Social Security now vs. then

We keep hearing how social security is going broke. Part of the problem has always been fewer workers per retiree. Maybe Wiz can answer this one. I have never really seen the news ask it this way.

When SS was started in 193? there were about 36 workers for each retiree so the amount you and your employer paid was something around 1% each. Today the worker/retiree ratio is at 3:1 or less. So, my question to Wiz, or anyone else, is: What would we need to raise the retirement age to so the ratio would get back to 36:1 or so? Please ignore the fact that some places might mak you retire at 65, 70, etc.

Correct, the ratio of people on Social Security to workers keeps climbing, and will continue to climb for years to come. That problem affects Medicare as well. When Social Security started the retirement age was just about the same as the average age at death, so lots of people never lived to collect, and didn't collect long if they did.

Advances in life expectancy should be a good thing, but Social Security not adapted much to this change. Reagan phased in a two-year increase in the full retirement age from 65 to 67, but the phase in is too slow, and 67 is still not high enough.

We need to do some combination of raising taxes, cutting benefits, or raising the retirement age to save the program. The longer we put it off, the more painful it will be when action is taken. The Social Security actuaries have been saying this for decades, the politicians know it, yet still nothing is done to remedy the inevitable demographic crisis to come. In fact the opposite, we keep borrowing more money when we should be paying down the debt.

My opinion is saving the program should be done with a combination of raising the full retirement age to 68, going up 2 months per year until we get there. Under the Reagan amendments, we go from 66 to 67 starting in 2020, as I recall. We can't put it off until then. As for raising taxes, I think income above say 500K should be subject to the Social Security tax again.

Before anyone asks, I oppose privatization.

The quickest and simplest fix would be to only award benefits to those who met a means test. If a person had enough income and/or enough assets, he wouldn't get any SSI check--or the amount awarded would be decreased on a sliding scale. After all, wasn't the original point of the program to provide "security"? If someone already has retirement "security"--like a pension, or substantial assets--then they don't need the fund. But at present, some seniors play golf every day at Lake Havasu, and some eat dog food in a Chicago slum--and they each receive the same check every month.

I fully realize that the above proposal would make the tops blow off of many retiree's heads. My father, a multimillionaire before the IRS crushed him, was inordinately proprietary about that stupid little check every month. It was HIS money goddammit. I never bothered to point out to him that the money he paid into the system decades ago had also been SPENT decades ago, because he wouldn't have countenanced such an argument. But despite the reality of the situation, tens of millions of people think that the government has a shoebox with their name on it, and it's been stuffing dollar bills into that shoebox all this time, in order to give it all back to them when the time comes.

So the only way ANY fix will come about is for someone to finally stand up and say that the emperor has no clothes: there IS NO MONEY IN THE SSI TRUST FUND. Its existence is a chimera. The government spent all that money long ago, folks, and it's spending all the money it collects from twenty-three-years-olds and forty-year-olds and sixty-one-year-olds RIGHT NOW: ALL of it (by definition: we're running a massive deficit). I actually hope that some forthright politician will come along and commit political suicide by stating the truth for once. He'd be the modern media equivalent of burned at the stake for doing so, but it would sure be refreshing to see.

Quote: mkl654321

The quickest and simplest fix would be to only award benefits to those who met a means test.

A huge disagreement from me here. First, a point of clarification. SSI (Supplemental Security Income) is a welfare program the is needs based only. Social Security is run out of the same offices, but is financially independent. What you get is based mostly on what you put it. It is already welfare weighted, so those who worked hard, and made a good living, are already getting a lousy deal out of it, while low-income workers get a lot more than they put in. To means test high income workers would just add insult to injury. Not to mention the indignity of questioning everybody retiree about the size of his house and portfolio. If you want the rich to pay more, or get less, you could easily accomplish the same thing by simply tweaking the existing benefit calculations. Punishing people for saving for retirement would be yet another moral hazard -- punishing good behavior and rewarding the bad.

Harsh means testing would force People to become even more adept at hiding assets, evading the system, and that they will do. Fleecing the hard workers or the successful to reward those that some argue are either deadbeats, or just had refused to plan. If someone really is a deadbeat or had turned his back on the most minimal of planning efforts, one can argue they made their bed, and deserve less.
I can see raising the upper limit contribution cap for those of extreme salaries, but telling someone - "you worked hard and you planned, so you deserve to get stiffed" is a non-starter.

Quote: Wizard

A huge disagreement from me here. First, a point of clarification. SSI (Supplemental Security Income) is a welfare program the is needs based only. Social Security is run out of the same offices, but is financially independent. What you get is based mostly on what you put it. It is already welfare weighted, so those who worked hard, and made a good living, are already getting a lousy deal out of it, while low-income workers get a lot more than they put in. To means test high income workers would just add insult to injury. Not to mention the indignity of questioning everybody retiree about the size of his house and portfolio. If you want the rich to pay more, or get less, you could easily accomplish the same thing by simply tweaking the existing benefit calculations. Punishing people for saving for retirement would be yet another moral hazard -- punishing good behavior and rewarding the bad.

You are correct in that I erred in using the term, "SSI".

I don't know what the most current figures are, but a few years ago, the time it took for a beneficiary to receive payments equal to what he or she had paid in over their lifetime was one year. Therefore, anyone who collected benefits for a longer period of time was simply the beneficiary of transfer payments from those who were still working AT THAT SAME TIME. Therefore, there was (and is) very little ENTITLEMENT---the money supposedly saved over a lifetime in the "trust fund" wouldn't last long in any case.

What this means to me is that the fiction of an existing trust fund has no need to persist. The people who paid Social Security taxes during their working lives did NOT pay into a trust fund for their own future use--they paid for the disbursements to existing beneficiaries. This is a simple fiscal truth. Therefore, NO ONE has any money coming, regardless--the government spent it all a long time ago. So what we need to do is scrap the program and start over. If we started over with a zero balance in the account, but took notice of all the outstanding contingent liabilities, we would be forced to consider paying only SOME of those contingent liabilities--to those who had the greatest need.

Instituting such a program wouldn't be "punishing" those who had managed to accumulate wealth for retirement; the government already did that when it spent their (and everyone else's) retirement money. Rather, it would be acknowledging that the existing system only has enough funding to support a welfare program for the elderly poor.

Quote: Paigowdan

Harsh means testing would force People to become even more adept at hiding assets, evading the system, and that they will do. Fleecing the hard workers or the successful to reward those that some argue are either deadbeats, or just had refused to plan. If someone really is a deadbeat or had turned his back on the most minimal of planning efforts, one can argue they made their bed, and deserve less.
I can see raising the upper limit contribution cap for those of extreme salaries, but telling someone - "you worked hard and you planned, so you deserve to get stiffed" is a non-starter.

That would also be an argument against income taxes, and one that was bandied about in the postwar period ad nauseum. It isn't defensible---for one thing, it's relatively hard to hide AND utilize significant assets.

