America's Future" proposed by Rep. Ryan. It has the magic number of age 55... those 55 and older keep the old plan... those under 55 get lesser benefits.

This divides my household - DH is 60, I'm 50. It makes the arbitrariness of the age 55 seem ridiculous.

I agree there will need to be shared pain and that the lowest economic folks should be spared cuts. But I don't have any clean solutions.

 

[rodi]

And the story ends with you retiring early -and your coworkers will 'look at you like you have a hole in your head, blanks stares or looks of horror' (for themselves). So it all works out...

Not retired yet... if they muck with SS benefits too much I may have to stay at this j*b longer than I'd planned. (On track for 2014ish... but the down market may kick that longer. Darn it.)

 

[ziggy29]

When the "temporary" reduction first happened I immediately increased my 401k contributions by 2%. After all - I was used to not having that money.

I advised all my coworkers to do the same. They looked at me like I had a hole in my head.

Then when the employee stock purchase plan was eliminated, again, I upped my 401k contribution to divert the payroll deduction difference. Again, I advised coworkers to do the same. Again, blank stares or looks of horror.

This is called "paying yourself first". It's amazing to me how so many people don't get it. Lifestyle creep is also a big enemy of retirement planning. Back in the days when people sometimes got promotions and raises exceeding inflation, one of the best ways to avoid "lifestyle creep" is to withhold all of the higher real earnings into your retirement plan before it ever hits your checkbook. And yeah, sometimes people look at you like you have a third eye when you say you do this, and they instead go out and buy a new car with the increased cash flow (too often with little or nothing down).

 

[teejayevans]

One of the more talked about reform plans is the "Roadmap for America's Future" proposed by Rep. Ryan. It has the magic number of age 55... those 55 and older keep the old plan... those under 55 get lesser benefits.

This divides my household - DH is 60, I'm 50. It makes the arbitrariness of the age 55 seem ridiculous.

I agree there will need to be shared pain and that the lowest economic folks should be spared cuts. But I don't have any clean solutions.

Yea, it's called divide and conquer, I think the 55 is too high, 40-55 year olds tend to vote, I think they need to push it to 40 or even 30, at 55 or even 45, it doesn't give you enough time to make adjustments.

The one ? is how do you decide who is lowest economic folks are? By income or net worth. If the former, then you will see a lot of ER folks adjusting their strategy to lower their reported income until 65.
TJ

 

[Independent]

I agree there will need to be shared pain and that the lowest economic folks should be spared cuts. But I don't have any clean solutions.

I suppose I should keep quiet, but I think there is a technically possible solution that accomplishes this (I'm not saying it's politically possible).

Most people think that SS should be self-funding. I'll define that as making benefits = taxes in each year. We know there will be years when the current formula will create benefits > taxes.

The solution: Each year, a committee of economists and actuaries projects taxes and benefits for the next year. If they are out of balance, they put a cap on benefits that's just low enough to recover the balance. The person getting $10k sees no impact, the person getting $29k gets a haircut.

As time goes by, the cap will have to come down, so younger people (who will live longer) will see more reductions. But, there is no hard cut-off by age, all age groups take some of the hit. The lowest income people are protected.


(People who like technical details will say that:
- the cap should be on PIA instead of benefit
- we would get a broader sharing by lowering the 32/15 bendpoint instead of using a hard cap
- the tax number should be calculated at a "standard" unemployment rate.
Those are all improvements.)

 

[growing_older]

Or don't mess with benefits at all. Raising the contribution ceiling, or possibly raising the contribution ceiling while capping benefit amounts where they are now or slightly higher, or raising the contribution ceiling and putting in a new inflection point above the current max benefit will all solve the problem immediately. Someone just needs to pick one and push for it. The longer we wait the more significant of a course correction will be needed.

 

[Focus]

Those of us *under* 50 also had their age raised to 67.

I have already started making retirement plans at 46. Why should my older brothers be shared the pain of "shared sacrifice" while I get screwed? And what if the 50+ folks are already affluent and don't *need* SS at all? Why would a 49-year-old who needs it get treated like a second class citizen compared to a wealthy 50-year-old who doesn't?

