Good News/Bad News RE: SS

[mickeyd]

Not sure about the accuracy of all of this but it seems pretty sensible that "seniors" (whoever they are) seem to be in a better place than "juniors".

Good news for seniors. The benefits of current retirees and those close to retirement remain completely safe. The 2008 report shows that the program will have enough resources to pay full benefits until 2017. Despite political scare tactics, seniors can rest assured that their benefits are safe and that they will receive every cent that they are due, including an annual cost-of-living increase.

2008 Social Security Trustees Report Continues to Show the Urgent Need for Reform

 

[rs0460a]

"seniors" (whoever they are)

I'm here ...

- Ron

 

[Independent]

I'd say that current retirees' benefits are "completely safe" only if it's "completely unthinkable" that Congress would change them. Just like tax laws, Congress can change the rules for SS anytime it wants to.

That said, I think the politics of the situation mean that about the only thing Congress could do in the short run is extend taxes on SS benefits or do some other limited means testing.

Most of the Heritage Foundation's piece just repeats numbers in the Trustees Report. However, I think this line near the top is extremely misleading:

Several plans to establish personal retirement accounts have been shown to fix Social Security.

There are plans that "fix Social Security" by reducing benefits to the level that can be supported by taxes.
Some of those plans then tack on individual accounts, but those accounts have nothing to do with "fixing Social Security", the fix is entirely a result of the benefit reductions.

The economic rules don't change - there is no free lunch. If we want to "balance" SS, we can either increase the tax rate, add some new taxes, or decrease the benefit formula.

 

[haha]

Here is key information that shows why our pay as you go SS system is badly flawed. It might work fine, if all generational cohorts were almost the same size. But they are not. We are about to start replacing the retired small generation of the 30s with the huge boomer generations.

We ignored the parable of the seven fat years- we've had our fat years, and instead of laying by we spent it. All the debate about the lockbox, etc. can just we swept off the table. It is accounting thinking. Economic thinking shows that boomer payroll taxes rolled in, and were sent right back out in spending for defense, social services, and boondoggles. Now the seven lean years (more like 30!) are about to begin, and our granaries will soon be empty.

Is the important year to consider 2041, 2017, or 2010?
The year when Social Security begins to spend more than it takes in, 2017, is by far the most important year. From that point on, Social Security will require large and growing amounts of general revenue money in order to pay all of its promised benefits. Even though this money will technically come from cashing in the special-issue bonds in the trust fund, the money to repay them will come from other tax collections or borrowing. The billions that go into Social Security each year will make it harder to find money for other government programs or will require large and growing tax increases.
A second important year is 2010. Starting in just two years, the annual Social Security surpluses that Congress has been borrowing and spending on other programs will begin to shrink. From that point on, Congress will have to find other sources to replace the money that it borrows from Social Security or shrink spending. By 2017, Congress will have about $80 billion less to spend annually.
Compared to these two dates, 2041--the year that the Social Security trust fund runs out of its special issue bonds--has little importance. Even though the end of those bonds will require a 25 percent benefit reduction, Congress would have been paying more than $300 billion a year (in 2008 dollars) to repay those bonds for about seven years by the time the trust fund runs out. Congress will have to do this through some combination of other spending cuts, new taxes, or additional borrowing. These are the same choices that Congress would face without the trust fund.

Ha

 

[aenlighten]

Bull

This just reveals the problem is not SS but the general fund that is out of wack with taxes. Conservatives just want to cut SS benefits to pay for general fund spending. I look forward to day the general fund will have to pay its own way. That is not a problem, that is an improvement over the current situation. That is why 2017 is utterly irrelevant. What does the government do when debt comes due? It rolls it over. No spending cuts, no tax increases. Instead of SS holding the debt, other parties will. But the government won't have the SS surplus to spend. Tough. They shouldn't have had it in the first place.

 

[Frugality_of_Apathy]

Conservatives just want to cut SS benefits to pay for general fund spending. .

That would be republicans not conservatives. Fiscal conservatives want to cut all spending.

 

[haha]

This just reveals the problem is not SS but the general fund that is out of wack with taxes. Conservatives just want to cut SS benefits to pay for general fund spending. I look forward to day the general fund will have to pay its own way. That is not a problem, that is an improvement over the current situation. That is why 2017 is utterly irrelevant. What does the government do when debt comes due? It rolls it over. No spending cuts, no tax increases. Instead of SS holding the debt, other parties will. But the government won't have the SS surplus to spend. Tough. They shouldn't have had it in the first place.

Your analysis as to politics may be correct, but 2017 is far from irrelevant. Federal borrowing capacity is not infinite, at least not without seriously pushing on interest rates.

Ha

 

[cute fuzzy bunny]

However, I think this line near the top is extremely misleading

Thats because the heritage foundation's stated mission is reducing government size, taxes and taking power away from the government. So quite naturally they want to make a lot of noise about social security failing and having personal accounts established as a replacement for social security.

As usual anytime someone tells you something, its worthwhile to figure out why they're taking the trouble.

"Founded in 1973, The Heritage Foundation is a research and educational institute - a think tank - whose mission is to formulate and promote conservative public policies based on the principles of free enterprise, limited government, individual freedom, traditional American values, and a strong national defense."

 

[Helena]

The year when Social Security begins to spend more than it takes in, 2017, is by far the most important year.

2017 is the year I turn 65.

But I'll probably choose early SS at 62... if that is still an option.

