Social Security in Trouble

[mikex]

Guess you heard, SS will be in trouble years earlier than the last prediction. Now I think it's 2037 instead of 2041 before it busts, and 2016 before it pays out more than it takes in. I will probably be able to get something out of it (I'm 51 and plan on taking SS at 62), but for how long?

What are the solutions? Don't you think means testing is part of the solution? Also, they better start making some decisions for very young workers quick, because if they pay into it for 30 years and don't get anything out of it, there's going to be hell to pay when they get to be in their 60s. I'd decide on a cutoff date (if taxes are'nt going to be raised to fund it) and tell the young workers to start funding their retirement by other means. At least they'll have been warned.

 

[shotgunner]

If Social Security should become means tested it would become a welfare program for the needy. I suspect the first thing to be done to help the numbers will be to eliminate the earnings cap so that every dollar of earned income is subject to FICA. the next step will be to further increase eligibility age, followed by lower payouts followed by higher FICA tax.

 

[ziggy29]

What are the solutions? Don't you think means testing is part of the solution?

The more we means test benefits for everything and the more we tax those remaining to pay for it, the more we encourage the "ants" to become "grasshoppers" and discourage people from being productive and profitable. Encouraging more tax *payers* to become tax *consumers* is not a long-term sustainable economic model, IMO.

 

[dshibb]

Shotgunner you clearly don't know much about this issue at all. Higher income individuals would rather be completely shut out of the system than have the cap thrown out because the return on the excess money and still getting SS would be at least negative 25%. Throwing out that cap would be one of the biggest tax increases in history. Means testing will most likely happen, and mathematically its supported by those that would lose it.

 

[shotgunner]

Shotgunner you clearly don't know much about this issue at all. Higher income individuals would rather be completely shut out of the system than have the cap thrown out because the return on the excess money and still getting SS would be at least negative 25%. Throwing out that cap would be one of the biggest tax increases in history. Means testing will most likely happen, and mathematically its supported by those that would lose it.

Oh I understand the issue alright. The desires of the high earners may not matter. We have a President who has stated that people who earn over $250K are rich, he has already floated the idea of removing the cap and he has a willing Congress to go along with his ideas. The idea of having one of the largest tax increases in history would seem to follow the idea of some of the largest deficits in history don't ya think?

http://www.taxfoundation.org/blog/show/23353.html

 

[dshibb]

"the next step will be to further increase eligibility age"
This should be the next step, but good luck. I personally expect that they will means test it and cutback on benefits by changing the formula, freezing its wage inflation index, etc. That is just an honest assessment of the political will.

Still though, the best move is private accounts(when this issue came up it was accompanied by the worst explanations I have ever seen in my life, the vast majority of the public still doesn't understand that plan). It should get younger people off the system. Then the goverment will be able to justify taking on a little bit more debt and cutting into other programs because one day 20 years down the road, the entitlement will all but stop and the savings would more than pay off the debt.

 

[dshibb]

It wont pass, period. There isn't a doubt in my mind about that. But you made it sound like you thought it was good policy.

 

[ziggy29]

Still though, the best move is private accounts(when this issue came up it was accompanied by the worst explanations I have ever seen in my life, the vast majority of the public still doesn't understand that plan).

That's not going to be an easy sell with a lot of people's 401K plans down by a third or more, and in a time when a lot of people wish they could trade theirs for a DB pension. The last thing they'll want is to trade the only pension-like retirement plan they have for another 401K.

 

[Bikerdude]

The solvency of SS has always fluctuated with the state of the current economy and future predicted economic growth rate. I think they use 1%, which some argue is too low. The current administration is using the state of SS and medicare to set the stage for "reforms". You can expect to hear more bad news about both until the "solution" is put on the table.

SS is already means tested to some extent (and growing with inflation) with the way its taxed.

 

[shotgunner]

More of Obama's thoughts on the Social Security System referenced here:

Obama on Social Security - Eliminate the Social Security Payroll Tax Cap?

Good Policy? I subscribe to "Don't tax you and don't tax me, tax that man behind the tree" :-D

 

[dshibb]

I've commented on this in two separate threads. So allow me to quote the key part.

"It is crap because the average rate of return that baby boomers will receive on their money will be 1 percent a year and for the next generation most likely 0 or negative. And by definition the government can't produce "good returns" on anything. If the democrats can't stomach SS going into the markets(and they fail to acknowledge that a portion of the money would purchase secondary guarantees that specifically stated that if the market crashed, the secondary guarantee would bring your balance to the same amount that you would have gotten under the current system) then fine allow people to move the money out of the government into fixed income investments earning 3 to 5 percent(with no risk) instead of the 1 percent they are getting now. Anybody that says that people would end up with less in private accounts instead of government run is either A) a liar or B) ignorant."

 

[dshibb]

I don't care what his thoughts are. It wont pass. It wont even pass the house, its political suicide for to many congressmen.

You don't understand that all of his "major" proposals are crashing before his eyes, and when he takes a shalacking on the budget he will realize that. Then he will readjust, and start passing bills that are bareable to a couple of republicans. He's already burned to many of his own congressman, and he is expending political capital on crap faster than any other president in American history. This is Jimmy Carter all over again, and he had even more senators and reps.

