Can you count on SS?

[New Thinking]

I'll take the contrarian approach to you posters who say that SS is currently means-tested due to the taxation of benefits. The benefits themselves are not reduced and you choose how much of your SS is taxed by your planning..The same exists for your IRA withdrawals. Are those means-tested?

There are ways to eliminate the tax on SS for many including Roth conversions and delaying SS.

 

[bosco]

"Removing the cap" would be less painful if the individuals at the top end at least had the illusion that they woud derive some benefit. Today, SS is not simply an intergenerational wealth transfer, it has become a means of redistributing $$ from higher income individuals to lower income individuals.

"From each according to his abiilty, to each according to his needs."
-K. Marx

the benefit would be the knowledge that you are helping to keep the system financially sound. I'm sorry, but it wouldn't bother me a bit of people that make over $94k/year had to pay an additional 6.15% tax. And for the record, I exceed it myself. I somehow think the word "painful" for someone in this situation is a bit of an overstatement....

 

[rs0460a]

Darn...

This thread is getting too "serious"

As a Boomer (age 58), I have a simple suggestion...

Let the "youngsters" on this board start "pumping out the kids" (along with having those kids have jobs that ensure solvency to the programs )

That should take care of the SS/Medicare problem (at least while I'm still alive )

- Ron

 

[RockMiner]

the benefit would be the knowledge that you are helping to keep the system financially sound. I'm sorry, but it wouldn't bother me a bit of people that make over $94k/year had to pay an additional 6.15% tax. And for the record, I exceed it myself. I somehow think the word "painful" for someone in this situation is a bit of an overstatement....

Heck, If it's so painless why not volunteer to pay the extra SS tax...why wait?

 

[Cut-Throat]

SS itself is pretty easy to fix, if that is what's wanted. A couple tweaks here and there will put it in great shape. There are probably 10 painless ways to fix it, and it does not have to be 'Fixed' for a decade or so.

The problem last year was that Bush Jr. proposals included 'private accounts'. His solution was to pull the young folks off the SS roles. This would have reduced funding of SS by a huge margin. It took the 'politically challenged' awhile to figure out that he was trying to eliminate S.S. - Not Save it! His proposals would have cost Billions if not Trillions!. What did he care about deficit spending? - He wanted to be the 'The Guy' that dismantled S.S. - A program hated by the right, ever since FDR times!

The real problem is Medicare - Everyone agrees! - If Bush was really concerned with the finances of the nation, he would have brought this to the forefront first! - This is what really bugs me about Bush. He will do anything to promote himself. Even to the detriment of the country. - Iraq is of course the ultimate example!

The reason people focus on S.S. is that we all want to collect money. The reason we don't focus on Medicare, is we all believe we will stay healthy!

 

[Mr._johngalt]

SS instelf is pretty easy to fix, if that is what's wanted. A couple tweaks here and there will put it in great shape. There are probably 10 painless ways to fix it, and it does not have to be 'Fixed' for a decade or so.

The problem last year was that Bush Jr. proposals included 'private accounts'. His solution was to pull the young folks off the SS roles. This would have reduced funding of SS by a huge margin. It took the 'politically challenged' awhile to figure out that he was trying to eliminate S.S. - Not Save it! His proposals would have cost Billions if not Trillions!. What did he care about deficit spending? - He wanted to be the 'The Guy' that dismantled S.S. - A program hated by the right, ever since FDR times!

The real problem is Medicare - Everyone agrees! - If Bush was really concerned with the finances of the nation, he would have brought this to the forefront first! - This is what really bugs me about Bush. He will do anything to promote himself. Even to the detriment of the country. - Iraq is of course the ultimate example!

The reason people focus on S.S. is that we all want to collect money. The reason we don't focus on Medicare, is we all believe we will stay healthy!

Hello C-T. Please tell me this was a CHP.

JG

 

[JohnEyles]

Waiting in my doctor's office, I read the recent Newsweek, which had an article
on Social Security and how it's a pretty good deal and don't assume it's not
worth much.

And how did they back this up ? Our old friend the "instant annuity quote"
calculator at the Vanguard website !

http://www.aigretirementgold.com/vlip/VLIPController?page=SubmitQuote

They basically ran the computation of how much it'd cost to buy a SPIA with
a payout equivalent to SS. Even if you think SPIAs are a really bad idea, this
calculator is a great resource !

 

[jazz4cash]

Waiting in my doctor's office, I read the recent Newsweek, which had an article
on Social Security and how it's a pretty good deal and don't assume it's not
worth much.

And how did they back this up ? Our old friend the "instant annuity quote"
calculator at the Vanguard website !

http://www.aigretirementgold.com/vlip/VLIPController?page=SubmitQuote

They basically ran the computation of how much it'd cost to buy a SPIA with
a payout equivalent to SS. Even if you think SPIAs are a really bad idea, this
calculator is a great resource !

If you use this approach, it ignores the time value of the SS taxes witheld over 40 years, but it still looks like a good "investment".

 

[tiredofwork]

this is a misleading statement. The top earners don't make contributions on a lot of their earnings so why should they get higher benefits from them? This year, there are no contributions on income over $94,200.

In fact, one proposal to fix the system is to simply remove the earinings cap. That'll never happen with Republicans in power.

