Social Security: a positive note for Gen X/Y

[FinanceDude]

Originally Posted by Lusitan

FinanceDude - that sucks that your mother died when you were so young, but your situation is exactly the thing I was thinking about when I posted my positive note about SS for younger workers.

Well, obviously I would rather have had my mom than the money, but it did help.

However, my sisters being penalized by dying before she could collect without a spouse or children is something I think could be changed.

You could easily allow a single person to elect a beneficiary to receive a reduced benefit (50% or something) to someone that's related by blood, or their favorite charity. You could structure it si SS only pays for a finite period of time.

For instance, my sister had NO plans to get married again or have kids (she was too old), but I am sure she would have loved to leave a 50% benefit to some of the causes she beleived strongly in..........

[armor99]

Originally Posted by igsoy

Your saying, hey, they can go to college or get training doesn't make it so, and it doesn't magically mean that people who barely got through 9th grade can find a way to be as successful as you just by working hard. But I don't think I'll convince you of anything, you seem like you don't want to stretch your world view to consider the large numbers of disadvantaged people I am suggesting.

Interesting point of view igsoy. So you are saying that these folks are not smart enough to figure out a way to increase their income. That because of their lack of intelligence they are only able to get minimum wage type jobs. Fair enough.... I see your point. But at the same time these same people ARE smart enought to raise a family, own their own home, or vote for the president of the US? The point that I am trying to make, is that to be a complete person means that you take ownership over all the parts of your life, not just some of them. There are many professions out there that make far superior salaries to "minimum wage" and do not require people to be in the top 10% of intelligence category. Electricians, carpenters, and plumbers come to mind, but I am sure if I thought about it, there are many others to choose from.
You are also implying by your statements that because these folks are less fortunate due to their low intelligence, that the rest of us that do have higher intelligence "owe" them something. Merely for the fact that we have more than they do. Do NBA or NFL stars owe less athletic folks anything? I will never be as handsome as Brad Pitt, does the man own me anything because he won the "good looks" birth lottery, and I did not? Ok... the above two examples are silly at best, I admit it, but there are lots of people that imply that if you were born smater than someone else, and that enabled you to get a higher paying job, that you now "owe" less intelligent people some of your earnings. To me it seems the same sort of reasoning.

[youbet]

Originally Posted by FinanceDude

I will add that some tenets don't work as well, for instance, my sister died after paying into SS for almost 30 years, and with no spouse or children, it got reabsorbed into the pot..............

Try to remember that there is an insurance component involved. If your sister had qualified dependents, SS would have paid. She didn't need the insurance to support dependents, so it didn't. SS premiums would be higher, possibly much higher, if it paid out uncollected balances to heirs as you're suggesting.

I haven't started to collect SS yet. DW cannot collect any of my SS, and doesn't have her own SS, due to working as a teacher. So, if I die before collecting it will be the same situation as your sister. I will have paid all my working life and not collected, nor will my heirs collect. On the other had, had I died when I was 22 yo, my son would have received payments.

Given the current financial status of SS, I doubt we'll see a change where uncollected contributions are refunded to heirs.

[Rustic23]

I am old enough to take SS, and it will be about 1/3 of our retirement income.

However, I am aware that several Counties in Texas chose to opt out of SS. NCPA - BA #215 - Some Americans Already Have Privatized social Security
As you can see they are doing much better than SS. A worker making $20,000 a year for 40 years of work would get $775 a month from SS. If you were a Galveston employee, you would get $2,740 a month. A worker making $50,000 would get almost $7,000 a month!! Three times more than the max SS payment currently. Now I don't know if their plan would have worked for the entire county, however, I can't imagine anyone in Galveston asking to go under SS.

[FUEGO]

Originally Posted by FinanceDude

If you don't have kids, that might work ok. If your spouse works at a steady job, and the money from SS will NOY change their economic status, then it will work for you........

I don't understand this comment. I have kids, and they are the primary reason the SS survivor benefit is so large for me. Each of the kids are entitled to a benefit as well as a surviving spouse caring for dependent children. My point is that the SS benefits will essentially pay for our family's current expenses (sans either me or DW) so that any earnings from the surviving spouse working would be devoted to raising the standard of living or devoted to savings.

If my income went away due to my premature demise, it would impact the surviving family's economic situation by reducing the amount we save, but not requiring alteration in our expenses.

