It is very likely that other projections on different issues could illustrate similar or better estimates. Why not create a chart labeled "Higher death rates of the elderly lowers the Social Security deficit" or "Higher death rates of the disabled lowers the Social Security deficit" or "Higher employment lowers the Social Security deficit". Of course, if the opposite is true, do we want to increase those death rates or implement policies to lower the employment rate? Insofar as immigration's effect on the Social Security deficit, what would charts based on legal immigration look like compared to illegal immigration? Charts comparing the other benefits to society of legal immigration vs. illegal immigration?
In terms of employment, that's mixed. Lower unemployment does immediately result in reducing the deficit short-term, but long-term the financial soundness of the trust funds depends on the average wages of the individual. Specifically, the amount paid in must either be equal to or less than the amount paid out. The amount paid out is set according to a formula which consists of three "bendpoints," with the amount being the average of 35 highest years of earnings reported. Low-wage workers get more of what they pay in and high-wage workers get less. Not less overall, just less relative to what they pay in.
The lowest bendpoint is 90% of money paid in (up to $926/month), which sounds like the trust funds would get that remaining 10%, however as wages are inflation adjusted, unless inflation were to only rise 10% over 35 years, then it's a net loss. Next bendpoint is 32% ($927 to $5583 per month), which is still a slight net loss taking into inflation's historical average. Last bendpoint is 15% (over $5583 per month), which actually results in net savings to the system after inflation. There is some wiggle room as 18 years old to full retirement age is nearly 50 years meaning ~15 years of earnings are just paid in, only the top 35 years are averaged, but not everyone starts work at 18 (college, unemployment, etc.) Those other years theoretically are net savings to the system. Also, the average lifespan of retirees is only a decade or so. However, even taking that into account, low-wage workers result in a net drain after adjusting for inflation.
As to whether we should be encouraging a higher death rate, no. One, that's inhumane. Two, effectively this is what the proposals to raise the retirement age does, reducing the pool of eligible beneficiaries.
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It is very likely that other projections on different issues could illustrate similar or better estimates. Why not create a chart labeled "Higher death rates of the elderly lowers the Social Security deficit" or "Higher death rates of the disabled lowers the Social Security deficit" or "Higher employment lowers the Social Security deficit". Of course, if the opposite is true, do we want to increase those death rates or implement policies to lower the employment rate? Insofar as immigration's effect on the Social Security deficit, what would charts based on legal immigration look like compared to illegal immigration? Charts comparing the other benefits to society of legal immigration vs. illegal immigration?
ReplyDelete@11:14
ReplyDeleteIn terms of employment, that's mixed. Lower unemployment does immediately result in reducing the deficit short-term, but long-term the financial soundness of the trust funds depends on the average wages of the individual. Specifically, the amount paid in must either be equal to or less than the amount paid out. The amount paid out is set according to a formula which consists of three "bendpoints," with the amount being the average of 35 highest years of earnings reported. Low-wage workers get more of what they pay in and high-wage workers get less. Not less overall, just less relative to what they pay in.
The lowest bendpoint is 90% of money paid in (up to $926/month), which sounds like the trust funds would get that remaining 10%, however as wages are inflation adjusted, unless inflation were to only rise 10% over 35 years, then it's a net loss. Next bendpoint is 32% ($927 to $5583 per month), which is still a slight net loss taking into inflation's historical average. Last bendpoint is 15% (over $5583 per month), which actually results in net savings to the system after inflation. There is some wiggle room as 18 years old to full retirement age is nearly 50 years meaning ~15 years of earnings are just paid in, only the top 35 years are averaged, but not everyone starts work at 18 (college, unemployment, etc.) Those other years theoretically are net savings to the system. Also, the average lifespan of retirees is only a decade or so. However, even taking that into account, low-wage workers result in a net drain after adjusting for inflation.
As to whether we should be encouraging a higher death rate, no. One, that's inhumane. Two, effectively this is what the proposals to raise the retirement age does, reducing the pool of eligible beneficiaries.