Monday, January 07, 2013
New York Times: Social Security is using antiquated math to predict lifespans and total payouts
The New York Times Sunday Review section on January 6, 2013 has a full page story by Gary King and Samir S. Soneji, “Social Security: It’s Worse than You Think”, link here.
The crux of the matter is that the Social Security Administration uses antiquated models for predicting life expectancy. The article provides a lot of technical, actuarial details.
People who “retire” today will probably live twice as long afterward as people did when I was growing up.
It would sound as though private insurance companies selling annuities would need to consider the same factors, and make the payouts adjustable. But the life insurance industry seems way ahead ot Social Security and Congress on predicting life spans. Congress ought to tap in to private industry experience and hire some actuarial professionals to recalibrate the government’s system for predicting life spans. It’s all in the math.
The same thing would be true of defined benefit pensions, both public and private, even as these become less common.
People now in their 40s and early 50s probably will have even longer life spans than my generations. I don't think it's inherently "unfair" to adjust retirement ages and payout formulas (and COLA increases) accordingly to make the system sustainable.
Still, I'd like to see the "property right" carve-out that I have presented before.