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Old 09-09-2017, 05:08 PM   #21
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That's the name of the game, redistribution, and why SS was created over 80 years ago. It was NEVER meant to be a full retirement income. It was designed to be a safety net. The bend points in SS make sure that the more you earn over your career, the less you will receive as a percentage of those earnings.
I know, I know- I studied a 500-page text on Social Security for an actuarial exam (and then they took an exam question form a footnote). It just annoys me when my contemporaries post on FB, convinced that all their SS payments are from theirs and their employers' contributions. In the text, the re-distributed amount was called "the welfare element". I also get annoyed at (and feel sorry for) people complaining about how hard it is to live on their meager SS. As you noted, it wasn't supposed to fully provide for retirement.
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Old 09-12-2017, 09:38 AM   #22
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Originally Posted by athena53 View Post
I know, I know- I studied a 500-page text on Social Security for an actuarial exam (and then they took an exam question form a footnote). It just annoys me when my contemporaries post on FB, convinced that all their SS payments are from theirs and their employers' contributions. In the text, the re-distributed amount was called "the welfare element". I also get annoyed at (and feel sorry for) people complaining about how hard it is to live on their meager SS. As you noted, it wasn't supposed to fully provide for retirement.
The "all their SS payments are from theirs and their employers' contributions." statements are worth another review as the "math" is similar to those who buy a lump sum annuity... it takes 15 years or more just to get your principal back... factor in interest I would have gotten on the SS contributions, my projected life span, and yes... all of my SS payments will be from my and my employers contributions.
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Old 09-14-2017, 02:52 AM   #23
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When I took early retirement (2012 – age 57), I went thru my records (packrat that I am) re Social Security (SS). During my total working years the amount that went into SS “on my behalf” was $193,818.88. I did a spreadsheet using the historical interest rates for plain old savings bonds. If, year by year, the money that went to the SS had instead gone into savings bonds and I held those bonds, at my ("early") retirement in 2012 there would have been $406,234.15

Per the SS statement, supposedly five years later at age 62 I could start to receive $1,692 per month. Of course, if the wife & I die before I turn 62, everything in SS goes “poof”.

When I look at the amount flushed into the SS slush fund toilet, I see what could have been the 2012 CASH purchase of four decent small rental units… That would have immediately been paying significantly more than $1,692/month, essentially indefinitely, and leaving a valuable inheritance for the kid…
This story remind me of a friend of mind who used to complain of paying in to SS, guess what he became disabled in his late 30's. It also insurance. He sure changed his tune quickly.
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Old 09-15-2017, 08:31 AM   #24
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This is an ER forum where we have many folks who are good savers, frugal spenders and probably more intelligent than the average person. Could "we" do better by saving our own retirement fund instead of contributing to SS. There would be undoubtedly be no employer match, so we would be saving our 6.1% contribution. The real question is whether the 95% or more of Americans not like "us" could do better? Actually, the real question is whether they would just consider the extra money as spendable cash and blow it the same week they get it. I think "we" all know the answer. SS was established as a safety net for,older Americans, not a guaranteed lifetime income that would cover all expenses. The really sad thing is that for over 40% of our fellow citizens who receive SS, it's their only income.

It's like any other tax. It's used to help redistribute wealth from those who have a lot to those who have very little. It's the same as people who send their kids to private school and still have to pay property taxes to support the local school system. Or any other service that they, personally, don't make use of.

And how would any of us react to an injury or illness early in our career that ended our earnings?
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Old 09-15-2017, 10:43 AM   #25
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And how would any of us react to an injury or illness early in our career that ended our earnings?
Typically people like redistribution of others income toward them, including employment in publicly financed schemes. Not so keen on it flowing away from them. So this answers your question. Diminished or missing income due to disability, bring on the SS.

Ha
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Old 09-15-2017, 02:31 PM   #26
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The Romans called it Bread and Circuses. You gave stuff, food or whatever to the peons and then entertained them with a variety of battles, animal fights, gladiators, etc. this kept them happy until the next time.

