Retirement and Social Security

Margaret Atkins MunroLet's Talk About MoneyLeave a Comment

Each spring, as tax season comes to a close, I am reminded of my own mortality. The physical toll of too many hours at my desk, sleep deprivation and a weary brain elevates the simplest tasks, those that were inconsequential in November, to huge endeavors by early April.
At this time of year, everything hurts.
If the death throes of tax season were not enough, every March I receive my annual Social Security letter, outlining the potential benefits that await me should I live to my “Sell By” date – and those my family will receive if I don’t. Of course, increasingly prominent in each successive notice is the caveat that the money may run out before I die (very likely), and that my future benefit may be reduced (almost definitely).
Annual letter aside, the concept of collecting retirement is unreal to me. Although I add to my retirement accounts regularly, it seems odd that I will ever be entitled to any Social Security benefits, despite having made contributions to it since my early teens.
But what was unimaginable over thirty years ago is now looming. Friends and family only slightly older than me are now counting down to retirement (albeit early) in single digit years, or even months. At the beginning of our working lives, while repaying college loans, retirement remained an abstract concept. Now, our own educations paid for and our children in college (or edging closer to it), it’s becoming disturbingly real.
More remarkable is how quickly we, as a society, have absorbed the collective, absolute certainty that we are entitled to retire at a specific age. Retirement as a given didn’t exist in this country until the Social Security Act was passed in 1935, a time when life expectancy for the average American was a whopping 61.7 years. To limit the number of people eligible for a benefit, this novel program pegged the official retirement age at 65, allowing few to actually collect. By comparison, in 2004, average life expectancy had leapt to 77.9 years, while retirement age only increased to 67. Now, not only are you likely to live long enough to collect monthly benefits, but also collect them over a longer period of time. Comparing current length of benefit payments to the original average length is a sobering exercise; remember, had the original time span between retirement age and average life expectancy been preserved, current retirement age would now rest at 81.2 years.
Social Security is such a given in our lives that we tend to forget that it was designed to deal with Depression-era levels of unemployment. By retiring older workers from the workplace, jobs became available for the younger. Money to pay the retirees came from their replacements – a small but necessary payment in exchange for a job.
And so the system was born, of current workers paying benefits for those that came before, with the expectation, but not the guarantee, that, when it became your turn, the workers replacing you would pay your benefits. Until recently, it’s been a system that worked. Two factors have tipped the balance – increased life expectancy, and the falling birthrate.
With many living well into their 80’s, 90’s and beyond, the number of years of collecting Social Security may well exceed the number of years of contributing. Today, a retiree frequently accumulates far more in benefits than he or she ever put in, and sometimes for more years than he or she ever participated.
In addition, as boomers live well past their retirement dates, succeeding generations won’t be large enough to fill the gap without substantial contribution increases. In its present form, Social Security will pay much more for each retiree from retirement through death than it ever did before, while fewer current workers are available to fund that benefit.
Right or wrong, Social Security has become a sacred cow; while everyone agrees that it’s in grave danger of collapsing under it’s own weight, tinkering with it is the political “third rail”. As a tail-end baby boomer, it’s likely that I will live to see this great piece of social engineering falter. Its original intent, replacing older with younger workers, is no longer applicable in an economy where there are sufficient jobs for all. For most, retirement at age 67 is not necessary and, in these days of continued low unemployment, maybe not even desirable. And clearly, given the current state of the Social Security system, it’s not sustainable.
So, as I look at my letter, I am reminded that, whether I live to collect or not, perhaps the issue under discussion shouldn’t focus on the solvency of the system, but on the nature of retirement itself. Granted, we’ve all become accustomed to the idea of eventually receiving Social Security payments, and grown to depend on it. No one is suggesting that we do away with it – but if we’re going to create a self-sustaining program that allows successive generations to benefit, it’s time we adapted that program to 21st century economic models.
We’re entitled to that.

Each spring, as tax season comes to a close, I am reminded of my own mortality. The physical toll of too many hours at my desk, sleep deprivation and a weary brain elevates the simplest tasks, those that were inconsequential in November, to huge endeavors by early April.

At this time of year, everything hurts.

If the death throes of tax season were not enough, every March I receive my annual Social Security letter, outlining the potential benefits that await me should I live to my “Sell By” date – and those my family will receive if I don’t. Of course, increasingly prominent in each successive notice is the caveat that the money may run out before I die (very likely), and that my future benefit may be reduced (almost definitely).

Annual letter aside, the concept of collecting retirement is unreal to me. Although I add to my retirement accounts regularly, it seems odd that I will ever be entitled to any Social Security benefits, despite having made contributions to it since my early teens.

But what was unimaginable over thirty years ago is now looming. Friends and family only slightly older than me are now counting down to retirement (albeit early) in single-digit years, or even months. At the beginning of our working lives, while repaying college loans, retirement remained an abstract concept. Now, our own educations paid for and our children in college (or edging closer to it), it’s becoming disturbingly real.

More remarkable is how quickly we, as a society, have absorbed the collective, absolute certainty that we are entitled to retire at a specific age. Retirement as a given didn’t exist in this country until the Social Security Act was passed in 1935, a time when life expectancy for the average American was a whopping 61.7 years. To limit the number of people eligible for a benefit, this novel program pegged the official retirement age at 65, allowing few to actually collect. By comparison, in 2004, average life expectancy had leapt to 77.9 years, while the retirement age only increased to 67. Now, not only are you likely to live long enough to collect monthly benefits, but also collect them over a longer period of time. Comparing the current length of benefit payments to the original average length is a sobering exercise; remember, had the original time span between retirement age and average life expectancy been preserved, current retirement age would now rest at 81.2 years.

Social Security is such a given in our lives that we tend to forget that it was designed to deal with Depression-era levels of unemployment. By retiring older workers from the workplace, jobs became available for the younger. Money to pay the retirees came from their replacements – a small but necessary payment in exchange for a job.

And so the system was born, of current workers paying benefits for those that came before, with the expectation, but not the guarantee, that, when it became your turn, the workers replacing you would pay your benefits. Until recently, it’s been a system that worked. Two factors have tipped the balance – increased life expectancy, and the falling birthrate.

With many living well into their 80’s, 90’s and beyond, the number of years of collecting Social Security may well exceed the number of years of contributing. Today, a retiree frequently accumulates far more in benefits than he or she ever put in, and sometimes for more years than he or she ever participated.

In addition, as boomers live well past their retirement dates, succeeding generations won’t be large enough to fill the gap without substantial contribution increases. In its present form, Social Security will pay much more for each retiree from retirement through death than it ever did before, while fewer current workers are available to fund that benefit.

Right or wrong, Social Security has become a sacred cow; while everyone agrees that it’s in grave danger of collapsing under its own weight, tinkering with it is the political “third rail”. As a tail-end baby boomer, it’s likely that I will live to see this great piece of social engineering falter. Its original intent, replacing older with younger workers, is no longer applicable in an economy where there are sufficient jobs for all. For most, retirement at age 67 is not necessary and, in these days of continued low unemployment, maybe not even desirable. And clearly, given the current state of the Social Security system, it’s not sustainable.

So, as I look at my letter, I am reminded that, whether I live to collect or not, perhaps the issue under discussion shouldn’t focus on the solvency of the system, but on the nature of retirement itself. Granted, we’ve all become accustomed to the idea of eventually receiving Social Security payments, and grown to depend on it. No one is suggesting that we do away with it – but if we’re going to create a self-sustaining program that allows successive generations to benefit, it’s time we adapted that program to 21st-century economic models.

We’re entitled to that.