How to fix Social Security

[martyp]

Historically, SS was designed to have some connection between taxes collected and benefits paid. Removing the wage cap would result in large benefits being paid to wealthy individuals. Means testing would sever the relationship between taxes paid and benefits received. It would turn it into a wealth transfer program.

At a minimum the retirement ages need to be adjusted up (as was done in the '80s). I think you could probably tweak the wage cap up some and means test some of the benefits without negating the original philosophical foundations too much though it may be a slippery slope.

 

[samclem]

Historically, SS was designed to have some connection between taxes collected and benefits paid. Removing the wage cap would result in large benefits being paid to wealthy individuals. Means testing would sever the relationship between taxes paid and benefits received. It would turn it into a wealth transfer program.

The connection you mention between the SS taxes a person pays and what they receive is a very weak one--the more money you make, the less % of what you've paid will be received in benefits. In fact, SS is primarily a wealth transfer program. The transfer is across two gradients:
1) From the young to the old (because now every penny paid in taxes today goes immediately to recipients. Even when we had a surplus it was fairly small)
2) From the "non-poor" to the "more poor". Because of the benefit formula I mentioned above. SS is a great "deal" for the poor, they receive far more than they pay in. Those who make more money receive much less than they could have received by investing their money somewhere else.

 

[devans0]

The connection you mention between the SS taxes a person pays and what they receive is a very weak one--the more money you make, the less % of what you've paid will be received in benefits. In fact, SS is primarily a wealth transfer program. The transfer is across two gradients:
1) From the young to the old (because now every penny paid in taxes today goes immediately to recipients. Even when we had a surplus it was fairly small)
2) From the "non-poor" to the "more poor". Because of the benefit formula I mentioned above. SS is a great "deal" for the poor, they receive far more than they pay in. Those who make more money receive much less than they could have received by investing their money somewhere else.

What I learned today was that the "more poor" get less from social security than they pay in, while non-poor get more. Why? More poor don't live as long, thus their greater benefits are distributed for a shorter time. So much for simple fixes.

 

[flyfishnevada]

You know, we aren't talking about the mythical one percenters either. These folks that make a big salary usually are just like everyone else. They work hard, earn a paycheck, etc. They aren't the super rich. Asking them to pay some percentage of their wages that they will never receive in benefits is a little much. Hell, it's downright unfair. It's bad enough I've got to pay for people that don't work, but now I'm funding the retirement of my neighbor because he chose teaching instead of law?

Honestly, the government, especially the federal government, shouldn't be in the business of setting up retirement plans. The whole thing was a sham form the beginning. But were here and many people are counting on it. As far as I'm concerned. If you're 20 or younger, your on your own. We suck it up and pay what we've promised and then abandon the damn thing. Either this is a free country where anyone can become rich and successful and some people fall through the cracks, usually from their own lack of ambition, or were just another failing entitlement society.

Social safety net for those that truly cannot help themselves, sure. Government sponsored retirement plan, aka ponzi scheme, aka wealth redistribution scam, no.

 

[samclem]

What I learned today was that the "more poor" get less from social security than they pay in, while non-poor get more. Why? More poor don't live as long, thus their greater benefits are distributed for a shorter time. So much for simple fixes.

There's some of that, but the shorter life expectancy of the poor does not make SS a worse "deal" for them than for the wealthy.
And if we want to get down to the nub of it, living a shorter life and being poor often spring from the same cause--bad decisions. Not always, but often. Maybe that's something else government (e.g. everyone else) should pay to fix, also.

 

[martyp]

The connection you mention between the SS taxes a person pays and what they receive is a very weak one--the more money you make, the less % of what you've paid will be received in benefits. In fact, SS is primarily a wealth transfer program. The transfer is across two gradients:
1) From the young to the old (because now every penny paid in taxes today goes immediately to recipients. Even when we had a surplus it was fairly small)
2) From the "non-poor" to the "more poor". Because of the benefit formula I mentioned above. SS is a great "deal" for the poor, they receive far more than they pay in. Those who make more money receive much less than they could have received by investing their money somewhere else.

I don't disagree that it is fairly weak today but it would be much much weaker if we eliminated the wage cap. It was probably better when it was first implemented. At least that is what I read when doing a little research on the origins of the wage cap.

