Sep 10, 2011

A Rare Thing For Social Security: A New Idea -- And AARP Likes It

From Jed Graham, writing at
It’s not every day, one can safely assume, that AARP’s chief policy guru John Rother offers supportive words about a specific approach for cutting Social Security benefits.
So it was to my great surprise that I received an email from Rother recently with relative praise for a new approach to Social Security reform called Old-Age Risk-Sharing that has flown under the radar of policymakers....
Of all the options, reducing COLAs [Cost of Living Adjustments] is among the worst approaches because it could make retirement at 62 look like a better financial decision than it really is — before the Social Security safety net is gradually unwound by inflation over the next few decades in retirement. 
Here is a brief case for a new approach that works in the opposite way — providing the biggest cut, though in a progressive way, in the first year of retirement in order to avoid any benefit cuts in very old age...
[I]in Old-Age Risk-Sharing, ... the steepest benefit cuts would come in the first year of retirement; the cuts would be progressively smaller for lower earners; and they would gradually unwind over 20 years to provide robust support for retirees of all income levels in very old age, when almost everyone will depend on it.


Anonymous said...

Ridiculous option. Essentially that turns the whole program into an actual welfare system. Take money from everybody but only pay people who earned below a certain threshold.

That is not the purpose of why SS was made. It was made as a forced retirement plan, not a robin hood retirnement plan. If you want to get more money from the rich then tax them, dont take away money they have been contributing for years.

Anonymous said...

My thought is that this option would encourage people to stay in the workforce past their full retirement age because their initial benefit would not be adequate. Although this would cut down on government expenditures for the program, I don't think it would be welcomed in the job market -- current or future. Even if our economy improves and unemployment rates decrease, employers will not want to keep the most experienced, highest paid workers.