And the government already has stiffed all those Social Security recipients by spending their retirement money. Speaking the truth--that Social Security is both bankrupt and unsustainable--may be wildly unpopular, but eventually someone will have to speak it. Everybody--those who saved and scrimped and those who were what you call "deadbeats"--is in the same boat as far as Social Security is concerned: they have nothing in their "accounts."

I recommend a means test because the existing system will collapse if it tries to fulfill all its promises. All it will be able to do is protect the poorest of the elderly. That is better than going bankrupt trying to pay everyone, when it can't possibly do that.

Quote: mkl654321

I recommend a means test because the existing system will collapse if it tries to fulfill all its promises. All it will be able to do is protect the poorest of the elderly. That is better than going bankrupt trying to pay everyone, when it can't possibly do that.

I'll admit that:
a) Some means tests are harsher than others, and
b) Something has to be done, the bullet has to be bitten.
The poorest of the elderly will/should be protected, but some satisfatory return to lifelong contributors has to be present also.
Also keep in mind that with a huge greying voting population, it's gonna be real tough to face down.

Quote: Paigowdan

I'll admit that:
a) Some means tests are harsher than others, and
b) Something has to be done, the bullet has to be bitten.
The poorest of the elderly will/should be protected, but some satisfatory return to lifelong contributors has to be present also.
Also keep in mind that with a huge greying voting population, it's gonna be real tough to face down.

I agree, but if the government would admit that the money those greying people kicked in is gone, spent, squandered, pissed away, disposed of, and, to put it simply, not there any more, then those people might be more willing to accept a plan that pays off only those in actual need.

I think if it comes down to Bill Gates getting his green punch card check every month and some little old lady in Paducah not being able to pay her light bill, people will vote that Mister Bill doesn't get his check, no matter how much he "deserves" it. An extreme example, but you get my point. I think that the "satisfactory return" you mention should be the existence of a safety net; anyone disqualified because of a means test would still get benefits if their circumstances changed for the worse. This is all that Social Security was ever meant to do, and anyway, it's all that it soon will be ABLE to do.

We ARE making an assumption here - that all U.S. residents and citizens are somehow "entitled" to SS retirement income without countributing - when they're not. Other programs, yes, retirement income - no.

The system works on the basis that you've worked a minimum number of full-time "quarters" in your lifetime - say 40 quarters, or about 10 years. Obviously, if you officially worked, then you also made at least minimum wage. So...even the most "lowly" worker in the program had indeed worked for years, and at a certain level that one could consider "productive" and deserving" and so that a) he is NOT a dead beat, and b) paid taxes, or had taxes taken out.

But your comment of "If it comes down to Bill Gates getting his green punch card check and some old little old lady in Paducah being able to pay her light bill" - then that little old lady better had worked a total of 10 years full time in her lifetime, - else - no check and her lights go out, sweet little old lady or not. And if she had worked less than 10 years out of 45 possible years (from 20 to 65), then SOMEONE took care of her so that she didn't have to work, and they better still be paying alimoney, (AND she can claim from her husband work history as a widow) - or she was homeless to begin with, and WON'T be getting a "promotion" - up to a funded pension.

LOOK, if a heroin dealer worked off the books for 20 years, didn't get caught, and paid no taxes or contributions, and found out one day his supplier got busted and dissapeared, he ain't collecting. And yes, I'd feel better if Bill Gates got his check (that he technically deserves and had actually contributed for) - than this guy. And I feel good about him getting, because he sure as hell paid into it way more than he got out of it - to cover us working stiffs.

I disagree with the position that people are "entitled to a safety net" if they didn't further themselves and made a good faith effort to advance themselves in out society, as a paying part of our system.

We will watch the welfare states of Europe collapse in the near future (just before us, perhaps).

Chile has a retirement system where their contributions go into their own accounts - what you get in the end is what you had put in, compounded by interest in the investment. If you didn't put in, you can't take out, destitute or not.
Where were you, and what did you do to work? will be asked.

Quote: Paigowdan

We ARE making an assumption here - that all U.S. residents and citizens are somehow "entitled" to SS retirement income without countributing - when they're not. Other programs, yes, retirement income - no.

I disagree with the position that people are "entitled to a safety net" if they didn't further themselves and made a good faith effort to advance themselves in out society, as a paying part of our system.

We will watch the welfare states of Europe collapse in the near future (just before us, perhaps).

Chile has a retirement system where their contributions go into their own accounts - what you get in the end is what you had put in, compounded by interest in the investment. If you didn't put in, you can't take out, destitute or not.
Where were you, and what did you do to work? will be asked.

Sigh. You're working yourself into a tea-partyesque lather, when the point you're arguing against isn't even the point I was trying to get across.

IT IS A MYTH that the eventual disbursements a SS contributor receives have anything to do with the money he or she put in. THAT MONEY IS LONG GONE. Now, it would be nice if we could maintain the fiction that said retiree is, in fact, getting his money back, by taking money from working people and giving it to him--but that scheme isn't sustainable. At some point, quite soon, we'll have to either a) dramatically increase SS levies on the working public or b) tell SOME beneficiaries, "Look, we don't have enough money to pay you any more. Sorry." a) is probably untenable, since we're going to be seeing massive tax increases to pay for the Obamaesque national debt. So b) is the only option, and who should we tell "You're not getting your check,": Bill Gates or the old lady in Paducah? it's going to come to that, you know.

Parenthetically, I continually wonder why the idea of some "undeserving" person receiving enough social benefits so that he doesn't starve to death or die of exposure sends conservative wingnuts into SUCH a tizzy. So he didn't "qualify". Wouldn't it still be a good idea to at least keep him alive, so that he doesn't die on the lawn of some rich guy's estate and stink up the joint? Sheesh!

Quote: mkl654321

Sigh. You're working yourself into a tea-partyesque lather, when the point you're arguing against isn't even the point I was trying to get across.

I'm not a tea partier. [ad hominen here...] And I won't respond by calling you a socialist :) Also ad hominen.

Quote: mkl654321

IT IS A MYTH that the eventual disbursements a SS contributor receives have anything to do with the money he or she put in. THAT MONEY IS LONG GONE.

If we're told it is a now myth - as opposed to an actual obligation to us who contributed in good faith to our retirement - as reasonably weighted on our contribution amount and duration, to find out that we hadn't had this, - would be a MAJOR NATIONAL problem that would not be resolved by your solution of basically saying, "oh...that's too bad. Sorry! It's Gone! Poof!"

Quote: mkl654321

Now, it would be nice if we could maintain the fiction that said retiree is, in fact, getting his money back, by taking money from working people and giving it to him--but that scheme isn't sustainable.

1. Fiction? Try the words "national default against it own citizenry" or "renege."
2. "Talking money from working people and giving it to him [the retire]" as the problem here? Well - that is exactly how this SSA system is supposed to work. Who were the people who contributed to SSA all their lives?
3. Since money would be taken from "working people," then...should it be given to a) other "working people" who already have jobs and are not yet retired; b)to "people who refuse to work or do not need to work, and therefore did not contribute into it," or c) "people who HAD BOTH worked and HAD contributed for decades?"

