Monday, January 17, 2005

How I saved Social Security

Well, I finally got to play the Social Security Reform Game I mentioned earlier today. It kept throwing database errors; it must have been getting some heavy use.

I used two strategies to make Social Security solvent:

Strategy One

  • Accelerate increase in retirement age to 67 and index thereafter.
  • Reduce cost-of-living adjustment (COLA) by 1/2 percentage points.
  • Increase wages subject to Social Security tax.

This involved an increase in the wage cap by $8,000, and a decrease due to a change in benefit formulation.

Strategy 2

  • Raise the retirement age to 70 by 2030 and keep adjusting the age as people live longer.
  • Increase wages subject to Social Security tax.
  • Include new state and local government workers.

This bumps the retirement age up 5 years, with the same cap increase, but I avoided a benefit reduction by making state and local government employees subject to Social Security tax.

Interesting thing is the simulation warns you about a tax increase because of potential Medicare problems. I'd like to see a simulation for that. By the way, private accounts alone do nothing - but that's no great surprise.


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