Boehner: Raise SS age and means-test benefits

[MasterBlaster]

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"We're all living a lot longer than anyone ever expected,"

It may be that Americans are living longer. However this chart doesn't support that conclusion. This chart mainly supports the better infant mortality stats than that we are living longer.

To support your conclusion you need a mean age at death chart or something equivalent.

[Westernskies]

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Originally Posted by ziggy29 Go back and read what you are responding to. Nowhere was it asserted that Congress doesn't pay into SS. You're reading something into it that wasn't said. The point is that if Congress wants to means test SS and raise the full age to 70, they should do the same to their own Congressional pensions or forego their own pensions. (Which would mean most of them, regardless of party, would get nothing from them in either case.) Lead by example, y'know?

Thanks, Ziggy. At least you read the post before responding with a diatribe. I say forego Congressional pensions altogether- Congress was never intended to be a full-time Government career, with lifetime perks and benefits. If they were relying on SS for their retirement like 99% of their constituents, they might get serious about fixing and funding the problem. Just like the health care issue.

[Emeritus]

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Originally Posted by Westernskies Thanks, Ziggy. At least you read the post before responding with a diatribe. I say forego Congressional pensions altogether- Congress was never intended to be a full-time Government career, with lifetime perks and benefits. If they were relying on SS for their retirement like 99% of their constituents, they might get serious about fixing and funding the problem. Just like the health care issue.

If you want government of the rich, by the rich and for the rich even more than we have now, eliminate congressional salaries and pensions. Make them all beholden to corporations and wealthy patrons. I'm sure that will improve pensions.

Even better have each billionaire simply designate their senator or representative and keep turning them over so its not a career.

[samclem]

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Originally Posted by MasterBlaster It may be that Americans are living longer. However this chart doesn't support that conclusion. This chart mainly supports the better infant mortality stats than that we are living longer. To support your conclusion you need a mean age at death chart or something equivalent.

According to the neat WolframAlpha knowledge engine Martha recently steered us to:
-- In 1935, the average person reaching 65 in the US could expect to live to be 77.76 years old, thus drawing on SS for 12.76 years.
-- In 2005. the average person reaching 65 in the US could expect to live to be 83.82 years old, thus drawing on SS for 18.82 years.

So, the average senior is drawing checks for about 1/3 longer now than when the program started. Add in all the other benefits that SS didn't have in the beginning (for kids, disability, etc) plus the demographic changes, and it's easy to see why the Ponzi scheme (beloved as it is) is in trouble.

[harley]

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Originally Posted by Emeritus I'm sorry, but you not me, misread the post the precise quote was "Do away with cushy Congessional pensions and replace them with the same SS benefits, age requirements, and means testing they are proposing for the rest of us... Problem solved." This is a demand to eliminate congressional pensions, not change them as you suggest the request is that the Pensions be REPLACED The total claim was that there were Cushy Congressional pensions that should be "replaced" with "The same SS etc." That is clearly a statement that Congress is not covered by SS.

YouTube - Monty Python - Argument Clinic

[Emeritus]

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Originally Posted by samclem According to the neat WolframAlpha knowledge engine Martha recently steered us to: -- In 1935, the average person reaching 65 in the US could expect to live to be 77.76 years old, thus drawing on SS for 12.76 years. -- In 2005. the average person reaching 65 in the US could expect to live to be 83.82 years old, thus drawing on SS for 18.82 years. So, the average senior is drawing checks for about 1/3 longer now than when the program started. Add in all the other benefits that SS didn't have in the beginning (for kids, disability, etc) plus the demographic changes, and it's easy to see why the Ponzi scheme (beloved as it is) is in trouble.

Depends on the tax rate and other factors. SS is no more of a Ponzi scheme than any other pension system. The fundamental backing for social security is the American economy , which is what backs any US stock or bond based pension. Only a functioning economy can convert assets into income.

[kyounge1956]

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Originally Posted by ziggy29 (snip)And exactly where are all these extra jobs going to come from, to say nothing about the rampant age discrimination that already exists even below age 65?

