Helping Social Security survive

Readers offer options to help Social Security see its 150th birthday

August 23, 2010|By Eileen Ambrose, The Baltimore Sun

When Social Security turned 75 this month, we asked how you would fix the system so it could see its 150th birthday.

Given the choice of 10 possible fixes highlighted in the Social Security Game created by the American Academy of Actuaries, most readers preferred that the wealthy pay more in taxes or receive fewer benefits. Many created their own solutions, such as taxing alcoholic beverages or lowering the legal age to work so more youngsters pay into the system. One reader proposed scrapping Social Security altogether.

After The Baltimore Sun published the game last week, hundreds of readers responded to an online poll, e-mailed their ideas or even clipped out the article, marking the proposed solutions they preferred. Ensuring that the system has enough money to pay promised benefits has been the subject of fierce debate for years, and it appears readers have been paying attention — and have strong, informed opinions.

The vast majority of readers want Social Security to survive. And the most popular option for keeping it solvent: raising the amount of wages subject to Social Security taxes from the current limit of $106,800. Some thought the limit should be raised to $150,000; others want all wages taxed with no extra benefits going to the rich for their added contributions.

"The high earners might object, saying they would never see the benefit of their payments, but many people pay high property taxes for education and have no children or send their children to private schools," says Jane Parrish, a 64-year-old village manager in Columbia.

Charles Jaecksch, a 65-year-old retired IRS agent in Millersville, would tax all income, including stock options and executive golden parachutes.

"Imagine, for instance, if the outgoing executive of Hewlett-Packard was required to pay Social Security withholding and Medicare on his [$40 million plus] buy-out," Jaecksch says. "Multiply this by all executives and employees earning millions of dollars per year, and it would go a long way to boosting the Social Security trust fund."

Many approved of raising taxes on all workers by increasing the payroll tax rate from 6.2 percent to 6.7 percent.

Marge Webster, a senior accountant from Carney, points out that the rate hasn't gone up since 1990. "If people making $200,000 or $5 million can't afford 6.7 percent, then they have serious money management issues," says Webster, 60.

Recognizing that we are living longer, other readers voted to raise the age at which people can qualify for full retirement benefits to 70.

Richard Dix, a 58-year-old financial adviser in Hunt Valley, would raise the age retirees could start receiving early — but smaller — benefits from 62 to 65, the age when Medicare benefits begin.

"The benefit would allow funds to grow three additional years and give a larger payout to individuals and, more importantly, would possibly keep people working longer," he says. "Quite a few of the people we work with consider 62 to be a retirement age because that is when they can first access Social Security."

But A.J. Nicastro of Forest Hill says older workers often are forced into early retirement and may rely on Social Security.

"Companies go to the older employees when they need … a layoff because they save more money faster," says the 71-year-old retired distribution manager who was laid off a decade ago. "Layoffs are a real factor. Try to get a job when you're 58 or, worse even — 60."

Several readers wrote that Social Security should eliminate benefits for nonworking spouses, who are entitled to half the amount mates receive — returning the system to its original intent of awarding retirement benefits only to those who contributed.

"A number of people have pushed that position in recent years," says Frank Todisco, a senior pension fellow at the American Academy of Actuaries. Households with nonworking spouses do get more back on their contributions than two-earner households, he says.

Cutting out nonworking spouses would solve about 16 percent of Social Security's deficit. But this small fix could trigger bigger problems. Congress added benefits for spouses and minor children in 1939. A Social Security official at the time warned that without basic benefits for retired workers and their spouses, society would end up supporting a large number of elderly poor.

Still other readers said the solution to Social Security's current financial woes lies in increasing the pool of workers who contribute to it. Ray Tallon, a 67-year-old securities broker in Baltimore, says the United States should change its immigration policy to allow millions of young undocumented workers here to become citizens paying taxes into Social Security.

Several readers wanted to invest Social Security dollars in the stock market. One reader proposed that Uncle Sam invest $10,000 on behalf of each newborn, who could later tap the money in retirement.

But Brian Rogers, chairman of Baltimore money manager T. Rowe Price Group, who also played the Social Security game, says he supports shoring up the system through tax increases and benefit cuts for the very top earners.

"Social Security was originally designed as a safety net, not necessarily as a source of retirement income for those who have been most fortunate," the 55-year-old says.

Poll: How would you fix Social Security

Nearly 600 people cast votes at on ways to shore up Social Security. Among the most popular were:

Make more wages subject to Social Security tax: 334

Raise eligibility age for full retirement benefits to 70: 225

Add new state and local government workers to the system; some government employers don't participate: 207

Cut benefits for top half of earners: 135

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