Should Social Security benefits be adjusted by a person’s race and gender?
One of the big discussions underway right now is how to shore up the finances of the hugely popular — and, some would argue, essential — Social Security program.
Currently, people can choose to begin receiving some benefits as early as age 62. Under various reform proposals, the age at which we begin receiving those checks will climb to 67, 69 or even 70.
This sounds reasonable. Americans are living a lot longer, right? Surely a program created to support people for a few years shouldn’t be expected to sustain them for a decade or longer.
The trouble, of course, is that Americans of different races have very different life expectancies. Women are the big “problem” here, because on average they live to be more than 80 years old.
On average, a white woman who reaches the age of sixty-five can expected to live another two decades.
A black man, by contrast, is likely to live fewer than 15 years more.
That 25% disparity equates to a huge amount of Federal dollars. But there’s also a fairness issue here.
Some of these proposals would have us raise the Social Security eligibility age beyond the life expectancy of the average black man.
Arguably, given our current economic realities, this is a population that can be expected to need retirement support.
But some of the “solution” now on the table would mean that many if not most African Americans who pay Social Security tax will never receive a dime back.
So what do you think? Should the realities of race, gender and life expectancy factor into a real-world discussion of retirement programs, or not?
Tags: politics
While I doubt that raising the retirement age will cause us to riot like the French did a few weeks back, something has to be done to fix Social Security. There’s an entire generation paying into it right now in the hope that we’ll be able to see some of the money back, but a fair amount of us know that its not going to be there when its our turn to retire (assuming we ever get the chance to retire). However, I do see potential civil rights issues arising if race, gender, and life expectancy get thrown into the mix of whether or not you get SS payments or not. The ACLU and NAACP would have a field day in the courts and media opposing any such changes.
I’m not sure if what you are presenting here is accurate. Right now my official Social Security age is 66, but I can elect to begin receiving benefits at 62 – a considerably lower level of benefits. One could say that my TRUE full retirement age is 70, because my statement shows that if I wait to retire until then, I will receive a benefit that is significantly higher than the one I would receive at 66.
I doubt that people will be prevented from drawing benefits at a younger age than their full retirement age. That full retirement age may be pushed back to be later, and that is what I read as being proposed by the Debt Commission chairs. Perhaps the benefit available for an earlier retirement may be further reduced.
In reality, it looks like Social Security is NOT the big problem. Health care spending is. Check out the graph here: http://motherjones.com/kevin-drum/2010/11/deficit-commission-serious
Its probably not legal to take either race or gender into consideration. But both are probably proxies for the types of work people do, and/or economic status. People who work dangerous and physically demanding jobs or have poor access to health care are going to need to retire at an earlier age than people who work in safe healthy environments and get access to good health care. I dont know how you take that into consideration.
Here is an easy fix which no politician will ever get accomplished. Take the money that is supposed to fund SS and put it in a seperate fund instead of using it as free $$$ that actually masks the true budget shortfalls/deficits. The old Al Gore “lock box”. That is how the system was originally designed but was never implemented because for many yrs there was more workers to fund it than there were retirees drawing from it. It would be nice to see the “lock box” but I’m sure it will not happen, ever.
phahn50’s point echoes this great quote by Krugman from earlier this month: “So you’re going to tell janitors to work until they’re 70 because lawyers are living longer than ever.”
Social Security already allows for this in a sense. Those who start drawing at 62 get less per month than if they waited until “full retirement age” (65 , 66 or 67 depending on your birthdate). What many folks don’t know is that the monthly amount goes up every year you wait past 62 to start drawing benefits. Also if you go back to work and stop drawing SS your SS is recalculated after re-retiring to account for the time you didn’t draw plus any additional earnings during the return to work may increase your benefit. IMO adding race and gender unnecessarily complicates things and raises the question, should we also take into account occupation? Coal miners for example tend to have shorter average life spans.
Lock Box sounds good. But Al Gore is fat and has a bald spot and tried to wear earth tones, and nobody wants to have a beer with him.
http://nyti.ms/cXAg7X
You could also limit the annuity. For example you could say that the annuity can only be drawn for 10, 15 or 20 years whatever works to solve the problem. So you could take your pay anytime past the age of 62 but it could only be drawn for those set periods of time.
its too late for the lock-box – the account is going negative. and Dave – I admit I was echoing that great quote from Krugman.
This is a joke, right? No, sorry. The joke is we have geniuses who dream up this stupidity and get paid far too much to sit around, probably making money from taxes we pay, to come up with this nonsense.
First thing we need to do is to take away all the health insurance and retirement benefits scammed from us by our beloved Congressmen/woman and Senators.
Then we need to eliminate all subsidies to every business there is, including farming and the airlines.
Airlines should be required to charge on the basis of miles flown so that short flights are not subsidizing long flights.
Stop subsidizing medical research. Stop subsidizing form of business. After all, isn’t this supposed to be a free enterprise system.
The few bucks retirees get from SS should not be breaking the back of this government. To try to blame everything on SS and Medicare is just ridiculous.
Pete give this a try.
The things you pointed out don’t make much of a dent.
http://www.nytimes.com/interactive/2010/11/13/weekinreview/deficits-graphic.html
They will dent the overpaid people who claim to represent us.
