Good Article about ongoing Social Security Funding on Market Watch

[FiveDriver]

Market Watch has a good story about how to cover the shortfall in the SS Trust Fund.

https://www.marketwatch.com/story/heres-a-proposal-to-fix-social-security-that-we-could-enact-today-8cbc0b1e?mod=mw_latestnews

A level-headed mix of Revenue Increases and moderate Benefit reduction avoids the impending doom of major cuts. Key to success is raising the Taxable Wage Base, something I've been banging the drum for. Here's asummary ion table form.....

 

[Luvtoride]

Thanks for the good summary. I guess most of these things will impact our kids now and for their retirement. I wonder if these moves contemplate the great wealth transfer that we will leave as a legacy to them?

 

[flyoverstate]

1 and 2 are nobrainers and should have happened long ago. I would say remove the cap altogether.

3 will be a hard sell for the people on early-retirement.org, so it will never happen! LMAO.

4, I guess so? Are there loopholes today?

5, how would that work? People earn varying amounts over their careers. Sounds dumb and unworkable. Some get FRA at 67, but if you work hard and make good money, it is 69? No. Not going to happen, IMHO.

6, makes as much sense as 1 and 2.

I highly doubt number 7 will gain any traction. There are still many people who work small part-time jobs throughout their career, while taking care of their kids, etc. And the powers in charge now want more of that.

8, it *should* be happening already, sheesh.

9, I'm not quite sure what they mean here. Unless immigrants are working under the table, they are already paying into SS, often under an assumed SS number. We definitely need a new immigration policy, not just for "direct care workers", but for every industry that relies on immigrant labor. I'm restraining myself from climbing on the soapbox, but I am very involved in a segment of agriculture, and all I have to say is hold on to your wallet, fresh food is about to become WAY more expensive. We may end up living Soylent Green after all, just a few years later than in the film.

Number 10 simply isn't going to fly in some states, specifically, Colorado where I live and where my wife draws a state pension. Paying in an additional 6.4% for each employee would break the state budget even more than it is already. The state already pays 21% into the public pension, and each employee pays 11%, and those numbers are set to rise due to shortfalls. They can't simply end the pension contributions, or it will collapse. They are already reducing the COLA for the pensions (again) down to an insignificant 0.5%. I wish long ago Colorado had put their public employees into a dual Social Security/pension plan like most states, but they didn't, and changing now is untenable.

 

[RetireBy90]

Before any “fix” can be considered we need to 1 - stop adding to the cost with new entitlements, no changes to increase payouts unless directly paid for, and 2 - agree that SS and Medicare taxes and benefits are just one more program, I mean get past thinking that is “my money”. I used to think of it like an IRA, I paid it for my golden years. It isn’t mine or yours, it has been added to govt owned pile.
Then after appropriate mourning, rais income limit but not top end limit on payments. Set a limit indexed to COLA of say $4,500 / month.
I would also increase all SS retirement ages bu 1 year (early to 63, FRA to 68 and max out at 71). Same benefits as to day. Of course this would have to apply to those born say 1980 or so.
There is no free lunch

 

[Jerry1]

If I understand 8 it's just saying that we shouldn't put SS money into the general fund. Well if we don't do that then there will need to be a tax increase for the general fund. No free lunch.

 

[Gumby]

If I understand 8 it's just saying that we shouldn't put SS money into the general fund. Well if we don't do that then there will need to be a tax increase for the general fund. No free lunch.

How is the social security trust fund going to invest if it can't buy treasuries?

 

[FiveDriver]

Speaking strictly for myself, I believe Provisions 1 and 2 should be enacted immediately to Increase Revenues. Deficit Reduced by 25%.

Provisions 5 and 6 should be enacted to increase the Full Retirement Age by gradually adding 2 years to the current Claiming stages. People are living longer and working longer. Deficit is reduced by over 27%.

Provisions 8 and 9 should be enacted immediately (I thought all taxes on SS benefits went back into the Trust now, as a matter of policy).
And Immigration Reform goes without saying. Deficit reduced by another 25%.

That is a relatively painless way to eliminate over 75% of the Deficit we're facing. Some small sacrifices by all affected parties, which is the way it's supposed to work.

 

[audreyh1]

I thought #8 already happened decades ago.

 

[AudiDudi]

I thought #8 already happened decades ago.

Taxation of benefits

"Under legislation enacted in 1983, the Social Security Trust Funds receive income based on Federal income taxation of benefits."

