Protect SS, it's important

[nun]

Another article that subtly shows bias against SS
what-you-should-expect-from-social-security: Personal Finance News from Yahoo! Finance

One quote is

Workers have clearly gotten the message that they're largely on their own: Just-released numbers from Charles Schwab reveal that almost half of the general population say they do not plan on counting on Social Security as a source of income in retirement.

Could have been written like this.
Workers have clearly gotten the message that SS is important to their retirement: Just-released numbers from Charles Schwab reveal that more than half of the general population say they plan on counting on Social Security as a source of income in retirement.

For the less than 50% of workers who aren't counting on SS, what are they counting on....current personal retirement savings rates and balances
indicate that they are relying on the tooth fairy or winning the lottery.

 

[ziggy29]

For the less than 50% of workers who aren't counting on SS, what are they counting on....current personal retirement savings rates and balances indicate that they are relying on the tooth fairy or winning the lottery.

Maybe some of them are saying they don't think they can ever retire.

Many people are skeptical because they think the rules will change on them. Also many people (myself included) just prefer to make very conservative assumptions about retirement, and that means assuming no SS. Do I think I'll get some? Yes, even though I think I'll get less than currently projected (due to formula changes and/or means testing) and my full retirement age (now 67) might be raised on me. But I feel more comfortable planning for the worst and hoping for the best. If I plan for the best, I won't be able to retire if less than the best case occurs.

 

[nun]

Maybe some of them are saying they don't think they can ever retire.

Many people are skeptical because they think the rules will change on them. Also many people (myself included) just prefer to make very conservative assumptions about retirement, and that means assuming no SS. Do I think I'll get some? Yes, even though I think I'll get less than currently projected (due to formula changes and/or means testing) and my full retirement age (now 67) might be raised on me. But I feel more comfortable planning for the worst and hoping for the best. If I plan for the best, I won't be able to retire if less than the best case occurs.

That perception is being reinforce by articles like the one I link to. What I'm concerned about is the undermining of SS so that the very people who most need it (those that don't plan) come to think of it as worthless and therefore don't bother to protect it.

You (and all us ER nerds here) are at the other end of the scale and probably think too much about retirement and SS.
We have a spreadsheet with field for each source of retirement income so we can project the effect of any changes.

 

[ziggy29]

That perception is being reinforce by articles like the one I link to. What I'm concerned about is the undermining of SS so that the very people who most need it (those that don't plan) come to think of it as worthless and therefore don't bother to protect it.

Until such a time as reforms are passed and implemented which can almost certainly guarantee the solvency of SS for the next 50-75 years, I believe the concerns are warranted and justified. And the longer we wait, the more draconian the solution will have to be, whether it's lower benefits, more means testing, raising the retirement age or raising taxes -- or some combination thereof.

Like so many other things, the longer we kick the can down the road, the more painful the "fix" becomes when it can no longer be kicked.

 

[Independent]

IMO, ziggy has the correct FIRE attitude, if you're young, plan for the worst. When you get closer to retirement you can adjust course based on better information.

I've got a lot of trouble with statements like this:

"They should be upset, and concerned that Social Security is structured in a way to give them less than they might otherwise receive. They'll certainly get less than their parents and grandparents, and they're stuck in a position where they are either going to pay higher taxes or get lower benefits, or, what's worse, both," says David John, senior fellow at the Heritage Foundation.

I not sure why young workers should be "upset". They'll live longer than prior generations, so the same monthly benefit will be more valuable over their lifetimes. Why wouldn't they expect lower monthly benefits to balance the additional years of life?

In addition to longevity (and actually a bigger factor) another reason they'll get less than their grandparents is that their grandparents had 3 children per couple while boomers and following generations only had 2. No matter how you fund retirement, if the country has only 2/3 as many children per parent as some prior generation, then either the parents will have to do with less or the children will have to be more generous.

And, what is this "otherwise receive" teaser that John throws out? I looked at the Heritage Foundation site and didn't see anything better with his name on it.

That said, the current law has this cliff when the "trust fund" runs out. IMO, that's not a good idea, but I don't see anyplace that John addresses that issue.

