Good Article about ongoing Social Security Funding on Market Watch

[GrayHare]

If annual COLA increases to SS benefits were put on hold until the system could avoid the shortfall predicted to hit next decade, and annual inflation runs at 3%, how long would it be until COLA could be resumed?

 

[stepford]

If annual COLA increases to SS benefits were put on hold until the system could avoid the shortfall predicted to hit next decade, and annual inflation runs at 3%, how long would it be until COLA could be resumed?

Well if you forgo 3% COLAs for 8.6 years the result is 23% less - exactly the same as the predicted shortfall in 2035. But the correct answer is probably until the torch and pitchfork holding villagers surround the castle.

 

[Koolau]

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)...

I have the (near) perfect example of your scenario: BFF who died at 79 half a mil in debt made the same money as I did (at the same Megacorp) His DW made a lot more than my DW ever made. I have a very decent stash while he spent and borrowed for every toy. Should he have gotten more SS than I get because he was a spend thrift and found himself in debt? I think not.

 

[Montecfo]

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.

In countries where they do things like that, it is impossible to amass the assets necessary to retire. And trying to would be frowned upon by the State.

Suggest we not fix SS by making it worse.

 

[Flieger]

Well if you forgo 3% COLAs for 8.6 years the result is 23% less - exactly the same as the predicted shortfall in 2035. But the correct answer is probably until the torch and pitchfork holding villagers surround the castle.

This has changed to 26% according to the CBO, with the latest change. Add some more time.

Flieger

 

[GenXguy]

Well if you forgo 3% COLAs for 8.6 years the result is 23% less - exactly the same as the predicted shortfall in 2035.

So the solution to avoid cutting benefits is to.... wait for it.... cut benefits.

In countries where they do things like that, it is impossible to amass the assets necessary to retire. And trying to would be frowned upon by the State.

That's easy for us to say, but many were working hard at low paying jobs just trying to get the bills paid with minimal to no savings, and around 40% of seniors (ages 65 and older) rely on Social Security for 90% or more of their income. They're not exactly "amassing" large amounts of assets for retirement. Then you have a number of elderly who were never married, even some who were married, who don't get SS benefits.

Suggest we not fix SS by making it worse.

We just did. See WEP/GPO thread.

 

[NomDeER]

I'm sorry your friends didn't pay for 40 quarters to qualify and got caught in the crack, but why? 40 quarters isn't a high hurdle.

My friend, who worked at a hospital, had a guy come in once who did not have Medicare. He admitted to her that he hadn't declared his income for most of his life (so didn't pay taxes, including Medicare taxes.) I suspect that this may become a bigger problem as I think there may be more people working in the gig economy who don't declare their income.

Or, more commonly, it will become a Social Security issue for some as they don't declare all their income and are getting less credit for Social Security. (There are proposals not to tax tips, which raises a bunch of issues, one of which may be this type of Social Security issue.) I hope most of these people are saving for retirement, but I think a lot of them probably aren't. My sympathy is limited since they aren't paying the same taxes as people making the same amount of money.

 

[Flieger]

My friend, who worked at a hospital, had a guy come in once who did not have Medicare. He admitted to her that he hadn't declared his income for most of his life (so didn't pay taxes, including Medicare taxes.) I suspect that this may become a bigger problem as I think there may be more people working in the gig economy who don't declare their income.

Or, more commonly, it will become a Social Security issue for some as they don't declare all their income and are getting less credit for Social Security. (There are proposals not to tax tips, which raises a bunch of issues, one of which may be this type of Social Security issue.) I hope most of these people are saving for retirement, but I think a lot of them probably aren't. My sympathy is limited since they aren't paying the same taxes as people making the same amount of money.

I am sure these is related to Fed Tax, not SS. States would possibly still tax as well (if they have a state income tax).

