My 60th birthday is less than a week and a half away, and if there is one thing I can say with certainty it’s that 60 is not the new 50.
My body creaks and groans. My eyes aren’t what they used to be. I don’t sleep as soundly as I did just a few years ago. Lately, I’ve been seeing a lot of doctors, just to make sure everything still more or less works.
I’ve also found myself with a sudden urge to get my house in order — just, you know, in case. Insurance, wills, that sort of thing. Sixty is when you stop pretending you’re going to live forever. You’re officially old. Or at least old-ish.
The only thing I haven’t dealt with on my to-do checklist is retirement planning. The reason is simple: I’m not planning to retire. More accurately, I can’t retire. My 401(k) plan, which was supposed to take care of my retirement, is in tatters.
Last year, CNN reported that:
A quarter of middle-class Americans are now so pessimistic about their savings that they are planning to delay retirement until they are at least 80 years old -- two years longer than the average person is even expected to live.
It sounds depressing, but for many it's a necessity. On average, Americans have only saved a mere 7% of the retirement nest egg they were hoping to build, according to Wells Fargo's latest retirement survey that polled 1,500 middle-class Americans.
While respondents (whose ages ranged from 20 to 80) had median savings of only $25,000, their median retirement savings goal was $350,000. And 30% of people in their 60s -- right around the traditional retirement age of 65 -- that were surveyed had saved less than $25,000 for retirement.But, as we discussed here, we can "save" Social Security very easily -- mostly because it's not really in trouble. If we remove the cap on earned income subject to Social Security taxes -- currently set at $106,800 -- we would add about 0.6% worth of GDP back into Social Security. And the expected shortfall is expected to be about 0.6%. It's that easy.
But how could we raise enough money to increase Social Security benefits? We quote ourselves:
The magic words are “unearned income.” The 1% have pulled off a brilliant con over last 30 years, where they’ve been able to convince the government that unearned income – the kind that comes from capital gains, dividends and interest – should not be subject to the kind of taxation that the rest of us face. In terms of income tax, long term capital gains are taxed at 15%, far below the current maximum marginal rate of 35%.
But it gets worse in terms of Social Security, because these things have ... never been taxed at all.
In 2009, the IRS reported that there was nearly $7.7 trillion in income, $5.7 of which was salaries and wages. Now, just because something isn't salaries and wages does not necessarily mean it would qualify as "unearned income," but it does give us a sense of scale. If only half of it was -- $1 trillion -- then applying the 2009 employee Social Security rate of 6.2% would yield an additional $60.2 billion in revenue.
And all of this increase would be on income -- literally -- that no one worked for.In 2009, the average Social Security benefit was $1,153 per month (and the maximum was $2,323), and Social Security paid out a total of $686 billion in benefits. So if we were to raise Social Security benefits by 10% -- to a whopping $1268 a month (and a maximum of $2555) -- we'd need another $68.6 billion. As shown above, if we could tax half of unearned income, we'd come up with nearly 90% of that figure. We could probably make up the rest by not invading Iran.
By the way -- ever wonder how much is in the Social Security Trust Fund? It's $2.5 trillion. As the current national debt is about $15.6 trillion, that means that about 16% of our national debt is financed internally, in the form of a special series of Treasury bonds held by the Trust Fund.