Coming Generational Showdown

[Senator]

It’s too bad some folks consciously vote for their own selfish interests with no regard whatsoever for others. And then wonder why “we” can’t arrive at a consensus.

And it’s easy to blame politicians for not doing anything about entitlements, while overlooking the fact that partisan voters, PACs and orgs like AARP do everything they can to make sure politicians kick the (obviously unsustainable) can down the road for years.

We get what we deserve, and it’s getting worse, not better.

You made the perfect argument for a dictatorship...(or a flat tax, where everyone pays the same percentage from dollar one)

 

[Midpack]

It’s too bad some folks consciously vote for their own selfish interests with no regard whatsoever for others. And then wonder why “we” can’t arrive at a consensus.

And it’s easy to blame politicians for not doing anything about entitlements, while overlooking the fact that partisan voters, PACs and orgs like AARP do everything they can to make sure politicians kick the (obviously unsustainable) can down the road for years.

We get what we deserve, and it’s getting worse, not better.

You made the perfect argument for a dictatorship...(or a flat tax, where everyone pays the same percentage from dollar one)

Nothing between where we are and a dictatorship? A two (or more) party system worked for about 1-2 hundred years...

 

[Hamlet]

Of course, one could argue that for nearly a decade many of us 'seniors' have been getting miserably low interest rates on our savings while the young home buyers are getting fixed 30 year mortgage loan rates that were never available to us at the same age.

And don't get me started on the cost of travel for today's 20 and 30 somethings compared to the real cost when I was the same age.

There are two sides to every coin.

I'd feel worse for 'seniors' getting those low rates if they hadn't coincided with extremely high stock market returns.

Ultimately, there is an odd duality to old age. There are a lot of very poor old people, because most people don't save much and if you don't have savings, you are generally dependent on Social Security. There are also a lot of very rich old people, because if you do save, all that time tends to generate a lot of investment returns.

It is an odd thing that many millionaires get senior discounts.

 

[pb4uski]

I know. I've tried to point out to my "it's not an entitlement" friends that the SS benefit formula is heavily-weighted in favor of lower-income workers (my SS will be about half what I could get if I bought a similar annuity with the $$ my employers and I put in, plus a 6% return). On top of that, 85% of my SS is taxed and I get stuck with IRMAA Medicare surcharges, depending on investment results. They're still convinced that their money is coming out of a little bank account with their name on it that contains all their and their employers' contributions. Most have no clue about SS benefits being taxed which is, in effect, a cut in SS benefits.

Are you sure about that half? I'm guessing that you are not reducing the contributions to reflect that a portion that relates to survivor and disability income insurance coverage nor adjusting the annuity value for being a COLAed annuity.

If I take my SS taxes paid and my employers and then haircut 20% assuming that relates to survivorship benefits and accrete those cash flows at 6.55%, I get roughly the value of a COLAed annuity with a monthly benefit equal to my monthly SS benefit at may FRA. For the calculation I have assumed that a COLAed annuity would cost 1.5x a fixed annuity. Since I am married I used a 100% survivorship annuity.

On the taxation of SS benefits, you didn't pay tax on the employer contributions and your getting growth so it makes sense that some of SS would be taxed... if you made post-tax 401 contributions and got a 100% employer match and the total contributions grew and you later made withdrawals in retirement a good majority of the withdrawals would be taxed... probably 85% or so.

 

[aja8888]

It is an odd thing that many millionaires get senior discounts.

I got a senior discount today from my dental surgeon (had two implants put in). The bill was a shade over $5,000 and they gave me 10% off! I paid with my PenFed VISA and will get another 2% (and I didn't even have to show my AARP membership card!

For those who don't know, once on Medicare + Supplement, most dental, vision and hearing issues are not covered by Medicare.(cataracts are)

 

[athena53]

OK, half may have been an overstatement but here are my numbers. Employer + employee contributions over the 38 years I worked accumulated at 6.55% =$1.578 million. That would buy a non-COLA annuity of about $11.000/month starting at age 70. (I'm female, almost age 65.) Decrease it by 20% to include a survivor benefit, divide by 1.5 to approximate a COLA annuity and you get about $5,800/month. Current estimate is that I'll get $3,500/month. Even if COLA over 5 years is 2%/year, that's $3,800/month, or 2/3 what I'd get by buying an annuity with similar characteristics.


While I agree that a portion of annuity income would be taxable, I consider the taxation of SS to be a broken promise. It was not taxed for many years. And, since I can drop "famous-in-actuarial-circles" names I once asked Bob Myers, one of the original Social Security actuaries, about means-testing SS and he said it was a bad idea because it would discourage personal savings. To me, taxing SS is a back-door means test.

 

[pb4uski]

It is true that it was not taxed for many years but it never made sense that it would be 100% tax-free given how retirement benefits for similar retirement programs work... so they fixed it.

