Social Insecurity

[Ed_The_Gypsy]

Just got my latest Your Social Security Statement. For some time now, there has been a notice in bold letters at the bottom of page 2:
"Your estimated benefits are based on current law. Congress has made changes to the law in the past and can do so at any time. The law governing benefit amounts may change because, by 2041, the payroll taxes collected will be enough to pay only about 74 percent of scheduled benefits."

You have been warned.

Ed

 

[Michael]

The most likely change is to index future benefits to the CPI rather than wage inflation. This will cut about 10% from a 50 year old's payment, and 50% from a 20 year old's payment. It will cut more if the CPI is adjusted downward as Alan Greenspan suggests.

 

[Cut-Throat]

The most likely change is to index future benefits to the CPI rather than wage inflation.  This will cut about 10% from a 50 year old's payment, and 50% from a 20 year old's payment.  It will cut more if the CPI is adjusted downward as Alan Greenspan suggests.

Not gonna happen under the Bush Admin. - He can't even convince the red states. I see the Cap Lifted for the over $90K and retirement age boosted a bit for those under age 45!

Bush is a lame duck and getting no where with this. As he should. Do you want Social Security to end up like Iraq?

 

[Michael]

Personally, I would prefer that Social Security remains just as it is.

 

[Mr._johngalt]

Personally, I would prefer that Social Security remains just as it is.

Me too!

 

[vic]

Maybe some of this stuff has already been addressed by Mr. Bush. I jus have not been on top of it lately because everything he said so far seemed like nonsense and I had a hard time following it.

If the social security age goes up, does that also mean that the medicare age goes up with it? I have not hear much about that yet but I can see even more savings there.

One proposal about the Bush plan I think was to have poor people build their retirement faster than high earners. I am sure that is built on the assumption that your wages will go up as you get older. So what does that mean for early retirees? If an early retiree earns a decent paycheck in his younger years but goes to about zip afterwards, does that make him fall in the poor category?

Vicky

 

[TromboneAl]

I see the Cap Lifted for the over $90K

Yes, maybe. But if that's done, we'll have a major, qualitative change in SS, because it changes the system to a welfare system. With the cap in place, it's just a system in which we all contribute for our own retirement. But if the cap is too high, then all of a sudden you have a system where wealthier people are paying for the retirement of poorer people.

So, if some politicians make a big point of that, it will make it hard to pass.

 

[youbet]

SS is already a welfare system. High earners get a poor return vs their lifetime contribution. Low earners get a good return vs their lifetime contribution. Extending the cap past $90k simply amplifies the situation.

 

[Cut-Throat]

But if the cap is too high, then all of a sudden you have a system where wealthier people are paying for the retirement of poorer people.

Right now we have a system where the poorer people are paying for the retirmement of wealthier people. Unless you think that executives of companies like United Airlines made all of their money without Baggage handlers, Flight Attendents, Pilots and Mechanics? They (the executives) didn't even fund the Pension System Properly, so this is welfare also, as the government (read Poor and middle class) will pick up the tab for this also.

I think eveyone who does not understand the Labor history of the United States should go see the movie "Cinderella Man" - It will show you how a Pure Capitalist society works. We had a lot of the same attitudes during the 1920's that are present today!

 

[laurence]

Right on, CT, you are definitely a little left of me on the spectrum, but you always make your point quite well.

SS is a regressive tax, I pay almost as much into it as Bill Gates, no way to spin that one. We raid the piggy bank to fund shortcoming in the general fund due to, among other things, tax cuts that hand back most of the cash to the wealthiest. I've said many times that my GOP affiliation lies with my firm belief in fiscal responsibility, and I think the GOP has abandoned their principles. Either raise taxes (like rasing the cap on SS) or cut spending. Every GOP President since I've been alive has borrowed our way out of a mess-throwing the problem in somebody else's lap. If a balanced budget does not get made a priority, if McCain is passed up for the next nomination for another stooge of the far right, I won't have to leave the party, the party will have abandoned me. The problem is, where else to go?

 

[Dreamer]

Maybe some of this stuff has already been addressed by Mr. Bush. I jus have not been on top of it lately because everything he said so far seemed like nonsense and I had a hard time following it.

If the social security age goes up, does that also mean that the medicare age goes up with it? I have not hear much about that yet but I can see even more savings there.

One proposal about the Bush plan I think was to have poor people build their retirement faster than high earners. I am sure that is built on the assumption that your wages will go up as you get older. So what does that mean for early retirees? If an early retiree earns a decent paycheck in his younger years but goes to about zip afterwards, does that make him fall in the poor category?

Vicky

 

[Dreamer]

Okay, I do not have the quote thingy down yet. The last time the social security retirement age went up, the Medicare age stayed the same, age 65.