 

[shotgunner]

I don't care what his thought are. It wont pass. It wont even pass the house, its political suicide for to many congressman.

His thoughts and actions as POTUS does matter. Democrats have a history of passing higher taxes and more regulations yet they control both the White House and Congress at the present time. My advice, never say never. Most of us can only watch what happens and deal with it as best we can.

 

[dshibb]

I'll acknowlege that the situation can change, but right now he looks screwed. Regulation is a different story. A $hitload of that is coming down the pike.

In the last 50 years the democrats have controlled more house and senate seats in a lot of sessions. They weren't able to do things as dumb as what he wants to do, and now we have the internet, C-SPAN, the new media, etc. His big ones will crash and burn.

 

[mikex]

I think SS is important to get straightened out. A lot of companies are doing away with their pensions (like mine, but it doesn't affect me, only new hires), and let's face it, a lot of people just aren't responsible enough to save properly for retirement, or just don't have the extra cash, they're lucky to have a job in a lot of cases.

We need to increase the tax (a little), reduce the benefits (a little), and look, if you have 10 million dollars, I think you can probably muddle through retirement without the SS check coming in - you don't need it.

 

[DayDreaming]

I'd hate to see this happen, but the age at which you could take SS should be much higher. When SS was started in 1935, it was never meant to provide 30 some years of income for retirees - people didn't live that long past age 65, but now we do. Something has to change.

 

[dshibb]

Why do you need to increase the tax? Just cut back on spending elsewhere and allow SS to raid into other portions of the budgets for a couple decades. Since the revenue for those other things do come predominately from wealthier American's it will be like you ending the cap without giving a tax increase.

 

[dshibb]

Actually the average life expectancy wasn't even to 65. I believe it was 63. So essentially FDR created a program where more than half of the public wouldn't ever be able to participate.

 

[mikex]

Why do you need to increase the tax? Just cut back on spending elsewhere and allow SS to raid into other portions of the budgets for a couple decades.

OK, how about Medicare?

 

[dshibb]

Simple voucherize it, you could allow every single person on it to go get the best policy on the market, give them $5K a year and still save money. I personally would give them $2K in their HSA instead of the 5(just making a point) and cutout the rest.

 

[Martha]

I think SS won't be that hard to fix. I do think raising the retirement age is a mistake. A lot of people take SS early at 62 because they are already so beat up by work and life. Very few are able to hold off past 66.x.

Although life expectancy has increased, most of the extra length is due to reductions in very early deaths. A pre 20th Century individual who lived past the teenage years could expect to live to an age close to the life expectancy of today.

So raise the tax cap.

Medicare is a bigger problem.

 

[ziggy29]

I think SS won't be that hard to fix. I do think raising the retirement age is a mistake. A lot of people take SS early at 62 because they are already so beat up by work and life. Very few are able to hold off past 66.x.

Another problem with raising the retirement age is that there has to be additional jobs for all these older people who used to be able to retire. Do you see those jobs out there? I don't...

 

[Westernskies]

Any eligibility change is SS age grids should be implemented to affect younger workers (they presumably will live longer thanks to the benefits of medical science) who are not paying into the system now- those of us who have been paying SS taxes for 20-30-40+years to help fund our retirements have done so against a very clear set of expectations.


Besides, we all grew up with spankings when we misbehaved; lived with chain smokers and secondhand smoke; ate 4% butterfat milk and 12% butterfat ice cream; sugared soft drinks and saccharine; scotch whiskey from a flask and beer from a metal can, ate steaks, chops, and eggs- including the yolks. drank flouridated water from the garden hose; rode in the backs of pickup trucks and in cars without seat belts, no bike helmets or tofu; watched grainy B&W TV, took plain aspirin, and prepared for the Cold War. We clearly weren't expected to live this long.

 

[dshibb]

"So raise the tax cap."
Don't need to.

"Another problem with raising the retirement age is that there has to be additional jobs for all these older people who used to be able to retire. Do you see those jobs out there? I don't..."
Obviously with exception of the current economic climate, this statement shows a clear lack of knowledge of economics, no offense. Jobs aren't finite they build off each other. AKA there isn't a big pie of jobs out there where one person getting one deprives another of one. As certain jobs are created, those workers have money to spend. So, more jobs need to be created to increase production for those previously hired workers.

Actually as evidenced by China, India, etc. having more workers is a plus to your economy. Just take a look at the difference between a small town and a city. Which has more wealth? Labor is a commodity, more of it increases everyones wealth. I'll admit that right now our current situation is a unique one in world history, and does provide certain temporary problems. Adding a billion workers overnight is a huge shock to the system, traditionally the increase in labor is more gradual(a good thing). So much, so fast will mean that the world will grow faster, but at the expense of some labor wage stagnation, which tends to piss off many Americans.

 

[ziggy29]

Obviously with exception of the current economic climate, this statement shows a clear lack of knowledge of economics, no offense.

You know, you've been having some trouble making your points without being insulting or condescending.