Another Social Security gloomy outlook

[molly]

This morning there was an interesting article regarding Social Security. The author paints a grim picture for the near term. We all better carefully manage our other investments as things could get very dicey.

Social Security Trust Fund 2009: Economy Has Crippled the Fund, Major Overhaul Now Needed -- Seeking Alpha

Are we setting ourselves up for a war between the generations?

 

[Jay_Gatsby]

This morning there was an interesting article regarding Social Security. The author paints a grim picture for the near term. We all better carefully manage our other investments as things could get very dicey.

Social Security Trust Fund 2009: Economy Has Crippled the Fund, Major Overhaul Now Needed -- Seeking Alpha

Are we setting ourselves up for a war between the generations?

Not a war per se, but arbitrarily ending Social Security at some point in the future would be something akin to a game of musical chairs, where the last generation to pay into the system is left standing.

Perhaps Social Security will simply be phased out for the coming generations, leaving it available only for those seniors who are unable to work and don't have sufficient assets to sustain themselves. This would necessitate the Government looking at people's accumulated assets/wealth, which in turn would likely lead to a wealth tax.

 

[MasterBlaster]

Are we setting ourselves up for a war between the generations?

That was the main theme in Scott Burns/Laurence Kotlikoff's book "The Coming Generational Storm".

Perhaps Social Security will simply be phased out for the coming generations, leaving it available only for those seniors who are unable to work and don't have sufficient assets to sustain themselves.

My take is that it won't be totally phased out but will certainly move in that direction. SS will move more away from the "insurance" model more towards the welfare model.

Many seniors retirement plan is a paid off home and Social Security.

We saw this trainwreck coming. The late Senator P. Moynihan spoke of this at length decades ago. Why should poor people be required to fund welfare ? If SS is welfare then shouldn't it be funded with income taxes ? When someone pays into SS do they then have the expectation of collecting ? If SS is funded with income taxes will it still enjoy the widespread support that it now has ? If only poor people collect SS then will it still enjoy widespread support ?

 

[Independent]

I think we'll have more political generational conflict as time goes by.

The underlying issue for SS is "To what extent do current workers feel a responsibility to support their elderly relatives?".
If the answer is "a great deal", then SS will survive because workers will see that the alternative to SS is sending a check directly to your parents/grandparents.
If the answer is "not much" than SS could fade away, probably through a system that brings in "just a little bit" of means testing, then more, eventually turning it into welfare, leading to people arranging their finances in order to appear poor, leading to less public support, etc.

 

[MasterBlaster]

The underlying issue for SS is "To what extent do current workers feel a responsibility to support their elderly relatives?". QUOTE]

Ah Contraire...Should struggling generation X,Y workers really be paying anything to support their better off parents. Especially when what they will receive most certainly will be significantly less. A common theme for gen X is the anger about this issue.

 

[W2R]

From the article linked to in the original post above,

We are in an election year. Any significant legislation on SS changes will have to be completed by June. After that no one will want to touch this.

Oh, great. June? You mean that particular June, (June 2010) that is the very first moment that I become eligible for SS, and before which I cannot be grandfathered in to avoid any changes? (sigh) Such is life.

My solution has always been a means test. If you have $100k in taxable income you don’t get paid. Finished. I’m not sure that is legally possible. But to me it is the only option.

Let's see. In the past, inflation has cut the buying value of money in half in what, about 10-15 years? Then in 30-45 years, that taxable income ceiling would give one the buying power of $12.5K today. Since we are expecting massive inflation, we could reach that level of inflation in half the time, 15-22.5 years. A means test with a specific ceiling needs to be related to inflation, IMO.

All of this gives me more motivation to claim my SS benefits in June, rather than waiting as I have always planned. I would imagine that I am not the only person thinking along these lines.

 

[Rustic23]

Blaster,
IMHO, it is all in a name. When SS taxes are collected and lent to the General Fund i.e. Income tax collections, then there is no difference. It is just what you decide to call it. While current benefits are paid from SS collections, this will not be true much longer.

The government will continue to patch SS. Seniors vote, this is the base of most SS decisions. Therefore, I think raising the SS collection ceiling is most likely the way they will try to fix their current mess. On the other hand, medicare is another question. I think it was the Mayo Clinic Ca. that said they would no longer take Medicare patients. I think this is the wave of the future. Quality hospitals will begin to refuse Medicare, leaving it to a second teer provider.

 

[samclem]

The government will continue to patch SS. Seniors vote, this is the base of most SS decisions. Therefore, I think raising the SS collection ceiling is most likely the way they will try to fix their current mess.

Yep, I think that's the most likely first step. The next step would either be more "progressive" tiered taxation (instead of the flat SS rate we have now) or, more likely, a further "tilting" of the already "progressive" payout scheme for higher income workers (e.g. each dollar paid in buys much less in benefits as income goes up). After that, means-testing based on assets (which would require some highly intrusive measures to determine wealth, and would pave the way for other wealth-based taxation).

 

[ziggy29]

I think we'll have more political generational conflict as time goes by.

I think it's a given, and it's bad enough already.

