Thursday, January 10, 2013

Leadership on Social Security

We've all heard about the time-bomb called Social Security. When all the baby-boomers are retired, there won't be enough Generation X and Y people paying taxes to cover their Social Security payments. We've seen the issue come up again and again but nobody seems to want to deal with the issue. Because older people vote in high percentages it is a political hot potato that leaders prefer to ignore and hope their successor will deal with.

A recent article in the Times shed some interesting light on the issue that I wasn't aware of. The government's forecasting methods have barely changed since the program was set up in 1935! Their actuarial tables are significantly different from reality. The Times did a great job exposing some of these errors. I'll try to summarize for you some of the more egregious ones.

How about the number of smokers? Do you think that might have changed since 1935? You bet it has which means what? People are living longer. Of course some of that gain is reversed by increasing obesity though the link between that and lifespan is being questioned lately.

The study the Times conducted showed weirder results. Like the stoke graph below where the projections going into the future have different curves so that the lines cross when they shouldn't.
The data becomes more ridiculous when you add up the deaths from all causes to end up with death rate charts. Look at this one where everyone who is between the ages of 55 and 59 will die in 2028. What's this, the Incan calendar end date?
So, come on Obama. I understand why you wanted to avoid the political hot potato but how about getting someone within the administration to look at the data and statistics behind these models and get them up to date and accurate. If insurance companies can do it, so can the Social Security Administration. 

Great graphics by the way NY Times!

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