Warren Buffett’s Social Security Solution Works, but Has Drawbacks
According to the Social Security
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Yet seniors and future retirees can take comfort in knowing that
Still, removing
How has a program that's been paying benefits for 78 years come to this? It has to do, in part, with changing demographics. For example, the retirement of baby boomers from the workforce is pushing down the worker-to-beneficiary ratio. We've also witnessed increased longevity (which is allowing retired workers to receive a payout for an extended period of time), as well as growing income inequality.
The other part of the problem lies squarely with
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But don't think for a moment that possible solutions to this mess don't exist.
Famed buy-and-hold investor, and the third-richest person in the world according to Forbes,
Keeping in mind that Buffett penned an op-ed column in
As of 2018,
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Buffett has also opined that adjusting our perception of the retirement age may be in order. In a 2006 shareholder meeting, Buffett said, "Perhaps the idea that 65 isn't the right age for retirement anymore is correct and more change is needed." The idea of raising the full retirement age, or the age at which the
The logistics behind raising the full retirement age are simple to understand. Workers would be given a choice: wait longer to receive their full payout, or claim early and accept a steeper permanent reduction in their monthly payout. Either way, lifetime benefits paid to workers would be reduced over the long haul, thereby saving the program money.
If this bipartisan approach were implemented, it would almost certainly put
Buffett's plan would work, but there would be losers
However, there is a catch to Buffett's proposed
For instance, if the maximum taxable earnings cap is raised, a majority of working Americans wouldn't even notice. That's because they're already paying into the program on every dollar they earn. But it would require people with higher income to pay more into the program. The catch: These higher earners wouldn't see an extra cent in benefits when it's their turn to retire and collect a payout. The reason the cap exists is that the
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Future generations of working Americans would lose out, too. Raising the full retirement age would effectively protect the payouts of existing retirees, and likely pre-retirees who are just a few years away from hitting their 62nd birthday (i.e., the initial eligibility age for claiming a
Don't get me wrong: Buffett's bipartisan approach is exactly what lawmakers in
The
If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "
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