Fill in the blank: (on retirement)

Last updated on: August 16, 2016 at 9:47 am by Jane the Actuary

Fill in the blank: (on retirement) 2016-08-16T09:47:27-06:00 Jane the Actuary

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Regardless of what kind of Social Security system the government might implement in the future, everyone over the age of ____ should have their basic needs met by the government if they have no other resources, regardless of their work history (or lack thereof) in their younger years, without being expected to work at any available job or being expected to continually search for work.

What’s the age?

Those on the far left would say there should be no age threshold at all, of course, and that work requirements for welfare are an injustice since any individual who’s not working or looking for work can be trusted to have a good reason not to be doing so.

Some ambitious Social Security reformers have pegged that age as 75 or so — or, at least, careless blog comment posters do so when they speculate that that’s the age at which we need to fix Normal Retirement.

The answer is somewhere in-between — 70 at most, I’d say, but I don’t have a good feel about where to peg this; it’d have to be based on research on health and aging rather than blind life expectancy calculations.

Some Western European countries (I want to say Belgium, as an example, though I’d have to look it up) have a normal retirement of 65, but have special unemployment provisions in the 5 or 10 years prior to this point, in which unemployment effectively becomes unreduced early retirement, with the employer required to chip in an additional amount, in the case in which an employee is “legitimately” laid off (as opposed to voluntarily or semi-voluntarily terminating).

In the U.S., for too many near-retirees, Social Security disability effectively serves as an unemployment benefit, when they’ve exhausted other resources.

Fundamentally, that’s one of the key purposes of Social Security — to meet the material needs of the elderly who are no longer capable of work without taxing their strength. And indeed, based on our (admittedly poor) measures of poverty level, 90% of Social Security-aged people are above the poverty line (though our determination of what income “counts” in this calculation is a bit goofy — Soc Sec counts as “earned income” even though, for the very low income, it has been “earned” to an even lesser degree than for others, but means-tested benefits such as SSI, food stamps, Medicaid, subsidized senior housing, etc., do not — which means that this 90% figure doesn’t adequately measure how many Social Security-aged individuals are in material need (lack of nutritious food, ill-housed, etc.), which I suspect is a much smaller number.

The need for this basic anti-poverty benefit will always be there, and every “provident fund”/mandatory saving-type Social Security system includes some kind of basic minimum benefit, whether as a flat amount for everyone (Sweden, I think — I need to look this up), or an automatic but clawed-back benefit (Australia), or a welfare-type benefit which one must apply for, similar to welfare for active workers but without the “actively looking for work” requirement (Hong Kong).

The question is, what sort of anti-poverty benefit makes the most sense, is fairest, easiest to administer, and most affordable to the country, and how generous should such a benefit be?

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