Social Security: A 27-year-old’s common-sense reform ideas

I often dream about retirement. But at 27, I’m unlikely to leave the workforce for at least another 40 years. If existing law doesn’t change, that’s when I will take my full Social Security benefit.

To most Americans my age, collecting Social Security is a tenuous assumption — if they think about it at all. Polls show that my peers have lower confidence in its survival than any other age group. A 2009 National Academy of Social Insurance poll found that 67% of Americans between the ages of 18 and 34 are not confident they will receive their expected Social Security benefit when they retire.

Perversely, it is this lack of faith in the 75-year-old pillar of the New Deal that could embolden policymakers to make the deep cuts to Social Security that would weaken its long-term vitality.

President Obama’s National Commission on Fiscal Responsibility and Reform is listening to persuasive arguments in favor of raising the retirement age and reducing benefits. These changes might save the government a few pennies, but it is my generation that will pay the price. If we young workers are genuinely concerned about Social Security, we should ask lawmakers to strengthen the program, not dismantle it.

Several factors have contributed to the steady erosion of confidence in Social Security among younger Americans.

One is the perennial insistence by some commentators that Social Security is going bankrupt, despite the fact that a payroll tax increase of a mere 2 percentage points would ensure full benefits until 2083 — when I hope to be going strong at 101.

Many young people are also ignorant about the disproportionate cost of reform. Under the current schedule, the retirement age will increase to 67 in 2027. Economist Christian Weller in 2005 examined what would happen if the retirement age were further increased to 70 by 2055. That change would mean that today’s 25-year-olds would take a benefit cut of 18.9% if they retired at 70.

Finally, there is an apparent lack of awareness about the program among younger workers, who do not start receiving annual notices about their projected Social Security benefits until they are 25. This is particularly misguided. Three in four employees ages 18 to 29 have no direct contribution plan, such as a 401(k), to save for retirement. If they also lack a pension, this means they probably contribute to a single retirement program: Social Security.

Failing to inform these workers about what the program means to them individually misses a crucial opportunity to get them thinking early about retirement. It also tacitly undermines their support for Social Security by weakening the link between the FICA taxes that come out of every paycheck and the benefits these workers will eventually receive.

The wiser course would be for us to heed President Franklin Roosevelt, who, when signing the program into law on Aug. 14, 1935, called it the “cornerstone in a structure which is being built but is by no means complete.”

The charge for my generation is clear: We must continue building onto this structure so that it continues to provide economic security and stability to all future generations.

We can begin by doing a better job of informing young people about the program. Workers should receive an annual Social Security mailing starting at age 18.The Social Security Administration can provide online retirement information and resources by partnering with websites young people use, such as Facebook. And the agency also should provide accessible materials about Social Security to employers to give to workers or to display, similar to the workplace standards posters that the Labor Department offers.

We can also work to improve Social Security so that it does more for young people, from the very beginning of a worker’s career. Helping young people keep up with the rising cost of a higher education is one place to start. Researcher Alexander Hertel-Fernandez has suggested reinstituting the “student benefit.” From 1965 to 1983, this Social Security provision raised, from 18 to 22, the cutoff age of benefits to the children of deceased or disabled parents who were enrolled in postsecondary education.

The Social Security Administration could also get more directly involved in supplemental retirement savings plans. Some experts have proposed the creation of voluntary or mandatory retirement accounts that could be run through the agency. Such accounts would be portable — carried from job to job — and offer a guaranteed lifetime return. Increasing the retirement offerings administered through the Social Security Administration would expose young people to the program earlier in their working lives.

A variation on these proposals would be to create a supplemental retirement account targeted specifically to young people, who are the least likely to be offered a 401(k) or employer-sponsored plan.

These and similar ideas to strengthen the system have had difficulty breaking into a Social Security conversation dominated by pessimism and resentment. Let’s take the occasion of the 75th anniversary of Social Security to ensure a strong future for my generation and beyond.

Sam Gill, a consultant in Washington, has worked with foundations, nonprofits and advocacy groups focused on Social Security and retirement issues.