If you follow me on Social Media at all (I’m on twitter here and Facebook here), you’ve probably heard me grumbling about the riots in France this week. I’ll admit it: it’s not about the French, I’m totally being selfish. My husband and I have been planning a trip to France for awhile (it just so happens that he has an ABA speaking engagement that coincides with our anniversary) and it’s looking less likely that we’ll be able to go. I’m trying to stay positive but being tear gassed at a Parisian cafe is hardly my idea of a romantic vacation…
At any rate, what’s so fascinating about the riots is what is driving the French to protest: retirement age. Due to budget cuts, the French government is planning to raise the retirement age from 60 to 62. And with that, the French reacted – violently so. They cut off refineries, blocked a major airport, set cars on fire and slowed rail service.
The whole thing, while quite remarkable, had me thinking about how the US would react in similar situations. In the US, retirement benefits from the government for most taxpayers are paid out from the Social Security Administration. Those taxes that you pay in as FICA taxes, together with matching funds, are eventually paid back to you in the form of Social Security benefits (well, except for Gen Xers and after – nothing for you, bwahaha!). For taxpayers born in 1960 and later, “full” retirement age is 67 though you may begin to receive benefits as early as age 62 (or as late as age 70).
But what if the US raised the retirement age… again? That brings me to today’s Fix the Tax Code Friday question:
As far as I can tell, the only things the American people riot about are WalMart Thanksgiving sales, basketball playoffs, and American Idol auditions.
Maybe if the organizers offered free Krispy Kremes and the chance to win an iPad?
I don’t count on ever receiving Social Security. I’m Gen X, and the boomers have been pulling the ladder up behind them all my life. If I get it, fine, but I plan on working as long as I’m able.
I’ve been reading about the French “protests” as well, and noting that our own SSA raised the retirement age from 65 to 67 some years ago, and nobody even flinched. My own “retirement” age was kicked from 65 to 65 & 8 months. Unfortunately, I was busy at the time and unable to riot — but it would have been a one-man show, anyway. Maybe it was because the outside income limitation exemption was lowered from 72 to one’s “retirement” age, which gave me over 6 years of additional FULL SS benefits even though I still am working.
But, to answer the question: Yes, I think the retirement age should be raised to 70. People live a lot longer and stay healthy a lot longer, and and most can work a lot longer than 60+ years ago when Social Security was initiated with a retirement age of 65.
But I also think more “adjustments” should be made. First, the income limit for the FICA tax should be removed, as it is for the Medicare tax. And both taxes should apply to any “earned income” including stock options, and other “non-cash” income. It may even be that doing so would increase FICA tax collections to the point that the tax could be made sort of progressive by reducing the tax rate a bit on low incomes.
Finally, we should give up the pretense that, somehow, SS is a “real” retirement program like 401(k) and such. Benefits should be means tested in some way. Right now, the higher your income was, the larger your retirement benefit will be. But, the “social good” should be the other way around: benefits should bge higher for poorer people and lower for people who are well off. Before she died, ten years ago, my wife’s 80+ year old aunt lived on less than $800 a month Social Security (from which medicare premiums were deducted) and that was her only source of income. My benefit today is close to the max, which is around $2400 a month. Were she alive today, SHE should be getting the $2400 a month, and I the $800 (or, actually, nothing, since I have a job that pays several times $2400 a month to begin with.)
Finally, I have to acknowledge that I can be so glibly “rational” because even if the Feds change Social Security the way I recommend, the changes almost cfertainly wouldn’t apply to me because I’m too old — and people like me vote!
a) We’re (hopefully) headed to Paris for our anniversary in a month or so as well. Great accountants think alike.
b) I think, much like stock prices and news, raising the retirement age here in the U.S. is “priced in.” It is expected, and the only real variable is WHEN it will happen, not IF.
Meh. I’m 26 – my generation isn’t exactly banking on social security anyway. As long as personal retirement accounts are the vehicle that most young workers rely on for their retirement savings, upping the age when we start being able to receive SS benefits isn’t going to change much in the way I’d perceive an age increase.
I might be a little PO’ed if the rules around 401(k) and ROTH withdrawals changed, though.
