Americans are willing to pay more for Social Security

[samclem]

Would it make more sense to pay into deferred annuities rather than into the SS fund ? I have paid the maximum SS 'tax' since I have been working in the US for the last 10 years, and still my projected benefit when I reach 62 is only about $1k.

Do you have a choice, or is this just an academic question?

SS gives you some other useful benefits besides retirement, and I assume you are also paying into Medicare so you'll also qualify for those benefits at some point.

If I were paying the top SS tax and had a way to opt out of it, I would look for cheaper ways to buy the same protection.

 

[Midpack]

That sounds about right. Remember, SS benefits are calculated on the highest 30 years of contributions. Ten years will not get you a large benefit, even at the max SS contribution. After 30 years of the max you would now get about 2500/month @ full retirement age.

Just a detail, but actually it's 35 years. With only 30, SSA will use 5 years of $0 wages.

Computing benefits with less than 35 years of work

 

[MichaelB]

The info in the report posted by MichaelB (above) generally supports this. In a chart there, older groups were more in favor of FICA tax increases and removing the income cap than younger people by a significant margin.

I guess that's not a surprise. People who are going to receive a benefit and pay nothing or little for it favor it. People who are going to receive a benefit and pay a lot for it don't favor it as much.

Which charts are you referring to? I didn't see them all but in the ones I did see even young people strongly supported (65%) SS in general and making SS more stable by increasing their own taxes.

The opinions across all age and income groups reflect strong support of SS and willingness to increase the taxes the respondents pay.

 

[ziggy29]

Which charts are you referring to? I didn't see them all but in the ones I did see even young people strongly supported (65%) SS in general and making SS more stable by increasing their own taxes.

To me the bigger question is: Will they willingly increase their own taxes while those who are older, including those who are older and very wealthy, do not have to share the sacrifice?

The devil is in the details. There is often a lot of support for shared sacrifice. But politicians rarely want to make the pain "shared"; they have their own pet special interests to protect.

 

[Hamlet]

Yes, this is the big problem with most of the talk about cutting entitlements. Everyone talks about cutting things for people that are more than 10 years from retirement, while leaving everyone currently retired or close to retirement untouched.

Frankly that won't work. It doesn't do much to help the budget, since that leaves us trying to support the Boomer generation with tax revenue from later generations who will know they are getting the shaft. It's going to be tough to keep people willing to pay more and more into a system that will give them less and less.

Any cuts to benefits will need to affect current retirees as well as future retirees, or we will face an ugly generational split.

To me the bigger question is: Will they willingly increase their own taxes while those who are older, including those who are older and very wealthy, do not have to share the sacrifice?

The devil is in the details. There is often a lot of support for shared sacrifice. But politicians rarely want to make the pain "shared"; they have their own pet special interests to protect.

 

[MichaelB]

To me the bigger question is: Will they willingly increase their own taxes while those who are older, including those who are older and very wealthy, do not have to share the sacrifice?

The devil is in the details. There is often a lot of support for shared sacrifice. But politicians rarely want to make the pain "shared"; they have their own pet special interests to protect.

That's a fair question, and also an important one. For me, the great appeal of Bowles-Simpson was that everyone shared tax increases and spending reductions. That everyone shared was evident to everyone else. No one was exempt. There is no viable way out where only some must pay.

 

[samclem]

That's a fair question, and also an important one. For me, the great appeal of Bowles-Simpson was that everyone shared tax increases and spending reductions. That everyone shared was evident to everyone else. No one was exempt. There is no viable way out where only some must pay.

This is a main advantage of a "grand bargain" approach (whether we are talking about SS, the federal budget, etc). If we try to do these things incrementally, first targeting a small group for tax hikes, then a small group for benefits cuts, etc with all the finger-pointing and vitriol about who should be skewered next because they are the root of all evil, the process just looks and feels like a series of victimizations. Do it at once, show that lots of folks are sacrificing to solve the problem, and maybe we end up with a lot less rancor and some goodwill and trust is established to let us move forward on the next problem.
But that's not what we are doing at all.

 

[photoguy]

That sounds about right. Remember, SS benefits are calculated on the highest 30 years of contributions. Ten years will not get you a large benefit, even at the max SS contribution. After 30 years of the max you would now get about 2500/month @ full retirement age.