Here's an example I provided in an earlier thread back in August. The results may have changed somewhat because the Social Security COLA was published a few weeks back:

Go to http://www.ssa.gov/OACT/quickcalc/index.html and leave all of the defaults except vary the income. I just did this for incomes of $40000, $60000 and $80000 per year. You will find that the quck calculation gives age 66 annual Social Security payments of $14808 (37% of working income), $19836 (33% of working income), and $22236 (28% of working income). These are incomes that are fully taxable for Social Security. This is what I meant by means testing.

 

[Texas Proud]

I believe the calculation uses your highest 35 years of income. Letting it slide for a few years generally wouldn't have a large impact if you have nearly 35 years behind you. But they do count as zeros in the calculation. Being at my peak earnings now, I don't mind a bit when each year replaces a year of $11,000 back in the 70s.

WOW.... sorry, but I will not get in 35 years... at least 35 of real work.. those few years of teenage jobs don't count...

 

[youbet]

those few years of teenage jobs don't count...

Yeah they do........ Plug them into the calculator. Even if you only earned peanuts, you'll see a difference between those numbers and zero.

 

[sgeeeee]

Can you count on SS?

Yes, at least at 75% of current levels -- higher if we elect politicians with enough sense to legislate some minor changes to the tax - benefit formulae.

 

[mathjak107]

never forget the people who brought you ss also bring you the power to sell bonds and do magical financing to fund anything they want.

since some inflation may be tolerated better politically by 80 million baby boomers than politicians telling them they are cutting their ss or raising their taxes i dont think we have to worry.

 

[Mr._johngalt]

Hello C-T. Please tell me this was a CHP.

JG

Hey, I am "galting" again (gotta love this board)

This is mostly for C-T and those who agree with the post that
inspired my response above. Let's assume (for the sake of argument)
that the effects on SS postulated in the C-T Bush-rant could come to pass.
Would you folks allow that it might be due to.......oh, say............
cluelessness, as opposed to some evil plan? Just wondering.

JG

 

[donheff]

Speaking of of post talking about Newsweek's use of the Vanguard calculator to dirive a present value of SS

If you use this approach, it ignores the time value of the SS taxes witheld over 40 years, but it still looks like a good "investment".

In a recent thread I posted figures from a run of DWs SS payments (both employee and employer portions) and calculated what her nest egg would have been under a couple of different interest rate scenarios. It showed that SS was a better deal that an SPIA based on the nest egg. Add in the benefits Astro listed and you have a very good deal.

And remember, with minor tweaks it pays for itself - even with the boomers retiring. The problem is not the SS system, per se, but that SS invested all of its revenues with the spendthrift US Government which is now having a hard time paying them back.

 

[Mr._johngalt]

The problem is not the SS system, per se, but that SS invested all of its revenues with the spendthrift US Government which is now having a hard time paying them back.

Oh pshaw! They can just print more money.

JG

 

[rmark]

Yes, although I think its becoming more like a fixed pension due to rising medicare costs.

 

[Martha]

Yeah they do........ Plug them into the calculator. Even if you only earned peanuts, you'll see a difference between those numbers and zero.

Baled hay for cash. Doesn't appear on my record. And that was hard work!

 

[youbet]

Baled hay for cash. Doesn't appear on my record. And that was hard work!

Na na la la la la.....! Don't want to hear about your sources of illegal, non-taxed income.......... (Hands over ears)

Makes me think of some of those infamous American so-called "victimless" crimes like:

Collecting unemployment compensation when you're really not looking for work.....you're FIRE.

Hiding assets so grandma's stay at the "home" is covered by Medicaid to protect your inheritance.

Hiding income from the tax man.

BTW, my personal trip to the land of "wink wink, everybody does it" was as a teen working as a caddy and not reporting tips, which were the bulk of the compensation. We are all so bad.........!

 

[Nords]

I'll take the contrarian approach to you posters who say that SS is currently means-tested due to the taxation of benefits. The benefits themselves are not reduced and you choose how much of your SS is taxed by your planning..The same exists for your IRA withdrawals. Are those means-tested?
There are ways to eliminate the tax on SS for many including Roth conversions and delaying SS.

Sounds like the debate isn't "if" but "how much".

"We have established what you are, madam. We are now merely haggling over the price."
-- George Bernard Shaw

 

[FIRE'd@51]

The problem is not the SS system, per se, but that SS invested all of its revenues with the spendthrift US Government which is now having a hard time paying them back.

I would phrase it a bit differently. Even if the government pays off its obligations to the trust fund in a timely matter (which nearly everyone expects it to do), there is still a problem in that the trust fund is not growing fast enough to make up for the demographic drop-off in workers paying into the system combined with the increased boomer retirees. Sometime around 2016, SS will no longer be able to operate as a "pay as you go" system where SS taxes paid by workers pay the benefits to retired beneficiaries. At this point the trust fund will be relied upon to make up the difference, which, under the current level of benefits, is forecast to exhaust it sometime around 2040. The obvious answer, IMHO, is to do what any other defined benefit pension plan does - raise the rate of return on its assets by including equities (an index fund) in its portfolio. The problem with the spendthrift government's deficit is twofold: (1) it continues to borrow the SS surplus, and (2) it can't pay back it's obligations to the trust fund early. Thus, funds are not available for equity investment, even if Congress were to change the law to allow this.

This is where the "smoke and mirrors" part comes in. The government could borrow more money from the private sector, and use those proceeds to repay a part of its obligation to the SS trust fund, thus "freeing up" money for equity investment. However, politicians don't want to do this because then they would have to report a bigger deficit, even though the actual deficit would still be the same. In other words, the current reported deficit doesn't include the money borrowed each year from the SS surplus.