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Old 07-02-2010, 09:15 AM   #141
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Does anyone have a link that would explain the proposal to privatize SS (I'm guessing ~ 8 years ago?)?
Here's what the Heritage Foundation had to say.

Top 10 Myths about SS reform
Bold and Responsible: The President's Plan. . .

If you Google using "PRA" or "Personal Retirement Accounts" and "Social Security" you'll probably find more, including a lot more "con" than what will be found above.
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Old 07-02-2010, 09:29 AM   #142
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Emeritus & samclem, thanks for the links, I'll check those out a bit later.

On the surface, it sounds like the proposals might be separating SS as a 'retirement supplement/plan for people who worked from a young age to ~ 65', and the safety nets we need for people who have no money in old age, regardless of circumstances that got them there.

I think it is good to separate them, they really are two different things, and the mish-mosh just confuses.

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Old 07-02-2010, 10:08 AM   #143
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Emeritus & samclem, thanks for the links, I'll check those out a bit later.

On the surface, it sounds like the proposals might be separating SS as a 'retirement supplement/plan for people who worked from a young age to ~ 65', and the safety nets we need for people who have no money in old age, regardless of circumstances that got them there.

I think it is good to separate them, they really are two different things, and the mish-mosh just confuses.

-ERD50
I believe these do need to be separated- we do need to have a safety net for the basic needs of the indigent elderly, since our society won't tolerate leaving them out in the bush overnight for the lions...

My issue with means testing is that I paid into the system for XX years, with an expectation of a defined benefit at XX years of age- that benefit being an integral part of my retirement portfolio... Now, because I worked hard, saved/invested instead of spent, lived within my means, and accumulated a few assets I am going to see that benefit reduced to pay for the folks who did a piss-poor job of managing their own retirement? Another handout program to reward those who refuse to LBYM. Really, why bother? If the feds are going to step in and bail out your first, second and third mortgage, bail out your credit card debt, help you buy a new car, send you a stimulus check every time the economy hiccups, and then bail out your retirement, why worry about financial responsibility at all? Uncle Sam will give you all you need- after he takes it from someone else.

Maybe instead of another pocket-picking program, means testing should also incorporate some sort of a reward for a lifetime of financial responsibilty- give people an incentive to plan for retirement before they retire.
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Old 07-02-2010, 10:08 AM   #144
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What mission creep? Wasn't the original concept of Social Security that people who had worked for years should have enough to live on after their working days were over?

NOOOO.... it was supposed to be about 1/3 of what you need to live.... or a very minimum amount to buy food etc... YOU were supposed to save for the difference or have a pension... the creep is that people started to think it WAS a pension that people can live off of... so did the politicians...
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Old 07-02-2010, 10:21 AM   #145
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Old 07-02-2010, 11:14 AM   #146
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I believe these do need to be separated- we do need to have a safety net for the basic needs of the indigent elderly, since our society won't tolerate leaving them out in the bush overnight for the lions...

My issue with means testing is that I paid into the system for XX years, with an expectation of a defined benefit at XX years of age- that benefit being an integral part of my retirement portfolio... Now, because I worked hard, saved/invested instead of spent, lived within my means, and accumulated a few assets I am going to see that benefit reduced to pay for the folks who did a piss-poor job of managing their own retirement? Another handout program to reward those who refuse to LBYM. Really, why bother? If the feds are going to step in and bail out your first, second and third mortgage, bail out your credit card debt, help you buy a new car, send you a stimulus check every time the economy hiccups, and then bail out your retirement, why worry about financial responsibility at all? Uncle Sam will give you all you need- after he takes it from someone else.

Maybe instead of another pocket-picking program, means testing should also incorporate some sort of a reward for a lifetime of financial responsibilty- give people an incentive to plan for retirement before they retire.
I agree. But the prevailing mindset of many pols is you were just lucky and others were unlucky. They of course need to correct this imbalance in luck by zapping you at all times with things like means testing. There is no room for consideration that other factors beyond luck play a significant role in ones circumstances. Things such as the hard work, sacrifice, etc you mention.