Voters can obviously be bribed by whichever party offers them the most they can receive without paying for it. Until they stop trusting the promises. Then anything can happen. Medicare, Medicaid, welfare and other similar programs all offer the same carrot. You get a lot more out of it than you put in or pay for. SS is different in that it actually ran a surplus until very recently. But the government issued IOUs for the contributions and freely spent the money. As the supposed trust fund decreases due to demographics, the money to pay SS comes out of the general fund. And the only solution is to raise taxes or cut benefits. Welcome to the 21st century.
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Old 09-15-2017, 09:22 PM   #27
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Like unno2002, this is a depressing calculation for me. If I had taken all the contributions of my employer and me, with 6% annual return, I could purchase an annuity paying $9000/month at age 70. SS will pay me $3400 starting at 70. The only good news is that all I lost by not working till 65 was a paltry $50/month.

I don't think most people realize how much is redistributed.
I'm skeptical of your results because they are very different from the calcs that I've done and I was a high earner as well.

I took what I and my employer paid in, haircut it 20% for the value of DI and survivor's (life) insurance benefits (so 80% relates to retirement benefits) and compared those cash outflows to the value of a CPI-adjusted joint llfe annuity with a benefit at age 66 similar to my SS monthly benefit.

The IRR on my and my employer's contributions are ~5% if I consider only my benefits and 6.2% if I consider both my and spousal benefits.

See posts 7-14 of this thread: Return on SS "Investment"
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Old 09-16-2017, 06:46 AM   #28
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I'm skeptical of your results because they are very different from the calcs that I've done and I was a high earner as well.

I took what I and my employer paid in, haircut it 20% for the value of DI and survivor's (life) insurance benefits (so 80% relates to retirement benefits) and compared those cash outflows to the value of a CPI-adjusted joint llfe annuity with a benefit at age 66 similar to my SS monthly benefit.

The IRR on my and my employer's contributions are ~5% if I consider only my benefits and 6.2% if I consider both my and spousal benefits.

See posts 7-14 of this thread: Return on SS "Investment"
Your calculation included a couple of elements mine didn't- the 20% haircut for DI and Survivor benefits, and inclusion of spousal benefits. No one ever collected spousal benefits on my record and likely no one ever will- my Ex as well as my second husband collected on their own records and both are now deceased. I understand, though, that if I'd factored in anticipated spousal benefits, since they were always there if applicable, the result would have been much better.
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Old 09-16-2017, 06:53 AM   #29
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I suspect that the bigger difference between the calculations was that you were looking at what a fixed annuity could buy vs I looked at an inflation adjusted annuity.... the age 66 premium for the inflation adjusted annuity was about 150% of the premium for a fixed annuity.
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Old 09-16-2017, 08:30 AM   #30
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It's been a while since I logged on to the ssa.gov website. When I tried today I got this response. Wondering if someone has been playing with my personal info.

"We have suspended electronic access to your personal information.

We tried three times to match the information you provided with our records, but were unable to do so. You may try to access the electronic information again after 24 hours. Please verify your personal information again before trying to use this online service"
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Old 09-16-2017, 09:53 AM   #31
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I am having trouble understanding the posts concerning what you could have done with your SS money as an investment rather than pay into SS. I'm not saying that you wouldn't have done better, but for probably 95% of Americans, SS would be the better deal. There are several assumptions being made that I disagree with.
1. You would get both the employer and employee contribution - 12.4%. I don't see that happening - you would just keep the 6.2% you didn't contribute.
2. You would immediately invest that money in a separate taxable account and also continue to max out your 401K and IRA.
3. Your investment strategy was perfect - you were able to avoid recessions like 1999, 2008 and whatever comes next.
4. Your future returns would continue on the same path with your past returns.
5. You have the willpower to do as you said you would do - which would put you, not in the 5% mentioned above, but in the .05% that actually carry through on what they say they would do.
6. There is no black swan event in the year or two prior to you purchasing the annuity.

