Retirement

opinion Want to fix Social Security? It is important to accept small checks well.

Eleven years. The joint Social Security accounts — the Old Age and Survivors Insurance Trust Fund and the Disability Insurance Trust Fund — are likely to run out of money and no longer pay full scheduled benefits, so that’s all that’s left. Latest report of Social Security Trustees.

I’m not too concerned that the checks won’t come out after the projected 2035 funds run out, which are often considered a single pool of money, even though they’re legally separate. The current beneficiaries won’t stand for it, and neither will their children. (Even if not recovered at all – highly unlikely – the upcoming payroll will cover the tax. 83 percent of defined benefits.)

What I worry about is what Washington’s patch for Social Security will look like. Filmy, I’m afraid.

Cold math shows that fixing Social Security in a sustainable way will require a combination of tax increases and benefit cuts. Both Republicans, however, are loathe to talk about higher taxes. And leaders of both parties — President Biden and former President Donald Trump — have decided to cut benefits on the table.

I support benefit cuts, though not for everyone. Low-income Americans must be saved. If anything, their benefits need to increase. People 55 and older should also be spared, as they are either retired or close to retirement, so they cannot make up any shortfall by working and saving more.

But high-income working-age Americans will have to get used to the idea that Social Security will be less generous than they expected. They will need to put more money into their 401(k)s and may delay their retirement by a few years.

of Social Security Maximum benefit That’s about $48,000 this year for someone retiring at typical retirement age, which will rise to about $65,000 (in today’s dollars) by 2050. Double this as much as possible for two-earner couples.

Democrats, who otherwise have no problem with bailing out the rich, have historically resisted major changes to the Social Security benefit formula. The program is already there Better deal for the poor than for the rich (although this is partially offset by the rich). Long life span). They fear that social security will lose political support if it is seen as a form of redistribution from the rich to the poor rather than insurance itself.

But this long-standing fear may be unfounded. There are means-tested programs including Medicaid, college aid and nutrition assistance. Increased rapidly During the last half-century and for the most part it is not regarded as an unjustified gift.

One reason Social Security did not provide much of a safety net for low-income people when it was enacted in 1935 was that many Southern Democrats believed that blacks would not work if they received a good government retirement benefit. Christopher Pope, a senior fellow at the Manhattan Institute, wrote in one last year. topic on the RealClearPolicy website. Jackson Daily News Wrote at that time, “The average Mississippian cannot imagine himself paying pensions for able-bodied negroes sitting in the front galleries supporting all their relatives on pensions, while the cotton and Corn crops are crying out for workers to pull them out.” This racist argument should not continue to influence program design.

If Social Security reform comes down to a choice between A: reducing expected benefits for high-income Americans and B: raising taxes sharply to help keep those benefits high, voters have to choose A. Most likely, Andrew Biggs, a senior fellow. American Enterprise Institute.

Biggs argues that the United States should follow the lead of nations such as Australia, Canada, New Zealand and the United Kingdom, which have fewer benefits than providing Social Security. “You don’t see Canadians roaming the tundra without any retirement savings,” he told me.

Social Security needs a constant flow of new contributors to work. Payroll taxes from young workers go to pay benefits to older recipients. For its first half century, Social Security was an amazing deal. Retirees receive far more in benefits than they pay in, even in interest. That’s what made it so popular. But now the number of workers per beneficiary is low, and the trust funds that were built in Flesher’s time are drying up. So something needs to change.

Biggs co-wrote a short In January that called for reducing or eliminating tax preferences for retirement plans, including 401(k)s, and using savings to supplement Social Security. He and Alicia Minnell, director of Boston College’s Center for Retirement Research, argued that tax preferences “seem to be a bad deal for taxpayers, primarily benefiting high earners while significantly increasing national savings.” fails.” (This study was cited in a recent New York Times Magazine article.)

Biggs is actually optimistic. They Argued A recent Wall Street Journal article noted that the majority of retirees are doing well and that it would not be expensive to put a safety net under those who are not. Bureau of the Census Reports The share of elderly people in poverty fell to 6.9 percent in 2012 from 9.7 percent in 1990, according to official poverty data, which drew on data from pension plans and other records. is less than count.

According to the Federal Reserve’s Survey of Household Economics, only 3 percent of respondents who were 65 to 74 between 2019 and 2022 said they were “having a hard time getting by” and an additional 12 percent said they were “just Passing by”. Decision making. The problem is naturally concentrated among people with the least savings. Among people that age with less than $10,000 in savings, 12 percent said it was hard to get by, and 30 percent said they were just getting by, Biggs calculated.

This looks like an existing problem. Low-income people clearly need help in their golden years. Most of them don’t save for retirement partly because they don’t have the money to save and partly because they don’t get good advice. “If you cut their benefits, you’re just cutting their income,” Biggs said.

Other retirement experts are not as confident as Biggs about the financial health of most older people and the readiness of workers for retirement. “Based on their current account balances, income, savings and investment behavior, three out of four workers in our sample are not saving enough for retirement,” a 2022 the study Published by the Federal Reserve Bank of Chicago. Lawrence Kotelkoff, an economist at Boston University, said retirees who told surveyors they were probably living in really uncomfortable conditions.

Yet, to the extent that there is a problem, it is mostly among those who earned the least during their working years. Social Security needs to be fixed soon. The obvious choice is to gradually turn it into a safety net for minimal leverage.


As of May 8, Ukraine has launched at least 20 attacks on Russian oil refineries since October, destroying about 14 percent of Russia’s oil refining capacity and forcing the government to freeze gasoline exports for six months. A ban has been imposed. topic In Foreign Affairs magazine, Vice President Kamala Harris and Defense Secretary Lloyd Austin expressed concern that the attacks could raise global energy prices.

But an article by Bloomberg New Energy Finance’s Michael Leibrich notes that “with less domestic refining capacity, Russia will be forced to export more of its crude oil, not less, pushing global prices down rather than up.” for,” essay by Laurie Miley Verta of the Center for Energy and Clean Air Research and Sam Winter Levy of Princeton. They present data showing that this is already happening and conclude, “Ukraine’s campaign is working.”


“Time’s up.”

William Shakespeare, Hamlet (1604)


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