For better ***and*** for worse, the rise of the nuclear family has led to increased expectations that eldercare is a government responsibility, not a family responsibility.

And as more and more of the population is elderly, the strain on the budget for things like SS and Medicare becomes more and more unbearable over time. And yet these entitlements are so entrenched and payable to a lobby Washington lives in fear of, so something, somewhere, has to give. I think our kids and grandkids just keep getting screwed more and more over the next couple of decades -- with the "revolution" occurring against senior entitlements in 2030.... the year I turn 65, of course.

 

[FIREd]

I am a genXer, and the thought that I would be required to pay into SS and probably get no benefit in return used to make my blood boil... Until I read a thread on this forum a few years ago. It made me realize that my mom, FIL and MIL all critically depend on SS to help pay for their most basic needs and if SS wasn't there, they would all be living on our dime. Now I think that SS is a necessary welfare program.

But I am mad at our parents. They lived through an era incredibly rich with wealth building opportunities yet found ways to squander it all because of consumerism folly. I am mad to see people who made good money in their lifetime having to rely, in retirement, on SS and their children's generosity to make ends meet. Yes, they ask their children (who have had to endure the worst economic decade since the great depression and who will never benefit from pensions, subsidized health care or union job security) to pay for their financial failures. It infuriates me.

 

[bizlady]

As long as our legislators are guided by their pensions, I mean votes, I think not much will get done until we are at a crisis where payments cannot be made in the folllowing 12-24 months.

Then some action will happen, and IMHO it will raise the ceiling of income for collections, push back the age of collections, and probably reduce the amount of payments for future generations. I think when the latter happens retirees about 10 years out will get grandfathered, and it will be graduated after that--much like current "full retirement age" for SS is now.

Do I think it will go away--or be means tested? Maybe, but not until at least 20 years out and then only for new retirees....

 

[sirion]

My MIL has stated that she is "glad she had children so they will support her in her retirement." This is coming from a woman who has had a well-paying, stable job for 40 years and has managed to squander all the money she has ever earned. She is neck-deep in cc debt and has an interest-only mortgage. This is coming from the woman who divorced in her 30s with two young kids because she "just didn't have much fun in her 20s and she deserved to 'live.'" Cripes, it makes me so mad that my SS dollars will go to help this woman out. She married a guy roughly the age of her son recently and I hope that he will be able to support her because I sure don't want to. Unfortunately, he has no job and no skills (she married him off the Internet from a foreign country.) It all sounds like a bad joke, but this woman is real. I sure wish they could design a stupid tax for people like this.

 

[Independent]

The underlying issue for SS is "To what extent do current workers feel a responsibility to support their elderly relatives?". QUOTE]

Ah Contraire...Should struggling generation X,Y workers really be paying anything to support their better off parents. Especially when what they will receive most certainly will be significantly less. A common theme for gen X is the anger about this issue.

I asked a question, I think your answer is that you don't feel any particular responsibility to support your elderly relatives. You feel this is the common theme for gen X.

Presumably, you're willing to say "Tough, don't come to me now that SS has been cut." I've never seen a survey on this, it would be a good question.

 

[Independent]

My MIL has stated that she is "glad she had children so they will support her in her retirement." This is coming from a woman who has had a well-paying, stable job for 40 years and has managed to squander all the money she has ever earned. She is neck-deep in cc debt and has an interest-only mortgage. This is coming from the woman who divorced in her 30s with two young kids because she "just didn't have much fun in her 20s and she deserved to 'live.'" Cripes, it makes me so mad that my SS dollars will go to help this woman out. She married a guy roughly the age of her son recently and I hope that he will be able to support her because I sure don't want to. Unfortunately, he has no job and no skills (she married him off the Internet from a foreign country.) It all sounds like a bad joke, but this woman is real. I sure wish they could design a stupid tax for people like this.

The "divorced in her 30s with two young kids" seems especially relevant to me. Children are more likely to feel a responsibility to their parents if they believe the parents felt a responsibility to them.

The WWII generation probably had couples who stayed together "for the sake of the kids".
Boomers (and Gen X'ers, for that matter) seem more likely to say "I can't be expected to go on living with a person I no longer love. The kids will just have to deal with it."

That has to impact the children's attitudes when Mom or Dad is looking for help.

 

[FIREd]

I asked a question, I think your answer is that you don't feel any particular responsibility to support your elderly relatives. You feel this is the common theme for gen X.

Presumably, you're willing to say "Tough, don't come to me now that SS has been cut." I've never seen a survey on this, it would be a good question.

I would not be happy about it, but I would support my elderly relatives because I feel this is my duty. But they would have to get used to a Spartan lifestyle because I am only ready to finance their most basic needs. MIL sometimes complains she doesn't have enough money to go on vacation or eat out, but it's not going to happen on my dime. I would also expect my relatives to repay us with their time (if they are physically able). Perhaps help around the house or pet sit for us.

