Would you take a lump sum buy out from SS?

[Midpack]

Fascinating the proposals to be 'paid back' overly generous lump sums, knowing the "contributions" were spent when they were made (long ago), and the payouts would be coming from fellow taxpayers, our kids/grandkids mostly. Funny sense of humor if that's what it's meant to be?

 

[Fermion]

Fascinating the proposals to be 'paid back' overly generous lump sums, knowing the "contributions" were spent when they were made (long ago), and the payouts would be coming from fellow taxpayers, our kids/grandkids mostly. Funny sense of humor if that's what it's meant to be?

I wonder if some find the same humor in underfunded government pension funds wanting payouts from present taxpayers for contributions that should have been made by taxpayers long gone.

 

[MichaelB]

The original topic is interesting, hopefully the discussion will get back on track...

 

[marko]

Would depend on the size of the lump sum. $3M? Sure! $500K? No.

OTOH, with talk of us "rich" folk being dropped from the SS rolls, "bird in hand" might apply some day.

 

[Fermion]

I don't think it has gotten off track if you view SS as just another form of government pension.

These threads always seem to cast doubt on the sustainability of SS while we have military, state and federal pensions which should fall under the same doubt.

I guess we could have a separate thread for "Would you take a lump sum buyout of your military pension" or "Would you take a lump sum buyout of your federal pension" and then make statements on how that money would come from our children and grandchildren.

 

[Independent]

so you think pensions only invest in stocks and bonds? better check your facts

SS is a pay as you go because those funds where raided by politicians, more reason to take the money we are owed

According to this report on 100 big plans, 43% bonds, 37% equities, 20% "other" (including "real estate, private equity, hedge funds, commodities, and cash equivalents.")Corporate Pension Funding Study - Milliman - United States

But, the asset allocation wasn't the point. Most private plans are expected to be advance funded. If the sponsor decides to offer a lump sum option, the sponsor can usually get the money from selling assets.

SS is paygo. Almost all taxes collected were used to pay benefits in the same year that the taxes were paid. (Yes, I know about the Trust Fund, but it is small relative to an accumulation of all taxes.) Any decision to offer lump sums would need to get cash from somewhere.

Since the money was primarily spent on benefits to prior generations, my tongue-in-cheek suggestion was to get it back from them. My more serious comment was that we need to recognize that, for many of us, our current financial position is better due to the SS benefit our parents or grandparents received.

 

[hnzw_rui]

I guess we could have a separate thread for "Would you take a lump sum buyout of your military pension" or "Would you take a lump sum buyout of your federal pension" and then make statements on how that money would come from our children and grandchildren.

Nah. Lump-sum from our local gov't pension only gives a return of employee contributions plus very small interest based on Treasuries. That would be depleted in something like 5 years if using the annuity payout rate. You don't get any employer contributions or even the pension trust fund returns.

 

[Debbyalee]

Would stick with monthly SS payments. Never put all your eggs in one basket and it is always good to have multiple streams of income.


Sent from my iPad using Early Retirement Forum

 

[bclover]

And what to do with those that would take a lump sum, blow it and then come back as destitute? SS was never meant to be a retirement income, just a safety net.

+1

 

[Texas Proud]

Fascinating the proposals to be 'paid back' overly generous lump sums, knowing the "contributions" were spent when they were made (long ago), and the payouts would be coming from fellow taxpayers, our kids/grandkids mostly. Funny sense of humor if that's what it's meant to be?

Lighten up.... it is a hypothetical question that has zero chance of happening....


But, everybody who is getting a SS check is getting it from "fellow taxpayers, our kids/grandkids".... so what is the difference

 

[Big_Hitter]

I'd say it has a negative chance of happening since the system is in dire need of more funds.

 

[unno2002]

[FONT=&quot]If I could get a payout of the “contributions” made on my behalf with accrued interest at the rate of Savings Bonds, I’d jump at the chance. I even believe I’d accept a single check for the contributions, without interest. [/FONT]

 

[LoneAspen]

Yes.

