Monday, August 2, 2010

New York Times: “Social Security Jitters? Better Prepare Now”

The New York Times
reports on how individuals can prepare for uncertainty regarding Social Security's financial future:

"…while lawmakers may, in the end, not decide to make drastic changes in Social Security, many of the financial advisers and other experts we talked to said they were erring on the side of caution and were already recommending that their clients start saving more now. "People 50 and below should change their planning now to incorporate a benefit cut," said Laurence J. Kotlikoff, an economics professor at Boston University who ran some numbers for us to see what life would be like if the retirement age were immediately raised to 70. That change would translate into a nearly 20 percent cut in benefits, because you would have to wait an extra three years to get the same amount of money, he added.

Several financial planners told us they were assuming that clients in their 30s and 40s might receive just 50 to 80 percent of their full benefits. Or, the advisers say, they may figure that the cost-of-living adjustments applied to benefits won't keep pace with inflation, or some other combination of adjustments.

One of the (many) problems with delaying a fix for Social Security is that it needlessly complicates the retirement planning of millions of Americans, who don't know how the inevitable changes to Social Security's taxes and benefits will affect them. Fixing the program today isn't merely the most economically efficient way to do it, as it spreads changes over as many people as possible, it's also just plain fairer to tell people what's going to happen to them.


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