Don't get me wrong. I'm actually not convinced the retirement age needs to go up at all -- 67 is high enough. But if it does need to go up, then it should be accomplished by a continuation of the 1982 reform. In other words:

Born in...
1961 - 67 and 2 months
1962 - 67 and 4 months
1963 - 67 and 6 months
etc., until you get to 70

The idea is that the age would be raised gradually to reflect expanding lifespans (if you buy into that argument). It's not fair, in my view, to move the goal post again for those born in 1960 or before, since they were already part of the last adjustment.

Social Security is already quite progressive. I don't support adding means testing.

 

[ziggy29]

Don't get me wrong. I'm actually not convinced the retirement age needs to go up at all -- 67 is high enough. But if it does need to go up, then it should be accomplished by a continuation of the 1982 reform. In other words:

Born in...
1961 - 67 and 2 months
1962 - 67 and 4 months
1963 - 67 and 6 months
etc., until you get to 70

I get that, but between the breakdown of the human body as it ages *and* the rampant age discrimination in employment... how practical is it to throw more 67+ into the workforce or force them to stay there? And how desirable is it when there is high unemployment and their remaining in the workforce continues to block entry level hires and promotions? Frankly, of all the proposals I've seen, I consider raising the FRA the least desirable because of these factors. What we save in SS could just be cost-shifting into higher cost of unemployment benefits for younger workers (or the older ones who get laid off but can't get SS yet).

 

[Focus]

I get that, but between the breakdown of the human body as it ages *and* the rampant age discrimination in employment... how practical is it to throw more 67+ into the workforce or force them to stay there? And how desirable is it when there is high unemployment and their remaining in the workforce continues to block entry level hires and promotions? Frankly, of all the proposals I've seen, I consider raising the FRA the least desirable because of these factors. What we save in SS could just be cost-shifting into higher cost of unemployment benefits for younger workers (or the older ones who get laid off but can't get SS yet).

Totally agree. This might sound like I'm giving an idealistic spin to selfish motives, but I actually think the best thing any of us can do is earn our fair share, save to the maximum, and retire early, so younger folks can get their shot.

 

[jclarksnakes]

Uh, wishin&hopin those people born after 1960 were also included in the last adjustment. Their SS full retirement age got increased to age 67. I was born in 1952 and my SS full retirement age only got increased to 66. Those younger people are already getting a worse deal than I am and I am not too keen to see them have to adjust to another change without us older folks feeling any of the pain. We are not just talking about faceless, nameless younger people. They are our children and our grandchildren.

 

[Focus]

Uh, wishin&hopin those people born after 1960 were also included in the last adjustment. Their SS full retirement age got increased to age 67. I was born in 1952 and my SS full retirement age only got increased to 66. Those younger people are already getting a worse deal than I am and I am not too keen to see them have to adjust to another change without us older folks feeling any of the pain. We are not just talking about faceless, nameless younger people. They are our children and our grandchildren.

Hey, you're misunderstanding me. I sincerely believe in this:

"Our greatest responsibility is to be good ancestors." --Jonas Salk

I think an increase in the Social Security age should be a last resort. All I'm saying is that if it has to be increased, then the formula that was applied with the 1982 reform should simply be extended. That's the fairest approach.

 

[jclarksnakes]

Maybe I am misunderstanding you but you did write.

"It's not fair, in my view, to move the goal post again for those born in 1960 or before, since they were already part of the last adjustment."

And now you are saying that if SS retirement age has to be increased the fairest approach is to only increase the age for younger folks.

To which I reply. Is that really the fairest approach? It seems obvious to me that it would cost me nothing and would cost plenty for younger people. BTW, I am also not in favor of increasing the retirement age for anyone. I think the fairest fix for the projected SS shortfall is to make a small gradual cut in benefits by stopping the COLA for several years. That way everybody shares a little of the pain.

 

[Independent]

Or don't mess with benefits at all. Raising the contribution ceiling, or possibly raising the contribution ceiling while capping benefit amounts where they are now or slightly higher, or raising the contribution ceiling and putting in a new inflection point above the current max benefit will all solve the problem immediately. Someone just needs to pick one and push for it. The longer we wait the more significant of a course correction will be needed.

