Fixing Social Security game

[Buddha44]

Has anyone tried this "Fix Social Security" game? (although I know that Medicare is a more pressing need). The "fixes" I agreed to was a) no reduction of benefits; b) increase the FICA tax to both employees and employers by 0.5%; and c) put some SS funds in the private sector (although their model of 40% I think is too high).

http://www.actuary.org/socialsecurity

Perhaps it is simplistic but would be interested in what people prefer to include as a solution.

 

[bbuzzard]

I like a solution I heard somewhere: Index the age at which SS can be obtained to x years less than current life expectancy, where x might be in the range of 5 to 8 years. Thus, as people live longer, the age of retirement is increased.

 

[RedHawk]

I have read that real life expectancy has only gone up a few months there are just few infant and childhood deaths. Therefore more people are living to adulthood and increasing the average.

 

[Texas Proud]

link does not work....

BTW... I would not raise taxes.... that would only hurt the people paying...

I would limit the increase due to inflation for awhile... almost everybody on SS today is getting a LOT better return than they 'earned'... and taking a few dollars a month from them would add up quickly...

NOW, that would affect my starting amount, so don't think I am only hurting the current old farts...

 

[Caroline]

Removing the cap entirely, thereby imposing a flat tax of 12.4 percent on all earnings - essentially a $100 billion a year tax increase on the wealthy -- would more than completely close the funding gap.

Good discussion here. I make more than the cap as will the MBA students in this article. Still, I agree with them that paying SS tax on ALL income, not just the first $90K or whatever it is, is a fair thing to do.

I'm against cutting benefits -- it's a step on the slippery slope to guting the Social Security program altogether.

 

[Buddha44]

Sorry, let me try it again.

http://www.actuary.org/socialsecurity/game.html

Interesting about using life expectancy -- I had posted earlier that my life expectancy based on an online calculator was 54 so that would mean I could get it relatively soon. Of course, I know you mean the average life expectancy and not on an individualized basis.

 

[tomz]

I agree with what Caroline said. I don't see any reason for the cap and cutting benefits is a tough sell.

 

[donheff]

I agree with what Caroline said. I don't see any reason for the cap and cutting benefits is a tough sell.

I agree with it also and (when working) was far above the cap. DW is far, far above it now. But the idea is extremely controversial - viewed by many as socialist. I still find it amazing that the bulk of people who oppose such a pinko step would benefit from it while many of the people supporting it (moi) would not.

 

[Goonie]

The "fixes" I agreed to was a) no reduction of benefits; b) increase the FICA tax to both employees and employers by 0.5%; .........
Perhaps it is simplistic but would be interested in what people prefer to include as a solution.

I agree with your a) & b). Actually we've discussed this at w*rk a while back, and that was the general concensus then. We even thought a 1% increase would be OK.

 

[califdreamer]

I agree with eliminating the cap, moderating the COLA to some extent and introducing a relatively mild form of means testing. I think the FICA tax is high enough.

 

[Bikerdude]

Cut benefits for those 40 and below by 10%. Invest their SS in the federal employee's savings plan. Guarantee current SS payout at retirement if savings insufficient.

 

[Gumby]

My solution was to gradually raise the full retirement age to 70 and increase the taxes to 6.7%. In my opinion, this preserves the existing progressive features of social security, while taking into account the changing average life expectancy.

 

[tiredofwork]

I agree with eliminating the cap, moderating the COLA to some extent and introducing a relatively mild form of means testing. I think the FICA tax is high enough.

We already have means testing. This "fix" would make it more pronounced.

 

[Bikerdude]

Didn't Greenspan say (something like this) about fixing SS in a recent interview . "It could be fixed in 15 minutes. The only question would be what to do with the extra 10 minutes."

 

[Zoocat]

I would prefer increasing the wages subject to SS tax as well as increasing the payroll tax from 6.2 to 6.7%. If our society wants a safety net for the elderly then we need to all pay for it.

I think raising the retirement age to 70 should not be an option. Just because people are living longer doesn't mean they aren't burnt out in their occupations. White collar workers do not understand how brutal the blue collar occupations are and how they wear you down. Blue collar workers are out of gas by 65 and should have the option of retiring.

 

[old woman]

I think raising the retirement age to 70 should not be an option. Just because people are living longer doesn't mean they aren't burnt out in their occupations. White collar workers do not understand how brutal the blue collar occupations are and how they wear you down. Blue collar workers are out of gas by 65 and should have the option of retiring.

I agree, we need an option to retire younger than 70. I work in a shipyard with union trade workers, most are baby boomers and they are wearing out. For a worker getting to be over 55 and needing a knee replaces or having a heart attack then still having to face another 15 years of work is too much. Not only the workers get worn out but have spouses and parents with issues they need to deal with. I work at a desk job but at 58 I am starting to feel my age, my ankle hurts when I sit too long or stand too long, but I only need to keep working to 62 now before I can collect SS. My mom is 80 and boyfriend is 59 either one might have something happen that I would be needed as a caregiver. My mom just lost her mother at 98 and between her and her sister that is 79 they really needed to be not working to help her when needed the last 20 years. If mom would have worked to 70 when her mom was 88 she would have still been working and her sister would have worked until grandma was 89. Imagine working all week then driving 5 hours to go help your mom and home again to work another week. Mom retired at 61 when her mom was only 79 and didn't need her much so mom could travel some then take care of my dad until she was 67. No way she could take care of a 79 year old dying husband when she was working full time. When she was 61 she couldn't face another day. The lady that retired when I got her job was 71 and now less than 5 years later can't play golf anymore because her hands are too bad to hold a club.
How many 67 year olds can compete for jobs with 40 year olds?

