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Old 12-25-2011, 03:34 PM   #41
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I don't think that anyone earning $106,800 to $150,000 would be upset, particularly if they know that their SS will be more secure as a result.
High earners are not nearly as concerned with SS being secure as those at the lower end of the earning spectrum. Someone earning $150k for a decade is likely to have $1,000,000 saved by retirement thus relying far less on SS than someone with only $20k saved at age 65.
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Old 12-25-2011, 03:52 PM   #42
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High earners are not nearly as concerned with SS being secure as those at the lower end of the earning spectrum. Someone earning $150k for a decade is likely to have $1,000,000 saved by retirement thus relying far less on SS than someone with only $20k saved at age 65.
I agree that high earners are less concerned with SS being secure for themselves but the security of SS has wider implications than just themselves. There are many high income earners who have less than $1m savings because their lifestyles are commensurate with their means.
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Old 12-25-2011, 04:15 PM   #43
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Ok just to do the math on a 250k mortgage, .1% is 250 a year, for 25 years that works out to 6250, but that is before the tax deduction. However until mortgage rates go up from their terribly low levels its not much of an issue, as the total interest will be on the order of 145k (5% at todays low levels of interest). Let the rates go back to 6%and the total interest is 233k and at 10% its 431k. So if interest rates go back up the impact on the total payments is reduced.
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Old 12-26-2011, 08:07 AM   #44
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Where's Al Gore with his 'lock-box' when we need him?
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Old 12-26-2011, 01:45 PM   #45
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There are a lot of misconceptions on Social Security so I'm surprised there isn't a sticky/FAQ (unless I missed it) on this topic at an ER forum, though probably no one wants to be responsible for the content...
Here's my candidate for the SS Trust Fund Sticky FAQ:

First: The blind men who described an elephant all had different stories, depending on which part they felt. One said it was like a snake, another a rope, another a tree, another a wall. Describing the SS trust fund depends on your perspective.

Accounting: The TF is just a spreadsheet that records each period's revenue and expenditures and accumulates the difference with interest.

Political Agreement:
The TF keeps track of a compromise between people who wanted a bigger SS program and people who wanted a smaller program. They agreed that SS benefits would be fully funded by a dedicated tax, and that tax would not be used for anything else. The accounting worksheet tells us whether we're slipping off that agreement, and by how much.

Tax Burden:
Since the SS tax is a regressive tax on labor income, while the FIT is a progressive tax on labor and capital income, different people are more impacted by one or the other. When the worksheet shows that SS is out of balance, we know that the groups are bearing more or less of the total burden of government than agreed.

Legal:
Under current law, the Treasury Secretary is both allowed and obligated to pay SS benefits as long as the worksheet shows a positive balance. When the balance gets too close to zero, s/he will have to defer benefits until tax revenue refills the bucket enough to send the next batch of checks, and then s/he will send them.

Political Decisions:
Because of the Legal above, gridlock in Congress means that SS benefits will be paid in full as scheduled until the worksheet gets too small. Then they will be paid at a reduced annual rate. Changing laws requires two houses of Congress plus the Prez, and they seem to be pretty polarized. Therefore the "full benefits till the big step down" scenario could actually occur.

Macro-economic:
The federal gov't impact on the macro-economy depends only on total spending and total taxes. Any internal government accounting is irrelevant.

My Taxes:
It depends on my personal tax situation. Is the SS tax a bigger deal to me than the FIT? or is FIT bigger? or are they about the same? In the third case, I really don't care where they get the money for SS. If one is noticeably bigger than the other, then how Congress deals with the TF imbalance can impact my tax bill.
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Old 12-26-2011, 07:27 PM   #46
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Last year when the payroll tax cut started my employer started requiring the employees to contribute to the health insurance benefits plan. Our net pay stayed almost the same.

In this case the payroll tax cut just went to fund the increase cost of health insurance that was passed on to us as a payroll deduction.
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Payroll tax not for everyone
Old 12-27-2011, 12:33 PM   #47
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Payroll tax not for everyone

Just to clarify, the new tax cut is for those not making above the SS max. If you earn over $110,000, the bill had a new tax on the wealthy sneak thru.

The new bill extending the social security payroll tax cut for two months includes a recapture tax for those who make above the taxable wage base prorated for the two-month period.


The Internal Revenue Service said the “recapture” provision applies only to those employees who receive more than $18,350 in wages during the two-month period (the Social Security wage base for 2012 is $110,100, and $18,350 represents two months of the full-year amount). This provision imposes an additional income tax on these higher-income employees in an amount equal to 2% of the amount of wages they receive during the two-month period in excess of $18,350 (and not greater than $110,100).
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Old 01-28-2012, 12:20 PM   #48
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I think they want to remove the fact that Social Security funds itself.It will make it easier to slash benefits that way.

They also want to get around the 4 or 5 trillion dollar surplus that has vanished and turned into IOUs.

Something else that get`s my goat is how they call it a "payroll tax cut" when it should be called a Social Security tax cut.Many people just listen to the sound bites on the news and are led to believe this is a federal income tax cut.

Nothing like putting lipstick on a pig.
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Old 01-28-2012, 12:45 PM   #49
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I actually like the simplicity of the social security, I mean payroll tax. We have a program to provide some income help to older people. We pay for it through this tax. It applies to all Americans and people working legally in the countery. Very nice. SS funds should not be part of the Unified Budget as they are now. This has corrupted the system.

