Fixing Retirement

John Tierney writes in The New York Times that the concept of the retirement age is an anachronism:

The problem isn’t that Americans have gotten intrinsically lazier. They’re just responding to a wonderfully intentioned system that in practice promotes greed and sloth. Social Security is widely thought of as a kumbaya program that unites Americans in caring for the elderly, but it actually creates ugly political battles among generations.

With the help of groups like AARP, the elderly have learned to fight for the right to retire earlier and get bigger benefits than the previous generation – all financed by making succeeding generations pay higher taxes than they ever did themselves.

The result is a system that burdens the young and creates perverse incentives for people to retire when they’re still middle-aged. Once you’ve worked 35 years, more work often yields only a tiny increase in your benefits (sometimes none at all), but you still have to keep paying the onerous Social Security tax, which has more than doubled over the last half century.

If the elderly were willing to work longer, there would be lower taxes on everyone and fewer struggling young families. There would be more national wealth and tax revenue available to help the needy, including people no longer able to work as well as the many elderly below the poverty line because they get so little Social Security.

Tierney raises a good point — the current system basically provides a disincentive for high-income workers to keep working. Low-income workers don’t have much choice in the matter, they need all the money they can get. If you’re already making $200,000 a year, chances are you have enough investments to coast through retirement and can leave the workforce earlier. The problem with that being that when that high-income worker leaves the work force, Uncle Sam loses that tax revenue. A smart investor will have set up his retirement income in such a way as to minimize taxation, which means less revenue for the government and less productivity for the economy.

There’s really no reason for a mandatory retirement age. It doesn’t help the lower classes at all, and those who would otherwise be able to work have every incentive not to. A program that actively encourages people not to contribute to the economy is simply not a smart one, especially in an age where living into the triple digits isn’t going to be as uncommon as it used to be. With advances in medical technology, future generations could have significantly longer lifespans. A system of pensions that’s stuck in the days of high birth and mortality rates just isn’t going to be sustainable over the long term.

The free world faces a massive demographic crisis, and action needs to be taken to ensure the solvency of programs like Social Security. The notion of a fixed retirement age is a product of a bygone era that reduces tax revenue and economic productivity. It is time to reconsider a system that no longer works and provide workers with a syste m that will last well into the next century.

3 thoughts on “Fixing Retirement

  1. So what exactly are you proposing? And how does it relate to when people are and are not eligible to receive Social Security benefits?

    It strikes me that the common denominator among people proposing that the retirement age should rise “in correspondence with increasing life expectancy” is that work for them consists of sitting behind a desk. My dad is 60 and breaks his back every day on the railroad. I can assure you that working until 75 is not an option for him. Even those who stand on their feet in retail stores all day can’t realistically be expected to hold off on retirement. The body can only withstand so much strain before it gives, regardless of how long one can be expected to live. Any proposal to extend the retirement age has to make exceptions for those who do something more physical than shuffle papers for a living, particularly in the current era of mandatory unpaid overtime, ever-increasing assembly line speeds, and if “moderate Republican” Arnold Schwarzenneger’s vision is realized, no more lunch hours.

  2. Perhaps a system that offers incentives for people to stay in the system, and some form of minuses to people who retire too early. Without getting into fiscal details you can arrange a system which encourages people to retire at 70 or even 72, while penalizing people from “desk jobs” who retire at 60 or even 55. Of course the issue of who is working at a desk job well be somewhat or a grey area of course. As well as the fact that one of the benefits of social security is that by taking the elderly out of the work force by providing for their welfare enables younger workers to obtain jobs easier and with better pay ( ie shrinking the labor pool), would now become in jeopardy.

    However this would help keep the system fiscally solvent, as well as encourage people to rely on market returns for early retirement, thus increasing the desire for them to invest. Such encouragements can also be “tweaked” to make young or old investors react differently. For example to shrink the labor pool government could spend a little more and cover some of the penalties of retiring earlier.

    Just some food for thought, as this helps turn the social securities “career blind” policy into one that recognizes each person as having different retirement needs.

  3. In the end, what people our age think isn’t going to matter. Older people have all the power and money. I’m not expecting an outcome that benefits me.

    I worked as the front desk clerk at a hotel once and I didn’t have breaks or lunch.

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