Social Security was created at a time when American lifespans were significantly shorter than they are today. Three innovations below are aimed at pushing Americans to work later into life and enhance their benefits for retirement.
The first innovation would allow workers to make “catch-up” contributions via increased payroll deductions starting at age 40 or 50. Utilizing the power of defaults in affecting outcomes, workers would be defaulted into the program with the ability to opt out if they choose to do so.
The second proposal would provide beneficiaries with a lump-sum payment if they delay claiming retirement benefits. Under this plan, those who delay claiming beyond the early eligibility age (62) would receive monthly benefits as though they claimed benefits at 62 in addition to a lump-sum payment reflecting the delayed retirement credit. Those claiming after their full retirement age (66 or 67) would receive monthly benefits as though they claimed benefits at the full retirement age in addition to a lump-sum payment actuarially equivalent to the present value of the delayed retirement credit.
The third innovation would establish mandatory add-on accounts known as Supplemental Transition Accounts for Retirement (START) that each worker would be required to exhaust before receiving Social Security retirement benefits. STARTs are designed to encourage workers to delay claiming Social Security benefits, thereby mitigating the effects of actuarial reductions for claiming early.