I'm in the same situation -- about 10years of SS contributions (pretty much at the max or close to it for most the years). For this I get a little less than $1k/month at 62 and about ~1300 at FRA. Seems like a pretty good deal since I only paid in about 6k*10years = $60k. Even if you include the employer match, I still think it's a pretty good deal.

 

[ERhoosier]

Could be.

Here's a link to the study http://www.nasi.org/sites/default/files/research/What_Do_Americans_Want.pdf

Pretty strong support. No sign of "other people's money" syndrome either. People like Social Security and want to see it strengthened.

Interesting that there was widespread support for the 2010 "payroll tax relief" maneuver with only a few voices complaining that it would weaken SS-

Tax cut threatens Social Security? - Salon.com

And now folks are complaining about their taxes "going up"when actually workers' payroll tax (SS tax) just went back to pre- "payroll tax holiday" levels.

Abstract answers to surveys are one thing, but actually seeing the smaller NET (after-taxes) paycheck can be another. US public tends to be funny that way

 

[pb4uski]

Very large majorities across every age group, political affiliation and income group said they would be willing to pay more to maintain current benefits.

Just 14 percent of households report they expect to have enough money to live comfortably in retirement, according to the Employee Benefit Research Institute. Barely two-fifths of private-sector workers ages 25 to 64 have a retirement plan of any sort with their job, Boston College's Center for Retirement Research reported recently.

So let me see. People seem unwilling to save for their own retirement but are willing to pay more into SS for someone elses. Sounds stupid to me.

 

[ziggy29]

That's a fair question, and also an important one. For me, the great appeal of Bowles-Simpson was that everyone shared tax increases and spending reductions. That everyone shared was evident to everyone else. No one was exempt. There is no viable way out where only some must pay.

Right. Simpson-Bowles can be appealing to folks like you and me, since it took a balanced approach and shared the pain broadly. That makes it wildly unpopular on Capitol Hill, though, because it doesn't allow them to carve out exceptions and special deals for their pet constituencies.

 

[Hamlet]

People are not the rational actors that the economic textbooks describe.

So let me see. People seem unwilling to save for their own retirement but are willing to pay more into SS for someone elses. Sounds stupid to me.

 

[growing_older]

Make sure that your math includes the disability insurance that it provides everyone, and the life insurance that it provides parents of young children.

There is more to SS than just the retirement income.

Just to be clear, this is not correct. "Social Security" as we usually discuss it is only the old age pension and death benefits. SSI, the disability income program, is not Social Security. It is Supplemental Security Income and is often confused with Social Security.

From the ssa.gov website:

Supplemental Security Income (SSI) is a Federal income supplement program funded by general tax revenues (not Social Security taxes)

 

[BTravlin]

Right. Simpson-Bowles can be appealing to folks like you and me, since it took a balanced approach and shared the pain broadly. That makes it wildly unpopular on Capitol Hill, though, because it doesn't allow them to carve out exceptions and special deals for their pet constituencies.

Pet constituencies = those who pad their pockets

 

[REWahoo]

Pet constituencies = [-]those who pad their pockets[/-] dogs and cats who vote

 

[scrabbler1]

Just to be clear, this is not correct. "Social Security" as we usually discuss it is only the old age pension and death benefits. SSI, the disability income program, is not Social Security. It is Supplemental Security Income and is often confused with Social Security.

From the ssa.gov website:

Supplemental Security Income (SSI) is a Federal income supplement program funded by general tax revenues (not Social Security taxes)

While the bold is correct, your earlier comment is incorrect. Social Security includes disability insurance as well as retirement and survivor benefits. SSI is a supplementary program which provides benefits to people who may or may not qualify for Social Security.

Also from the ssa.gov website Social Security Disability Benefits

Social Security pays disability benefits to you and certain members of your family if you have worked long enough and have a medical condition that has prevented you from working or is expected to prevent you from working for at least 12 months or end in death.

You may see the acronym OASDI when referring to Social Security (sometimes it appears in the context of payroll taxes being deducted from your paycheck). OASDI means "Old-Age, Survivors, and Disability Insurance."

