Social Security Fix

ttwtt78640 said:

That (predicted) crisis (depletion of the SS ‘trust me’ fund) could be avoided by increasing the SS FICA ‘payroll’ tax rate(s) from 6.2% to 7.75%. Using Liberal math, that’s only a 1.55% tax rate increase.

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According to the Committee for a Responsible Federal Budget's tool, I have to raise FICA Payroll taxes by 3.37% to achieve that, But I suppose that's because they are counting both sides. I will note that employees do pay both sides, just as consumers pay tariffs. Corporations don't pay taxes - they collect them and send them on.


And that still leaves us with a crappy system - now just one that costs even more, meaning that it sucks even more while harming Americans even more.


You've been pretty open about your general lifestyle. If you'd made $30K (inflation adjusted) a year over your working life and had the current 12.4% FICA invested in this plan, you would have over $1.5 million in the bank, with a monthly check of at least $6,444.18.

I mean.... do you have that? Again, you've been fairly open about your lifestyle... my guess is "no", you don't get that from OASI.

The difference between your current savings and $1.5 mil, or between your current OASI check and $6,444.18 is what the system took from you in poor management and structure. That's what you would have had, and didn't.

I mean, if we have a chance to? I vote we not double-down on that.

Lord Tammerlain said:

The people during the transition are basically paying double. They pay the SS of current and near future retirees, and they have to pay into their own mandate retirement program.

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Sort of ish. Some of the costs are focused on people during this period, and some are stretched out.

Those folks are GOING to be paying extra, however - either because they will be funding benefits they themselves will never get, or because their taxes will increase in order to pay for the checks previous generations wrote to themselves, but didn't bother to fund.

This way, at least those people also get a better retirement system for themselves out of the cost.

cpwill said:

According to the Committee for a Responsible Federal Budget's tool, I have to raise FICA Payroll taxes by 3.37% to achieve that, But I suppose that's because they are counting both sides. I will note that employees do pay both sides, just as consumers pay tariffs. Corporations don't pay taxes - they collect them and send them on.


And that still leaves us with a crappy system - now just one that costs even more, meaning that it sucks even more while harming Americans even more.


You've been pretty open about your general lifestyle. If you'd made $30K (inflation adjusted) a year over your working life and had the current 12.4% FICA invested in this plan, you would have just over $1.5 million in the bank, with a monthly check of $6,444.18.

I mean.... do you have that? Again, you've been fairly open about your lifestyle... my guess is "no", you don't get that from OASI.

The difference between your current savings and $1.5 mil, or between your current OASI check and $6,444.18 is what the system took from you in poor management and structure. That's what you could have had, and didn't.

I mean, if we have a chance to? I vote we not double-down on that.

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OK, but that’s not considering the additional taxation which would absolutely have been required to fund the ‘transition’ period. It also ignores the “free” disability insurance included within the SS system.

My current (net) SS benefit is $2,239/month, but that’s reduced (by about 25%) since I started collecting SS at age 62 instead of at my ‘full benefit’ age of 66.

ttwtt78640 said:

OK, but that’s not considering the additional taxation which would absolutely have been required to fund the ‘transition’ period. It also ignores the “free” disability insurance included within the SS system.

My current (net) SS benefit is $2,239/month, but that’s reduced (by about 25%) since I started collecting SS at age 62 instead of at my ‘full benefit’ age of 66.

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Okedoke, but, an income of 30K from age 20 to 62 on this plan comes out to a monthly benefit of $4,426, and just over a million dollars in the bank to pass on to an heir(s) when you go.

And you wouldn't have necessarily (though I'm not against it) paid any additional taxes for the transition, at least, not until you and your spouse (if you have one) die, at which point that million dollars gets taxed.

cpwill said:

Okedoke, but, an income of 30K from age 20 to 62 on this plan comes out to a monthly benefit of $4,426, and just over a million dollars in the bank to pass on to an heir(s) when you go.

And you wouldn't have necessarily (though I'm not against it) paid any additional taxes for the transition, at least, not until you and your spouse (if you have one) die, at which point that million dollars gets taxed.

