COMMENTARY | AARP is an organization that works to help seniors. This week it has made headlines for stating that it is willing to discuss cuts to Social Security. This stunned many seniors because the group had been adamantly opposed to such action. During the 2008 election season, it aired many TV commercials against cuts to Social Security; now it has changed its tune. According to Bloomberg, “‘we are open to talking about different options to strengthen Social Security for the long term’ including ‘changes on the benefit side,’ David Certner, the group’s legislative director, said in an interview.”
Here is some information on three proposals that have been made to save Social Security.
Reducing Social Security Benefits
There have been proposals to change the Social Security formula. The idea was first brought forth in 2005 by the Bush administration. According to the Washington Post, “under the proposal, the first-year benefits for retirees would be calculated using inflation rates rather than the rise in wages over a worker’s lifetime.”
The major advantage to this proposal is that it would change the formula so that the program would be extended for many years to come. If Social Security runs out by 2035, everyone who has paid into it for years will not recoup the money they paid into the system, which is unfair to current workers.
There are many downsides to taking this action right now. The economy is very bad and most seniors now rely on their Social Security benefits just to live. Reducing the benefits for each person would be unfair, forcing many seniors into receiving Welfare or living in homeless shelters, which would greatly reduce their quality of life.
Invest Social Security Funds in the Stock Market
Some people like the idea of investing Social Security funds in the stock market. Andrew Stern, a member of the Deficit Commission, has pushed for this idea to be implemented. This would help increase the amount of money that is in the program. Social Security will need billions of dollars to stay funded, and investing could help the program meet its financial needs. The stock market has been inconsistent lately and many people do not trust Wall Street due to the bailouts of the banks. It would be hard for seniors to get on board with investing their hard-earned money in the stock market.
Increasing the Retirement Age to 69 By 2075
According to the NY Times, “the most recent projections from the Social Security Administration, issued last month, indicate that at the current rate, the program’s trust funds will be exhausted by 2036, and that $6.5 trillion in additional money will be needed over a 75-year period to pay all scheduled benefits.” President Obama’s Deficit Commission, led by Erksine Bowles and Alan Simpson, proposed the idea to increase the retirement age to 69 in November of 2010.
People are living longer, so increasing the retirement age over the next 60 years does not seem too harsh. It would help Social Security stay funded much longer because there would be fewer people filing benefits at one given time. It would also allow people to pay into the system for additional years, which would help inject more money into the program.
There are some issues with this plan. The first is that the economy may not have enough jobs to employ people so they can work until the age of 69. According to Reuters, “national employment numbers released earlier this month cast a shadow on the country’s economic recovery. U.S. nonfarm payrolls increased a slight 54,000 in May and the country’s unemployment rate rose to 9.1 percent from April’s 9 percent.”
The second is that as we age our bodies begin breaking down and many seniors have problems with vision and joint issues. This makes it harder for them to see and stand up for long periods of time. Most jobs require vision and strength in some capacity, so seniors may be unable to work, leaving them with virtually no money until they reach the age of 69.
The Proposal that I Think AARP and Seniors Might Accept
I personally think that seniors and AARP will need to accept increasing the retirement age to 69. A reduction in benefits is a huge financial burden for seniors, so increasing their retirement age might not be ideal, but it is the best way to maintain their benefit level. The cost of living will continue to increase in the future, so implementing this idea is not only cost-effective but also has the least negative consequences for seniors.
Tags:AARP Receptive to Social Security Cuts; What Seniors Should Consider