Changes Americans are willing to make to fix Social Security

[jollystomper]

One different angle to look at the spousal benefit issue...

Women are more likely to benefit from the spousal benefit as (a) they tend to be the marriage partner that lives the longest.

In the workplace, women over the years have not had the same opportunity for earnings as men have. In the recent years this of course has improved. But go back to when those currently 62 or over were entering workforce age, and society was different. Maybe some of those who were SAHM had no choice, or were underemployed (e.g. the cost of daycare and associated things needed for 2 working parents exceeded the lower income and made it worse financially for the family).

So, in one sense, spousal benefits are a partial compensation for the work and income challenges women faced back in the day.

So perhaps we pick a year where we deem opportunity for working for both men and women were equal, with near equal pay, and say any marriages after that year are not eligible for SS spousal benefits, as both spouses had equal opportunities for work and income.

Another angle might be "if you have no dependents at the time the earner with the larger lifetime income takes their SS, then no spousal benefits".
Just a couple of "Modest Proposals"...

 

[athena53]

So perhaps we pick a year where we deem opportunity for working for both men and women were equal, with near equal pay, and say any marriages after that year are not eligible for SS spousal benefits, as both spouses had equal opportunities for work and income.

I'll certainly agree with you about the difficulties women had in the Bad Old Days- they frequently couldn't get into Medical or Law schools or couldn't get decent jobs even if they did. (Sandra Day O'Connor was offered a job as a Law Librarian after graduating from Stanford.)

OTOH, there are good reasons even for educated women (or men) with good career prospects to stay home with kids. My niece has an MBA in Finance but quit after she had twins. Her husband is the youngest person ever to become partner in a CPA firm large enough you'd probably recognize the name. If one spouse is going for the top, or close to it, it is VERY hard for the other to have a fulfilling, lucrative career if they want to have kids and actually nurture them.

Now you could argue that they should be able to save enough $$ that they don't need spousal benefits and they probably are, but I think it would be harsh to say she gets nothing from SS. Besides in their tax bracket they'd probably be giving 25% of it back in the form of state and Federal taxation on SS anyway, as I am.

 

[GenXguy]

Regarding those relying on SS for 90% of retirement income, note that retirement "income" isn't the same as retirement "spending". Someone could be taking distributions from a Roth IRA, principal on investments/savings drawdown in taxed accounts, which would show no percentage of income vs. percentage of spending. They would only see income on things such as capital gains, dividends, interest.

Spousal benefits when both spouses are living is different than survivor benefits. I support survivor benefits. So living longer would still allow the benefit.

Social security isn't about compensating for anyone's past challenges. It's still not fair rewarding households that had $100K income and one spouse not work and giving them as much as a couple spouses earning $100K and $50K.

With SS underfunded to pay promised benefits, it makes sense to first cut the fat - money going to those that didn't actually earn the benefit before reducing it for those that did.

I'm not sure what metric to use to figure inadequate retirement savings. Perhaps look at age 60 to 65 accumulation including taxable account. Maybe define adequate as a $500k accumulation or five times your average income the past three years, something like that.

There are so many variables that would define what adequate savings is for anyone in particular. Age of retiree, single vs. married, dependents, pension income, cost of living / budget, how taxable the savings is when used for spending, SS benefit, health, etc. But I believe I read that the median savings/retirement for those nearing retirement (60+) was around $200,000. As a median, that sounds inadequate in general but wouldn't be a problem for others, like someone with a sweet pension.

 

[TheWizard]

...I'd be more suspicious of stats on actual account balances- I have a Fidelity account and I have a UBS account that's about 3 X what's in the Fidelity account. It would be hard for someone doing a study to aggregate them.

I agree.
And then you have certain small business owners with very little in tax-deferred, but then they sell the business for $2M and retire...

 

[athena53]

Regarding those relying on SS for 90% of retirement income, note that retirement "income" isn't the same as retirement "spending". Someone could be taking distributions from a Roth IRA, principal on investments/savings drawdown in taxed accounts, which would show no percentage of income vs. percentage of spending. They would only see income on things such as capital gains, dividends, interest.

It depends how you measure it. If it's done from tax data that's what would be available. The way I'd do it is (SS/(SS plus pensions plus what I draw from my accounts) and for me that's 27%.

It's still not fair rewarding households that had $100K income and one spouse not work and giving them as much as a couple spouses earning $100K and $50K.

I know I'm getting repetitive here but I wish people would stop referring to a spouse who has no wages as someone who "doesn't work". Most of them work darn hard.

 

[GenXguy]

It depends how you measure it. If it's done from tax data that's what would be available. The way I'd do it is (SS/(SS plus pensions plus what I draw from my accounts) and for me that's 27%.

The question would be what that 90% statistic is including as "income".

I know I'm getting repetitive here but I wish people would stop referring to a spouse who has no wages as someone who "doesn't work". Most of them work darn hard.

