I want to start off this post by taking the time to thank the soldiers who have given their lives for us throughout the years of this country’s history. Their sacrifices can never be repaid, and I wish all of their families a happy belated Memorial Day.
For years, many Americans have feared that the Social Security system is unsustainable and will eventually crumble under the weight of its financial costs. There are multiple reasons for this. For one thing, the retirement age has barely been raised while the life expectancy has increased by almost twenty years. For another, only income up to $118,500 is eligible for Social Security taxes, shrinking the pool of money to draw from. Some Americans want to privatize Social Security. Others think the best solutions are reforms such as raising the retirement age or lifting the earnings cap for Social Security taxes. Raising the retirement age could make sense in that people are living longer, and some sixty-five year-olds neither want nor need to retire. But it also comes with its own set of problem. All senior citizens are not created equal. What is “too old” to work for one person is not necessarily too old for another. Some senior citizens are very healthy and mobile, while others are very feeble. As Greece demonstrates, a country in which people who retire at fifty get government pensions is headed for financial insolvency. But a country in which people have to work until age seventy-five to get government pensions may put an undue burden on senior citizens who are obliged to work past the point that they are physically able. Lifting the earnings cap has a ring of fairness to it; after all, it may seem unjust that people who earn $70,000 per year have to pay Social Security taxes on all of their income, while people who earn $5,000,000 per year have to pay Social Security taxes on only small a fraction of it. At the same time, lifting the earnings cap could be seen as fighting injustice with injustice. Why should the super rich have to pay more money into a retirement program that they do not need and may not want?
Privatization has its benefits. Government is notoriously incompetent and often crooked, and trusting it to manage people’s retirement accounts is risky to say the least. Many Millennials understandably feel that they are being forced to pay into a system that will not exist by the time they retire. At the same time, relying on the stock market is probably just as dangerous as relying on the government in this particular area. Stock markets are unpredictable and unsafe by design. Furthermore, what percentage of Americans know enough about finance and stocks to keep from losing their pensions? I know that I lack the necessary knowledge to manage my retirement accounts in the stock market, and I suspect many other people would say the same. Individuals could hire financial advisers or stock brokers to help them, but this could set up a bonanza for scam artists and charlatans. And it might be cost prohibitive for low-income Americans.
In my view, the best solution is to make Social Security voluntary. Under this system, people who want to pay into the system in exchange for pensions could do so, while those who wanted to opt out could do that also. A significant minority of Americans would almost certainly choose the latter option, reducing the amount of taxpayer money needed to sustain the program. It would also be far fairer than the current system. Why should people be forced to pay into a program whether they want to use it or not? At the same time, a voluntary Social Security system would provide a safety net to poor and middle-class Americans who may not have enough money to set aside for retirement and understandably do not want to risk the fluctuations of the stock market. The retirement age would perhaps still need to be slightly raised for people who start paying into Social Security after this reform took affect but having fewer people getting pensions would allow those who do get pensions to receive them for more years. The inequitable earnings cap could be abolished, since wealthy people would be free to opt out of Social Security, while those who want Social Security would be expected to pay the necessary taxes for it. This solution combines personal choice, compassion, and limited government–but sadly, it is unlikely that it will ever come to pass.