I agree means testing would be bad... it would reward spenders and penalize savers and also IMO significantly reduce the popular support for the progm as a whole... making it just another welfare program.

 

[CRLLS]

I'm not agreeing with the inclusion of the employer's half in the calculations. If one wants to compare their SS benefits with other retirement investments, just use your contribution. That's what you "saved" Not all 401K plans sponsors include a matching contribution. I could argue that without employer's half of SS contributions, salaries might be higher allowing for even higher personal savings, but I won't. Once the employer's side is removed, how does it compare?

But all that aside. SS is not a savings plan, as I have said before.

These are the same arguments that people used for privatizing SS back in the day. It didn't work then, ......If it had passed back then, I wonder how many of the average Joes and Janes would be wanting increased entitlements today due to their poor investing habits.

I also agree with the "broken promise" that athena53 mentioned.

 

[Senator]

Nothing between where we are and a dictatorship? A two (or more) party system worked for about 1-2 hundred years...

The 2+ party system has worked well. Even when both parties have the same vision, there are multiple ways to achieve the goal.

That is where your original statement of "some folks consciously vote for their own selfish interests with no regard whatsoever for others" may be flawed.

There is a big difference voting to keep your own money, and voting to take someone else's money away. Yet, often the ones that want to keep their own money are the villains.

The USA, along with many other countries, will be a dictatorship in due time. It is the natural progression of government. We will both likely to be gone by then, but the next generation will likely experience it.

A democracy will continue to exist up until the time that voters discover that they can vote themselves generous gifts from the public treasury. From that moment on, the majority always votes for the candidates who promise the most benefits from the public treasury, with the result that every democracy will finally collapse due to loose fiscal policy, which is always followed by a dictatorship.

Alexander Fraser Tytler

 

[Koolau]

It’s too bad some folks consciously vote for their own selfish interests with no regard whatsoever for others. And then wonder why “we” can’t arrive at a consensus.

And it’s easy to blame politicians for not doing anything about entitlements, while overlooking the fact that partisan voters, PACs and orgs like AARP do everything they can to make sure politicians kick the (obviously unsustainable) can down the road for years.

We get what we deserve, and it’s getting worse, not better.

Well, never mind. I could smell the bacon as I was typing.

 

[Koolau]

It occurred to me that many of the "issues" covered in THE COMING GENERATIONAL STORM are rearing their ugly rears in this discussion. Seriously, I think the book is worth a read because it doesn't short-circuit to the "outrage." It shows how we got here with actual facts and actual figures. When it "points fingers", you can always argue with the conclusion, but not with the facts.

K & B do suggest some (only doable by the politicians) solutions, but they are skeptical that anything will be done until the coming crisis becomes a catastrophe.

By the way, they DO suggest what individuals can do to insulate themselves somewhat, so there's that.

YMVV

 

[pb4uski]

I'm not agreeing with the inclusion of the employer's half in the calculations. If one wants to compare their SS benefits with other retirement investments, just use your contribution. That's what you "saved" Not all 401K plans sponsors include a matching contribution. I could argue that without employer's half of SS contributions, salaries might be higher allowing for even higher personal savings, but I won't. Once the employer's side is removed, how does it compare? ....

If the output is unchanged and the input is halved, does the rate of return go up or down?

If you exclude the employer contributions then what you receive is a screaming deal in relation to what you paid in... even considering the time value of money (probably a double digit IRR).

 

[razztazz]

A democracy will continue to exist up until the time that voters discover that they can vote themselves generous gifts from the public treasury. From that moment on, the majority always votes for the candidates who promise the most benefits from the public treasury, with the result that every democracy will finally collapse due to loose fiscal policy, which is always followed by a dictatorship.

Alexander Fraser Tytler

Nope. He didn't say it. But I can dig why The Fortunate and their Admirers like it. It has already been long ago circumvented in this country anyway. The voters don't run things. The Rich simply purchase the Government they want. That is called corruption. Compounded inheritances aid and abet that. And I suppose it is considered a good thing since it serves property and the owners. If the Voters did in fact get to vote themselves what they need that is called freedom. Doesn't have to be pretty. Doesn't have to work even. It is in fact and indeed what The Wealth of Nations suggests. Yes. Adam Smith. That's what the money is for. To simply let a few keep it is feudalism. All those olde time kingdoms were quite wealthy by the standards of their day. The problem was only the king and a few of his friends had all the stuff.

Read about Professor Tytler. He was a pretty big sourpuss about the whole concept of By the people, for the people etc. There as nothing he couldn't find fault with. He sounds a lot like Karl Marx in his general outlook.

 

[Pilot2013]

Nope. He didn't say it. But I can dig why The Fortunate and their Admirers like it. It has already been long ago circumvented in this country anyway. The voters don't run things.

Aren't there a lot more of us than them (99%?). Shouldn't we be "smart enough" to vote the aristocracy out? Are we willing to? That to me is the question...

