AARP on Social Security: A Game-Changer for Entitlement Programs?

Raising the [payroll tax] cap has been something talked about all along. Even in 2005 when President Bush tried to carve private accounts out of Social Security, even then he implied he would be willing to talk about a raise in the cap.

[See 5 Retirement Planning Reminders.]

That's been out there and that solves a big part of the problem, [but] there are other ways to raise revenues that don't have anything to do with tax increases. Investing the money better—Canada does that—signing up everybody and making this a universal system. It's surprising that in many states, teachers, cops, and fireman are not in Social Security. There are a variety of ways to think about the revenue side of the equation.

How does this impact the broader dialogue about entitlement programs?

I think what they're trying to do here is they're trying to lead, which is what they should be doing and I do think it has implications for the wider debate. They can engage their members, they can be constructive on Medicare, and especially on healthcare even more broadly. If we're going to get debt and deficit under control, we have to get healthcare under control and AARP can contribute to that.

If you look at the whole healthcare picture, who would've thought we would have had healthcare reform a few years ago. Now we have it and what we have to do now is build on it. AARP is in a good position to help us do that.

[See Protecting Senior Benefits Puts Medicaid at Risk.]

What does this mean for retirement income security?

We have to think about retirement income as broader than just Social Security, and AARP has been talking about this all along. We need some way to improve retirement security.

There is one good trend, which is that older people are working longer and that's because there's more longevity and better health and there's also a need—some people want to work longer, but some people have to work longer.

But we have to think about retirement security beyond Social Security. We need add-on accounts on top of Social Security, we need to help people be more financially literate, we need people to start [saving for retirement] earlier.

These are the areas that we can make progress, and if we can break out of all this partisan bickering and really face up to these issues with AARP helping out, we have a lot of opportunities.

Twitter: @mmhandley

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