Social Security Trust good to 2035

[VanWinkle]

Maybe you should run for federal office, talk tough about solving the debt and deficit to get applause lines, win election, vote to dramatically expand the deficit. That seems to be how we “deal with” the deficit in this country.

+1 and it doesn't matter which party they start from.

 

[ShokWaveRider]

OK, seems like we've got S.S. figured out.... Has anyone figured out how to deal with the 1 Trillion Dollar Deficits that we are currently running up? - This seems to be a little more important as it is Happening NOW... Rather than a 20% shortfall 15 YEARS FROM NOW!

Maybe this warrants a separate thread?

 

[pb4uski]

.... It seems odd to decrease all retirees' monthly benefits to offset the additional cost created by the higher income workers. ....

Where did I say anything about decreasing benefits? If we increased the cap and added an additional bend point for high income earners the increase in taxes would far exceed the increase in benefits and help fund existing benefits to all others.

 

[USGrant1962]

Removing the cap goes a long way to solving the problem. I've posted this site before - it is using last year's numbers, but removing the cap and extending benefits (not breaking the social compact) covers ~72% of the problem. I believe this model just extends the SS tax and 15% bend point to cover all wages.

The Reformer: An Interactive Tool to Fix Social Security

As others have mentioned, the current proposal in the House increases the cap (after a donut hole) but adds a 2% bend point (much worse than the current 15% top one). IMO, a donut hole and 2% bend point are both pretty silly. If a straight removal of the cap solves 72%, the politicians should look elsewhere to close the rest of gap.

Folks that think the SS tax cap should be removed and disconnected from benefits accumulation better be careful what you wish for. Once you break the wages-benefits connection completely, it is only a very short step for capital gains, dividends, and interest to also be subject to 12.4% SS tax.

 

[Alan]

Maybe this warrants a separate thread?

There is already a very active thread running on this.

http://www.early-retirement.org/forums/f52/national-debt-96272.html

 

[Independent]

Where did I say anything about decreasing benefits? If we increased the cap and added an additional bend point for high income earners the increase in taxes would far exceed the increase in benefits and help fund existing benefits to all others.

This would be a good first step, in addition to increasing the FRA to reflect mortality improvements since it was last reset in 1982 (I think?).

It looked to me like you were supporting the idea of raising the FRA. That is a decrease in the monthly benefit. I suppose you could argue that increasing longevity has been increasing the PV of the benefits, so decreasing the monthly benefit simply keeps the PV the same. Was that your point?

If so, I think it's worth noting that the bottom half of income earners don't seem to be participating in this extended longevity.

 

[pb4uski]

I was supporting the idea of raising the FRA commensurate with improved longevity... but that doesn't necessarily equate to a reduction in benefits since a participant would receive benefits for the same number of years as they did when the FRA was changed from 65 to 67.

So for example, if in 1981 the change in the FRA from 65 to 67 was based in part on an expected life of 82 and due to medical advances, etc the expected life is now 84, then the FRA would be increased from 67 to 69.... in both cases a participant would be expected to collect benefits for 15 years on average (82-67 or 84-69). I don't see how you can characterize this as a decrease in benefits.

I'm skeptical that lower earners are not participating in increased longevity... I can see that they might be benefitting less than higher earners, but I think it would be hard to say that they are not benefiting at all.

 

[Cut-Throat]

I was supporting the idea of raising the FRA commensurate with improved longevity... but that doesn't necessarily equate to a reduction in benefits since a participant would receive benefits for the same number of years as they did when the FRA was changed from 65 to 67.

So for example, if in 1981 the change in the FRA from 65 to 67 was based in part on an expected life of 82 and due to medical advances, etc the expected life is now 84, then the FRA would be increased from 67 to 69.... in both cases a participant would be expected to collect benefits for 15 years on average (82-67 or 84-69). I don't see how you can characterize this as a decrease in benefits.

It is definitely a Decrease in benefits. Maybe not on 'Average', but for a certain individual it is most certainly. If Person a lives to age 95 (regardless of what life expectancy says) -- He will collect much less, if the FRA age is increased.

 

[pb4uski]

I'll agree to disagree. The total collected is the same... 15 years at whatever he is due per month based on his earnings record.

If you don't increase the FRA to reflect improved longevity then you are increasing benefits... he'll collect for 17 years rather than for 15 years.

With logic like yours, it is no wonder that the system is in peril.

 

[Cut-Throat]

I'll agree to disagree. The total collected is the same... 15 years at whatever he is due per month based on his earnings record.

