Bending the Aging Curve Marc Goldwein Policy Director, Committee - - PowerPoint PPT Presentation

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Oct 12, 2023 480 likes •694 views

Bending the Aging Curve Marc Goldwein Policy Director, Committee for a Responsible Federal Budget Associate Director, Bipartisan Commission on Fiscal Responsibility and Reform goldwein@newamerica.net http://www.crfb.org Looming Insolvency

SLIDE 1

Bending the Aging Curve

Marc Goldwein

Policy Director, Committee for a Responsible Federal Budget Associate Director, Bipartisan Commission on Fiscal Responsibility and Reform goldwein@newamerica.net http://www.crfb.org

SLIDE 2

Looming Insolvency

6% 8% 10% 12% 14% 16% 18% 20% 1970 1974 1978 1982 1986 1990 1994 1998 2002 2006 2010 2014 2018 2022 2026 2030 2034 2038 2042 2046 2050 2054 2058 2062 2066 2070 2074 2078 2082

Histor

rical

al Proj

jections
ns

Social Security Revenues and Costs (percent of payroll)

Source: Committee for a Responsible Federal Budget and Social Security 2009 Trustees Report

SLIDE 3

Growing Levels of Debt

Current Law Debt Levels Current Policy Debt Levels

SLIDE 4

Caused by Growing Entitlement Costs

SLIDE 5

Driven by Health Care and Aging

Source: Committee for a Responsible Federal Budget and Congressional Budget Office

SLIDE 6

Other Consequences of Aging

►Slower Economic Growth

Fewer Workers
Fewer Investors

►Greater Risk of Poverty in Old-Age

More years in retirement
Higher chance of outliving savings

►Fiscal Insolvency

More Entitlement Costs
Less Revenue

SLIDE 7

We Can Bend the Aging Curve

SLIDE 8

The Dependency Ratio

SLIDE 9

Change the Demographics

SLIDE 10

Make Retirees Less Dependent

SLIDE 11

Make Workers Wealthier

SLIDE 12

Change the Equation

SLIDE 13

Mitigating the Effects of Aging?

► Increase Mortality ► Increase Fertility ► Increase Immigration ► Encourage Longer Working Lives ► Increase National (and Personal) Savings ► Improve Economic Growth

SLIDE 14

Benefits of Later Retirement

► Lower Social Security Costs

(or larger annual benefits)

► Higher Payroll Tax Revenues ► Higher Income Tax Revenue ► Greater Retiree Wealth ► Fewer Years of Reliance on

Wealth by Retirees

► Stronger Economic Growth

Policy Percent of 75-year gap closed Percent deficit closed in 75th year

Raise Normal Retirement Age (NRA) to 68

23% 17%

Index EEA and NRA to Life Expectancy

28% 28%

Increase Computations Years to 38

15% 10%

Modify Early/Late Retirement Penalties/Bonuses

15% 5%

Exempt Workers with 45 Years of Work from Their Half of Payroll Tax

SLIDE 15

We Can Do It

40 45 50 55 60 65 70 75 80 85 90 1 9 2 9 1 9 3 2 1 9 3 5 1 9 3 8 1 9 4 1 1 9 4 4 1 9 4 7 1 9 5 1 9 5 3 1 9 5 6 1 9 5 9 1 9 6 2 1 9 6 5 1 9 6 8 1 9 7 1 1 9 7 4 1 9 7 7 1 9 8 1 9 8 3 1 9 8 6 1 9 8 9 1 9 9 2 1 9 9 5 1 9 9 8 2 1 2 4 2 7 Average Life Expect ancy at Birt h Average Ret irement Age Social Security Act Passed Early Retirement Age (62) Established for all Beneficiaries Medicare Established Normal Retirement Age Increase Begins 6 Years 16 Years

SLIDE 16

Increasing National and Personal Savings Through Add-On Accounts

► Greater Retirement Security

(especially in light of benefit cuts)

► Increased Availability of Safe

and Low-Cost Investments

► Better “Pre-Funding” of

Retirement Benefits

► Stronger Economic Growth

SLIDE 17

Saving 2% of Income

Based on data produced by bankrate.com’s 401(k) retirement calculator

$0 $50,000 $100,000 $150,000 $200,000 $250,000 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 60 62 64 66

Total Contribution Size of Account Cumulative Contributions at Age 67: $43,135 Value of Savings Account at Age 67: $231,132

SLIDE 18

Returns to Accounts After a Market Crash

Average Change in Total Benefits

Source: Andrew Biggs, American Enterprise Institute

SLIDE 19

Making Hard Choices

Policy Percent of 75- year gap closed Percent deficit closed in 75th year

Immediately Raise Payroll Tax by 1%

50% 25%

Raise Taxable Maximum to Cover 90% of Earnings

37% 14%

Eliminate Taxable Maximum

95% 38%

Apply Payroll Tax to Employer-Provided Health Care Benefits

57% 22%

Impose 3% Surtax on Payroll Income Above $200,000

19% 10%

Policy Percent of 75-year gap closed Percent deficit closed in 75th year

Immediately Cut All Future Benefits by 5%

31% 19%

Slow the Growth of Initial Benefits for Higher Earners

31% 36%

Slow the Growth of Initial Benefits for High and Medium Earners

66% 91%

Index Benefits to a Slower Measure of Inflation

25% 16%

Apply Progressive Benefit Formula Based on Annual Rather than Lifetime Wages

21% 19%

Source: Committee for a Responsible Federal Budget and Social Security Administration Actuaries

SLIDE 20

Bending the Aging Curve

Marc Goldwein

Policy Director, Committee for a Responsible Federal Budget Associate Director, Bipartisan Commission on Fiscal Responsibility and Reform goldwein@newamerica.net http://www.crfb.org