Who would you say is deserving? Simply put:
a) Those who worked for more than 10 years contributing the most into it, with the pay out:
b) at least partially pro-rated based on past contribution, with "need" being just "ONE" factor.

Quote: mkl654321

At some point, quite soon, we'll have to either a) dramatically increase SS levies on the working public or b) tell SOME beneficiaries, "Look, we don't have enough money to pay you any more. Sorry."

Which people will you tell sorry to? Those who joined the system, and contributed into it for decades in good faith, or those who did NOT?

Quote: mkl654321

a) is probably untenable, since we're going to be seeing massive tax increases to pay for the Obamaesque national debt.

Maybe not. The FICA tax limit of $120,000 can be extended into the wealthy populace above a $120,000 [or whatever the limit is]. This I agree with this.

Quote: mkl654321

So b) is the only option, and who should we tell "You're not getting your check,": Bill Gates or the old lady in Paducah? it's going to come to that, you know.

Actually, the little old lady in Paducah - if she was not a part of the system - and a Yes to Bill Gates - if he was a part of the system.
You see, the SSA retirement system is not a "hard luck redistribution system." It is a retirement system for those who contributed, pro-rated on what they contributed and for how long.
Now WELFARE/Public Assistance is such a safety net, and the little old lady from Paducah who is beginning to look like a straw man] can apply for Welfare, and for food stamps, and for Medicare or Medicaid, and Supplimental Income, and a thousand and one other separate programs.

Quote: mkl654321

Parenthetically, I continually wonder why the idea of some "undeserving" person receiving enough social benefits so that he doesn't starve to death or die of exposure sends conservative wingnuts into SUCH a tizzy.

Well, for the same reasons that they aren't allowed to rob the 401(k) retirement accounts of working or retired people.
I will say:
a) Yes, it is a crying shame that some people are completely unprepared and downright unable to care for themselves, young or old. No doubt about that. But...
b) Robbing the retirement accounts of people who did pay into it is not the answer, be it public or private.

SSA is not a social entitlement program, it is a retirement program for people who actually paid into it. If someone needs a social program, then refer them to the appropriate Public Assistance program.

Last point:

Quote: mkl654321

So he didn't "qualify". Wouldn't it still be a good idea to at least keep him alive, so that he doesn't die on the lawn of some rich guy's estate and stink up the joint? Sheesh!

Oh, I agree with that. Do keep each one alive, as we are all precious children of God and all that - even if it is a small heated room with a TV and a soup kitchen in the lobby of an SRO building. But a lot of the "keeping us alive" work is in our own responsibilities and in own hands during our own long lives. People have a lot of responsibility as to where they go and where they end up! A lot of writing was written on each of our walls all along the way. For someone to have nothing at 65 (no retirement account, no veterans benefits, no Social security contributions record, nothing at all - nothing but walk onto a wealthy family's lawn to just die) is actually a VERY hard thing to do. You would practically have to be a life-long heroin addict and ex-con - and survive that - to get to that lawn. I say he gets a bedsitter's room and a soup kitchen with medical care to boot. Out of County Welfare, not SSA.

I begrudge nothing from a wealthy man who paid his dues and his own way through life to end up in comfort, including the monies due him, as long as he did not do it as a gangster. And I would also have serious questions for a 65 year old man who has absolutely nothing to show, and who is now asking to recieve but had never gave, as to how exactly he got there.

Quote: Paigowdan

We ARE making an assumption here - that all U.S. residents and citizens are somehow "entitled" to SS retirement income without countributing - when they're not. Other programs, yes, retirement income - no.

The system works on the basis that you've worked a minimum number of full-time "quarters" in your lifetime - say 40 quarters, or about 10 years. Obviously, if you officially worked, then you also made at least minimum wage. So...even the most "lowly" worker in the program had indeed worked for years, and at a certain level that one could consider "productive" and deserving" and so that a) he is NOT a dead beat, and b) paid taxes, or had taxes taken out.

But your comment of "If it comes down to Bill Gates getting his green punch card check and some old little old lady in Paducah being able to pay her light bill" - then that little old lady better had worked a total of 10 years full time in her lifetime, - else - no check and her lights go out, sweet little old lady or not. And if she had worked less than 10 years out of 45 possible years (from 20 to 65), then SOMEONE took care of her so that she didn't have to work, and they better still be paying alimoney, (AND she can claim from her husband work history as a widow) - or she was homeless to begin with, and WON'T be getting a "promotion" - up to a funded pension.

LOOK, if a heroin dealer worked off the books for 20 years, didn't get caught, and paid no taxes or contributions, and found out one day his supplier got busted and dissapeared, he ain't collecting. And yes, I'd feel better if Bill Gates got his check (that he technically deserves and had actually contributed for) - than this guy. And I feel good about him getting, because he sure as hell paid into it way more than he got out of it - to cover us working stiffs.

I disagree with the position that people are "entitled to a safety net" if they didn't further themselves and made a good faith effort to advance themselves in out society, as a paying part of our system.

We will watch the welfare states of Europe collapse in the near future (just before us, perhaps).

Chile has a retirement system where their contributions go into their own accounts - what you get in the end is what you had put in, compounded by interest in the investment. If you didn't put in, you can't take out, destitute or not.
Where were you, and what did you do to work? will be asked.

Canada has a combination of both. There is an Old Age Security program ($534/month) which is a guaranteed supplement based on your age, which all Canadians fund through their Canada Pension Plan (CPP) deductions (currently about 5 percent of earnings with the employer kicking in a matching amount). There is a Canada Pension Plan which pays you up to $934/month based on your earnings. And finally, there is a Guaranteed Income supplement of $658 paid to those with maximum income of $15,816/year. All told, if you worked full time all of your life and retired today, you would earn about $1,450/month from the government starting at age 65. Canada has a similar 401(k) program where you can put money into an investment account and defer your taxes on theose contributions until withdrawn (with all income within the investment account also deferred). The guideline is that your retirement income should be about 60 percent of your preretirement income. The Old Age Security is clawed back if your taxable income is over about $60K for the year.

We had a Finance Minister in the 90s who was smart enough to realize that the pension benefits that we were paying were not going to be able the fund the Pension plan, so he raised the deduction rates drastically over 5 - 6 years to cover the shortfall. The US did not do the same and its social security fund is facing a crisis as a result.

I think the program in Canada is decent, but I wish that the CPP benefits for working were higher.

A few years ago I had an idea that I thought might be fair and extend the SS finances at least a little bit, (and every little bit helps), but I was unable to find supporting figures to see if it had a chance of working. I'm also going to ignore the concept that their is no money people put in because I don't believe that will ever be part of the equation used to address this issue. I also use the term "investment" for simplicity even though some may disagree that it is an appropriate term.

The concept is relatively simple: a means test that takes effect only after the recipient has collected what he has already put in, preferably with a modest amount of interest.