The old to young transfer was designed into the program from the start. I would guess to get the funds coming in right away. It wouldn't have done much good to wait 20-30 yrs for the program to kick in.

 

[youbet]

I don't disagree that it is fairly weak today but it would be much much weaker if we eliminated the wage cap. It was probably better when it was first implemented. At least that is what I read when doing a little research on the origins of the wage cap.

The old to young transfer was designed into the program from the start. I would guess to get the funds coming in right away. It wouldn't have done much good to wait 20-30 yrs for the program to kick in.

Did you mean young to old?

 

[martyp]

Did you mean young to old?

Ooops

 

[pb4uski]

What I learned today was that the "more poor" get less from social security than they pay in, while non-poor get more. Why? More poor don't live as long, thus their greater benefits are distributed for a shorter time. So much for simple fixes.

Part of it is become more poor people smoke, which both shortens their lives and makes them poor.

 

[Independent]

The connection you mention between the SS taxes a person pays and what they receive is a very weak one--the more money you make, the less % of what you've paid will be received in benefits. In fact, SS is primarily a wealth transfer program. The transfer is across two gradients:
1) From the young to the old (because now every penny paid in taxes today goes immediately to recipients. Even when we had a surplus it was fairly small)
2) From the "non-poor" to the "more poor". Because of the benefit formula I mentioned above. SS is a great "deal" for the poor, they receive far more than they pay in. Those who make more money receive much less than they could have received by investing their money somewhere else.

+1

 

[Independent]

Social safety net for those that truly cannot help themselves, sure. Government sponsored retirement plan, aka ponzi scheme, aka wealth redistribution scam, no.

I'm having trouble imagining a "Social safety net for those who truly cannot help themselves" which isn't some sort of a "wealth redistribution scheme".

 

[bld999]

Here is the party line for anyone interested. My apologies if I am the last to notice this.

Social Security Online

 

[MichaelB]

A social safety net is not only for the misfortuned. It frees people to make choices that have important social value but poor economic reward. Because it is insurance it applies equally to all of us when we are beginning our economic without knowing how it will evolve. Social Security reduces a major component of risk in all our lives that allows us to make choices that otherwise would be much more difficult.

 

[ziggy29]

A social safety net is not only for the misfortuned. It frees people to make choices that have important social value but poor economic reward. Because it is insurance it applies equally to all of us when we are beginning our economic without knowing how it will evolve. Social Security reduces a major component of risk in all our lives that allows us to make choices that otherwise would be much more difficult.

I think there's also a perception that a social safety net would never be used by "responsible" people who would never have a need for it. The problem is that this requires that life goes 100% according to "plan" and that decisions that seemed responsible and sound today don't turn out to be bad decisions later in life because of events largely out of our control.

The corollary to this is the idea that everyone who uses the safety net is lazy, unprepared, irresponsible and the victim of their own bad choices. I've seen too many bad things to happen to too many good people to believe this. Virtually no one can shield themselves from just about every potential piece of bad luck that could come their way. Yes, too many people (IMO) abuse it but cutting off industrious people who just had a streak of bad luck just seems mean to me.

 

[Independent]

I don't disagree that it is fairly weak today but it would be much much weaker if we eliminated the wage cap. It was probably better when it was first implemented. At least that is what I read when doing a little research on the origins of the wage cap.

Just out of curiosity, I went looking for the original benefit schedule. It had two bend points.

For a worker with 10 years of wages prior to age 65, the monthly benefit worked out to 60% of the first $25 of average wage, 10% of the next $350 of average wage, and 5% of any excess.

Social Security Online

The median wage at the time was about $100/month.

(Since the wage base at the time was $3,000, or $250 per month, the third band didn't come into play until workers had at least 15 years participation.)

 

[MasterBlaster]

I think there should be means testing AFTER the SS recipient has been paid back his contribution + employers contribution + a reasonable investment return say about ~ 7% - the long time equities return. At that point, the recipient has been effectively paid back and monies received after are in fact redistributing income from others and he/she should not be eligible if of sufficient means.

- Good Luck with that one.

_ post back here and tell us how it works out for you

 

[jdw_fire]

means testing discriminates against the prudent/planning/saving person and favors the spendthrift, therefore i am against means testing.

