Constant's pations

If it's more than 30 minutes old, it's not news. It's a blog.

Sunday, February 13, 2005

Social security: Perhaps another way

There remains much uncertainty with social security: The assumptions, the expected returns, and other variables.

However, three things we do know: Life expectancy, retirement age, and the date once receives benefits.

Because of the uncertainties with the market and the assumptions with the estimates, one approach is to focus on what we know and adjust the solution around those known factors.

What we do know

In short, one solution proposed for social security is to focus on the life expectancy age, then adjust both retirement and date of receipt of benefits.

This means raising both the mandatory-retirement age and date one receives benefits in relationship to ones life expectancy, not their hoped-for rate of return.

Social security was originally created when life expectancy was lower. Today, people are living longer, but getting more benefits.

If people have enough savings to retire, then there’s nothing stopping them from doing so. However, if people are short on funds, but able to work then they should work.

If people are too sick to work, then the problem isn’t social security, but medical benefits.

Other perspectives

Rather than focus on what needs to be done to “fix” social security, society would better spend its time on the question, “How can we educate people to better manage those risks leading toward people relying on Social Security.”

In other words, if we look at “what are the things that contribute to insecurity and financial problems” we’ll actually be solving the fundamental problems.

  • What can be done to better educate the public on the risks of investing the financial markets?

  • How adequately are we educating people in school about the real risks to budgets: Uninsured investments, financial fraud, debt, mortgages, school loans, medical expenses, and marriage.

  • How can we better link financial success to addressing issues related to abortion? [For example, consider that abstinence and “delaying marriage until one is financial security” are other ways of looking at the issue]

  • How can we encourage people to delay exclusive relationships until they are emotionally mature, well educated, and secure in their personal financial status?

  • What can be done to encourage people to engage in life experience and save funds so they have a credible foundation to truly reap the benefits of advanced degrees?

    The answer to these issues relates to planning, incremental steps, and then building up momentum over time. Rather than throw quick solutions to the public, the leadership of the country would better address the core issues if they talked about credible solutions to the real issues driving the social insecurity.

    The country should also reward people who are financially capable of supporting themselves in taking time off. Gone from the interview process should be the requirement to explain gaps in ones resume.

    Flexible approaches to wealth

    If one has the finances to take time off, there is no explanation required. Rather, society needs to demonstrate that is more inclined to listen to those who reflect on the issues, as opposed to shout louder than their perceived adversary.

    Social security could easily be solved by simply looking at the conditions that surrounded its creation: The linkage between benefits, retirement date, and life expectancy.

    The other solutions ask us to believe fictions about the expected returns or risks in the market place. These risks will not disappear. Social security is designed to be a safety net, not something that can be exposed to the unreliable financial reporting and regulatory system.

    Educating informed decision makers

    If someone says they have the guaranteed solution to social security, keep your hand on your wallet. The real answer lies in society engaging in dialog that addresses the larger issues. Then educating its citizenry to make more informed decisions.

    When the United States creates an education system and community institutions that address these larger issues, it will do far more than save social security. We’ll see a country that that truly stands as one for the world to emulate: It’s actions and results will speak louder than its promises.