American Senior Citizens are Pampered

From Money, November 2008:

You talk about fixing the unwritten agreement between younger and older generations - the “intergenerational contreact.”  What’s broken?

The existing contract assumes that working age population is going to be able to support the older population - the retired population - out into the future and should do so.  And that’s not a sustainable assumption.

Why not?

Forty-two percent of federal spending now goes to three programs, with the major share to the elderly.  Two or three decades from now, those three programs will be as large as the federal government is today.  Let’s say someone is now paying 25% of their income in taxes.  To maintain the commitments we’ve made to the elderly, they would have to pay 50%.

What’s the solution?

We need those who can afford it to contribute more to their own retirement costs.  Take Social Security: Right now the benefit formula provides a pretty good retirement income to those who make more than $100,000 a year.  I don’t think that the working-age population should continue to fund benefits for seniors who are so well off.

And you want to spend this money instead on the younger generation?

Yes.  We would reap enormous economic benefits from spending more on early childhood education.  It’s like any investment that has a rate of return.  If you do it when people are young, it’s going to help make them more productive and enable them to earn a reasonable living.

Wouldn’t the AARP crowd scream bloody murder about benefit reductions?

I don’t think all older Americans are opposed to investing in their children and grandchildren.

So how do you sell this idea of spending less on the elderly and more on the young?

We have to change the debate, which has been focused on the idea that there’s going to be generational warfare.  I’, trying to get away from that concept by talking about the fact that every individusal, every generation, should expect more from their government when they’re young and less from their government when they’re old.  That’s not generational warfare.  That’s common sense.

I agree, we are spending way too much on the baby-boomers and world war generations.  Most of the people collecting right now collected 100% of what they paid in years ago, and that includes what they would have gotten in interest!  Remember, these programs were only supposed to pay out for the vast minority of people who accidentally survived despite the odds!  But medical science increased the life expectancy of people so significantly that most people in America live to collect Social Security.

If we were to just raise the age you can collect on your Social Security to an appropriate age similar to how it was designed, you’d have to wait until you were 105 years old to collect! (Give or take.)

So what if we just made it “need” dependent?  If you are homeless, without any savings, no assets of which to speak, and too infirm or ill to work, then you can get a stipend from the Social Security fund.  Otherwise, you live off your savings.  And yes, your savings would include getting a reverse mortgage on your home. (You sell it to the bank and the bank pays you until they paid for the home - although if you outlive the payments, they cannot kick you out, they just wait until you die then take the home.)

Well, I would like to keep the topic focused on what the younger generation should be supplying the older generation versus what the older generation should be supplying the younger generation.

For instance, is it better to invest $5 into a 5 year old child or into a 90 year old adult?  One would think the gains realized from investing in the 5 year old child, over that child’s expected life time, would far outweigh any benefits realized from the 90 year old adult since the 90 year old adult is already living past his or her expected lifetime.

Like, totally, OMG Stuka! (Sorry, I don’t do Valley Girl well enough….<sob>)  Seriously it would be great if we could require the elderly to take the train, taxi, limo or bus instead of letting them drive!

As for Social Security (and like programs)  i think they should be need based, not age based if you want my honest opinion.  If you are 65 with five different kinds of cancer and a missing leg, sure, you can get Social Security!  if you are 65, in great health, physically and mentally fit and employed full time, I don’t think you should qualify.

However, I could see just an elevated age requirement.  I think we would need to look at the statistical ages people die now versus how they were in the 1940s when the program was established.  If, and this is a hypothetical because I am using IF, men typically died at 45 years of age in 1941 and the age you were allowed to collect on Social Security was 56, then we should look at the actuarial tables to determine the odds of someone living to 56 when the life expectancy was 45.  Then we should look at the tables for today and find the odds that are closest to those of the 1940s and that should be the age.

for instance.  If you had a 3% chance to live to age 56 in 1941 and you have a 3% chance to live to 93 today, then you should not be able to collect on Social Security until you reach the age of 93.

That is purely a hypothetical example with every number pulled out of my little, “bubble-butt” to demonstrate my point.  Those numbers are not to be held as cast in stone, nor are they researched.  I just grabbed numbers that seemed somewhat realistic in my mind.</sob>