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Thursday, August 25, 2005

Retirement

Economist Robert Fogel, winner of the Nobel Prize, recently told students at Cornell University that "half of you [may] live to celebrate your 100th birthday." Fogel's prediction goes well beyond standard projections, which envision today's college students living into their late seventies. But Fogel, who has studied centuries of change in human well-being, said that conventional forecasts are usually too cautious. "In the late 1920s," he recalled, "the chief actuary of the Metropolitan Life Insurance Co. put a cap of 65 on life expectancy."

Fogel's forecast reminds us that sooner or later Americans will have to work longer and retire later. It will become economically, politically and morally intolerable for government (aka taxpayers) to support people for a third or even half of their adult lives. Our present Social Security "debate" ought to start this inevitable transformation. But it isn't. We are in deep denial about the obvious.


I have to agree with what Washington Post columnist Robert Samuelson writes here. It is not right for older people to be supported by struggling younger people for that long. (Consider a future with rising housing prices, rising college debt, AND much higher FICA taxes.) It is not what people envisioned when they created a system of old age pensions. And it is absolutely not supportable in the long run.

One additional solution would be for people to be able to start drawing their Social Security benefits, in part, earlier. It would mean lesser benefits when fully retired, of course, but it would allow a person to retire from their main career, move into a less stressful job (teaching would be a good fit for many), and not be forced to lower their lifestyle due to a lower salary. It would help prevent Mr. Samuelson's proposal from "condemn[ing] them to poverty."

Actuarially, you could calculate any distribution pattern from the present value of one's Social Security benefit, and make it equivalent to the standard plan (pay in full starting at 70, for example). But, you know what would make such a solution more practical? If Social Security benefits were in the form of individual accounts, that people could partially withdraw from, much in the manner they can withdraw from their own savings.

There's another reason for personal accounts!

(Via Instapundit)

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