Alot of the time, when people take early retirement at age 62, they do not have medical insurance until Medicare at age 65. When problems arise, the general public ends up caring for them. A friend's mother was without insurance when she was experiencing some medical problems and so she did not go to the doctor to have it checked out. She had a major stroke shortly after and is in a nursing home with Medicaid paying for it for 4+ years.

Something really needs to be done with the health insurance problem in the US. I feel very fortunate to have good health insurance, but there are far, far, too many people doing without it.

Dreamer

 

[Red_y]

For the yet-to-be-retired members of the group:

When you are making your calculations about when you'll be financially able to retire, what assumptions are you making about SS? I personally take 50% of the estimated amount and plug it into the number-crunchers (Financial Engines, etc.).

Is that conservative enough?

 

[cute fuzzy bunny]

I dont figure it in at all. But then I'm retired and 20+ years away from SS. I figure if I cant make it work without social security and other items that are potentially out of my control (yeah I know a lot of things arent in ones control) then its not doable from a conservative perspective.

 

[moghopper]

Personally, I would prefer that Social Security remains just as it is.

You live a rich fantasy life.

 

[Michael]

Reality is over rated.

 

[snowbird]

I plan on ER'ing in Jan 2006 and will get a pension from my mega-corp. Since I've been there awhile they calculate a SS offset that will be 50% of my SS payment, in other words reducing my pension by this amount. If they mess with SS  , I'll probably get screwed.

Anyone else in this situation who have ER'd, will or already get a pension and have the current SS offset calculated?

 

[Cb]

For the yet-to-be-retired members of the group:

When you are making your calculations about when you'll be financially able to retire, what assumptions are you making about SS? I personally take 50% of the estimated amount and plug it into the number-crunchers (Financial Engines, etc.).

Is that conservative enough?

I reduce the current SSA estimates by 25% when I use FIREcalc we're 45 & 46 now). At this point, I think maybe that's a bit too conservative, given that:

- those estimates do not take into account the difference in inflation indexes - in other words, in real terms, SSA's current estimates are quite likely to grow somewhat in the next 16 years

- our annual gross income will likely be around $70K (in '05 dollars) - I cant' imagine that the AARP will let the SSA chop middle class voter's bennies by any more than 25%

I think maybe a 15% reduction (by one means or another) is more likely, but I'll work until I can weather a 25% cut just to be safe.

Cb

 

[ESRBob]

For the yet-to-be-retired members of the group:

When you are making your calculations about when you'll be financially able to retire, what assumptions are you making about SS? I personally take 50% of the estimated amount and plug it into the number-crunchers (Financial Engines, etc.).

Is that conservative enough?

I am already in early semi-retirement and make about 10k a year from a few hobby-jobs. My current SS benefit when I am 67 is supposed to be about the same amount (I had a pretty patchy earnings history as an expat and an entrepreneur). So I kind of think the one will cancel the other. Slightly different reasoning than TH, but bottom line is I don't include SS in my calculations about future financial solvency, either.

 

[cute fuzzy bunny]

Reality is over rated.

I reject your reality, and substitute my own...

 

[Michael]

I reject your reality, and substitute my own...

Eminently sensible. After all, if you can't trust the voices in your head, who can you trust?

 

[RockMiner]

For planning purposes I've been assuming a 40% cut in promised benefits. (I'm about 50).

This is probably too extreme but I like to look at the worst case. It's a good bet people with solid
earnings histories will bear the bulk of future cuts. Medicare is likely a bigger variable than SS and
who knows what the politicians will do to it...still, I can't see ignoring expected SS income entirely
unless you are so flush it doesn't matter.

 

[Patrick]

Right now we have a system where the poorer people are paying for the retirmement of wealthier people.

Really? 

From ssa.gov:

"Your Social Security benefits are reduced because Social Security benefits were intended to replace only a percentage of a worker’s pre-retirement earnings. The way Social Security benefit amounts are figured, lower-paid workers get a higher return than highly paid workers. For example, lower-paid workers could get a Social Security benefit that equals about 55 percent of their pre-retirement earnings. The average replacement rate for highly paid workers is about 25 percent."

 

[ESRBob]

Patrick,
I think Cut-Throat's point was more along the holistic view that poor people are actually poor because they are never paid very much, and that the fruits of their labor are siphoned off by their superiors who give themselves rich retirement packages outside the SS system. Within SS, you are right -- the lower paid people do better than they put in. Been a long time since I was a socialist in college but the muscles still work!

 

[Cut-Throat]

ESRBob Gets it!  - The hardest working people, that I've ever seen never made more than $25K per year in their lifetimes.

So, Patrick how do you explain a CEO that goes into a company, drives it into the ground, screws over the stockholders and employees and all the while drawing a $10 Million paycheck. Yes, he is paying into Social Security Bigtime. But the real question is - With who's money?   - He is certainly not 'earning' it.