Premature Retirement

A front-page story in today's New York Times bemoans the decline of employer-paid retiree health coverage. It's filled with complaints from people who retired early and are dismayed at the cost of health insurance without their former employer's subsidy. Some of them may have a legitimate grievance, depending upon what they were promised when they retired. But as a general matter, the solution to this latest crisis seems pretty clear: People need to work longer, at least until Medicare kicks in at age 65. (Given that the average 65-year-old can expect to live another 18 years or so, even that cutoff seems a bit low.) It's hard to work up much sympathy for people who decide to retire in their mid-to-late 50s, as the people described in the story did, and then have trouble paying for health insurance.

Comments

[Isaac Bartram]

James Merritt

....the reason we have employer-sponsored health-care coverage today ....

I have heard that explanation given so many times that I have come to believe it. If any one can confirm it I would appreciate it. I don't believe it was actually planned by FDR, but more a way for employers to circuvent P&W controls and bid up wages to attract workers. Unintended consequences anyone.

I do know that when I started working full time in 1966 employer provided health insurance was well established.

Keep in mind, also, that the number of workers who got employer provided health insurance after retirement have always been a lucky minority.

Jacob is quite right tho that it appears that some of these retirees have a grievance since their employers have broken what appears to be a contract.

[Warren]

cdunlea
No sale. The AARP has been successfully lobbing for expanding senior bennifits for the past twenty years. This coincides with the baby boomers entering their peak earning years. (They've been footing the bill, but it's a good investment because they can expect to collect many times over what they put in). Also, the fact that these are 'entitlement' programs should not be construed to mean that beneficiaries are 'entitled' to them in the conventional sense of the word. In fact, just the opposite is true. In Washington speak an 'entitlement' is code for 'government handout given to important voting blocks' and has the defining characteristic of being unearned.

[fyodor]

Isaac Bartram,

If a contract was really broken, the injured parties could surely sue. More likely, it was their mistaken assumptions that weren't met. Hey, if you can truly save enough to retire in your 50's, more power to ya. But if you're expecting someone else to take care of you who never really promised to do so, you have no one to blame but yourself. That goes for SS, too.

[Isaac Bartram]

Point taken.

[Isaac Bartram]

Actually fyodor, since I only have 10 yrs to go I should be on the barricades with the AARP, but I'm not. I would be quite happy to see SS (and the payroll tax) abolished and replaced with a means tested income supplement for retirees over a certain age paid for out of general revenues.

Actually the big winners of the SS Sweepstakes were "the greatest generation" who collected huge gains on their "investment". Boomers will see extended retirement ages and substantialy reduced COL adjustments. The big losers of course are young wage earners forced to pay an ever increasing tax both for retirement and Medicare and an ever decreasing benefit when their turn comes.

[fyodor]

I.B.,

Good analysis. The boomers may do better than those who follow, but probably not as good as those retired right now, already taking advantage of modern medicine to live a lot longer than folks did when the retirement age was first established. But then, that's likely the story of most social programs, they crack with age. Better get your dole while the gettin's good!

[Dan]

Hard to blame the geezers for being pigs, Warren--they're just getting what they were entitled to.

I'm sorry, but no. Social Security wasn't looted -- it has been insolvent since its creation. Social Security is, and has always been, a Ponzi scheme. From day one, recipients have been paid with money put into the system by new investors.

The investors may feel they're "entitled" to good returns on their investment, but they aren't (especially considering that Social Security has been identifiable as a Ponzi scheme for over half a century, and everyone "investing" during that time was knowingly involved in a scam). The only way to give good returns -- or any returns at all -- on a Ponzi scheme is to screw larger sums of money out of a large crop of innocent victims. Or, in our case, VASTLY larger sums of money out of a much-smaller crop of innocent victims.

[Allen Phelps]

James,

In a recent Tech Central Station article (http://www.techcentralstation.com/020204D.html) Milton Friedman spoke on how we ended up with employee based health care

"We got into our situation in a curious way. Believe it or not, a major part of our present difficulties arose from wage control in World War Two. That's a very strange statement offhand, and yet it's true. The reason is that during World War Two, wages were being held down under wage control, and we inflated. Naturally that created a demand for workers. And in order to try to attract workers, employers not being able to raise wages started offering side benefits.

