rescueme
Thinks s/he gets paid by the post
That's fine for you, but what about the vast majority of the remaining folks that can't do what you are doing?
Protect SS, it's important
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ERD50
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
I'm not sure that LE at age 5 is relevant - I think you need to look at LE at retirement age, or maybe well into their wage earning years when they would have paid a significant amount into the system. Regardless, we'd probably still find a difference in LE across different groups.
But the question remains - should we base policy on that? Is raising the retirement age across the board "unfair" to some? Maybe (or maybe not - since as I said, everyone gets paid "for life"), but then again it would be "unfair" to smokers, people with MS, probably all sorts of cross sections of society that might attract lawyers with class action law suits. Those groups will pay "disproportionately more" into the systems than others. Maybe we should charge more to people who come from families with long lives to compensate? Or people who take care of their health? It all gets rather silly. It's a life annuity - if you try to make it something else, it gets screwy.
I can't think of any rational way to deal with the differences, and that's why I called out the comment from Emeritus. What's the point of even mentioning it? In fact, if I turned the argument around (if you say that a group receives less in some social services, they should pay less; then it holds that if they receive more in some social services they should pay more), I'm sure there would be howls from many corners. I'm not going to go there, and I don't support that thinking. It holds that I don't support the view from the other angle other.
You know, this comes back to the problem with govt involvement in things - the "one size fits all" approach. If we were all educated and encouraged to save for our own retirement (doesn't take an advanced degree, some of the "simplest" people I can think of "get it"), we could do with our money what we want. If I died early, I could pass that money onto my heirs. Not so with SS. Which is "fairer" to a group with a short LE? Maybe SS is the "problem", not the "solution"?
One other thought comes to mind - it's almost impossible to be "fair", it's pretty straightforward to be "equal".
-ERD50
An observation: Black LE is lower than white LE in the US. While it is difficult to "tease out" the various factors contributing to life expectancy, it's almost certainly not true that blacks live shorter lives solely because they are black. Poor people live shorter lives, and blacks are disproportionately poor. People with less education live shorter lives, and blacks in the US have lower levels of education on average. Lifestyle/behavioral factors (diet, smoking, exercise, drug use, exposure to violence) are also obviously important. I'm fairly sure that all these other things are vastly more important in determining life expectancy than being black or white.
I know some will argue that the root causation for some of these other longevity factors is racial, but from a strict actuarial perspective (as opposed to a sociological/"social justice" approach) we'd need to make these other determinations before deciding on what is "fair."
I know some will argue that the root causation for some of these other longevity factors is racial, but from a strict actuarial perspective (as opposed to a sociological/"social justice" approach) we'd need to make these other determinations before deciding on what is "fair."
rescueme
Thinks s/he gets paid by the post
But they are both "losers"
"U.S. Hispanics can expect to outlive whites by more than two years and blacks by more than seven, government researchers say in a startling report that is the first to calculate Hispanic life expectancy in this country."
Hispanics' Lifespan Longest In US, CDC says
ERD50
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Excellent point. So it is probably more generally correct (and gets us away from the racially charged issues) that poor people would be "disproportional affected" by a rise in retirement age.
But to come full circle, SS payouts are very progressive - the poor generally get disproportionally higher payments relative to what they put in. For life - which is what SS was designed to do.
-ERD50
FIRE'd@51
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I don't know the statistics, but if actuarially, lower-income people, on average, live shorter lives, then the progressive nature of the payout would tend to compensate for that effect as well.
Independent
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If you're suggesting a new tax on existing 401k and IRAs to fund the individual accounts, then there is no borrowing. But I don't think that's what you meant.
The borrowing arises because we have to put dollars into those new IAs, where do we get the dollars to do that? If you are planning to carve them out of existing SS taxes, then you have the problem that we need 100% of existing SS taxes just to pay current benefits. The same tax dollar can't be used to buy $1 of stocks and pay $1 of benefits, one of those dollars has to be borrowed.
If you think the repayment from a 5% tax on the gain is going to offset this expense "soon", just imagine an agreement between us. You give me $1,000. I'll invest it in stocks and give you 5% of my gain, when will you be whole? Now suppose you give me $1,000 every year, when will you be whole?
Maybe you mean that #2 and #3 are really one idea, #3 is just clarifying how fast dollars go into the individual accounts? If so, the problem is the 100% above, there are no "extra" dollars to fund the IAs.
Borrowing is always fashionable with some people, I don't think either of us wants to see it on the scale necessary to make these proposals work. You're "sure there are ways", but with the thousands of people who have thought about this, nobody has come up with one yet. Replacing our paygo SS with a mandatory individual account system will require substantial new taxes, or cuts in benefits which are much deeper than the cuts necessary to balance the existing system, or huge borrowing (coupled with willful ignorance of how the asset markets would respond to that borrowing). There are no painless methods.
