Social Security (House) Proposal

[Exit 2024]

I think cutting spousal benefits would be much more fair and actually have their SS benefits be based on their own earnings like the rest of us.

That is not that fair for spouses that have been staying home with kids for some years. May be they need to get X years of at least minimum wage added to their records for each kid, to make a field more level in such case. Otherwise that will discourage people to have kids at all which will boomerang later on already not so great demographics of the country. And hurting side will disproportionally hit women which already receive on average just 80% of the men's social security.

 

[GenXguy]

That is not that fair for spouses that have been staying home with kids for some years. May be they need to get X years of at least minimum wage added to their records for each kid, to make a field more level in such case. Otherwise that will discourage people to have kids at all which will boomerang later on already not so great demographics of the country. And hurting side will disproportionally hit women which already receive on average just 80% of the men's social security.

I'm not opposed to spousal "death" benefits, but I'm saying they shouldn't be getting to double up on the household SS benefits while both are living as if both of them paid into the SS fund all those years. That's unfair to the single people or the married people where they both paid in about the same amount to the the SS fund. Having kids is a choice, and I shouldn't have to pay for their choice. Plus, it didn't appear to be discouraging anyone from having kids before they implemented spousal benefits. And having a kid is not even a requirement to get them! Remember, there are single people that didn't work enough to earn SS benefits, and they aren't getting ANY benefit simply because they weren't married to someone earning benefits. So they are even worse off. I just don't see any fairness in giving extra benefits to a spouse that never worked, at least while both spouses are alive, while then talking about cuts to those who actually paid SS taxes.

It's not just about what sounds "fair" to you. There's a formula for determining benefits. Being a non-working spouse shouldn't make you special to receive something you never paid into compared to what you're receiving out of it. There are plenty of others who could use more money, but we can't just hand out SS benefits to everyone we think could use it when they weren't contributing their fair share of $ in SS taxes.

An additional note is that the married couple pay much less taxes for regular income tax than a single household with the same income, and that's even before factoring in child tax credits, further benefiting the couple with kids. SS spousal benefits just takes it too far piling on the advantages to the married couple with non-working spouse for a program that everyone is talking about making cuts to for those who paid into the program full freight.

 

[AudiDudi]

When my Mother went to file for SS, she had the choice of her own SS, my father's SS or her late husband's SS. She was very unhappy to learn the 2 other ex-wives were already claiming on her late husband's SS earnings. Likely a rare situation to have been married to 3 different women for 10+ years. (note: it wasn't divided 3 ways - each got a full benefit)

 

[Aerides]

I think cutting spousal benefits would be much more fair and actually have their SS benefits be based on their own earnings like the rest of us.

Nope, fair is BS in this case. Often a family makes a joint decision that one stays home to raise children, the other works full time. I understand many do both, but right now that's a family choice and should be respected.

Get Out and Earn means less children = less future taxpayers paying into SS.

 

[Midpack]

Everyone well knows what the options are, but there is a VOCAL voting constituency for and against each of the various options, so nothing will happen. Any legislator who tries will be promptly vilified and defeated in their next election, by those against the options on the table. We have no one to blame but ourselves as voters.

It's been (pointlessly) debated here a hundred times...

 

[Andre1969]

When it comes to making changes to SS, there is no such thing as "fair." Somebody gets screwed over, no matter what you do. Some group of people is going to pay more into it, some group is going to get less in benefits, someone is going to have to work longer, etc., depending on what alterations are made.

About the "fairest" thing to do would just leave it alone, as-is, and when it runs out of money, make up the shortfall from the general fund, and tack that on to the National Debt. Of course, that's not totally fair either, because someone's going to have to pay that, eventually.

 

[Northforker]

Just remove the cap on SS withholding entirely. Gates, Buffet, Musk, Bezos, et al. They won't even notice.

 

[marko]

Just remove the cap on SS withholding entirely. Gates, Buffet, Musk, Bezos, et al. They won't even notice.

+1. We've had this discussion here endlessly and I've never understood the hesitancy. I wasn't close to being in the Bezos/Gates group but made high six figures. I never would have minded, or even noticed such removal of the cap.

There's always some comment about it being unfair to do so but if we need to decide who gets unfairly treated, I'd choose the group that I came from.

