{"id":488,"date":"2014-05-20T22:14:00","date_gmt":"2014-05-21T04:14:00","guid":{"rendered":"http:\/\/admin.patheos.com\/blogs\/janetheactuary\/2014\/05\/marco-rubios-big-social-security-reform-plan-meh.html"},"modified":"2016-08-16T09:51:45","modified_gmt":"2016-08-16T15:51:45","slug":"marco-rubios-big-social-security-reform-plan-meh","status":"publish","type":"post","link":"https:\/\/www.patheos.com\/blogs\/janetheactuary\/2014\/05\/marco-rubios-big-social-security-reform-plan-meh.html","title":{"rendered":"Marco Rubio’s Big Social Security reform plan: meh"},"content":{"rendered":"\n<\/head>

(I\u2019m currently reading The Anguish of the Jews, and will augment my prior post on Islam when I\u2019m done. \u00a0In the meantime, let\u2019s talk retirement.)<\/p>\n

So Marco Rubio gave a speech on retirement and Social Security reform to the National Press Club last Tuesday and has gotten a fair amount of favorable press from it, in particular, from Republican pundits who may or may not choose to welcome him back to the world of Rising GOP Stars after his \u201cimmigration reform\u201d oopsie. \u00a0Here\u2019s the transcript<\/a> of his speech. \u00a0(I can\u2019t seem to find any sort of policy document with more specifics, so this is what we\u2019ve got to work with.)<\/p>\n

Does he have any exceptional ideas?<\/p>\n

His first proposal is to let anyone enroll in the Federal Thrift Savings Plan. \u00a0Why this plan, rather than simply offering greater availability of private IRAs? \u00a0Because, he says, the TSP offers lower fees than most private retirement plans. \u00a0Is this so? \u00a0According to a white paper<\/a> from the Investment Company Institute (the 6th hit on a google search for thrift savings plan expense ratio), there\u2019s no magic to why the TSP\u2019s expense ratio is so low: \u00a0Congress has exempted it from various compliance regulations, certain administrative costs are handled by the individual government entities and excluded from the expense ratio, administration is simpler because there is, after all, only one employer, the expense ratio is reduced by nonvested forfeitures, etc. \u00a0Opening it up to all comers would either increase the expense ratio for everyone, or only for the new investors, or would require that the taxpayers subsidize the funds to keep the expense ratios low. <\/p>\n

His second proposal is to eliminate the Social Security Payroll Tax for anyone who\u2019s already reached retirement age. \u00a0Now, I\u2019ve seen this suggestion before, and, although, conceptually, there\u2019s an argument that, past Normal Retirement Age, the individual has already \u201cpaid for\u201d their retirement, Rubio should know better than to pretend that FICA taxes are contributions paid towards earning a benefit. \u00a0It also seems unlikely that seniors who have been paying FICA taxes their entire working life are dissuaded from working into retirement by this tax.<\/p>\n

He further proposes eliminating reductions in benefits for retirees who begin collecting benefits at age 62 but continue to work, especially because these reductions are \u201crepaid\u201d to the retiree later, so don\u2019t really appear to accomplish anything. \u00a0And here he\u2019s got a point \u2014 I\u2019ve never really understood the point of this, except to discourage collecting benefits early, back when the notion of partial retirement or part-time work didn\u2019t really exist.<\/p>\n

So fine.<\/p>\n

But his next proposal is to increase the Social Security Normal Retirement Age. \u00a0To what age? \u00a0How quickly? \u00a0No details at all. \u00a0Yes, we know that life expectancy is increasing. \u00a0Best-practice life expectancy tables now include an assumption that, for each year in the future, life expectancy will continue to improve by a specified percentage. \u00a0But it\u2019s not at all clear to me that there will be corresponding increases in the age up to which an individual remains hale and hearty and able to work a full-time job, whether it be physical strength or mental acuity. \u00a0Even if they\u2019re not bedridden and senile, even if they are fully able to play golf or go on cruises, I really hesitate to say that we can reasonably expect seniors to work, not just part-time, but at their \u201cday jobs\u201d until age 70 or later. <\/p>\n

His final proposal: <\/p>\n

\u201cWe also by the way need to look at how we calculate initial benefits. \u00a0Social Security needs to provide a stronger safety net for those at the bottom of the income scale . . . The answer is to reduce the growth of benefits for those upper income seniors, while making the program even stronger for lower income seniors. \u00a0This isn\u2019t a cut. \u00a0It is simply a reduction in how fast the benefit will increase for wealthier retirees.\u201d<\/p><\/blockquote>\n

I\u2019ve seen something similar to this before, and with similar vagueness. <\/p>\n

Is he referring to a reduced COLA for wealthier retirees, and a greater one for poorer ones? \u00a0This is, the \u201creduction in how fast the benefit will increase\u201d speaking of increases for individual retirees over the course of retirement?<\/p>\n

Is he proposing a means test to reduce benefits for those retirees with significant (or any) income outside of Social Security? \u00a0Does his plan to \u201creduce the growth of benefits\u201d mean that a means test would be phased in?<\/p>\n

Is he proposing a change in the formula, for instance, increasing the lower bendpoint, so that the 90% pay replacement level covers more income, and decreasing the upper bendpoint, so that those with higher pre-retirement incomes see relatively lower benefits?<\/p>\n

Now, as I\u2019ve said before,<\/a> I think that a move to an Australian or Dutch-style flat benefit would provide a better Social Security system in the long run \u2014 but I really don\u2019t have any patience for politicians to tiptoe around the subjects without any details!<\/p>\n<\/body><\/html>\n","protected":false},"excerpt":{"rendered":"

(I\u2019m currently reading The Anguish of the Jews, and will augment my prior post on Islam when I\u2019m done. \u00a0In the meantime, let\u2019s talk retirement.) So Marco Rubio gave a speech on retirement and Social Security reform to the National Press Club last Tuesday and has gotten a fair amount of favorable press from it, […]<\/p>\n","protected":false},"author":2209,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[450],"tags":[257,54],"class_list":["post-488","post","type-post","status-publish","format-standard","hentry","category-actuarial","tag-rubio","tag-social-security"],"yoast_head":"\nMarco Rubio's Big Social Security reform plan: meh<\/title>\n<meta name=\"description\" content=\"(I'm currently reading The Anguish of the Jews, and will augment my prior post on Islam when I'm done.  In the meantime, let's talk retirement.)So\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" 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