Good Article about ongoing Social Security Funding on Market Watch

[pb4uski]

..

... 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.

The problem that I have with means testing is that it penalizes savers and rewards spenders. You can have two people with identical earnings records who paid the same amounts into SS. The spender gets more SS benefits as a reward for not saving with means testing and the saver is penalized. No way. Sorry. Let the spenders who didn't LBYM and save for retirement live with the consequences of their decisions.

Ditto for those who took easier lower paying, less demanding jobs who didn't work as hard as those who earned more and as a result were able to save for retirement. Don't penalize those who hustled more.

 

[youbet]

Perhaps I shouldn’t have used the expression “means testing.” I am in favor of solutions which include current recipients sharing the burden of the fix along with the younger folks still in queue. But current recipients with very low income would require some protection, which I thought of as a form of “means testing.”

 

[pb4uski]

But we already have various welfare programs to help the poor seniors as well as skewing of benefits to lower earners through bend points and lower taxation of SS benefits. IMO no need to build more senior welfare into SS. Add it outside SS if needed but don't imbed it into SS.

 

[RetireBy90]

I’m not against a cut to current SS payouts, I just don’t think it would pass on our current situation. I think that removing or expanding the income is not taxed without expanding the max payment would be a compromise I could live with. Not affecting lower income.
At the same time I think there should be a study to list all the support govt provides at various income levels. At some point we are just collecting taxes to hand back out and becoming more dependent on the government. IMHO

 

[Texas Proud]

Perhaps I shouldn’t have used the expression “means testing.” I am in favor of solutions which include current recipients sharing the burden of the fix along with the younger folks still in queue. But current recipients with very low income would require some protection, which I thought of as a form of “means testing.”

As mentioned by someone else.... just because you are now low income does not mean you were low income during your working years...

The means testing should not be based on what you earn today, but your record of earnings in SS... so if someone spent all their money and had the same income I did, they should bear the same loss of SS as I would... you can have the low earnings into SS not get as bad of a haircut if that is what you are after...

 

[FiveDriver]

Another tired SS thread.

I disagree with 6 and 9.

Another tired post bemoaning a Social Security thread.
You disagree with #9 Immigration Policy Reform ?

This is a Retirement Forum and Social Security threads will appear from time to time -- with your permission or without it.

We now return to the more Constructive Discussion about closing the expected Deficit in the SS Trust Fund.

 

[Gumby]

MODERATOR NOTE: I don't know what the chart in the OP means by "change immigration policies," but I do know that continuing a discussion of that topic is likely to get political and result in thread closure, so please don't.

 

[MichaelB]

If anyone is tired of Social Security threads the solution is simple. Just move on to the next thread.

 

[GenXguy]

The means testing should not be based on what you earn today, but your record of earnings in SS... so if someone spent all their money and had the same income I did, they should bear the same loss of SS as I would... you can have the low earnings into SS not get as bad of a haircut if that is what you are after...

Some people have a high net worth, often inheriting a lot of it. And they might have a big pension. Many people have posted on retirement forums that they never factor in SS or that they don't need it. I think means testing by cutting benefits more to these people while not cutting benefits for those with less means makes sense.

Another option I read about is to switch to a Universal Basic Social Security system where every household with seniors gets the same benefit, whether or not they even paid into the system. Then we wouldn't have as many poor elderly. They way it is now, the highest benefits go to those less likely to need them.

 

[Jerry1]

But we already have various welfare programs to help the poor seniors as well as skewing of benefits to lower earners through bend points and lower taxation of SS benefits. IMO no need to build more senior welfare into SS. Add it outside SS if needed but don't imbed it into SS.

I’m mostly in this camp but one area that I’d would be fine with is taxing SS benefits in full. That would be a bit of a haircut for the current recipients but would also be done based on means due to the tax brackets.

 

[pb4uski]

... They way it is now, the highest benefits go to those less likely to need them.

Do you have a citation for that claim? How does one acquire such knowledge?

 

[pb4uski]

I’m mostly in this camp but one area that I’d would be fine with is taxing SS benefits in full. That would be a bit of a haircut for the current recipients but would also be done based on means due to the tax brackets.

Contributory pension plan benefits are not taxed in full. Nor are life contingent annuity benefits taxed in full. Nor are withdrawals from traditional IRAs with non-deductible contributions taxed in full. There are probably other examples. The common attribute is that you are not taxed on after-tax contributions.... so why should SS retirement benefits be any different?

 

[Texas Proud]

Some people have a high net worth, often inheriting a lot of it. And they might have a big pension. Many people have posted on retirement forums that they never factor in SS or that they don't need it. I think means testing by cutting benefits more to these people while not cutting benefits for those with less means makes sense.

Another option I read about is to switch to a Universal Basic Social Security system where every household with seniors gets the same benefit, whether or not they even paid into the system. Then we wouldn't have as many poor elderly. They way it is now, the highest benefits go to those less likely to need them.

But the whole point of SS to everybody was that it would not be welfare...

Means testing for benefits based on what someone owns means that it is now partially welfare...

I believe that SS should stand on its own... based on what people put into it... and not on what people have today no matter how they got it... So if someone gets $2,000 a month with a million dollars, their benefit is changed exactly like the person who gets $2,000 a month and has a million in debt... (extreme case, but shows what I think)...

 

[NomDeER]

The problem that I have with means testing is that it penalizes savers and rewards spenders. You can have two people with identical earnings records who paid the same amounts into SS. The spender gets more SS benefits as a reward for not saving with means testing and the saver is penalized. No way. Sorry. Let the spenders who didn't LBYM and save for retirement live with the consequences of their decisions.