As a Gen-X'er, I've never believed SS would be around for me, so I just don't trust it. I'm also not a believer in any kind of "forced participation" type system that takes MY money (and yes, I consider it MY money) away from me with promises to return it at a future date.

So, yes, I'd take a lump sum in a heartbeat.

It's also one reason why I'll file for, and start collecting, SS as soon as I can. I want to start getting MY money back as soon as I can.

 

[NW-Bound]

I do not think SS benefits will go away. But there's a strong chance it may be reduced in the future.

As for the people who think that their SS benefit is an inalienable right, they obviously do not know that in 1960, the US Supreme Court already ruled that it was no such thing in the case of Fleming v. Nestor.

The court said that Congress could do whatever it wanted with SS. Here's some exact wording.

“To engraft upon the Social Security system a concept of ‘accrued property rights’ would deprive it of the flexibility and boldness in adjustment to ever changing conditions which it demands.

It is apparent that the non-contractual interest of an employee covered by the [Social Security] Act cannot be soundly analogized to that of the holder of an annuity, whose right to benefits is bottomed on his contractual premium payments.”​

SS is a tax collection on earned income, which is then used to fund a welfare program. It's just that simple.

When you pay taxes to fund road construction, or paying for defense spending, do you have a direct say in how the money is spent? Although SS benefits go to you directly, you do not have any more say in it than with the other taxes. That's what the Supreme Court meant.

 

[Big_Hitter]

SS is a tax collection on earned income, which is then used to fund a welfare program. It's just that simple.

well in all fairness it's not really a welfare program since benefits are related to earnings; it's a social insurance program but I agree that SS is a tax collection (FICA/FUTA)

 

[bingybear]

well in all fairness it's not really a welfare program since benefits are related to earnings; it's a social insurance program but I agree that SS is a tax collection (FICA/FUTA)

It is not a pure welfare program, but is quite progressive. Just because the payout is related to earnings really would not exclude it from being welfare. The progressive nature of the benefit being based on average inflation indexed monthly income and having the bend points in the formula provides a better return on moneys paid in to those with lower incomes when considering those at the first bend point or above. It does provide a better return for those at the lower end than the upper end which could be seen as welfare by some.

I find it more interesting that some classes of employees got out of paying SS tax: federal and some state and local employees. That really begs the question of why and fairness as things are changed. But then again... if state and local governments fall short of paying pensions....PGC doesn't cover those entities.

It is fun having no control of anything

 

[NW-Bound]

... I find it more interesting that some classes of employees got out of paying SS tax: federal and some state and local employees. That really begs the question of why and fairness as things are changed. But then again... if state and local governments fall short of paying pensions....PGC doesn't cover those entities.

It is fun having no control of anything

What I have read was that when SS was enacted, some groups opposing it were allowed to opt out. Congress accepted it because they needed votes to pass it. Note that not just state employees, but some religious groups such as the Amish who took care of themselves and vowed not to use government welfare were also exempted.

These exempted groups have better retirement funding than the general public, because their contributions are for their own use, and not "shared" with the public for welfare purposes. Of course they may have caused other problems themselves with generous benefits, but that's another issue.

Anyway, because SS is really a tax, there should not have been any exempted group, other than the religious groups like the Amish in my opinion. It should be like federal and state income taxes. The Amish are not exempted of income taxes, because they do benefit from the public services that these taxes fund. By the way, I believe the Amish also do not draw Medicare benefits, and their communities pitch in to help members in need.

 

[hnzw_rui]

I find it more interesting that some classes of employees got out of paying SS tax: federal and some state and local employees. That really begs the question of why and fairness as things are changed. But then again... if state and local governments fall short of paying pensions....PGC doesn't cover those entities.

There's no SS tax but there are mandatory pension contributions. Employee contributions for our plan is 11% of gross. Also, there's the Windfall Elimination Provision and Government Pension Offset so employees get diminished or no SS benefits.

The DB pension for some state and local governments were intended to replace SS. I think state and local governments were given the option of contributing to SS or establishing their own retirement plans with the provision that their own plan had to be better than SS. I'm guessing shortsightedness is why a lot decided to establish their own DB pension instead of going with SS. With SS, they'd have to give SS both employer and employee contributions every quarter. With the DB pension, they probably under-contributed during plush years and delayed the employer contributions to the trust to the last minute.