 

[ronocnikral]

i plan on SS like anyone who doesn't plan would plan on it. sort that out.

outside of being my safety net, there is no plan for it. especially with my relatively high allocation of prepaid tax $$. assume it will work the same way as when i applied for college financial aid. when my father was employed, i couldn't even get work study. when my father lost his job, the flood gates were opened.

 

[Emeritus]

You have to deconstruct the social security problem into its components.

Social Security has two critical components, which we can call the Earned component

and the Welfare component. The welfare component of social security includes spousal benefits, added benefits for low income workers and benefits for disabled children. The earned components are pensions for middle and upper contributors and disability payments.

you can tell the difference because all wage earners benefit from the earned component in proportion to taxed earnings.
the welfare components are "detached" from the earnings i.e. they are calculated based on the earnings but no taxes are paid to support them. In particular there are no taxes collected to support the spousal benefit.

The entire welfare component of social security is paid for by middle income workers.
The rich are absolutely totally exempt from this welfare tax
Class Warfare on a grand scale.

I have not seen recent estimates of the welfare component but the last ones I saw indicate its about 50% of the SS tax for middle and upper income wager earners. (50-100,000 )
Its highest for the Dual income wager earners close to the social security limit.

All repeat all of the social security privatization arguments are based on eliminating this welfare payment. that is how they make the numbers work. In particular they always eliminate the spousal pensions.

The easiest path to solvency for social security is to shift the welfare component to the general government budget. There is simply no rational basis for taxing only middle income workers for social welfare payments.

 

[MasterBlaster]

The entire welfare component of social security is paid for by middle income workers.
The rich are absolutely totally exempt from this welfare tax
Class Warfare on a grand scale.

last I looked, high income workers paid the same maximum SS tax as anyone would. They were not exempt.

And last I looked high income workers received way less in benefits than they ever paid. talk about a crummy deal.

The easiest path to solvency for social security is to shift the welfare component to the general government budget. There is simply no rational basis for taxing only middle income workers for social welfare payments.

I don't believe that you thought this one through. When the welfare component gets shifted to the main budget then it will be diminished just like all the other welfare programs have been. If you disguise it within SS it then it gets funded.

 

[dgoldenz]

Is the glass half empty or half full? That's pretty much what you're getting at....of course younger people see it as half empty since in all likelihood, over time the "water" will continue to evaporate, leaving them nothing by the time they reach retirement age. Same deal with Medicare...

 

[samclem]

Why wouldn't they expect lower monthly benefits to balance the additional years of life?

'cause that official-looking estimate they get from the SSA every year in that official-looking envelope doesn't say they should expect lower monthly payments?

I'm a little surprised and glad that almost half of those surveyed aren't counting on SS. That shows at least they are aware of the situation (in general terms) and aren't making overly optimistic assumptions about how well they'll be able to live in retirement based on their SS check. That's good.

 

[jdw_fire]

IMO the best method for fixing the SS shortfall is to remove the income cap on FICA and adding a 4th, even lower, level for computing the benefit for the income above the present cap. doing this would also eliminate Emeritus' concern

There is simply no rational basis for taxing only middle income workers for social welfare payments.

 

[ziggy29]

doing this would also eliminate Emeritus' concern

Not to mention that his concern is flat-out wrong. People earning well over the cap are paying a lower percentage of their income into SS taxes, but it is patently and blatantly *false* to say that only middle-income workers are being taxed.

 

[MasterBlaster]

The theme seems to be...

Why can't rich people pay more/everything ?

Why have SS taxes at all ?

Just jack up income tax rates and get rid of SS taxes altogether !

Then we will distribute what used to be SS to those that need it !

Is that what you really want ?

 

[samclem]

IMO the best method for fixing the SS shortfall is to remove the income cap on FICA and adding a 4th, even lower, level for computing the benefit for the income above the present cap. doing this would also eliminate Emeritus' concern

Hopefully at least it would be a "pay-go" arrangement whereby only enough would be confiscated from higher-income folks to actually meet the anticipated SS shortfall for the coming FY. I don't think the electorate is in the mood to authorize excess collections (again) to be "saved" (wink, wink) for the future.

 

[GregLee]

Not to mention that his concern is flat-out wrong. People earning well over the cap are paying a lower percentage of their income into SS taxes, but it is patently and blatantly *false* to say that only middle-income workers are being taxed.

