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Memo on American Academy of Actuaries
Statement on
the Social Security Retirement Age
The American Academy of Actuaries arrogantly issued a statement
on
August 4, 2008“Actuaries
Advocate Raising Social Security’s Retirement Age”
[pdf file]
Contrary to its claim to represent the actuarial profession,
its leadership ignored the advice of its Social Insurance Committee
not to make the statement public
The American Academy of Actuaries held a press conference August
4 to
advocate in the “public interest” that the Social
Security retirement age be raised beyond 67. This is a serious
matter to workers, because the enacted increase to age 67 cut
benefits 13%, and each additional year will mean a commensurate
reduction that retirees can ill afford. (Total cuts in Social
Security benefits since 1983 are projected to total about 25%.)
While the Academy claims it is acting on behalf of its members,
the
evidence is to the contrary.
The statement did not, as asserted by the Academy, originate
at all with the experts on its Social Insurance Committee. Further,
when the committee chairman, Ken Buffin, was asked by the leadership
to have his committee vet the statement draft, he reported that
the members requested the statement not be made public, since
it did not represent a real consensus of the membership as a whole
and gave the appearance of being political. This advice was ignored
by the leadership.
The statement was also sent to all 16,000 Academy members in
May and
223 comments were received, mine included. I asked to see them
and was
told on July 21 that a summary prepared by the Academy board would
be
distributed at a later date. It has not yet been received. This
should have been distributed, of course, along with the Social
Insurance Committee’s opinion, before the board voted.
My critique follows on the Academy’s statement, which is
available on
its website.
- The Social Security system is in actuarial balance; there
is in fact a small surplus and not the 1.7% seventy-five year
projection deficit the trustees reported earlier this year.
(The 1.7% deficit is not significant in any event.)
- While the statement says “actuaries have evaluated countless
proposals” to prevent benefit shortfalls in the future,
my own research findings have been to the contrary, but have
been evaded by Academy officials for nearly 10 years. Moreover,
the “demographic problem” has been recognized in
the trustees’ projections since 1983.
- The cash flow will not turn red in 2017; the reserves borrowed
by the
Treasury will be repaid and, together with payroll contributions,
will enable payment of full benefits. The Intermediate Cost
set of actuarial assumptions projects red ink only starting
in 2041, when 74% of benefits can still be paid. Using the Low
Cost assumptions, however, which I have demonstrated
in the actuarial literature to be more accurate, there will
be no red ink even beyond the 75 year period.
- The perennial political cry that Social Security’s problems
should be
addressed now or woe will befall us has been regularly heard
for many years, but the finances have nevertheless improved.
Immediate action to cut benefits is not necessary.
* * * *
I will be pleased to discuss the Academy’s statement further
with you.
The matter is of monumental importance to the public: a further
reduction in Social Security benefits will be painful, given they
have already been severely cut, and Social Security is the only
solid leg remaining of the symbolic three-legged retirement stool.
Given the parlous state of the private system, one should be hearing,
instead, demands for a benefit increase.
My website (http://davidlanger.com)
and Google contain many of my writings on the financial and other
aspects of Social Security. Actuaries wishing to protest the statement
can contact Academy leaders Thomas Terry, Bruce Schobel, Stephen
Lehmann, and William Bluhm.
Sincerely,
David Langer, ASA, EA, MAAA
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