And the side benefit of medical control, of providing health insurance, health care proved to be extremely attractive, and tended to spread. And of course, the employers did not report that as part of the income for tax purposes, which they should have done. When the IRS woke up about three years later and started asking employers to report that, everybody had already been taking it for granted that that was a privilege of employment, and they raised the devil and Congress passed a law making it tax-exempt. The result is that if you get your medical care in the United States through your employer, you don't pay income tax on it. It comes out of before-tax income rather than after-tax income. "

[nobody]

Regarding SS, all who have been looted are entitled to it. The answer is to begin a very, very gradual phase-out, allowing the newest wage-earners to voluntarily opt out over time as current recipients gradually pass away. It could take 50 years or more, but the only alternative is higher and higher taxes from a decreasing supply of workers supporting an ever-increasing number of retirees.

[Gadfly]

The self centered, me, me, me folks posting here should get their wish. Abolish SS and Medicare. You can then take care of your parents yourselves, just as they took care of you. For those who can't handle changing adult diapers, poor farms, jails and mental institutions can substitute.

[nobody]

Gadfly,

In a free country no one will stop anyone else from engaging in charitable activities, if that is their desire. But charity is neither a duty nor an obligation. Forced charity (Welfare, Medicare, Social Security) is a contradiction in terms, and succeeds only in creating resentment from the looted and a sense of righteous entitlement from the recipients.

[Warren]

Gadfly,
AMEN, far better for me to be held accountable for mom's diapers than some bureaucrat.

And while it's a fair cop in my case, you shouldn't tar everyone on my side of the fence with the "me me me" brush. The dirty secret of SS is that it's a reverse Robin Hood program. It robs from the poor and gives to the middle class. How well you do under SS depends not only on how much you put in but how many years you collect. It is a fact of life that wealthy people live longer than poor people. A significant number of poor workers have been looted by SS without living long enough to collect. By privatizing SS, poor workers would be able to keep their money and pass it on to their heirs in the event of early death.

[Isaac Bartram]

You can then take care of your parents yourselves, just as they took care of you. For those who can't handle changing adult diapers, poor farms, jails and mental institutions can substitute.

Gadfly, that's pretty much the way it works now. SS has nothing to do with how well decrepit old folks are taken care of, it just makes things better for those who still have their health.

[Erik]

Warren,
For the same reason, I'd argue that SS is racist.

[Swamp Justice]

Plus, if you die early, the gub'mint keeps your uncollected SS money. It would be nice for parents to be able to will their hard earned money to their kids, rather than some bureaucrat's raise.

[nobody]

And...
Single, childless people are not allowed to name a beneficiary. When they die before retirement, their looted cash simply dissolves into thin air, benefiting no one.

[Grandpa Simpson]

HELP!!!

I've retired and I can't get up!

[Gilbert Martin]

"The self centered, me, me, me folks posting here should get their wish."

It always amuses me when some leftist tries to brand anyone resisting collectivist wealth redistribution schemes as "selfish". Who is more selfish - someone who merely wants to keep their own money and be left alone or someone who thinks they're "entitled" to a chunk of someone elses money?

[Steve in CO]

Soylent Green anyone? Seriously folks, we have no crystal ball to gaze into to foretell the outcome when us youngin's get to retirement age. I am 38 years old, aside from a 401(k) and a hopefully paid for home, I will be on my own in 30 years. There is NO WAY, that current benefits can be maintained, especially after the boomers start kicking up their feet in record numbers. I believe the aversion toward uthenasia will disappear pretty quickly once the fiscal reality hits home. A few really deep recessions, which will of course happen, and SS will be on blocks long before I see a dime of what I have paid in.

[Dan]

Regarding SS, all who have been looted are entitled to it.

They already got the money back, plus plenty more, prior to their retirement. They are entitled to jack shit.

Here is the kind of thing that happens: Adam gives $1000 to Bob, with the understanding that Bob will give it back to him later. Then Adam insists that Bob give him $1500 right now. Then Adam demands that Bob pay him back the original $1000. Would you say Adam is entitled to that $1000? I wouldn't.

[Isaac Bartram]

Hey Grandpa Simpson, I'm grateful that you and "The Fighting Hellfish" saved us from the Nazi hordes. But enough's enough. You guys got an awful good ride on the Social Security. But you did it on the back of working stiffs like me and your boy Homer who thought we were paying into a "Trust Fund" that would pay an equally generous benefit to us.

