Responses: Social Security Reform - Adjustable Retirement Age

Hello Readers,

Two weeks ago I posted a proposal about reforming social security. The gist of the proposal is to implement an automatically adjustable retirement age. In my proposal, retirement benefit payouts would be structured with the intention of benefits being collected for an average of 3 years. I encourage you to review the proposal before reading this post.

The point of the proposal was to offer an idea that might reduce the costs of social security retirement benefits. Ultimately, the reform may help make the social security retirement program more financially sustainable. This is especially pertinent as social security as a program is expected to start paying out more money annually than it takes in within the next decade and to be bankrupt within the next 30 years!

Here are some excerpts from responses that I received to the proposal from friends on facebook, in person, and on this blog.

"What happens when the life expectancy plateaus or declines? Also, what does such a plan you're proposing do for employment? Part of the idea of retirement is to free up space within the labor force to allow younger people to move up. How would your plan account for generations that are successively larger and smaller in terms of labor markets?"

"[I]f people had to work longer into old age, then perhaps that might lead to a decrease in life expectancy (i.e. continued stress, labour etc...) then over time could your algorithm cause the retirement age to settle back down again to what it was a few decades beforehand?"

"But Sean, if it comes down to it, will you really want to retire at 78?!"

"An important distinction to draw here is the difference between life expectancy and life span. A life expectancy of 58 and 62 in 1935 was impacted FAR more by infant mortality than it is today...i.e. if you lived to 5 years old, you could tack about 10-15 years more on to that number."

 "One thing that this model does not appear to consider is that the ability of people to work/support themselves in old age might not be so closely correlated to the average life expectancy as time goes by... To put it another way, just because the average life expectancy has increased, does not mean that people's capability to work/support themselves has stretched out likewise."

After considering all of these comments, I would like to put forward a few counter arguments and clarifications to defend my position as well as a few amendments and concessions to help sharpen my proposal.

Please see: Discussion: Social Security Reform - Adjustable Retirement Age (Part1) and (Part 2).