August 7, 2012 by Anders Ingemarson
Separating state and the economy will require dismantling Social Security. It’s a massive individual rights violation to force people and businesses to participate in a prescribed retirement scheme, whether they like that system or not. How do we dismantle SS? How do we get from here to there without pulling out the carpet from under people’s retirement planning? Here’s one example of how it probably could be done, a three prong approach I’ve been toying with:
- Increase the retirement age 1 year every 3 years until reaching the average life expectancy of Americans. After all, that’s where SS kicked in when it was first launched back in the thirties. Today’s 65 would become 66 in three years, 67 in six years, etc. Same for ranges of early/late retirement options: 62/70 would become 63/71 in three years, 64/72 in six years, and so on. If you’re 59 today, you’d have to wait until age 68 to collect in full, instead of age 65. If you’re 50 today, you’d have to wait until about age 74.
- Reduce benefits from a certain cutoff date, allowing everybody who’s 50 and above to collect in full once reaching the retirement age as calculated above. For everybody younger than 50 reduce benefits with 2.5%/year. If you’re 49 at the cutoff date, you’ll collect 97.5% when reaching retirement age, if age 48 95%, if 40 75%, etc. That will allow for plenty of time to save up for retirement for those younger than 50.
- Reduce Social Security taxes gradually to zero after all current liabilities have been funded (assuming the above gradual dismantling).
Voila, the total separation of state and retirement is well under way and in about 40 years we’ll be done. Do you think it’s too slow? Do you think the system will go bankrupt before being dismantled? Tweak the rules accordingly, increasing the retirement age 1 year every 2 or 2.5 years, or reducing the benefit percentage quicker for people under 50, or a combination of both. The important part is to establish the rules up front, whatever they are, to allow people to plan.
Once Americans realize the utter immorality of the existing system, and are offered an organized way out as in the example above, the practical implementation is not that difficult.
Any think tanks out there that have done the math? I’d love to see a kind of retirement calculator where you can play with the variables. Any free market politicians willing to take on the challenge? I think you’d be surprised at the willingness of Americans to address the problem if only presented with a reasonable plan.