Why I oppose private SS accounts

The Zero Boss asked why I oppose private accounts in Social Security.  It’s a reasonable question, and he asked nicely, so I’ll try to answer it.  And maybe I’ll get some more links.  (That’s a joke — Shakespeare’s Sister reports that one of the reasons the leading male bloggers don’t link to women is women don’t write about Social Security.  Via Feministe.)

Let’s start with a graph that I’ve showed on this site before:  http://www.census.gov/hhes/poverty/poverty03/pov03fig04.pdf  What this shows is that Social Security has been remarkably successful in reducing poverty among the elderly.  As late as 1967, 30 percent of all the elderly in this country were poor; today it’s just over 10 percent. 

So, what’s the problem?  Well, there’s no immediate problem at all.  For some years to come, even without any changes, Social Security taxes will bring in more revenue than the program pays out in benefits.  And then, as the baby boomers start to retire, there will be a period where the benefits exceed the revenues, but the program is paying out from the surplus that’s been built up over the years.  And then, finally, there will come a date when the surplus is all gone, and the benefits that have been promised still exceed the anticipated revenues.  This is estimated to occur somewhere around 2040, plus or minus a few years depending on whose figures you’re using. 

This is a problem, but not one that seems insurmountable if anyone was really motivated to solve it.  We put off the retirement age a few more years; we raise the cap on the amount of wages that are subject to Social Security taxes; we fiddle with the inflation adjustment; it all works out.  (The problem of health care costs for the elderly is much more intractable, but somehow Bush has decided that Social Security is in crisis and Medicare isn’t.) 

Diverting some of the taxes towards private accounts only makes the funding gap worse.  And while Lindsey Graham has indicated that raising the cap might be on the table, the Administration still says it’s not.  So, the only way that they’re willing to consider closing the funding gap is to cut benefits — and the private accounts proposal just seems like a smokescreen to try to hide that.

Moreover, it’s important to remember that Social Security isn’t just a retirement program.  It also provides both disability and survivor’s insurance.  And while a private account might add up to a reasonable amount of money after 40 years, it’s not going to provide anything significant to the person who is disabled or dies in their 30s or 40s.  Americans face more economic risk in our lives now than at any point in decades; it seems crazy to me that the President wants to shift even more risk onto individuals and families.

22 Responses to “Why I oppose private SS accounts”

  1. chip Says:

    I think what people don’t understand is that social security is an insurance program. Retirement is meant to rest on three legs. Social security is the risk-free leg that is the minimum that will always be there. One of the other legs that was relatively risk-free — guaranteed pensions — is basically non-existent for most of us now. All that’s left are 401k plans, which because they invest in the market bring with them significant risk — which is also why the returns are sometimes higher (though sometimes lower: One of my funds has lost 50% of its value in the past 3 years).
    The Bush plan in particular is fashioned in such a way that it will actually get rid of social security. It’s not just a smokescreen to cut benefits. It’s a smokescreen to destroy the program. That is the stated goal of people very influential in the Republican Party who are ideologically committed to ending government programs like this.
    The problem is that private investment accounts bring with them risk. In particular, the risk that when you get to retirement age you’ll have nothing or near nothing. That’s why there’s a need for a guaranteed benefit program, social security.
    My grandfather made some of the worst financial decisions in the world. He was a wonderful guy but just made bad decisions. He and my grandmother were surviving only because of their social security payments. If he could have put them into private accounts he would have, and he would have lost all the money. And then what?
    What happens when people get screwed by the market or by brokers and brokerage firms (as we’ve recently seen, many brokers are taking us all for suckers). Is our society going to let these people dumpster dive and sleep on the streets? As I remember that’s the reason Roosevelt came up with the guaranteed benefit risk-free social security plan in the first place.
    You’re more than welcome to gamble with your money in a 401k plan or something else. But as a 40-something who’s been paying into the system for quite a few years now (and who, when I was in my 20s had no idea why social security mattered), I have to agree with Elizabeth that social security privatization would be a disaster.
    Just look at the countries that have undertaken this step. In Britain, where they did it in the 80s, they are now reconsidering, and they are looking at the current US social security system as a model…
    Sorry for the rant but I can’t believe that this is even being considered!