My point is that between the very substantial SS survivor's benefits for those with families, personal savings and debt forgiveness, my family would be doing ok.

[youbet]

Originally Posted by Rustic23

, I can't imagine anyone in Galveston asking to go under SS.

It sounds like you are misreading the article. This only applies to gov't employees in those counties, not all citizens.

[Lusitan]

Fuego - that's one of the benefits of living a frugal lifestyle. We are the same way - our monthly expenses are roughly 50% of post-tax income. While SS survivor benefits for my wife and child would not completely cover our monthly expenses, it definitely would cover a significant chunk. Combined with the employer-provided life insurance I have, my wife could maintain our current lifestyle without even factoring in any supplemental life insurance.

That said, I am still going to factor in some supplemental life insurance, given that SS survivorship benefits are not guaranteed (e.g. the law might change in 10 years). For me, I'm comfortable counting on something like 50% of the calculated survivorship benefits. And again, going into all these calculations is the fact that our current plans call for me working only until I'm 40 or 45, so if I were to die after I FIRE it will not be such an economic hit to my family (in fact, from a strictly financial perspective, it will be one less person to support from our FIRE stash).

[FUEGO]

Originally Posted by Lusitan

Fuego - that's one of the benefits of living a frugal lifestyle. We are the same way - our monthly expenses are roughly 50% of post-tax income. While SS survivor benefits for my wife and child would not completely cover our monthly expenses, it definitely would cover a significant chunk. Combined with the employer-provided life insurance I have, my wife could maintain our current lifestyle without even factoring in any supplemental life insurance.

That said, I am still going to factor in some supplemental life insurance, given that SS survivorship benefits are not guaranteed (e.g. the law might change in 10 years). For me, I'm comfortable counting on something like 50% of the calculated survivorship benefits. And again, going into all these calculations is the fact that our current plans call for me working only until I'm 40 or 45, so if I were to die after I FIRE it will not be such an economic hit to my family (in fact, from a strictly financial perspective, it will be one less person to support from our FIRE stash).

Sounds like we save a similar % of income. I figure with all the sources of money the family would get if me or DW passes away, we'll be ok. Employer provided life insurance plus a currently significant portfolio will go a long way to provide support if SS survivor benefits get trimmed. And as the years go by, the portfolio will only grow with market returns and new contributions. Plus we pay down debt every year. For a typical "frugal" family that saves 20% of income, I can easily see the need for supplemental life insurance to maintain a pre-catastrophe standard of living.

[Rustic23]

I realized it was Government only, that does not mean that had 'regular' citizens been able to take advantage of the same system they would not be better off. For me, it shows that the SS system is a flawed retirement system and one that should be changed. I will also admit that just because the Galveston system succeeded, there is no guarantee that a national system modeled around it would have done as well.

However, a system that allows Government to take your money and then spend it by buying it's own debt, which is then re-payed by the same citizen they took the money from, is IMO horribly flawed!

[FinanceDude]

Originally Posted by FUEGO

I don't understand this comment. I have kids, and they are the primary reason the SS survivor benefit is so large for me. Each of the kids are entitled to a benefit as well as a surviving spouse caring for dependent children. My point is that the SS benefits will essentially pay for our family's current expenses (sans either me or DW) so that any earnings from the surviving spouse working would be devoted to raising the standard of living or devoted to savings.

If my income went away due to my premature demise, it would impact the surviving family's economic situation by reducing the amount we save, but not requiring alteration in our expenses.

My point is that between the very substantial SS survivor's benefits for those with families, personal savings and debt forgiveness, my family would be doing ok.

What's "debt forgiveness"?? The point I am trying to make is that as long as your family's welfare will NOT change due to the death of you or your spouse, then I think it's ok.

I have personally seen situations where the major breadwinner dies, and the remaining spouse either has to find a job or find someone with the means to support them, and vitually NONE of those scenarios end well..............

[FUEGO]

Originally Posted by FinanceDude

What's "debt forgiveness"??

Certain debts extinguish upon the death of the debtor. For example, the student loan that I owe is very large (mid 5 figures). This debt is not required to be repaid in the event of the death of the debtor. DW has the same level of student loan debt. This means a big debt and a big monthly payment goes away in the event of a premature demise.

[Oldbabe]

Originally Posted by donheff

Correct
I beg to differ. It is people (my generation and yours) that believe as you do (per the paragraph below) that INTENTIONALLY drove the Federal government deep in debt in the 80s and again in the last 7 years who made the promises unsustainable. I always voted against them and would gladly support policies that are not kind to my (relatively) deep pockets to keep those promises.