According to this chart if you maxed out your contributions over the past 30 years the total collected would amount to about $230,000, (the combined total of both employer and employee contributions). The current maximum monthly payment is $2,346, or a little over 8 years to get back what was paid in, without interest. The current retirement age is 66, so that would mean at somewhere around 74 years old the beneficiary would get back his initial investment, (without interest).

According to this chart the average life expectancy at age 66 is 15.96 years, or about twice the time needed to recoup the initial investment, not including interest.

The concept is simply that if the retiree's income is above X at that point where the benefits exceed investments then SS payments would cease. Should their income fall in later years below X then they would resume.

I've always thought that proposing a strait "means test" was a non-starter because it would be politically difficult and people were required to put money into the system with the promise of at least a chance to get it back later. At least this way they would get their money back, just not a whole lot, if anything, more than that, with the remainder going to strengthen the reserve. I suspect it wouldn't be a lot of money, but over time it adds up and every little bit helps.

It obviously isn't quite that simple and would take a lot more thought to make it work, but any thoughts on the basic concept? Any reason that I have not thought of on why this wouldn't work?

Take the $2.5 trillion surplus in the trust fund and put it on Banker.
If it wins, you've kicked the can down the road for a couple of decades.
If it loses, you retroactively enact a one-time 98.95% tax on casino profits on bets of over $2 trillion.
The comps at 30% of theo would be $7.875 billion.

On second thought, take a couple hundred billion out of the fund and build a buncha casinos. With 3:2 blackjack.

Quote: mkl654321

What this means to me is that the fiction of an existing trust fund has no need to persist. The people who paid Social Security taxes during their working lives did NOT pay into a trust fund for their own future use--they paid for the disbursements to existing beneficiaries. This is a simple fiscal truth. Therefore, NO ONE has any money coming, regardless--the government spent it all a long time ago. So what we need to do is scrap the program and start over. If we started over with a zero balance in the account, but took notice of all the outstanding contingent liabilities, we would be forced to consider paying only SOME of those contingent liabilities--to those who had the greatest need.

First, I think we could agree that Social Security is basically a Ponzi Scheme. The money going out is coming from contributions going in at the same time. It could also be argued that the trust fund doesn't exist, because it is based on money the treasury owes itself.

However, things are not as dire as you make them out. Government has the ability to run a successful Ponzi Scheme, because they can force everyone to participate. If we make modest changes like the ones I mentioned in my first post, then I submit that the Social Security actuaries would say the program would be solvent for as far as they make projections, which is 75 years.

It is always the extreme left and right wing that just want to scrap the current program and start over. That is lazy to say and extreme to promote. Whatever anybody wants to accomplish can be done by changing numbers here and there in the current law.

The sky is not falling.

Quote: mkl654321

Sigh. You're working yourself into a tea-partyesque lather, when the point you're arguing against isn't even the point I was trying to get across.

IT IS A MYTH that the eventual disbursements a SS contributor receives have anything to do with the money he or she put in. THAT MONEY IS LONG GONE. Now, it would be nice if we could maintain the fiction that said retiree is, in fact, getting his money back, by taking money from working people and giving it to him--but that scheme isn't sustainable. At some point, quite soon, we'll have to either a) dramatically increase SS levies on the working public or b) tell SOME beneficiaries, "Look, we don't have enough money to pay you any more. Sorry." a) is probably untenable, since we're going to be seeing massive tax increases to pay for the Obamaesque national debt. So b) is the only option, and who should we tell "You're not getting your check,": Bill Gates or the old lady in Paducah? it's going to come to that, you know.

Parenthetically, I continually wonder why the idea of some "undeserving" person receiving enough social benefits so that he doesn't starve to death or die of exposure sends conservative wingnuts into SUCH a tizzy. So he didn't "qualify". Wouldn't it still be a good idea to at least keep him alive, so that he doesn't die on the lawn of some rich guy's estate and stink up the joint? Sheesh!

There is no myth. The system was never set up for contributions to be saved upon your behalf and returned to you. The only pronise was the social contract that younger workers would provide some level of income to the elderly. In addition, the benefit that one receives is correlated to their contributions throughout their lifetime.

The reality is that the ss crisis is a red herring. It can be brought into balance with some minor tweaks to the retirement age among other things. The fiscal crisis we have is with medicare. Everyone for whatever reason always debates ss and ignores the elephant in the room.

Quote: Paigowdan

I'm not a tea partier. [ad hominen here...]

would be a MAJOR NATIONAL problem that would not be resolved

b)to "people who refuse to work

Which people will you tell sorry to? Those who joined the system, and contributed into it for decades in good faith, or those who did NOT?

a) Yes, it is a crying shame that some people are completely unprepared and downright unable to care for themselves, young or old. No doubt about that. But...

For someone to have nothing at 65 (no retirement account, no veterans benefits, no Social security contributions record, nothing at all - nothing but walk onto a wealthy family's lawn to just die) is actually a VERY hard thing to do. You would practically have to be a life-long heroin addict and ex-con

I said that your ARGUMENT was tea-partyesque, not that YOU were. My remark was thus the direct opposite of an ad hominem attack.

This IS a major national problem already, not a hypothetical one.

Not every person without means of support and/or in dire financial straits is a lazy no-good bum dope smoking welfare cheat. Some people are in (even by your lights) legitimate hardship circumstances.

I would tell EVERYBODY "sorry", since EVERYONE'S "entitlement" is nonexistent, and has been for some time.

If you cannot imagine how a person could reach the age of 65 without resources, well, then..you lack imagination. I could name a dozen plausible scenarios--loss of home equity, medical bills, financial reverses, etc. etc. etc. etc., where a person could become destitute even while being "worthy of living" in your eyes.

In any case, we're up against your ideology here--and ideologically based arguments resist, even are immune to, logic. You divide the country into goldurn hard-workin' folks who deserve to go on living after reaching age 65, and stinkin' lazy no-good BUMS who have jest been layin' about all their worthless lives and I WON'T give THEM mah hard-earned tax dollars just so they can sit on their couches and watch teevee. This is so common in the exhalations of conservative commentators and the people who phone in to their radio talk shows that it's a trope, and is becoming a cliche. The truth is that there are gray areas in this debate, and it's not a question of "deserving" or not "deserving". A person may have made bad choices, or may just have been unlucky. How on earth would you fairly differentiate between the two? Who gets to play God?

Quote: Wizard

First, I think we could agree that Social Security is basically a Ponzi Scheme. The money going out is coming from contributions going in at the same time. It could also be argued that the trust fund doesn't exist, because it is based on money the treasury owes itself.

However, things are not as dire as you make them out. Government has the ability to run a successful Ponzi Scheme, because they can force everyone to participate. If we make modest changes like the ones I mentioned in my first post, then I submit that the Social Security actuaries would say the program would be solvent for as far as they make projections, which is 75 years.

It is always the extreme left and right wing that just want to scrap the current program and start over. That is lazy to say and extreme to promote. Whatever anybody wants to accomplish can be done by changing numbers here and there in the current law.

