Working Us to Death? What Politicians' Social Security Plans Really Mean for You

Earlier this year, French citizens took to the streets to protest against a reform pushing pension eligibility from age 62 to age 64. France’s pension system works similar to Social Security in the United States: Participants must contribute a certain number of “quarters” and reach retirement age to receive their pension; those who defer for a couple years may receive a greater amount of money. The raised age requirement will take effect in September 2023.

It is no secret that a number of wealthier societies have aging populations and lower birth rates, making the current federal retirement pension systems unsustainable as currently designed. France enacted this change quickly, but countries that act slower will likely still follow the trend.

Republican presidential candidate Nikki Haley suggested that “those in their 20s coming into the system” would experience a higher retirement age “so that it matches life expectancy.” (I guess I just made the cut at age 32!) However, despite estimations that Social Security will no longer be able to pay out full benefits as early as 2035, Haley’s plan still lacks consensus from politicians across the spectrum and even received pushback from other Republicans like fellow candidate Asa Hutchinson.

The lack of consensus shows that changes will not happen as quickly as they did in France. So should you be worried about these potential reforms in the future?

The Logic Flaw in Justifying Raising the Social Security Age for Young Workers

Louisiana Senator John Kennedy agreed with Haley’s premise justifying raising the Social Security eligibility age for younger workers claiming, "For people who are in their 20s, their life expectancy will probably be 85 to 90."

There is one problem with this logic pattern: Life expectancy has dropped in recent years.

Kennedy’s numbers are not based on a scientific study but a vague estimation that life expectancy will increase, despite recent trends of lower life expectancy. Only three years after a global pandemic and with weather and climate-related disasters increasing in recent years, it seems naive to assume that life expectancy will remain immune to changes due to these outside variables or others we cannot yet anticipate.

So what is the real plan here? Importantly, these plans only negatively impact future retirees. Politicians suggesting raises in retirement age assume the 20-somethings they are targeting for benefit cuts are not voting on the issue of retirement benefits because they are not yet thinking about retirement. This means the best way to make sure these plans do not negatively impact you is to make sure you are thinking about retirement and voting about retirement, even if it is 40 years away for you.

Ensuring Your Earlier Retirement

Finally, some good news: If you are following our retirement planning ideas, Social Security does not impact you at all. It does not matter if politicians say you can retire at age 70 or 170. Your plan is to acquire the money you need to cover your expenses with a safe withdrawal rate chosen according to your risk tolerance. You know what savings rate you need now to acquire enough money to support your lifestyle in retirement.

I do not plan on seeing a cent of Social Security money. If I do receive a small fraction of what my father receives now (even though he also has a pension as a former teacher with a 40+ year career), I will just attend more Diamond Club games in my 70s. But I am still worried about the poor planning happening around Social Security and believe it is all of our responsibilities to make sure our loved ones are ready for changes.

Once you are protected from any legislation that affects retirement, spread the word to others. It is easy to delay thinking about retirement when you are in your 20s or 30s, and that is why politicians believe they can suggest these changes. Make sure the young people in your life think about their retirement plans, so they are ready as well. The younger the individual, the less likely that the benefit they receive will be sufficient to sustain their lifestyle in retirement. Help prepare them to plan for their retirement by saving and investing as an individual, rather than just acquiring a sufficient number of quarters.

Who These Plans Will Hurt

The other devastating result of these “plans” is that raising the Social Security eligibility age disproportionately hurts low-income individuals. The “plan” is simply to hurt the low-income individuals of the future instead of the low-income individuals of the present. That does not seem like a plan at all.

This happens at a time when life expectancy is dropping and socioeconomic status impacts life expectancy significantly. In short, these policies aim to increase the Social Security eligibility age to a point where many of the retirees who need it most will no longer be alive. That does not sound like a true plan to improve society or help the people who actually need assistance in Social Security.

So what do we do about this issue? First, set yourself up to make sure the lack of Social Security does not hurt you. Second, make sure those around you are similarly prepared. Third, we actually need a better plan to address the basic math problem that Social Security will no longer be able to cover everyone at its current levels.

Which brings me back to my dad: He has a terrific full pension as a former teacher. He invested for retirement throughout his career and has a brokerage account to supplement this pension. He continues to earn a small income as an adjunct professor since retiring from teaching full-time in 2012. He also worked enough part-time and summer jobs to acquire sufficient quarters to qualify for Social Security and receives a reduced benefit (due to also having the pension). He absolutely does not need Social Security, and he would tell you as much.

You will be like my dad. You will not need Social Security. But being financially secure does not absolve us from truly planning for folks who will need Social Security forty, fifty, or sixty years from now. Rather than push the problem to today’s 20-somethings, why not accept the math that Social Security will not cover every eligible individual’s entire retirement needs in perpetuity and address how to plan to get Social Security to those who need it most in the future?