The Social Security trust fund will be depleted in about 15 years without action, according to the 2019 Trustees report. Fixing this looming shortfall is usually cast as a bitter medicine that policymakers are unwilling to swallow, for fear of alienating older voters reliant on the program.
Marc Goldwein, senior policy director for the Committee for a Responsible Federal Budget, says Social Security reform can happen – and it can be done in a way to boost the U.S. economy.
“We're really headed to a period of slow economic growth because of the baby boomers, but the right types of Social Security reform can give us exactly the boost that we need,” Goldwein said on Yahoo Finance’s “YFiPM.”
One of the ideas behind Goldwein’s recent paper, “Promoting Economic Growth through Social Security Reform,” co-authored with Maya MacGuineas and Chris Towner, is to push Americans to retire later. The authors outline a plan to phase in “an increase to Social Security’s early and normal retirement ages and then indexing them to growth in life expectancy.”
Currently, Americans born between 1943 and 1954 can begin receiving partial Social Security benefits at age 62. If you wait until age 66 – “full retirement age” – you receive full benefits. The CRFB plan does have a carve-out for low-income workers who could opt to receive some benefits at age 62 and avoid slipping into poverty.
“We're better off if people can work a bit longer. Why? It means more economic growth,” Goldwein said, adding that it also helps people live longer and be happier. “To the extent that we can nudge people to delay their retirement, to move to more flexible retirement arrangements, there's potential win, win, win,” he said. The paper estimates the reform plan would increase the projected size of the economy “by between 3.5% and 13% by 2050."
The CRFB research has three other top-line recommendations. First, it would calculate Social Security benefits based on every year of work instead of the current 35-year average of earnings (Social Security calculates a worker’s average indexed monthly earnings during the 35 years in which they earned the most). Second, the plan would automatically enroll workers into a “Supplemental Retirement Account,” in addition to Social Security. Third, it would implement tax and benefit changes to the program, saying that the details of that would be worked out “as part of a political negotiation.”
Goldwein appeared as part of Yahoo Finance’s ongoing partnership with the Funding our Future campaign, a group of organizations advocating for increased retirement security for Americans.
Ben Werschkul is a producer for Yahoo Finance in Washington, DC.