Monday, April 11, 2005

Sometimes things are so easy. Like fixing Social Security.

Social security set the official retirement age at 65, when it was created in 1935. The program was a response to a country in which some 70% of seniors lived in poverty.

In 1935, a male retiring at 65 expected to live 11-12 additional years, a woman about 15 years. So the program imagined supporting people in dignity for that length of time.

Today men live on average 16.5 years after 65, women nearly 20 years. Thus, life span after age 65 has improved by about 5 years (and continues to improve about a month per year). Suppose you were inventing Social Security all over again, but with similar assumptions about an appropriate span of retired life. You would set the retirement age at 70.

What would be the result? Outlays for Social Security would decline by at least 12%, and as much as 40% if the retirement age in 2050 increased to 73 (which it could assuming further advances in life spans).

No tax increase. No decrease in annual benefits. (Actually a surplus available to fund real, additional private accounts rather than some phony replacement scheme like the Bush plan. The best idea is that of Paul O’Neil, former Treasury Secretary: use the surplus to give each child $500 or $1000 at birth, invested in a mutual fund-like account, add $500 a year until age 10 or so.)

Then again it can be hard to do the easy thing.


Morgan72 said...

It's a good idea, one that should be taken further. The surplus of much-needed money would be great for society. But i don't agree with giving it to the parents of new-born kids to spend on their behalf. For one thing, how would you know it was going to good use? And for another thing, even if the parents put it to good use, it doesn't matter if the kid has a nicer baby capsule or a few more toys if they can't get a good education at a government school or a bed in the hospital. If the Social Security System changes, the surplus should go towards fixing the rough spots in our hospital and schooling systems. Not a very futuristic comment i know but i just don't agree with your own comment.

HNB said...

I think it's great to offer your thoughts and ideas across to a worldwide audience for comment. At present, this is my own blog broadband site uk and although the subject matter is totally different from the one you're writing about perhaps it does affect us all in some way!