 

[Mr._Graybeard]

Read about Professor Tytler. He was a pretty big sourpuss about the whole concept of By the people, for the people etc. There as nothing he couldn't find fault with. He sounds a lot like Karl Marx in his general outlook.

Anybody who peppers his theories with "always" and "every" is suspect in my book, regardless of who said it.

 

[Ready-4-ER-at-14]

I was at a seminar recently that was talking about the national debt. It turns out that what is owned to say China, is dwarfed by what is owed to the Federal Reserve banks and the branches of the government.

I did a google search using key words "Who Owns the U.S. National Debt?"
Turns out a lot is owed between agencies Kimberly Amadeo has an article updated in oct of 2017. A lot of the debt is owed to bonds and inter government agency sorts of things.

When we do the we are in debt and can't pay unless we reduce payments to seniors logic, we assume it is ok to pay any debts at 100% to entities such as the Federal Reserve banking system.

Per her article about 1/3 of the debt is to the government itself.

I have opinions about this but declining to inflame a touchy thread.

 

[gerntz]

I have no problem taking a cut in SS benefits if it helps my children. I support SS for several reasons, the primary one being that many of our fellow citizens can't save worth a dime, and therefore would just end up on welfare anyway. At least SS lets them contribute something to their retirement.

That said.... I would take a cut in SS to help my children and not over burden them. It can be fixed, but the longer we wait the more pain to fix it..... blah, blah, blah,.... nothing new here....

I think I help my children by not taking a cut & giving to them the portion I don't spend. No reason to let the Gov decide to whom to give a cut to.

 

[gerntz]

I've often stated that we need to raise FRA to 70, keep early RA at 62 but obviously diminished, remove contribution limit (currently 118k?) while capping payout at whatever max is now.

I've often stated that I don't agree with increasing the tax rate by 6%+ on those making more than the cap just to make SS moire financially stable.

 

[gerntz]

It’s too bad some folks consciously vote for their own selfish interests with no regard whatsoever for others. And then wonder why “we” can’t arrive at a consensus.

IMO if everyone consciously voted their own selfish interests we'd be in a much better place.

 

[davebarnes]

The tweaks to fix it are not that big, but congress doesn't have the balls or the bipartisanship to do it.

This is the problem.
Changes are never gradual. It is always ignore until "something" has to be done.
It is even true with parking tickets. The fine stays the same for years (decades) and then someone screams "it is way too low" and they double/triple it.

 

[unclemick]

I was watching local C-span - after football of course. And don't ask me about some of calls and reviews.

It was on Jefferson and Adams relationship/correspondence over their lives. Jefferson became more pessimistic and Adams shifted to more optimism late in life.

'what we have here is a failure to communicate.'

'God looks after Drunkards, Fools, and The United States of America.'

heh heh heh - I don't think the younger/next generation needs my old tie dyed T shirt in the closet or my great wisdom BUT as amateur Curmudgeon I will cut loose with a 'I told you so' once in a while.

 

[Tekward]

Interesting perspective; the generational anger is being stoked by the 1% as a distraction:

Diverting Class Warfare Into Generational Warfare

 

[Senator]

I was at a seminar recently that was talking about the national debt. It turns out that what is owned to say China, is dwarfed by what is owed to the Federal Reserve banks and the branches of the government.

I did a google search using key words "Who Owns the U.S. National Debt?"
Turns out a lot is owed between agencies Kimberly Amadeo has an article updated in oct of 2017. A lot of the debt is owed to bonds and inter government agency sorts of things.

When we do the we are in debt and can't pay unless we reduce payments to seniors logic, we assume it is ok to pay any debts at 100% to entities such as the Federal Reserve banking system.

Per her article about 1/3 of the debt is to the government itself.

So if you owe yourself, can't you just cancel the debt? Print the money? To me, there is no downside. The money to pay it off has to come from new money no matter what.

I think the larger issue is that we will not have enough taxpayers in the future, for SS or otherwise. Upcoming demographics suggest lower paying jobs, and a less educated populace.

 

[NW-Bound]

It’s too bad some folks consciously vote for their own selfish interests with no regard whatsoever for others. And then wonder why “we” can’t arrive at a consensus...

IMO if everyone consciously voted their own selfish interests we'd be in a much better place.

People talk about enlightened self-interest in contrast with simple greed or unenlightened self-interest.

More often than not, the latter leads to the tragedy of the commons.

 

[samclem]

IMO if everyone consciously voted their own selfish interests we'd be in a much better place.

This works best when individual self interests are obviously and directly linked and congruent with those of society. Sometimes they are not, and that's where we get into some distortions. A person who pays no taxes of a particular type can be expected to vote for increases in those taxes especially if they expect to gain a benefit. People with children in private schools may be more likely to oppose taxes for public schools, etc. Now, if each voter can be shown how voting against their narrow short term interest can help them in the long term, then there's hope for greater enlightenment and wisdom.