The neo-con slogan "starve the beast" has been at play here during the bush years. Some of us liberal boomers are very much aware of this; it's the conservatives who are in denial about the reprecussions of their own policies. In the next administration, I hope that decent people will once again take charge. YES, we need programs like Social Security and Medicare that help to support old people who can't take care of themselves.

Obviously we can't continue social security the way it's set up. Seniors with middle class and higher incomes are going to take a cut in benefits. And Medicare is going to be reduced. The programs as they are currently designed are not sustainable.

Check out the book "Where Does the Money Go?: Your Guided Tour to the Federal Budget Crisis," by Scott Biddle and Jean Johnson to get a clear picture of what faces us.

[Notmuchlonger]

Originally Posted by Oldbabe

The neo-con slogan "starve the beast" has been at play here during the bush years. Some of us liberal boomers are very much aware of this; it's the conservatives who are in denial about the reprecussions of their own policies. In the next administration, I hope that decent people will once again take charge. YES, we need programs like Social Security and Medicare that help to support old people who can't take care of themselves.

Obviously we can't continue social security the way it's set up. Seniors with middle class and higher incomes are going to take a cut in benefits. And Medicare is going to be reduced. The programs as they are currently designed are not sustainable.

Check out the book "Where Does the Money Go?: Your Guided Tour to the Federal Budget Crisis," by Scott Biddle and Jean Johnson to get a clear picture of what faces us.

You might want to blame the past 5 administrations also for not "DOING ANYTHING" about social security either. Its very naive to blame it all on Bush.

[youbet]

Originally Posted by Rustic23

I realized it was Government only, that does not mean that had 'regular' citizens been able to take advantage of the same system they would not be better off.

Actually, if regular citizens had been included, it would have been a completely different system. They reason the government employee only systems (such as the one in Galveston you referenced and some teacher systems) pay higher pension amounts for a given working income than SS is that the members of the system are all decently compensated and there are no spousal benefits. SS pays relatively generously to low income folks at the expense of high income folks. The local govt systems generally don't have low income employees. And SS will pay a non-working spouse 50% of the working spouses benefit whereas the local govt systems do not. And there are a number of other differences.

Don't misunderstand, I like the local govt systems and would have opted for one over SS if I had had the choice. But they're not an apples to apples comparison to SS because they don't have to provide for the masses, just their own nicely compensated members.

[Rustic23]

I am not sure where you are getting your information that Governments don't have low income employees. Or maybe it is your definition of 'low income'. I worked for a Harris County, Tx agency. We had 750 employees. Over 95% of them made less than $18,000 a year in 2000. They now make about $23,000 a year. To me that is 'low income'. Also, I don't understand as the Galveston system pays a $20,000 a year employee almost $24,000 a year. Much more than SS would pay. Now if you are talking low income as below the poverty level, then you may have something, however, I would bet that they would come out better.

As far as Spousal benefits, I think most folks would see that twice their current SS is better than 1/2 their SS that is the spousal benefit.

[FinanceDude]

Originally Posted by FUEGO

Certain debts extinguish upon the death of the debtor. For example, the student loan that I owe is very large (mid 5 figures). This debt is not required to be repaid in the event of the death of the debtor. DW has the same level of student loan debt. This means a big debt and a big monthly payment goes away in the event of a premature demise.

So, no insurance to cover the debt, just stick it to the govt? Interesting thought...............

[FUEGO]

Originally Posted by FinanceDude

So, no insurance to cover the debt, just stick it to the govt? Interesting thought...............

Well, there would be no debt remaining in the event of death. The govt forgives it. As a matter of law, the debt is extinguished by death. I suppose the only way one could repay it would be to direct one's executors to send a check over to the Dept of Treasury equal to the amount of extinguished debt and call it a donation to reduce the national debt. I think my heirs could use the money a little bit better. So, yes, fellow taxpayers, you'll be repaying my student loan debt if I kick the bucket in the next 27 years before it is repaid.

[EngineeringMyFinances]

Even though I'm not currently drawing Social Security and have no dependents, I see a current benefit to myself.

My parents did very little saving for retirement, being caught up in a money-sucking cult. Right now they are living frugally on SS. If not for SS they'd probably be living off of me.