OPINION:
It’s campaign season, and you know what means: entitlement reform, or at least talking about entitlement reform.
For as long as I have been alive, Republicans and Democrats have included planks in their platforms to address the rapidly depleting entitlement trust funds. This year is no different.
On Wednesday, Republican presidential candidates spoke on this very issue at their primary debate in Alabama. Their solutions: SSDD — (same “stuff,” different day), and campaign promises that they won’t be able to deliver.
It’s not their fault. Most candidates for president have no background in financial planning or advising; most in Congress don’t either. This is a problem when the branch of government with the responsibility of regulating entitlements and making sure government funds remain solvent lacks members with qualified backgrounds.
I have been a financial adviser for my entire adult life. For nearly 20 years, I have been helping middle-class Americans prepare for retirement. I know what works in our current system, and I also know what can be done to make the program more attractive and, more importantly, more solvent.
The insolvency of our Social Security Trust Fund can be solved — and we do not have to cut benefits. But raising the full retirement age is not the answer. I have helped countless middle-class families retire over the past couple of decades, and raising the retirement age is an unequivocal and undeniable cut in benefits.
Instead, we should reduce the early retirement age from 62 to 58 years old. This will give hardworking Americans the choice to retire earlier and ease the burden on the Social Security Trust Fund because disbursements would be less than if they had waited four or more years.
For similar reasons, we should also reduce the early distribution penalties on individual retirement accounts from 59½ to 58 years old. This would allow retirees to start drawing on income sources for retirement without penalty — more private disbursements and less strain on public disbursements.
There is also an opportunity to reform our tax code through this. If we eliminate the federal income tax on the first $20,000 of wages for those on Social Security, we encourage retirees to remain in the workforce and earn added tax-free income. Importantly, though, they’ll continue to pay Uncle FICA, which in turn makes the system more solvent.
We should also eliminate the earnings test for Social Security benefits. I struggle to see any situation where offering incentives not to work is a good thing for individuals or society. The earnings test does just that.
This whole plan is about choice — giving retirees the choice to control their retirement.
Plus, there are added benefits. With an aging workforce, giving older Americans the opportunity to continue working part time without incurring federal income taxes will keep highly skilled workers in the workforce to train and mentor a growing unskilled and youthful workforce, which helps alleviate labor shortages for small businesses.
Studies have also shown that the more active older adults are, the healthier they remain. If these workers could join a low-stress workplace, then they would reap the health benefits, and other entitlement programs like Medicare are less strained with healthier recipients.
Likewise, it’s irrefutable that the longer someone works, the less likely they are to fall into poverty, thus minimizing the drain on Medicaid as well.
The status quo would tell you that Social Security solvency is impossible. But it’s not. It just takes bold ideas that buck the status quo and traditional way of doing business in Washington.
I have been helping Americans prepare for retirement for nearly 20 years. There is progress that can be made on this issue if Republicans and Democrats simply come together and work in good faith.
• Michael Markey is a financial adviser and Republican candidate for Congress in Michigan’s 3rd District.
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