Tuesday, August 5, 2008

Academy of Actuaries: Fix Social Security now (and do it by raising the retirement age)

The Academy of Actuaries yesterday released a position paper on Social Security reform. First, they say, whatever is done should be done as soon as possible:

Public policymakers sometimes wait until the last minute to take necessary action. But in the case of Social Security, waiting will limit the available options — and tend to force solutions that emphasize sudden changes that are more likely to involve tax increases. The last two times Congress made significant changes to Social Security, in 1977 and 1983, the legislation included near-term and long-term provisions involving both tax increases and reductions in the growth of benefits. Regardless of the kinds of changes ultimately enacted into law, the sooner policymakers act, the more options they will have. Tax increases could be phased in more gradually, and reductions in benefit growth could be spread across a much larger population of beneficiaries, making individual reductions relatively smaller and less painful. Enacting legislation sooner would also allow individuals sufficient time to modify their own financial planning —adjusting to changes in Social Security. The American Academy of Actuaries believes that delay will only make the changes ultimately needed to restore Social Security's financial soundness less attractive, more painful and more precipitous. Timely action can make the solutions more acceptable to all concerned.

It always struck me a strange that a good number of people opposed reforming the system on the logic that it wasn't yet a "crisis," as if waiting until it is a crisis would make for better policy. Apparently the actuaries see things the same way.

Second, the Academy argues that increasing the normal retirement age could play a useful role in a reform plan, although other options would likely be added to it:

The American Academy of Actuaries believes that a financially sound Social Security system must accommodate future increases in longevity. The most direct way to do that would be to extend the currently scheduled increases in Social Security's retirement age. The time to enact this change is now.

Read the whole paper here.

Update: Marie Cocco, a generally lefty columnist (at least when it comes to Social Security) apparently agrees with the actuaries, calling a retirement age increase a "fair, long-term solution." Consensus is in the air!


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