Rustic23
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Life Expectancy is something I know very little about. It is one of those things often quoted, but I bet few among us really understand the data behind it. I think it changes with age. i.e. the life expectancy of an infant, say 85, is different than a 90 year old say 95. In order to really compare, and IMO, to discuss SS's as it relates to social, racial, and economic groups, you would need to look deeper in to LE statistics. Seems to me you need to look at LE at different ages. What is the LE for each group at say 21? Is it closer? How about 30 or 65? If a group has a higher teen death rate, does that effect the argument? I don't have the answers.
Emeritus
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La majestueuse égalité des lois, qui interdit au riche comme au pauvre de coucher sous les ponts, de mendier dans les rues et de voler du pain.
Securing the general Welfare is one of the reasons people founded this country.
Independent
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I am 39 years old and at this point don't expect a dime back from SS, and, despite the handy statements that I am sent regularly. For the good of all, I would be willing to continue to contribute some amount to pay for those who above a certain age who were "promised" benefits and will rely on them to live (sorry Mr. Gate and Mr. Buffett..you are out, as means testing is a great idea)
The bottom line for me is that I do not want the federal government having any part of my retirement planning or investing. I can find better, smarter, more efficient, and higher yielding options on my own.
I will agree to pay a small tax into a "social security"-like fund that will provide for those that simply don't have enough money to take reasonable care of themselves.
I, morally, cannot demand that other people fund my retirement with their hard earned money. And, I cannot understand why anyone would willingly choose the federal government to manage their money for them (ex: see federal deficit & debt). How about this to make everyone happy, let the federal government's retirement program compete in the open market with all the other investment options and those that think it's the best can send in their money for handling
Again, it's an interesting debate and I continue to be surprised by all of those who think SS is a good program for us all....
This reminds me of Milton Friedman. While other "libertarians" wanted to replace SS with some mandatory savings system, MF said we should eliminate it and replace it with nothing. IMO, MF had the consistent position.
Here are a couple practical comments:
The "some amount" that you are willing to contribute needs to be just about the entire current tax rate. Ten years from now, the currently scheduled benefits will requires 107% of the current tax rate. All the people collecting then are probably in your "above a certain age" group. 15 years from now, we'll need 117% of the current rate, and 20 years from now we'll need 125%. I'm guessing that all the cuts you were thinking about will be needed simply to live within current taxes. So you would need to pay the current tax rate throughout your working career even if we could change the law today.
SS may be unique among gov't programs in that a family can choose to partially opt out. You can start now by telling your children that when you retire you will apply for any benefits that are still available, but you will immediately split those benefits among them to offset the SS taxes they pay. IMO the important thing is to tell them now, so it will be hard to change your mind when you're older. This solves the moral issue within your family.
If all the people who think like you did this, they would erode the importance of SS in a single generation. Your generation may not be able to assemble the political majority to change laws today, but your children's will have a much better chance if many of them know they are already effectively outside SS.
kyounge1956
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I chose age 5 because the original suggestion was to increase retirement age for everyone born after 2000, and the age 5's were the first age group in the statistics who would fit that description. However, white people have longer life expectancy than blacks up to age 75. At age 80, it is essentially equal, and over 80, life expectancy is a year or so longer for blacks than for whites. However, significantly fewer black people live to age 80 than whites, especially black men (see table B on pg 3 of the report).
Neither Emeritus nor I suggested that policy should be based on this. You "called him out" for something he didn't say. What we both said is that the raising the retirement age to 70 would affect blacks disproportionately, and the data bears that out. Maybe this discrepancy is, as suggested elsewhere in the thread, more of a high income/low income effect, and partly or fully canceled out by the progressive nature of SS benefits. Other policy changes that have been suggested, such as removing the income cap on SS tax, would, I suspect, affect white people disproportionately, because a greater percentage of white people than blacks have wages above the current cap.
I know! Remove the income cap and raise the retirement age to 70.
ziggy29
Moderator Emeritus
Frankly, in this economy, I think raising the age to 70 is a nonstarter simply because of its impact on unemployment even if it is the right thing to do actuarially. If you change the "workforce" from roughly ages 20-65 to 20-67 and then 20-70, you have a larger percentage of people who have to work in an era when there aren't enough jobs for those in the smaller workforce -- let alone the expanded one.
haha
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Quick reality check- there will be gamers, ad dsome will go for the moon in their private accounts, figuring that they are backstopped by what you are calling the insurance aspect.
Ha
Yes, that could happen. There are at least two things that would oppose this tendency:
1) Many of the proposals set limits on what the investments could be in (maybe indexes, etc), some opened the door to wider options for some of the money when people attained a certain asset level. So, it would be impossible for someone to gamble on pork belly futures because that option simply isn't available.
2) The "safety net" makeup checks are available to investors whose personal accounts don't produce an annuity payout equal to some baseline amount. If past history is any guide, investors in the conservative investments above will be well above this baseline amount by retirement age. Even if all the "safeties" were removed, a prospective retiree who has accumulated a nut that will throw off $3K per month and which can be passed on to his heirs would seem unlikely to bet it all aggressively in hopes of getting still more, knowing that the safety net promises just $1500 per month, and which stops on his death. Marginal utility theory and all . . .
