Issues We Should Debate: The Boomers Retire

Few issues invite equal measures of demagoguery from both political parties as aging. Republicans warn that Social Security will run dry when advocating their privatization schemes. Democrats scare seniors with the specter of Wall Street bankers robbing them of their Social Security checks. Political posturing takes the place of solutions and facts are replaced by fears. The next president will have to confront the growth of entitlement spending. First Medicaid, then Medicare, and finally Social Security, will go bankrupt unless changes are made. In the primaries, the most interesting debate on the Democratic side was between Barack Obama, who has said he intends to raise the cap on FICA taxes, which fund Social Security, and Hillary Clinton who warned that raising the cap would tax the middle class. (FICA taxes only apply to the first 102,000 of wages in 2008. Every dollar earned above that is free of FICA tax as are all dividends and other forms of non-wage income.) Obama got credit for candor in that debate but Clinton scored with those who might be affected by lifting the cap. A recent study by the McKinsey Global Institute addresses some of the challenges posed by the impending retirement of the Baby Boomers as well as offering some solutions. (The report can be downloaded from their website:) The study includes some startling facts. For example, of those Boomers aged 54 to 63, that is, those who are closest to retirement, only one-third are financially prepared for their retirement. Only half of America’s workers are eligible to participate in a 401(k) retirement plan, and of those who can, only 11% make the maximum allowable contribution, and the percentage drops to 0.6% for those making less than $40,000 per annum. The single most important thing the Boomers can do is plan on working an additional two years. If the median retirement age, currently 62.6, were raised to 64.1 by 2015, the number of Boomers unprepared for retirement would be cut in half. Additionally, two more years from the Boomers would address another looming problem for the economy: a shortage of workers. Boomers could also improve their retirement prospects by learning to spend less, but anecdotal evidence suggests that such a change in spending habits will only happen after the eschaton. One of the problems with retaining older workers is the rising cost of health care for older employees. Adopting some variety of universal health insurance would alleviate strain on businesses as well as restrain costs overall. (It is also the right thing to do!) Other policies, both public and private, encourage early retirement and those policies must be reversed. A change in attitude towards older workers may be as important as any particular change in policy: ours is a culture that values youth more than wisdom and the cut-throat business world values lower payroll costs over loyalty to workers. The problem in addressing these issues politically is that anytime someone ventures towards a practical solution, they will be met by demagoguery. Only a newly elected president with a sizeable amount of political capital and the ability to craft a bipartisan solution will be in a position to address them. But, this is exactly what happened in 1983 when Ronald Reagan shepherded a combination of reforms through Congress, reforms that raised taxes and delayed benefits in an effort to save Social Security. Let’s hope lightning strikes twice. But, it is a shame that our political process does not permit a discussion of the matter beforehand. Michael Sean Winters