I wonder though how a haircut in 10 years from now changes the calculation on when to take SS. I'd imagine that taking it sooner at a higher amount for ten years would be a better option.

 

[USGrant1962]

Just remove the cap on SS withholding entirely. Gates, Buffet, Musk, Bezos, et al. They won't even notice.

That doesn't do it. Just uncapping the SS tax (it is not "withholding") only closes about 60% of the gap. Removing the cap plus adding another lower bend point for high earners only closes about 2/3 of the gap. It is a big gap.

EDIT - here's a good model and I'm glad to see they recently updated it. Previously it used the 2018 Trustees report, now using 2023.

https://www.crfb.org/socialsecurityreformer/

 

[Route246]

I've paid in a lot. I'm not complaining. This system served my parents, aunts and uncles well. I've done well in terms of earnings in my career. I just started withdrawing at 67 because my wife only qualifies for spousal support. I'm still paying the max into the system even as I'm taking a withdrawal. Seems like 2.5x taxation or something Taxed going in, taxed coming out....

Wife and I are taking out $5629/month, $67,680/year which I believe is the max anyone can receive starting at my age 67. Ignoring the time value of money we nullify our paid in balance in a little under 7 years. If we die now the trust fund makes out pretty well. If we both live to 99, well, uh....

Personally, I'm impressed by SS and Medicare and what it allows for all working Americans to save, albeit forced savings.

Bottom line is this is not an entitlement, welfare or a transfer payment. It is defined benefit reimbursement for paying into a system through taxes. It is not perfect but it does a good job of letting most retirees have some amount of financial dignity, even if at or below the poverty level. It is better than nothing.

I've had some people ask me if I feel any guilt for receiving this reimbursement due to our FI status. I look at them as if they are crazy. It is a compulsory contract I was forced into signing up for and I'm just getting paid back for what I put in.

Taxes Paid
Total estimated Social Security and Medicare taxes
paid over your working career based on your Earnings
Record:
Social Security taxes Medicare taxes
You paid: $222,828 You paid: $98,167
Employer(s): $246,477 Employer(s): $98,167

 

[Route246]

Most of these guys take zero salary or $1. They have other ways to pay for their next meal.

Just remove the cap on SS withholding entirely. Gates, Buffet, Musk, Bezos, et al. They won't even notice.

 

[marko]

That doesn't do it. Just uncapping the SS tax (it is not "withholding") only closes about 60% of the gap. Removing the cap plus adding another lower bend point for high earners only closes about 2/3 of the gap. It is a big gap.

EDIT - here's a good model and I'm glad to see they recently updated it. Previously it used the 2018 Trustees report, now using 2023.

https://www.crfb.org/socialsecurityreformer/

Wow! What a great tool!

According to my inputs, increasing the retirement age to 69 plus taxing all wages over $400k makes a successful plan.

 

[Car-Guy]

Everyone well knows what the options are, but there is a VOCAL voting constituency for and against each of the various options, so nothing will happen. Any legislator who tries will be promptly vilified and defeated in their next election, by those against the options on the table. We have no one to blame but ourselves as voters.

It's been (pointlessly) debated here a hundred times...

At least 100 times.

 

[Andre1969]

I just googled "when will social security run out?" and this was one of the first things to pop up...

"Will Social Security still be around when I retire? Yes. The Social Security taxes you now pay go into the Social Security Trust Funds and are used to pay benefits to current beneficiaries. The Social Security Board of Trustees now estimates that based on current law, in 2041, the Trust Funds will be depleted."

I haven't been paying much attention lately, but it seems like forever, that year would dance around among 2033, 2034, or 2035. So what happened, I wonder, that now they're suddenly pushing the prediction out to 2041?

And this quote comes right from the horse's mouth... https://www.ssa.gov/newsletter/Statement Insert 25+.pdf

 

[GrayHare]

FRA increase has already been done before so another increase will likely be part of any fix. It's logical given the increase in average life span during the decades since the system began,

 

[TheWizard]

FRA increase has already been done before so another increase will likely be part of any fix. It's logical given the increase in average life span during the decades since the system began,

Lifespan stats have decreased recently due to COVID and fentanyl...

 

[USGrant1962]

...