  2. Jody Says:

    I share Chip’s astonishment that this is even being considered. I think it reflects the Republican party’s massive success in, more or less, LYING to people and being unchallenged in their lies. I am willing to entertain the possibility, after 8 years of Clinton, that lying has become the status-quo for getting legislation enacted, and that individual responses to those lies rest more on ideological commitments than opposition to lies. (This has NOTHING to do with Lewinsky and everything to do with, for example, the 1996 Welfare Reform Act.) I see this as the most dismaying conclusion of all the recent government/propoganda revelations–that people have become entirely jaded to lies. It may reflect the total saturation of marketing, or even the acceptance of marketing and the market as the only paradigms for discussing human interaction. That shift–the willingness of just about everyone, from teachers to preachers to politicians, to phrase their goals in terms of markets–may go a long way to explaining why the Republican party now does so well.
    Anyway, it’s also been my experience that too few people understand how social security works. There’s an attitude now of “I paid in my money, now I get it back” and Bush can ride on that–“the only way you’ll REALLY get your money back is if you never have to give it up in the first place.” This fills me with dismay and a kind of stuttering red-faced inarticulate fury. Because as you say, the problem here is RISK. My mother-in-law lost half a lifetime’s savings thanks to poorly timed investments in the NASDAQ and she WILL NOT RECOVER. She’ll work an extra five years past retirement because of these losses, but she still will not earn back what she lost.
    Without social security, my mother-in-law would face serious, significant poverty in her old age–and that poverty would cascade down onto her child, whose ability to invest for his own retirement would be compromised by his need/desire to support his mother. In other words, this could be one more way for the rich to get richer and the poor to get poorer, across the generations. And don’t even get me started on the lack of discussion about widows’ and orphans’ benefits (because I’ll go off on a tangent about how “good” single parents are set apart from “bad” single parents–widowed moms GOOD, divorced or never married moms BAD) or of disability insurance. I’m not surprised that the Republican party is meeting opposition to their plan–I’m SHOCKED that the whole country isn’t outraged.
    As I said, I think it comes back to lies: the original lie, that people could give up more tax dollars to a new welfare program “because you’ll get it back in old age” (the myth came from the original campaign to pass the program, I think); the new lie of omission, about how regressive the social security tax truly is (and therefore contains within itself an immediate partial solution to the funding problem it faces); and the ongoing lie of comission, which is the lie about what it means to risk your money in 401(k) or 503(b) type programs. Our money has done NOTHING in those accounts for five years now, because we’re being carefully age-appropriate in our investments. What would that mean as we approached retirement, if the stock market were flat for the preceding decade and low-risk interest-bearing accounts continued to offer returns that didn’t even keep pace with inflation?
    Bush is pulling a fast on people, potentially cutting the grand majority of people’s benefits to cut costs, while playing off people’s attraction to lotteries to offer the hope of doing better than social security. It’s bait and switch, or hucksterism, or both.
    I’m still trying to figure out how the Republican party of fifty years ago would have felt about the government creating a program in which they invest, more or less directly, in Wall Street. There was a time when the party’s opposition to big government and opposition to government interference in markets was more or less unhypocritical. No more.

  3. amy Says:

    It shouldn’t come as a surprise that the GOP is pushing this; it’s regarded SS as theft for decades.
    I oppose the private accounts primarily because a) individuals tend to be miserable investors (exhibit A: the tech bust); b) corporate accounting is not transparent enough for even good investors to understand what they’re doing, whether or not they’re ultimately successful; c) it can hardly help turning into a gigantic private fleecing operation. I’m surprised Schwab and the rest haven’t floated outdoors on a river of their own drool. If I ran a brokerage firm, I’d be dancing in my pajamas every single morning at the prospect of all these sheep walking in the door with their 2%, or whatever the hell it is.
    Oh. And d) we’re going to have to support these poor bastards in the end anyway, after they’ve pissed away a chunk of their retirement on bad decisions and brokerage bloodsucking.
    For me? Personally? I’d love to be able to invest the money individually. I just don’t want to live in a country with 40 million penniless geniuses who had no idea what they invested in or what it cost.
    Incidentally, you can buy private retirement insurance. Annuities. Too complicated for most people to bother with unless they’re forced to by employers, though, and even then they tend not to understand what they’re buying. See http://www.sec.gov/investor/pubs/varannty.htm#wvar

  4. Mieke Says:

    I love this discussion. I have heard most of these arguements before, but Jody brings up another point I had never thought of which really rings a BIG LOUD bell in my head and it seems should be STANDARD in those opposing privitizations discussions, because it is a simple and dramatic example which so clearly illustrates what’s wrong with this plan.
    She wrote: Without social security, my mother-in-law would face serious, significant poverty in her old age–and that poverty would cascade down onto her child, whose ability to invest for his own retirement would be compromised by his need/desire to support his mother.

