How does an entire generation in a country the size of the US “save” for retirement?
As EG points out, the macro picture is that most of the goods old folks consume – hamburgers, haircuts, healthcare, … – are produced after they retire. “Retirement systems” are simply ways of convincing active workers that they should share some of their output with former workers.
In some occupations, it’s not really feasible for a lot of the workers to work to age 70-something.
As for SSDI, I’d also recommend geographic separation between the applicant and the folks you’re recommending hiring, so they don’t have an incentive to approve claims to bring money into their community.
Oscillations aren’t the issue. Just the long term average. We’re not going to uninvent medicine. Or have permanent exponential population growth.
And yeah it would be great if people got more, etc. etc. But we were talking about what is going on in the CBO projection, and it’s SS/Medicare. (Well, that and interest rates.)
We can of course raise taxes or deficits, but that still leaves a question of what to spend our revenue (or debt) on.
Yeah, I’m not envisioning raising it that high.
But when the SSNRA was 65 you could retire up to 3 years before or 5 years after. Keep that 3/5 buffer the same for higher SSNRAs.
So for Gen X that means we can draw early benefits at age 64 (not 62) or keep working until we are 72 if we wish to do so. No one is required to keep working until age 72. They can retire at 64 if they want, or even earlier. They just can’t draw SS benefits prior to age 64. So for a lot of folks it means they can’t retire before age 64.
You’re going to see a bump in SSDI claims for 62-63 year-olds who are now too young to claim SSOAI. OK, fine. We have more SSDI claims. But not everyone currently drawing benefits at age 62 & 63 is disabled.
Is this a problem currently?
And I’ll point out that initially no one could draw benefits prior to age 65.
Then they put in a provision that women could retire at age 62 and men could retire at 65. Age 62 was selected because on average women were 3 years younger than their husbands and it was decided that it’d be nice if they could retire at the same time.
Then people complained that it wasn’t fair, especially since women live longer to begin with. Then they adopted the “anyone can retire any time between age 62 and 70 and we will adjust your benefit accordingly” policy.
That wasn’t a terrible policy… we just need to change “age 62” and “age 70” to “3 years before SSNRA” and “5 years after SSNRA”.
Or since it’s kind of too late given that baby boomers are already retiring with an SSNRA of 66… make it a symmetrical 4 years before and 4 years after.
Then any future changes to SSNRA automatically bump up the early & late retirement ages too.
It is always exponential. Just a question of which exponent. /pedant off
The preceding discussions focus on one aspect of social security: the benefits provided. The other aspect is funding/investment policy. Any possibility of changes for OASDI in that regard?
I have mentioned in a separate thread how the Canadian counterpart of OASDI was reformed in the 1990’s to go from pay as you go funding to steady state funding with the resulting enlarged fund invested by an independent entity in the manner of a private pension plan. It has worked well and the funding discussions have ended. Any possibility the US might radically reform either the funding or investment approach of OASDI?
In a thread about the debt limit, oscillations are the dominant issue. These have to be expected, although they may well be unpredictable. You can see a change in the ratio during a recession, btw.
And what long term average are you referring to?
The ratio of consumers to producers.
The long-term average birth rate is around (and not above) 2.
The long-term average Life-expectancy above 65 will continue to increase.
Imo, people mistakenly talk about “boomers aging” as a temporary issue. Yes there are a lot of old people right now. But you better get used to it. There’s never going to be less old people.
I don’t see how this would be effective. Unless you stipulate that the actuarial scaling factors are inaccurate. In life insurance annuity pricing, I don’t detect a noticeable increase or decrease in target profit margins between a 62 year old and a 65 year old annuitant.
Weirdly, the assumed discount rate is a much bigger driver. Are you saying the benefit amount should be adjusted each year for the current yield curve?
We agree on that in general. I’ll stop short of the last assumption, tho.
I suspect that the number of old boomers will eventually decline.
Naw, the discount / extra are calculated about as reasonably as they can be given the gender-neutral no-underwriting limitations inherent in the program.
But I think if you didn’t let people collect benefits until they are 64 then more people would work longer. And the extra taxes they would pay in would exceed the extra benefits they will pull out.
Similarly I know people who chose to stop working at 70 who otherwise would have kept going except that the combination of wages and RMDs was going to result in a lot of tax on the Social Security benefit, reducing the value of their wages. The fact that the RMD age increased already definitely helps here, but I think they could increase the 70 as well to further incentivize working longer.
Under my proposal if your SSNRA is age 67 and your desired benefit start date is between age 64 and 70 there would be no change at all for you.
It just encourages working longer, that’s all.
Agree, there was a small dip during the so-called “baby bust”. You can see it on this graph.
As baby boomers die off in larger numbers we’ll see a small reduction in the number of old people.
But it’ll be a small effect, to be sure.
And while a few baby boomers have already died, most are still with us. The oldest baby boomers are 76 with 65 being closer to average. So the large cohort of deaths is coming. Probably a good time to invest in a mortuary. 
Probably obvious, but purple is female and green is male on that graph.
Is this the goal of the proposed changes? If so, why is it desirable that people work longer? I understand the economic aspect, just wondering if there is some underlying philosophy? I would hope we could be moving in the other direction.
The goal of my proposed changes is to improve the solvency of the program without increasing tax rates.
If people want to retire at 62 they still can… they just wouldn’t have Social Security to fall back on unless they truly can’t work and qualify for SSDI.
I think it’s fine to promote self-funded retirement.
I’m thinking more along the lines of leveraging the productivity gains associated with automation to allow people to retire earlier, especially from physically demanding jobs.
Some kind of tax incentive for offering a substantial DB plan would potentially accomplish that.