But it brings up a point--the present system provides a baseline income to all participants. How much would individual savings go up (to the benefit of private industry and society as a whole) if the safety net were totally gone or at least much lower? Given that, what's the true cost of this safety net? I think many politicians know the political impact this net has, and they revel in it, seeking all the time to increase public dependency for the long-term benefit of their philosophy. The more folks who have a stake in higher government benefits, the better they and their friends will fare over time.
keegs
Recycles dryer sheets
Ron,
What I meant is that in our free market system, where many alternatives are available, voters have declined the privatization option.
SS is just like any other fixed annuity, you don't get to pick how the issuer invests the funds. My understanding is that SS funds are invested in treasuries backed by the full faith and credit of the US government. It's a credit worthiness that investors continue to flock to.
The only threat to your investment in social security is the voter. Which leads me to assume that these arguments about SS serve an ideological agenda.
MasterBlaster
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So what do you do when the trust fund isn't available and the SS taxes coming in don't pay for what is promised ?
What's your plan then ?
ziggy29
Moderator Emeritus
Actually, "voters" haven't declined anything other than that they didn't vote for enough supporters of "privatization" to get it passed. It's not like they were given a direct referendum on a single issue.
Plus, as much as voters tend to support the generic idea that "we need change," they tend to oppose significant change when they hear the details of the proposal -- regardless of the issue involved.
Rustic23
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Keegs,
I am in the camp that voters did not vote. Lots of spin in the news, but I don't remember either party bringing this to a vote.
I also have a problem with the government investing in their own government bonds, and saying this is the safest. I bought some bonds from myself, they pay 50% interest, and I can't think of anyone I trust more than me. I am now worth over a billion dollars, however, I am going to have to borrow a ton of money to pay myself.
The government took in SS tax, turned it into general fund revenue via bond sales, and spent the revenue. Just where do you propose they are going to get the money to pay back those bonds? With a trillion dollar annual deficit, it sure looks like it is going to be borrowed.
I am in the camp that voters did not vote. Lots of spin in the news, but I don't remember either party bringing this to a vote.
I also have a problem with the government investing in their own government bonds, and saying this is the safest. I bought some bonds from myself, they pay 50% interest, and I can't think of anyone I trust more than me. I am now worth over a billion dollars, however, I am going to have to borrow a ton of money to pay myself.
The government took in SS tax, turned it into general fund revenue via bond sales, and spent the revenue. Just where do you propose they are going to get the money to pay back those bonds? With a trillion dollar annual deficit, it sure looks like it is going to be borrowed.
ronocnikral
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Do tell how I could invest more than the mandated $6620/yr. I never thought about it this way and it seems like such a great deal! Anyone else want a piece of this action?
ziggy29
Moderator Emeritus
Become self-employed. Then you could invest twice as much.
ronocnikral
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Become self-employed. Then you could invest twice as much.
touche. i often forget DW has to do this, as my wages from the business have no SS. i'm fortunate to have such a kind employer to pickup the other half for me.
keegs
Recycles dryer sheets
keegs
Recycles dryer sheets
You're right Ziggy...there wasn't a referendum.
Emeritus
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Andrew Samwick, a Dartmouth economist who was chief economist at the Council of Economic Advisers early in the George W. Bush administration, expressed a view most economists endorse: "You know that the tax cuts have not fueled record revenues. You know that the first effect of cutting taxes is to lower tax revenues. The ultimate reduction in tax revenues can be less than this first effect, because lower tax rates encourage greater economic activity. No thoughtful person believes that this possible offset more than compensated for the first effect for these tax cuts. Not a single one."
As noted at the top of this column, Joel Slemrod, who served as a tax specialist on the staff of Ronald Reagan's Council of Economic Advisers in the 1980s, strongly agrees.
So does Martin Feldstein, a Harvard economist who headed the CEA in Reagan's first administration. Feldstein led the respected National Bureau of Economic Research for 30 years.
And there's Greg Mankiw, who headed the CEA for George W. Bush and made the "cranks and charlatans" remark about advocates of self-paying tax cuts.
These are just four highly respected economists who served in Republican administrations. One could go on and on listing others. And it is exceedingly difficult to find any prominent ones who disagree with them.
Read more: Lotterman: The myth of tax cuts that pay for themselves poses a threat | Edward Lotterman's columns | Idaho Statesman
As noted at the top of this column, Joel Slemrod, who served as a tax specialist on the staff of Ronald Reagan's Council of Economic Advisers in the 1980s, strongly agrees.
So does Martin Feldstein, a Harvard economist who headed the CEA in Reagan's first administration. Feldstein led the respected National Bureau of Economic Research for 30 years.
And there's Greg Mankiw, who headed the CEA for George W. Bush and made the "cranks and charlatans" remark about advocates of self-paying tax cuts.
These are just four highly respected economists who served in Republican administrations. One could go on and on listing others. And it is exceedingly difficult to find any prominent ones who disagree with them.
Read more: Lotterman: The myth of tax cuts that pay for themselves poses a threat | Edward Lotterman's columns | Idaho Statesman
