Social Security Merits Support, Not Disdain

It's no secret that Social Security is viewed as unreliable retirement support by most people who are still working. Many think the program will either disappear or be forced to cut payments so much that future retirees will get a much worse deal than past and current Social Security recipients. But now, according to research released this week by Sun Life Financial, it turns out that nearly half of all working people would prefer to stop paying into the system altogether, even if it means they would not get Social Security benefits. The percentages were highest among people in their 30s (59 percent) and 40s (52 percent). But even a third of workers aged 60 and older said they'd like to stop contributing to the system, even though they are only a few years away from receiving money from Social Security.

Now, it's probably true that overall pessimism about the economy is coloring people's attitudes toward everything about retirement. Last fall, Sun Life began to publish what's called an Unretirement Index, a sort of consumer-sentiment survey on retirement. While the index could go up to 100 if people were bullish on enjoying comfortable retirements, the readings have not gotten out of the 40s, and now stand at 44. Not a surprise. The survey also shows that Unretirement--defined as working at least 20 hours a week after qualifying for full Social Security benefits-- is becoming an economic necessity for more people as the economy weakens.

While pessimism is understandably the order of the day, consumer attitudes about Social Security surprise me. During the recent collapse of investments in general and retirement and pension accounts in particular, Social Security has stood out as a benefit that can be relied upon. Benefits are indexed to inflation as well, which has been a sweet deal for retirees. It amounts to an inflation-indexed annuity, generating lifetime payments. Buying such a product from an insurer would require an up-front payment for most people that totals hundreds of thousands of dollars, particularly with the inflation safeguard.

Social Security does face longer-term financial pressures, but the program has been given a bum rap by ideologues of all stripes who seize on it as an example of Washington's financial irresponsibility. Please. You can do much better than poking at Social Security. The program is in robust fiscal health compared with the nation's twin medical entitlement programs--Medicare and Medicaid. And with some relatively minor fixes, Social Security can be placed on a healthy financial footing. For starters, the retirement age can be bumped up a year or two. Life spans and working careers are expanding even more, so boosting the age at which people get full Social Security benefits is hardly unfair. It would be unfair to people just about to retire, but even here, a delayed trigger for higher retirement ages would go a long way toward returning the program to financial self-sufficiency. The next big source for a fix, and one that will be a major battle ground, is raising the earnings ceiling on Social Security contributions. Again, we're not talking about confiscatory behavior by the Feds, although any increase in taxes is hard to accept when one considers how poorly Washington has looked out for our money. The third "easy fix" target is the annual inflation adjustment for Social Security payments, which could be unsweetened a bit.

If these changes were put in place and meaningful progress was also made on restraining the pace of health-care inflation, retirees would come out way, way ahead. Mandatory Medicare premiums will soon eat up 15 to 20 percent of a typical retiree's Social Security check. Out-of-pocket medical expenses can do even more financial damage.

Given the Swiss-cheese appearance of private investment accounts and pensions, it's understandable that we've had multiple Congressional hearings about the adequacy of 401(k)'s and IRAs. But restoring confidence in consumers about their financial futures could be more effectively and appropriately achieved if we made sure that Social Security would be dependable for the next 75 years. Having done this, we then need to pound this point home to consumers and help educate them about financial responsibility and Social Security's role in a successful retirement system.