For a blast out of the past, I suggest attending your 50th high school reunion as soon as the opportunity arises. My 50th back in Springfield, Vt., last week was a Norman Rockwell scene that included an alumni day parade through a one-stoplight, brick-building town -- a parade complete with marching bands, class floats and a trailer with chairs for my classmates who couldn't have walked two miles. Later, at a dinner party in the evening, we were squinting at each other's name tags and reminiscing.
On the whole, my class has a group of people who have had 50 years to make something of their lives, and all have succeeded. The mood throughout was one of relaxed satisfaction. It didn't matter who they might have been in high school -- those shy or less academically inclined had managed over the years to make some sense of their innate talents and create wonderful lives full of spouses, children, careers and what appeared to be financial security.
All of which brings me to the Simpson-Bowles Social Security plan -- part of the overall plan commissioned by President Barack Obama to solve our nation's fiscal problems. I realized that my classmates attending the reunion at age 68 have a life expectancy of 20 more years. That means that half of us will still be alive in 2033 when the Social Security trust fund surplus (now $2.6 trillion) is expected to be depleted. From that point on, the only money paying for the benefit of those of us still standing will be derived from new inbound Social Security deposits from those then in the workforce.
If nothing happens, Social Security benefits in 20 years will drop by roughly 25 percent when the current surplus runs out. At that point, the then-current deposits every pay period from those working will go right out the door to support those who are retired. While that's not what the 50 percent of my classmates still standing would like to experience, it would not be the end of the world.
One consolation for the half of us still alive, of course, would be the smug satisfaction we would experience by having beaten the system and received back a reasonable return on our 60 years of payroll deposits. MIT professors did the math years ago and determined that the actual rate of return on the money someone has deposited into the Social Security system over the years amounts to about 5 percent if they live to life expectancy and collect a benefit for 25 years. Considering that it has the world's strongest guarantee and is immune to market meltdowns, that's not a bad return.
Plenty can happen over the next 20 years to avoid the 25 percent scheduled cutback. To mention just a few, the retirement age can increase with more financial incentives to wait longer before collecting. The amount of current earnings subject to Social Security payments can be increased. We can reduce the benefits as proposed by Simpson-Bowles so that higher income retirees receive less than they would have under the current schedule.
A final solution is to actually increase the Social Security tax -- a step that Ronald Reagan accomplished when he doubled the deposit percentage back in the '80s. Social Security is an interesting tax because, unlike income taxes, every single working American pays into the system from the first dollar earned. There are no deductions for mortgage interest, charitable contributions or anything else. The maximum income subject to the tax in 2012 is $110,100 and someone at that income or above pays $11,450.40. A student making just $11,010 pays $1,145. It's the ultimate flat tax.
For anyone who defies at least some odds to make it to their 50th high school reunion, the experience is, as I overheard one classmate say, "A lot more fun than I thought it would be." Anyone who makes it that far has much to celebrate and should not miss the event.