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Old 07-12-2018, 06:50 AM   #241
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we now have annual infusions from the US government every year to pay SS benefits
Sorry. You are simply incorrect. There are no annual infusions.

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it eliminates the bookkeeping "procedures" that were convenient at the time, but which just kick liabilities down the road to future generations, which is what we are already experiencing.
Very confusing. Of course Social Security is pay as you go.

What liabilities do you imagine are currently being kicked down the road to future generations, other than the funding for future generations of recipients (which is by definition exactly how pay as you go works)?
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Old 07-12-2018, 06:58 AM   #242
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Back to the 62 70 discussion for a minute...

Have any of the analysis jockies run i-orp and have an opinion about it's effectiveness in the decision?

My last known position on this topic was "Don't take it unless you need it", but that position was not based on my numbers since neither DW nor I we're 62. DW, with fewer earning years, will be 62 next year, so the decision point is arriving. My plan has been to run a bunch of i-orp scenarios, varying life span, investment return, and of course age when starting to get SS. There's even an option to presume SS benefit cuts to play with.

I just wondered if the i-orp calculations "looked right" to those that have an eye for this math.
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Old 07-12-2018, 07:19 AM   #243
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Pay as you go means self-funding and no borrowing... and that is what SS is... by law.

That is why when the surplus and interest run out in 2034 that benefits will be cut by ~25%... at that point you will get your wish... SS benefits will be limited to the then current year taxes.
Plenty of ways to stave that off...e.g. simply doubling (not removing) the amount of the current wage cap, increase FRA to 70.

Though I do think it is prudently conservative to choose the "75% SS benefit option" that i-ORP offers.
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Old 07-12-2018, 07:57 AM   #244
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But it's not pay-as-you-go as far as SS is concerned. Pay-as-you-go would mean every collected dollar goes to beneficiaries-->paid out as we go. If we linked SS benefits directly to current year SS taxes (in a slowly phased-in fashion) it eliminates the bookkeeping "procedures" that were convenient at the time, but which just kick liabilities down the road to future generations, which is what we are already experiencing.
I'm not sure which liabilities are being kicked down the road under the current system that wouldn't be kicked down the road under pure paygo.
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Old 07-12-2018, 07:58 AM   #245
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If you're so inclined you might try this game to look at different options to solve SS.

The Social Security Game | American Academy of Actuaries | American Academy of Actuaries

It's a bit dated but still relevant.

If I eliminate the wage cap but allow an increase in benefits commensurate with the additional taxes paid that solves 71% of the problem. The rest of the problem can be solved by either applying the payroll tax to health insurance premiums (32%) or gradually increase the FRA from 67 to 69 (40%... also see post #220 above).
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Old 07-12-2018, 08:04 AM   #246
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+1 IIRC when SS was first established and the retirement age was 65 someone would be expected to collect retirement benefits for 13-15 years... by 1980 that had increased to 15-19 years... so in response, the FRA was changed to 67 in 1983 .... this brought the years that one would collect back to 13-17 years... however, medical advances have significantly improved mortality since 1983 and IMO an increase in FRA to reflect those improvements in mortality are long overdue. IOW, make occasional changes to FRA to reflect mortality improvements so on average people collect for 13-15 years after they retire as one way of preserving the system.
Click on C here and you'll get the financial impact of various types of adjustments to the retirement age. Option C2.2 looks like one type of indexing.

https://www.ssa.gov/oact/solvency/provisions/index.html

The political push-back is that mortality trends are correlated with income. Generally, higher income people are living longer, lower income people aren't.

So, we'd be cutting benefits for everyone because higher income people collect for increasingly long retirements.
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Old 07-12-2018, 08:39 AM   #247
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Click on C here and you'll get the financial impact of various types of adjustments to the retirement age. Option C2.2 looks like one type of indexing.

https://www.ssa.gov/oact/solvency/provisions/index.html

The political push-back is that mortality trends are correlated with income. Generally, higher income people are living longer, lower income people aren't.

So, we'd be cutting benefits for everyone because higher income people collect for increasingly long retirements.
Thanks for the link, it was enlightening. Raising FRA is not as big an impact as I thought it might be. The biggest hitters, by a looong shot are:

1. Raise SS payroll tax rate (doesn't take much to make a huuuuge difference)
2. Raise the maximum taxable salary (not as big as 1, but still a big impact)

Everything else just seems to be noise other than eliminating COLA.