Flieger

 

[pb4uski]

My friend, who worked at a hospital, had a guy come in once who did not have Medicare. He admitted to her that he hadn't declared his income for most of his life (so didn't pay taxes, including Medicare taxes.) I suspect that this may become a bigger problem as I think there may be more people working in the gig economy who don't declare their income.

Or, more commonly, it will become a Social Security issue for some as they don't declare all their income and are getting less credit for Social Security. (There are proposals not to tax tips, which raises a bunch of issues, one of which may be this type of Social Security issue.) I hope most of these people are saving for retirement, but I think a lot of them probably aren't. My sympathy is limited since they aren't paying the same taxes as people making the same amount of money.

Yeah I forgot about that. We have a friend who was similarly situated. She worked a lot of under the table jobs and I'm sure never declared the income and as a result ddn't pay a lot of SE taxes in. We always thought that she didn't know how screwed she would be when she got old because she didn't pay much into SS. While we lost touch with her after she moved away, I think she may have found steady employment and hopefully is ok now.

 

[GrayHare]

FWIW, I don't recall COLA increases being part of SS when I paid into the system. I would think temporarily suspending COLA is more palatable to the general public than the forecasted sudden 25% benefit cut.

 

[GenXguy]

WADR, if 99% of people get Part A for free because they have paid in for at least 40 quarters, then the 1% slip through the cracks isn't an urgent public policy problem in my opinion.

It's more than 1% that fall through the cracks. That 1% you referred to are people are actually able to afford to pay for Part A. I stated in my previous post that not everyone can afford to pay for Part A, so they don't appear on the 99% or 1% side because they don't have Part A at all.

In terms of the number of people, the 1% would still be a lot, and if you're one of them, what's that really matters.

I'm sorry your friends didn't pay for 40 quarters to qualify and got caught in the crack, but why? 40 quarters isn't a high hurdle.

You have to look outside of your own box and narrow view. It can be drug addiction, poor health, mental health issues, are disabled, poor education with no job opportunities, etc.

I would think temporarily suspending COLA is more palatable to the general public than the forecasted sudden 25% benefit cut.

I actually think freezing COLA is one of the worst ideas. It ends up hurting the people who rely on SS the most. We need to preserve benefits for those lower on the income scale.

 

[GrayHare]

I actually think freezing COLA is one of the worst ideas. It ends up hurting the people who rely on SS the most. We need to preserve benefits for those lower on the income scale.

Such folks can't save to offset the forecasted sudden 25% reduction in benefits. Cold turkey is generally considered harsher than, well, never getting used to annually-higher benefits in the first place.

 

[GenXguy]

Such folks can't save to offset the forecasted sudden 25% reduction in benefits. Cold turkey is generally considered harsher than, well, never getting used to annually-higher benefits in the first place.

There are just better ideas than simply cutting benefits across the board equally for everyone, which is what COLA reductions amount to. Remember, 40% of seniors (ages 65 and older) rely on Social Security for 90% or more of their income. Most/all members here surely do not.

 

[pb4uski]

... You have to look outside of your own box and narrow view. It can be drug addiction, poor health, mental health issues, are disabled, poor education with no job opportunities, etc.

I actually think freezing COLA is one of the worst ideas. It ends up hurting the people who rely on SS the most. We need to preserve benefits for those lower on the income scale.

On the first part, we have other welfare programs to serve people in those situations... let's not bastardize Social Security to do welfare. Back to how we got off on this tangent to begin with, I think, I fully support having all income taxes paid on SS go back into SS and cease siphoning some off for Part A.

On the firts sentence of the second part, finally something we can agree on.

 

[pb4uski]

...Remember, 40% of seniors (ages 65 and older) rely on Social Security for 90% or more of their income....

I won't fact-check that statement, but it sounds reasonable. But the bigger question is why? From what I have observed in most cases if SS is 90% of their income it is because they didn't have any financial discipline to save and they didn't live below their means. So why should I feel sorry for them? It's not like it is a deep, dark secret that SS doesn't provide enough to have a great retirement and that if you want a great retirement that you need to save for retirement.

