For those who save for their retirement, what they save is what they get. For those who depend on Social Security income for their retirement (most people do both), the story is different. Social Security is a pay as you go system. While working, people (shared with their employer) pay a SS tax and once retired they receive a legally fixed income (defined benefit). The system works ok as long as there are enough workers paying the tax to finance the benefits received by those retired. “Saving Social Security” “What to do about Social Security”
But American’s are living longer than they did when the SS system was designed. Without any change in their retirement age they will live in retirement longer. In 1975 there were 3.2 workers (paying the SS tax) per retirees receiving SS benefits. By last year this had fallen to 2.8. Over the next ten years this ratio is projected to fall to 2.3. The simplest solution to the shortfall of taxes paid into the Social Security Trust Fund for financing its benefit payments to the retired is to raise the retirement age. Most of us want to work longer anyway. A new extensive study of these issues and the experiences of some other countries will be available in a few weeks. “Reimagining Social Security”
Author: Warren Coats
I specialize in advising central banks on monetary policy and the development of the capacity to formulate and implement monetary policy. I joined the International Monetary Fund in 1975 from which I retired in 2003 as Assistant Director of the Monetary and Financial Systems Department. While at the IMF I led or participated in missions to the central banks of over twenty countries (including Afghanistan, Bosnia, Croatia, Egypt, Iraq, Israel, Kazakhstan, Kenya, Kosovo, Kyrgystan, Moldova, Serbia, Turkey, West Bank and Gaza Strip, and Zimbabwe) and was seconded as a visiting economist to the Board of Governors of the Federal Reserve System (1979-80), and to the World Bank's World Development Report team in 1989. After retirement from the IMF I was a member of the Board of the Cayman Islands Monetary Authority from 2003-10 and of the editorial board of the Cayman Financial Review from 2010-2017. Prior to joining the IMF I was Assistant Prof of Economics at UVa from 1970-75. I am currently a fellow of Johns Hopkins Krieger School of Arts and Sciences, Institute for Applied Economics, Global Health, and the Study of Business Enterprise. In March 2019 Central Banking Journal awarded me for my “Outstanding Contribution for Capacity Building.” My recent books are One Currency for Bosnia: Creating the Central Bank of Bosnia and Herzegovina; My Travels in the Former Soviet Union; My Travels to Afghanistan; My Travels to Jerusalem; and My Travels to Baghdad. I have a BA in Economics from the UC Berkeley and a PhD in Economics from the University of Chicago. My dissertation committee was chaired by Milton Friedman and included Robert J. Gordon. I live in National Landing Va 22202
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