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Social Security is a hoorible deal. especiallt for poor people

longview said:
If you look at SS formula,
(Highest 35 year average/420 months, 90% of the first $895, 32% of anything between $895 and $5397, and 15% of anything over $5397,
It becomes obvious that the system is highly weighted against most hitting that Maximum.
I think a person would have to have a 35 year average income of over $70 K per year to hit the maximum.
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The top chart (male chart) is based on the assumption that the income earner hits the ss tax cap every year, thus the benefits should use the same assumption.

The bottom chart (female chart) uses a different set of assumptions.
 
ludin said:
SS is a joke when it comes to what it pays out. All the money i have paid in could be earning 5-10% in safe investments instead it earns nothing
hell it earns less than nothing because it is already paid out when i pay it.
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Private accounts aren't guaranteed for life, and only a financial genius could have a return that high. Most people are financial idiots and would lose money to scammers. Thats the point.
 
KLATTU said:
The returns are low for everydoy. that's worse for poor people since rich people have other soources of retirement income .

Also the current system allows for no transfer of wealth to heirs

That is the single biggest reason why the rich get richer.
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Nope.

The SS returns are based upon three tiers, the lowest tier getting an outstanding return, far higher than what individual investing could ever provide. The middle tear has a return comparable to what individual investing would provide. The upper tier get screwed because it subsidizes the lowest tier.
 
Bullseye said:
Very interesting stuff. Thanks for posting. A few years ago I took one of those "statements" SSA sends you each year and ran the data through a financial program I have. I assumed a rather modest 4% return on my contributions. Turned out that if I had retired at 66 and lived to 90 I would have been able to take a monthly amount three times the amount SS was predicting for me and when I died I'd still leave my heirs about a half million.
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What if the market crashes when you turn 66, or 75? What if you invest your money with someone like Bernie Maddoff or purchase bonds issued by Donald Trump's casinos? What if you live to 99 years old like my grandmother did?
 
Bullseye said:
Sadly true. But SS is dwindling, it's taking in less than it's paying out. As I understand it so far the difference is made up from interest on the bonds held in the "trust fund". But we're only a couple of years from actually having to redeem those bonds.
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The trust fund was nearly empty during the early '80s. We increased the tax to create a large trust fund which would last until the first baby boomers started dying off in mass (they will turn 90 by the time the trust fund is depleted). At which time, the annual growth of benefits will slow down and will continue to slow down for decades. As we become a more prosperous nation, we will make more and more money and thus the ss tax revenue will increase year after year. It's possible that SS may have to "borrow" from the general fund for a while, but eventually as our percentage of retired folks levels out, SS will not be in deficit for ever.
 
Bullseye said:
Pure baloney and not relevant to this discussion.
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If that $1.5 trillion had been transferred to the ss trust fund, instead of to the bank accounts of the rich, SS would have been shored up for another 20+ years.
 
KLATTU said:
Oh boy- MORE taxes on businesses and MORE money for the Govt to spend while not solving the problem and kicking the can down the road.Eventually these high earners are going to get huge benefits. There won't be enough current workers to pay those benefits so then what? ....( let me guess) ....More taxes.

YHey are you Bernie Sanders??? Some other Democrat??
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Actually, since SS payouts are in three different tiers, and ss taxes from upper income earners subsidize the payouts of the lowest income earners, the additional payouts will never be overwhelming if we remove the cap. If we eliminated it all together, we could actually reduce the tax, immediately return the $3 trillion trust fund to the treasury to lower the national debt, and SS would be self sufficient for ever.
 
cpwill said:
Actually I recall running the numbers at the time. If you had followed the S&P500, and retired at the very bottom of the 2008/2009 crash, you still would have ended up with more than double what you would have made off of Social (in)Security.

Meanwhile, SS doesn't move poor seniors out of poverty, but does discourage them from saving on their own, while also making it more difficult for them to do so.

That "Security"? It's a farce.
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How are poor senior citizens, who don't even have a ss income anymore, going to save on their own?
 
cpwill said:
Interestingly enough, poor people actually inherit more of their wealth than the wealthy do. Usually, as I understand it, in the form of property.
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That's only because poor people don't have much wealth. If your net worth iwas$2000, and you inherited $2000, then you inherited 50% of your net worth. Whooopty doo.
 
