Rubio's Retirement Plan

Marco Rubio announced a new plan for handling retirement in the US. It's mixed.

The Bad

Rubio wants to raise the retirement age. There is no need to do this and it is unfair to poor people who do not live as long. A better way to improve the fiscal balance is to increase the payroll tax cap so that richer people do not have as much of their market income exempted from the cap. You might even eliminate the payroll tax cap altogether. It's better to reduce the incomes of the rich than to reduce the already-short retirements of the poor.

Rubio wants to use means-testing to reduce the benefits of the wealthy. Discussion on this topic is far too narrow. Personally, I like the idea of utilizing a flat pension that pays out the same monthly sum to all retired people, instead of these tiered payments that we currently have that pay higher sums to those who had higher market incomes during their life. But this is different from the wealth means-testing Rubio is proposing and would just involve changing the benefit formula so as to lower benefits for high-income people and increase benefits for others. Short of doing that, a more sensible move to improve the fiscal balance here is to raise or eliminate the payroll tax cap. Wealth-based means-testing is a mess.

The Good

Rubio wants to have public individual retirement accounts. As Demos' Hiltonsmith has detailed, 401ks and the private retirement system in general is a huge fee-grabbing grift. Throughout their lifetime, workers have their retirements pilfered by high fees that most are not particularly aware of. This enriches Wall Street, which is also why the financial industry hates it when things like Social Security cuts them out of the game. Having a solid public option for individual retirement accounts that has a limited range of sensible, low-fee investment options is a great idea. Rubio's plan only allows people to utilize the public option when their employers don't provide their own plans. It would be better if the public option was open to everyone.


In Rubio's plan and everywhere else, little attention is paid to one part of our retirement system that is extremely troubling. Social Security is pretty alright as it is (though moving to condense the benefit tiers and increasing the payroll tax cap would be a good move). The individual retirement part of the system is a total trainwreck. One part of this trainwreck is the amount of tax expenditures that go into it, which will total approximately $1.4 trillion in the next 10 years. These tax expenditures, like our home ownership tax expenditures, flow heavily to the richest fifth, who receive 33x more dollars from them than the poorest fifth. And these subsidies don't, last I read, even cause people to put away more of their paychecks for retirement.

A worthwhile reform plan for the retirement system would eliminate these subsidies and direct that $1.4 trillion more equitably.