I’m only 34 and I think the retirement age should be increased. Life expectency is much longer for my parent’s generation (50 is, apparently the new 40) so I’m sure it’ll be even longer for my age group. It makes ethical sense that people in my age group should have to work longer, thereby paying more into the system, to make up for the fact that we’ll be cashing in longer. That having been said, I’m not counting on the program even being available to me in my retirement. And with the way my generation thinks nothing of living on credit, I fear for my children’s children who will have the tax burden of supporting us in our old age.
I would like to see the US populace get passionate about government, but I don’t envision any riots over changes in Social Security. I really don’t want to work until I’m 70, so I believe the answer is to max out the Roth IRA and the 401(k)/403(b)/457 (b), and have additional independent investments and savings. Live like a pauper today to live without worry tomorrow.
I saw a link to a story about ‘why you should consider Social Security in your retirement plan’ or something along those lines, and the realization that I have never considered Social Security contributing to my retirement gave me pause for a moment. But I still wasn’t interested enough to read the article. I’m 32, and like most folks my age or younger, I do not seriously expect Social Security to be viable when I am retirement age. (Besides, why would I retire? How boring.) So, no, I wouldn’t care.
My parents both retired at 70 — and HATED it! My Mom was perfectly capable of working a few more years, but the Commonwealth of Massachusetts said she had to retire. My Dad didn’t know what to do with himself, so he got a sailboat, did that for a few years, then did various other things — including some scientific consulting work until about 85 or so. (He could have done it beyond that, too, but he felt the client was wasting his time with research unlikely to produce useful results, so be quit.)
We should raise the retirement age… but I think the other part of Social Security that needs to be looked at (altho’ it’s politically incorrect) is disability. This is a huge area of abuse, but no politician wants to be seen as “against the disabled,” so they do nothing to fix it. I can’t tell you how many of my low-income tax clients find a way to go on disability because they can’t find a job (or just would rather watch Springer than go to work every day). There’s a whole cottage industry of lawyers who do nothing but help people get on disability. It’s a racket, and you and I are picking up the tab.
I am not sure if it is my generation (28 years old here) but we don’t really seem to protest all that much nevertheless riot.
I would love the opportunity to divorce myself from the whole mess! Let me opt out of the Social Security ponzi scheme!
I would rather they adjust the formula for calculating taxable portion of SS benefits to a currently relative amount. It has been $25,000 or $32,000 (joint) for years and years. This amount has dwindled as inflation and COLA has increased (remember COLA; there used to be one before schemes were enacted to destroy government retirement incomes!)
I’m with Evan. I thought Ponzi schemes were illegal. Can someone tell me how SS isn’t one? I’m putting in all this money that everyone admits I’ll never see. Doesn’t seem fair to me.
Hans: SS isn’t a Ponzi scheme because Ponzi schemes eventually collapse when the supply of new investors dries up. SS is a tax, so the new “investors” have to keep “investing” whether they like it or not — so, theoretically, the SS “scheme” can go on forever.
Dave: SS benefits ARE COLA adjusted, based on the Consumer Price Index. The reason why there have been no COLA adjustments for 2009 and 2010 is because The CPI hasn’t gone up since 2008. In fact, it’s actually down a little. SS beneficiaries got a very large 5.9% increase for 2009 because in 2008 the CPI was boosted way up by huge runups in the prices of oil, gas, agricultural commodities, industrial commodities, etc. Those prices have fallen considerably (along with the economy) so, theoretically, one’s benefits for 2011 will buy at least as much as the same benefit would have bought in 2009 and 2010.
JBruce,
Just because it is a REALLY good ponzi scheme doesn’t mean it isn’t a ponzi scheme lol
Evan:
The “41” is 1941. I’m almost 70 years old. Either the Ponzi scheme will outlive me, or by the time it collapses I’ll be so old I won’t know it happened.
In the meantime, I’m cashing those checks!
I’m with Evan. If I could opt out I would. I’d rather personally invest my money then rely on the government. Less government involvement in our lives the better.
Jbruce41, Dave is referring to the way social security benefits are taxed. While I am simplifying, single social security recipients don’t pay taxes if their base income is less than $25,000. For married couples filing jointly it is $32,000. These limits do not change, but social security benefits are indexed to cost of living. So recipients are paying a larger portion of their benefits back to the government.