Another Social Security gloomy outlook

[FIREd]

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Originally Posted by friar1610 And sometimes they "squandered" their money on college tuition for their kids.

Not ours.

[friar1610]

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Originally Posted by ziggy29 But this is family voluntarily taking care of family, not compulsory public taxation and inter-generational redistribution.

No big disagreement there. But the OP's comments sure paint his parents' generation (I have no idea how old he is) with a pretty broad brush. In my own case, the biggest inhibitor to saving more was not "squandering" money on "consumerism" folly" but rather methodically saving for my kids' college educations. Specifically:

"But I am mad at our parents. They lived through an era incredibly rich with wealth building opportunities yet found ways to squander it all because of consumerism folly. I am mad to see people who made good money in their lifetime having to rely, in retirement, on SS and their children's generosity to make ends meet. Yes, they ask their children (who have had to endure the worst economic decade since the great depression and who will never benefit from pensions, subsidized health care or union job security) to pay for their financial failures. It infuriates me.

And let's not forget that not everyone shared in the "wealth-building" opportunities that some of us enjoyed.

Just trying to inject a little perspective here.

[FIREd]

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Originally Posted by friar1610 No big disagreement there. But the OP's comments sure paint his parents' generation (I have no idea how old he is) with a pretty broad brush. In my own case, the biggest inhibitor to saving more was not "squandering" money on "consumerism" folly" but rather methodically saving for my kids' college educations. Specifically: "But I am mad at our parents. They lived through an era incredibly rich with wealth building opportunities yet found ways to squander it all because of consumerism folly. I am mad to see people who made good money in their lifetime having to rely, in retirement, on SS and their children's generosity to make ends meet. Yes, they ask their children (who have had to endure the worst economic decade since the great depression and who will never benefit from pensions, subsidized health care or union job security) to pay for their financial failures. It infuriates me. And let's not forget that not everyone shared in the "wealth-building" opportunities that some of us enjoyed. Just trying to inject a little perspective here.

I was not talking about my parents' generation as a whole but about our parents (DW's and mine) specifically.

[Zoocat]

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Originally Posted by FIREdreamer But I am mad at our parents. They lived through an era incredibly rich with wealth building opportunities yet found ways to squander it all because of consumerism folly. I am mad to see people who made good money in their lifetime having to rely, in retirement, on SS and their children's generosity to make ends meet. Yes, they ask their children (who have had to endure the worst economic decade since the great depression and who will never benefit from pensions, subsidized health care or union job security) to pay for their financial failures. It infuriates me.

Firedreamer, I sympathize with your viewpoint. I am personally trying to arrange my own modest finances and estate so that it will benefit my children. I realize that the economy will not benefit GenXers and those younger as it did previous generations.

But, I would ask you to view this presentation by Elizabeth Warren, chair of the Congressional Oversight Committee, on the coming collapse of the middle class. She points out many of the flaws in the viewpoint, similar to yours, that the post-WWII generation squandered their riches. It is well worth watching.

YouTube - The Coming Collapse of the Middle Class

[friar1610]

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Originally Posted by FIREdreamer I was not talking about my parents' generation as a whole but about our parents (DW's and mine) specifically.

OK; got it.

[youbet]

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Originally Posted by FIREdreamer I am a genXer.......But I am mad at our parents.

Don't paint with too broad a brush. For example, I'm both a Boomer and a member of the squeeze generation. We help support DW's 85 yo mom and fund the grandkids' college funds!

I am happily collecting SS however!

edit: posted this before reading the other posts between there and here. Sorry if I only restated what others have said.......

[molly]

Social Security is not a system that was either designed or put in place by BOOMERS. There are generations of "blame" for its insolvency.

I remember when my FIL first started collecting SS. At the time - there was an article in Time Mag. explaining the "breakdown" of SS benefits. My FIL collected more benefits in two months than he had contributed to the system in his entire lifetime (well paid engineer).

The article was in response to what was at the time thought to be a huge increase in SS taxes. I believe that was in the very late 60's or early 70's.