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Originally Posted by FIREdreamer That, to me, is the main hurdle which is often ignored in this discussion. Mathematically, yes, raising Social Security's retirement age makes sense. People live longer, they should work longer, I have no problem with that logic. Reality is a tad different though. I already know too many people whose career imploded in their 50's and that are just fighting for survival until they can get some relief from a SS check. But perhaps, surviving is all we should expect in the future...

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Originally Posted by FinanceGeek IIRC (and I don't - not old enough to know this first hand) - one of the original selling points of social security was the idea that many older workers would leave the workforce and open up jobs for younger folks. Before social security, I think most people worked until they died.

Maybe adding another level of Social Security benefits would address this issue. Set the ages for early retirement, "full" retirement and late retirement (currently 62, 65-67, and 70) to float with increasing life expectancy, but make "emergency retirement" available to anyone who has paid into the SS system for enough quarters to be eligible for benefits and is over 50. I would leave that as a fixed age, because it's more a function of what age makes it difficult to find another job than of life expectancy. Make the amount actuarially equivalent to full retirement, so the cost to the system will be the same regardless of the age a person retires at. I will guess that making the benefit at this earlier age equivalent to full retirement benefits starting some 15 or 20 years later, would probably reduce the monthly benefit enough that few people would elect to retire at 50 unless they've run out of other alternatives. A possible additional qualification would be that to be eligible, you first must exhaust any unemployment benefit you might have coming. The benefit wouldn't be a large amount, but combined with one of those "not very good" jobs which may be all that's available to people in this predicament, would keep food on the table and a roof over the head.

Of course you could still ER if your savings were sufficient to support you, but the earliest such a retiree would be able to start SS would be 62 (and older as life expectancies increase). Anyway, all the arguments that are now leveled against taking SS at 62 would apply even more strongly to starting at 50 if you didn't need to.

[Katsmeow]

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Originally Posted by lets-retire I think it's a good idea. SS was started when the life expectancy was much lower than it currently is. I also think any changes should have a fairly long phase in period. So those who are within 10-15 years of retiring, wouldn't have any changes to their system. Then phase it in over the course of five or six years. Raise all ages for SS. Even the early retirement age should get raised by two or three years. If it were up to me, and I know it isn't, I'd try to tie it to life expectancy at a selected age, so it wouldn't need to be adjusted again.

But the relevant life expectancy wasn't much lower when SS was started. It is true that overall life expectancy was lower. However, it wasn't like people were living until 65 and then suddenly dropping dead. Life expectancy was primarily lower because of people dying young (infant mortality for example). So people who lived to late adulthood had a fairly long life expectancy.

SS itself explains this on their webpage. SS indicates that if you look at people at age 65 the life expectancy has only increased by about 5 years. SS is also clear that the more important drivers for financial problems for SS are not the change in life expectancy -- rather, it is the size of the baby boom generation and number of workers v. number of recipients (which is also related to size of baby boom generation).

http://www.ssa.gov/history/lifeexpect.html

[lets-retire]

kyounge--That sounds like a good plan to me.

Katsmeow--Read Sam's post. Also with the number of people receiving SS any change does not have to be large to get large results. A five year increase in life expectancy could literally cost hundreds of millions of dollars, without the increase in number of people receiving the benefit. Add to it the increase in number of people that number easily raises to billions or hundreds of billions of dollars. This isn't even considering the income side of the equation.

[samclem]

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Originally Posted by kyounge1956 Maybe adding another level of Social Security benefits would address this issue. Set the ages for early retirement, "full" retirement and late retirement (currently 62, 65-67, and 70) to float with increasing life expectancy, but make "emergency retirement" available to anyone who has paid into the SS system for enough quarters to be eligible for benefits and is over 50. I would leave that as a fixed age, because it's more a function of what age makes it difficult to find another job than of life expectancy. Make the amount actuarially equivalent to full retirement, so the cost to the system will be the same regardless of the age a person retires at.

