Happy Retirement

As the administration’s proposals for Social Security are exposed to scrutiny, a new concern rears its ugly head - at least for me - the possible adverse impact on the social compact between the generations. To develop support for his program, the president may well exacerbate the conflict between the generations – the opposite of the stated intention.

All those receiving Social Security payments and those close to retirement would, under the president’s plan, be exempt from the provisions that he supports – good politics. That, however, does not settle the war between the generations but merely postpones it – in this case until those under age fifty begin to retire in fifteen or twenty years.

The president and the Congress can exempt present and near retirees from the provisions of the new legislation, but they cannot guarantee that the exemption will remain in place.

In 1972, large numbers of the so-called “Notch” generation were significantly and adversely impacted by a change in Social Security benefits. That grouping of cohorts born between 1917 and 1921 were inadvertently impacted by legislation in 1972 that caused a number of anomalies in benefits. Many of that age grouping who retired young (age 62) did relatively better than those who worked many years beyond the age of minimum retirement.

The “Notch” generation – those remaining are now all well into their eighties – fought to no avail over many years for equity and for a revisit of the calculation of benefits they received. This relatively small number of recipients that thought it had been unfairly treated by the government – and it cannot be said with certainty that they were not but it was certainly without intent – was able to secure support in Congress for a long struggle in which they ultimately failed.

The benefits cut off proposed by the president just about splits the Baby Boom generation down the middle, the older half would be treated as all today’s recipients are and the younger would get some yet to be explained transitional set of benefits. Young workers coming into the system after enactment would be covered by the provisions of the new program.

Today’s mantra is that anyone on Social Security today and those near retirement age would have nothing to worry about. Really? As those favored under the president’s proposal begin to die off, the massive number of the Baby Boomers and those behind them in the queue for benefits will have an opportunity to see the new program unfold. Obviously, as the program comes on line, it will become more and more apparent that the program works pretty much as expected, more generously than expected, or, obviously, less generously.

Clearly, the millions of young retirees (today’s 55 to 65 group) and those younger will have ample time to asses if the deal is equitable. If not, any promises made to today’s retirees and near retirees will be subject to great political pressure either to bring the new group up equivalently – impossible – or to adversely impact those on the Social Security rolls at that time. That could include reducing cost of living benefits or any number of other ways of assuring equity.

The president and the Congress will make promises, but they won’t be around when the rubber hits the road. While it is easy for us older folks to buy into the system, most of the effects will be felt only after we’re dead, younger people both retired and within ten years of retirement today had better consider that as the benefits of those paid under the old system will be paid to a smaller number of beneficiaries over time while those looking at lesser benefits will be a constantly increasing percentage of the electorate, so all promises made in 2005 may be revisited in the future.

We’re I in my forties or fifties, I’d be looking for ways to shore up the present system rather than buying the pig in a poke of personal accounts.

Blog on!

Wild Bill