Social Security: a positive note for Gen X/Y

[Lusitan]

A while back we had a thread debating the problems with Social Security and the gloomy outlook for Gen X/Y when it comes to retirement and SS.

While all those issues remain, I was reminded recently that I and my fellow Gen X/Y young dreamers do receive one immediate benefit of SS even if we're not among those Boomers currently receiving SS income. Namely, SS provides a not-too-shabby "life insurance" for all of us younger worker via its survivorship benefits.

Were I to die tomorroe, my surviving spouse and child would receive SS payments based on my SS contributions to date. While it's far from a complete life-insurance solution, one might want to factor some SS survivorship benefits into his estate planning which would reduce the amount of life-insurance you end up paying for.

I know it's not news to anyone, but I had forgotten about it in my posts about Social Security and its systemic problems, and just thought I'd mention it as one way in which we younger workers receive some immediate benefit from the current system.

The SSA has some nice calculators here:

Choose a Benefit Calculator

 

[chinaco]

Yup... Thats part of it.

 

[donheff]

I can't understand why so many of you Gen whatevers are so pessimistic about SS. It is not that difficult to fix - at worst some reductions in benefits. Unless, that is, you elect a bunch of troglodytes who want you to sink on your own if you hit a bad spot on the road of life. And, if you do that, what are you complaining about? You chose it.

Go to the polls for heaven's sake.

 

[armor99]

Hi donheff,
You ask why some of us are so pessimistic about SS. Let me try to give some of those reasons. I think they are clear and fairly reasonable. I think it is fairly clear to almost anyone, that the return on investment that you get with SS pay-in, pales in comparison to what an individual could do if he could "keep" that money and invest it himself. There are no guarantees in this life, nor do I expect any. I believe that the best way to determine what the future holds is to analyze what happened in the past. If you look at any 30 year period in the stock market, it always beats any other investment during that same time period. Seems a fairly safe bet to conclude that investing is the way for the "common" man to achieve a nice retirement.
I will also challenge your "hit a bad spot on the road of life" model. Bad things will and do happen to good people every day. People loose their jobs, contract illnesses, encounter random acts of violence etc. But I will counter those with, did you save enough to have a cushion for periods of joblessness, did you choose to eat McDonalds every day and get no excercise for 20 years, did you choose to hang out with folks that tend to get arrested alot? Although many things that happen to you in your life are unpredictable and random, there are just as many things that you can do to help avoid such problems.
The other problem with SS is that it works sort of like a ponzi sceme. As in, it takes several people paying in, to be able to support one person taking out. Over time this becomes a very fragile balance, as it is now. Now that you will soon have a huge influx of baby boomers retiring, it threatens to bankrupt the system entirely.
The last problem with SS is that the reality is.... it is government backed extortion. The government takes my money away from me today, and then gives it back to me later in life. What if I do NOT want this "service" of the govt? Do I have the right to opt out? If the govt would give me the option to "opt out" of paying into SS today I would gladly do so. I would even sign a waver saying they could keep all of the money I have already put in over the years. But there is no such option, and I have no choice in the matter. So the govt is now forcing me to pay into a service which I do not want to use in the future. And no.... SS is not the same as a tax. Tax money is used for public common works. I have used, or will one day use schools, roads, libraries, have need of the police, fire department, military, etc. The output of my SS input today goes towards none of those things. It goes to OTHER people. I do not believe that MY money should be used to finance OTHERS expenditures. I work to supply myself with a decent standard of living, not to support other folks standard of living.
And finally... because I know I will get a chorus of "Oh.... think of the people.... they will be dying in the streets". I also think that charity is a wonderful thing. In my life I have, and will continue to contribute to charities to help the less fortunate. The thing that makes charity noble, is the fact that it is voluntary. You do not HAVE to contribute, you do that because you want to. Charity is still avalable for folks that need it, and I believe that the US is one of the most charitible nations on earth. But I see SS as "forced" charity. And that is something that I dis-agree with.

