by David Langer
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.
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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.
David Langer, ASA, EA, MAAA