It's easy to look back and say what you would have done. Marriage, family, school, college, illness, elderly patents,. etc. etc., all have a way of interfering with those plans and projections. I know that I could have never stuck to the savings plan some of you envision until I was in my 40s and the kids finished college and were on their own.

To me, at the risk of insulting some on this list, the folks who believe they would have been better off without contributing to SS and being on their own, are selfish and totally oblivious of 95 to 99% of the rest of the population who would not be able to do this. Once again, SS was meant as a safety net, not a retirement plan for everyone. Those who are high earners, frugal and can save will have lots more assets than those who are in none of those categories. If you say you are a high earner, then what difference does 6.2% really make. I have one kid who is doing very well - he constantly complains about how much federal and state income tax (as well as RE, etc.) that he has to pay. My answer is always the same - earn less and your taxes will drop. 40% total taxes of $400K still leaves you with $240K. Someone who makes $70K and pays 15%, is left with $60K. It's a lot better to have $240K than $60K.
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Old 09-16-2017, 10:43 AM   #32
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People often forget that 'social' part of social security. It is not a straight annuity or other investment. The idea is that we old folks (and now a lot of younger folks) aren't left hanging out in the breadlines for our next meal. Thus, those who are lower income get a higher proportion of benefits than those of high income. I have known a number of older people who have benefited from that. So, yes, it is in effect a welfare system, but one we all qualify for at a certain age without having to prove 'need'.

It's far better than the alternative which is, IMHO, letting millions of careless people save absolutely nothing for their retirement and then get on some other type of welfare system to which they have contributed nothing. At least with SS, most of us - including the careless people - have contributed for a decade or more and our benefit is tied to our contributions.

That said, it was never intended to be one's sole source of retirement income. People need to remember that. And the politicians need to have the guts to say it. Lots of luck with that.
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Old 09-16-2017, 10:45 AM   #33
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People often forget that 'social' part of social security. It is not a straight annuity or other investment. The idea is that we old folks (and now a lot of younger folks) aren't left hanging out in the breadlines for our next meal. Thus, those who are lower income get a higher proportion of benefits than those of high income. I have known a number of older people who have benefited from that. So, yes, it is in effect a welfare system, but one we all qualify for at a certain age without having to prove 'need'.

It's far better than the alternative which is, IMHO, letting millions of careless people save absolutely nothing for their retirement and then get on some other type of welfare system to which they have contributed nothing. At least with SS, most of us - including the careless people - have contributed for a decade or more and our benefit is tied to our contributions.

That said, it was never intended to be one's sole source of retirement income. People need to remember that. And the politicians need to have the guts to say it. Lots of luck with that.
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Old 09-16-2017, 11:13 AM   #34
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If you were one of those approximately 8 million people who receive a Social Security Disability benefit, you might be thankful you were required to pay into the system.

Admittedly, there is some fraud in the program, but for those who really need it, it may be all they have.
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Old 09-16-2017, 11:24 AM   #35
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If you were one of those approximately 8 million people who receive a Social Security Disability benefit, you might be thankful you were required to pay into the system.

Admittedly, there is some fraud in the program, but for those who really need it, it may be all they have.
I bet there are a lot of public employees in places like Detroit and Illinois who wish they had contributed also.
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Old 09-16-2017, 01:51 PM   #36
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Regarding redistribution, remember that any of us who are alive and are collecting SS are receiving money from those who were not as lucky and paid into the system but didn't live long enough to collect.
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Old 09-16-2017, 01:55 PM   #37
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Regarding redistribution, remember that any of us who are alive and are collecting SS are receiving money from those who were not as lucky and paid into the system but didn't live long enough to collect.
However if these folks had children under 18 when they died the kids got a benefit till at least 18. (The survivors benefit) as indeed did the surviving spouse until the kids turned 18.
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Old 09-16-2017, 08:18 PM   #38
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One of these threads, from a few years ago, dwindled off after a post that went something like this:

One of the big benefits of SS is that it provided enough income to my MIL so she could live independently and did not have to move in with us.

Not sure how to convert that to a Net Present Value.
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Old 09-17-2017, 07:28 AM   #39
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Sounds priceless to me.
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