Certainly luck plays a part in all our lives. And most people I know who are well off understand this and feel blessed by their circumstances. It often translates into a spirit of giving and volunteering.

But it seems much more hollow when outside forces mandate this giving and imbalance correction. And the wrong behaviors are seemingly rewarded while the admirable behaviors are penalized.

Although I hate to see a rise in the retirement age the arguments and proposals made by Samclem seem to me the most logical solution to the mess SS has become.
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Old 07-02-2010, 11:49 AM   #147
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The big problem is if it is means tested... then it is just a welfare program...

Now, you could say it IS a welfare program since it is heavily weighted to the people who do not make a lot of money... but that is more of a distribution issue...

Back when I was doing taxes... I thought it was interesting to put down $20K of SS income on a return that had a few million in other income..
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Old 07-02-2010, 11:53 AM   #148
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The big problem is if it is means tested... then it is just a welfare program...
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Now, you could say it IS a welfare program since it is heavily weighted to the people who do not make a lot of money... but that is more of a distribution issue...
You lost me here. A welfare program paid for by a very regressive tax?
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Old 07-02-2010, 12:03 PM   #149
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You lost me here. A welfare program paid for by a very regressive tax?
I guess whether or not SS taxes are "regressive" may be a matter of semantics and how one defines the term.

On one hand, it seems regressive because high incomes are not subjected to as high a percentage (overall) of SS taxes, but on the other hand, that's only because the benefit levels are capped. In terms of what you receive in benefits relative to how much you pay in, SS is actually moderately progressive -- and made even more so by the fact that higher incomes lose more of the benefit to taxes than lower incomes.

I believe the old age pension component of SS had two primary goals when it was enacted: first, to prevent the older and less employable seniors from starving in hard times; second, to reduce the number of people looking for work at a time work was very hard to find.
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Old 07-02-2010, 12:03 PM   #150
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You lost me here. A welfare program paid for by a very regressive tax?
It's regressive in some respects (e.g. the rate doesn't go up with income, and income above a certain level is not taxed [and also does not accrue any SS payout]), but certainly not when viewed in terms of $$ received in benefits vs SS contributed. While has a dismal "return" for the vast majority of taxpayers, the lowest income folks actually get a good deal--at the expense of others.
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Old 07-02-2010, 12:43 PM   #151
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Good points ziggy and samclem.

A few more:
The SS tax is flat (certainly not progressive) and (as mentioned) capped.
It is levied only on earned income, not capital gains, interest, or dividends. The truly rich pay little or no SS tax. Anyone who is FI (no earned income) pays no SS tax.

It seems to me that SS is a program for the working poor and middle class, and it is paid for almost entirely by the working poor and middle class.

It is true that the benefits are progressive. However, deadbeats who pay nothing in, get no benefits at all.

As for being a good deal or not, how much would a COLA'd annuity combined with disability insurance cost you on the open market?

What's not to like?
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Old 07-02-2010, 12:50 PM   #152
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As for being a good deal or not, how much would a COLA'd annuity combined with disability insurance cost you on the open market?
That's another aspect that allows one to see the moderately progressive benefit formula. Someone who is paying the maximum in SS every year might actually pay *less* for a COLA'd annuity and disability insurance on the open market than they pay into SS. But for someone earning (say) only 1/3 of the SS income cap, there's no comparison that SS is a much better deal. In that sense you could say higher incomes are "subsidizing" the COLA'd annuity costs for lower incomes because someone who pays twice as much in gets considerably less than twice the payout.
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Old 07-02-2010, 01:45 PM   #153
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You lost me here. A welfare program paid for by a very regressive tax?
Kind of stopped writing my point...

IF it becomes a welfare program ONLY... ie, only the middle class and poor get benefits... there will be more incentive to stop the program... because to make any kind of dent in the payments, you have to have the level of not gettting payments pretty low (maybe in the $100K range)... if it is over $250K... not much savings (I am talking income here... AGI... ) I don't think that there are a large number of people who are making that in retirement....

If it is asset based.... then you will also need to factor in the value of a pension... IOW, if you are getting $60K per year... that is worth $1 mill or whatever... so now.. where do you draw the line... if you think the public sector people who are getting an annuity from their job are howling about losing promised benefits now... what will happen if their SS is cut completely because they get so much from other sources...


