Congressional Follies: A Really Bad Retirement Proposal

There's never a shortage of head-scratcher ideas coming out of Congress. My personal favorite (and that is not a compliment) over the past year being a tax-break for pet owners. For the record: Yes I have one. No, I don't think I deserve a tax break for that choice.

But the recent retirement idea floated by Ohio representative Dennis Kucinich crossed the line from questionable to downright dangerous. Kucinich wants to offer a six month window during which one million folks at least 60 years old could retire and qualify for Social Security benefits; that's two years earlier than the current age-62 requirement to begin receiving Social Security. Kucinich's goal is that those one million retirements would create one million job openings, and that would be a big boost for the 15million+ unemployed Americans.

In his own words:

Encouraging Less Retirement Security?
There has to be a better way to boost employment opportunities than to push a million people into making a bone-headed financial move. Most people need to be encouraged to delay retirement, not speed it up, to have any chance a a financially secure retirement.

Kucinich used the fact that nearly 70 percent of folks already opt for an early Social Security benefit as some sort of justification for scooting the age test down two more years from 62 to 60. (For the record, he suggested unused TARP money could finance this convoluted jobs idea.) That's like saying just because your six-year-old believes ice cream is an essential food group you should serve it for breakfast, lunch and dinner. Taking early retirement benefits is typically not a smart move for many Americans. It carries a severe financial opportunity cost that most beneficiaries are probably not properly focused on.

When you opt to take early benefits you lock in a benefit that is 25 percent to 30 percent less than what you would be entitled to if you wait until your Full Retirement Age (FRA).

Now maybe that would be okay if we knew the one million folks who would opt for Kucinich's idea have ample retirement savings or a modest enough lifestyle that they don't need the full benefit. But given that Americans say their retirement confidence is at an all-time low that seems unlikely. Moreover, just last month the president's Middle Class Task Force included initiatives specifically targeted at the issue of retirement security. Encouraging people to take reduced Social Security benefits was not mentioned in the report. What Americans really need is a jobs policy that will help more pre-retirees work longer to shore up their retirement security, and more education on the value of delaying Social Security until age 70.