The problem is indeed that we have asked too much of Social Security. I remember when widows/widowers children could collect SS all the way through college - while everybody else had to pay for their own children's college.

How about an old neighbor of mine who at 62 (retired) - remarried - and had 4 children. They collected SS for each child - to add to his good pension and SS. People at 55 - support their own children. He says that he had never made so much money.

We have always lived modestly, paid our bills, aimed for no debt, saved to put our kids through college (state schools - no college loans) and have saved for our retirement. I do believe that we are entitled to SS but expect that it will be "sliced and diced".

We have dumped a lot on the next generations. However, those responsible "Middle Class" people who have done all the right things are the people who will be most punished by future changes.

We have boxed ourselves into a corner.

The Elizabeth Warren interview was EXCELLENT - Thank you.

[MasterBlaster]

Molly:

You point out a number of examples of people who apparently gamed the system in the past to their advantage.

You seem to have some sort of expectation that SS will be "fair" to you because you paid into it. If you start thinking about SS as a welfare system for old people you'll feel better about it than thinking it is some sort of insurance that you are entitled to.

[molly]

MasterBlaster I have no expectations personally of "FAIRNESS" with regards to SS or any other govt. program.

My point is that the very people who are the "financial backbone" of the "entitlement system" (SS is an "entitlement), play by all the rules and exercise prudence, are the very people who will shoulder the "generational blame".

And -future generations will have an increasing burden if some of these issues aren't addressed soon.

I also want to make sure that we try to leave something for our kids and grandkids. It isn't going to be a rosy picture ahead.

[youbet]

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Originally Posted by MasterBlaster Molly: If you start thinking about SS as a welfare system for old people you'll feel better about it than thinking it is some sort of insurance that you are entitled to.

That's where the debate will intensify and become explosive. By blending the retirement-pension and the welfare aspects together, our leaders set us up for this decades ago. What were they thinking?

I'm anticipating SS will continue its drift away from being a pension system towards being a safety net for widows/widowers, orphans, low wage earners and folks who only worked a few years at the expense of medium to high wage earners who contributed for a lifetime. This will manifest itself with a change to progressive taxation levels (as opposed to the current flat system) on the input side to income and wealth testing on the output side.

For folks with FIRE aspirations, the implications are obvious and need to be part of the scheme. For us already enjoying a FIRE lifestyle, there's probably some prudence in formulating plans to account for future cutbacks.

[ziggy29]

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Originally Posted by youbet I'm anticipating SS will continue its drift away from being a pension system towards being a safety net for widows/widowers, orphans, low wage earners and folks who only worked a few years at the expense of medium to high wage earners who contributed for a lifetime.

It could be, but I think this would need to be phased in over a long period of time, say 2-3 decades. It would be political suicide and a gross miscarriage of economic justice to say "people born before 19XX will get everything ever promised to them and everyone born in or after 19XX get screwed out of everything. And oh, yeah -- all you post-19XXers still have to pay all the taxes for a benefit you won't get."

I think more means testing of SS is inevitable, but it should never be 100% means tested. I think it serves a useful purpose with encouraging retirement to open up jobs for the next generation, and taking that retirement incentive away could cause the unemployment rate to soar.

[eridanus]

As others on this forum have suggested, the bottom line is that we all live too high on the hog. Cut spending? Where and how?

[MasterBlaster]

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And -future generations will have an increasing burden if some of these issues aren't addressed soon.

Oh these issues will be fixed one way or another - the bond markets will see to it.

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As others on this forum have suggested, the bottom line is that we all live too high on the hog. Cut spending? Where and how?

Lots of choices, but Medicare/Medicaid is the elephant in the room. Expect medicare to migrate towards the "HMO from Hell" model. There really is no other choice as the money just isn't there.

[youbet]

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Originally Posted by eridanus As others on this forum have suggested, the bottom line is that we all live too high on the hog.

Hmmmm...... Perhaps the word "all" shouldn't be in there. I certainly don't live too high on the hog! Perhaps you were refering to the collective "we?" But, definitely not "me."