Well, actually I figured out the scam but Homer hasn't.

[Ken]

I just wish I could expect some small part of the benefits that Congress has voted itself!

[PLC]

Work until you're 65! That's insane - I'm already goin' stir-crazy thinking about the 4 years I have left till I can retire at 35...

[Madog]

With the pension plan I have a work, I can retire at 45. 🙂

Of couse, that's 19 years from now, so who knows what will change.....

[Eric]

Seems to me the answer is to separate health coverage and employment. Why should an employer be responsible for providing health coverage? It makes employees more dependant on the employer, gives them no control over their health care costs, and places no price pressure on providers.

Make us all responsible for choosing our health insurance and paying for it, and I think you'd see a revolution in health care. All for the better.

[Isaac Bartram]

I have been wondering for some time now what it is about the magic age of 65 that entitles geezers to start sponging. Can anyone explain it please? I mean, why not 45 or 25?

One explanation has it that this was the life expectancy of Prussians when Bismarck set up his pension scheme.

[Warren]

What burns my ass is that I'm going to be paying out the whazoo to all the massive and increasing senior benefits programs. Higher SS rates, greater eligibility, and for more years thanks to Medicaid and the new mammoth drug benefit. Yep I'll be on the hook for all of it throughout my peek earning years right up until it's time for me to retire, and right at that moment all those juicy gubment handout programs will go broke. What do you want to bet, that by then the withholding will be twice as large as my take home and I'll have to keep working till I drop dead at 85.

So here's a big 'fuck you very much' to all the old age piggies living it up on my dime.

[James Merritt]

The way I hear it, the reason we have employer-sponsored health-care coverage today is because FDR needed a spoonful of sugar to help his program of post-war wage and price controls go down more easily with the public. Since employers couldn't offer their workers raises under law, the government tossed them a bone: offer healthcare insurance instead and you, Mr. Employer, can take a tax writeoff.

Was that how it happened? I had always thought that the HMO Act of the 1970s was in response to the introduction of Medicare in the mid-1960s, but perhaps the history of healthcare as an employer-provided benefit goes back even further.

In any case, the situation of being bound to employment-related healthcare insurance appears to go hand-in-hand with the rise in healthcare costs, both being caused -- or at least, instigated and aggravated -- by government interference in the economy.

[Eric]

James,
Your history rings true. Employers also have tax incentives for offering coverage.

I think another reason costs in health care are going up is because of health insurance. We as consumers exert no price pressure on providers, because someone else is paying the bulk of the price. Make us pay for ALL of it, and I think you'd see costs (and prices) plummet, with little effect on quality.

[cdunlea]

Hard to blame the geezers for being pigs, Warren--they're just getting what they were entitled to. Problem is, after these commitments were made before you or I were born, administrations from Reagan on were obsessed with starving the government for tax funds, so they creatively played with the SS funds, using it to balance the budget on paper. Generalissimo Bush just worsened the problem of course and now he's trying to pass the buck to free-market investment companies.

[Gilbert Martin]

"And if you quit pretending the "trust fund" has real assets in it, the picture is even worse..."

Exactly. The SS trust fund is a financial fraud of a magnitude that makes all the corporate fiancnal fraud incidents (like Enron) look like a penny-ante street corner shell game by comparision. The Sh*t will hit the fan when those "special" treasury securities the trust fund is "invested" in have to be redeemed.

[Isaac Bartram]

....when those "special" treasury securities the trust fund is "invested" in have to be redeemed....

They will be "redeemed" with money from general revenues or borrowing. This is what makes the whole "trust fund" fiction even more scandalous.

If we must have an old age pension scheme (and I am resigned to the fact that we probably must) let it be a means tested program funded from general revenues.

[Gadfly]

Yes, I read it. What I got was that some adjustments need to be made, not that it needs to be thrown to the dogs. SS's percentage of GDP is about the same as that of the national debt, the difference being that SS actually goes to real people, not financial houses and it has been successful for over 70 years.

As far as the trust fund, I suppose we could demand that it be stored in gold bullion but that would be, well...dumb.

