Fixing Social Security by Not Retiring Young

Jonas Max Ferris
Politicians love cooking up complex schemes to temporarily repair the intrinsically flawed system that is Social Security. They must tip toe around the issue — any straight talk about raising taxes or cutting benefits can alienate huge swaths of the voting population. Social Security has too many beneficiaries for any mere politician to grapple with. Where is a king when you need one?

Fixing Social Security is remarkably simple: make people retire when they are actually old.

Social security was created to help keep our eldest citizens from becoming destitute in the last years of life — when they are least able to fend for themselves. The architects of the plan had their hearts in the right place, even though the math behind the world’s biggest chain letter never made much sense.

The main hitch in Social Security’s long-term feasibility is it requires an ever-growing working population to sustain itself. Since baby boomers didn’t have enough children to collectively support them in retirement through transfer payments in the form of payroll taxes (the peace and love generation could have used a little more love…), something has got to give.

Social Security was never supposed to be a paycheck to support decades of lounging around the pool. The Social Security Act of 1935 set the minimum age for receiving full retirement benefits at 65. Over the next seventy years politicians have moved this age out a whopping two years.

Trouble is, seventy years ago everybody smoked, there was no such thing as jogging or tofu, and brilliant scientists hadn’t cooked up a wide range of pharmaceuticals to extend life.

Fact is, today’s 67 year old is in much better health than yesterday’s 65 year old. Besides the fact that today’s 65 year old man is expected to live four years longer (and women six years longer!), and they tend to be more active years as medications make some of the ailments of old age less debilitating.

In addition, what we consider work has changed dramatically over the last century. In the past, many jobs in the economy were on factory floors or farms — back-breaking work that would be hard to do late in life.

Today most of these jobs are done by machines or outsourced to low-labor-cost countries. Today’s workforce injury is more likely to be carpel tunnel syndrome or tired eyes than a run-in with a cotton gin.

Bottom line, today’s 67 year old is far more capable of working then yesteryear’s 65 year old. There are many benefits to the economy (and stock market) if the government pushes off the retirement age to collect full benefits to say, 70.

For each year somebody is not collecting benefits, they are probably going to work and therefore pay more in payroll taxes. They go from being a drag on the Social Security system to being a source of revenue.

Increasing the size of the labor pool helps keep labor costs down for business — more supply means lower prices. Labor costs are by far the most expensive aspect of doing business today, far exceeding healthcare and energy costs. Even better, these “extra workers” are arguably the most skilled and knowledgeable in a non-manufacturing economy. Why pay them to retire young!

Working more years means earning more money and spending more money. Why take a pay cut a few years before you have to? Talk about a kick to GDP.

When you compare moving out the retirement age to the likely alternative — raising already high payroll taxes — the benefits are obvious: one helps the economy, one hurts it.

This is not to say you would be forced to retire later, just that the government isn’t going to support you if you quit work while still more than able bodied — no more than they would support a 40 year old who wanted to quit work.

This weekend our Business Block has more on solving the Social Security dilemma. Tune in Saturday 10am — noon ET.

Jonas Max Ferris is a regular contributor on "Cashin' In" and is co-founder of .