If the average 65 YO can now expect to live 18 more years, then allowing someone to start taking withdrawals at 50 would mean a monthly check of less than 1/2 of the full retirement amount. For many workers, that will be below the government poverty line, which will mean more transfer payments from the taxpayers for these "can't afford it but want to quit" early retirees. Plus the already mentioned taxpayer subsidies for health insurance for low income folks (who,because they quit work at 50 haven't yet reached 65 and the Medicare eligibility). Once you start piling on the gravy, it's hard to stop.
I think if we want a competitive economy it would be better to encourage work than to encourage people to not work. That's the lesson of Europe.

[ronocnikral]

another issue i am interested in hearing people's opinions about...

SS isn't just for retirement. what about tightening up the disability requirements? same with survivor? i know my SIL would be very dependent on SS if her hubby kicked the bucket. but maybe i should be happy it's not me she's asking for money?

not to mention a quick run through the calculator shows if i was to become disabled today, i would collect more than if i retired @ 67.

from another forum i frequent which makes me not happy...

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I am 47 and recieve SSD (disability) have for a number of years now, from a back injury. In 2007 I desided to buy a boat and live on it. It took some time but I started sailing and found I could do it with help. My back injury was from a 21' fall while at work so I did recieve a number of settlements to help me get started and set some money aside. [...] I can tell you now alot of things will come up when you refit a boat so whatever budget you set by the end it will be double. I started with a Budget of $15K but we are around $25K as of right now on the upgrades. My wife and I plan to travel the Great loop on my monthly SSD income, I do not see any reason this can not be done. The cost to live at a dock is more than you spend to live while traveling, unless you spend alot sight seeing.

Thoughts?

[tjscott0]

"We're all living a lot longer than anyone ever expected,"

Not really.
http://iussp2005.princeton.edu/downl...issionId=50729

life expectancy

1935:75% of 65 yr olds made it to 73, 50% made it to 77, 25% made to 82, graph zeros out at 90.

1965:75% made it to 75, 50% made it to 80, 25% made it to 85, graph zeros out at 95.

1982:75% made it to 75, 50% made it to 80, 25% made it to 86, graph zeros out at 100.

1999:75% made it to 76, 50% made it to 83, 25% made it to 88, graph zeros out at 100.

Life expectancy has incrementally increased over the past 60+ years. NO GIANT LEAPS. And I don't believe we can credit medicine with all the gains. Our society has moved from a blue collar physical work place to a to a white collar/service job workplace. And the remaining blue collar factory workplace has eased the physical aspect via robot automation.

The above data leads me to think that

1) the problem with social security is mostly demographic issue.[large baby boomer generation, with insufficient workers to pay taxes] Once
that generation is dead the program becomes stable assuming another large generation is not created.

2)that the massive amounts of health care being consumed isn't adding alot to a person's life expectancy. And that we could maintain these life expectancy numbers with alot less use of the health care system. So yes Virginia, I'm for rationing health care & improving the malpractice law which generates much unneeded tests.

[jIMOh]

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Originally Posted by tjscott0 "We're all living a lot longer than anyone ever expected," Not really. http://iussp2005.princeton.edu/downl...issionId=50729 life expectancy 1935:75% of 65 yr olds made it to 73, 50% made it to 77, 25% made to 82, graph zeros out at 90. 1965:75% made it to 75, 50% made it to 80, 25% made it to 85, graph zeros out at 95. 1982:75% made it to 75, 50% made it to 80, 25% made it to 86, graph zeros out at 100. 1999:75% made it to 76, 50% made it to 83, 25% made it to 88, graph zeros out at 100. Life expectancy has incrementally increased over the past 60+ years. NO GIANT LEAPS. And I don't believe we can credit medicine with all the gains. Our society has moved from a blue collar physical work place to a to a white collar/service job workplace. And the remaining blue collar factory workplace has eased the physical aspect via robot automation. The above data leads me to think that 1) the problem with social security is mostly demographic issue.[large baby boomer generation, with insufficient workers to pay taxes] Once that generation is dead the program becomes stable assuming another large generation is not created. 2)that the massive amounts of health care being consumed isn't adding alot to a person's life expectancy. And that we could maintain these life expectancy numbers with alot less use of the health care system. So yes Virginia, I'm for rationing health care & improving the malpractice law which generates much unneeded tests.

good data... I can agree with the conclusions if data is validated.

