More SS undermining

[FIRE'd@51]

Quote:

Originally Posted by keegs Social Security isn't underfunded. It's been running up a surplus for decades.

Underfunded means the present value of the SS liabilities exceeds that of it's assets. It has nothing to do with whether or not SS currently has a surplus.

[ronocnikral]

Quote:

Originally Posted by keegs How much has it cost us to maintain the fifth fleet? How much did it cost to prosecute the war in Iraq? Has it all been to support the sardine industry?

how much does it cost to support an industry like farming? what's your point?

do you get your talking points from anderson cooper?

[keegs]

Quote:

Originally Posted by FIRE'd@51 Underfunded means the present value of the SS liabilities exceeds that of it's assets. It has nothing to do with whether or not SS currently has a surplus.

Ok..in twenty five - thirty years SS's liabilities will exceed its assets.

[keegs]

Quote:

Originally Posted by ronocnikral how much does it cost to support an industry like farming? what's your point? do you get your talking points from anderson cooper?

Are either of the costs I mentioned insignificant?

[samclem]

Quote:

Originally Posted by keegs Ok..in twenty five - thirty years SS's liabilities will exceed its assets.

But the "pain" on taxpayers starts in approx 2016. That's when taxpayers will begin to pay money to social security recipients (because the SS taxes won't keep up with benefits). It makes no difference that excess SS taxes were collected in prior years, that money has been spent. The "special bonds" exist, but are irrelevant to the policy discussion. In 6 years the additional money needed every year to pay SS recipients becomes just another expense that is subject to prioritization, and cuts.

[bbbamI]

Quote:

Originally Posted by Alan In that case I must be a fossilized fossil.

Mmmm...perhaps I was a bit harsh proclaiming fossilism.... Hey, I imagine you and I are both well pickled preserved....

[chinaco]

Of course the adviser is going to say don't include SS.... more fees for larger savings.

[FIRE'd@51]

As everyone knows, the reason SS has a surplus is because SS has been taking in more from taxes than it pays out in benefits. In about 6-7 years, this will reverse, and the difference will have to be made up by drawing down the surplus. Sometime around 2035-2040 the surplus will be gone, and the then level of benefits will not be able to be paid. At this point SS benefits will have to be cut significantly, or taxes raised significantly.

There is nothing inherently wrong with the current surplus being invested in government securities. We certainly wouldn't want the SS trust fund to simply hold cash and get a 0% (or less in real terms) return. The problem is that the trust fund has only been earning about 2% after inflation on the government securities it holds, not enough to grow the surplus fast enough to offset the coming decline in receipts from SS taxes.

IMO, the least painful way to fix this would be to increase the rate of return that the the trust find earns on the surplus. But current law requires that the surplus only be invested in non-marketable government securities. If Congress changed this law, and allowed a portion of the surplus to be invested in stocks (as is the case with any defined-benefit pension plan, public or private), presumably over 30-40 years the rate of return could be increased and the problem would go away (the magic of compounding). Unfortunately, because the entire surplus has already been lent (invested in government securities), there is no money in the trust fund to be invested in stocks. To come up with the money to invest in stocks, the government would have to stop rolling over the maturing securities and either pay down the deficit or borrow the money elsewhere.

[samclem]

Quote:

Originally Posted by FIRE'd@51 If Congress changed this law, and allowed a portion of the surplus to be invested in stocks (as is the case with any defined-benefit pension plan, public or private), presumably over 30-40 years the rate of return could be increased and the problem would go away (the magic of compounding).

-Do we really want the government to become a major a stockholder in more private companies?

- Also, how are politicians going to continue to tell people that they shouldn't have private SS accounts because the market is simply too risky if they invest the government money in the same markets? It would be a sticky political problem that few have a vested interest in solving.

[MasterBlaster]

Fired@51:

You have eloquently described SS given that a trust fund actually exists independent of anything else.

In reality, the bond markets will see that unlimited borrowing and indebtedness to fund SS/medicare and other programs will be prohibitivly expensive. Changes and cuts are likely going forward.

[FIRE'd@51]

Quote:

Originally Posted by samclem -Do we really want the government to become a major a stockholder in more private companies?

This is a valid objection. However, state government pension plans already invest in the stock market. I'm sure a way can be figured out to eliminate any problems associated with the government owning stock (maybe not allowing the government to vote the shares).

Quote:

Originally Posted by samclem Also, how are politicians going to continue to tell people that they shouldn't have private SS accounts because the market is simply too risky if they invest the government money in the same markets? It would be a sticky political problem that few have a vested interest in solving.

A pension plan, whether public or private, can "diversify over time", so that the plan can still pay the defined benefit to an employee who retires during a bear market. An individual can't do this, and this is my main objection to private accounts.

[ronocnikral]

ss is an insurance plan, not a pension plan.

