Making Social Security fair for all

It might come as a surprise that Social Security isn’t mathematically fair to everyone. Last week we reported on an upcoming change to the program’s regulations that will close the “file-and-suspend” loophole. This clever approach to claiming payments largely benefits higher-income retirees, which some consider unfair. It also only works for married couples, which almost any single person might feel is unfair, too.

That’s not the only fairness issue – or the biggest one. As the Washington Post explains, Social Security was originally designed as a ‘whole-household’ benefit based on the ideal family of the 1930s: a male breadwinner and a stay-at-home wife. Spousal payments of one-half the other spouse’s benefit tend to give one-earner households like this more in total payments than the total taxes they put in. This gives them a financial edge compared to just about everyone else: two-earner couples, unmarried or divorced retirees, and particularly single women.

Some recent proposals aim to change that. A proposed Senate bill would raise benefits for single retirees, and allow divorced people greater access to ex-spousal benefits (without taking anything away from the ex in question). Another recommendation would give those who care for family members at home full-time a credit in the system, in lieu of the usual payroll deductions.

Both are sponsored by Democrats and would be financed by rate hikes on the wealthiest tier of taxpayers. Naturally, conservative opponents have some very different proposals. These tend to focus on fixing the fiscal infrastructure of the system. In a wide-open election cycle, some also head into wilder territory of privatizing or eliminating the whole thing.

We can be pretty sure that nothing will come of all this until after November, 2016. But we’re pleased to see that the debate has moved on from “OMG, it might run out of money!” to a more substantive discussion of why, how, and whom Social Security should benefit, and at whose cost. While we don’t have a political stance here either way, we are in favor of fairness. We founded GuidedChoice on the principle that professional financial planning should be accessible to everyone, not, just a privileged few.

Social Security has long been an untouchable “third rail” of politics. If congressional Democrats and the American Enterprise Institute (quoted in the Post article) can agree even slightly about something as controversial as reforming it, we’ve hopeful that eventually we can put the program on the right track for the next 80 years.

Image courtesy PatrickSeabird via Flickr CreativeCommons