The strongest version of "raise the contribution ceiling" is

Eliminate the taxable maximum in years 2012 and later, and apply full 12.4 percent payroll tax rate to all earnings.
Do not provide benefit credit for earnings above the current-law taxable maximum.

This closes lots of the gap, but still leaves a negative annual balance starting in 2025. The trust fund lasts for more than 75 years, some people will say that's irrelevant.

Details here: Long Range Solvency Provisions

 

[growing_older]

A solution that lasts for 75 years is a pretty good idea. It's unlikely that projections 75 years into the future play out as predicted, too many unexpected changes will happen.

As I read the table, the calculations were only made for the fist 75 years, but it looks like the trust fund is projected to last somewhat over 100 years.

 

[rodi]

What jclarksnakes said....
I'm a 1961 person... I've seen SS FRA go from age 65 to 67... now you're proposing raising it again. I was in the workforce when it was raised the first time. Hard to see how 1960 is a magic date that you don't mess with, but it's ok to mess with 1961 and later.

 

[haha]

Social Security is already quite progressive. I don't support adding means testing.

I support absolute confiscation. Anyone with invested assets over $100,000 is rich, and these assets should be confiscated. Government workers and union pensioners are exempt from this rule.

Also the housing industry and banks must be supported, so you get to keep any size or value of house.

No one needs to retire, early or late. Working is mandatory, except those granted disability and of course government workers and union pensioners.

Get with the program, or get hurt, Americans.

Ha

 

[Katsmeow]

Unless everyone is willing to share sacrifice, I don't see this getting resolved. Does that mean everyone has to suffer? No. But a "magic number" like someone's age is not sufficient, IMO, without other factors being considered. If someone is over 50 or 60 and has a lower income, one that's highly indicative of needing every dollar of their benefit? Spare them. I don't think an affluent person should be spared because they are 52 while a struggling household is told to wait longer or accept a lower benefit because they are 48. Again, I think that invites generational warfare that helps none of us.

Theoretically that sounds fine. What people (not you -- but others) often mean when they say that are things like people who have any savings get no SS. I could see someone saying that if you have savings of $500,000 then you are "rich" and should get any SS. These are people who think a 10% withdrawal rate for that $500,000 would be fine.

I am inclined FWIW not to have a hard age line where if you are saying 49 years and 364 days old you have huge changes and if you are 50 years old you have zero changes. I would have a range of changes that might ramp up over time. Someone who is 60 years old might see some changes but not the changes that someone who is 20 years old would see. Someone 45 would see more changes than someone who is 20, but less than someone who is 60.

I would eliminate the cap on SS taxes based upon income. I am not sure that raising the SS eligibility age does much for the reasons you state. I would probably make 100% of SS benefits taxable if your income other than SS was X... that kind of thing.

 

[samclem]

This closes lots of the gap, but still leaves a negative annual balance starting in 2025. The trust fund lasts for more than 75 years, some people will say that's irrelevant.

When the money comes from the "trust fund" it is coming from the US taxpayers (who must come up with the money to pay off the trust fund "notes."). I suspect what many people really want is a way to avoid that increasingly painful transfer, so they are looking for ways to increase payments into SS. Without these increased SS taxes, we'll need to do one or more of the following:
-- Find new folks to loan us money (kicking the can down the road another decade, and making the mound of debt higher)
-- Increase the money supply ("print money") and use the funds to pay the SS benefits (and suffer increased inflation)
-- Decrease SS benefits (means testing, increased retirement age, modified inflation adjustments, etc)
-- Increase income taxes and other taxes going to the General Fund
-- Reduce other government spending to allow taxes to meet the increasing transfers to SS beneficiaries

I'm betting on "print more money" since it's the least obvious, least politically painful, and has the big benefit of also reducing the value of the huge pile of other US debt.

 

[donheff]

When the money comes from the "trust fund" it is coming from the US taxpayers (who must come up with the money to pay off the trust fund "notes."). I suspect what many people really want is a way to avoid that increasingly painful transfer, so they are looking for ways to increase payments into SS.

