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Generational Equity versus Generational Interdependence represents two conflicting theories of how we, as a society, consume government benefits, specifically social security and Medicare.

 

Generational Equity (GE) posits that children, younger adults, and older adults are in some competition for societal resources. GE proponents argue that this situation becomes more acute since the Boomers have reached retirement age, and our numbers are so large that we will be scarfing up way more than our share of social security and Medicare. We are, therefore, jeopardizing those benefits for future generations. One remedy that some GE proponents propose is partial privatization of social security-taking some of the employer contributed funds and enabling employees and those who pay in who are self-employed to invest the funds as they see fit.

 

Generational Interdependence (GI) is the counter to GE. GI proposes that, in effect, we’re all in this together. The generations are interdependent and to single out one is to negate one of the bases of our society. GI doesn’t present a position on how to maintain the safety net beyond our generation, but as far as I know, GI proponents do not endorse privatization.

 

While there may well be some merit to the GE position on partial privatization, I don’t agree with GE’s overall view that somehow each generations’ interests conflict with those of other generations. Generations rely on one another. Family economics often cross generations: my wife and I hope to create some education trust for our grandchildren.

 

My mother was widowed in her early 70’s and needed my help short term to get through a situation when one of her investments went south. I wasn’t then and am not now affluent, but I helped her through just as she and my father did what they could to make sure I got an education and a start in life.

 

Once my mother got through her difficult time, she was economically self- sufficient in part due to social security and Medicare. If she hadn’t been secure economically, my family would have had to help her financially. That would have created a significant burden for us. I use this example because it is not atypical- our parent’s generation, which raised our generation, was being provided for in part by my generation’s contribution to social security. My question to Generational Equity proponents is, “why isn’t this fair?”. Each generation has supported one another. My generation (Boomer) raised a generation-we nurtured, fed and clothed them and helped them financially, just as our parents’ generation supported us. We paid the taxes that funded public education (or we paid private school tuition), Social Security, and Medicare. Many in our generation provided the money for our children to attend college, start a business, etc. The generation that we raised, supported, and in some cases, sacrificed for, is now helping to fund Social Security and Medicare for our benefit.

 

GI, in my view, also has a problem: if we want to sustain tax-based programs such as Medicare and social security at the level that it’s providing for Boomers, reforming those systems is critical. Our generation is vast, and due to improved medical treatments, we are aging well and living longer. Generational Interdependence does not address this issue. If the system is going to provide the same social security and Medicare benefits to future generations, I believe we have to change how they are funded and have to take other measures not directly related to funding that maintains current levels.

 

One idea for sustaining social security and Medicare is to raise the maximum income on which social security is taxed from $118,500 to $175,000 or include all sources of income as the tax base for an individual. I’m not anti-rich, but I believe many wealthy people are not paying their fair share in our society, and they should. And at least if they pay their fair share into both social security and Medicare, that would help. Another idea is to raise the minimum age for full retirement from 66 to 68 or higher. Folks who still want to retire early can either take a little less or defer collecting until they are 68. One indirect thing we can do to ease the burden on Medicare is cradle to grave education on healthy living. If children and their parents are taught about healthy diets, and we are all encouraged to either exercise or move (going dancing, walking, climbing stairs), this will lessen avoidable diseases linked to poor eating habits and a sedentary lifestyle. And in turn, we will consume fewer healthcare resources, which, in turn, will hopefully control the cost of maintaining Medicare. Partial privatization could work if individual investment retirement accounts are protected against the vagaries of the market and are bundled into funds large enough to get the full attention of money managers. Several people I know had to delay their retirement after the 2008 market collapse savaged their IRAs, 401ks, etc..

 

I was born in 1946, so I am part of the vanguard cohort of the Boomers. During my growing up and up through my young adulthood, our economy was based on manufacturing-making things- in this country. Unions in significant manufacturing industries provided family-wage jobs, employer-paid healthcare, and pensions, which, when combined with Social Security and potential personal savings and investments, provided a comfortable retirement, one which allowed us to age without becoming a financial burden to our children. That has changed dramatically.

 

Our economy has gone through a drastic change beginning with the first big wave of corporate flight in the mid-’70s to now. We are a post-industrial, service, and information-based economy. This new economic order has resulted in the shrinking of family-wage jobs, replaced by lower-paying, lower benefitted, or non-benefitted positions that often lack a retirement plan or health insurance. Recently, we see a significant increase in the so-called “gig economy,” temporary jobs that sometimes pay decent salaries but don’t provide health care or retirement and offer little job security. Where there were the rich, the middle, and the poor, we now have a consolidation of great wealth in a relatively small number of people, a significantly smaller middle class, and more poor people, if not officially poor, then “near poor.” In the end, GE’ers or GI’ers have to acknowledge the same truth: no matter where you stand, we have to figure out how to make sure our children, grandchildren, and their children and grandchildren have access to a viable social security and Medicare, because that may be the only source of retirement income and medical insurance for a whole lot of them.

 

– Edward from McMinnville, Oregon, a FAR customer who is finding purpose in this new stage of his life.

 

 

 

 

 

Edward

Edward writes for FAR and is also a customer.  He is 73-year-old, born and raised in and around New York City. After college and a little graduate school, he took Horace Greeley’s advice and went west.  Edward lived in several cities throughout California and currently resides in Oregon.  He practiced law for a few years as part of a law collective doing what they called “people’s law,” but spent most of his career working as an internal organizer for the unions.

 

When Edward’s career ended with the unions, he was determined to become an advocate for older adults.  He enrolled at Portland Community College studying Gerontology.  He learned a lot about aging and how it applied to his own life experiences and my own aging process. Much of Edward’s writing is related to what he learned in his Gerontology studies.

 

* The opinions expressed in this article are those of the authors. They do not necessarily reflect the opinions or views of the Finance of America Reverse (LLC).

This article is intended for general informational and educational purposes only, and should not be construed as financial or tax advice. For more information about whether a reverse mortgage may be right for you, you should consult an independent financial advisor. For tax advice, please consult a tax professional.