Saving Social Security

OK, new thread ... from the Ash Wednesday thread,

Quote: Wizard

You're absolutely right. At the risk of changing the topic, I strongly support increasing the Social Security retirement age.

http://diversitytomorrow.com/thread/2571/4/#post96809

I once saw an article list several different options for saving social security. Increasing the retirement age helped a little but the option that would do much better was changing the amount at which you no longer pay into social security. So, I think in both of these options, you could go to an extreme and say 'this will fix it' ... say putting the age up to 75 or say making the upper income limit $200,000 instead of the current $118,500 [guessing]. Or surely some less radical point could be reached, or a combination. But I got the impression it is sort of sticking your head in the sand not to realize the upper income limit is going to have to be mostly 'it' ...

definitely interested in what the wizard knows about this.

PS, if that article was right I think you can say it is a bit counter-intuitive. Seems like the retirement age change would be more effective.

IMHO the retirement age has to go up. When SS started we had about 36 workers carrying 1 retiree. Now it is about 3:1 if not lower. Simple math is that each worker has to give 1/3 to support a retiree. It is less than that, maybe 1/4 or 1/5 as SS is supposed to be just a supplement. OTOH, survivor benefits drive it right back up.

Bush had the right idea, put part of it in an individual account and let it grow.

Quote: AZDuffman

IMHO the retirement age has to go up. When SS started we had about 36 workers carrying 1 retiree. Now it is about 3:1 if not lower. Simple math is that each worker has to give 1/3 to support a retiree. It is less than that, maybe 1/4 or 1/5 as SS is supposed to be just a supplement. OTOH, survivor benefits drive it right back up.

Bush had the right idea, put part of it in an individual account and let it grow.

The reason that the cap exists is because at retirement the maximum benefit is some percentage of that cap. The cap increases every year. In theory, your FICA deduction (and the equal amount your employer pays) is a contribution into the system, not a tax, per se. Those making less than the cap of course see nothing wrong with extending the cap, sort of like those who support inheritance taxes, sort of like those that support the additional Medicare tax on those making over 250k, I can go on....

Had we allowed the Bush plan to go forward individuals would have been able to grow THEIR retirement savings at a far greater rate than the increase in Social Security payments, and would all be better off. Anyone that has a 401k just look at it. But I remember distinctly the rhetoric that the plan was just the evil Republicans wanting to take advantage of the poor.

Quote: odiousgambit

I once saw an article list several different options for saving social security. Increasing the retirement age helped a little but the option that would do much better was changing the amount at which you no longer pay into social security.

I favor doing that too. We already eliminated that cap for the Medicare portion, equal to 1.45%, for FICA tax. However, Republican would fight against it as Social Security is already a subsidy for the poor and eliminating the cap would only be more of a transfer of wealth from the rich to poor, which you know Republicans hate.

In Canada when the Conservatives were in power they passed a bill to raise our Old Age Security age from 65 to 67. It was to be phased in over 15 years. The Liberals killed the plan when they were elected even though it had been in place for several years. Not sure why, anybody with need for the money earlier has multiple ways to access the plan and top up benefits.

Quote: SOOPOO

The reason that the cap exists is because at retirement the maximum benefit is some percentage of that cap. The cap increases every year. In theory, your FICA deduction (and the equal amount your employer pays) is a contribution into the system, not a tax, per se. Those making less than the cap of course see nothing wrong with extending the cap, sort of like those who support inheritance taxes, sort of like those that support the additional Medicare tax on those making over 250k, I can go on....

Had we allowed the Bush plan to go forward individuals would have been able to grow THEIR retirement savings at a far greater rate than the increase in Social Security payments, and would all be better off. Anyone that has a 401k just look at it. But I remember distinctly the rhetoric that the plan was just the evil Republicans wanting to take advantage of the poor.

