If there’s one thing that’s certain during an election year it’s that no one is going to talk about social security. It’s one of the most expensive government programs along with Medicare and Medicaid and in dire need of reform. It was already set up as a ponzi scheme but the government has made matters worse by refusing to make changes to the system partially thanks to huge lobbying efforts from the likes of AARP. For the last few years the amount we’re paying into the system has been reduced to help free up extra cash in our paychecks.

Being an election year, no one is going to touch social security. That will keep you out of your desired office. It’s a no win issue because any attempt to reform will run into some kind of resistance. So Social Security is likely to get much worse before it gets any better. Younger professionals like me are rightfully assuming that we won’t have much if any benefit from the program. Given that the first people to pay in to the fund contributed pennies and got back dollars, it’s only right to assume the final generation will contribute dollars and get back pennies.

The biggest problem with social security is that it has changed the expectation of what workers do when they get older. For some reason in the 20th century people decided they should stop working. Up until WWII people pretty much worked until they died. Social Security was established for people that managed to live longer than they were supposed to.

When social security was first proposed and then made into law, the retirement age was virtually the same as the life expectancy of the worker: 65. Some pension systems at the time wouldn’t pay out until age 70, so you really had to outlive your friends to collect a pension. This is why pensions and social security were stable back then.

But as you can see something has changed. While the retirement age has been virtually flat, Americans are living a lot longer than they used to. That’s great but the longer people collect social security, the less stable the fund becomes. As a result the system has started to break down and is inching closer to a Madoff moment.

Reforming social security is actually quite easy then. But the public has to be reeducated about what the program is actually supposed to do. There’s what it was designed to do and what Washington has allowed it to become. The fix can come from raising taxes or reducing payments, but the retirement age needs to move up, a lot.

It would be great to just bump the retirement age up to 77 but eventually we’ll run into issues again even if that idea got through Congress. The simple fix then is just to tie the retirement age to the life expectancy of Americans. Just make it 5 years less than the life expectancy. So if you want to retire in 2040 and the life expectancy is 90, then you need to turn 85 that year. Plain and simple.

But like I said, no one is going to touch social security this year. It’s not likely to get touched any time in the next few years either. But rest assured, unless you’re a baby boomer, you aren’t going to get the sweet deal that they’re getting.

categories: economics, government