When someone runs the numbers comparing payroll taxes to some expected return on them had they been invested in a personal account, one should exclude the portion which pays out disability and survivor benefits because as with those forms of insurance, there is no expectation of getting money back - something unforeseen and tragic must occur (unlike simply turning 65 and retiring, for example) in order to collect those benefits.

 

[Hamlet]

Oops. The fact that SS administers SSI made me assume it was funded the same way.

Sorry for the confusion.

Just to be clear, this is not correct. "Social Security" as we usually discuss it is only the old age pension and death benefits. SSI, the disability income program, is not Social Security. It is Supplemental Security Income and is often confused with Social Security.

From the ssa.gov website:

Supplemental Security Income (SSI) is a Federal income supplement program funded by general tax revenues (not Social Security taxes)

 

[Hamlet]

So Social Security pays regular disability that is dependent on having worked out of FICA, and pays SSI (which is not dependent on having worked) out of general funds?

I had no idea that SS had two separate disability programs.

An idea on how much SS pays out in regular disability? I've had trouble finding any details on it.

While the bold is correct, your earlier comment is incorrect. Social Security includes disability insurance as well as retirement and survivor benefits. SSI is a supplementary program which provides benefits to people who may or may not qualify for Social Security.

Also from the ssa.gov website Social Security Disability Benefits

Social Security pays disability benefits to you and certain members of your family if you have worked long enough and have a medical condition that has prevented you from working or is expected to prevent you from working for at least 12 months or end in death.

You may see the acronym OASDI when referring to Social Security (sometimes it appears in the context of payroll taxes being deducted from your paycheck). OASDI means "Old-Age, Survivors, and Disability Insurance."

When someone runs the numbers comparing payroll taxes to some expected return on them had they been invested in a personal account, one should exclude the portion which pays out disability and survivor benefits because as with those forms of insurance, there is no expectation of getting money back - something unforeseen and tragic must occur (unlike simply turning 65 and retiring, for example) in order to collect those benefits.

 

[growing_older]

While the bold is correct, your earlier comment is incorrect.

Thanks for the correction. I am apparently confused by multiple programs calling themselves SS and addressing disability in various ways. With the overlap, I'm not sure how we account for the "value" of these various benefits when discussing what the social security premiums are paying for. So any comparisons to a private alternative system are going to be confused by which of these disability benefits to include.

 

[Marc]

Just a detail, but actually it's 35 years. With only 30, SSA will use 5 years of $0 wages.

Computing benefits with less than 35 years of work

Furthermore, IIRC, the year before you turn 62 is the last year that enters in the calculation. So, if you start work at 35 and work until you are 70, only 26 or 27 of those years count towards calculating SS benefits.

marc

 

[Alan]

Furthermore, IIRC, the year before you turn 62 is the last year that enters in the calculation. So, if you start work at 35 and work until you are 70, only 26 or 27 of those years count towards calculating SS benefits.

marc

You can continue to earn benefits after you are 62.

If you continue working past age 62, your additional earnings could increase your benefit.

Social Security Publications

 

[scrabbler1]

Growing_Older and Hamlet, it can be confusing to figure out how much SS pays in retiree versus disability versus survivor benefits (versus benefits which might fall into any of these categories).

This report might shed some light on the breakdown of the payouts.

FINANCIAL OPERATIONS OF THE TRUST FUNDS ANDLEGISLATIVE CHANGES IN THE LAST YEAR

One ratio I use (Calendar year 2011, all figures in millions) is Retired Workers divided by total payments, or 461,234 / 725,148, or 63.6%. The Disability payments as a percentage of total payments is shown in the report, 128,935 / 725,148, or 17.8%. Survivors payments as a percentage of total payments is 106,310 / 725,148, or 14.7%.

As for SSI, it is a program administered by SS but whose funds come from general revenues. Many people get this confused with actual SS. For income tax purposes, however, SSI is treated like SS. (A friend of mine received SSI many years ago and it was reportable on his income taxes as SS.)

 

[ER Fireball]

Views on SS as a function of age

A lot of your opinions depend on your seat in the ballpark.
This is where I have seen my views on social security and the amount paid for it over the years.