Also, the government gives away free money for low income people to save for retirement through the retirement saver's tax credit.

 

[pb4uski]

FWIW, I don't recall COLA increases being part of SS when I paid into the system. I would think temporarily suspending COLA is more palatable to the general public than the forecasted sudden 25% benefit cut.

Benefits have been COLAed for 50 years... since 1975... 50 years.

 

[GenXguy]

On the first part, we have other welfare programs to serve people in those situations... let's not bastardize Social Security to do welfare.

Well, it's already providing welfare to provide spousal benefits.

I won't fact-check that statement, but it sounds reasonable. But the bigger question is why? From what I have observed in most cases if SS is 90% of their income it is because they didn't have any financial discipline to save and they didn't live below their means. So why should I feel sorry for them? It's not like it is a deep, dark secret that SS doesn't provide enough to have a great retirement and that if you want a great retirement that you need to save for retirement.

You feeling sorry for them isn't going to provide a means for them to live on. But you seem to think that everyone had the education and opportunities that you were privileged to receive. I gave some examples in my earlier post as to why some people don't get any SS at all, while you said your own spouse received benefits for staying at home and not contributing to SS. How's that for fairness?

Also, the government gives away free money for low income people to save for retirement through the retirement saver's tax credit.

That doesn't work out too well for people that can barely pay to survive, let alone save.

 

[NomDeER]

That's easy for us to say, but many were working hard at low paying jobs just trying to get the bills paid with minimal to no savings, and around 40% of seniors (ages 65 and older) rely on Social Security for 90% or more of their income. They're not exactly "amassing" large amounts of assets for retirement. Then you have a number of elderly who were never married, even some who were married, who don't get SS benefits.

Serious question: Why do you think this problem should be addressed through cutting Social Security for some people? The Social Security pot primarily comes from wage earners who are not wealthy and the taxes stop at a certain income level. None of the money is coming from taxing really rich people who are making their masses of money on capital gains or other income that is not taxed for Social Security. Why address issues caused by low wages, expensive health care, inadequate disability laws, refusals of states to have decent Medicaid systems, etc. by depriving people of money through a screwy means test that deters saving and punishes savers? Why not address the actual causes of those problems or use different resources instead of creating perverse incentives and turning Social Security into a welfare program funded primarily from people who have worked hard to contribute?

For most people, if you didn't earn money yourself (and weren't married), I would hope that the reason you didn't work even 40 quarters for Social Security purposes is because you had a job that paid you an alternative type of pension, were independenty wealthy, or were earning pretty good money through means that aren't taxed for Social Security purposes, like a couple of people I know who earn their money through stock trading. But, I know that's not everybody in that situation. If you have been disabled most of your life or fall through some other crack, then there should be welfare programs for you (and there are some), but it should not be on the back of the Social Security system.

I won't fact-check that statement, but it sounds reasonable. But the bigger question is why? From what I have observed in most cases if SS is 90% of their income it is because they didn't have any financial discipline to save and they didn't live below their means. So why should I feel sorry for them? It's not like it is a deep, dark secret that SS doesn't provide enough to have a great retirement and that if you want a great retirement that you need to save for retirement.

I don't think that all -- or even most - of the people who are living primarily on Social Security are people who could have afforded to save for retirement and didn't. Some put the money into buying a house (and that is making retirement more affordable for them because they are not paying rent and have built up equity in the home). Some have worked to help put their kids through school. Some simply haven't been able to earn much for various reasons or have had major expenses like medical bills that derailed them or aging/injury that prevented them from continuing with their jobs.

Having said that, I definitely know plenty of people who could have been saving for retirement but haven't been. They make more than the average American, but they have been living well above their means and will have problems when it comes time for retirement. They have a higher standard of living than I do, but some people expect me to subsidize them in retirement after they've blown all their dough.