I definitely know some that didn't work hard. But in this context, I'm just referring to working a job that paid SS taxes long enough to qualify for a benefit at retirement.

 

[pb4uski]

I'd be curious on your sources for determining that a large majority the current retiree generation was lax in contributing to their tax-deferred retirement funds.
I and my former coworkers, for example, had mandatory 403(b) contributions from day one of employment, and spanning four decades in my case.

I'm not sure what metric to use to figure inadequate retirement savings. Perhaps look at age 60 to 65 accumulation including taxable account. Maybe define adequate as a $500k accumulation or five times your average income the past three years, something like that.

A related problem is how to turn a $500k tax-deferred accumulation into lifetime retirement income, in many cases for joint lifetimes.
Many folks seem averse to "pensionizing" a major portion of that accumulation to create that third stool leg...

To my knowledge, mandatory retirement plan contributions are very rare. In fact, default contributions that employees can opt out of are a relatively new requirement, albeit a good one IMO.

There is loads of information on how underprepared Americans are for retirement. Here are a few:

According to this survey by the Transamerica Center for Retirement Studies, the median retirement savings by age in the U.S. is:

• Americans in their 20s: $16,000
• Americans in their 30s: $45,000
• Americans in their 40s: $63,000
• Americans in their 50s: $117,000
• Americans in their 60s: $172,000

2019-2020 Federal Reserve SCF data also shows us the average retirement savings by age in the U.S.:

• Ages 18-24: $4,745.25
• Ages 25-29: $9,408.51
• Ages 30-34: $21,731.92
• Ages 35-39: $48,710.27
• Ages 40-44: $101,899.22
• Ages 45-49: $148,950.14
• Ages 50-54: $146,068.38
• Ages 55-59: $223,493.56
• Ages 60-64: $221,451.67
• Ages 65-69: $206,819.35

Source: https://www.synchronybank.com/blog/median-retirement-savings-by-age/

So using the 4% rule, that suggests that the retirees in their 60s with $200k of median retirement savings could withdraw $8k of inflation adjusted withdrawals... that's not very much on top of social security which is a median of $20k a year.

.... The call to action is now. There are too many signs suggesting the population is unprepared. A quarter of US adults have no retirement savings and only 36% feel their retirement planning is on track. Even for those who are saving, many will likely come up short. We estimate the median retirement savings account of $120,000 for those approaching retirement (age cohort 55 to 64) will likely provide less than $1,000 per month over a 15-year retirement span. That’s hardly enough, even without factoring in rising life expectancies and increasing healthcare costs.

Source: https://www.pwc.com/us/en/industries/financial-services/library/retirement-in-america.html

 

[Car-Guy]

I know I'm getting repetitive here but I wish people would stop referring to a spouse who has no wages as someone who "doesn't work". Most of them work darn hard.

+1, my DW (non wage earner for the most part) worked harder (and still does) than I ever did.

 

[Bigdawg]

VERY hard for the other to have a fulfilling, lucrative career if they want to have kids and actually nurture them.

Wow! So my DW and I either worked VERY hard OR we didn't nurture our kids. I'll have to ask them which is it. Some how with both of us working full time (active duty Marines for 20 plus years each) did the laundry, cleaned the house, made dinner, both kids excelled at sports through college, and how in the heck did DD manage to get that Master's degree from Trinity College in Dublin with parents that both worked and couldn't possible nurture her/them? My DM kicked butt as a working mom. Still made it to almost all of my games (football, basketball and baseball), did the laundry, cooked and cleaned the house. She must have been super woman by your standards. And that measly $1880/mo she received from SS starting at 62 was on her record. And she was only 1 year younger than Sandra Day O'Connor. Stop treating women like victims. Teach them to stand up for themselves. I encourage all the ladies in my life. The most attractive person in the world to me is a women who doesn't NEED me. My DW certaining doesn't need me. No person should NEED another person. Wanting is a differnet story.

 

[Bigdawg]

+1, my DW (non wage earner for the most part) worked harder (and still does) than I ever did.

So your house must be cleaner, your kids smarter, your laundry cleaner and your food prepared much better than mine. When I get home on Wednesday I'll let my wife know how much harder your wife works compared to mine. Should I tell her that at 0345 when she wakes up to work out before she heads to work(at her desk at 0545 every morning)?

I have no actual problem when a spouse decides to stay home. But please stop trying to convince us that "they work so hard" and "are better than working spouses". I'm not buying it.

 

[Car-Guy]

So your house must be cleaner, your kids smarter, your laundry cleaner and your food prepared much better than mine. When I get home on Wednesday I'll let my wife know how much harder your wife works compared to mine. Should I tell her that at 0345 when she wakes up to work out before she heads to work(at her desk at 0545 every morning)?

I have no idea, but I didn't say that. All I can say for sure, as I said above, is she worked harder (and still does) than I ever did or will

 

[Gumby]

Thanks to all for an interesting discussion.