Boehner: Raise SS age and means-test benefits

[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...

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/download.aspx?submissionId=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]

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

Not really.
http://iussp2005.princeton.edu/download.aspx?submissionId=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]

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]

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]

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

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]

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]

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

 

[MasterBlaster]

Has something changed

No - This train wreck has been known about for decades. The late senator Pat Moynihan D-NY talked about this issue at length decades ago and was ignored.

or are the fixes made by the Greenspan team in 1984 still in effect

The increased FRA is still in effect. The extra SS taxes have been spent instead of saving the money. They just couldn't keep their hands off of it. There is no "trust fund" no "lockbox". The money is gone.

Clinton talked briefly years ago about "generational accounting" but abandoned it when it was deemed too hot to talk about.

When is the program going to "run out of money"?

It has already run out of money. SS is operating in deficit right now. The big deficits really start as the boomers start to retire. Around 2017 expect a crisis. The bond markets will insure that this will occur as costs of debt become unaffordable.

What was the famous "lockbox" and what (if anything) happened to it?

Al Gore used that phrase to move away from a "unified" budget. It never happened. The money has been spent.

 

[samclem]

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.

Maybe "game the system" sounds too judgmental, and that was not my intent. "Respond to the given rules" might be a less "loaded" way of saying it. And, I intend to do just as you are doing as the government changes the rules--shift my financial life around to get as much of the government money as legally possible. Failing to do so is just the same as not taking an available tax deduction, etc. If the rules are written in a particular way, then take full advantage of it. And there's nothing hypocritical about opposing a certain policy (e.g. writing legislators, voting for those who oppose it) and yet taking full advantage of every rule that is on the books.

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.

But, of course, there's no fixed basket of jobs. As wages decline, US businesses will become more competitive in the world market and the number of jobs will increase. They won't necessarily be high-paying, "fullfilling", fun jobs. But, they'll put some food on the table, which may be more important.

 

[IndependentlyPoor]

It has already run out of money. SS is operating in deficit right now. The big deficits really start as the boomers start to retire. Around 2017 expect a crisis. The bond markets will insure that this will occur as costs of debt become unaffordable.

In addition to recommending tax increases to alleviate the short-term funding problem, the Greenspan Commission projected that the system would be solvent for the entirety of its 75-year forecast period.

So were the Greenspan Commission's projections just wrong? What happened? That is a pretty big goof.

 

[MasterBlaster]

So were the Greenspan Commission's projections just wrong? What happened? That is a pretty big goof.

They spent our money that wasn't theirs to spend. The boomers weren't paying attention.

The party was fine until the check came around.

 

[Texas Proud]

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.

But if the person is not working anyhow... they can get the subsidies even without getting SS... I don't see the connection...

IOW... if you can not get a job at 50... you qualify for X... just because you now might get SS does not change the fact you qualify...

 

[samclem]

The extra SS taxes have been spent instead of saving the money. They just couldn't keep their hands off of it. There is no "trust fund" no "lockbox". The money is gone.

Yes and no. The government has spent the money, but SS got government bonds in exchange. What did people expect to be done with the money in the "lock box"--piled up as currency in a big vault? Used to buy equities (making the government a stakeholder in American businesses--even more than they already are?). But, yes, now the taxpayers need to pay back those bonds, and that will mean more taxes.

 

[LARS]

Most likely outcome for SS is push back retirement age overtime, lift (or eliminate) the cap on FICA paid by employees a la Medicare, and deal with “means testing” through increased income tax rates which are coming anyway due to outsize deficits (i.e. give “wealthy” SS with one hand and tax it away with another).

To do anything else is to 1) change the nature of SS (insurance to welfare), 2) create societal pressure to not save for your own retirement, and 3) create the need for a bureaucracy to “means-test” which will be more costly to SS than the incremental savings.

Just one example of the bureaucratic nightmare: if the year you qualify for SS you are means-tested out, what happens the following year if your income drops. Do you now qualify? Is it at the amount of last year? Does it COLA adjust? What happens if you qualify and the following year you have a windfall, does SS now go away? Can you get it back next year if you qualify again?

 

[ziggy29]

Yes and no. The government has spent the money, but SS got government bonds in exchange. What did people expect to be done with the money in the "lock box"--piled up as currency in a big vault? Used to buy equities (making the government a stakeholder in American businesses--even more than they already are?). But, yes, now the taxpayers need to pay back those bonds, and that will mean more taxes.

The thing is, if there is "nothing" in the SS trust fund, then anyone who owns Treasuries in their own portfolios also has "nothing." So if you believe there is no credit risk in the Treasuries held in your portfolio, there shouldn't be any risk to the Treasuries held by SS.

To the extent the SS program actually holds the "surplus" as Treasuries in its trust fund, there is something of real value there just as it would be if I held Treasuries in my IRA. But there is some funny accounting involved when the federal government owes money to itself.

 

[samclem]

But if the person is not working anyhow... they can get the subsidies even without getting SS... I don't see the connection...