 

[ziggy29]

The thing that makes charity noble, is the fact that it is voluntary. You do not HAVE to contribute, you do that because you want to. Charity is still avalable for folks that need it, and I believe that the US is one of the most charitible nations on earth. But I see SS as "forced" charity. And that is something that I dis-agree with.

"Forced charity" is an oxymoron, regardless of whether you support government redistribution or not.

 

[donheff]

To each their own Armor. This is similar to the Universal Health Care argument. Some of you want to leave it to the individual - do it yourself and insure against all misfortune and if you fail, you fail. I have sufficient savings, health insurance, real property, LTC to insure that I will be sitting pretty absent a global catastrophe. But I still prefer to live in a country where those of us who make it (though hard work, luck, or both) contribute to see that a safety net exists for those who fall behind. Without such a net your kids are seriously jeopardized if you lose your job and can't keep up life insurance, health insurance, and disability insurance. You did maintain those insurances throughout your working/child rearing years, didn't you?

 

[FinanceDude]

A while back we had a thread debating the problems with Social Security and the gloomy outlook for Gen X/Y when it comes to retirement and SS.

While all those issues remain, I was reminded recently that I and my fellow Gen X/Y young dreamers do receive one immediate benefit of SS even if we're not among those Boomers currently receiving SS income. Namely, SS provides a not-too-shabby "life insurance" for all of us younger worker via its survivorship benefits.

Were I to die tomorroe, my surviving spouse and child would receive SS payments based on my SS contributions to date. While it's far from a complete life-insurance solution, one might want to factor some SS survivorship benefits into his estate planning which would reduce the amount of life-insurance you end up paying for.

I know it's not news to anyone, but I had forgotten about it in my posts about Social Security and its systemic problems, and just thought I'd mention it as one way in which we younger workers receive some immediate benefit from the current system.

The SSA has some nice calculators here:

Choose a Benefit Calculator

I received those said benefits because my mom died when I was 5, and had worked. It helped me pay rent to go to college.

 

[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..............

 

[FUEGO]

I definitely added this pot of money into my "what if" plans. SS survivor benefits are the main reason DW and I carry no additional life insurance beyond what is provided by our employers. Survivor benefits will provide essential living expenses for whoever is left. Working would be optional at that point, unless the survivor wanted a higher standard of living.

 

[mickj]

You either believe in socialism or you don't...

move along people

 

[Lusitan]

donheff - I think that sums it up pretty neatly: an increased tax burden while Gen X/Y is working to pay for the much larger Baby Boom generation getting 100% of its benefits, then receiving large reduction in benefits when we reach retirement age. So Gen X/Y end up making more contributions to the SS system than Boomers ever did, and in the end get less out of in that Boomers will. It's not complicated, but it's enough of a fundamental problem for many in Gen X/Y to be pessimistic about it.

We had a whole discussion on that a while back, and I am in the pessimistic Gen X/Y camp, but I just posted this follow-up thread because there is an immediate benefit to Gen X/Y that I did not realize or acknowledge in my earlier posts and wanted to point it out in the interest of balance. This immediate benefit actually makes me a little less pessimistic about SS, because it's a way that we younger worker are actually receiving 100% of the benefits, in at least some areas of SS.

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.

 

[innova]

I can't understand why so many of you Gen whatevers are so pessimistic about SS. It is not that difficult to fix - at worst some reductions in benefits. Unless, that is, you elect a bunch of troglodytes who want you to sink on your own if you hit a bad spot on the road of life. And, if you do that, what are you complaining about? You chose it.

DonHeff I'm guessing you're a democrat Boomer.

The problem I see with you Boomer types is that you (as a population) will elect politicians that will make promises to your generation that are unsustainable and will ultimately be paid for by mine.

Its not that I don't think SS will be there for me, its more than I don't want it, period. I look at it as welfare. I don't think it was intended to be used the way it is, I think the contribution rates are robbery, and I think the payout rates are too high. I'd like to see the rates slashed, allow me to keep mine, and stop making promises to people that don't need it.

When I read all these sob stories about the poor old people that have to live on a meager SS pittance I ask: How in the greatest, most prosperous country in the world did these people not manage to save anything over their working years?

