Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 01-08-2010, 11:36 AM   #41
Recycles dryer sheets
 
Join Date: Mar 2008
Posts: 57
This thread has had a lot of ideas on what is and isn't Social Security and what it was originally intended to do. This link from the SS site I think gives a very interesting perspective on its history: Social Security Online

From what I've read in the past it actually was intended to be something of a welfare system in the sense that lower income earners get a far greater proportion of their salary as benefits than did higher earners. So I don't really think it's true to say that it's changing from a pension plan to a welfare plan. Though I haven't read the full history above so I don't know just when the variation in payments began. It could be that it wasn't in the original bill and only came later.
__________________

__________________
metabasalt is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 01-08-2010, 11:47 AM   #42
Recycles dryer sheets
 
Join Date: Mar 2008
Posts: 57
Quote:
Originally Posted by metabasalt View Post
This thread has had a lot of ideas on what is and isn't Social Security and what it was originally intended to do. This link from the SS site I think gives a very interesting perspective on its history: Social Security Online

From what I've read in the past it actually was intended to be something of a welfare system in the sense that lower income earners get a far greater proportion of their salary as benefits than did higher earners. So I don't really think it's true to say that it's changing from a pension plan to a welfare plan. Though I haven't read the full history above so I don't know just when the variation in payments began. It could be that it wasn't in the original bill and only came later.
An interesting quote from the SS site:

In 1893, for example, the $165 million spent on military pensions was the largest single expenditure ever made by the federal government. In 1894 military pensions accounted for 37% of the entire federal budget.
__________________

__________________
metabasalt is offline   Reply With Quote
Old 01-08-2010, 11:49 AM   #43
Moderator Emeritus
Martha's Avatar
 
Join Date: Feb 2004
Location: minnesota
Posts: 13,212
Quote:
Originally Posted by MasterBlaster View Post

Just so you know, I am a Boomer and have paid SS/medicare all of my life.

However I am well aware of the anguish that SS causes the gen Xers. There truly is a fairness issue here (The generational Storm Issue).

For those that are not in poverty, exactly what do the Xers owe the Boomers ?
I think the anguish is the uncertainty of whether SS will be there for them. It isn't about owing or not owing the prior generation, it is about whether the social contract will be undone leaving them with nothing. They have been sold the uncertainty of SS.
__________________
.


No more lawyer stuff, no more political stuff, so no more CYA

Martha is offline   Reply With Quote
Old 01-08-2010, 11:54 AM   #44
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2004
Posts: 11,615
Quote:
Originally Posted by metabasalt View Post
From what I've read in the past it actually was intended to be something of a welfare system in the sense that lower income earners get a far greater proportion of their salary as benefits than did higher earners. So I don't really think it's true to say that it's changing from a pension plan to a welfare plan. Though I haven't read the full history above so I don't know just when the variation in payments began. It could be that it wasn't in the original bill and only came later.
Right--it has always been a two-axis wealth redistribution system:
Younger people --> Older people
Higher income people --> Lower income people.

What has changed over the years is the degree of other benefits that have been added (for the disabled, children of disabled parents, etc). These were not in the original legislation. Also, there have been firm promises to everyone who pays in for 40 quarters of exactly what their benefit will be (per the annual statements we get). The wealth transfer from wealthy --> poor was already baked into that cake (by way of the much lower payout a high income earner gets for each dollar contributed in his working life), and changing that formula will undermine confidence in the system. But, it will probably happen.
__________________
"Freedom begins when you tell Mrs. Grundy to go fly a kite." - R. Heinlein
samclem is offline   Reply With Quote
Old 01-08-2010, 12:01 PM   #45
Moderator Emeritus
Martha's Avatar
 
Join Date: Feb 2004
Location: minnesota
Posts: 13,212
Confidence in the system is already undermined. The younger generations have no confidence that SS will be there for them. So changing the formula might actually increase confidence in the system.
__________________
.


No more lawyer stuff, no more political stuff, so no more CYA

Martha is offline   Reply With Quote
Old 01-08-2010, 12:40 PM   #46
Moderator
ziggy29's Avatar
 
Join Date: Oct 2005
Location: Texas
Posts: 15,612
Quote:
Originally Posted by Martha View Post
Confidence in the system is already undermined. The younger generations have no confidence that SS will be there for them. So changing the formula might actually increase confidence in the system.
Maybe. But when you go to the well too many times, it starts to dry up. Similarly, too many "one-time" reforms that make it a worse deal for younger folks will leave them wondering how many more times it's going to be watered down before they will collect.
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

RIP to Reemy, my avatar dog (2003 - 9/16/2017)
ziggy29 is offline   Reply With Quote
Old 01-08-2010, 03:42 PM   #47
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
youbet's Avatar
 
Join Date: Mar 2005
Location: Chicago
Posts: 9,965
Quote:
Originally Posted by samclem View Post
What has changed over the years is the degree of other benefits that have been added (for the disabled, children of disabled parents, etc). These were not in the original legislation.
That's right. These additional add-on benefits are not necessarily bad. Appropriate safety nets are a function of gov't IMO. But the politicians cleverly forgot to fund them thereby putting the pension portion of SS in peril.
__________________
"I wasn't born blue blood. I was born blue-collar." John Wort Hannam
youbet is offline   Reply With Quote
Old 01-08-2010, 08:09 PM   #48
Recycles dryer sheets
 
Join Date: Apr 2009
Posts: 81
Quote:
Originally Posted by metabasalt View Post
An interesting quote from the SS site:

In 1893, for example, the $165 million spent on military pensions was the largest single expenditure ever made by the federal government. In 1894 military pensions accounted for 37% of the entire federal budget.
Yes, this was the result of a successful lobbying effort by veterans' organizations (specifically the Grand Army of the Republic) to secure pensions for disabled Civil War veterans and their widows. The costs associated with this special pension system were enormous, but they decreased over time as the Civil War generation died off...the cost of ss and medicare are never going to get smaller with time.
__________________
av8er is offline   Reply With Quote
Old 01-09-2010, 03:02 AM   #49
Full time employment: Posting here.
old woman's Avatar
 
Join Date: Dec 2005
Posts: 551
I have saved pretty hard for the last 25 years. I don't earn a fortune so it has all been money it would have been easy to spend.