I think healthcare improves quality of life even if it does not increase life significantly (for example a 55 year old taking blood thinner because of an early heart attack or a 60 yo taking other medicine to lower blood pressure).

[jIMOh]

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Originally Posted by kyounge1956 Maybe adding another level of Social Security benefits would address this issue. Set the ages for early retirement, "full" retirement and late retirement (currently 62, 65-67, and 70) to float with increasing life expectancy, but make "emergency retirement" available to anyone who has paid into the SS system for enough quarters to be eligible for benefits and is over 50. I would leave that as a fixed age, because it's more a function of what age makes it difficult to find another job than of life expectancy. Make the amount actuarially equivalent to full retirement, so the cost to the system will be the same regardless of the age a person retires at. I will guess that making the benefit at this earlier age equivalent to full retirement benefits starting some 15 or 20 years later, would probably reduce the monthly benefit enough that few people would elect to retire at 50 unless they've run out of other alternatives. A possible additional qualification would be that to be eligible, you first must exhaust any unemployment benefit you might have coming. The benefit wouldn't be a large amount, but combined with one of those "not very good" jobs which may be all that's available to people in this predicament, would keep food on the table and a roof over the head. Of course you could still ER if your savings were sufficient to support you, but the earliest such a retiree would be able to start SS would be 62 (and older as life expectancies increase). Anyway, all the arguments that are now leveled against taking SS at 62 would apply even more strongly to starting at 50 if you didn't need to.

Change the whole system if you want an early out to begin with.

Guarantee what you paid in will be paid out to you, plus 2.4% per year (average CPI).

Then you can collect provided you meet some basic requirements:

worked 60 quarters (15 years)
paid taxes for at least 15 years
no felony convictions
you pass a drug test
add in other requirements to prevent people from abusing system (too much).

I want what I paid in
I want it without paying taxes on it too
I want it paid back inflation adjusted

I don't care what age I start getting it, as long as I get 100% of what I paid in.

[MasterBlaster]

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Guarantee what you paid in will be paid out to you, plus 2.4% per year (average CPI).

Good Luck collecting on that. Let us know how it works out for you !

You seem to be under the impression that SS is like an insurance annuity where what you put in reflects what you get out. Those in charge now want it to move to the welfare model where the neediest get some help and others won't need much help.

[Texas Proud]

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Originally Posted by Emeritus Depends on the tax rate and other factors. SS is no more of a Ponzi scheme than any other pension system. The fundamental backing for social security is the American economy , which is what backs any US stock or bond based pension. Only a functioning economy can convert assets into income.

OHHH... now this is classic.... as long as we can keep the scheme up, it is not a Ponzi scheme..

Definition "An investment swindle in which high profits are promised from fictitious sources and early investors are paid off with funds raised from later ones."


SS is a classic Ponzi scheme...... there IS not a pool of funds that funds SS.... The classic pension does have a pool of money that is supposed to be enough to pay all future benefits IF the company should go out of business.... that is NOT where SS is... it HAS to have new money coming in all the time or else benefits stop in a relatively short amount of time.....

Trying to tie it to the economy is a baseless argument... it is either funded or not funded... if it is not funded then the early 'investors' are paid off with funds raised from later ones.... a Ponzi scheme...