I wish we would do medical care the same way. This is the medical care we are providing to all citizens and legal aliens. This is the tax that is going to pay for it. We would all know what we are getting for our money and can make a rational decision on it. Again, the $$'s would not be part of the Unified Budget and spent on other things.
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Old 01-28-2012, 01:00 PM   #50
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I actually like the simplicity of the social security, I mean payroll tax. We have a program to provide some income help to older people. We pay for it through this tax. It applies to all Americans and people working legally in the countery. Very nice. SS funds should not be part of the Unified Budget as they are now. This has corrupted the system.

I wish we would do medical care the same way. This is the medical care we are providing to all citizens and legal aliens. This is the tax that is going to pay for it. We would all know what we are getting for our money and can make a rational decision on it. Again, the $$'s would not be part of the Unified Budget and spent on other things.
This makes a lot of since to me for its intended purpose: providing a safe minimum of survival and care in a civilized society. My concern has to do with how it is manipulated by those who can earn money by gaming the system. Does the basic level of support and care become the new zero basis, which allows insurers and everyone else to make that the new zero basis for costs? Then it's simply a step up in costs, i.e. inflation. Insurance companies make money on these spreads.
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Old 01-28-2012, 05:51 PM   #51
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I actually like the simplicity of the social security, I mean payroll tax. We have a program to provide some income help to older people. We pay for it through this tax. It applies to all Americans and people working legally in the countery. Very nice. ...
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This makes a lot of since to me for its intended purpose: providing a safe minimum of survival and care in a civilized society. ...
I also feel we should have a safety net for people. However, I disagree that SS makes sense in this regard. SS strikes me as a very odd and convoluted safety net.

For example, why should someone who earned a higher career income, get a higher payout? They should (on average) have less need for a safety net. Just seems backwards to me.

-ERD50
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Old 01-28-2012, 06:05 PM   #52
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For example, why should someone who earned a higher career income, get a higher payout? They should (on average) have less need for a safety net. Just seems backwards to me.
Part of it. I think, is that SS wasn't designed as a welfare program or a major wealth redistribution tool. It wasn't designed *specifically* as a safety net though it is surely that for folks with lower incomes and not a lot of personal savings.
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Old 01-28-2012, 06:14 PM   #53
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Part of it. I think, is that SS wasn't designed as a welfare program or a major wealth redistribution tool. It wasn't designed *specifically* as a safety net though it is surely that for folks with lower incomes and not a lot of personal savings.
Agreed, and I think that is part of what makes SS discussions tough. People should agree on what it is (or should be) before we can intelligently discuss changes to it, and I'm not sure what it is (or what people want it to be).

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Old 01-28-2012, 06:39 PM   #54
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Good point, although I'm glad to get it, when I decide to start it. By then, they may have a different plan of disbursement. Means testing will likely be the method selected. I'm prepared.
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Old 03-11-2012, 06:43 AM   #55
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.I also feel we should have a safety net for people. However, I disagree that SS makes sense in this regard. SS strikes me as a very odd and convoluted safety net.
SSI is not convoluted - it's a very straight forward system designed to provide participants about 40% of their income upon retirement. It is not designed to support people, but to 'assist'. Unfortunately, Many participants have come to see the system as something which is supposed to support them. That is not what it is designed to do. Last time I researched it, about 27% of people who will receive benefits have no other source of income upon retirement. (the following figures are as best as I can remember): 56% have less than $25k saved, and somewhere aroun 75% have less than $100k saved. 93% percent of the work force will receive some benefit, no matter how minimal. Again, my numbers may be a bit off, but are close. Middle age memory ( researched it last year for a discussion.)

SSI was designed to FORCE workers to save, because they were not doing so. It was not designed to share the wealth, or balance out inequities in earnings. It was designed to be self sufficient, supported only by participants.

The safety net comes in the form of disability, Medicaid, and other social programs targeted for lower incomes. Medicare for the elderly, etc.

*those figures came from the SSI website
** I meant SS above, not SSI. Thanks for the correction.
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Old 03-11-2012, 07:40 AM   #56
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. For example, why should someone who earned a higher career income, get a higher payout? They should (on average) have less need for a safety net. Just seems backwards to me.
Because they paid more INTO the system. It's like any other pension plan. It's not a welfare program.
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Old 03-11-2012, 08:29 AM   #57
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SSI was designed to FORCE workers to save, because they were not doing so. It was not designed to share the wealth, or balance out inequities in earnings. It was designed to be self sufficient, supported only by participants.
SSI is not SS (nor SSD):

Understanding Supplemental Security Income (SSI)-- SSI Overview

Just trying to keep the terms correct ...
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Old 03-11-2012, 08:38 AM   #58
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With all the alphabet soup it's easy to understand how Speraphim called it SSi instead of OASI.
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Old 03-11-2012, 08:39 AM   #59
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SSI is not SS (nor SSD):

Understanding Supplemental Security Income (SSI)-- SSI Overview

Just trying to keep the terms correct ...
Thanks for the link, I never realized that FICA doesn't support SSI.
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Old 03-11-2012, 08:40 AM   #60
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I stand corrected lol. I thought SSI stood for something else.

I don't participate in SS, and normally don't pay it much attention. The payroll tax reduction affects me not at all.

I'm a bit bothered, though, that so many people who DO participate don't seem to understand how it works.
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