Posted: July 25th, 2021
After playing the “Social Security Game,” which options did you chose, and why you chose them. (Note that some options “solve” the shortfall very quickly, so you may want to start the game over to learn about other options). Does it really seem that difficulty to solve the Social Security shortfall? When thinking about the topic, does playing this game provide better insights into how we might make sustainable changes? And, given the prompt about raising the ceiling on maximum total income, if we use COLA to adjust how much money comes out, why doesn’t it make sense to use some kind of adjustment for money going in?
To play the game go here: https://socialsecuritygame.actuary.org/#how-play
When starting this game I thought it would be easy to make the choices, but I thought about the actual implications to people such as my own mother who is currently planning to retire. Rather than just increasing taxes a drastic amount to fix the issue I wanted to look at both revenue increase and benefit deduction.
The first thing I choose to do was to increase the retirement age by 2 months until age 68. I then looked to decrease benefits to the top 40% of earners. However, those combined only made a 33% solution to the Social Security issue. I realized that reducing benefits was not going to make the large difference I was hoping for, without drastically cutting benefits, but I did not want to take that option.
I then went to the other side and looked at the increase in revenue. For this, I increased payroll tax, which completes the rest of the needed income issues. Though I do not know how many would want to pay more in taxes that may seem like the only way to fix the issue.
Seems sad that we will need to work longer and pay more into the system, however, we also get the benefits of living longer and utilizing the system longer so it seems to pan out in the end.
The options I chose for the “Social Security Game” were: Lower Benefits for future High-Income Retirees, Raise Payroll Tax Rate and Subject Benefits to Higher Taxes. My reasoning was simple: I will be drawing Social Security in about 12ish years or so, and I don’t want to see my benefits decrease (yes, it’s selfish). Lowering benefits for those who earn higher wages would ‘level the playing field’ a bit. My assumption is that those who earn higher wages also save more towards retirement, and wouldn’t need to draw a lot from social security. Raising the payroll tax rate would simply help offset the deficit in the social security program, although it means a bigger chunk out of everyone’s paycheck – maybe think of it as a “forced savings” that helps your grandparents or parents now, and hopefully will also benefit you one day. Lastly, I did choose to tax social security benefits to a little higher tax rate. My intent there is to spread the responsibility around a little better. While it would mean either having to pay a little more in taxes at the end of each year or have a little more taken out, I wouldn’t intend to have it be so much that it would prohibit someone from being able to meet their basic needs.
While there are different ways to solve the social security shortfall, I don’t believe there is one correct solution – my hope is that it would be a blend of things so as not to harm any one group. That being said, I do think that those making higher incomes could help a little more than lower wage earners. I don’t think it would keep people from trying to earn higher wages (similar to what we’re seeing now during the pandemic, some unemployment collectors are choosing not to work because they can get more money by remaining unemployed), but I do think it would be quite unpopular with the higher earnings crowd.
The social security program definitely needs some work. If nothing is done, there won’t be anything for me to claim – much less my 30-something children in about thirty years from now. Too many people work too hard to not be able to benefit from the program in their retirement years. Utilizing COLA could be a very good tool, if used properly. Choosing this option could reduce the deficit by 20-65%! Here’s another idea – maybe those who earn over a certain yearly income amount would be deemed ineligible to claim more than $200 per month, or something like that – would that be a reasonable tradeoff for making $300k/year for several years before retirement? It sure would incentivize saving, wouldn’t it?
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