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I’m not saying that you’re wrong, but SS operates as a ‘pay as you go’ system - meaning that current workers fund the benefits of current SS beneficiaries. Again, you can’t spend the same $1 twice, thus during the (30+ year?) ‘transition’ period both retirement systems (including disability insurance) would have to be funded simultaneously.

You make it far to complicated.
SS is not broken, it merely needs a few tweaks.
Remove the cap to start with.
Pick a age when you can start collecting and stick with it.
Mandate a yearly cost of living increase maybe based on the inflation rate.

ttwtt78640 said:

I’m not saying that you’re wrong, but SS operates as a ‘pay as you go’ system - meaning that current workers fund the benefits of current SS beneficiaries. Again, you can’t spend the same $1 twice, thus during the (30+ year?) ‘transition’ period both retirement systems (including disability insurance) would have to be funded simultaneously.

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Agreed - that's a serious hurdle. As I think I mentioned before, it is the GaBaJillion dollar question indeed. At the time I originally developed this plan, we had a much greater ability to take on additional debt than we do today (past poor decisions limit future options).

For all folks who have any time prior to retirement, their accounts will offset federal expenditures as described above, and this offsetting will accelerate when the first tranche of people with small accounts begins to die, and those accounts are taxed at 50%.

Median household income was ~$80K in 2024. Keeping that fixed and the $1920 fixed (for an easy apples-to-apples, just to see the dynamic), the median retiree will have completely replaced government expenditures by ~2048, though, of course, the higher income earners (who are also more expensive) will have done so well before then.

In the meantime, I think we will almost definitely have to bust the cap, though, upper income earners will suffer less of a massive tax hike because of this than they otherwise would, because of the portion of funds that would be going into their own accounts. We will probably also have to reduce benefits for upper income earners over time - either by chaining them to a different means of inflation until the median/lower income folk catch up (preferred), or by simply holding it flat (less preferred). However, some version of that is going to happen anyway.

Finally, there will probably be additional debt issuance associated with it - I really, really don't like that, but, A) We were already going to have to do that, as the current system can't sustain itself, and B) This way at least it truly is a one-time thing as this cost transitions us to a sustainable system that weans itself off Government outlays. The payoff of that debt will occur when revenues from the accounts themselves begin hitting government coffers.

KingLeo said:

You make it far to complicated.
SS is not broken, it merely needs a few tweaks.

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I mean, that's like saying it's not that my van doesn't work, it's just that the transmission is blown and it needs a new one

But the problem isn't merely that it's deeply insolvent - it's also that it sucks. It takes a large chunk of people's income and gives them relative pittance in return.

KingLeo said:

Remove the cap to start with.

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The problem there being unless you cut benefits, you are left with the same problem, as payments-out are based on payments-in.

KingLeo said:

Pick a age when you can start collecting and stick with it.

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Yup, we did that already.

KingLeo said:

Mandate a yearly cost of living increase maybe based on the inflation rate.

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Yup, that's already done too.

cpwill said:

I mean, that's like saying it's not that my van doesn't work, it's just that the transmission is blown and it needs a new one

But the problem isn't merely that it's deeply insolvent - it's also that it sucks. It takes a large chunk of people's income and gives them relative pittance in return.



The problem there being unless you cut benefits, you are left with the same problem, as payments-out are based on payments-in.



Yup, we did that already.



Yup, that's already done too.

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And your fix is like my van needs and oil change so I'll just replace the entire engine.
Removing the cap would quickly make SS solvent for decades to come.

KingLeo said:

And your fix is like my van needs and oil change so I'll just replace the entire engine.

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Actually it is "The transmission is blown, and it's just as much to buy a better van".

KingLeo said:

Removing the cap would quickly make SS solvent for decades to come.

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Not unless you also cut benefits, and even then, you are choosing to keep older Americans in a crappy system that leaves too many of them in poverty.

KingLeo said:

And your fix is like my van needs and oil change so I'll just replace the entire engine.
Removing the cap would quickly make SS solvent for decades to come.

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Many high income earners already have low FICA taxable income. Warren Buffett, for example has a $100,000 per year FICA taxable income.

people who don't work won't like this much, their SS checks wouldn't be as much IMO