Ditto for those who took easier lower paying, less demanding jobs who didn't work as hard as those who earned more and as a result were able to save for retirement. Don't penalize those who hustled more

I agree with your first paragraph. I worked with people who were making pretty much the same income as me. They couldn't even conceive of retiring early like me because they spent so much more than I did. Well, if I invested my money instead of eating out all the time, buying expensive cars, and going on a bunch of epensive vacations. I shouldn't have to receive less in Social Security because of this. I'm already going to pay more in taxes on my investments - capital gains and IRA/401(k) withdrawals and these taxes may be higher in part if I'm in a higher tax bracket because I invested money instead of spending all of it.

I disagree with the second paragraph to some extent. Not all low paying jobs are easy. A lot of them are very hard, and most of us would prefer our jobs to theirs even if the pay were the same. There are people sometimes husling to work two of these jobs to pay for necessities. I think there are a lot of hard working people who effectively are subsidizing my standard of living because their jobs are essential but they get paid terribly. A lot of these jobs are physically demanding and the jobs and age take a toll, making it even harder to earn money as they age. But, to me, the solution to this should involve better wages, not changing the Social Security system.

As mentioned by someone else.... just because you are now low income does not mean you were low income during your working years...

The means testing should not be based on what you earn today, but your record of earnings in SS... so if someone spent all their money and had the same income I did, they should bear the same loss of SS as I would... you can have the low earnings into SS not get as bad of a haircut if that is what you are after...

ITA. Social Security is based on wages. Social Security already takes lower wages into account because you basically get a better return on your investment if you paid less in Social Security taxes because you earned less.

 

[Jerry1]

Contributory pension plan benefits are not taxed in full. Nor are life contingent annuity benefits taxed in full. Nor are withdrawals from traditional IRAs with non-deductible contributions taxed in full. There are probably other examples. The common attribute is that you are not taxed on after-tax contributions.... so why should SS retirement benefits be any different?

Ideally, it shouldn't be any different, but in terms of fixing a problem, it's a concession that I think is reasonable.

 

[ncbill]

means testing won't work for assets, only income.

the USA federal tax system is setup to track/match income, not assets.

e.g. W-2, K-1, various flavors of the 1099.

tracking assets relies on voluntary reporting.

 

[RetireBy90]

means testing won't work for assets, only income.

the USA federal tax system is setup to track/match income, not assets.

e.g. W-2, K-1, various flavors of the 1099.

tracking assets relies on voluntary reporting.

And I would suggest nobody’s business but mine, ok and DW.

 

[GenXguy]

But the whole point of SS to everybody was that it would not be welfare...
Means testing for benefits based on what someone owns means that it is now partially welfare...

You can call it that if you want, but I didn't see many people calling UBI welfare. And we would still call it Social Security. It might be a better option than means testing, which could result in a higher income person losing all of their SS benefits.

I believe that SS should stand on its own... based on what people put into it...

It's already not like that. Someone's spouse can claim benefits despite never contributing to SS. If you're going to give it to spouses who never contributed, it should be provided to other U.S. citizens seniors who never contributed enough to earn benefits, in fairness

 

[camfused]

I think the "fix" is going to be a bunch of compromises, so here is my current guess that I sometimes run in my model...

Many of the OP's article's points get implemented for younger and working people, but of more interest to the folks here, there are two changes: a 10% cut in benefits (at least for non-lower income people), which is offset by not taxing SS as income. That way, campaign promises are (sort of) kept, and it is sold as not a net decrease in benefits.

Curiously, my model at age 90 (always my reference for any model changes), shows a very substantial 18% increase in net worth, if these 2 changes are made.

 

[RetireBy90]

You can call it that if you want, but I didn't see many people calling UBI welfare. And we would still call it Social Security. It might be a better option than means testing, which could result in a higher income person losing all of their SS benefits.

I would call it welfare. Just disagree 100% with paying those that can work for not working. If they can’t find a job then they can pickup trash on roadside or parks.

It's already not like that. Someone's spouse can claim benefits despite never contributing to SS. If you're going to give it to spouses who never contributed, it should be provided to other U.S. citizens seniors who never contributed enough to earn benefits, in fairness

I would disagree, one could argue that the working spouse did the contribution.
Problem IMHO is we (congress we elected) expanded benefits without expanding contributions.

 

[GenXguy]

I would call it welfare. Just disagree 100% with paying those that can work for not working. If they can’t find a job then they can pickup trash on roadside or parks.

You can call it what you want, but the official name could stay Social Security. Do you realize that many people are unable to work, and disability can be extremely difficult to get? Do you really want to see poor elderly people out in the cold picking up trash just to survive?

I would disagree, one could argue that the working spouse did the contribution.

That would be a poor argument. The working spouse's contribution to SS is used for determining their own SS benefits using the same calculation as a single person who contributed. The non-working spouse is double dipping (even though it's not actually double the benefit).

 

[pb4uski]

...It's already not like that. Someone's spouse can claim benefits despite never contributing to SS. If you're going to give it to spouses who never contributed, it should be provided to other U.S. citizens seniors who never contributed enough to earn benefits, in fairness

 

[dmpi]

Didn't we just sign the Windfall Elimination Provision (WEP) like days ago? How serious can we be about fixing social security?

 

[GenXguy]

From OP:

 

[GenXguy]

Didn't we just sign the Windfall Elimination Provision (WEP) like days ago? How serious can we be about fixing social security?

Exactly. It's a head scratcher.