The sky is not falling.

I don't know to what extent your proposal takes changing demographics into account, but most insolvency projections are cognizant of the fact that people are living FAR longer than the constructors of the original scheme ever meant them to. This throws all the calculations into a cocked hat. There is no possible way a "modest" change in the Ponzi scheme can compensate for the fact that the pool of workers is shrinking and the pool of retiress is growing (relative to each other).

Of course, the characterization of the legitimate (and overdue) concerns about Social Security as "alarmist" and "extreme" is exactly what is going to keep the issue from being dealt with until it becomes a full-blown fiscal crisis. You want to reform Social Security? HE WANTS TO STARVE GRANDMA TO DEATH!!!! VOTE FOR ME INSTEAD!!!!!

To make the system sustainable in even the short run would require a doubling of the payroll tax. This could probably be absorbed by individual wage-earners, but the doubling of the self-employment tax, to a total levy of over 30%, would crush many small businesses like a steamroller running over a beer can. Of course, the obliteration of small business would serve the government's aims.

It is soooooooo silly to think, by the way, that ANY fiscal mess can be solved by increasing taxes on the rrrrrrrrrich. There just ain't enough of them to squeeze. Taxes are mostly paid by the great unwashed masses. It makes them happy to hear the populist shibboleth: "we're gonna go after them rich folks,", however.

Quote: Chuck

Take the $2.5 trillion surplus in the trust fund and put it on Banker.
If it wins, you've kicked the can down the road for a couple of decades.
If it loses, you retroactively enact a one-time 98.95% tax on casino profits on bets of over $2 trillion.
The comps at 30% of theo would be $7.875 billion.

On second thought, take a couple hundred billion out of the fund and build a buncha casinos. With 3:2 blackjack.

You could feed quite a few elderly people with those earned comps.

Oh wait, that already happens in Vegas. Check out the Arizona Charlie's lunch buffet (especially on Senior Days).

Quote: ruascott

There is no myth. The system was never set up for contributions to be saved upon your behalf and returned to you.

Perhaps not, but that's the way it was sold, and that's the way most people perceive it. The government has not tried to disabuse people of the shoebox notion, because fessing up and admitting that they've been blowing the money that was supposed to have been stuffed in the shoeboxes would be political death. But the Trust Fund does not exist.

I doubt that a program touted as "you pay for the other guy's retirement, and we HOPE that when you retire, the next guy will pay for it in turn" would have sold very well. It would have been the truth, though.

Quote: mkl654321

I don't know to what extent your proposal takes changing demographics into account, but most insolvency projections are cognizant of the fact that people are living FAR longer than the constructors of the original scheme ever meant them to. This throws all the calculations into a cocked hat. There is no possible way a "modest" change in the Ponzi scheme can compensate for the fact that the pool of workers is shrinking and the pool of retiress is growing (relative to each other).

Of course there is. Actuaries can easily see how demographics are and were changing and make adjustments to compensate. Raise the retirement age. Raise the contribution. It's pretty simple, really. Calculating pension funding is something that every major corporation with a pension fund does. Calculating your own retirement income is essentially the same amount of work. I would think that raising the retirement age another year to 68, increasing the contribution rate, and decreasin the SSI formula would solve the problem. Clawing back the Social Security payments from the rich would also help.

Perhaps the death tribunals in ObamaCare will solve the problem :)

Quote: AZDuffman

So, my question to Wiz, or anyone else, is: What would we need to raise the retirement age to so the ratio would get back to 36:1 or so?

I don't believe anyone answered the question?

Raising the age has to be part of the solution. Can it be the entire solution?

I gotta respond to this comment of earlier...

Quote: mkl654321

If you cannot imagine how a person could reach the age of 65 without resources, well, then..you lack imagination. I could name a dozen plausible scenarios--loss of home equity, medical bills, financial reverses, etc. etc. etc. etc., where a person could become destitute even while being "worthy of living" in your eyes.

I never said here that some are not "worthy of living in my eyes." Indeed, I said quite the opposite, that "We are all children of God." I will state that words were put into my mouth that I did not say - to shade arguments.

And I can indeed imaging how bad times can happen for anyone. The one who contributed generously to SSA retirement and became destitute (medical bills, bad investment, divorce, etc.) is fully worthy to collect, assuming that person did contributed during his life - same as a contributor who managed himself better or was more fortunate. And if he lost his house and assets accumulated from a lifetime's work because of medical bills, bad investments, divorce, etc., his contributions should count for his receiving over someone who worked off the books and did not contribute to the SSA program. You wanna beat the system by being off the books, your payback is in not getting paid.

What I was saying is that if you're not a part of the program, (e.g., you didn't work and contribute, or through a legal income that paid into it) then you shouldn't collect on it, even if you happen to be a hard luck case who is destitute and is worthy of sympathy. There are welfare programs for that, and they're separate.

Quote: mkl654321

In any case, we're up against your ideology here--and ideologically based arguments resist, even are immune to, logic. You divide the country into goldurn hard-workin' folks who deserve to go on living after reaching age 65, and stinkin' lazy no-good BUMS who have jest been layin' about all their worthless lives and I WON'T give THEM mah hard-earned tax dollars just so they can sit on their couches and watch teevee. This is so common in the exhalations of conservative commentators and the people who phone in to their radio talk shows that it's a trope, and is becoming a cliche. The truth is that there are gray areas in this debate, and it's not a question of "deserving" or not "deserving". A person may have made bad choices, or may just have been unlucky. How on earth would you fairly differentiate between the two? Who gets to play God?

...wow....forums can get like this...that I'm a conservative back-water Glen-Beck Watchin' redneck that sees anyone who ain't some hardworking folk, as a no good commie pinko no good lazy bums who 'deserve' to die destitute...

Just Far out. I'm actually the product of a very liberal new york Jewish family whose father was the music critic for The New York Times, and whose mother was a New York psychoanalyst. With a background like this I should be the president of the ACLU or the American Socialist party.

We know that SSA is not a fully funded program at all, and that it is a distributive program, with a false "trust-fund" buffer or not. But who should get these distributions? Those who contributed to it and were promised it - or those who did not, when other welfare program exist for them?

I didn't divide this country into "hard workin' and fine worthy folk" versus "the no good bums."

I divided the SSA retirement program into "those who had contributed into it, and should receive disbursements from it" and "those who did not - for whatever the reason - and should not receive disbursements from it."

THIS distiction I make, and nothing else.

However, I WILL sound like a Glen-Beck Listenin', shotgun totin' redneck when someone suggests, "Hey, let's take your retirement credits - and give them to someone else - who didn't even earn them! What a Brilliant idea to solve this whole mess!"

But I don't think destroying the SSA retirement system, and saying, "opps! ALL GONE!" is the really fix for the retirement system.

Whatever goes into SSA by contributors should be paid out to those who were also contributors, even if it's smaller because of the ratio of "those now contributing" versus "those who had already contributed."

