Another Article On Social Security Running Out of Money

[lucky penny]

Well, I do remember when the CBO report said that Social Security would "run out of money" in 2046. (I remember the date because that's when I'll be 100.) I think the estimated date is now 2029. It's a little scary how quickly that date keeps moving closer.

 

[aja8888]

I wonder if when SS runs out of money will the working stiffs and employers be done putting in their contributions?

 

[pb4uski]

Well, I do remember when the CBO report said that Social Security would "run out of money" in 2046. (I remember the date because that's when I'll be 100.) I think the estimated date is now 2029. It's a little scary how quickly that date keeps moving closer.

Even when it "runs out of money" the inflows will still be ~70% of the outflows.

Under current law, CBO projects, Social Security’s trust funds, considered together, will be exhausted in 2029. In that case, benefits in 2030 would need to be reduced by 29 percent from the scheduled amounts.

 

[Ted_Shepherd]

A Tax Levy is Never Temporary (Is it?)

I wonder if when SS runs out of money will the working stiffs and employers be done putting in their contributions?

Those "contributions" will continue as before. Otherwise, Social Security could not pay the 71% or so that the accounts say will be available.

 

[Blue Collar Guy]

OMG "SS is running out of money"!!
Yeah, yeah, yeah. Been hearing that since I started working back in '66.
Just keep sending the checks, ok boys?

Yup, I heard that before. I got mine, shame about you.

 

[pb4uski]

Gentlemen: Social Security is ALREADY means tested in two ways. First, in computing a monthly retirement benefit, it replaces a larger fraction of a worker's income when that income is smaller. Then, then the recipient (including rich geezers like me) pays income taxes on the social security benefit and a surtax for Obamacare. We couldn't deduct our FICA payments at the time, but when the money comes back to us, we have to pay income taxes on it -- double penalty. When you advocate means testing, it would be helpful if you include recognition of the amount of means testing already in the program. Further, please consider a life, fire, or casualty insurance policy you might buy. If, when it comes time to pay off, the insurance company declines to pay, or pays only part of the insured amount, because the insurance company feels you don't need the payoff. The caterwauling about immoral corporations would then be deafening, but you may be OK with the federal government stiffing us. If need is the basis of Social Security payouts, then the program becomes welfare, rather than a universal program, and its public support would decline. (Wouldn't it?) Of course, it would be burdensome on young struggling families to pay higher social security tax. Old guys like me are already helping those families through property taxes that go largely or mostly for schools for the children of those young families. At this point, I am not advocating any particular policy. I'm just commenting on pros and cons of your naked, unsupported statement "Yep, they definitely need to means test your SS." To that extent, I am behaving like the statesman of my dreams, one who admits both the costs and benefits of his proposals, and faces political realities too. Note to that person: Geezers VOTE.

Nice rant... albeit a bit uninformed. While it is true that lower income SS participants get higher benefits relative to their contributions and that a portion of SS is taxed, neither are means testing, which is defined as reducing or eliminating benefits for wealthy or high income beneficiaries... your/our wealth and current high income have no bearing on what our SS benefits are. IOW if you have two people with identical earnings histories they get the same benefits even if one is broke and the other is a multi-millionaire... under means testing the multi-millionaire would get less.

It is true that there is an element of career earnings insurance built into the SS benefit formula...those who have higher career earnings get lower SS benefits and those who have less career earnings get higher SS benefits.... to some degree it is a similar to the impact of earnings limits in defined benefit pension plans rules.... those who earn less get higher benefits relative to their earnings and high earners get lower benefits relative to their earnings... but that is not means testing.

I found this Society of Actuaries report on Means Testing for Social Security interesting reading. Note that one of the alternatives to means testing is making the current difference in benefits between those with higher earnings history and lower earnings history more extreme than it currently is... if that were means testing then they would not have referred to it as an alternative to means testing.

The taxation is similar to a pension annuity.... a portion of each benefit payment is return of prinipal and is not taxed and a portion is earnings and is taxed. I recall that there are studies suggesting that 85% is in the ball-park, however this source suggests that if pension annuity taxation was used for SS benefits, the amount taxable would be even higher.

Less than 30 percent of all Social Security benefits paid out in 2014 were subject to income tax. By contrast, distributions from defined benefit pension plans were entirely taxable, except for the part of each distribution that represented the recovery of an employee’s “basis”—that is, his or her after-tax contributions to the plan. If benefits paid by the Social Security program were treated the same way—by taxing all benefits that exceeded the basis—federal revenues would be more than $400 billion higher over the next 10 years, the staff of the Joint Committee on Taxation estimates. For additional information, see Options for Reducing the Deficit: 2015 to 2024—Option 55.