  5. Darleen Says:

    Guess what. I don’t pay any SocSec at all. My mandated contributions to a retirement account are MINE. Fully refundable. Mine to leave as an inheritance to MY designated beneficiary. It is an asset not a will-o-the-wisp “trustfund” that doesn’t exist.
    How do I get away with this?
    I’m a government employee.
    Now, why would politicians/public employee unions (I’m a member) so absolutely certain about the Greatness and Omnipotence of Social Security As It Is, refuse to participate in it themselves?
    Doesn’t that give ANYONE pause?
    And why does the argument against even a small portion of SocSec actually belonging to the person have to include the sentiment “Well, I know what I’m doing, but most of my neighbors are just too stupid to be trusted with their own money”? Things that make one go “Hmmmmmm.”

  6. amy Says:

    It has to include the sentiment because unfortunately it’s true. If you look at the investing habits and performance of most of the suckers who came to work in the post-pension period — through the 90s, essentially — you’ll see that an awful lot of people, even some otherwise bright people, have serious trouble managing their investments. They buy things they don’t understand, they don’t bother looking critically at fees, returns, risk, taxes, penalties, any rational measure of performance. They don’t see their investments as part of a global economic world. They do no research, they don’t have concrete financial goals, they don’t go for the maximum employer match, they even do things like put all their money in the company stock, regardless of whether or not it’s required, just because they get a discount. It’s a serious problem.
    And yes, I’m unusually good at individual investing. It involves a fair amount of research, a decent fin/econ/IR background, no fear of arithmetic, and a strong retail sense. An awful lot of politicians are also good investors and businesspeople, which is why you don’t pay social security. Most state/fed people I know, though, have pensions or annuity-based retirement accounts, which have pretty nice training wheels on them. I’m guessing you don’t have the ability to trade in futures with your retirement contributions.
    About the mother-in-law: People for the individual accounts would not be impressed by that argument. Here’s what they’d say: “Well, that’s your mother-in-law’s own fault. She shouldn’t have bought stocks she didn’t understand. She knew there was risk involved, and if she couldn’t afford to gamble, she should have gone with less risky investments. She made her bed. It’s unfortunate she made the road rougher for you and your husband, but that’s not my fault or responsibility either.”
    Incidentally, my in-laws have not prepared for retirement despite having had nice incomes most of their lives, and I don’t know how they’re planning on getting by, but if it comes down to a choice between our own college/retirement savings and my in-laws’ mortgage or prescriptions, the younger people win. My in-laws have had a good 20 years to hear the “get responsible financially” message, and they’ve ignored it. They just don’t like dealing with money, think nice people don’t, it’s cold, soulless stuff, find it anxiety-producing, etc. It’s an ugly choice to have to make, and we’d probably be more inclined to help if we were childless, but our daughter should not be hostage to their irresponsibility. We might also feel differently if there had been some reason they really hadn’t been able to save, have some foresight, or whatever, but they basically just declined to deal with the problem.

  7. Darleen Says:

    that was only one portion of my post.
    I DO NOT contribute to SocSec and I have a mandatory retirement account that is MY property.
    What is wrong with that?
    Sorry, but I just look very leery at the continued promotion of even greater nannystate as some sort of “feelgoodism” to cloak naked elitism and to absolve oneself of the possible future responsiblity of taking care of indigent family members.
    If one is so worried about people making “bad” decisions with their own property, heck, why stop with retirement? How about dictating diet and grocery purchases? Exercise? Mandatory medical checkups?
    Wow, the list is endless on getting the goverment to “help” the great stupid unwashed live the “proper” lifestyle.

  8. Darleen Says:

    PS Amy
    If Social Security isn’t dealt with now, it’s a lot more seniors your daughter will be forced to labor for than just possibly her grandparents.

  9. chip Says:

    I’ll deal with substantive issues later.
    For now, I find it very interesting that Darleen has used the term the right uses to disparage social programs: “Nanny State”.
    A very gendered term. And as usual, a term that denotes women and caring, but in a way that devalues. And in this case it is being used to denigrate programs through which society helps its members.
    A better term might be all of us helping each other out. But no, that does not fit in with the masculinist ideology of the right, where it’s sink or swim every man (person?) for himself.
    And we’re not even talking about guaranteeing overall retirement; as I explained above, social security is just one part, to guarantee that no one will be destitute and living on the streets when they get old.
    But even that seems to be too much for the masculinist ideologues of the right. I find it very sad. We’re lucky that large majorities of americans realize this and reject privatization of social security.

