First Person: A 10 Percent Raise at Age 55? I Don’t Want It

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COMMENTARY | An article on MSN Money entitled, "For a better retirement, work longer" caught my eye the other day. I think the obvious nature of the title is what intrigued me so much. Of course a person working longer would likely have a better retirement, I thought. So what's this article all about?

Well, it pretty much boiled down to a recent study conducted by the University of Michigan Retirement Research Center considering a 10 percent raise for older workers. According to the article, "The idea was simply to eliminate Social Security payroll taxes starting when workers are 55 years old. As a result, take-home pay would jump 10.6%, and the average worker would stay on the job 1.5 years longer. During that time, older workers would continue paying income taxes; their only break would be on the payroll tariff."

But I don't particularly like the idea, here's why.

Funding

With the Social Security trust fund already underfunded, I don't think that looking at ways to cut contributions further to give people personal "raises" is the best answer, even if it means pushing contributions on younger wage earners higher. With younger earns often earning less than those who are at the height of their career earning power as they move into their 50s, this adjustment might not be a good move. For example, giving someone who is 55 and making $100,000 a year in income a 10 percent cut on Social Security payroll taxes would equate to $10,000 not being put into the system. Meanwhile, raising the contribution amount by 10 percent (a huge increase) on someone in his or her 20s and who was only making $30,000 would leave a gap in funding of $7,000 between the two. Over the course of 10 years, this could be problematic, and I'm not sure that people delaying taking Social Security benefits by 1.5 years would equate to enough in savings to make the cuts worthwhile.

10 Percent or 5?

I think one of my main questions with the study is their considering the payroll cut amount a 10.6 percent bonus for the wage earner. As a self-employed individual who pays both sides of the payroll tax, this might be the case. But for many people working for an employer, they only pay half this tax, with their employer paying the other half. So would eliminating the payroll taxes at 55 only give the employee a 5.3 percent increase in earnings, with the other half going into their employer's pocket and therefore negating much of the incentive?

Disability and Certain High Intensity Jobs

Having waited tables, been on a landscaping crew, and worked as a grocery store bagger in my younger days, I can only cringe at the thought of the physicality of doing those roles at age 55 or 60. Similarly, miners, fishermen, hotel room attendants, construction workers, and people in a variety of other more physical work roles might not have the desire or ability to work longer. While I keep hearing statistics about how people are so much healthier and living longer these days, many of the baby boomers I know are not in the best of shape -- frankly, and I'm not trying to sound flippant here, but most of them are falling apart -- and few would be able to continue in any sort of high-intensity sort of work role as they enter their 60s. So while I think that it is a good idea for many seniors to keep working to some extent as the move into retirement in an effort to keep them productive and active, I just don't feel that the "10 percent raise" idea is a best option for fixing the issues with Social Security.

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