And this quote comes right from the horse's mouth... https://www.ssa.gov/newsletter/Statement Insert 25+.pdf

Look at the fine print at the bottom of page 2. "01/09 edition". And it is an insert to your SS statement - they don't send SS statements anymore.

Here's the horse's mouth:

https://www.ssa.gov/OACT/TRSUM/index.html

 

[Car-Guy]

^^^^^
Just skimmed it but I feel so much better after seeing this:


By the Trustees:

Janet Yellen,
Secretary of the Treasury,
and Managing Trustee of the Trust Funds.

 

[Andre1969]

Thanks, USGrant. I had a feeling it was too good to be true. Oddly, that was also the very first thing to pop up on my Google search. You'd think it would have found something more relevant!

And, sure enough, I looked at my most recent SS statement, downloaded in February, and it said this, which is more in line with what I'd expect...

"The Social Security Board of Trustees estimates that, based on current law, the Trust Funds will be able to pay benefits in full and on time until 2034. In 2034, Social Security would still be able to pay about $800 for every $1,000 in benefits scheduled. Learn more at ssa.gov/ThereForMe."

And since then, now they're calling for 2033! Dang, and I had gotten my hopes up for a brief moment, there!

 

[Andre1969]

Lifespan stats have decreased recently due to COVID and fentanyl...

And even if people are living longer, a lot of it is because of reduced infant mortality/childhood deaths, safer working environments, fewer people going off to war, and so on. And medical advances are keeping sick, unhealthy people alive longer, who would have normally died years ago.

So, even if people are living longer than in the old days, they're not necessarily living longer, healthier. Your typical 68 year old of today probably isn't any healthier than the typical 68 year old of my grandparents' generation.

 

[gauss]

My fear would be getting a haircut of more than 20% under any modification to address this.

IE if they were to raise my FRA to 70 from 67 that would be 24% (ie 3 years x 8%/year delayed retirement credit under current law).

-gauss

 

[Midpack]

Bottom line is this is not an entitlement, welfare or a transfer payment. It is defined benefit reimbursement for paying into a system through taxes. It is not perfect but it does a good job of letting most retirees have some amount of financial dignity, even if at or below the poverty level. It is better than nothing.

No longer true, and that's been shared here dozens of times. While workers used to pay more in than they got back, you get a lot more back than you paid in today. Social Security began paying out more than it takes in starting in 2020, or we wouldn't even be discussing reserves running out in 2034. It has been a PAYGO system from the start, it's not a defined benefit reimbursement by any stretch, and the funds are not invested so there is no investment return if you're inclined to make that argument.

The basic idea behind Social Security retirement benefits is that you’ll spend your working years paying into the system through payroll or self-employment taxes, and the money you pay in will come back in the form of retirement benefits. It doesn’t quite work that way, though. You’ll likely receive a lot more in benefits than you paid in through taxes, according to a new analysis from the Tax Policy Center — and that discrepancy is contributing to Social Security’s funding problems.

https://www.msn.com/en-us/money/ret...et-on-average-for-what-you-pay-in/ar-AA1jUjtX

 

[qwerty3656]

No longer true, and that's been shared here dozens of times. While workers used to pay more in than they got back, you get a lot more back than you paid in today. Social Security began paying out more than it takes in starting in 2020, or we wouldn't even be discussing reserves running out in 2034. It has been a PAYGO system from the start, it's not a defined benefit reimbursement by any stretch, and the funds are not invested so there is no investment return if you're inclined to make that argument.

Does that include earnings? I find it hard to believe that if I just dumped my SS payment plus my employers payment into an Roth like instrument for 35 years, that I wouldn't be farther ahead.

 

[gauss]

^ You would have to invest the Roth in Treasury Bonds in order to make a fair comparison.

 

[Midpack]

Does that include earnings? I find it hard to believe that if I just dumped my SS payment plus my employers payment into an Roth like instrument for 35 years, that I wouldn't be farther ahead.

May be, but that's not where your FICA payments went. Again your FICA payments went to Soc Sec beneficiaries in the year you paid them. Any SS surpluses (while we had them) were in federal bonds, but those "returns" have been part of deficit spending for almost every year as far back as you care to look. So it's hard to argue there's been any return on past SS surpluses.