I'd be ok with raising the SS payroll tax rate by 0.1% annual increment up to a maximum of 14%. I would also be ok with eliminating the maximum salary limit all together but phasing in the tax above the limit by 0.1% annually until it reached a maximum equal to the base payroll tax. Would also be nice if they would adjust the bend points so there is some benefit to the increase in taxes.
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Old 07-12-2018, 08:49 AM   #248
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Sorry, Mom. The government says you have to go on welfare rather than Social Security. And of course that means you'll have to work too, since welfare is now subject to a work requirement. Good luck with those "generous" benefits though. No retirement for you I guess. Thanks for playing! This hypothetical future is run (for some).


Your Social Security is already welfare, just with a name that allows you to feel better about it

And I don't see how you solve "today's funding crisis" by moving benefits from one program to another.
We'll just have to agree to disagree. My hope would be that folks like you mother would be well taken care of in our society which likely can afford to do so. I'm just not a fan of lumping welfare benefits and retirement benefits into a single funding scheme. I think it makes it too easy for the politicians to kick the can down the road and to avoid calling a spade a spade.
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Old 07-12-2018, 09:07 AM   #249
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nue with the system we have.

The only possible exception is raising the taxable cap. I believe I've seen at least one poll where that got more than 50% support.
Of course. This concept is an example of a key part of the "American Personality." Anytime one group can benefit at the expense of another, it's popular with the group that benefits! (Stand, remove your cap and place your hand over your heart!)

An alternative/additional SS revenue raising concept is simply increasing the FICA tax. This is popular with those already collecting SS and those nearing that time (for obvious reasons). Again, the benefactors like benefitting at the cost of others!

I think we need to find compromise between the generations. For example, geezers near or already collecting take a means-based hit. Youngsters will also collect less and also pay more FICA (higher rate + higher ceiling) but not as much of an increase as if geezers didn't take a means-based hit. *

*means-based to be formulated so that low income SS recipients are not driven further into poverty. Or, provide them with a welfare-based supplemental income based on their finances.
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Old 07-12-2018, 09:12 AM   #250
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Everything else just seems to be noise other than eliminating COLA.
That's true financially, but not politically.
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Old 07-12-2018, 09:14 AM   #251
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That's true financially, but not politically.
True dat.
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Old 07-12-2018, 09:16 AM   #252
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My hope would be that folks like you mother would be well taken care of in our society which likely can afford to do so.
I would hope the same for everyone's mother. Sadly, it hasn't always worked out that way.

Mine passed away a few months ago, so it's no longer her problem.

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I think it makes it too easy for the politicians to kick the can down the road and to avoid calling a spade a spade.
No idea what you mean by "spade" remark here.

It appears that kicking the can down the road is inherent in our political system. I'm not sure how "unlumping" changes that.
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Social Security at 62 - Yes or No
Old 07-12-2018, 09:19 AM   #253
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Social Security at 62 - Yes or No

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Not sure if someone pointed this out, (I may have missed a post) but Social Security is not SS. It is SSI. The "I" means Insurance. So when I see people talking about "getting" their money back it ignores the Insurance part of the equation. In particular disability insurance. All those years of paying in are not just building your old age benefit, they are "buying" you disability insurance. Insurance premiums are not something you get back So don't forget to subtract out yearly disability insurance premiums while calculating how much you "should" be getting back.

Urn2b:
You are wrong. SSI is welfare. Supplemental security income. For low income people.
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Old 07-12-2018, 09:23 AM   #254
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I'm not sure which liabilities are being kicked down the road under the current system that wouldn't be kicked down the road under pure paygo.
It depends on how the paygo system is structured-- is the program size set by demand (by a set benefit for each retiree regardless of available funds) or by supply (available funds from a payroll tax determine the size of the benefits)? A demand based program would allow obligations to be pushed to the future (making promises that future workers work would have to pay for), a supply-bounded program would not. On a national level, only the total spending on retiree benefits would be determined by the available funds, the task of apportioning it to individuals could be done in any way that is desired. I'd expect that a system to highly favor those of modest working income would be chosen (aka "progressive").
Most of us (particularly on this site) are comfortable with supply-bounded spending during our working years and in retirement.
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Old 07-12-2018, 11:17 AM   #255
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.... AFAIK, every change to SS that might reduce the future gap between revenue and benefits is politically unpopular. That's why we continue with the system we have.