Quote: mkl654321

There is no possible way a "modest" change in the Ponzi scheme can compensate for the fact that the pool of workers is shrinking and the pool of retiress is growing (relative to each other)....To make the system sustainable in even the short run would require a doubling of the payroll tax.

Source, if you please.

My source that moderate change will suffice is the 2010 Trustees Report (link to the summary). Here is an excerpt , "Over 75 years, Social Security’s actuarial imbalance is 15 percent as large as payroll taxes, and 12 percent as large as program outlays." That means that the program can be self-sustaining for 75 years with just a 15% increase in the Social Security tax, or a 12% cut in benefits.

Agreed with the point earlier the Medicare is the bigger problem. The same Trustees Report also says as much.

About the question if the program can be saved by raising the retirement age only, sure, but I'm not sure exactly what age would be necessarly. Probably 69, give or take 6 months. My suggestion is to go up to 68, and get the rest by subjecting very high incomes to the Social Security tax.

Quote: odiousgambit

I don't believe anyone answered the question?

Raising the age has to be part of the solution. Can it be the entire solution?

Yes it can - if it is brought up far enough. Retire at 75, let's say, - to get payments equivelant to a 1965 payout at 65.

It'll help...people will have to live on a "savings bridge" until a later age - and assuming they have that bridge.

There will alwyas be an "Early Reduced" retirement age, some matching the normal retirement age of an earlier era, and it might not be enough to live on.

Social Security was never meant to be the full retirement kit-and-kaboodle, but only a third of it, along with:
- the company pension
- your own savings.
They called it the Three-legged approach to retirement

Quote: odiousgambit

I don't believe anyone answered the question?

Raising the age has to be part of the solution. Can it be the entire solution?

Insufficient data. That would depend on future life expectancies: the longer people will be expected to live, the greater would be the period when they are collecting benefits. It would also depend on projections of the gross earnings of those who are expected to contribute in the future. One variable would be retirement ages, in terms of how long most people would be expected to continue working; it would seem that if the age for receiving full SSA benefits were raised to, say, 70, then there would be a concurrent social movement to raise mandatory retirement ages to 70 as well. That would have the twin effects of growing the pool of contributors and shrinking the pool of beneficiaries. Would that alone be enough? Almost certainly not--unless we FORCED those 65-year-olds to keep on working five more years (the threat of not receiving full benefits, which is currently held over the heads of early retirees, would probably not be a sufficient deterrent).

It is obvious, if you plug in any set of numbers, that the system as it is would only be viable with the imposition of greatly increased payroll taxes, unless you restored the original dynamic--that the earliest age that you could collect full benefits was also the age when half of the beneficiaries were expected to already be dead. I doubt that the government could pull that off now---raising the retirement age to 78. But it would probably be the only way to fund the coming shortfall via raising the retirement age alone.

The solution, if it ever gets dealt with, would probably be a mixture of payroll tax hikes and raising of the retirement age. Given the increasing electoral power of oldsters, I would hazard a guess that hiking taxes on those young whippersnappers will be the greater element of any reform.

Quote: Wizard

My suggestion is to go up to 68, and get the rest by subjecting very high incomes to the Social Security tax.

If someone is making $2,000,000 a year, the 6.5% FICA tax is $130,000 - enough to pay 10 people $13,000 a year, or $1,083 a month.

Mike, why is there a cap, and why is it where it is, at just over $100,000 or so....

The SSA can learn from the gaming industry: you get 90% of your tip income from 10% of the players...

Quote: Wizard

Source, if you please.

I wish I HAD a definitive source--the gummint famously refuses to game out the various scenarios (at least, publicly). My estimation--that payroll taxes will have to double--is based on declining birthrates, increasing life expectancies, and the evaluation that no significant reform in the way those taxes are collected and the benefits disbursed will ever occur. I also use as a broad estimation the published figures that show the worker:retiree ratio dropping to 2:1 by 2050. At that point, to maintain an equal standard of living among retirees and workers, the Social Security tax alone would have to be 50% (25% on the employee, 25% on the employer).

Quote: Paigowdan

If someone is making $2,000,000 a year, the 6.5% FICA tax is $130,000 - enough to pay 10 people $13,000 a year, or $1,083 a month.

Mike, why is there a cap, and why is it where it is, at just over $100,000 or so....

The SSA can learn from the gaming industry: you get 90% of your tip income from 10% of the players...

The reason that the cap exists is that people earning amounts over the cap already pay large portions of their earnings as federal and state income taxes.

At some point, taxes become too burdensome even on the evil rich. It's easy to say, "oh, this guy makes 2 million, why not hit him with another 6.5%, it won't make any real difference to him," and ignore the fact that he's already coughing up half of his earnings or more to various taxing agencies. Taking that money out of his hands means he can't invest it in his business, or blow it on a trip to Vegas for that matter. And at some point the tax burden becomes so onerous that he either shelters his income, hides his income, or stops trying to make money because he'll lose 2/3 of it if he's successful, but will lose all of it if he fails. (The single most unfair thing about the federal tax system BTW.)

Quote: Paigowdan

Mike, why is there a cap, and why is it where it is at?

It is currently at $106,800. That cap is in no small part why the middle class often have a higher overall tax rate than extremely high earners. There are other factors too, like the extremely wealthy defining their income as captial gains rather than from a salary.

One proposal that I believe Obama has supported, and I like too, is to continue to give income from $106,800 to around $500,000 a break from the tax. Then, anything over $500,000 would be subject again.

I believe the reason for the cap was congress felt that the retirement benefit earned at the cap was more than sufficient to live on, and taxing income beyond would be unfair to high earners. As I've pointed out in my original post, income above a certain point contributes very little to the monthly benefit you will eventually get. I can go over the calculation formula upon request.

Quote: mkl654321

I wish I HAD a definitive source--the gummint famously refuses to game out the various scenarios (at least, publicly). My estimation--that payroll taxes will have to double--is based on declining birthrates, increasing life expectancies, and the evaluation that no significant reform in the way those taxes are collected and the benefits disbursed will ever occur. I also use as a broad estimation the published figures that show the worker:retiree ratio dropping to 2:1 by 2050. At that point, to maintain an equal standard of living among retirees and workers, the Social Security tax alone would have to be 50% (25% on the employee, 25% on the employer).

I'd be interested to see details of these calculations please.

Quote: Wizard

It is currently at $106,800. That cap is in no small part why the middle class often have a higher overall tax rate than extremely high earners. There are other factors too, like the extremely wealthy defining their income as captial gains rather than from a salary.

One proposal that I believe Obama has supported, and I like too, is to give income from $106,800 to around $500,000 a break from the tax. Then, anything over $500,000 would be subject again.

Of course, the "extremely high earners" pay much more tax than the middle class, PER CAPITA. The top 1% of earners pay roughly 1/2 of all collected federal income tax.