  10. amy Says:

    Yes, I know you don’t pay ss taxes. That’s why I wrote:
    “An awful lot of politicians are also good investors and businesspeople, which is why you don’t pay social security. Most state/fed people I know, though, have pensions or annuity-based retirement accounts, which have pretty nice training wheels on them. I’m guessing you don’t have the ability to trade in futures with your retirement contributions.”
    That means I am guessing there’s a fair amount of nannying going on in your retirement program, even though it’s not ss. For instance, my main retirement account is at Schwab; I can speculate, trade derivatives, put half my money into six companies no one else has ever heard of, etc. I’d be very surprised if you have that degree of freedom with your retirement accounts. And that’d be to protect you. I also have a 403(b) at TIAA-CREF, started when I was a state employee. That account has very little freedom, precisely because people aren’t good with money. In the option with the most freedom, I have a choice among something like twelve mutual funds. And it still pays out as an annuity. And they won’t divulge any information about who’s managing the funds. That, to me, is a big ol’ nanny. I’m glad it’s there, too. I would not want to see most of my former co-workers set loose in the market with their retirement money. They have enough trouble distinguishing among the various mutual funds at CREF and figuring out what an SRA is.
    See if you can answer these off the top of your head, by the way: What do you think Pfizer’s outlook is in 3-5 years? Anything significant in their product pipeline, and if so, what’s the potential market size, and what stage are the products at? Got any idea of their cash-on-hand/debt ratio? How do they expect the dollar’s weakness to affect profits over the next year?
    Incidentally, I don’t care what people do with themselves as long as they don’t expect me to pay for it, one way or the other, in the end. You want to eat all day and weigh 400 pounds? Enjoy. But pay full freight on your healthcare. You want to smoke? Have at it. Keep the smoke in your own house, though, and away from any kids too young to leave. And take a barrel of cash with you to the hospital when you’re there for smoking-related diseases. Darleen, the problem is not that people do miserable things to themselves; it’s that they then expect other people to pay for the results. If they’re not going to accept the responsibility, then I say take away the privileges, or enforce responsibility through sin taxes. I also think parents should _lose_ some privileges to do stupid things to themselves, let alone to their children, because if they die or are seriously incapacitated through their stupidity, guess who pays to raise the children? That’s right, somebody else. You want to ride that motorcycle, Mr. Dad, you put up the bond for Susie’s care and education first, or proof of insurance.
    I agree with you, btw, that the current retirement security setup is untenable. Not because of ss, but because of Medicare. To me, the most sensible solution for the ss end is to restore the original intent, which means pushing off eligibility till 72-74. If, as a nation, we were able to legislate for welfare without kicking recipients while they were down, I’d also be for means-testing. The Medicare end is a much bigger problem, and I suspect in practice we’ll have severe rationing and quiet acceptance of euthanasia and suicide. But I don’t really think Medicare problems can be separated from healthcare problems in this country in general.

  11. Joy Says:

    There are 2 issues that the Bush Admin. is conflating and that I wish they wouldn’t.
    The first is the inevitable financial deficit in the OASDI trust fund.
    The second is public pension privatization.
    One does not fix the other. At all.
    Another thing that bothers me is that the Admin. is using pessimistic economic assumptions to project the OASDI trust fund finances but using optimistic economic assumptions to promote the supposed benefits of privatization. You can’t have it both ways! *delicately bangs head onto brick wall, trying not to muss hair*
    The simplest and most effective thing to do is fiddle with “retirement age”, raise the tax cap (indexing it to the annual salary of a Congressperson is my suggestion), and possibly means-test benefits for those who are still filthy rich well into retirement.
    Otherwise in pursuit of privatization we borrow loadsamoney to buy out the generational transfer, send the dollar and bond markets (and the economy) into a tailspin, in pursuit of privatization–which has been a mixed bag, usually underperforming public pensions, in the countries that have tried it.

  12. Elizabeth Says:

    Well, Darleen, I’m a public employee and I do pay into Social Security. I’ve also got our version of a 401(k) — the Thrift Savings Plan. And if I stick it out for another 22+ years, I’d even get an old-fashioned pension — including health coverage. The combination leaves me better off than any one alone.
    My mom was a city employee and had the option not to pay into social security. She chose not to, because she knew that she’d collect almost as much in spousal benefits under my dad’s account as she would on her own, if not more. It was the smart choice on her part — and perfectly legal — but is an example of how it’s possible to game the system when you allow people to opt in and out.