 

[EvrClrx311]

Forgive my ignorance (maybe something like this is already being done) but why not just set the system up to give a smaller interest rate of return to those getting the most out and a higher one to those getting the least. While paying people back AT LEAST what they put in.

Example:
If you paid in as a top 20% SS contributor you get back only what you paid in adjusted for inflation. If you paid in as a bottom 20% SS contributor but met the minimum requirement you get back what you paid in adjusted for inflation plus a larger portion of the interest return.

Everywhere in between is based on and adjusting function. So everyone gets A LEAST back what they paid in, but all of the interest goes to help those who are less fortunate

It would look something like this (pulling numbers out of the air, just to get the idea across):
LifeContri% = percentage of qualifying SS that you paid in more than
Infl Adj Payout = what you would be paid if everyone got back what they paid in inflation
Fair Payout = what you would be paid if everyone got back what they paid in plus interest and inflation
Actual Payout = what you get back under this system

Name -- LifeContri% --- Infl Adj Payout --- Fair Payout ---- Actual Payout
Bob -------99%-----------$4,000-----------$4,800-----------$4,000
Nancy -----80%-----------$2,400-----------$2,880---------- $2,550
Jill ---------50%---------- $2,000-----------$2,400---------- $2,400
Jim --------20% ----------$1,600-----------$1,920---------- $2,100
Dave ------ 1% ----------- $900 -----------$1080 -----------$1,500

I suspect that something kind of like this is already being done? If so, can't we just adjust the scale a little more to fix things?

 

[ejman]

- Good Luck with that one.

_ post back here and tell us how it works out for you

Thank you. Will report back as soon as its implemented

 

[bld999]

Don't forget to give your employer back their share..

 

[ejman]

Don't forget to give your employer back their share..

Nah, that was part of my compensation they ain't getting it back.

 

[rodi]

Slightly off topic... but sort of on topic.
A family member in his late 50's just had an epiphany. He's been unemployed/underemployed for years - he lives a frugal lifestyle, but lived off cash he'd made selling investment rental properties. He's had a few very-much part time jobs in the past decade... but not a lot of income.

He just realized he's not going to get much from Social Security because he hasn't had much in the way of wages.

Family has been telling him to get a job for years. It's probably too late now. Savings is spent, and not much SS in his future.

 

[MasterBlaster]

Family has been telling him to get a job for years. It's probably too late now. Savings is spent, and not much SS in his future.

As I recall SS has a category for people like him. Even though he didn't work much SS has a charity-case category that can give hime a small amount every month.

From the link: http://www.ehow.com/info_7755704_do-worked-eligibility-social-security.html

• Social Security administers the Supplemental Security Income (SSI) program. Social Security taxes do not fund this program. Since Social Security has no minimum payment, SSI provides essential income to low-income and low-resource individuals who qualify based on need. Work history plays no part in calculations or distribution of SSI. Individuals who never worked can get SSI benefits if they qualify based on need and are disabled, blind or over age 65. Limitations on resources are $2,000 for individuals or $3,000 for couples, but not all resources count for SSI calculations. The basic rate is $674 for individuals and $1,011 for couples, and income subtractions make the monthly payment less for most recipients.

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Read more: Do People Who Never Worked Get Eligibility for Social Security? | eHow.com http://www.ehow.com/info_7755704_do-worked-eligibility-social-security.html#ixzz1tYajLEIF​

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[rodi]

Interesting, MasterBlaster.

He's single, no kids, not disabled.
I went to the SS website. Social Security Publications
Looks like once he spends down his savings, he'll qualify for $600ish/month once he reaches 65. They did not seem to look at his house - just his bank accounts/brokerage accounts etc.

This is good - we have nightmares that he's going to want to move in with us. This is NOT a family member that we'd want to take in.

 

[explanade]

Some ways to extend the life of the ss "trust fund"
- all taxes raised from taxed ss benefits go back to trust fund
- cap annual increases to benefits at no greater than the average growth of income by wage earners, not CPI.
- means test ss benefits for all
- separate accounting of the "trust fund" and allow trust fund to invest in other than fed govt securities
- increase ss tax and eliminate max wage limit on ss taxable income

Supposedly the last measure alone would "save" SS.