This raises the interesting question of just how "progressive" income tax rates should be. If Rich Guy earns fifty times as much as Middle Class Guy, is that ipso facto justification for levying fifty times as much tax on Rich Guy? Does Rich Guy need fifty times as much army to protect him? Does he use fifty times as much of the national infrastructure? Does he eat fifty times as much as everybody else? Does he breathe fifty times as much air?

I have the general opinion that any one individual only has the obligation to pay N taxes, if N=the total cost of government/the total number of working-age citizens. I do realize that the existing structure couldn't possibly support that, however---the levies on the lower classes would have to be too great. So the tax structure needs must be "progressive"--but I do NOT think that a person should, because he makes more money, ipso facto owe more tax. That seems to me to be too much like the rationale of the burglar who only robs houses in good neighborhoods.

Congressman Paul Ryan of Wisconsin has put together some proposals for Social Security, Medicare, and Medicaid. On the Social Security side, it includes raising the retirement age and privatization of a portion of contributions (with ownership of the assets):

Social Security proposal

And the SSA's evaluation of the plan:

Actuary's scoring of plan

I leave the number crunching in the documents to the Wizard; I'm no actuary.

There are certainly some question marks for me, including guaranteeing the principal in the private accounts, but at least someone is trying.

Quote: Wizard

I'd be interested to see details of these calculations please.

Looks like he is calculating as if SS was the reriree's only source of income and also assumes that the average retireee is supposed to have the same income level as the average worker. Hence his idea that 2 workers supporting one retiree need to give 50% of their wages, 25% each from worker and employer. This whole premise has so many holes in it that it is not worth it to explain reality.

Quote: odiousgambit

I don't believe anyone answered the question?

Raising the age has to be part of the solution. Can it be the entire solution?

Correct, no one has. I was hoping Wiz might have some insight given his background. I brought it up as everyone and I mean everyone who talks about SS talks in terms of life expectancy, etc. They talk based on life expectancy then vs now, but I have never heard how high the retirement age would have to go to get us to the 36:1 worker/retiree ratio we had back then.

Quote: Calder

And the SSA's evaluation of the plan:

Actuary's scoring of plan

I know the actuary who signed that, Steve Goss, well. I wouldn't dream of questioning his math.

Quote: Wizard

I'd be interested to see details of these calculations please.

I probably didn't state the percentages appropriately. However, the proper estimation is very simple. General federal income tax revenues go to pay for other expenditures besides SSA. Therefore (if you trust gummint accounting), the monies collected from workers and employers as "Social Security taxes" go directly to supporting existing recipients (since, as we all seem to agree, the "Trust Fund" is a fiction).

If you posit a 2:1 worker:retiree ratio, then each retiree will have to be supported by two workers. This, in turn, means that to maintain the same standard of living for the retiree as the workers (and bear with me when I say that I fully acknowledge that that is unlikely to be the reality), the retiree must receive one half as much from each worker as that worker needs to maintain that standard of living. At current rates, this is accomplished by a total levy on the worker and his employer of 16% (rounded up). Of course, the full levy of 16% actually falls on the worker, since his wages are reduced to accomodate the taxes that employing him entail.

The current worker:beneficary ratio is 3.2:1. This alone would mean that a reduction in the ratio to 2:1 would result in a 27% tax rate necessary to maintain equiibrium. However, the current state is NOT that of equiibrium: Social security is hemhorraging money. To make the existing program revenue-neutral would necessitate either an increase in taxes or a reduction in benefits. I've heard all sorts of numbers quoted, but one number I've frequently heard is 25%. In other words, we really need to be collecting 20% RIGHT NOW. Plugging that back into the 3.2:1/2:1 ratios, we would actually have to be collecting 32% in 1950.

However, that assumes that life expectancies do not change, and it is manifest that they will lengthen by then. So the total cost of supporting a given retiree will be higher than it is now. Given that the average life expectancy of an American is 78, or 13 years as a SS beneficiary, it follows that even a modest increase in life expectancy will create a large increase in "benefit life". Let's assume a VERY modest increase of four years in American life expectancy. That increase--to age 82--will increase the "benefit life" by 23%. 123% of 32 is 38. So now we're up to 38%.

By the government's own admission, one out of every five dollars collected as taxes and disbursed as transfer payments is simply destroyed. The government has a nice term for this: "frictional loss". In other words, if you want to pay Paul four dollars, you must rob Peter of FIVE. So the current collection of 16% actually only gets 13% to the recipients. An increase in the levy from 16% to 38% would actually only increase the amount disbursed from 13% to 31%, so a true cost-of living calculation would necessitate a tax rate of (38)(1.25), or 47.5%.

So I admit, I was in error. The tax rate would only have to be 47.5%: 23.75% on the worker, and 23.75% on the employer.

Quote: AZDuffman

Looks like he is calculating as if SS was the reriree's only source of income and also assumes that the average retireee is supposed to have the same income level as the average worker. Hence his idea that 2 workers supporting one retiree need to give 50% of their wages, 25% each from worker and employer. This whole premise has so many holes in it that it is not worth it to explain reality.

See above. I agree that my calculation was an oversimplification. It should be noted, though, that the "employer contribution" is actually a "worker contribution", in that wages are reduced by the cost of the employer contribution.

Quote: AZDuffman

Correct, no one has. I was hoping Wiz might have some insight given his background. I brought it up as everyone and I mean everyone who talks about SS talks in terms of life expectancy, etc. They talk based on life expectancy then vs now, but I have never heard how high the retirement age would have to go to get us to the 36:1 worker/retiree ratio we had back then.

Since the current ratio is 3.2:1, we would have to decrease the number of beneficiaries by roughly a factor of ten. Since the current American life expectancy is 78, we would have to go well beyond that point to reach the 36:1 ratio. As a practical and political matter, we ain't never gonna do that as long as we maintain the fiction that it's a sustainable system.

Quote: Wizard

I'd be interested to see details of these calculations please.

He doesn't have any source. Like 90% of what he posts on this site, it is just pulleed directly out of his ass and presented as some semblance of fact. The claim that payroll taxes would have to be doubled to bring the system into balance just proves.that he has no clue what he is talking about. He is so full of himself he probably never bothered to read your bio to know what your prior career was. Bbut he has done some bs calculation in his head and is more than happy to enlighten us with his dramatic proclomations of dire circumsatnces to come.

Quote: mkl654321

See above. I agree that my calculation was an oversimplification. It should be noted, though, that the "employer contribution" is actually a "worker contribution", in that wages are reduced by the cost of the employer contribution.

You have proven you know nothing about acturarial calculations nor the history of the ss system. Why don't you reutrn to your other expertise of predicting demographic migration. I can't fucking stand people who think they are an expert in any and all topics.

I still look at Canada's example. From 1966 to 1986, the contribution rate from employee/employer was 3.6 percent of payroll up to a maximum of $840/year. At that point, someone in the government recognized that there would be a huge shortfall of money in the Pension fund. From 1987 to 1996, the rate went up .2 percent per year to 5.6 percent of payroll up to a maximum of $1,786/year. Even that was not enough enough. From 1997 to 2003 the rate went to 9.9 percent. At this point, I pay $2,163/year in contributions and my employer pays the same. It's alot of money. I don't pay after I earn $47,200.

