Those who don’t plan for the future get the future
they planned. However, they avoid the perils of planning.
By not planning for retirement, people avoid the hassle
of thinking ahead. They get the hollow
satisfaction of “spending ‘til they’re broke.”
They avoid the frustration of inevitably discovering weaknesses in their
plan and having to adjust. Planning for
lengthy, twenty-first century retirement isn’t easy.
By contrast, the Social Security Administration
updated their projections this May. The
update anticipates that the existing plan will support current benefits for
fewer years than previously thought.
They, fortunately, don’t avoid the need to plan. But, as will be discussed in the next few
postings, they avoid addressing the important realities that determine whether
Social Security is a realistic program or just a square peg we can fit into a
round hole for a few more election cycles.
Social Security is a part of retirement
planning. Now that upsets many liberals
who want to use it as a method of redistribution. It also constraints libertarians who want to
get government out of the retirement-planning business. Not surprisingly, neither extreme gets much
support since everyone who has done any retirement planning starts by
estimating what roll “their” Social Security payments will play. So, how people plan for retirement is an
important reality Social Security reformers need to consider.
What are elected officials doing instead of
addressing the reality of the pleasure many people derive from unplanned
behavior? They too are avoiding serious
planning. While Romney is willing to
propose some tinkering around the edge (e.g., inflation adjustment, retirement
age, etc.), Obama’s clear message is he’ll attack anyone who dares to interrupt
the joy of not planning.
Social Security reform should take into account the
benefits of not planning. That may seem
like an impossible task, but it’s not. If
it were impossible, the appropriate response would be to give up on the concept
of social insurance.
The retirement plan we seem to be pursuing is to
ignore reality. Instead we continue to
pursue a fiction that will eventually end in failure. Telling people they need to plan would be a
good first step. Yet, if positive
incentives like tax deferrals on retirement plans can’t overcome the joy of not
having to plan, advice isn’t going to do it.
It would, however, reflect, perhaps encourage, some responsible behavior
on the part of politicians. It would get
in the way of those planning to run on the “don’t bother to plan, we’ll make
others support you” rhetoric. Class warfare rhetoric is so much more appealing
than even the most obvious truth. Giving
up the rhetoric is a small price to pay if it results in a realistic view of
the problem.
So, face it: not planning is easier, but it doesn’t
work. There is no reason it has to be
that way. Just acknowledging the reality is an important first step. There is ample research documenting that
planning an activity can often be more fun than the activity itself. Vacations are a well-researched and an often-cited
example. All that is required is the
realization that without a plan the activity won’t occur. Since Social Security isn’t and never was an
adequate retirement plan, stop promising what can’t be deliver.
Social Security should have disclaimers just like
other retirement products. It should
start with an acknowledgement that it doesn’t provide for retirement. It’s a social insurance program not an
individual retirement plan. Social
Security, including old age and survivors’ benefits and disability insurance,
are good social policy. However, to be
viable as a retirement plan, Social Security would have to provide for the
production of the goods and services consumed during retirement. Currently, it pools risks but doesn’t
generate the output retirees and the disabled consume. Pooling risk, although useful, doesn’t
satisfy society’s desire to support the old and disabled. It’s a risk reduction plan, and an effective
one, but it’s not a retirement plan.
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