  13. amy Says:

    Darleen, about indigent family members: Let me ask you something.
    Forget about ss for the moment, since as Chip pointed out, it’s only a small part of retirement prep. The savings rate in this country is currently 0.5%. Half of one percent. Most people do not have the savings they’ll need to retire at age 65 and live another 20 years. Now imagine that as the boomers retire, there’s a lull, and then there’s a discovery that as they hit 73 or so, they’re broke. So they sell the house. And after paying for someplace else to live, they eat the rest of the house by age 77.
    Their children, meanwhile, are still working, trying to pay mortgages, patch together health insurance, save for retirement, feed and clothe kids, and send the kids to state colleges. They’re also fighting to keep their jobs out in corporateland, and can’t afford to miss days of work or leave early to go take care of Dad. There is no housewife to take on the job of caring for Dad, either. This assumes Dad is still a pretty hale and lucid old soul, by the way. The burden on the family gets much heavier if Dad is seriously ill in mind or body.
    How many of these middle-aged children do you think are going to be able, financially and timewise, to care for their parents? Leave the sentimentality behind, and take a look at the actual dollar and hour cost of supporting an indigent elderly parent. Include in that the cost of lost jobs and promotions because your boss sees you as unreliable, with all these family-related absences you don’t seem to be able to manage.
    If the majority of the middle-aged kids fail to take on the caregiver and supporter role you think they ought to take, what do you guess will happen?

  14. Maggie Says:

    This social security thing is where my socially liberal side butts up against my fiscally conservative side and I become ideologically schizophrenic and not a member of either party. My parents are in the “we need social security to make it in retirement” club. But I’d much rather take the $$ I’m paying into social security – about the same as their benefits will be – and make a direct transfer to them, without the governmental middleman.
    I wish there were an opt-out. I’d take it in a heartbeat. But I see the rationale for not having one. I think the amount that may be privatized under the Bush proposal is so relatively small that it may be irrelevant to anyone who is willing to go to the trouble to set up the private account. It’s a concept test, and they’re trying to see if it will fly politically. If it does, I’m sure we can wave goodbye to a lot of other, less sacrosanct, social support programs – not a good thing, but then again, maybe the fear of extinction will drive a little more efficiency into the programs?

  15. The Zero Boss Says:

    Oh my. What did I start?
    I want to keep my end of the conversation on the facts, and not on personalities. I will just remark, however, that I’m saddened to see so many people here talk about other commenters “buying into the lies of the right”. Those of us who support some sort of privatization have usually arrived at that conclusion independent of any so-called GOP spin. I’ve been in favor of some form of SS privatization ever since I read Henry Hazlitt’s ECONOMICS IN ONE LESSON at age 17. My libertarianism well predates the Bush administration.
    To me, the safety net issue takes a second seat to the individual rights issue. It’s my money, ostensibly set aside for my retirement. Why can’t I control even a fraction of it, esp. considering that, under the current system, my SS contributions will net me a guaranteed NEGATIVE return (http://www.heritage.org/research/features/socialsecurity/)? The Bush proposal is a restricted privatization plan that lets investors select from a conservative mix of bond and index stock funds. What’s so risky in that? If bonds and index funds go south, then THE ENTIRE ECONOMY will go south. Social security, funded by payroll taxes, would be in just as much trouble financially as stocks and bonds.
    But what about the safety net? I’m all for a minimal saftey net that effects people who see their savings blown away by tragedy or circumstance (family member gets cancer, e.g., and insurance doesn’t pick up the entire tab). I oppose the arguments that we must have SS to protect people from their own incompetence, and I think that the commenter who declared that 40 million Americans will bankrupt themselves via privatization is exaggerating beyond reason. Such a result isn’t even possible, given the current proposals.
    As for the drag on social security caused by privatization, I liked Greenspan’s response: We can’t afford NOT to save. Saving is the lifeblood of a capitalist economy. Encouraging savings provides the basis for future economic growth, which is the only way you can ensure that SS stays solvent. The sale of bonds funds our government; the sale of stocks provides capital to someone for investing elsewhere in the economy. Saving is a Good Thing.
    God, I’ve spent way too much time on this. 🙂 Thanks for responding, Elizabeth.