[Gadfly]

Somebody tell me how Gen-Xers are getting screwed. The stuff I see shows that with no changes at all, SS is good til 2034 when boomers are either 90+ or dead. With them gone, it then turns the corner.

Of course, we'll probably blow ourselves up by then, but that's another story.

[LauraN]

Why is it so hard to understand? There will be no SS $ left for anyone currently in the 40 and under zone. Oh, you might get about $400/month. Do you really expect to live on that?

Anyone who hasn't planned and saved for their own retirement is a fool. Those who cannot due to poor education or planning will simply have to work until they no longer can and then take that nice long walk in the woods with the 9mm. Hell, that's my plan, anyway. LOL No muss, no fuss and no STEALING from others to support my crappy planning.

[nobody]

Dan,

You're a crackpot.

[Geotech]

I can't decide if self-righteous lefty fatalists like Gadfly are funny, annoying, or a little of both.

[fyodor]

We need a lefty like Gadfly around, now that the original Lefty is gone and even Joe's posts seem to be dwindling.

[joe]

That's it, Laura. Low income workers who haven't squirreled away enough for their retirement are victims of "crappy planning." Hell, why weren't they forward looking enough to limit the kids to two meals a day, so they could grow their bank accounts?

"I would be quite happy to see SS (and the payroll tax) abolished and replaced with a means tested income supplement for retirees over a certain age paid for out of general revenues." Oddly enough, me too. But I suspect for different reasons.

"Forced charity (Welfare, Medicare, Social Security) is a contradiction in terms, and succeeds only in creating resentment from the looted and a sense of righteous entitlement from the recipients." Oh, and actually delivering enough benefits to go around by providing a much, much larger funding pool than has ever, ever been provided by charity alone. "Looted." Cry me a river.

Nice final point, Gadfly. The "the trust fund has no money in it" crowd are complaining that the government, finding itself with excess money, put that money back into productive society instead of stuffing it under a mattress for 60 years. Why do I suspect that a $multi-trillion asset wouldn't ease their wailing?

[Gadfly]

Preaching to the choir is satisfying but not very productive.

For those interested in actually learning about the subject, here's a link to the current SS Trustees Report.

http://www.ssa.gov/OACT/TRSUM/trsummary.html

For those who want to sit around and whine, carry on.

[tchiers]

No, joe, we're complaining that the government is out-and-out lying when it publishes reports that prentend there's a trust fund that they can draw down like a checking account when the time comes.

We don't wish the government had buried the benjamins in the White House lawn. We wish it hadn't been foolish enough to run a program that generated a nearly $15 trillion unfunded liability in the first place.

And just why is it beyond the pale to suggest that people should plan for their own retirement? Sorry, I'm just not terribly sympathetic towards people who can't plan for an event with 45+ years of advance notice.

[tchiers]

Gadfly,

Did you actually read that summary? It doesn't support your 'SS-is-A-OK-so-don't-touch-it' stance, either.

The annual cost of Social Security benefits represents 4.4 percent of gross domestic product (GDP) today and is projected to rise to 7.0 percent of GDP in 2077. The projected 75-year actuarial deficit in the combined Old-Age and Survivors Insurance (OASI) and Disability Insurance (DI) Trust Funds is 1.92 percent of taxable payroll, up from 1.87 percent in last year's report due primarily to the growing annual financial gap at the end of the valuation period. Thus, the program continues to fail our test of financial balance by a wide margin. Projected OASDI tax income will begin to fall short of outlays in 2018 and will be sufficient to finance only 73 percent of scheduled annual benefits by 2042, when the combined OASDI trust fund is projected to be exhausted.

And if you quit pretending the "trust fund" has real assets in it, the picture is even worse...

[LauraN]

Joe, why are people who cannot make a living having children they cannot afford to raise?

[joe]

For the same reasons everyone else has children - they like kids, they want to leave a legacy, they have sex lives, they're parents want to grandparents, etc etc etc. Is there some connection here to Social Security?

[joe]

Or how about, most people have kids in the 20s, prior to their prime earning years, on the assumption that they'll be earning more in the future. This doesn't always work out.

OK, I've tortured you enough. Here's your answer:

Because poor people just aren't as smart and decent as you, Laura dear.

[LauraN]

About damned time someone noticed.

[Weintraub Ariel]

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