The main issue, as I understood it, and personally I agree with it, with Bush's plan was the risk tolerance was too high for subsistence money. What happens when the market goes down? What if a newly-retired person had invested their personal account in Bush's newly passed (hypothetical) SS investment thing in 2005 or 6? We went into a MAJOR recession in 2007-09. There those people are, SS their only income, needing to live off the proceeds of....nothing, having no income to refuel the account, digging deep into their shrinking capital just to eat and keep a roof over their heads, until...oops, all gone. Now what? Put them in the bushes to die? Strap them into a chair in a workhouse? Deed them a 6 sqft piece of sidewalk, like India?



Some things are a 1 way street. You make people pay into a fund for 40 quarters, tell them it's subsistence in retirement, you can't, decades later, make it a risk-exposed fund.

Risk?
Anything subject to political whims is risky.
LBJ raised social security payments a wee bit just before the election. No great financial impact but the principle is that politicians will not act for the long term safety of the fund, just the short term survival of themselves and their party.

Risk?
Someone is always unlucky. Consider that lone death in the casino boat fire I posted about in the Florida thread at WOV. Fifty passengers ALL of whom made it to shore, no one really gets sick, a very few who got real cold were fine after coffee and a blanket but ONE woman died from walking on a barnacle encrusted sea wall.
Or consider the idiot that "added some extra rope" because two people were jumping simultaneously, the extra bungee cord meant they hit the ice head first.

"Individual" retirement accounts will always include the unlucky and unwise, no matter how sensible the overall program is.

Everyone wants to make changes but few want them to take immediate affect, they want to wait until they get their payout, then let the fund be on a more sensible basis that takes into account demographics and health care costs and a globalized economy of no real jobs here anymore.

The California Modocs fought ferociously, raped, pillaged and enslaved but pretty much died out because their water and olive oil containers were the equivalent of smoking two packs a day. As a society we seem to be doing the same thing. Everyone is getting diabetes, emphysema and alzheimers and there is not enough money but we may have to look back and find out that 'Wonder Bread''s dough conditioners is what did it to us.

Retirement funds and medical funds have to be segregated otherwise the politicians and the greedy "I paid in, so I want it back" types don't prevail.

You are mixing up different risks as if they were all the same thing, when in fact the ones you mentioned and the bush idea are all independent of each-other.

Just because one kind of risk exists, or you are willing to take one kind of risk, does not mean that you might as well take all of the other risks too.

Quote: beachbumbabs

The main issue, as I understood it, and personally I agree with it, with Bush's plan was the risk tolerance was too high for subsistence money. What happens when the market goes down? What if a newly-retired person had invested their personal account in Bush's newly passed (hypothetical) SS investment thing in 2005 or 6? We went into a MAJOR recession in 2007-09. There those people are, SS their only income, needing to live off the proceeds of....nothing, having no income to refuel the account, digging deep into their shrinking capital just to eat and keep a roof over their heads, until...oops, all gone. Now what? Put them in the bushes to die? Strap them into a chair in a workhouse? Deed them a 6 sqft piece of sidewalk, like India?



Some things are a 1 way street. You make people pay into a fund for 40 quarters, tell them it's subsistence in retirement, you can't, decades later, make it a risk-exposed fund.

I always prefer to do something for myself rather than have the government do it for me when possible.

People over a certain age who had already funded their own Social Security and were depending on it were not to be affected. The plan, as I recall, was to start with generally younger people.

My self guided plan at work has what they call a "guaranteed option", which will always result in a positive appreciation year after year. The percentage is low, maybe 2-4 % depending on interest rates and other such stuff. Having made 10%+ or so per year over the last 10 years I am glad I didn't take the "guarantee" that I was offered. For a community that prides itself on knowing what "EV" is, can anyone say putting money into a government Social Security system is +EV compared to investing it yourself?

But I understand BBB's point about the 'poor people' not being able to manage their assets and always depending on the government to bail them out.

In addition to volatility reasons, I oppose investing Social Security savings into the stock market because we need that money to pay for our deficit spending. In other words, the Social Security trust funds, which are in the trillions, really don't exist. It is just a burden future generations will have to pay. If we must have an enormous debt, at least we owe some of it to ourselves.