Aberration said:
None of that justifies the absolute scam that is SS. You could compel individuals to invest the exact same $ into publicly available treasuries, which is pretty much all SS is now, and you would come out far better. In every way.
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nope. SS provides benefits for life, regarldless of how long you live. $300k in treasuries might last til you are 80, but it isnt going to last until you turn 99 years old, or 115 years old.

People who live long lives do rather well with ss. People who live shorter lives, might have done better with individual investments, but if they die at age 66 and don't get the benefits of that savings, they aren't really any better off than the SS payer who dies at age 66 are they?

Spendable income is the important thing in life, not net worth. Net worth means nothing when you have to live like a miser to conserve your savings for a possible infinately long life, or when you are dead.
 
calamity said:
It's a real bad deal for anyone who dies before the age of 65. :)
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Of course living like a miser trying to save all you can for retirement because there is no old age benefits is also a raw deal if you die at age 65. Either way, your dead and money no longer has any value to you.

I figure I prefer paying the SS tax and hoping for a long life, over living like a miser and hopping that I die before my money runs out.
 
imagep said:
The top chart (male chart) is based on the assumption that the income earner hits the ss tax cap every year, thus the benefits should use the same assumption.

The bottom chart (female chart) uses a different set of assumptions.
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I think under the current rules, very few people would ever get the maximum benefit. (Maybe 10%)
 
ttwtt78640 said:
Nope, all that we own are household goods, a used (2009) travel trailer (our newest toy), tools/equipment for construction/handyman work (worth around $5K if sold but would cost more to purchase/replace new) and a used (2002) SUV. The good news is that we have no debt, are both in decent health, have an established customer base (get more offers for work than we accept) and pay very low ($300/month) rent for a single-wide mobile home on about 1/3 acre of land.
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Our only debt is a small (~100K now) mortgage that we chose to take on because it was cheaper at 4.15% than cashing in investments to cover it would have been. Our only real problems at this point are my medical issues. We've planned pretty well, but SS and Medicare are baked into that plan.

We do have the tax bills that come with owning property, and the insurance bills for 3 cars. Again, that's all in the plan.

I hope you guys stay healthy and can keep working as long as you have the desire to do so.
 
longview said:
I think under the current rules, very few people would ever get the maximum benefit. (Maybe 10%)
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Sure. But the assumption presented, based on how much the top chart showed that was paid in, is that the top chart is for someone who would draw the max benefit. The second chart is for someone who paid in and will thus draw a lesser amount.
 
imagep said:
Sure. But the assumption presented, based on how much the top chart showed that was paid in, is that the top chart is for someone who would draw the max benefit. The second chart is for someone who paid in and will thus draw a lesser amount.
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Where did you get that (bolded above) idea? The OP chart says that it is based on average earnings. The total SS payout of $53K by age 70 is for either 4 or 5 years worth of SS benefits. Assuming 5 years (started getting benefits at age 65) that is only an annual income of $10.6K. I get about twice that (with about 25% reduced benefits since I started collecting my SS at age 62) and I only hit the earnings cap for a couple of my working years.
 
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imagep said:
What if the market crashes when you turn 66, or 75? What if you invest your money with someone like Bernie Maddoff or purchase bonds issued by Donald Trump's casinos? What if you live to 99 years old like my grandmother did?
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First off, as I said those who CHOOSE to participate will have a limited array of mutual funds ranging from very conservative to highly aggressive, including something like a money market government securities fund. Funds will be vetted by government. Second, only a portion of your FICA would go into this program. Third, when you retire you won't cash in the whole thing, you'll set up a withdrawal scheme to ensure you're covered, oh, and the part of retirement coming from the SS part of your account continues if you live to 99 or 199.


The BIG plus here is that the entire thing is OPTIONAL; you decide if you want to participate, you decide how much (up to a set limit) you want to invest and you decide where to invest. And you are free to rearrange your investments throughout your career - maybe start out with fairly aggressive stock funds early in you career and then transfer to the US bond money market as you approach retirement.