 

[samclem]

- I'd vote "no" to government ownership of US businesses. That's what "investing the SS money in equities" would mean.

- Removing the cap on SS taxes: We need to at least recognize that under the current payout formla, those paying these higher taxes would receive virtually no increase in their monthly SS checks.

- A small % to private accounts, with some strict limits on available investment options. Let's at least PRETEND that Americans still believe independence is an admirable trait (even if the govt has to force you to do it). A small percenatage would not appreciably impact the health of the SS system, but could be a very important tool in breaking the cyce of poverty, passing along an inheritance in lower income families, and in heading off a recurrrance of the SS funding crisis in the far future (30+ years).

 

[rogerc1944]

My former FIL was stripped of everything by his caretaker. My aunt was stripped by her niece who had her sign a new will 2 hours before she died. This sort of financial elder abuse is all too common. This is the reason that I am totally opposed to privatizing Social Security. Piles of money attract crooks. You can be stripped of all your assets but at least Social Security will continue. A further hedge against being left penniless is longevity insurance. This is essentially a delayed annuity but pays out much more than a regular annuity. Typically, this type of annuity is purchased at age 60 or 65 and kicks in at age 85. While immediate annuities typically pay about $700 per 100k invested per month, longevity insurance will pay out 8K per 100k invested per month. The big drawback is that the money is gone if you don't live to be 85.

 

[Texas Proud]

I see where there is a large number of people that want to increase taxes... must be that leaf leaning vote in this forum.... we are taxed a lot more than neeeded...

The main problem is that the benfits are higher than what was paid in by most people.. that means CUTS.. and don't give me that 'all these old people only live on SS'... well, it was only supposed to be a safety net, not a 100% live on pension. It is also a major transfer of wealth... I will never come close to getting what I put into the system... well, I can accept that, but don't ask me to put MORE into it and not get anything for it... let the people get LESS...

BTW.. if there is a large number of people who did not save anything and are living on the edge... then propose a welfare system for them... that way the people that make a lot of money don't get it because it is labeled SS...

I remember way back when I was doing taxes... there was this guy who made over $1 million... and got his $12,000 in SS payments... (this was early 80s...).. He didn't need to get 'more' than he deserved... and SS made little difference to hiim...

I am NOT saying to get rid of it.... It is a good system... and it does have the death benefits for the children and spouse... but it is too rich...

 

[OAG]

Personally, I like this one:

The Govt keeps the benefits. In return:

If you are over 67 and fully RETIRED you become EXEMPT from most ALL Taxes. This means basically you would be exempt from FEDERAL and STATE Income Taxes and RE Taxes on your PERSONAL Residence. Some method could be devised for other taxes and this option could be made an optional election based on a one time lifetime election.

Right now the Govt gives us $1 in SS then proceeds to take back $.25 SO the actual benefit is only 75% of the gross SS Benefit. Medicare and Income Taxes is the two deductions that will lower your benefit and is virtually impossible to dodge.

Of course you would have to do something like SSI for those individuals BELOW some level of income.

Medicare/cade is another whole subject.

 

[lets-retire]

Social Security is one area I don't pretend to know what I'm talking about. I think any changes to the benefit must not be applicible to anybody over 45. That way they are able to change their spending or saving habits to take the new changes into consideration. I liked the idea of allowing me to direct where I want a portion of my social security to go, but with the stipulation that I only receive the amount in the personal account. Obviously only a risk taker should opt to do this. I thought that made more sense, even when I was a teen, than the system we currently have.

I don't support any tax increase that does not go into an account controlled by me. The government has not proved they are responsible with the money they do take from me, so why should I give them more to waste?

 

[eytonxav]

Although I am no expect on this subject, isn't part of the issue with SS that SS funds have been used for other pork projects and benefits and thereby have depleted what SS was actually intended to cover? I do not believe SS should be all that difficult to fix, but what worries me the most is the deplorable costs and lack of healthcare coverage in a country that supposedly has the best medical technology in the world.

 

[Moemg]

Why not limit the amount of people who can collect on one account ? In these days of mutilple
marriages sometimes there are three people eligible to collect on one account .

 

[donheff]

Although I am no expect on this subject, isn't part of the issue with SS that SS funds have been used for other pork projects and benefits and thereby have depleted what SS was actually intended to cover? I do not believe SS should be all that difficult to fix, but what worries me the most is the deplorable costs and lack of healthcare coverage in a country that supposedly has the best medical technology in the world.

Social Security is basically a pay as you go system. The increases in the 90s started to build up a huge surplus in the books (it still exists). But the surplus wasn't like one of our 401Ks, invested in the market. It was used, sensibly, to offset other Government obligations. That works fine as long as you control those other obligations. In simplistic terms, the idea was that the debt will decrease until the boomer retirements start to pile up. At the height of the boomer exodus we will go rapidly back in debt but shoulda/coulda handled that because we were going to keep taxes level and other Government obligations down. Unfortunately, Bush pushed through a wrongheaded - IMHO - tax cut and then engaged in a wrongheaded war (originally proposed to pay for itself and now hitting 1/2 trillion). So, while the SS surplus still exists, overall debt has skyrocketed instead of decreasing. Thus we need another fix. We also need a fix on medicare costs (not part of the original plan) and health care in general. So get your wallet out.

 

[FinanceDude]

Based on all I have read, SS ISN'T a big pile of money somewhere in Washington, it's an empty box filled with IOUs from Congress because they used the money for pork barrel projects and the like years ago.

It's just an accounting entry in the budget. If you stopped collecting SS for a month, and asked the Treasury to pay benefits, they couldn't.......... without having the hugest auction of T-Bills and T-Notes in history...........