  16. amy Says:

    Zero Boss —
    Greenspan’s comment that we “can’t afford not to save” makes sense in a ss context if privatization actually constitutes saving. But, as Krugman’s been elaborating, it’s not saving; privatization requires massive borrowing upfront which _may_ pay off down the line, _if_ we do brilliantly as a nation of individual retirement investors. To take it to home-economics terms, you’re taking out a home-equity line and investing the money, hoping to beat the interest on the loan. That ain’t saving, that’s gambling. What do you say to the Krugmans of the world?

  17. Jody Says:

    Zero Boss:
    The lie here is that the money you pay into social security is being held for you against your own retirement. We’re paying now for the people in retirement now, with the expectation that other people will pay for us later. And of course the major crisis in social security is precisely that when the program was established, there were what, 16 workers for every retiree? And now there are 4? Or 3? And soon it will be 2.
    But if it were truly your money being held for you, your heirs would get some amount left over at the end, and you could outlive your share of the funds. They won’t, and you can’t. If it were truly a government-managed savings program, the entire widows and orphans part of the program, and the disability part of the program, would also cease to function as it does.
    This lie of “my money in, my money out” was perpetuated by the DEMOCRATIC party to get welfare-wary Americans to sign onto a massive social spending package they would not have supported otherwise. (Well, they might have–there’s nothing like a decade of massive under- and unemployment to shake people loose from ideological commitments.) The lie of the Republican party right now is that privatization would be cost-neutral or even cost-beneficial, when in the short- and medium-runs it would NOT be.
    All that having been said, I’m married to a Libertarian, so I understand that either you believe the government should be doing this, or you don’t, and there isn’t enough common ground to continue the discussion when you’re hold opposing opinions about that underlying premise.
    I’d also like to reiterate that the lying I’m talking about is the perfectly normal, casual, pervasive and all-encompassing lying of marketing, which is the new paradigm for American life. There’s an intriguing discussion of precisely how the lies are calibrated to appear as something other than lies, in a posting about how to harness marketing for the benefits of the Democratic party at http://tinyurl.com/6mt4a (although I’d argue that the Democrats are always going to lose if they are forced onto that ground, that Democrats need to assert a different model for public life than the model of marketing).
    But I’m suddenly being reminded that the use of the word lies triggers all sorts of specific political rhetoric/book marketing from last year. That genuinely wasn’t in my mind when I used the word (although I’m not going to back down from my use of it, either).

  18. Elizabeth Says:

    Until ebay takes it down:

  19. ElizabethN Says:

    Well, if we’re getting into SS humor: http://www.themorningnews.org/archives/stories/pledge_of_allegiance.php

  20. SusanJ Says:

    “My mom was a city employee and had the option not to pay into social security. She chose not to, because she knew that she’d collect almost as much in spousal benefits under my dad’s account as she would on her own, if not more. It was the smart choice on her part — and perfectly legal — but is an example of how it’s possible to game the system when you allow people to opt in and out.”
    Elizabeth–this is NOT true. There is something called Government Pension Offset that means your mother will not get as much in spousal benefits as she would if she did not have her own non-SS pension. Look it up!
    I have the same situation in reverse.

  21. Elizabeth Says:

    Actually, my mother didn’t lose any social security benefits. At the time, there were rules in effect that let her buy a kind of tax deferred annuity instead of paying social security taxes –and that annuity doesn’t count as a government pension for the purpose of offsets.
    (There also used to be a weird loophole that only affected Texas teachers — they could avoid the offset by working for a short period in a job covered by social security right before they retired.)

  22. SusanJ Says:

    Elizabeth, thanks for the clarification. I take your point that allowing people to opt in or out (or even explict exceptions like that former Texas loophole) can cause gaming. It can also cause unintended unfairness. My current husband had just starting working when his employer, which had not been co-ordinated with SS, switched over to required co-ordination for new employees but allowed current employees to choose. In the event, the actuarial information he was given was wrong, he made a one-time choice (at age 22!) not to co-ordinate, and is getting much smaller retirement benefits (for similar pay-in) than those who did co-ordinate. (Plus he’s affected by both the Windfall Provision and the Government Pension Offset. I guess, as a liberal, I have to find these fair.)
    My first husband was given the same choice by another employer (after about 5 years in) when we were still married. I went over the info very carefully. It showed a wash as far as total retirement but I chose SS because of the insurance aspect affecting our then minor children. We never needed the insurance but it turned out to have been a much better financial decision for similar reasons to those that negatively affected my current husband.
    These experiences definitely argue for KISS.

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