My last comment... was that it is not a welfare program right now... even if you have income of $5 million per year.... you still get your SS check... not as much in percentage terms as the guy who made $60K... but you get one...

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Old 07-02-2010, 01:53 PM   #154
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Good points ziggy and samclem.

A few more:
The SS tax is flat (certainly not progressive) and (as mentioned) capped.
It is levied only on earned income, not capital gains, interest, or dividends. The truly rich pay little or no SS tax. Anyone who is FI (no earned income) pays no SS tax.

It seems to me that SS is a program for the working poor and middle class, and it is paid for almost entirely by the working poor and middle class.

It is true that the benefits are progressive. However, deadbeats who pay nothing in, get no benefits at all.

As for being a good deal or not, how much would a COLA'd annuity combined with disability insurance cost you on the open market?

What's not to like?

I would disagree that the truly rich do not pay into SS... most of them have earned income somewhere... a sch C, being on a board, etc. etc... lots of places where they can have 'wages'...

As I said.. when I did taxes... this one guy (and we are talking the 80s here) had $5 mill in dividends, $5 mill in cap gains... I forget about his sch C, but think it was in the $10 mill range... and $20K SS.... I found it odd at the time... like 'why does he need SS?'... now I know better...
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Old 07-02-2010, 01:58 PM   #155
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I would disagree that the truly rich do not pay into SS... most of them have earned income somewhere... a sch C, being on a board, etc. etc... lots of places where they can have 'wages'...
Also, employer SS taxes are embedded in the price of the products we buy.
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Old 07-02-2010, 02:25 PM   #156
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Also, employer SS taxes are embedded in the price of the products we buy.
Of course.
Another good point.
Another way to say it is that employers just reduce salaries by the amount of the SS tax.
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Old 07-02-2010, 02:26 PM   #157
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(snip) What on earth are you talking about? If those guys up the scaffold are getting premium pay, it's for their trade skills, not because of the physical demands. (snip)
You're making the case that some types of work cannot be done effectively by older workers, and that because of this workers should be able to get their SS early. (snip)
I don't think that's the claim. I think the claim is simply that employers won't hire them.(snip)
Ziggy is right, I was referring mostly to the problem of age discrimination. If an older worker is able to keep up (and is able to convince the prospective employer of that ability), or works in a field where age discrimination is rare, they'll (probably) be able to get rehired before their unemployment benefits run out, and so won't be eligible for "emergency retirement" as I propose it.

And now I must be away. I'm off to put in a spot of "strenuous physical work" in the parental backyard—cool and rainy spring means the weeds have gotten a big head start this year. We'll see whether or not that's a type of work that can be done effectively by this "older worker". I think I'm still good for four or five hours, anyway.
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Old 07-02-2010, 02:39 PM   #158
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(snip)What mission creep? Wasn't the original concept of Social Security that people who had worked for years should have enough to live on after their working days were over? (snip)
NOOOO.... it was supposed to be about 1/3 of what you need to live.... or a very minimum amount to buy food etc... YOU were supposed to save for the difference or have a pension... the creep is that people started to think it WAS a pension that people can live off of... so did the politicians...
I expressed myself poorly. I didn't mean to imply that the original concept of SS was that one would be able to live on that alone, and an actuarially equivalent benefit at that early age would surely not be enough for anyone to live on. It would have to be supplemented by part time employment, personal savings, employer pension, home business...whatever other resources were available.

I do think "emergency retirement" would be within the original mission of supplementing income for people past work, in which category I would include people who can't get hired at a living wage due to age discrimination.
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Old 07-02-2010, 03:10 PM   #159
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Another way to say it is that employers just reduce salaries by the amount of the SS tax.
That doesn't follow. Would you say that employers reduce salaries due to the office/parking space needed for the employee?
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Old 07-02-2010, 03:13 PM   #160
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That doesn't follow. Would you say that employers reduce salaries due to the office/parking space needed for the employee?
Just sayin' that that employers look at total compensation costs.
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