 

[Texas Proud]

What I have read was that when SS was enacted, some groups opposing it were allowed to opt out. Congress accepted it because they needed votes to pass it. Note that not just state employees, but some religious groups such as the Amish who took care of themselves and vowed not to use government welfare were also exempted.

These exempted groups have better retirement funding than the general public, because their contributions are for their own use, and not "shared" with the public for welfare purposes. Of course they may have caused other problems themselves with generous benefits, but that's another issue.

Anyway, because SS is really a tax, there should not have been any exempted group, other than the religious groups like the Amish in my opinion. It should be like federal and state income taxes. The Amish are not exempted of income taxes, because they do benefit from the public services that these taxes fund. By the way, I believe the Amish also do not draw Medicare benefits, and their communities pitch in to help members in need.

From what I have read (and of course it could be wrong), the state employees were exempted because back then the fed gvmt could not force the states to pay their share... now that the fed gvmt is a lot 'stronger' and is basically saying it can do anything despite what the constitution says... if it passed today I think they would not get an exemption....

 

[Texas Proud]

I do not think SS benefits will go away. But there's a strong chance it may be reduced in the future.

As for the people who think that their SS benefit is an inalienable right, they obviously do not know that in 1960, the US Supreme Court already ruled that it was no such thing in the case of Fleming v. Nestor.

The court said that Congress could do whatever it wanted with SS. Here's some exact wording.

“To engraft upon the Social Security system a concept of ‘accrued property rights’ would deprive it of the flexibility and boldness in adjustment to ever changing conditions which it demands.

It is apparent that the non-contractual interest of an employee covered by the [Social Security] Act cannot be soundly analogized to that of the holder of an annuity, whose right to benefits is bottomed on his contractual premium payments.”​

SS is a tax collection on earned income, which is then used to fund a welfare program. It's just that simple.

When you pay taxes to fund road construction, or paying for defense spending, do you have a direct say in how the money is spent? Although SS benefits go to you directly, you do not have any more say in it than with the other taxes. That's what the Supreme Court meant.

I do not read where most people think it is a right... they just think that since they paid in they should get what was promised... most know that it can be taken away which is why so many people say they plan on getting nothing...


BTW, I think there will be some minor adjustments, but nothing major... voters go a long way in determining what gets passed and what does not... (hope this does not go overboard... edit if you think it does)... but look at Greece... they are not willing to give up anything and keep voting for the groups that tell them what they want to hear... and they are much worse off than we will be (at least in my life time)....

 

[Midpack]

BTW, I think there will be some minor adjustments, but nothing major... voters go a long way in determining what gets passed and what does not... (hope this does not go overboard... edit if you think it does)... but look at Greece... they are not willing to give up anything and keep voting for the groups that tell them what they want to hear... and they are much worse off than we will be (at least in my life time)....

The majority of Americans are no different, see our deficits. Few if any politicians are elected telling us what we need to hear...voters share the blame.

I hope you're right, but I am not planning on it.

 

[mickeyd]

Now that I am used to getting my monthly income from SSA, I like it, so no way would I give it up. If I were 30 years younger, I'd consider it.

 

[NW-Bound]

... look at Greece... they are not willing to give up anything and keep voting for the groups that tell them what they want to hear...

Speaking of Greece, Tsipras just got re-elected. Nothing ever changes.

 

[easysurfer]

No. I'd prefer getting SS benefits until I'm ready to check out.

 

[Texas Proud]

The majority of Americans are no different, see our deficits. Few if any politicians are elected telling us what we need to hear...voters share the blame.

I hope you're right, but I am not planning on it.

That was my point... the old folks that will be getting, or about to get, SS will vote in the people who say they will not touch it... the young folks will not vote and will have to deal with the problem when they get old...

I do not see how we can get that bad anytime soon.... then again, if we did we actually have a better chance of getting out of the problem than Greece does (well, maybe not since Germany keeps writing checks)....