Old Age and Security Benefits in the U.S.

There is concern about the fact that our social security program is lacking the ability to sustain itself financially in the coming years. There have been suggestions made as options for fixing the issue. There are no easy choices in the matter and there is no “quick fix” that will make the problem disappear. It is important to choose the best solution based on what will affect those who rely on the social security program, those who will in the near future and the American tax payer. Looking at the options available it is clear that the best way to address the situation is to plan to reduce social security benefits at a later date with a grandfather clause to omit anyone who is in receipt of the benefits before the date they are reduced.

For many the social security program is what they depend on for their day-to-day expenses and living. To make any immediate change without allowing those at risk to be more proactive in creating a savings and retirement package would be harmful to economic growth, the citizens themselves and can lead to a variety of other problems. However, reducing government spending and keeping taxes lower is found to be healthier for the countries GDP and in turn has better long-term benefits . By reducing the amount of social security benefits given this meets both of those criteria as government spending will be reduced and taxes will not have to be raised as much as they would in order to cover the required funds. It has been found that marginal tax-rate cuts can lead to both an increase in GDP as well as a higher employment rate (Durante, 2022). This will allow those who are still twenty or thirty years from retirement to benefit from the economic boost and make stable plans for their future retirement.

Another plan that will assist in reducing the financial strain on the Social Security Program will be to follow in the footsteps of other nations and increase the age of retirement by 2 years. Canada for example has been in the process of moving their age of retirement from 65 to 67 in annual four-month increments . By doing so the adjustment is less noticeable by those who are about to receive benefits but by the time the program is complete in 2030 the Canadian Government will have saved billions of dollars (Clavet, 2014). By making this small adjustment the United States can use the additional funding to offset the cost of those who are at the late stages of collecting social security while continuing to collect tax revenue from those working who would have already been retired under the current structure. This will also give future generations an additional two years to prepare for retirement making the process of saving marginally easier.

Correcting the financial issues with the Social Security program is essential for those who have paid into it and are going to rely on it for an income throughout their retirement. The most intelligent course of action is to make a cut in a delayed way to allow future generations to prepare and continue to bolster the economy so they have the means to do so. Lower taxes and an older working age will help economic growth by reducing unemployment and generating more disposable income. This trend will continue with the new era of retirees on Social Security as they will be better prepared for retirement. The income generated by the additional two years in the work force, interest from savings plans and the retirees spending will create a positive cycle that will continue to spur growth without the need for additional government spending.

Sources

Clavet, N. (2014, December 13). Reforming Old Age Security: Effects and Alternatives. SSRN. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2549065

Durante, A. (2022, January 16). Reviewing Recent Evidence of the Effect of Taxes on Economic Growth. Tax Foundation. https://taxfoundation.org/reviewing-recent-evidence-effect-taxes-economic-growth/

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