I have said it before and will say it again, any attempt to avoid the painful transfer from the general tax rolls back into the already spent SS trust fund constitutes a very regressive retroactive transformation of the SS payroll tax (14% for low to moderate earnings) into an income tax. I think doing so would be a travesty and betrayal of the people who paid into the trust fund. Let the low/moderate income folks get the benefit of the favorable income tax rates (or what ever we as a society agree to turn the income tax into over time) when paying back this general US debt.

 

[samclem]

(Bold added)

I have said it before and will say it again, any attempt to avoid the painful transfer from the general tax rolls back into the war spent SS trust fund constitutes a very regressive retroactive transformation of the SS payroll tax (14% for low to moderate earnings) into an income tax. I think doing so would be a travesty and betrayal of the people who paid into the trust fund. Let the low/moderate income folks get the benefit of the favorable income tax rates (or what ever we as a society agree to turn the income tax into over time) when paying back this general US debt.

"War spent" ? C'mon. It was spent on everything from the war(s) to food stamps to the bridge to nowhere. It was just spent, okay?

There are no static income "bins", most people move up and sometimes down throughout their lives. Today's low income retiree might have been a huge earner years ago. We could look at this through generational "tribes" rather than the "tribes" of income level and ask why "earners" of today should pay even more (in their income tax) for those now retired. Why shouldn't those getting the benefits (retirees)" take the "pain" via lower benefits, especially since those earning paychecks today will (presumably) be subject to the same benefit formula when it's their turn to get a check?

Regarding a "betrayal of the people who paid into the trust fund"--maybe. The betrayal may have occurred when the money was spent. If we''d been on a real "pay as you go" system this wouldn't have happened.

The money the taxpayers owe the "trust fund" is no different from any other obligation. And debtors are always free to negotiate with the note holder for a change in terms. I think we might see that, especially as the US Government is on both sides of the table.

 

[donheff]

(Bold added)

"War spent" ? C'mon. It was spent on everything from the war(s) to food stamps to the bridge to nowhere. It was just spent, okay?

You are right, I was getting political. I fixed it by changing war spent to already spent.

There are no static income "bins", most people move up and sometimes down throughout their lives. Today's low income retiree might have been a huge earner years ago. We could look at this through generational "tribes" rather than the "tribes" of income level and ask why "earners" of today should pay even more (in their income tax) for those now retired. Why shouldn't those getting the benefits (retirees)" take the "pain" via lower benefits, especially since those earning paychecks today will (presumably) be subject to the same benefit formula when it's their turn to get a check?

I don't argue with lowering benefits to the extent that that trust fund is insufficient to cover current promises - that is fair. What I object to is any attempt to avoid the payback of the trust fund from general revenues.

Regarding a "betrayal of the people who paid into the trust fund"--maybe. The betrayal may have occurred when the money was spent. If we''d been on a real "pay as you go" system this wouldn't have happened.

I don't believe the betrayal was in the spending. It was intended to be spent from the get go. Most economists have no problem with that as long as total spending and total revenues are managed appropriately. that, of course, wasn't done.

The money the taxpayers owe the "trust fund" is no different from any other obligation.

Precisely. And that is why it should not be treated as distinct from the rest of the debt. New SS obligations and current SS obligations that exceed the Trust fund can be dealt with as we all see fit. I just think the effort to treat the spent Trust Fund as a SS problem that SS recipients have to make up for (as distinct from all taxpayers) is disingenuous.

 

[MasterBlaster]

The 2010 Bowles-Simpson report (Presidents Commision) recommended a number of slowly phased in changes to Social Security that people are alluding to in this thread. Increased taxes, reduced benefits (especially for higher income types), and higher Full retirement age are recommended.

Something like this will inevitably be passed.