 

[audreyh1]

Taxation of benefits

"Under legislation enacted in 1983, the Social Security Trust Funds receive income based on Federal income taxation of benefits."

Thanks! That’s what I thought.

So the source for the table in the OP seems poorly informed.

 

[pb4uski]

^^^ No, I don't think so. The source is an expert, SSA's chief actuary. We are the ones who are poorly informed. From the article:

... The final component involves the logical move of placing all revenues ever collected from the taxation of retirement and disability benefits into the Social Security Trust Funds. At this point some of these revenues go to the Hospital Insurance Trust Fund, also known as Medicare Part A, so changes would be required in the Medicare program. ...

 

[youbet]

I don't see enough (any?) sacrifice on the part of current recipients who have high retirement incomes outside of SS. There really needs to be some means testing so that Joe Sixpack doesn't see his SS cut or FRA date pushed out just so Warren, Elon or Bill don't have to see a modest benefit reduction. I'm talking about something more than just taxing 100% of their SS.

 

[pb4uski]

My thoughts.

1. Yes, when I was working I always wondere why the cap wasn't higher given the financial issues the program had.
2. Agree. another 0.2%, 0.1% employee and 0.1% employer isn't going kill anyone.
3. Disagree. Everyone should be treated equally regardless of level of financial success in life. I would support individualized calculations of the taxable amount based on the individuals lifetime contributions towards retirement benefits in relation to rettirement benefits.. the same taxation as contributory pension plans, rather than the broadbrush 85%. The data exists to do something more refined than 85% but 100% is just wrong and 100% on high income people is more wrong.
4. Agree as long as benefits are commensurate with payroll taxes paid irrespective of your employment type.
5. Again, no. I agree with the idea of increasing full retirement age to reflect improved longevity. I recall reading that when SS first started and the full retirement age was 65 that based on longevity at the time program only expected to pay 10 years of benefits. With today's longer lives it is much more than 10 years.
6. Agree
7. Agree, even though we have benefitted from this because DW was a SAHM.
8. Agree, I also thought that was already done but I guess some gets diverted to support Medicare Part A benefits.
9. Don't ow enough, but suspect that I would agree.
10. Absolutely, I think it was stupid to not require that SS apply to everybody to begin with.

 

[pb4uski]

I don't see enough (any?) sacrifice on the part of current recipients who have high retirement incomes outside of SS. There really needs to be some means testing so that Joe Sixpack doesn't see his SS cut or FRA date pushed out just so Warren, Elon or Bill don't have to see a modest benefit reduction. I'm talking about something more than just taxing 100% of their SS.

I disagree. While it has some warts in the bend points and the taxation, in general SS is merit based... what you get is based on what you pay in... aothough it is somewhat skewed to provide greater benefits to lower income people.

Any addition of means testing starts to tilt it to becoming just another welfare program and I don't want to go there. Popular support for the program will die. Warren, Elon and Bill can just not apply for their retirement benefits or donate what they receive to charity.

 

[Aerides]

I disagree. While it has some warts in the bend points and the taxation, in general SS is merit based... what you get is based on what you pay in... aothough it is somewhat skewed to provide greater benefits to lower income people.

Any addition of means testing starts to tilt it to becoming just another welfare program and I don't want to go there. popular support for the program will die. Warren, Elon and Bill can just not apply for their retirement benefits or donate what they receive to charity.

Yup because once the higher earners start to see their benefits cut, they will question the program more and more... and we know how money talks.

That it's at least somewhat egalitarian helps to enable its survival, at least so far. And that's why increasing the cap on when pay-in stops has never had much traction, because it won't be equal in payback.

 

[athena53]

I disagree. While it has some warts in the bend points and the taxation, in general SS is merit based... what you get is based on what you pay in... although it is somewhat skewed to provide greater benefits to lower income people.

Any addition of means testing starts to tilt it to becoming just another welfare program and I don't want to go there. Popular support for the program will die. Warren, Elon and Bill can just not apply for their retirement benefits or donate what they receive to charity.

I agree. I'm not Warren, Elon or Bill but I can tell you that if my SS went away, yeah, I could live decently but the first thing I'd cut is my charity budget and right now it's about equal to my SS income.

Eons ago I met Bob Myers, one of the Chief Actuaries of Social Security, and asked him about taxing SS (this was before they actually did). He was against it- he said it would discourage individual saving.

