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PHILADELPHIA – FEBRUARY 11: Blank Social Security checks are run through a printer at the U.S. … [+] Treasury printing facility February 11, 2005 in Philadelphia, Pennsylvania. As U.S. President George W. Bush travels the country to stump for his plan to change the Social Security system, opposition continues from some members of Congress and senior citizen groups concerned that the proposal would erode guarantees to the federal retirement program. (Photo by William Thomas Cain/Getty Images)
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It turns out back-scratching is a profession. And a well-paid one at that. So is sleeping, videogame playing, and college sorority consulting. As automation and globalization continue to lay waste to the backbreaking work of the past, jobs associated with the most specialized of skills sets are exploding.
It’s a beautiful development on its face, but it’s also the easy fix for Social Security that’s hiding in plain sight. And it’s the answer to retirement expert Alicia Munnell’s comment in a recent New York Times interview that if nothing is done about Social Security’s looming shortfall, “benefits would have to be cut by 21 percent.”
About the coming shortfall that actuaries claim is less than ten years away, it should be stated up front that there’s arguably nothing to it. And the reason there isn’t can paradoxically be found in the fact that there was never a Social Security “lockbox” in the first place. Social Security taxes that did not fund Social Security benefits were not squirreled away into lockboxes dense with individual accounts, rather the money was spent.
That it was spent explains why all the handwringing about shortfalls is pretty baseless. A federal government that helped itself to unspent Social Security taxes in the past will now reverse the process whereby general tax revenues (and yes, borrowing) will cover what Social Security tax collections do not. In other words, there are no benefit cuts of 21 percent or any kind in the future. Munnell would likely agree.
Just the same, there’s an opportunity to be had for all in Social Security’s looming “insolvency.” It can be found in stock-market returns, along with work that gets better and better all the time. And it would come in the form of a Social Security compromise.
In return for America’s workers voluntarily delaying their earliest Social Security benefits from 62 to 72, the volunteers would get to delay taxes on 401(k) withdrawals along with taxes on those withdrawals.
Delayed Social Security benefits would quickly shore up the finances of an “entitlement” that individuals increasingly won’t need or want in their 60s for a variety of reasons, including that they’re still young at heart, in appearance, and more and more doing work that increasingly doesn’t feel like work. The simple truth is that 62 is no longer 62. Neither is 65. Let people opt out from receiving a benefit associated with old people. Say it over and over again that 62 isn’t old anymore. It’s young.
Better yet, it will be the age at which more and more of us start new careers or remain productive in the ones we’re in. As my 2018 book The End of Work argued, work has long been life for Americans. And life promises to get better and better as automation and globalization bestow on us “work” that would have been unimaginable in the not too distant past. See the opening paragraph.
Not surprising is that in a world increasingly defined by work that individuals can’t not do, productivity is soaring. And this productivity can arguably be found in stock-market returns. After all, companies are people.
So let people continue to work while delaying Social Security, but also let them continue to expose a portion of the fruits of their work to the stock market. The only difference is to once again let people working longer, and taking Social Security much later, attain rewards for doing so such that they’re freed to enjoy the benefits of tax-free compounding for much longer.
If so, everyone will win. Compound returns will continue to reveal their eighth wonder genius, while Social Security will become morph into a late-in-life retirement supplement instead of a national retirement plan.
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