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Social Security Fix

Your Identity and For/Against this SS Reform model

  • Total voters
    75
phattonez said:
Take away their benefits and they'll have much more of an incentive to do just that. Of course, with inflation being the devil that it is, savings is penalized, and I see that as being the main obstacle to saving for a retirement.
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What you don’t understand is that the activating motivation you are hoping will appear will not. For most people a future threat of not having any money is not nearly as motivating as the pleasure of spending now for most people. Since SS is not enough to retire on with any comfort everyone is still ‘motivated’ to save for retirement.
I see this all the time when we shop for homes to buy. I saw it in my coworkers. How do you save when you have $40k in credit card debt and you are older than 40, drive a car you can’t afford and wear clothes that you can’t afford? I greeted her today. I want her forced to ‘save’, otherwise I’ll be taking care of her ilk one way or another.
 
SirPwn4lot said:
I like certain parts of it, but on the whole I'd say no.
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:) you'll notice that option has a "(explain)" requeset. what parts good what parts bad?
 
OhIsee.Then said:
What you don’t understand is that the activating motivation you are hoping will appear will not. For most people a future threat of not having any money is not nearly as motivating as the pleasure of spending now for most people. Since SS is not enough to retire on with any comfort everyone is still ‘motivated’ to save for retirement.
I see this all the time when we shop for homes to buy. I saw it in my coworkers. How do you save when you have $40k in credit card debt and you are older than 40, drive a car you can’t afford and wear clothes that you can’t afford? I greeted her today. I want her forced to ‘save’, otherwise I’ll be taking care of her ilk one way or another.
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Nearly half of those nearing retirement lack adequate savings

About 47 percent of early baby boomers are not expected to have enough money to cover basic living expenses

... a sobering study released Tuesday shows the fantasy isn't far off the mark. About 47 percent of early baby boomers, now 56 to 62 years old, are not expected to have enough money to cover basic living expenses like food, utilities and health care through retirement...

Members of Generation X, ranging from 36 to 45 years old, should be in better shape because they have more time to prepare. Nevertheless, 44.5 percent of them also are expected to run out of money, the study said.

Inadequate savings will be disastrous for individuals who want to live as comfortably in retirement as they lived their working years. Even those who have saved adequately could be affected: New taxes or limits on Social Security may be required to help an overburdened system cope with so many needy people.

Although middle- and lower-income people are most at risk of running out of money in retirement, even the highest-income people, baby boomers now making over $72,500, could be at risk if they have a disease or accident that requires them to enter a nursing home early in their retirement years, said VanDerhei, who led the study. Nursing home costs average $200 a day. VanDerhei estimates about 13 percent of the high-income group would exhaust their savings prematurely.

When Social Security was established in the 1930s, people lived on average to 61.7. Now, the U.S. Census estimates that a 65-year-old can expect to live to 78.3. About 40 percent of women live to 90.

Because people are living longer and fewer will have the guaranteed pensions that the previous generation enjoyed, personal savings — either through 401(k) plans, IRAs or other accounts — are crucial...
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and see, that's the beauty of this fix. it basically turns Social Security into a ramped up IRA (because money going in and profit made are both untaxed) for anyone who wants it to.
 
phattonez said:
Take away their benefits and they'll have much more of an incentive to do just that. Of course, with inflation being the devil that it is, savings is penalized, and I see that as being the main obstacle to saving for a retirement.
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i sincerely doubt that if we took away social security and medicare (both of which are politically impossible; whereas this modification is a potential reality), that we would see a 10% savings rate.
 
OhIsee.Then said:
What you don’t understand is that the activating motivation you are hoping will appear will not. For most people a future threat of not having any money is not nearly as motivating as the pleasure of spending now for most people. Since SS is not enough to retire on with any comfort everyone is still ‘motivated’ to save for retirement.
I see this all the time when we shop for homes to buy. I saw it in my coworkers. How do you save when you have $40k in credit card debt and you are older than 40, drive a car you can’t afford and wear clothes that you can’t afford? I greeted her today. I want her forced to ‘save’, otherwise I’ll be taking care of her ilk one way or another.
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And I should be forced to provide for them when they make these stupid decisions in life? Talk about a moral hazard.
 
cpwill said:
i sincerely doubt that if we took away social security and medicare (both of which are politically impossible; whereas this modification is a potential reality), that we would see a 10% savings rate.
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You think people don't care about their futures and that people don't act the way they do because of the moral hazard of social safety net programs?
 
cpwill said:
Nearly half of those nearing retirement lack adequate savings



and see, that's the beauty of this fix. it basically turns Social Security into a ramped up IRA (because money going in and profit made are both untaxed) for anyone who wants it to.
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People thought that they had their wealth in their homes. That's why we saw an up-tick in savings when home values came crashing down. Of course, that increase was nipped in the bud by QE1.
 
liblady said:
that's untrue. the middle class IS dwindling.