 

[samclem]

Three advantages of charity and in-family help vs a government entitlement for assisting the poor:
1) The givers are in a much better position than the govt to determine the worthiness of the recipient.
2) The availability of assistance will be a lot less certain, so folks will be more likely to provide for themselves than plan on getting help.
3) The givers get to feel satisfaction for helping the needy. Few people feel any sense of satisfaction at paying their taxes (at the risk of fine/imprisonment for failure to pay).

Citizens in Western Europe give far less to charity than do Americans. The feeling there: "taking care of the poor is the government's job, that's why I pay taxes."

 

[MasterBlaster]

I asked a question, I think your answer is that you don't feel any particular responsibility to support your elderly relatives. You feel this is the common theme for gen X.

Presumably, you're willing to say "Tough, don't come to me now that SS has been cut." I've never seen a survey on this, it would be a good question.

Just so you know, I am a Boomer and have paid SS/medicare all of my life.

However I am well aware of the anguish that SS causes the gen Xers. There truly is a fairness issue here (The generational Storm Issue).

For those that are not in poverty, exactly what do the Xers owe the Boomers ?

 

[Alan]

I sure wish they could design a stupid tax for people like this.

it's called the Lottery

 

[friar1610]

I am a genXer, and the thought that I would be required to pay into SS and probably get no benefit in return used to make my blood boil... Until I read a thread on this forum a few years ago. It made me realize that my mom, FIL and MIL all critically depend on SS to help pay for their most basic needs and if SS wasn't there, they would all be living on our dime. Now I think that SS is a necessary welfare program.

But I am mad at our parents. They lived through an era incredibly rich with wealth building opportunities yet found ways to squander it all because of consumerism folly. I am mad to see people who made good money in their lifetime having to rely, in retirement, on SS and their children's generosity to make ends meet. Yes, they ask their children (who have had to endure the worst economic decade since the great depression and who will never benefit from pensions, subsidized health care or union job security) to pay for their financial failures. It infuriates me.

And sometimes they "squandered" their money on college tuition for their kids.

 

[ziggy29]

And sometimes they "squandered" their money on college tuition for their kids.

But this is family voluntarily taking care of family, not compulsory public taxation and inter-generational redistribution.

Big difference.

 

[FIREd]

And sometimes they "squandered" their money on college tuition for their kids.

Not ours.

 

[friar1610]

But this is family voluntarily taking care of family, not compulsory public taxation and inter-generational redistribution.

No big disagreement there. But the OP's comments sure paint his parents' generation (I have no idea how old he is) with a pretty broad brush. In my own case, the biggest inhibitor to saving more was not "squandering" money on "consumerism" folly" but rather methodically saving for my kids' college educations. Specifically:

"But I am mad at our parents. They lived through an era incredibly rich with wealth building opportunities yet found ways to squander it all because of consumerism folly. I am mad to see people who made good money in their lifetime having to rely, in retirement, on SS and their children's generosity to make ends meet. Yes, they ask their children (who have had to endure the worst economic decade since the great depression and who will never benefit from pensions, subsidized health care or union job security) to pay for their financial failures. It infuriates me.

And let's not forget that not everyone shared in the "wealth-building" opportunities that some of us enjoyed.

Just trying to inject a little perspective here.

 

[FIREd]

No big disagreement there. But the OP's comments sure paint his parents' generation (I have no idea how old he is) with a pretty broad brush. In my own case, the biggest inhibitor to saving more was not "squandering" money on "consumerism" folly" but rather methodically saving for my kids' college educations. Specifically:

"But I am mad at our parents. They lived through an era incredibly rich with wealth building opportunities yet found ways to squander it all because of consumerism folly. I am mad to see people who made good money in their lifetime having to rely, in retirement, on SS and their children's generosity to make ends meet. Yes, they ask their children (who have had to endure the worst economic decade since the great depression and who will never benefit from pensions, subsidized health care or union job security) to pay for their financial failures. It infuriates me.

And let's not forget that not everyone shared in the "wealth-building" opportunities that some of us enjoyed.

Just trying to inject a little perspective here.

I was not talking about my parents' generation as a whole but about our parents (DW's and mine) specifically.

 

[Zoocat]

But I am mad at our parents. They lived through an era incredibly rich with wealth building opportunities yet found ways to squander it all because of consumerism folly. I am mad to see people who made good money in their lifetime having to rely, in retirement, on SS and their children's generosity to make ends meet. Yes, they ask their children (who have had to endure the worst economic decade since the great depression and who will never benefit from pensions, subsidized health care or union job security) to pay for their financial failures. It infuriates me.

Firedreamer, I sympathize with your viewpoint. I am personally trying to arrange my own modest finances and estate so that it will benefit my children. I realize that the economy will not benefit GenXers and those younger as it did previous generations.

But, I would ask you to view this presentation by Elizabeth Warren, chair of the Congressional Oversight Committee, on the coming collapse of the middle class. She points out many of the flaws in the viewpoint, similar to yours, that the post-WWII generation squandered their riches. It is well worth watching.
YouTube - The Coming Collapse of the Middle Class

 

[friar1610]

I was not talking about my parents' generation as a whole but about our parents (DW's and mine) specifically.

OK; got it.