Can't we just stop the oil speculators?

Both my husband and I are looking forward to retirement, but do not think retirement means we want to quit working. We would like to supplement retirement income with jobs…. The problem for us and for others is we would lose Social Security benefits by earning "too much." Raising the limit on the amount individuals can earn and still receive Social Security benefits would be a good idea because it would allow many seniors to work and supplement their income without losing their Social Security earnings for doing so. Do you see this as a logical approach to the ongoing problem?
-Dairdre M., Rochester Hills, Mich.

It’s absolutely logical. But unfortunately logic doesn’t seem to be playing a big role in the debate about Social Security reform.

The problem with your suggestion is that raising the earnings threshold for Social Security recipients would cost the program more money — at a time when the projections show that it’s going to have trouble making ends meet in a few decades. Under your proposal, retirees who are now ineligible because they earn “too much” would get paid. Where would that extra money come from?

There’s no question the fund needs to be fixed. Just like any retirement plan, you have to make adjustments along the way. Retirees know this well. As conditions in the financial markets and the economy change, many of them have to change their mix of investments, or the amount they withdraw to live on. If times are good, you take that cruise you’ve been wanting to go on for years. If times are tight, you skip the “extras” and economize where you can.

Today, the Social Security Trust Fund is — probably — going to run out of money sometime toward the middle of the century. We say “probably” because no one knows. The Trustees, who analyze and report on the fund’s status every year, acknowledge as much in their report.

So they offer up three different scenarios — the low, intermediate and high cost assumptions (call them the Good, the Bad and the Ugly), depending on forces and conditions that are really unknowable. What is the average life span going to look like in 2030? Will economic conditions continue to generate Social Security tax receipts at the same pace they’ve been coming in for the last two decades? Just as you make assumptions on those retirement calculators about the future rate of inflation or your spending requirements, you can only make — at best — educated guesses about how long the fund will be able to keep up with payments promised retirees.

There’s certainly cause for concern. The baby boom generation is going to put an historic strain on the system. (It’s worth noting, though, that if the “low cost” assumption turns out to be correct, there’s no problem: the fund remains in the black as far as the eye can see.)

We’ve seen this movie before. In 1983, President Reagan asked future Fed Chairman Alan Greenspan to chair a bipartisan committee to get the fund back on track, which it did with relatively minor tax increases, including making higher income retirees pay taxes on their benefit, and other tweaks. Those changes helped generate big surpluses to create a gigantic nest egg to cover the coming wave of baby boom retirees.

Twenty-five years later, it’s time to make similar adjustments to get the fund back on track before the problem gets worse. Unfortunately, the “bipartisan” concept is in very short supply in Washington these days. Unless that changes fairly soon, the solutions to the problems facing the Social Security trust fund will only get harder to fix.

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