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Playing the other side of the coin, Social security taxes are current capped at 12.4% of up to $90,000. According to this article from the EPI, raising the cap for taxes and benefits would almost eliminate the “crisis,” otherwise know as “a shortfall approximately 75 years out.” For anyone who earns above the cap the downside to this is obvious. If you manage your money and invest wisely, you could probably make better returns than will be provided by the Social Security system. That argument misses the whole point. Social Security is about mutual agreement, as a country, that we will not allow those who have contributed throughout their lives to die poor. We don’t ask each tax group whether they would like to pay their taxes, we agree as a country that tax is progressive - the more you earn the higher percentage of your total income you should pay. This, of course, is not how our tax system is currently structured. The more your earn above a certain threshold, the smaller percentage you end up paying, mostly because of loopholes affordable to those with surplus or flexible forms of income. If our Congressional representatives were to ask their constituents their opinions on the Social Security contribution cap, I’d venture to guess that an overwhelming majority (those to whom the cap does not apply because they do not earn more than $90,000 a year) would support removing it without a second thought.

I was listening to Will Saletan on NPR’s Day to Day this afternoon discussing the impetus for setting the retirement age at 65 and, by extrapolation, estimating what that age should be today. Saletan concludes from reading the various reports released by the Committee on Economic Security that the key factor in setting the retirement age was based on the ability to work (or inversely the age at which people become dependent). By gaging the active life expectancy - defined as the time beyond retirement that a person could expect to lead a relatively healthy, active and disease free life - and comparing to today’s active life expectancy, he concludes that adjusted for improvements in health and life-style, today’s standard benefits should kick in at age 71 (with the caveat that the disability system continue to support those who are not able to work until this age). This is based on maintaining an approximate 8.8 years of active life post retirement. By most calculations, raising the age by 6 years (and continuing to raise the age as health improves) will solve any “crisis” that the system might otherwise encounter. The interviewer raised an interesting counter-point: shouldn’t we allow ourselves the luxury of a longer post-retirement active life? The interviewee responded simply that we should not do so at the expense of guaranteeing the system for future generations. Looking at this from a different perspective - we should allow ourselves to enjoy a longer healthy retirement so long as we have the capital to pay for it. If we can support our retirees for another year then by all means, set the age at 70. From this perspective, an additional 6 years of healthy retirement is not affordable. You can read the blurb and listen to the report from a link on Slate