 

[Sunset]

Gentlemen: Social Security is ALREADY means tested in two ways. First, in computing a monthly retirement benefit, it replaces a larger fraction of a worker's income when that income is smaller. Then, then the recipient (including rich geezers like me) pays income taxes on the social security benefit and a surtax for Obamacare. We couldn't deduct our FICA payments at the time, but when the money comes back to us, we have to pay income taxes on it -- double penalty. When you advocate means testing, it would be helpful if you include recognition of the amount of means testing already in the program. Further, please consider a life, fire, or casualty insurance policy you might buy. If, when it comes time to pay off, the insurance company declines to pay, or pays only part of the insured amount, because the insurance company feels you don't need the payoff. The caterwauling about immoral corporations would then be deafening, but you may be OK with the federal government stiffing us. If need is the basis of Social Security payouts, then the program becomes welfare, rather than a universal program, and its public support would decline. (Wouldn't it?) Of course, it would be burdensome on young struggling families to pay higher social security tax. Old guys like me are already helping those families through property taxes that go largely or mostly for schools for the children of those young families. At this point, I am not advocating any particular policy. I'm just commenting on pros and cons of your naked, unsupported statement "Yep, they definitely need to means test your SS." To that extent, I am behaving like the statesman of my dreams, one who admits both the costs and benefits of his proposals, and faces political realities too. Note to that person: Geezers VOTE.

+1
Besides I was one of those young folks who supported the old geezers, not it's my turn

 

[marko]

Yup, I heard that before. I got mine, shame about you.

My point was that we've been told for over 50 years that SS "will soon run out of money" and it never seems to happen.
I suspect in 20 years from now there'll be folks writing articles about how SS will "soon run out of money".

 

[braumeister]

I know, Im going to be the poster child for the beat down. I feel it coming.

Thanks for being the forum's own Rodney Dangerfield.

If I bought a cemetery, people would stop dying.

 

[joeea]

Seems no one asked me in 1983 what I thought of raising the retirement age. I had started my career just then. I would have voted a big fat no. I dont even know the history of how it got extended.

There was no poll conducted in 1983 asking for opinions.

If you want to learn the history, read this: https://www.ssa.gov/history/reports/crsleghist2.html

 

[joeea]

My point was that we've been told for over 50 years that SS "will soon run out of money" and it never seems to happen.
I suspect in 20 years from now there'll be folks writing articles about how SS will "soon run out of money".

Yup.

Congress likes to wait until the last minute when faced with difficult funding decisions.

This time will be no different. Same as it ever was...

 

[Another Reader]

"Gentlemen" Who do you think is on this forum?

 

[GravitySucks]

I'm not to worried, Other than a possible 25 or so % haircut - which I doubt will really happen, of benefits going away for three reasons:
1. Geezers vote.
2. Middle age people vote and don't want Ma and Pa moving in.
3. We still have a second amendment.

 

[Winemaker]

"Gentlemen" Who do you think is on this forum?

Wild women, maybe?

 

[Ian S]

Here's an interactive site where YOU can play with changes to Medicare and see how your suggestions might impact its long term viability: The Reformer: An Interactive Tool to Fix Social Security

I made three changes: 1) subject all wages to SS taxation 2) bring all new state and local employees into social security and 3) slow benefit growth for top 20% of earners. The result is to keep SS "solvent" i.e. not requiring general fund revenues for nearly 70 years. The website is sponsored by an organization of mainly conservative deficit hawks so its predictions are probably pretty "conservative." IMHO, trying to predict beyond 70 years is pretty meaningless as many things could change the outlook before that. If my suggestions seem to stick it to more to the high wage earners that's because they've done far better over the last few decades than folks lower on the totem pole and are liable to continue to do so. They can afford it.

 

[Blue Collar Guy]

Here's an interactive site where YOU can play with changes to Medicare and see how your suggestions might impact its long term viability: The Reformer: An Interactive Tool to Fix Social Security

I made three changes: 1) subject all wages to SS taxation 2) bring all new state and local employees into social security and 3) slow benefit growth for top 20% of earners. The result is to keep SS "solvent" i.e. not requiring general fund revenues for nearly 70 years. The website is sponsored by an organization of mainly conservative deficit hawks so its predictions are probably pretty "conservative." IMHO, trying to predict beyond 70 years is pretty meaningless as many things could change the outlook before that. If my suggestions seem to stick it to more to the high wage earners that's because they've done far better over the last few decades than folks lower on the totem pole and are liable to continue to do so. They can afford it.

My 1 suggestion of investing in the stock market cut the problem by 21 %. Ill accept the Nobel prize now, ty.