[samclem]

Bumping up the SS FRA won't fix the system, but it can be part of the solution. The question is--should we keep adjusting it upward so that the average retiree gets about 13 years of benefits (as was the case in the original program)? I'd favor that over means-based payouts, especially if we kept the option for an individual to take an actuarilly identical payout at 63 or 65. The means-testing of payouts encourages folks to quit working or to game the system by taking steps to reduce income. More fundamentally, the means-testing goes even farther to make it a welfare program, which I think is the last thing we need right now. Finally, markets and people both benefit from consistency and certainty--a shifting formula for payouts based on income (or assets) will encourage evermore tweaking and adjusting by politicians

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Originally Posted by tjscott0 2)that the massive amounts of health care being consumed isn't adding alot to a person's life expectancy. And that we could maintain these life expectancy numbers with alot less use of the health care system. So yes Virginia, I'm for rationing health care & improving the malpractice law which generates much unneeded tests.

A lot of health care spending is not aimed at increasing longevity--much of it is intended to enhance quality of life. The knee replacement that allows a 65 YO to remain mobile and pain-free costs a lot of money. The cataract removal that preserves sight costs a lot of money. From a $$ perspective, it's better to issue Gramps a pair of crutches or a white cane. After all, he ain't working, right?

[ziggy29]

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Originally Posted by samclem Bumping up the SS FRA won't fix the system, but it can be part of the solution. The question is--should we keep adjusting it upward so that the average retiree gets about 13 years of benefits (as was the case in the original program)? I'd favor that over means-based payouts, especially if an individual could take an actuarilly identical payout at 65. The means-testing of payouts encourages folks to quit working or to game the system by taking steps to reduce income.

As for your last statement, yes, if they continue to move toward income-based means testing, I fully intend to game the system by amassing assets and engineering a fairly low taxable income. I don't feel good or proud about that, but there will be only two options: me taking advantage of the system, or the system taking advantage of me. A "fair deal" for both myself and the system does not seem like a third option; if I don't game the system, the only other outcome is that I'm screwed by the system, working harder and/or longer to pay higher taxes and getting less benefit.

I still believe the biggest problem here is finding enough work for everyone up to age 70. I agree that raising the retirement age (among other things) makes economic and demographic sense. But from a practical standpoint the jobs just aren't there, probably won't be for a long time (if ever), and the age discrimination -- already a problem in the 50-64 demographic -- would even be worse for 65-70.

If health insurance is no longer tied to full-time employment, I can see part time jobs being an option here. So maybe our entire retirement model needs to change from "full-time work directly to full-time retirement" into a step-down where starting at 55 or 60, someone would get a small monthly amount, enabling them to perhaps go to half-time employment, and followed by full retirement (and a larger check) at 70? I don't know the specific economic impact of that, so it could be unfeasible, but I do think a period of "semi-retirement" before full retirement might be emerging as a clear trend. And maybe it's better to have two "half jobs" for 60-somethings than no one being willing to hire them for one full time job?

[IndependentlyPoor]

I admit to confusion and memory lapses. In addition, I admit to being too lazy to research this myself. Instead, I suspect that some here have the facts at there fingertips, so some questions:
Has something changed, or are the fixes made by the Greenspan team in 1983 still in effect? When is the program going to "run out of money"? What was the famous "lockbox" and what (if anything) happened to it?

[Emeritus]

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Originally Posted by Texas Proud OHHH... now this is classic.... as long as we can keep the scheme up, it is not a Ponzi scheme.. Definition "An investment swindle in which high profits are promised from fictitious sources and early investors are paid off with funds raised from later ones." SS is a classic Ponzi scheme...... there IS not a pool of funds that funds SS.... The classic pension does have a pool of money that is supposed to be enough to pay all future benefits IF the company should go out of business.... that is NOT where SS is... it HAS to have new money coming in all the time or else benefits stop in a relatively short amount of time..... Trying to tie it to the economy is a baseless argument... it is either funded or not funded... if it is not funded then the early 'investors' are paid off with funds raised from later ones.... a Ponzi scheme...

Funded with what? What do you define as "money"? Federal reserve notes?
Euros? Pounds sterling ? All are promises based on future economies.
If you have a company pension that is "funded" with AAA US Government bonds how is it any different from the government bonds held by SS?
Shares of stock are pieces of paper that also depend on a functioning economy. It is freshman economics that no asset is "worth" anything without a functioning economy to turn the asset into income. Try taking gold bars to a desert island