Don't tell me its easy for me because I make more money than they did. I know of several teachers in their 60's that by any reasonable measure are rich. A life of smart living is all thats required. I'm tired of the fear stories out there.. government-administered retirement is/will be a failure, just as govt-run healthcare (just wait).

Good to know that I have the option of dying to get some of that money back in form of payment to my spouse, though. She'll smile about that.

(I'm really not this crabby, this kind of stuff just gets my goat. Nothing personal).

 

[donheff]

DonHeff I'm guessing you're a democrat Boomer.

Correct

The problem I see with you Boomer types is that you (as a population) will elect politicians that will make promises to your generation that are unsustainable and will ultimately be paid for by mine.

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.

Its not that I don't think SS will be there for me, its more than I don't want it, period. I look at it as welfare....

Fair enough, you are reaping what you sewed.

When I read all these sob stories about the poor old people that have to live on a meager SS pittance I ask: How in the greatest, most prosperous country in the world did these people not manage to save anything over their working years?

Look up the current value of the minimum wage. You would take social security away from people who are expected to live on next to nothing without even getting basic health care services. Do you take your position to the logical extreme (as many other true believers do) and advocate abolishing public education?

 

[igsoy]

Don't tell me its easy for me because I make more money than they did. I know of several teachers in their 60's that by any reasonable measure are rich. A life of smart living is all thats required. I'm tired of the fear stories out there.. government-administered retirement is/will be a failure, just as govt-run healthcare (just wait).

Teachers tend to have at least average intelligence, college degree and all, plus they have a pension system. I'm guessing there could easily be 50 million adults in this country who have less than average intelligence, they probably work crap jobs and have no pension. Smart living the best they can can't make up for minimum wage earnings and no prospects of advancement. How do you save when there's nothing to save? Not everyone is born with the same advantages in life, but they are still people, they have contributed to the economy, and they can't work forever into old age. That is where the need for SS comes in.

 

[innova]

there could easily be 50 million adults in this country who have less than average intelligence

It doesn't take great intelligence to save at least 10% of your income instead of buying flat-screen TV's and 19" spinners for your Escalade. I'm exaggerating a bit but so are you.

Smart living the best they can can't make up for minimum wage earnings and no prospects of advancement. How do you save when there's nothing to save?

Who is earning minimum wage? Who are the 50 million out there that have no access to job skills training, college degrees, etc? This is the most prosperous nation the world has ever known - you can't say it can't be done.

Not everyone is born with the same advantages in life

You needn't win the birth lottery to be successful in America. In fact, most millionaires (80+%) are first-generation rich. That ought to say something.

would gladly support policies that are not kind to my (relatively) deep pockets to keep those promises.

We're similar in that regard. I just don't want to make any new promises we can't keep. Current state of SS is not dire, but lets face it: We're looking at either cutting benefits or taking more from the income side to make the program float.

Look up the current value of the minimum wage. You would take social security away from people who are expected to live on next to nothing without even getting basic health care services. Do you take your position to the logical extreme (as many other true believers do) and advocate abolishing public education?

Again, I ask: Why settle for minimum wage? Around here, even illegals make more than minimum wage. The only people I see making it are entry level workers, high school kids, summer jobs.. not career-level work. When you settle for a life of a dead-end, minimum wage job, what you are in effect saying is that "My skills are not worth more than the minimum my employer is forced by law to pay me". Thats a terrible mentality.

I'm not against SS in general. I'm against what its become. I believe it was intended to act as a safety net to keep people from living on the street. If you reduce the expectations of the program, you could eliminate SS benefits for MOST, who really shouldn't need it while keeping the intent in place (the safety net). That would put a lot more dollars back into circulation, which would be spent or invested. When I say I equate SS to welfare, thats what I mean.

Healthcare is a huge problem and I'll admit I'm a bit speechless over what to do about it. I fear universal healthcare for all, as I feel in general that the government is a poor steward of resources. I'd not be opposed to single-payor (as opposed to single-provider) healthcare, but nobody is talking about that. I'd be in favor of the government not giving a free pass to drug companies in the form of extended patent protection, direct-to-consumer ads, and weak price negotiations.