(The only possible exception is raising the taxable cap. I believe I've seen at least one poll where that got more than 50% support.)
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Even when I was working and would have paid more I favored eliminating the cap to help the survivability of the program.
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Of course. This concept is an example of a key part of the "American Personality." Anytime one group can benefit at the expense of another, it's popular with the group that benefits! (Stand, remove your cap and place your hand over your heart!) ....
While many people are so self-serving, many are not.

It would be interesting to me if there are polls/surveys on eliminating the cap if people that are currently subject to the cap. Anecdotally, my sense is that those currently subject to the cap would be fine with eliminating it as long as their additional contributions count towards the calculation of benefits... and that one change would go 2/3rds of the way towards solving the problem.

ETA: Found this tidbit in a Washington Post article:
Quote:
..... In addition, 59 percent went further, saying they would support eliminating the cap on taxable earnings entirely. .....

.... in the survey, people with incomes over $100,000, who would be singularly affected by raising the cap on income subject to the payroll tax, favored doing so by the same large majorities as for those who would not be affected.
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Old 07-12-2018, 11:29 AM   #256
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While many people are so self-serving, many are not.
There's always room to see things in different ways....... My own experience is that most people are in favor of what benefits them at the expense of others, especially related to taxes and gov't spending. I wish it was different. I guess it depends on what you mean by "many."
Quote:

my sense is that those currently subject to the cap would be fine with eliminating it as long as their additional contributions count towards the calculation of benefits...:
The proposals I've seen wouldn't work this way. Folks making over the current cap, and thus paying more under the new proposals, would receive no additional benefits. They'd receive as though they contributed exactly at the cap.

But, who knows what we'll wind up with. I'll say it again, my hope is that today's young people don't get stuck with higher taxes while current geezers skate....... There needs to be compromise. It would be wrong for a young, working family to pay higher FICA and a multi-millionaire geezer continues to collect full SS. IMHO anyway..........
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Old 07-12-2018, 12:25 PM   #257
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.... The proposals I've seen wouldn't work this way. Folks making over the current cap, and thus paying more under the new proposals, would receive no additional benefits. They'd receive as though they contributed exactly at the cap. ....
There are competing proposals. See https://www.ssa.gov/oact/solvency/pr...ayrolltax.html

The one you referred to is E.2.1 and would solve 83% of the gap if there were no additonal benefits.... see https://www.ssa.gov/oact/solvency/pr...rt_run181.html

The proposal that I was referring to that removes the cap but allows additional benefits is E.2.2 and would solve 67% of the gap.
https://www.ssa.gov/oact/solvency/pr...rt_run193.html
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Old 07-12-2018, 12:58 PM   #258
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There are competing proposals. See https://www.ssa.gov/oact/solvency/pr...ayrolltax.html

The one you referred to is E.2.1 and would solve 83% of the gap if there were no additonal benefits.... see https://www.ssa.gov/oact/solvency/pr...rt_run181.html

The proposal that I was referring to that removes the cap but allows additional benefits is E.2.2 and would solve 67% of the gap.
https://www.ssa.gov/oact/solvency/pr...rt_run193.html
Thanks...... Great info! I guess I was blowing off E.2.2 because the cries of outrage from the "tax the rich" crowd had me thinking it could not happen....... And I was only catching snippets off the usual sensationalistic media outlets.

I'm long past paying FICA but if I was still paying it, having a reasonable formula where paying beyond the current cap (perhaps unlimited) got me at least a tad bit higher payout would make it much more palatable.

The 67% provided by E.2.2 coupled with a modest, means tested (to protect the near indigent) reduction in benefits to current and future recipients would probably do it and might be considered a fair compromise with no negative consequences for low income citizens.
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Old 07-12-2018, 01:55 PM   #259
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Pay as you go means self-funding and no borrowing... and that is what SS is... by law.

That is why when the surplus and interest run out in 2034 that benefits will be cut by ~25%... at that point you will get your wish... SS benefits will be limited to the then current year taxes.
and AARP will be out of business..........
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Old 07-12-2018, 04:03 PM   #260
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and AARP will be out of business..........
One can only hope.
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