February 2006 #2
I am in favor of a Social Security reform, but I am not in favor of reducing benefits of current retirees. I favor the following reforms:
1. Raise the retirement age at which people can start receiving Social Security benefits. It is necessary to correlate social security benefits with new life expectancy in society. When Social Security was created, life expectancy was much lower than it is today. If we fixed the normal retirement age to 90% of life expectancy, we could reduce the potential outlays to retirees.
2. Raise or eliminate the Social Security Payroll Tax Cap. Doing so would increase current collections into the Social Security Trust fund.
3. Reduce the benefits based on income while employed. In some circles, this is referred to as progressive indexing. MFS chairman Robert Pozen, proposed a plan which states that: benefits for workers earning $25,000 or less annually would continue to track a wage index, or the rate at which an average worker's income increases over their career. But for those earning $113,000 or more, their benefits would track a price index. In other words, their benefits would be adjusted to reflect cost of living increases.
4. Income-testing during retirement. We might also consider reducing or taxing more the Social Security benefit of those who are employed full-time during normal retirement years.
Several web sites (conservative and liberal) to visit while contemplating the subject include