Age 20 - 35
Contributions: This is sort of pricey, but everybody pays the same. I am OK with it because I can reconcile it with the benefits.
Expectations: I don’t expect there to be anything in this system for me when I retire. I need to plan for funding my own retirement. I work for a company that has a pension plan, and that looks like a good deal. But I’m not sure I trust the company I work for. I might switch jobs and have to restart the pension formula, so I better stash some cash for myself.
Benefits: I see my grandparents and their generation is getting a check every month. They never put much into the system, but it seems like it is a big deal to them. Some of those folks never saved any money, and it is a very big deal to them. My contributions are paying for their benefits.

Age 35-50
Contributions: This is part of that big chunk of income that goes out every paycheck. Seems like quite a chunk, especially when you consider that my employer is paying the same amount. Taxes are inevitable; everybody complains about them, I guess it is my job to pay them.
Expectations: I sure hope there is something in benefits down the road. I have paid in quite a bit. But I also see my own 401K growing nicely, and think I will pump up the contributions there. I think about changing jobs, but that pension thing looks like it turns into a real benefit if I stick around a few more years. I really don’t trust the company I work for, so I better put another percent into the 401K.
Benefits: Grandmother really looks forward to when the check shows up in the mail. My parents are starting to draw social security. They are much better off financially than where my grandparents were, but they live very differently also. They are very active, travel, and have a lake place. They grouse a little bit because they had a small business and wrote big checks to SS every payday (the company sides of the contribution), and they think the check isn’t very big. But I suspect they like the regular source of money also.

Age 50-65
Contributions: Now that the kids are out of the house, it seems like we have more discretionary income. Stuff is mostly paid for. We can max out the 401K and the wife’s IRA contribution.
Expectations: I have paid for SS for 30+ years, maxing out the amount probably 25 of those years. There had dang well better be a check there every month. This 2% reduction is one of the stupidest things that I have ever heard of. Most folks I work with don’t even see it. The 401K is really rockin’ and rollin’ now. It took a beating a couple times, but the market is cyclical. It is interesting to look back 20 or 25 years to where I was watching the balance every day or two. Heck, those accounts were so small then, I have that much in my savings account now! I still don’t trust the company that I work for, but it is probably as good as it gets.
Benefits: When I start working on my retirement planning, that projected SS amount shows up in the calculation. When you add it in with the projected pension amount, it makes a difference. Seems like there are a number of different ways to draw it out, I wonder what the rules will be when it comes time to make those decisions. I worry about a lot of stuff when planning for retirement, but the reality is that we have it made in the shade! There are lots of things that can go wrong, but even if they do- we will be in a much better position than a lot of folks. Life is good.

 

[ER Fireball]

Views on SS as a function of where you sit

Of course, there are other seats in the ball park. It seems like the following are the folks that show up on TV:

Age 20 – 35
Contributions: I sure could buy some more beer with that FICA money.
Expectations: I am going to live forever and there will always be beer in the fridge!
Benefits: Those old people that are worried about Social Security should have taken care of themselves.

Age 35-50
Contributions: I sure could make payments on a boat with that FICA money.
Expectations: I am going to live forever and somebody is drinking the beer in my fridge!
Benefits: Those old people that are worried about Social Security should have taken care of themselves.

Age 50-65
Contributions: I sure could make payments on another pickup or motorcycle with that FICA money.
Expectations: I am going to work forever and hope there will be beer in the fridge!
Benefits: I am going to have it made when that SS check rolls in at age 60! I wish it was a bigger check!

 

[Hamlet]

That's exactly what I was looking for.

Thanks!

Growing_Older and Hamlet, it can be confusing to figure out how much SS pays in retiree versus disability versus survivor benefits (versus benefits which might fall into any of these categories).

This report might shed some light on the breakdown of the payouts.

FINANCIAL OPERATIONS OF THE TRUST FUNDS ANDLEGISLATIVE CHANGES IN THE LAST YEAR

One ratio I use (Calendar year 2011, all figures in millions) is Retired Workers divided by total payments, or 461,234 / 725,148, or 63.6%. The Disability payments as a percentage of total payments is shown in the report, 128,935 / 725,148, or 17.8%. Survivors payments as a percentage of total payments is 106,310 / 725,148, or 14.7%.

As for SSI, it is a program administered by SS but whose funds come from general revenues. Many people get this confused with actual SS. For income tax purposes, however, SSI is treated like SS. (A friend of mine received SSI many years ago and it was reportable on his income taxes as SS.)