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Promising Editorial On SS "Are Benefits Safe" from AARP Bulletin 11-2018
Old 11-06-2018, 02:06 PM   #1
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Promising Editorial On SS "Are Benefits Safe" from AARP Bulletin 11-2018

In this months AARP Bulletin there is an encouraging editorial about Social Security. They list 12 Fun Facts about SS.

Here are some highlights (Not All):

1) Social Security is NOT Going Bankrupt

2) Congress will probably not take up SS Reform Any Time Soon

4) Lawmakers do NOT raid the Trust Fund

12) Most people get more back than they put in.

Those are the ones that caught my eye, you will find the whole section on Page 8 of the Publication. There may also be more info on their AARP Web Site. https://www.aarp.org/retirement/social-security/
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Old 11-06-2018, 05:26 PM   #2
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Yep.... I am sure AARP would NOT lie!
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Old 11-06-2018, 09:35 PM   #3
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Yep.... I am sure AARP would NOT lie!
Nothing they've said is a lie. Can you provide anything other than an ad hominem attack? Data, sources, charts,....?
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Old 11-06-2018, 10:26 PM   #4
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This may affect some.
Quote:
Tax cap grows
Taxes on workers’ wages finance Social Security. Workers pay 6.2 percent of their earnings to fund the benefit (employers pay the same). Next year, the maximum amount of earnings subject to the Social Security tax will increase from $128,400 to $132,900.
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Old 11-06-2018, 10:48 PM   #5
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....12) Most people get more back than they put in. ....
Easy to get a sense of the above, your SS statement will show how much you paid in for SS in the left column on the middle of page 3 under:

Quote:
Estimated taxes paid for Social Security:
...................You paid.................$xxx,xxx
Take that amount and multiply by ~80%... about 20% of what is paid in funds disability benefits.

Then divide the result by the payment on page 1 to get the number of months by which you have received all your money back. The amount is shockingly short.... mine (high earner) is 3 years and DW (a SAHM) is 8 months.
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Old 11-06-2018, 11:43 PM   #6
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Easy to get a sense of the above, your SS statement will show how much you paid in for SS in the left column on the middle of page 3 under:



Take that amount and multiply by ~80%... about 20% of what is paid in funds disability benefits.

Then divide the result by the payment on page 1 to get the number of months by which you have received all your money back. The amount is shockingly short.... mine (high earner) is 3 years and DW (a SAHM) is 8 months.
This ignores both the time value of money and inflation over decades.
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Old 11-07-2018, 01:25 AM   #7
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No kidding.

If you're more ambitous you can do this. Apply the appropriate SS tax rates to the annual earnings on page 3 to get the amount of SS that your paid each year. Multiply those numbers by 80% to factor in only estimated amounts paid in relating to retirement benefits (and exclude amounts relating to disability benefits).

Estimate the lump sum value of your benefits at your FRA. The best way would be to get quote for a SPIA with inflation adjusted monthly benefits equal to your PIA.

I go to opensocialsecurity.com and put in my info and select advanced options. I use the TIPS real discount rate less 200 bps assuming the insurer takes a 200 bps spread for overhead and profit and I use the least conservative mortality table (non-smoker super preferred) since annuity mortality is less conservative than life mortality. The resulting value is ~150% of a fixed benefit SPIA at my FRA rather than COLAed benefits, which seems about right.

Using Excel's IRR function, solve for IRR that equates what you paid in to the lump sum value of your benefits... YMMV but my IRR is about 8%. The reason that seems high is because the cash outflows are only what I paid in, but my benefits and therefore the lump sum value is based on what both I and my employers paid in, but it is a true return comparing what I paid in to the benefits that I will receive. If I include what my employers paid in then the IRR is about 5% in my case.

The IRR would be higher for lower income earners due to the benefit structure and bend points.
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Old 11-07-2018, 06:11 AM   #8
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Rather than one obvious naysayer, I think the report is both positive and relieving. Hopefully we will not see the potential haircuts and speculated changes that have been discussed at length in other posts. One can also feel a little better about waiting to take SS as the chances are it will be solvent, at least in my lifetime.
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Old 11-07-2018, 06:53 AM   #9
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The link just took me to a general SS page, not the editorial cited above. But I don't find the summary bullets controversial. The data is out there for anyone to see. The SS Trust Fund is alive and well, no different than the Treasuries in your portfolio. The Trust fund will be exhausted somewhere around 2034 after which the incoming funds will pay for about 77% of current benefits if nothing is done to address the shortfall. How we address that shortfall is ultimately up to us via our chosen representatives in Congress.
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Old 11-07-2018, 07:11 AM   #10
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The link just took me to a general SS page, not the editorial cited above.
Yes, that is the AARP SS Page. The 12 bullets are in the AARP Bulletin Magazine that gets delivered. I did not list them all, only the ones I thought were the most pertinent.
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Old 11-07-2018, 07:42 AM   #11
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The article with 12 top bullets is here.
https://www.aarp.org/retirement/soci...-about-ss.html