Nothing I'm suggesting is wildly radical or off the wall - This strategy has been used by millions of people for decades to ensure a more comfortable and secure retirement than relying on government's generosity.
 
imagep said:
The trust fund was nearly empty during the early '80s. We increased the tax to create a large trust fund which would last until the first baby boomers started dying off in mass (they will turn 90 by the time the trust fund is depleted). At which time, the annual growth of benefits will slow down and will continue to slow down for decades. As we become a more prosperous nation, we will make more and more money and thus the ss tax revenue will increase year after year. It's possible that SS may have to "borrow" from the general fund for a while, but eventually as our percentage of retired folks levels out, SS will not be in deficit for ever.
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Funny, that's not what the Trustee's say. But what do they know, right?
 
imagep said:
If that $1.5 trillion had been transferred to the ss trust fund, instead of to the bank accounts of the rich, SS would have been shored up for another 20+ years.
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LOL, you mean if we transferred some nebulous LW talking point to SS? It doesn't exist so it wouldn't help a bit. Even if it did it would just delay the inevitable a few years.
 
imagep said:
The government does issue the US Dollar. So yes, money comes from the government.
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So then it is your belief that we all work for the Federal Govt. and it is their money first? Where did you get your education? Please tell me why such hatred for people keeping more of what they earn? Do the bureaucrats need the money more than the taxpayers?
 
imagep said:
Private accounts aren't guaranteed for life, and only a financial genius could have a return that high. Most people are financial idiots and would lose money to scammers. Thats the point.
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Never spent any time with an investment calculator have you? Even a simple interest rate at an average over 35 years pays better than SS and when you retire it is YOUR MONEY or your family's. The point is you buy the leftwing rhetoric and ignore the return that the bureaucrats get out of your money and how little of a return you get especially if a family member dies early.
 
JasperL said:
Right, because the poor have existing wealth of roughly....nothing, so a $1,000 inheritance might be ALL their wealth.
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IIRC, more commonly it's a house.

The stat means nothing, really
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OTC, it's useful as a reminder to dispel the myth that the rich are a bunch of trust fund babies (in fact, most millionaires are first-generation), as well as to dispel the idea that inheritances only benefit the upper-income and those with high levels of wealth.

If an inheritance makes up a larger part of your wealth, as it does for the poor, then that means that you rely on it more.

And you ignored the other part - "And, obviously, the child of a rich family will compared to a poor child receive just comparatively massive transfers of wealth during life - private school, college, cars, clothes, trips, toys, straight up gifts of cash or 'spending money' etc."

The amount transferred at death is just a part of the question.
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:) I think you have a very narrow idea of what the rich look like.

That being said, typically, the most valuable thing that the wealthy give their children are - as you point out - not inheritances, but rather intangibles, such as a good education, a positive upbringing, and social capital.
 
KLATTU said:
Not only do you not make money, you actually lose it. And when you did, nothing goes to your heirs.


View attachment 67236415
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we really just need a fifteen dollar an hour minimum wage, unemployment compensation for being unemployed on an at-will basis in our at-will employment States, and Industrial Automation to help with social costs.
 
imagep said:
What if the market crashes when you turn 66, or 75? What if you invest your money with someone like Bernie Maddoff or purchase bonds issued by Donald Trump's casinos? What if you live to 99 years old like my grandmother did?
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Stunning ignorance, why does anyone have to invest in the stock market, how about a money market account or long term savings account? You think the bureaucrats in DC want you to control your own money? Let's cut the chase, you really don't give a damn about what happens to someone else's money just your own and believe what you are told by the left about how much they care about SS and Medicare recipients. What they care about is control over the dollars collected
 
imagep said:
The trust fund was nearly empty during the early '80s. We increased the tax to create a large trust fund which would last until the first baby boomers started dying off in mass (they will turn 90 by the time the trust fund is depleted). At which time, the annual growth of benefits will slow down and will continue to slow down for decades. As we become a more prosperous nation, we will make more and more money and thus the ss tax revenue will increase year after year. It's possible that SS may have to "borrow" from the general fund for a while, but eventually as our percentage of retired folks levels out, SS will not be in deficit for ever.
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Why was the trust fund almost empty in the 80's? How do you think LBJ paid for the Vietnam War and the war on poverty? Seems big govt. liberals never are concerned about how the money is spent but more concerned what the bureaucrats tell you most of which are lies
 
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