I don't think that irresponsible people like this should end up homeless and starving, but I agree with you that screwing with Social Security is not the answer.

 

[pb4uski]

Well, it's already providing welfare to provide spousal benefits.

You feeling sorry for them isn't going to provide a means for them to live on. But you seem to think that everyone had the education and opportunities that you were privileged to receive. I gave some examples in my earlier post as to why some people don't get any SS at all, while you said your own spouse received benefits for staying at home and not contributing to SS. How's that for fairness? ...

Welfare programs are based on need so you are just plain wrong characterizing spousal benefits as welfare.

To be clear, DW has been collecting benefits based on her own work record for a few years now, so you are wrong where you say she did contribute to SS.

When I start SS she will get a bump because her PIA is less than 50% of my PIA because wshe was a SAHM and in a profession that earned less than me even when she did work. I'm on record as not having any problem with curtailing spousal benefits, but you are an annoying broken record on the subject.

If doesn't matter whether I think the bump she will get is fair or not, even if we wanted to there is no mechanism to decline it. It will happen automatically whether we want it or not.

There is so much opportunity in this country and so many rags-to-riches stories that IMO if someone doesn't have any retirement savings there is a good chance that they just didn't hustle enough or lived beyond their means, so you are correct, my sympathy is limited. Sorry.

 

[pb4uski]

Low-Income Retirees Leave $30 Billion in Government Aid on the Table Each Year. Here's How to Get Your Piece​

... The NCOA report revealed that low-income seniors leave approximately $30 billion in government aid on the table every year, largely because they don't know the programs exist or are unsure how to apply to them....

Low-Income Retirees Leave $30 Billion in Government Aid on the Table Each Year. Here's How to Get Your Piece | The Motley Fool

www.fool.com

 

[pb4uski]

I am sure these is related to Fed Tax, not SS. States would possibly still tax as well (if they have a state income tax).

Flieger

The self employed pay both the employee and employer SS on Form 1040, Schedule SE and then they get a deduction for the employer half, so it ends up being taxed the same as if the employer was an outsider.

 

[AudiDudi]

I am sure these is related to Fed Tax, not SS. States would possibly still tax as well (if they have a state income tax).

Flieger

About 10 states with income tax do tax SS income. Montana is one of those states and the current legislature has a bill to do away with it.

 

[GenXguy]

For most people, if you didn't earn money yourself (and weren't married), I would hope that the reason you didn't work even 40 quarters for Social Security purposes is because you had a job that paid you an alternative type of pension, were independenty wealthy, or were earning pretty good money through means that aren't taxed for Social Security purposes, like a couple of people I know who earn their money through stock trading. But, I know that's not everybody in that situation. If you have been disabled most of your life or fall through some other crack, then there should be welfare programs for you (and there are some), but it should not be on the back of the Social Security system.

Umm.... yeah, seems all the people I know that don't quality for SS are poor and for reasons like I mentioned earlier. And sadly, they don't quality for those programs because of the steep restrictions.

But if we aren't giving those people SS, then we should stop giving it to anyone who hasn't paid into (e.g. spousal benefits.) Keep it fair and don't punish people simply because they didn't get married.

 

[GenXguy]

The self employed pay both the employee and employer SS on Form 1040, Schedule SE and then they get a deduction for the employer half, so it ends up being taxed the same as if the employer was an outsider.

About 10 states with income tax do tax SS income. Montana is one of those states and the current legislature has a bill to do away with it.

The comment he put in bold was "There are proposals not to tax tips", so it looks like he was referring to the proposal not to tax tips for all tipped workers and that the proposal applies to federal income tax. So nothing about self employed or the taxation of SS benefits.

 

[AudiDudi]

The comment he put in bold was "There are proposals not to tax tips", so it looks like he was referring to the proposal not to tax tips for all tipped workers and that the proposal applies to federal income tax. So nothing about self employed or the taxation of SS benefits.

I believe you are not replying to the post that I replied to. Scroll up.