The graphic under #4 portrays the challenge pretty well, IMO.
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Old 11-07-2018, 07:55 AM   #12
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The article with 12 top bullets is here.
https://www.aarp.org/retirement/soci...-about-ss.html

The graphic under #4 portrays the challenge pretty well, IMO.
Thanks for this. I still think it is encouraging considering all the commentary and speculation we have all had here over the years about SS.
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Old 11-07-2018, 08:52 AM   #13
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Thanks for this. I still think it is encouraging considering all the commentary and speculation we have all had here over the years about SS.
I think many of us accept the "facts" as presented and marketed too quickly. I am encouraged that the problem will be solved.
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Old 11-07-2018, 09:33 AM   #14
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The SS Trust Fund is alive and well, no different than the Treasuries in your portfolio. The Trust fund will be exhausted somewhere around 2034 after which the incoming funds will pay for about 77% of current benefits if nothing is done to address the shortfall. How we address that shortfall is ultimately up to us via our chosen representatives in Congress.
And the White House, since any such legislation would have to be signed into law by the President. Sadly, it's hard to picture today what miracle it would take for both houses of Congress and the White House to agree on any fix in the next 16 years. I will continue to assume that my SS payments will drop by 25% or so starting in 2034, since that's what will automatically happen if nothing is done.
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Old 11-07-2018, 09:51 AM   #15
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And the White House, since any such legislation would have to be signed into law by the President. Sadly, it's hard to picture today what miracle it would take for both houses of Congress and the White House to agree on any fix in the next 16 years. I will continue to assume that my SS payments will drop by 25% or so starting in 2034, since that's what will automatically happen if nothing is done.
Can you please point us to some credible documents that explain this?
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Old 11-07-2018, 09:54 AM   #16
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12) Most people get more back than they put in.
That's always been how it's been sold since AARP ignores that employers directly put in as much as employees do instead of paying same to employees. But that's their agenda.
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Old 11-07-2018, 09:55 AM   #17
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That's always been how it's been sold since AARP ignores that employers directly put in as much as employees do instead of paying same to employees. But that's their agenda.
I do not think you read the whole article. It states that employers do contribute. Check the top left Paragraph.
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Old 11-07-2018, 09:59 AM   #18
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I do not think you read the whole article. It states that employers do contribute. Check the top left Paragraph.
OK, but does it count the money employers put in as part of YOUR contribution? If not, then you need to double employees contributions amount to see whether they're getting back more than they put in. I.e., the employer money doesn't go in w/o you contributing first/also.
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Old 11-07-2018, 10:14 AM   #19
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Can you please point us to some credible documents that explain this?
Well, here's the info from the horse's mouth. But it is written in bureaucrat-eze, and so is a little dense. https://www.ssa.gov/OACT/TRSUM/index.html

The operative paragraph is:

Quote:
The OASI Trust Fund, when considered separately, has a projected reserve depletion date of 2034, a year earlier than in last year’s report. At that time, income would be sufficient to pay 77 percent of scheduled OASI benefits.
The Social Security Administration has no authority to spend any non-OASDI monies, so will need legislation to fix the shortfall.
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Old 11-07-2018, 10:23 AM   #20
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That's always been how it's been sold since AARP ignores that employers directly put in as much as employees do instead of paying same to employees. But that's their agenda.
Wrong.

Actually, the statement wasn't based on any AARP analysis, but was based on an Urban Institute study... the study indicates:

Quote:
We assume that workers pay both the employer and employee shares of the payroll tax. By statute, the payroll tax, except for the HI surtax, is split evenly between workers and employers, with each paying 6.75 percent for combined OASI and HI taxes. However, a standard economic assumption is that in the long run, employers can pass this tax onto workers by slowing wage growth or offering fewer fringe benefits.
So even if you include both employee and employer contributions, the average recipient gets out much more than what they and their employer contributed.

You can check for yourself. Take what you and your employer contributed on page 3 and divided it by your monthly benefit get the number of months that it would take to get back what you and your employer put in.
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