Joe Biden was born on November 20, 1942. Donald Trump was born June 14, 1946.
Barring a seismic shift in the political landscape, America’s next president will be either 78 or 74 on Inauguration Day 2021. This will be a record, breaking the previous record (that would be Trump on Inauguration Day 2016). Of the 44 American Presidents, only 11 were north of 60 when they took the oath of office.
Life expectancy in the US (and the world, for that matter) has been rising steadily across the decades and centuries. It currently sits at just about 79 years. If we roll the WABAC Machine to 1935, we find life expectancy only at 60 years. But, since infant and child mortality was much higher back then, it’s appropriate to consider expectancy for those who reach adulthood. With that adjustment, the average age of death for Americans in 1935 was 65.
Guess what happened in 1935?
Social Security came into existence.
Guess what the SS retirement age was set to at its advent?
- Guess what the SS retirement age is today?
66.2, going up to 67 for those born in 1960.
Coupled with the “pay-as-you-go” fiscal model (more accurately and more cynically dubbed a Ponzi scheme) and a below-replacement fertility rate, and it’s plainly obvious that Social Security as currently structured will fall prey to Herbert Stein’s Law:
If something cannot go on forever, it will stop.
Anyone willing to apply a shred of logic and arithmetic to his reasoning knows that Social Security is a ticking time bomb, a vast unfunded liability. The government’s estimates peg that liability at $13.2 trillion, a truly vast figure that is, horrifyingly, dwarfed by the Medicare/Medicaid shortfall. Even these staggering numbers are believed to be well short of the reality, with one analysis putting the government’s total fiscal gap at over $200 trillion.
“Many Americans think of “their” Social Security like a contract, similar to insurance benefits or personal property. The money that comes out of our paychecks is labeled FICA, which stands for Federal Insurance Contributions Act. We paid in all those years, so it’s just our own money coming back to us.
That’s an understandable viewpoint. It’s also wrong.
A 1960 Supreme Court case, Flemming v Nestor, ruled that Social Security is not insurance or any other kind of property. The law obligates you to make FICA “contributions,” and Congress can do whatever the hell it wants with those contributions, as long as enough politicians vote to do so. The purported Social Security “lockbox” is a bit of data keeping, not a depository. And, thanks to some accounting shenanigans born of the LBJ administration and never undone, the surpluses it has been collecting for decades have been used to mask the size of the federal deficits. Ask yourself why, if the government ran a surplus during last two years of the Clinton Administration, did the national debt go up? That surplus was money that should have been set aside to pay future obligations. Social Security, which has run a surplus across most of its history, has started running deficits, and is projected to “run out of money” in 14 years. I scare-quoted “run out of money” because the funds in the Trust are nothing more than a bunch of IOUs written by the government to itself, that will have to be paid back with future tax revenues.
For many reasons, we are not only living longer, but many more of us are leading productive and fulfilling lives in our 70s and even 80s. The nature of Social Security, from its inception, and decades of kick-the-can irresponsibility by those we elected to tend to the nation’s affairs and finances, means that there will come a day of reckoning. Social Security, long dubbed the Third Rail of american politics, is a problem that will need to be addressed at some point. Yes, it sucks that you and I have been paying into the system all our lives under a false pretense and and empty promise, but that money is gone, spent, misused and abused as is the government way, and it’s not going to reappear. The longer we cling to the fiction, the worse things will be when Herbert Stein’s obvious observation materializes.
There have been attempts in the past to address this problem, most recently (in my memory) in GWBush’s second term, when a plan was floated to start a transition to a true lock-box arrangement, where each of us would contribute to individual accounts that could not be IOUed by a government that’s always hungry to spend more. Histrionics ensued, most of them misinformative or deliberately disinformative, and the “third-rail” adage was proven yet again. Nothing got done, in no small part because grotesquely irresponsible political partisans would rather scare people into thinking the other party wants to throw Granny out on the street than actually do their job.
Decades back, the private sector realized that the long-standing pension model, where a defined-benefit was accrued by workers, was becoming untenable. Most companies transitioned to a defined-contribution model (see: 401K), where your retirement money actually sat in an account that you could a – have some control over, and b – move with you, if you wished, should you change jobs. A company’s continued financial health decades into the future stopped being an issue.
The public sector didn’t follow suit, in no small part because leaders worked with other people’s money, were far more beholden to the organized labor special interests than to the fiscal health of the city or state they were running, and faced virtually no electoral backlash for kicking the fiscal can down the road. Now, we see more and more states facing major public pension problems. Only 8 of the 50 states have their pensions funded at 90% or more, and half the states are under 70%. Despite that. we still witness people working in the public sector for 20 or 25 years, and being assured of 40 or more years of income, often at full final salary. Again, see Stein’s law. The only way this is sustainable is through impoverishment of everyone else and continued borrowing. So, on top of the Federal pension plan’s looming insolvency, we have a growing problem at the state level (which the COVID pandemic will hasten).
Why dub this essay The New Sixty? Because retirement at 65, a long-established benchmark, is going to start sliding upward even more than the little nibble to 66-67 now taken. Because many of us are going to have to keep working a lot longer than our forebears, who actually got to receive their promised Social Security at that magical number. Because our pay-as-you-go Social Security Ponzi scheme’s end-game is now visible on the horizon. Because, unless you rely on yourself rather than the government to fund your retirement, you’ll be working later in life than prior generations. That’s not necessarily a bad thing – if it’s voluntary and not by necessity born of government fecklessness. But, it should be a choice, not an outcome.
Seventy is the new sixty, the age when we’ll start to think about retiring, rather than be several years into it. On the positive side, this is a result of advancing knowledge in health, and it speaks of fuller and more productive lives. But, if that extra decade is forced upon us by lies and irresponsibility?
Politicians can take action to reduce the future pain at any time. But, they need a reason to do so, other than “because it’s the right thing to do.” They don’t care about the right thing to do, they care about winning the next election, and if the voters remain attached to the fiction of “their” Social Security money, nothing is going to get fixed until those poor unlucky future politicians who happen to be in office when the government can neither tax nor print enough to cover the obligations are forced to act, lest they pay the ballot box price.
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I wonder when they are going to start messing with the minimum age that you can start collecting SS benefits. Right now it 62.5 yrs. at a 30% reduction in benefits, going a percentage if you wait.
and can be maximized if you wait until you’re 70.
Now it becomes a balancing game of how much do you need/want from SS.
I’m more worried about them looking at all that money setting in 401k (and like) and thinking of ways to tax it early. Or worse Nationalize it an promising a guaranteed income at some age again probably 67 or higher.