Advice about maximizing Social Security from the guy who wants to end it

Get What's YoursI had a chance today to hear Larry Kotlikoff speak about his best-selling book Get What’s Yours: The Secrets to Maxing Out Your Social Security. Kotlikoff is a professor of economics at Boston University and founder of Economic Security Planning, Inc, a financial software company that created MaximizeMySocialSecurity.com, one of a handful of premium software tools for optimizing benefits. He co-wrote the book with Paul Solman, the business and economics correspondent for The PBS Newshour and Philip Moeller, who writes about retirement for Money magazine, the PBS website Making Sen$se and serves as a research fellow at the Sloan Center on Aging & Work at Boston College.

Kotlikoff and Moeller spoke at the spring conference of the Society of American Business Editors and Writers in Chicago, in a session moderated by my friend and colleague John Wasik. The session was mainly focused on the myriad ways to get the most out of Social Security through smart filing decisions; plenty of useful information was offered – much of which will be familiar to readers of this site. You can hear an audio recording of the session below, and I recommend “Get What’s Yours” – it’s a well-written, well-organized and even entertaining (!) guide to the most important retirement-related financial decisions most households will need to make.

Just disregard the sections dealing with Kotlikoff’s misbegotten ideas about Social Security’s financial problems and ways to fix them.

Kotlikoff argues that Social Security is “bankrupt today,” and that the program should be replaced by “freezing” the program and replacing it with a system of personal accounts that would rely on returns from capital markets and ditch the program’s defined benefit, guaranteed lifetime income feature. That would mean the end of Social Security, as we know it; here’s how the accounts would work:

It transforms the retirement portion of Social Security into a personal security account system with compulsory, shared (between spouses) and progressively matched (by the government) contributions made to personal accounts and invested by a computer (i.e., not Wall Street) in a global, market-weighted index of stocks, bonds and real estate. The government would guarantee a zero cumulative real return on the portfolio and gradually sell each participant’s account balance, converting them into inflation-indexed pensions (again, with no involvement by Wall Street).

Kotlikoff  justifies this by pointing to Social Security’s complexities (which he’s at pains to explain in the book). He also likes to point to the “infinite horizon” projections that were added to Social Security’s annual trustee report during the Bush Administration (which tried to privatize the program). Those projections make the program’s long-range shortfalls look much more dire than the 75-year projections that trustees actually use.

Kotlikoff and Moeller made for something of an odd couple on the podium. Moeller voiced mainstream views about Social Security’s design and ways to fix the program’s financial problems (lift the cap on wages subject to the payroll tax, maybe tinker with the retirement age a bit). Interspersed with their excellent advice about navigating the program, Kotlikoff couldn’t resist straying into his fringy political attacks.

So – here’s advice about Social Security from a guy who wants to end the program. Still, the authors are experts on Social Security’s rules and features, and the session makes for educational listening. I’ve posted the audio from today’s session below; do read the book, and don’t worry about Social Security’s future.

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