 

[GravitySucks]

My 1 suggestion of investing in the stock market cut the problem by 21 %. Ill accept the Nobel prize now, ty.

Are you counting on the fact that limits will be placed on what company's will be allowed to be invested in?
I know there's been talk of your pension not being allowed to invest in tobacco and liquor companies. Pretty sure they were forced to sell off South African holdings at a low point.
I can see the left screaming to not invest in Chik-Fil-A and the right over investing in whoever makes Plan B pills.
I'm still concerned that corruption would be rampant. The US is not Canada or Norway.

 

[Blue Collar Guy]

Are you counting on the fact that limits will be placed on what company's will be allowed to be invested in?
I know there's been talk of your pension not being allowed to invest in tobacco and liquor companies. Pretty sure they were forced to sell off South African holdings at a low point.
I can see the left screaming to not invest in Chik-Fil-A and the right over investing in whoever makes Plan B pills.
I'm still concerned that corruption would be rampant. The US is not Canada or Norway.

I only counted the Vanguard Wellesley fund. at 2.4 Trillion or VTI at 700 Billion. No carve out. Lets not complicate things.

 

[Lakewood90712]

Although politically unpalatable, the best thing IMO would be to immediately reduce FICA payroll tax , increase the medicare tax, let the SS trust fund quickly deplete, then reduce SS benefits going forward for new recipients. Get it over now.
Someones Oxen is going to be gored in any solution. Anyone who is working, or employers , in favor of substantially increasing FICA tax to be sure you "get your full share in retirement" some day ? I bet not many.

 

[samclem]

SS is >fairly< close to true "pay-as-you go" right now. It was only last year that SS benefits paid out exceeded payroll taxes. This would be a good time to explicitly link SS payouts to SS revenues.
"Oldsters, the folks working now are going to pay just the same percentage of their income as you paid. From here on out, our "family" SS spending will depend on how much we take in--so your checks will vary each year depending on how many people are working and what they paid in SS taxes. Retirees, you have some skin in this game--the better our workers do, the better our industry does, the beefier your checks will be. And if they have to tighten their belts, so will you."

"Now, in your working years, we had more money coming in than we needed to send out in checks. We spent that money for all kinds of things--roads, a war on poverty, a couple of wars on other things, lots and lots of new programs and benefits. We kept track of the amount, and it is in "special" bonds that we were going to make future taxpayers pay for. We're not going to do that after all. You were adults and voting when that money was spent, apparently you thought it needed to be done. Okay, but we've decided not to stick future generations with the bill for that party."

From then on, it would >truly< be pay-as-we go, and no mixing of the SS money with the general fund.

 

[Koolau]

I don't have any suggestions. I just know that back in the 80's they said they were "fixing" SS for the foreseeable future. Well, guess what, it's the future! So what ever is done to "fix" SS will be temporary no matter what reassuring words are used to get folks to buy in. "Fool me once, ..." YMMV

 

[Mr._Graybeard]

The income cap on FICA tax should be raised substantially. That would take a lot of the revenue pressure off SS. $127K is way too low -- a middle-class salary in many parts of the country.

 

[scrabbler1]

The income cap on FICA tax should be raised substantially. That would take a lot of the revenue pressure off SS. $127K is way too low -- a middle-class salary in many parts of the country.

The only thing wrong with this idea is that it severs the tenuous link between the cap on SS benefits and the income cap on SS taxes. The same cap which prevents Bill Gates and Michael Jordan from receiving $1M(?) a year in SS payments keeps them from paying too much in SS taxes. Raising the income cap without raising the benefit cap begins to turn SS into a welfare program, not an income replacement program.

As was pointed out earlier in this thread, SS already replaces a lower percent of income for higher-income wage earners, but at least it replaces some percentage of wage income for each dollar of income subject to the income cap. Raising the income cap without raising the benefit cap basically tells those higher income people, "Thanks for the extra FICA tax dollars, but screw you when it comes to collecting any extra benefit dollars as a result of it!"

 

[samclem]

The only thing wrong with this idea is that it severs the tenuous link between the cap on SS benefits and the income cap on SS taxes.

If the cap was removed and the high earners also got big SS checks, the program would still make a huge net gain. This is due to the low, low replacement rate for high earners (i.e. SS is a "bad deal" for high earners.). And I suppose this change could also be seen as reinforcing the link between earnings and SS benefits, diminishing the perception that is welfare. In actuality it is a big transfer of wealth from young to old and from high earners to low earners. There are societal benefits and pitfalls to this, but that's the math.

 

[MichaelB]

Use my idea, closes 21% of the gap.

You've posted that already. I don't think the folks responsible for managing the SS fund (or awarding the Nobel Prize) are reading this thread. Perhaps you should direct your message to them.