If you don't increase the FRA to reflect improved longevity then you are increasing benefits... he'll collect for 17 years rather than for 15 years.

With logic like yours, it is no wonder that the system is in peril.

First of all the System is NOT in Peril!


Sorry, you are explaining Averages, not for the individual Retiree. If a retiree is going to live to age 82 years, regardless of improved longevity, he'll collect less if you raise FRA.... You make the assumption that EVERY retiree gets to live 2 years longer when they raise the FRA! Do you understand that some retirees may not even live to Age 62?



Some retirees exercise, don't smoke and eat a balanced diet and will live longer regardless of the FRA .... People are not limited to collecting for 15 years! -- They collect until they die! --- If they start collecting later, then that is a DECREASED Benefit for them!



With logic like yours, ---- Do I have to explain it to you?

 

[joeea]

I think the social security ages should be gradually raised and then permanently indexed to longevity. All of them should be indexed - the earliest age (currently 62), the FRA (currently going to 67) and the max benefit age (currently 70).

That won't get us back to having a growing trust fund though.

Consequently, the social security tax rate should be gradually increased, such that the 75 year projection for social security is positive.

To me those are the simplest solutions, both financially and politically. No other changes are needed.

I have no comment on when or if that could actually be passed.

 

[pb4uski]

First of all the System is NOT in Peril!


Sorry, you are explaining Averages, not for the individual Retiree. If a retiree is going to live to age 82 years, regardless of improved longevity, he'll collect less if you raise FRA.... You make the assumption that EVERY retiree gets to live 2 years longer when they raise the FRA! Do you understand that some retirees may not even live to Age 62?



Some retirees exercise, don't smoke and eat a balanced diet and will live longer regardless of the FRA .... People are not limited to collecting for 15 years! -- They collect until they die! --- If they start collecting later, then that is a DECREASED Benefit for them!



With logic like yours, ---- Do I have to explain it to you?

If you have a system that is likely to have a 20% cut in benefits because it has NO assets left and outflows will exceed inflows in 15 years, I would call that peril. If a private pension plan had that degree of underfunding the feds would be all over the plan sponsor to increase contributions.

What does the fact that we agree on that some retirees may not live to age 62 have to do with what the FRA should be? The system is designed around averages with full knowledge that some will die earlier and some will live longer... so what?

One of the premises for the FRA originally was that retirement at age 65 would provide a certain number of years of retirement benefits given average longevity when that age 65 FRA was set.... then they later expanded the FRA from 65 to 67 to reflect improved longevity... and with technology and medical advances over the last 30 years we are due for another adjustment.

And these later FRA's are not a reduction in benefits because participants will be collting benefits for the same extent of time as participants of earlier generations.

 

[pb4uski]

I think the social security ages should be gradually raised and then permanently indexed to longevity. All of them should be indexed - the earliest age (currently 62), the FRA (currently going to 67) and the max benefit age (currently 70).

That won't get us back to having a growing trust fund though.

Consequently, the social security tax rate should be gradually increased, such that the 75 year projection for social security is positive.

To me those are the simplest solutions, both financially and politically. No other changes are needed.

I have no comment on when or if that could actually be passed.

I like both of those ideas, but I would also include increasing the cap (and indexing it to inflation) and adding another bend point.

 

[Cut-Throat]

And these later FRA's are not a reduction in benefits because participants will be collting benefits for the same extent of time as participants of earlier generations.

You keep talking about Averages... When I collect benefits, I don't care about averages... I care about me... My father is still alive at age 97... He was born in 1922...



Bottom Line is you don't collect S.S. for a Set number of years. You collect until you die.... That is why we delay S.S. to Age 70 -- Old age Insurance. If you delay my start date, I don't get to Live Longer. I still die at the same age and I get LESS money.


THIS IS A DECREASE IN BENEFITS --- That is why one Party is pushing it -- It CUTS Benefits.

 

[pb4uski]

Well, you're irrational, so there is no point in any further discussion. You prefer to expand benefits by refusing to recognize that longevity has improved... that's ok.... just don't complain when you benefit gets cut by 20% in 2034.

 

[Cut-Throat]

just don't complain when you benefit gets cut by 20% in 2034.

If you believe that you have been suckered in, and are not paying attention.

 

[pb4uski]

Look in the mirror, sucker.

 

[joeea]

I like both of those ideas, but I would also include increasing the cap (and indexing it to inflation) and adding another bend point.

I agree, that's a good feature as well.

I vote to include that change in the next round - whenever that may be.

 

[samclem]

Thanks for the interesting discussion.