 

[pb4uski]

I'm struggling for the linkage where taxing SS would discourage individual saving. I would think it would do the opposite... people would know that all else being equal that more retirement savings would be needed to fund retirement if SS was subject to taxes.

 

[RetireBy90]

I'm struggling for the linkage where taxing SS would discourage individual saving. I would think it would do the opposite... people would know that all else being equal that more retirement savings would be needed to fund retirement if SS was subject to taxes.

I don’t understand the link either. Too many people haven’t made retirement enough of a priority and ones I know won’t change.
I also don’t agree with means testing. It would be yet another way to redistribute. I’m not against helping folks having needs but we already do that with many programs.

 

[GenXguy]

Another tired SS thread.

I disagree with 6 and 9.

For number 3, the thresholds for taxation need adjusted for inflation since 1983 when the indexes were set so that lower income retirees aren't paying a lot more of their benefits back in taxes compared to when those thresholds were set.

And add in some means testing for higher income earners and raising the retirement age more for younger workers, not just the top 40% of earners.

WEP and GPO should be in place.

 

[youbet]

I'm not Warren, Elon or Bill but I can tell you that if my SS went away, yeah, I could live decently but the first thing I'd cut is my charity budget and right now it's about equal to my SS income.

Are you saying that the burden of keeping your SS whole should fall exclusively on the younger folks by asking them to contribute more and work longer? You're not willing to share the burden with them? Maybe you take a small cut and they pay a little more and work a little longer?

 

[youbet]

. I’m not against helping folks having needs but we already do that with many programs.

I'm not talking about helping folks having needs as much as sharing the burden of funding ongoing SS across those currently collecting SS and those in queue. Don't ask younger folks to pay more and work longer so we can preserve our own benefits intact.

We enjoy the benefits of a system where our payouts are, in aggregate, large enough that our payments look like the bargain of all time. Let's face it, we didn't pay in enough vs. what we're collecting. I'm willing to split the difference in some way so that I take a small cut and the younger folks only have to pay a small amount more and work only a bit longer to support me. Why put all our burden on them if we're upper income in retirement and wouldn't miss a kilobuck or two of annual SS payments?

I only mentioned means testing, as opposed to across the board cuts for all currently collecting, because I think that those SS recipients who are cutting it close financially should be protected. No cutting SS for Widow X trying to get by on $15k/yr SS. But for all the folks on this site who refer to SS as "gravy" or the "cherry on top," etc., a small haircut to reduce the hit for the younger folks supporting us seems appropriate.

 

[Koolau]

I thought #8 already happened decades ago.

I was recently assured of this here by one of our many SS experts.

You mean they were wrong?

 

[GenXguy]

I was recently assured of this here by one of our many SS experts.

You mean they were wrong?

Looks like the problem is that it's not "all" proceeds.

 

[Koolau]

I'm not talking about helping folks having needs as much as sharing the burden of funding ongoing SS. Don't ask younger folks to pay more and work longer so we can preserve our own benefits intact.

We enjoy the benefits of a system where our payouts are, in aggregate, large enough that our payments look like the bargain of all time. Let's face it, we didn't pay in enough vs. what we're collecting. I'm willing to split the difference in some way so that I take a small cut and the younger sfolks only have to pay a small amount more and work only a bit longer to support me. Why put all our burden on them if we're upper income in retirement and wouldn't miss a kilobuck or two of annual SS payments?

I only mentioned means testing, as opposed to across the board cuts for all currently collecting, because I think that those SS recipients who are cutting it close financially should be protected. No cutting SS for Widow X trying to get by on $15k/yr SS. But for all the folks on this site who refer to SS as "gravy" or the "cherry on top," etc., a small haircut to reduce the hit for the younger folks supporting us seems appropriate.

I tend to agree that some haircut for beneficiaries is probably in order. There's simply no "fair" way to handle the situation without trying to spread the pain around. Having said that, YMMV.

 

[pb4uski]

I agree. I'm not Warren, Elon or Bill but I can tell you that if my SS went away, yeah, I could live decently but the first thing I'd cut is my charity budget and right now it's about equal to my SS income. ...

Are you saying that the burden of keeping your SS whole should fall exclusively on the younger folks by asking them to contribute more and work longer? You're not willing to share the burden with them? Maybe you take a small cut and they pay a little more and work a little longer?

How in the world could you read that into the athena53 post?