You could fund the program but it would be more expensive than our current system. Right now everyone working is paying directly to those who are retired, there is no “fund” that is being drawn down, the people who are retired now paid for the social security of those before them just as we pay for them, it is a social contract.
To move to a self funded system where the money that you paid in social security was actually set aside for you would mean that those right now would have to be paid for with additional taxes as the people working would be setting aside their own money in a lock box.
As I pointed out to oa in a previous topic (“What we talk about when we talk about Big Government”) the article uses a 2008 CBO projection. The fact is the projection is wrong as outlays exceeded revenues this year. The so called Social Security surplus is Treasury bonds (IOU’s) that have to be redeemed to pay the shortfall. In other words, the surplus collected over the years was spent and the government owes itself. With the baby boomers retiring the ratio of worker to retirees is heading south so we have a double wammy. Consequently, the taxpayer will pick up the tab for this shortfall from here on out through the general funds.
Now go to:
http://www.census.gov/population/www/projections/projectionsagesex.html
There is an Excel file:
File 2. Annual projections by 5-year and selected age groups by sex
Assume that the group between 20 and 64 are the ones paying into Social Security and the 65 and over are the ones collecting. I calculate the ratio of 20 – 64 to 65 and over from 2010 to 2030 since that would give us a rough idea how many workers we will have to support one retiree. In 2010 we have 4.6 workers per retiree. By 2020 the ratio has dropped to 3.5 and by 2030 it is down to 2.76. Raising the retirement age to 70 and in 2020 and 2030 the ration improves to 5.2 and 3.8 respectively. This all assumes that EVERYBODY between the ages of 20 and 64 are actually working which we know is not realistic.
Adjust the SS payments based on “financial need”.
This should just be a safety net, not a retirement program.
If people wait longer and longer to leave the work force, what happens to young people trying to start a career? There’s never enough jobs for everyone, and this seems to limit the opportunities even more.
Has anyone done a study to see how this might impact the economy as a whole? Logically, it appears that, should older people not start to draw SSI, more younger people start needing Welfare, food stamps, etc.
Dan3583 that is exactly why this program has to get back to being a “safety net”, this cannot be the retirement program for a large portion of the population.
People who do not need SS payments should not get them.
I agree, Paul.
Kinda rankles to think that top 2% are actually going to collect.
Not even pocket change.
If you are going to advocate a need test for SSI, then maybe the same thing for unemployment insurance?
People are paying into both programs. If you want to scrap them, then are you willing to pay out all that was paid in with interest and go back to the day when workers who don’t have some kind of pension to fall back on are just out of luck or have to go on welfare?
Pete,
I am not suggesting scrapping anything. Maybe that was addressing some other comment.
There already is a financial needs test for unemployment benefits. If you have a job you can’t collect. That is why that program usually does quite well.
But yes I am suggesting that SS be more like “insurance” something that you only need if you need it. Many people (in fact maybe most folks) always pay for unemployment insurance and usually never collect. I am suggesting the same thing for social security.
Pete,
One difference between SS and unemployment insurance (in most states) is that employees don’t contribute toward UI, only the employer. In NY we don’t and unless it has changed in the last few years (since I retired) there are only three states where employees pay into the UI fund.
It is a lot harder to justify a needs test for SS where everyone contributes. Of course no one makes you draw SS. If you have other health insurance you will be forced to sign up for Medicare when you reach 65. If you are rich enough to be self insured, you don’t have to take that either. It would be interesting to know how many decline SS because they don’t need it.
P.S. I know people who could have drawn UI when unemployed and, based on their income level, arguably should have taken it but didn’t as a matter of pride. FWIW
I have always found it amusing, that we talk and talk about the coming shortfall in our social security system, but always put off dealing with it ’til another day. As I get older of course, I find it less amusing. If we were sitting in a car, and it started rolling toward the pond, a little quick action would eliminate the problem. We’ve been sitting in this car now, discussing the problem of the pond, since I can remember…back in the 70s at least.
From the employer’s point of view the only number relevant is total cost of the employee. It would make no difference to the employer if instead the cost of the UI was in the employee’s paycheck and the employee paid the insurance. It is politically convenient for the politician to hide the cost from the employee by pretending the employer is paying the paying the insurance.
NITV stole my thunder. To say “only the employer pays UEI” is simply false. It’s all part of the cost of the employee.
SS- You can do means testing, you can limit payout or raise the age. The problem still remains. We have a shrinking workforce, a growing welfare class and ever higher taxes and costs. The gov’t depends on Income Tax for a large portion of it’s revenue and yet something like 50% of working Americans effectively pay no income tax and many actually receive more in their return than they pay in! We made our bed back in the 60’s when Johnson was allowed to start raiding the SS funds. Now we have to face the music.
Life sux, then you die.
The fact is that there is a max on the amount of money you can collect while unemployed. This means that even if your last job was paying you $2,000 per week or even $100,000, the most you can collect is about $400 or so. Haven’t checked on the current limit. The $400 or so max is computed on half of your gross weekly pay.
When talking of an social benefit, always remember your employer looks at the big picture – pay + benefits. You should too because the amount your employer is paying for a federal mandated benefit is money you don’t see unless you qualify for it. As the ad on TV says, “It’s your money!” and you might just need it some day.