But Emeritus didn't say that. He said: "The entire welfare component of social security is paid for by middle income workers."

 

[ziggy29]

But Emeritus didn't say that. He said: "The entire welfare component of social security is paid for by middle income workers."

What does that even mean? When's the last time you saw your SS contributions itemized to show the amount of the "welfare component"? Anyone who is paying into SS is paying into both components, I'd say.

 

[jdw_fire]

The theme seems to be...

Why can't rich people pay more/everything ?

Why have SS taxes at all ?

Just jack up income tax rates and get rid of SS taxes altogether !

Then we will distribute what used to be SS to those that need it !

Is that what you really want ?

not even close, my suggestion would have everyone paying the same percentage of their income into FICA. (well not really, those who get income from means other than wages would be paying a smaller percentage then the pure wage earner.) kind of a flat tax on wages that makes a pension.

 

[MasterBlaster]

not even close, my suggestion would have everyone paying the same percentage of their income into FICA. (well not really, those who get income from means other than wages would be paying a smaller percentage then the pure wage earner.) kind of a flat tax on wages that makes a pension.

What is your concept for benefits ?
One size payment for everyone, or pay more get more ?

 

[chinaco]

Another article that subtly shows bias against SS
what-you-should-expect-from-social-security: Personal Finance News from Yahoo! Finance

One quote is

Workers have clearly gotten the message that they're largely on their own: Just-released numbers from Charles Schwab reveal that almost half of the general population say they do not plan on counting on Social Security as a source of income in retirement.

...

I have heard a few younger people (30's) make this comment. For most of those people the idea of retirement is such a distant idea... they are just blurting out words... regurgitating sound bytes from political commercials.

Most people above 40 know they are screwed if it is not there. They are figuring that out at they see their parents struggle with retirement.

If the boomers don't get SS (after paying in all those years)... then their kids can kick in a weekly stipend to their parents and support them.

SS is not going anywhere... It will continue. There will be some changes to shore up financing (keep it solvent) probably in the early 2011 (after the election).


I wonder why Schwab is perpetuating that line... Do you think it has anything to do with scaring people into send them more money?

 

[jdw_fire]

What is your concept for benefits ?
One size payment for everyone, or pay more get more ?

it was in my 1st post:

and adding a 4th, even lower, level for computing the benefit for the income above the present cap.

or maybe i dont understand your question.

 

[Independent]

'cause that official-looking estimate they get from the SSA every year in that official-looking envelope doesn't say they should expect lower monthly payments?

I guess I should have said "people paying even a little bit of attention shouldn't expect ... ". I'm pretty confident that people who post here are paying attention.

My 2010 statement has a section on the front page entitled "About Social Security's future ... "

People who read that section find stuff like "... facing serious financial problems ..." and "Without changes, by 2037 .... there will be enough money to pay only about 76 cents for each dollar of scheduled benefits."

I suppose you could put that in bold or make it red or something. I'm sure lots of people look at the numbers and completely space off on the text so maybe it would be good to do the math and add an adjusted benefit number to that sentence. But I'll bet that every word on that statement is challenged because the authors know that more words means fewer readers.

 

[MasterBlaster]

My 2010 statement has a section on the front page entitled "About Social Security's future ... "

That's recent. Until a couple years ago it said stuff like "Social Security is there for you - You can count on it"

 

[GregLee]

What does that even mean? When's the last time you saw your SS contributions itemized to show the amount of the "welfare component"? Anyone who is paying into SS is paying into both components, I'd say.

I wouldn't presume to say what it means. But I'm not excluding the possibility that it means something.

 

[samclem]

I know that I read the SSA "statement" too. I just like to see how the wording changes with time.

But I'll bet that every word on that statement is challenged because the authors know that more words means fewer readers.

Yep, they could make things shorter and clearer: "These bonds will only cover 76 cents of every dollar that is owed to you and others under the present formulas. As a result, you may get smaller checks."

 

[MasterBlaster]

I know that I read the SSA "statement" too. I just like to see how the wording changes with time.


Yep, they could make things shorter and clearer: "These bonds will only cover 76 cents of every dollar that is owed to you and others under the present formulas. As a result, you may get smaller checks."

How about, thanks for the loot you paid..... sucker !

Is that short and succint ?