Analysts Concerned as Statistics Show Steady Decline of American Middle Class - DailyFinance

See full article from DailyFinance: Analysts Concerned as Statistics Show Steady Decline of American Middle Class - DailyFinance
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How many times do I have to post this link?

http://www.debatepolitics.com/econo...some-problems.html?highlight=following+income

Furthermore, a study with good methodology:

America's No. 1 Endangered Species - Reason Magazine

But everyone is getting richer. In real dollars, every quintile has posted significant annual increases over the past 35 years, ranging from $3,000 for the lowest quintile to $13,000 for the middle quintile to over $25,000 for next-to-highest one. And the individuals in those quintiles change all the time, something even The New York Times, which wrings its hands on class matters like an obsessive-compulsive, admits. Urban Institute economists Daniel P. McMurrer and Isabel V. Sawhill estimate that between 25 percent to 40 percent of individuals switch quintiles in a given year and that "rates of mobility have not changed over time." Research tracking individuals in the lowest income quintile in 1968 found that 23 years later, 53 percent were in a higher quintile and that half had spent at least a year in the top income quintile.
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OhIsee.Then said:
Check history, housing the poor in the US before SS, housing the SMI before SS, etc.
You just can't support your position factually.
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You mind showing me that the poor weren't improving back then?
 
phattonez said:
You think people don't care about their futures and that people don't act the way they do because of the moral hazard of social safety net programs?
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i think that we don't have a savings culture, that not having a safety net isn't politically viable, and that it should thus be constructed in such a manner as to prove as economically undamaging and wealth-building as possible.
 
Social security is much more complex than the sound bites most people are privy to. I count myself in that group. Having said that, and based on my limited understanding of the overall system (and with the understanding that it isnt likely to go away-ever), I think it makes sense to modernize and consistently evaluate the system. We cant keep operating a system under the same guidelines that existed 40-50 years ago. So I think it makes sense to revealuate every 5 years the current state. Has there been in an increase in life expectancy? Sure. So should the eligible age to collect SS be adjusted upward? Of course (retirment age would be grandfathered at say, 45 and up). Are there more people as a percentage) collecting SS benefits? Yes. Then it makes sense for an increase in SS tax levels. Id also institute an income cap (not a populare decision...I know). But if someone has though investments and earnings an income of over $250k they would be ineligible to recieve SS payments (but still eligible for health care benefits). Should they loose that income potential their full benefits would be reinstated. Should they die without collecting so much as a penny, then their family would recieve a taxed refund check).

Along with changes there should be an information drive taught during Jr High and High school and a consistent message. Social Security is NOT MEANT as a means of retirement. SS is a supplemental income to your retirement. Work, save, invest.
 
cpwill said:
i think that we don't have a savings culture,
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That's due to inflation, which is why having assets instead is a much better option.

that not having a safety net isn't politically viable, and that it should thus be constructed in such a manner as to prove as economically undamaging and wealth-building as possible.
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The more privatization the better, but I'm not going to hide my ultimate goals of completely getting the government out of charity.
 
ultimate goals are fine; but moving in the right direction is still positive. it's a compromise position; not where i want to end up.
 
Speaking of SS reform, anyone know when the last time the FICA Cap of $106,500 was updated?
 
phattonez said:
And I should be forced to provide for them when they make these stupid decisions in life? Talk about a moral hazard.
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Oh thank you for getting down to the nut of it.

When a poor uninsured person uses the ER and doesn’t pay, your out of pocket cost for the ER goes up and you insurance premiums go up. When a drunk driver totals his and another’s car, you pay because the insurance company raises everybody’s rates. When a coworker screws something up (CEO or assembler) you pay because you work there (you might have been on the platform), or you fish the gulf, or you buy gas, or of if you bought BP stock before the blowout. (I bought after the blowout, sold a while ago, did great.) Yup, you pay for people that make stupid decisions in life all the time, and more than you think. I was pissed when I figured that out.

When people use the social safety net, the environment you live in is greatly improved. Unless you ship them off to some low cost place. You will not have the SMI scattered everywhere, 70 year olds will not be cleaning windshields at every intersection, etc. The lazy ineffective low wage people don’t become rich, and probably will have to move to a cheap apartment. The hard workers that made some money get more back and can stay in their home instead of doubling up. And the people with the 6 figure incomes can use the extra to ski Telluride. And if the 7 figure income (getting differed income also) people are complaining I just don’t know what to say.

And what is your cost for this? It is basically the difference between what you can get investing the same amount vs. the ‘return’ (cola) that SS might yield. That difference in dollars (PV or FV) is less than 10% of what you pay in SS tax (FICA). Our view is that SS is conservative part of our portfolio, and with or without the fixes it needs it will do well for us.
 
cpwill said:
Here is my proposal:

Allow workers to opt into a partially privatized system, where of their 7.65% FICA expenditures, 5% goes into a private TSP-style account; and the Employers match follow the same. the remaining 2.65% (or, when you count the match, 5.3%) will go straight into SS, but it will be revenue for which SS will never see a liability. the cost for opting out is that part of your pay continues to go to pay for others, but the upside is that you get a combined total of 10% of your annual income going into a retirement account that belongs to you, and grows tax-free. Social Securities' revenues will instantly drop, but nowhere near as severely as their liabilities. To ensure solvency in the adjustment period (and to make it politically palatable); lift the cap. We can lift the cap on only the worker (and not the employer) if we want to encourage job-creation; or lift it on both if we need the revenue to ensure solvency, or if that's the only way to get the thing passed; here is room for compromise wiggling. Higher paid workers will see more of their money leave in the form of taxes, but those making less than $604,000 will get back even more in the form of ownership of personalized accounts (assuming the employer cap isn't lifted, and that's not figuring for the added benefit of those accounts growing tax-free), and so they will be willing to make the trade. Perhaps another compromise point would be to raise the cap to $604K. Poorer workers can either spend their lifetime building far more wealth than they ever would have seen under Social Security if they are younger, or keep the guaranteed program benefits if they are older.

ta-da! the American people and the Government are left better off.
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Although I suppose the specifics of the plan would need to be tweaked, I think this is on the right track for how to address social security. Also, if the government is worried about the market tanking and wiping out people's savings, these private accounts could have a mechanism to deal with that: Mandate that a certain percentage of them went into low-risk investments like bonds, and the minimum percentage of low-risk investments could slowly increase as a person neared retirement age.

I do like the idea and would support something along these lines. Another change we'll probably need to make is to raise the retirement age a few years. 65 just isn't sustainable now that people live well into their 80s and 90s.
 
Kandahar said:
Although I suppose the specifics of the plan would need to be tweaked, I think this is on the right track for how to address social security. Also, if the government is worried about the market tanking and wiping out people's savings, these private accounts could have a mechanism to deal with that: Mandate that a certain percentage of them went into low-risk investments like bonds, and the minimum percentage of low-risk investments could slowly increase as a person neared retirement age.
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the trick with such a plan is it lowers the average rate of return. i think the combo of more conservative investments + an older retirement age might could measure out.

I do like the idea and would support something along these lines. Another change we'll probably need to make is to raise the retirement age a few years. 65 just isn't sustainable now that people live well into their 80s and 90s.
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alright if we follow your advice above and have it invested more conservatively (say, at a 6% rate of return), then regular worker Joe (whose pay increases at 2% a year) can start working at 20 at $25,000, and retire at 65 with a monthly income of $3376.00, or at 70 with $4381.00; both of which are FAR beyond what he could expect from Social (in)Security. low income Joe (whose pay only increases at a rate of 0.5% a year) will never make $33,000 a year; but he can retire at 66 and completely replace his annual income of 31,500, or work until he's 70 and make $41,583.

obviously either of these men working until 75 would be fine. L. I. Joe would be bringing home more than 4,700 a month, and M. I. Joe would be bringing in a little over $6K.

make the dang thing even more conservative (5% return, which it should be noted matches the annuity), and it does get trickier. If M. I. Joe retired at 65, he would only be making double the average social security payment. He would have to work until 75 to get an income of $50,000 a year from his account. L. I. Joe doesn't replace his income until 72; and if he retires at 75 he will only recieve $39,000 a year.

which, mind you, is still more than 3x what he would get from Social Security. Even at 65, Joe is still making more with this exceedingly low growth rate than he would under that program.
 
and again, i'd like to emphasize that all this happens without costing either of the Joe's a single red cent. this is merely on top of whatever other savings they accrue.
 
I didn't bother to do an independent analysis on the numbers, but it looks workable.
 
megaprogman said:
I didn't bother to do an independent analysis on the numbers, but it looks workable.
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i used excel; it's real handy for these kinds of things; once you've plugged in the equations you can mess with it and it runs all the calculations for you
 
Anyone who has studied history should understand that government is the worst of all entities to protect your money. Social Security would not have even passed through the courts had it not been for the "Switch In Time That Saved Nine." In fact the SCOTUS gets a bit whacky with its precedents after FDR threatens to stack the courts. But I digress...I am hearing people calling it a retirement plan etc etc...Nothing can be further from the truth. Its purpose was meant as an assistance/aid program for the elderly, the unemployed, dependent children, etc...Honorable, but questionable and arguable as to whether Congress has such power under Article I Section 8 of the Constitution.

I digress again...

Allow workers to opt into a partially privatized system, where of their 7.65% FICA expenditures, 5% goes into a private TSP-style account; and the Employers match follow the same. the remaining 2.65% (or, when you count the match, 5.3%) will go straight into SS, but it will be revenue for which SS will never see a liability.
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I have some questions CP. Firstly, how are you to force people to pay 5% of their paycheck into a TSP like account? Are you going to mandate it? Sounds very similar to Obama's Health Care Act if you do, and it is questionable as to whether or not such mandates can be imposed. I get that its an opt in on the individual, but is it an opt in for the employer? Secondly, employers are not going to pay 2.65%. They are going to write those costs off to the consumer. In effect you are levying another tax. How do you intend to force employers to actually carry the weight of the 2.65%, and what kind of impact will 2.65% have on small businesses which makes up 75% of the available jobs?

Ax
 
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