In the United States, SSI benefits are much higher then higher contribution cap. And Canada does have a Guaranteed Income Supplement for low income earners and survivor benefits as well. What happens, for example, if you are a woman who raised their children their entire life and never entered the workforce because your husband supported you through life (which is a fair payback). Then the husband (say PaiGowDan) gets another heart attack and dies. The woman grows old and has no skills. She gets nothing? Funnily enough, there are not too many bums collecting the GIC - about 2 percent of all collectors. All Canadians get an Old Age Supplement which is non-income dependent. I guess Canada figures that if you make it to 65, you shouldn't have to work. And finally, those who work get a monthly benefit similar to a pension calculation based on your YMPE (Yearly maximum pensionable earnings). Personally, I think it's fair.

You don't have to get back to a ratio of 36:1 to make it right. That will never happen. Demographics have changed. Upping the retirement age, clawing back SS after income and raising the contribution rates will fix the problem. To the actuary, it's a complex problem but can be defined in terms of variables that could be solved for.

The problem with congress of course is that any increase in the rates or raising the retirement age will come with riders for bridges to nowhere, benefits for immigrants in Delaware, funding swampland in Florida and a bailout for Halliburton. And of course that comes with the election ads in the constant election cycle. "Congressman Bob voted 192 times to raise taxes and to make your grandfather work longer". Blat.

Quote: ruascott

pulleed Bbut proclomations circumsatnces

You were frothing at the mouth so much that it affected your typing.

Quote: ruascott

You have proven you know nothing about acturarial calculations nor the history of the ss system. Why don't you reutrn to your other expertise of predicting demographic migration. I can't fucking stand people who think they are an expert in any and all topics.

I don't really care what you can fucking stand and cannot fucking stand. I did not ever claim to be an "expert"--I proffered my opinion on a subject. For what it's worth, thought, I am CERTAIN that YOU don't know enough about these subjects to tell whether someone is an expert or not.

And if you don't like people articulating opinions with which you disagree, I suggest that you stay away from internet discussion boards. In fact, don't leave the house, and don't turn on the TV, or you might hear or see something else that you can't fucking stand.

Quote: boymimbo

I still look at Canada's example. From 1966 to 1986, the contribution rate from employee/employer was 3.6 percent of The problem with congress of course is that any increase in the rates or raising the retirement age will come with riders for bridges to nowhere, benefits for immigrants in Delaware, funding swampland in Florida and a bailout for Halliburton. And of course that comes with the election ads in the constant election cycle. "Congressman Bob voted 192 times to raise taxes and to make your grandfather work longer". Blat.

That IS why the system will never be fixed--anyone who acknowledges the fact that it is broken will doom himself politically. How nice it would be if all elected officials were restricted to a single term! Then they wouldn't be afraid to tackle politically sensitive issues.

As always, though, it will come down to the tired old ideological debate between the two things that each side, in turn, considers to be absolutely abhorrent--one, the injustice that ANYBODY receives money they don't "deserve", and the other, that elderly people suffer and die from the effects of poverty in the richest country in the world. To the conservative, the deaths are better than the injustice. To the liberal, the injustice is better than the deaths. It'll have to come down to that as the realization gradually dawns that Social Security is and always was not a pension fund, but a transfer payments mechanism. And we go round and round.

Quote: mkl654321

This, in turn, means that to maintain the same standard of living for the retiree as the workers (and bear with me when I say that I fully acknowledge that that is unlikely to be the reality), the retiree must receive one half as much from each worker as that worker needs to maintain that standard of living.

I'll stop you here. Social Security was not meant to keep retirees at the same level of income they averaged over their working life. No, it provides just a small fraction of that, roughly one-third. It is expected that the retiree will have other retirement income from a private pension and personal savings.

Quote: Wizard

I'll stop you here. Social Security was not meant to keep retirees at the same level of income they averaged over their working life. No, it provides just a small fraction of that, roughly one-third. It is expected that the retiree will have other retirement income from a private pension and personal savings.

I did correct that statement in a later post, so it's too late to "stop me". And I didn't say that SS was ever meant to provide retirees with an equivalent INCOME to that which they earned in their working lives---it was meant to provide them with a decent standard of living after they retired. This is true whether it was envisioned as an income supplement, or as the sole means of support.

In any case, the working poor/middle class rarely have the wherewithal to save up any substantial amount, and are rarely enrolled in a pension plan, so SSA frequently winds up being the only leg of that stool you mentioned, especially for those who need it the most. I've known quite a few people, including my grandfather, for whom that monthly check was their ONLY means of support. Maybe that's not how it was intended, but that's the way it's turned out.

Quote: mkl654321

I did correct that statement in a later post, so it's too late to "stop me".

Did you also retract your claim that payroll taxes would need to be doubled to save Social Security?

Quote: mkl654321

it was meant to provide them with a decent standard of living after they retired.

The average monthly retirement benefit as of Aug 2010 was $1171.57 (source). Does that sound like a decent living to you? It is more of a safety net than a security blanket.

Quote: mkl654321

In any case, the working poor/middle class rarely have the wherewithal to save up any substantial amount, and are rarely enrolled in a pension plan, so SSA frequently winds up being the only leg of that stool you mentioned, especially for those who need it the most. I've known quite a few people, including my grandfather, for whom that monthly check was their ONLY means of support. Maybe that's not how it was intended, but that's the way it's turned out.

I don't know your grandfather's story, but I hope he wasn't expecting Social Security to give him a comfortable life in his golden years. It is pretty much meant as an insurance policy against being totally destitute for reasons of death of a wage-earning spouse or parent, disability, or retirement.

Quote: Wizard

Did you also retract your claim that payroll taxes would need to be doubled to save Social Security?

The average monthly retirement benefit as of Aug 2010 was $1171.57 (source). Does that sound like a decent living to you? It is more of a safety net than a security blanket.

I don't know your grandfather's story, but I hope he wasn't expecting Social Security to give him a comfortable life in his golden years. It is pretty much meant as an insurance policy against being totally destitute for reasons of death of a wage-earning spouse or parent, disability, or retirement.

Yes. I modified the claim to an estimate that they would need to be increased by 47.5 percent.

No, it sounds like a minimal existence. But it is eminently feasible; I've lived on much less. Anyway, what you're saying pretty much proves my point---if that benefit were only meant to be a third of an individual's retirement funding, then that would necessarily mean that it actually took $3,514.69/month to maintain that "decent living"--which seems a teensy bit high to me. Obviously, for many recipients, that $1,157 is being expected to do the whole job, or a major portion of it, not just one-third. So whether or not it was intended to, the SS program has morphed into the primary means of retirement support for many.

I don't see what kind of "insurance policy against being totally destitute" any payment that doesn't provide a minimal standard of living would provide. It would just create a homeless person with some money in his or her pocket.