Daily Debunker

June 15, 2005

By now, almost everyone agrees Social Security has big problems but the latest fad, increasing the retirement age, would leave unchanged the flaws in the pay-as-you-go system that got us here in the first place.

Americans have been here before. Those workers who paid their payroll taxes since 1955 were told that they would be allowed to retire at 65. When Social Security hit its most recent previous crisis in 1983, the retirement age was bumped up, rising over time to 67 years. Since the system was running out of money, Congress decided to keep workers out of retirement for longer than promised.

Now it is reported that lawmakers are considering proposals to bump up the retirement age to 69. Again, workers would see the terms on which their payroll taxes are taken changed by Congress. Without personal ownership, there's little to prevent such unforeseen changes.

The only way to guarantee workers reliable retirement security is to grant them control of their money in the form of personal accounts. Workers would control these accounts, which would make them less reliant on current workers to fund their retirement benefits and would lighten the burden on taxpayers.

Of course, breaking the deal with future retirees isn't the only problem with an increased retirement age. A retirement age of 69 would discriminate against African Americans and others on account of lower life expectancies. As it stands, returns for African Americans are a full percent point lower than for whites and many do not live to see a single pay check. Again, personal accounts would solve this problem. Since personal accounts are owned and controlled by workers, individuals can pass on their retirement savings to their family if they die before retirement. This feature of personal accounts - inheritability - fixes the injustice of workers who pay their payroll taxes throughout their career but never see a return.

Yes, all ideas should be on the table as Congress seeks a solution to Social Securities short- and long-term financing problems. But this bad idea should be disposed of swiftly.