Are Social Security “catch-up contributions” an answer to retirement income worries? What do you think? Published by Jane the Actuary View all posts by Jane the Actuary
5 thoughts on “Forbes post, “Social Security “Catch-Up Contributions” And The Quest For The Holy Grail””
It is, as you say, a “muddled system”…but, then again, so is yours…the place to start to save SS going forward is to eliminate the income cap on SS taxes, then to see how far that gets us in the years ahead (if that alone were done a decade or two ago there would be no SS crisis (or upcoming crisis) now,,,
I think the people running SS should be fired and go to jail for misaproping our money , people go to jail for a whole less .
The people that the proposal most want to help are those most likely having difficulty paying health care costs. . Studies show many lower income individuals have reduced contributions to retirement plans to pay for health care. People don’t make financial decisions in a vacuum… other factors come into play.
I am one of the authors of the study, and also a fan of Jane the Actuary. Jane doesn’t have to take our word that the program won’t increase the Social Security shortfall. The Urban Institute ran it through the respected DTYNASIM model and confirmed it wouldn’t. And as we point out in the paper, catch-up would be attractive to high earners notwithstanding the low rate of return, because it enables them to buy lifetime income on terms far more favorable than those obtainable from an insurance company
Thanks for your comment, Anthony. I had to go back to reread this myself. I do have an issue with using the 75-year shortfall as a metric for assessing the cost of a new program such as this – it’s simply not an actuarially appropriate approach. The “balance” of the plan would have a short-term surplus as new participants make extra contributions as they approach retirement age; then, in the longer-term, you’d have a mix of inflow and outgo, but if, at any point, you were to end the program, the inflows would end but the payments would continue. To be fully “paid for,” the present value of the boosted contributions would have to match the present value of the promised extra payouts, using an appropriate assumption for the discount rate used to calculate those present values.