A coworker my age has spend every cent she earned. She has no house and no savings except about 50K in 401K mostly put in by profit sharing. She is now saving 125.00 a week.

I have a house, not all the way paid off yet but equity. I save about 25K a year on a 54K salary. So far I have 435K saved and am two years younger than her. I spent the time and money to finish college while workng full time.

SS will give her a higher percentage so she will get about the same check as I will get.

If it were to turn to welfare I would need to be broke to get anything because they can say I don't need it.

I don't know many people over retirement age earning 100K and you can't until full retirement age now. My boss is 67 and earning that much but for how many more years? Since he earns that now and saves 22K into the 401K plan he will need to save much more to replace so much income. He has a million dollar house with a big mortgage and some land he will sell someday. Property taxes are about more than his SS would be. Saving 3 million to replace his income will be harder than the coworker who can expect SS to cover 40%.

Also what counts as income after you don't work? If he sells a piece of land for 100K is that costing him more than 20K in lost SS plus the taxes on the long term gain? If he has 6 to sell does he need to get them all closed the same year so he can go back to lower income?

When he draws his 401K money because of RMD will that cost him his SS checks? It might be cheaper to take it all out before the RMD starts pay the tax and pay off the mortgage.

If you take money out of your ROTH is that income showing you don't need your SS?

Why don't they just say you don't need more than 40K to live so reduce it dollar for dollar until the savers are equal to the non savers.

I could live on 40K but I have to have my investment income so need to keep saving.

I and the other woman coworker never had children. I have one nephew who might help a little but she has nobody except a sister who had a stroke today and her children are on drugs and worthless.
__________________
old woman is offline   Reply With Quote
Old 01-09-2010, 05:00 AM   #50
Thinks s/he gets paid by the post
Tadpole's Avatar
 
Join Date: Jul 2004
Posts: 1,169
Quote:
Originally Posted by old woman View Post
If you take money out of your ROTH is that income showing you don't need your SS?

Why don't they just say you don't need more than 40K to live so reduce it dollar for dollar until the savers are equal to the non savers.
I have always expected for the solution to be found in a wealth transfer between retirees with as minimal impact on current workers as possible. This process was begun with the 50%-85% taxable means testing back in the early 90s when the money wasn't needed to pay current benefits. This transferred current benefits back to the trust fund to be borrow for current operations of the general fund budget under the guise of deficit reduction. There aren't enough "very rich" retirees to supply/repay this money so it will rapidly become an upper middle class retiree transfer and gradually a middle class retiree transfer if that isn't enough. I expect the phase in to be sneaky. (Look at Medicare B.) Even the RMD has become a potential mechanism to accomplish more than tax collections.

As the Lenin Strategy (search CATO) points out, erosion of middle class benefits to provide a minimal income for poor retirees will destroy support for the entitlements entirely. If cash flow is diverted from the pay-go through private investment of part of it, the cash flow in Social Security becomes even worse and more and more will be required from savings and pension fund redistributions. The funny thing is that people who don't support wealth redistribution from the rich seem to support it when the middle class is the main class impacted. In that case, generational fairness becomes an argument. Funny thing is that the same fairness could be used for any budget, not just Social Security.

Brace yourself. You have been saving for your neighbor who earns more than yourself but has been smart enough to spend rather than save. He can probably sell that boat to his brother in law under the table and hidden from income records in relative safety of being caught.

The only thing I haven't figured out is how the transfer will be projected since 401k's and pensions aren't guaranteed and most pensions aren't inflation protected. I guess that is why mandated annuities are being discussed. But... what if the insurers go broke?

Exaggeration? Of course. But the major thing people with savings need is inflation protection. (Actually, that is true of all retirees especially as they get older.) Social Security has provided a little of that and is important to middle class retirees.

Since (almost) no politician would say outright - we aren't going to pay the boomers back for the fake pre-payments but we are going to pay Japan and China back so they can afford their aging problems, any mechanism that drags out repayment to SS will be used. Lowering the bend points is a perfect mechanism as well as reducing the COLA gradually. Unfortunate, according to the American Academy of Actuaries, the only "perfect" solution is tethering the retirement age to longevity. I, myself, don't see how that helps the cash flow problem since it just solves the long term actuarial balance problem. No, since this occurs in the short term, there will be one big pot and all retirement money from all sources will be thrown in and redistributed.

Who will support this? A greater number of people than you think. If you combine the numbers of retirees without pensions or savings with current workers you have a lot of people. The former gets their SS guaranteed and the later gets lower taxes.
__________________

__________________
Tadpole is online now   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Social Security Engineer FIRECalc support 2 09-20-2007 04:00 PM
social security Carol0720 FIRECalc support 2 07-26-2007 12:55 PM
Social Security Carol0720 Other topics 5 07-19-2007 01:18 PM
Social Security, --- Again Sundance Kid Other topics 12 03-05-2007 08:53 PM
ARE YOU SURE OF SOCIAL SECURITY idevision Young Dreamers 11 07-27-2005 01:05 PM

 

 
All times are GMT -6. The time now is 06:52 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.