If you are interested you can read the whole report here. It's quite interesting.

http://www.google.com/url?sa=t&rct=j&q=bowles%20simpson%20report&source=web&cd=1&ved=0CFUQFjAA&url=http%3A%2F%2Fwww.fiscalcommission.gov%2Fsites%2Ffiscalcommission.gov%2Ffiles%2Fdocuments%2FTheMomentofTruth12_1_2010.pdf&ei=myLRT-a1Ceqg2QWsm_2mDw&usg=AFQjCNH45aK2QlglWmjUCeMEus90bb_0og

RECOMMENDATION 5.1: MAKE RETIREMENT BENEFIT FORMULA MORE PROGRESSIVE. Modify the current three-bracket formula to a more progressive four-bracket formula, with changes phased in slowly. Change the current bend point factors of 90%|32%|15% to 90%|30%|10%|5% by 2050, with the new bend point added at median lifetime income.

RECOMMENDATION 5.2: REDUCE POVERTY BY PROVIDING AN ENHANCED MINIMUM BENEFIT FOR LOW-WAGE WORKERS. Create a new special minimum benefit that provides full career workers with a benefit no less than 125 percent of the poverty line in 2017 and indexed to wages thereafter.

RECOMMENDATION 5.3: ENHANCE BENEFITS FOR THE VERY OLD AND THE LONG-TIME DISABLED. Add a new "20-year benefit bump up" to protect those Social Security recipients who have potentially outlived their personal retirement resources.

RECOMMENDATION 5.4: GRADUALLY INCREASE EARLY AND FULL RETIREMENT AGES, BASED ON INCREASES IN LIFE EXPECTANCY. After the Normal Retirement Age (NRA) reaches 67 in 2027 under current law, index both the NRA and Early Eligibility Age (EEA) to increases in life expectancy, effectively increasing the NRA to 68 by about 2050 and 69 by about 2075, and the EEA to 63 and 64 in lock step.

RECOMMENDATION 5.5: GIVE RETIREES MORE FLEXIBILITY IN CLAIMING BENEFITS AND CREATE A HARDSHIP EXEMPTION FOR THOSE WHO CANNOT WORK BEYOND 62. Allow Social Security beneficiaries to collect half of their benefits as early as age 62, and the other half at a later age. Also, direct the Social Security Administration to design a hardship exemption for those who cannot work past 62 but who do not qualify for disability benefits.

RECOMMENDATION 5.6: GRADUALLY INCREASE THE TAXABLE MAXIMUM TO COVER 90 PERCENT OF WAGES BY 2050.

RECOMMENDATION 5.7: ADOPT IMPROVED MEASURE OF CPI. Use the chained CPI, a more accurate measure of inflation, to calculate the Cost of Living Adjustment for Social Security beneficiaries.

RECOMMENDATION 5.8: COVER NEWLY HIRED STATE AND LOCAL WORKERS AFTER 2020. After 2020, mandate that all newly hired state and local workers be covered under Social Security, and require state and local pension plans to share data with Social Security.

RECOMMENDATION 5.9: DIRECT SSA TO BETTER INFORM FUTURE BENEFICIARIES ON RETIREMENT OPTIONS. Direct the Social Security Administration to improve information on retirement choices, better inform future beneficiaries on the financial implications of early retirement, and promote greater retirement savings.


RECOMMENDATION 5.10: BEGIN A BROAD DIALOGUE ON THE IMPORTANCE OF PERSONAL RETIREMENT SAVINGS.

 

[Midpack]

Don't get me wrong. I'm actually not convinced the retirement age needs to go up at all -- 67 is high enough.

I get that, but between the breakdown of the human body as it ages *and* the rampant age discrimination in employment... how practical is it to throw more 67+ into the workforce or force them to stay there?

I think an increase in the Social Security age should be a last resort.

You may have seen this story recently, this will really muck up the program...

Could babies born today live to 150? - CBS News

 

[donheff]

You may have seen this story recently, this will really muck up the program...

Could babies born today live to 150? - CBS News

If the singularity is really near we will have some big time turmoil.

 

[Focus]

You may have seen this story recently, this will really muck up the program...

Could babies born today live to 150? - CBS News

The media have always been fond of this type of story. The theme is always the same, but the key to greater longevity changes. Some years back, it was megavitamins. More recently, it's been calorie restriction. I think it's just wishful thinking, fueled by our primal fear of death and endless faith in the power of science. The book "Never Say Die: The Myth and Marketing of the New Old Age," which I've mentioned here before, does a good job of debunking this type of theorizing.