[keegs]

Quote:

Originally Posted by MasterBlaster Fired@51: In reality, the bond markets will see that unlimited borrowing and indebtedness to fund SS/medicare and other programs will be prohibitivly expensive. Changes and cuts are likely going forward.

If by other programs you mean the country continues to operate under the notion that the insurance and health care industries will solve our second to none healthcare cost problem, that wars of choice should be kept off budget and that tax cuts pay for themselves....I agree.

[FIRE'd@51]

Quote:

Originally Posted by ronocnikral ss is an insurance plan, not a pension plan.

Calling it an insurance plan doesn't solve the underfunded problem. If you take out the disability payments and death benefits it pays, it functionally acts like a defined-benefit pension plan.

[keegs]

Quote:

Originally Posted by FIRE'd@51 As everyone knows, the reason SS has a surplus is because SS has been taking in more from taxes than it pays out in benefits. In about 6-7 years, this will reverse, and the difference will have to be made up by drawing down the surplus. Sometime around 2035-2040 the surplus will be gone, and the then level of benefits will not be able to be paid. At this point SS benefits will have to be cut significantly, or taxes raised significantly. There is nothing inherently wrong with the current surplus being invested in government securities. We certainly wouldn't want the SS trust fund to simply hold cash and get a 0% (or less in real terms) return. The problem is that the trust fund has only been earning about 2% after inflation on the government securities it holds, not enough to grow the surplus fast enough to offset the coming decline in receipts from SS taxes. IMO, the least painful way to fix this would be to increase the rate of return that the the trust find earns on the surplus. But current law requires that the surplus only be invested in non-marketable government securities. If Congress changed this law, and allowed a portion of the surplus to be invested in stocks (as is the case with any defined-benefit pension plan, public or private), presumably over 30-40 years the rate of return could be increased and the problem would go away (the magic of compounding). Unfortunately, because the entire surplus has already been lent (invested in government securities), there is no money in the trust fund to be invested in stocks. To come up with the money to invest in stocks, the government would have to stop rolling over the maturing securities and either pay down the deficit or borrow the money elsewhere.

Fire,

Our fiscal ills are a direct result of a tax, spending and deregualtion agenda not seen since the Reagan administration.

We're not going to fix SS without policies that address the aforementioned root causes.

[FIRE'd@51]

Quote:

Originally Posted by keegs Fire, Our fiscal ills are a direct result of a tax, spending and deregualtion agenda not seen since the Reagan administration. We're not going to fix SS without policies that address the aforementioned root causes.

Fine. If your choice is to fix SS by raising taxes and cutting benefits, go for it. I was trying to suggest another "less painful" way.

If you were working for a private company that had a defined-benefit pension plan, and the plan sponsor suggested that the plan only invest in government securities, and by the way, your payroll deductions would be increased and your benefits would be reduced due to lower expected returns, would you applaud that suggestion?

[keegs]

Quote:

Originally Posted by FIRE'd@51 Fine. If your choice is to fix SS by raising taxes and cutting benefits, go for it. I was trying to suggest another "less painful" way. If you were working for a private company that had a defined-benefit pension plan, and the plan sponsor suggested that the plan only invest in government securities, and by the way, your payroll deductions would be increased and your benefits would be reduced due to lower expected returns, would you applaud that suggestion?

Fire,

I'm not paticularly opposed to this idea but can you identify a state that can claim that this approach avoided or resolved their employee pension funding woes?

[FinanceDude]

Quote:

Originally Posted by chinaco Of course the adviser is going to say don't include SS.... more fees for larger savings.

Yeah, that HAS TO BE THEIR only reason....good thing ya got a disclaimer in red........

[Pie Floater]

I'm interested in opinions on what the government might do with benefits already being received by SS recipients. Do you think the folks already receiving checks are going to see their paychecks cut or their COLA cut out or reduced.

Both my parents and the wife's parents rely heavily on SS. They are all 4 very spry and I could see all 4 living into their 90s. I'd hate to see their benefits cut to the point of not being able to live independently.

Any thoughts on whether SS cuts will be fazed in for future folks or is it possible to see the cut like I mention above?

[ronocnikral]

Quote:

Originally Posted by Pie Floater I'm interested in opinions on what the government might do with benefits already being received by SS recipients. Do you think the folks age going to see their paychecks cut or their COLA cut out or reduced. Both my parents and the wife's parents rely heavily on SS. They are all 4 very spry and I could see all 4 living into their 90s. I'd hate to see their benefits cut to the point of not being able to live independently. Any thoughts on whether SS cuts will be fazed in for future folks or is it possible to see the cut like I mention above?

do newspapers run articles with young workers talking about how hard it is to make ends meet? or do you get the article with a white haired old lady who acts sweet and talks about how she can't put food on the table. no sympathy here, sorry.

my solution is highly unpopular. i think we should follow the french and raise the retirement age on anyone younger than 62. and get payments in check.

and no, i don't believe the job market is zero sum.