Friday, July 17, 2015

Should we eliminate Social Security's delayed retirement credits?

Individuals who delay retirement receive a higher Social Security benefit. Since Social Security benefits are paid for life, this means that a person who delays retirement is "purchasing" a large annuity from the government. This means the government takes on greater mortality risk. Does this make sense?

Writing in The Hill, Brenton Smith argues no:

When DRC was created in 1972, the annuity market may have forced the government to assume a monopoly role. The past is the past. Today, the government’s role is completely unnecessary. There is a robust annuity market today that could support retirees with an expanded range of choices.
The problem for Americans with this rule is risk. Annuities in the private sector are priced daily – every day.  The government does not re-price the annuity daily, weekly, monthly, or even yearly.  The last time that the government changed the pricing for the annuities issued by Social Security was in 1983.  Pricing is a tri-decennial event.
Click here to read the whole article.


WilliamLarsen said...

Mr. Smith is correct;

"At some point, the debate about Social Security reform must grow beyond simply cutting benefits and raising taxes. These solutions do not fix Social Security. They are the way that we pay for its brokenness."

While those who are retired will want to keep their benefits, others yet not retired generally under 45 would rather walk away from what they have paid to SS and op out of SS, while those generally over 45 are split between opting out of SS and phasing it out for those under 46.

Having been listening to the debate since 1972, I have seen a dramatic shift from keeping the status quo. Raise taxes, raise retirement age, reduce benefits, means test, tax other income, raise the SS base, change COLA and more all clearly indicate SS is broken. The cost of doing nothing is EQUAL" to the cost of doing nothing. Doing nothing allows those already to retire to escape the pain while shifting all the cost to workers and future works.

The sacred cow as SS was once referred to is about to slaughtered.

WilliamLarsen said...

I have a typo in my reply above

it should have read

The cost of doing nothing is "EQUAL" to the cost of any combination of changes.

Both sides of the equation REVENUE and EXPENSES must be equal. If not the program generates either more revenue than needed or pays less then full scheduled benefits.

Which ever age group can gather the most number of votes in support of against proposals will succeed. The millennial generation has out numbered boomers for since the last millennial was born over 17 years ago. Since that time the additional babies have been born that out number the all those over age 69 by a large amount.

The group best able to get their message out will succeed. My bet is on the younger generation.