[youbet]

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Originally Posted by MasterBlaster Expect medicare to migrate towards the "HMO from Hell" model

Agreed. I just hope that whatever "progress" we make with health insurance reform, we continue to have Medicare supplemental policies available for those who can afford them. I want one, even if they are expensive.

[eridanus]

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Originally Posted by MasterBlaster Lots of choices, but Medicare/Medicaid is the elephant in the room. Expect medicare to migrate towards the "HMO from Hell" model. There really is no other choice as the money just isn't there.

Looking at the federal budget, there are 3 elephants in the room. They're all pretty much equal in spending: defense, SS, and Medicare/Medicaid make up ~60% of our spending. Actually, only one is truly an elephant in the room by the strictest definition...it's there and it's huge but no one will talk about it.

[samclem]

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Originally Posted by MasterBlaster Lots of choices, but Medicare/Medicaid is the elephant in the room. Expect medicare to migrate towards the "HMO from Hell" model. There really is no other choice as the money just isn't there.

Agreed. This is one reason for the frantic desire in some quarters to get any kind of govt run health care bill passed immediately, almost without regard for what it contains. The public does not like what is happening and the 2010 elections will close the door on further "reforms" if they are anything like this approach. Soon after, the true magnitude of the Medicaid/Medicare underfunding will come clear as people are forced into increasingly substandard medical treatment (ref: Mayo Clinic in CA announced recently they would no longer accept Medicare patients). As Medicare becomes the ghetto of American health care, any prospect for citizens handing over more health care responsibilities to DC become increasingly remote. Thus, some believe it is now or never for healthcare reform.
I disagree. If this present effort founders, the way will be clear for a market-based approach. People want reform, they just don't want this brand of reform. If the other party doesn't seize on that opportunity (after the elections), they deserve all the bad press they'll get.

[teejayevans]

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Originally Posted by eridanus Looking at the federal budget, there are 3 elephants in the room. They're all pretty much equal in spending: defense, SS, and Medicare/Medicaid make up ~60% of our spending. Actually, only one is truly an elephant in the room by the strictest definition...it's there and it's huge but no one will talk about it.

Are they suppose to be gorillas ;-)
Anyhow, add another: interest on the US Debt.
TJ

[samclem]

Well, when we're considering the budget allocated to various "elephants", I hope we'll give priority to functions that are actually mentioned in the Constitution by name. We've added lots of frills over the years--it's a good bet that the things we thought to include in the budget in the beginning are more essential for a nation than some of the later "good ideas."

[misty57]

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Originally Posted by Oldbabe Firedreamer, I sympathize with your viewpoint. I am personally trying to arrange my own modest finances and estate so that it will benefit my children. I realize that the economy will not benefit GenXers and those younger as it did previous generations. But, I would ask you to view this presentation by Elizabeth Warren, chair of the Congressional Oversight Committee, on the coming collapse of the middle class. She points out many of the flaws in the viewpoint, similar to yours, that the post-WWII generation squandered their riches. It is well worth watching. YouTube - The Coming Collapse of the Middle Class

I loved the Warren lecture. To avoid the two income trap (before I took the pregnancy route to retirement), we always lived off of his income and saved mine (we made equal salaries). We always contributed the max to our 401Ks so when I stopped working, we were already used to the "retirement deduction" from his paycheck. We delayed having a child and stopped at one. We took our savings and allocated 50% for the 20% down payment on our first home and the other 50% for a huge EF in case hubby lost his job. It took a few years, but hubby also "banked" as much vacation as allowed (400 hrs) which we considered extra "unemployment insurance". Other than our home mortgage, we never carried any debt - not even on cars. When I finally did leave the work force, our lifestyle did not change one bit - we just couldn't save any money until DH's income increased over time. Despite job opportunities/salary increases to go to other companies, DH stayed with the same company that he went to work for right out of college and will retire at age 55 with a little over 31 years of service so we will have a pension and medical insurance upon retirement.

DH made the money, and I made the money make money. I also stretched his income to the max. Geez, I could stretch a buck like it was made of rubber!!!

I'm not really sure if what we did could be done today; I am pretty sure, however, that not many couples would want to do it.