IOW... if you can not get a job at 50... you qualify for X... just because you now might get SS does not change the fact you qualify...

My rationale: For a lot of folks, getting a $1000 a month SS check would let them quit work and start drawing the additional government benefits. Without the SS check, they'd have to stay at the job (and, paying into SS and Medicare).

 

[ziggy29]

My rationale: For a lot of folks, getting a $1000 a month SS check would let them quit work and start drawing the additional government benefits. Without the SS check, they'd have to stay at the job (and, paying into SS and Medicare).

Offset by the fact that if this person quits work, their job is available to someone else, and that's someone else who is paying taxes instead of taking in unemployment benefits and perhaps other public assistance such as food stamps. It may not be a complete offset, but it is significant.

 

[IndependentlyPoor]

Yes and no. The government has spent the money, but SS got government bonds in exchange. What did people expect to be done with the money in the "lock box"--piled up as currency in a big vault? Used to buy equities (making the government a stakeholder in American businesses--even more than they already are?). But, yes, now the taxpayers need to pay back those bonds, and that will mean more taxes.

So doesn't that mean that the problem really isn't Social Security, but the increased debt accumulated since 1983? Without that increased debt, isn't it true that the government would have no problem in servicing the bonds held by the SSA?

 

[Emeritus]

The thing is, if there is "nothing" in the SS trust fund, then anyone who owns Treasuries in their own portfolios also has "nothing." So if you believe there is no credit risk in the Treasuries held in your portfolio, there shouldn't be any risk to the Treasuries held by SS.

To the extent the SS program actually holds the "surplus" as Treasuries in its trust fund, there is something of real value there just as it would be if I held Treasuries in my IRA. But there is some funny accounting involved when the federal government owes money to itself.

Which brings us back to the key point that the "security" for the social security system and frankly every retirement fund is the national Economy itself. To use a classic example , Jobs as such don't matter. It doesn't matter how many people are employed it matters if the employment is productive. More crime may create more prison guard jobs but not more productivity. Adam Smith first targeted the problem of unproductive employment, although history has shown that his categores are incorrect. But the issue still exists. Some government investment & job creation is extremely productive for the future economy. (Roads bridges communications infrastructure) some is marginal and some is a dead loss. "Excess" military spending for example (and yes what is excess is debatable) is clearly a dead loss that reduces future productivity.

So the key is not government spending but unproductive government spending. Private investment also has a mix of relatively productive and unproductive spending. Ireland had massive and unproductive private investment in housing, which created an unsustainable boom and bust. So did we, but in a different form.
Most sports stadiums are terribly unproductive public investments.

What we need to do is get away from slogans and do the hard analysis. How do we increase productive employment? How do we divide the fruits of the economy among workers investors and children and the elderly?

 

[IndependentlyPoor]

The thing is, if there is "nothing" in the SS trust fund, then anyone who owns Treasuries in their own portfolios also has "nothing." So if you believe there is no credit risk in the Treasuries held in your portfolio, there shouldn't be any risk to the Treasuries held by SS.

To the extent the SS program actually holds the "surplus" as Treasuries in its trust fund, there is something of real value there just as it would be if I held Treasuries in my IRA. But there is some funny accounting involved when the federal government owes money to itself.

Agreed. Seems like the funny accounting just boils down to this. With a fixed debt/GDP ratio, bonds sold to SSA just reduce the amount of money the government can borrow for other purposes. Did we do that, or is the debt/GDP dramatically different now than it was in 1983. If I can muster the energy, I will try to find out.

 

[samclem]

Offset by the fact that if this person quits work, their job is available to someone else, and that's someone else who is paying taxes instead of taking in unemployment benefits and perhaps other public assistance such as food stamps. It may not be a complete offset, but it is significant.

Another offset: The more people who are looking for work (driving down compensation costs), the more jobs there are. Obviously, its not 1:1 (or unemployment wouldn't rise) but it is real.

 

[samclem]

So doesn't that mean that the problem really isn't Social Security, but the increased debt accumulated since 1983? Without that increased debt, isn't it true that the government would have no problem in servicing the bonds held by the SSA?

There's no single "problem." Yes, increased government debt has contributed (if we weren't paying interest on all that debt, the current government revenue straem would more easily pay back the SS bonds). But, you could just as easily blame anything else--after all, if SS payroll taxes were higher (for example), we wouldn't have to start dipping into the SS bonds so early.
All the problems interlink and boil down to this: The government has in the past, and continues to, spend much more than it takes in. This will reduce our standard of living going forward as we pay for last night's party.

To address another point of noise--there's precious little "productive government spending" from an economic viewpoint. Defense spending is vital (at some level), but produces little payback economically. Spending on law enforcement and the courts enables our society and economic system to exist, but I'm not sure how an economist would attribute a value to this ("each $ paid to a cop enhanced economic performance due to elimination of drag caused by crime by XX dollars"). Roads and infrastructure might be an exception--government expenditures enhance economic growth by making the private sector more efficient--to a point. Government-sponsored high-speed rail through high-importance congressional districts is likely not a net winner.