Though it’s not all that popular, I wouldn’t oppose means testing (no Social Security income over X income level) as part of a “solution.” Whatever we do is going to disappoint many folks. The only question is whom.
Redefining Retirement
This certainty that major changes are coming, but uncertainty about what they will be, greatly complicates retirement planning. Preparing for it would be far simpler if you could know in advance when you will get sick and die. That means you must either:
• Save too much and possibly check out with a surplus, or
• Outlive your savings, then fall back on Social Security and the kindness of family for your final years.
The first option is obviously better, but is it feasible? For most people, no, even at today’s life expectancies. A surprising number of people die with negative assets, i.e. debt, having never repaid money borrowed earlier in life.
Longer lifespans make this harder. Say you finish your education and start making money at age 25. If you retire at 65 your career was 40 years, during which you probably had to buy a house, help children with college, maybe repay your own student loans and otherwise live a normal and hopefully comfortable life. You use whatever is left for retirement savings.
Now, is it mathematically possible to save enough in those 40 years to fund another 30 or 40 years of retirement? Probably not. Sure, you might build a business or invent a new technology, but the average working person can only save so much of their income, and basic retirement living costs will consume most of it in less than 30 years. Then what? Traditional “retirement” will grow increasingly out of reach, available only to the very highest-earning tier of the population.
At the other end, outliving your savings will be as easy as ever but the likelihood that Social Security will be there for you, in anything like its current form, is diminishing rapidly. Extended lifespans further complicate the problem.
This is what my British friends call a “sticky wicket.” The good news is we will soon be living longer. The bad news is we will soon be living longer. Since the technology is coming regardless, we need ways to reconcile the costs and benefits. It is not at all clear how we will do so. My editor and long-time friend/associate Patrick Watson and I have been discussing this for years. He expects some kind of Soylent Green solution. My sunny nature makes me more optimistic; I think we’ll find better answers that reduce the costs and spread the benefits widely.