~

 

[Khan]

Has anyone considered not applying for Social Security unless you need it?

 

[Independent]

Thats because the heritage foundation's stated mission is reducing government size, taxes and taking power away from the government. So quite naturally they want to make a lot of noise about social security failing and having personal accounts established as a replacement for social security.

As usual anytime someone tells you something, its worthwhile to figure out why they're taking the trouble.

"Founded in 1973, The Heritage Foundation is a research and educational institute - a think tank - whose mission is to formulate and promote conservative public policies based on the principles of free enterprise, limited government, individual freedom, traditional American values, and a strong national defense."

I think you're correct.

 

[Independent]

Here is key information that shows why our pay as you go SS system is badly flawed. It might work fine, if all generational cohorts were almost the same size. But they are not. We are about to start replacing the retired small generation of the 30s with the huge boomer generations.

I wouldn't say that the size of the generation is the critical number. It's the ratio of workers to retirees. The WWII generation had 3 kids per couple, the Boomers only 2. So, if nothing else changed, the Boomers' kids would have to transfer 50% more of their incomes to their parents to maintain the replacement ratio that the Boomers provided for the WWIIs.

And, I'd say this is a characteristic of any "retirement system". It's always a matter of transferring consumption from current workers to retired workers, so the ratio is always important.

 

[aenlighten]

The money has already been borrowed. Now rolling it over to new borrowers may affect rates, but fairly small in itself. The US debt ratio is only 66%. The amounts in any year are only reach 100-200 billion or less than 1% of future gdp. This alone won't even require an increase in real debt, unless general funding is allowed to continue running amuck, again showing the problem is general funding, not SS. We will have to decide whether we want to raise taxes or cut spending without the surplus to spend, or just go deeper in debt, but this is not a SS problem but a general fund problem and should be resolved gradually over the next decade as the surplus goes away. Conservatives (ok Republicans) prefer their taxes regressive which is why they want to cut SS spending but not SS taxes. Actual conservatives would prefer general spending cuts, while liberals would prefer tax increases.

 

[haha]

I wouldn't say that the size of the generation is the critical number. It's the ratio of workers to retirees.

Think there might be a connection here?

 

[FIRE'd@51]

And, I'd say this is a characteristic of any "retirement system". It's always a matter of transferring consumption from current workers to retired workers, so the ratio is always important.

It doesn't have to be this way. If the SS trust fund had been able to be invested in assets that had a higher rate of return than government securities, it would have been possible for it to grow enough to offset demographic changes.

 

[aenlighten]

What will be a problem in 2017

is Medicare. If nothing is done it will end up in general funding then. Now if healthcare is reformed, this may be delayed or go away, but if it takes a crisis to do anything, that will be when it occurs.

 

[FIRE'd@51]

is Medicare. If nothing is done it will end up in general funding then. Now if healthcare is reformed, this may be delayed or go away, but if it takes a crisis to do anything, that will be when it occurs.

No question, Medicare is the bigger problem. And so far, none of the major proposals for "universal" healthcare seem to incorporate Medicare, but rather carve it off, and attempt to deal solely with the under 65 group. Even a well-thought out proposal like Ron Wyden's doesn't incorporate Medicare.

 

[BLS53]

I've never understood how the universal healthcare advocates, expect it to function financially, when Medicare's going broke with only including those over 65. Seems a similar program covering all age groups would be doomed financially.

 

[cute fuzzy bunny]

Probably because we're already putting more money into the system we have now, and getting inferior coverage for only a portion of the population.

Our per capita healthcare costs for covered people is far higher than any other country in the world. For that we dont top or come close to topping any measurement of health and well being.

So I think the idea there is to take all that money that employers and individuals are throwing in right now and end up with better care at a lower cost as a result of reducing bureaucracy and improving preventative care.

But thats another topic and another thread, and we've already had quite a few of those discussions. In one we made the population of the united states swell to seven billion people!

 

[Marquette]

I've never understood how the universal healthcare advocates, expect it to function financially, when Medicare's going broke with only including those over 65. Seems a similar program covering all age groups would be doomed financially.

Well, if we go through a mental exercise where, in general, people over 65 are more probable to experience certain illnesses and diseases, then we can assume that adding younger people, who in general are less probably to experience certain illnesses and diseases, will reduce the per capita coverage needs of the current plan.

 

[REWahoo]

Has anyone considered not applying for Social Security unless you need it?

Silence speaks volumes...

 

[rs0460a]

Has anyone considered not applying for Social Security unless you need it?

While this could certainly be done by a person of some wealth, I personally would not do it, assuming I could.

I would rather collect it and if so inclined donate the money to "a charity of my choice" (not the government )...

- Ron

 

[OAG]

Has anyone considered not applying for Social Security unless you need it?

Yes, I just did last Friday, sent a mid-5 figure check in to SSA withdrawing my original application for SS (filed at age 62). Well sort, of as I also applied for spousal benefits on DW record on Saturday. Hopefully, will be around for a couple of more years to apply (reapply) for my benefits at age 70.

 

[Spanky]

Has anyone considered not applying for Social Security unless you need it?

Certainly not.

 

[Gardnr]

Has anyone considered not applying for Social Security unless you need it?

I think the better option would be to take the money and set it aside (invested) to pass it on to your kids and grandkids to help them pay their taxes since we're piling up the debt and future obligations that they'll be burdened with.

That's assuming you can afford to do so, of course. Hopefully I will be able to do so.