FWIW, my wife is a teacher, and while we support public education we are disappointed at the utter lack of transparency about where monies go. The profession has many issues facing it, but because of the lack of accountability I don't see that changing any time soon. Teachers aren't subject to performance evaluations in the way nearly every other professions are, and the tenure / payscale system makes it difficult to motivate people to move to the next level of performance.

 

[maddythebeagle]

You people that complain about having to contribute have an easy solution brought to you by this board....FIRE and live off of investment income...

 

[Fireup2020]

Come work for the employment/Department of Labor (not Unemployment) and you will see there is a relatively large chunk of our society who only make minimum wage ($7.15/hr)...many are looking for work (often warehousing/shipping/recieving - common for veterans), unwilling to relocate for familial reasons, and there are NO jobs available here...so have to settle for a $7-$10 hr job working lousy retail in the meantime...it is not such a rosy world all the time.

There are plenty of success stories too, but those are for a different thread

 

[igsoy]

It doesn't take great intelligence to save at least 10% of your income instead of buying flat-screen TV's and 19" spinners for your Escalade. I'm exaggerating a bit but so are you.

Who is earning minimum wage? Who are the 50 million out there that have no access to job skills training, college degrees, etc? This is the most prosperous nation the world has ever known - you can't say it can't be done.

You needn't win the birth lottery to be successful in America. In fact, most millionaires (80+%) are first-generation rich. That ought to say something.

I'm exaggerating? You don't think that out of 225 million adults, 50M are below average? Actually, the average IQ score is 100. If you go by the bell curve distribution, then it would be 33.75M who are below 85(which is a significant disadvantage, these people typically remain in food service, nurse's aides, things dropouts can do. At one point, the military had a cutoff of 85 because they couldn't reliably train people below that). 157.5M would fall in the 85-115 cluster and then 33.75M above 115. Just remember that out of that 225 million people, nearly half fall below 100, the actual average number, so...

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.

I do agree with you on the safety net topic, I do wish that SS wasn't intended for me. It would still be necessary for everyone to pay into it for the safety net for those elderly who really need it. How can you bring change like that about when all everybody thinks about is what's in it for me?

 

[chinaco]

armor99

SS is important to you and our society (such as it is today). THere could be a better way to handle it, but that is the current approach.

By the way, some people (rhetorically) state that it is a redistribution of wealth... But I have news for you. you are not wealthy enough to have your wealth redistributed. This happens typically the very wealthy.

The rest of us are paying taxes and into government insurance programs (medicare, SS) and pension (SS). From which we will benefit someday.

Bottom line: We pay for the poor's health care today through medicaid. We pay for the working poor (who can't pay) through cost shifting. (somebody pays for it).

Few people properly prepare for health care, pension in old age, and Disability, or death of a parent of guardian. These safety nets are the hallmarks of a developed country (at least the current state of things).


You could lose everything in a second. Those safety nets will be there. You could take the same elliptical logic and apply it to just about anything. Schools, Roads, Military, etc.

Don't get me wrong... I am not anxious to pay up on a lot of taxes. But these programs are important. They are important to you, your family, your neighbors, (everyone you know) whether or not you realize it.

I would agree that the programs could probably be recast and updated. But as is the case with anything, it will have to occur over time. But all of us boomer's have already paid... for your parents, grand parents, aunts uncles, disabled cousins, etc. There is no way for us to get a refund. Since it is pay as you go. The next gen has to pay. I doubt you would want to pay double (once for the traditional SS and again for your private account).

 

[FinanceDude]

I definitely added this pot of money into my "what if" plans. SS survivor benefits are the main reason DW and I carry no additional life insurance beyond what is provided by our employers. Survivor benefits will provide essential living expenses for whoever is left. Working would be optional at that point, unless the survivor wanted a higher standard of living.

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........

 

[FinanceDude]

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]

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]

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]

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.