Hypothetical SS question

[USGrant1962]

We are not supposed to talk about politics on this board, but what incentive does the current administration have to address this issue? Think real hard about that. IMHO, the answer is none. Kick the can to the next administration and let them deal with it. The "solution" is almost certainly going to cause whatever administration is in charge to lose the following election.

Really? The last administration that signed SS cuts and tax increases was reelected with 49 states in the Electoral College!

 

[FedRetired50]

The CBO had a report a while back which said that a 1% increase in FICA and eliminating the payroll cap, would have fixed the problem. No decrease in benefits. It is too late for that now.

SS is insurance, not a retirement plan or earned benefit. SSA is the largest insurance company in the world.

This is directly related to my prior work life. For 12 years I was the lead developer of the system at SSA that computed the administrative costs that are deducted from the trust funds (it did other things, too).

 

[old medic]

Thanks for all the replies and thoughtful insight. We always ran firecalc without using our SS income. We have always viewed SS as our fun money anyway but I started wondering about the what ifs while playing with the numbers.

Why wait? Get it now and have fun with it... We planned on me getting it as soon as I could get on Medicare due to ACA.. Life changing accident and disability has change both life and plans...

 

[Koolau]

The CBO had a report a while back which said that a 1% increase in FICA and eliminating the payroll cap, would have fixed the problem. No decrease in benefits. It is too late for that now.

SS is insurance, not a retirement plan or earned benefit. SSA is the largest insurance company in the world.

This is directly related to my prior work life. For 12 years I was the lead developer of the system at SSA that computed the administrative costs that are deducted from the trust funds (it did other things, too).

I agree with you that SS was designed to be an insurance plan but the electorate has come to think of it (and so have corporations who no longer wish to support pension plans) as a retirement plan - maybe even THE retirement plan. Therefore, the electorate expects the gummint to keep it going as a "retirement plan" and not just as insurance.

Elected officials are stuck with the "monster" that SS has morphed into. Along the way, the officials have added to it (generous benefits with COLA, relatively generous disability, early retirement, etc.) Now they must live with the "monster" they helped to created.

I appreciate any insights you have with your unique perspective. Thanks.

 

[FedRetired50]

@Koolau just saw your response. Yes I agree that in actuality it is the default retirement plan for the US now that pensions are mostly gone. The majority of seniors rely on it for most or all of their retirement income. Any payment reductions would wreck the US economy (which is based on consumer spending) so they'll be forced to do SOMETHING to prop it up. As usual it will be something last-minute and drastic.

Unfortunately SSA, like so many agencies, has been severely underfunded over the last 25 years. I literally watched cube after cube go empty due to a retirement/resignation and then never get refilled, some after 5-10-15 years. I started my career feeling like I was doing useful things for the agency, but that morphed into feeling like we were treading water instead of adding value every year. The project that I mentioned that computes the administrative costs used to have many people on it. By the time I took over there were 3 of us dedicated to it, and eventually it was just me with 2 others only partially assigned to it.

 

[pb4uski]

I guess I would pick a nit and object to the idea that SS is "not a retirement plan". In my opinion, it is bundled life insurance (the survivors' benefits), disability insurance and a retirement plan, and the retirement plan is the biggest component of the three.

I guess that one could claim that the retirement benefits are insurance against being poor in old age but I think that is a disingenuous view.

Since its pretty clear that most people (present company excepted) can't or won't save for retirement, now that employer pensions are all but extinct, I would consider increasing SS's retirement benefits and increasing SS taxes so SS morphs into life insurance, disability insurance and a forced retirement savings program.

Perhaps include a soverign fund component that invests any surpluses in a combination of bonds and stocks of American businesses similar to the way that pension plans do/did although the potential political pitfalls of the federal government doing such investing gives me the jimmies.

 

[camfused]

So the cuts have been discussed to death in these forums, but I don't believe I have seen anything on what happens after the 2033 cuts. Will there be a COLA in 2034, 2035, etc? So, will it be business as usual, after the cut?

 

[Texas Proud]

I saw someone on TV that used to run SS... and he made a stmt that is true which most will not believe..

SS does not add to the deficit..

Now, back when Clinton was prez they combined the SS with the general fund when they wanted to say how 'bad' spending was.. because it LOOKED good putting that surplus in there... now it does not as they are cashing in the extra savings that SS created...

But... SS has not spent a penny more than it has taken in.. hence, has not added to the debt of the country... the $35 or $36 trillion is due to other spending...

 

[Exchme]

I saw someone on TV that used to run SS... and he made a stmt that is true which most will not believe..

SS does not add to the deficit..

Now, back when Clinton was prez they combined the SS with the general fund when they wanted to say how 'bad' spending was.. because it LOOKED good putting that surplus in there... now it does not as they are cashing in the extra savings that SS created...

But... SS has not spent a penny more than it has taken in.. hence, has not added to the debt of the country... the $35 or $36 trillion is due to other spending...

Yes, it's an accounting device. Currently the SS "trust fund" is owed trillions by the federal government, so the actual deficit to non-government entities is smaller than we typically hear about. But the baby boomers are almost fully retired now so the surplus is being spent down rapidly and by 2033 or so, it will be gone.

I predict nothing interesting will happen to retirees at that point in time, the government will simply do what it always does and borrow more from our children. Much less short term political fallout than cutting Granny's benefit.

 

[euro]

I saw someone on TV that used to run SS... and he made a stmt that is true which most will not believe..

SS does not add to the deficit..

Now, back when Clinton was prez they combined the SS with the general fund when they wanted to say how 'bad' spending was.. because it LOOKED good putting that surplus in there... now it does not as they are cashing in the extra savings that SS created...

But... SS has not spent a penny more than it has taken in.. hence, has not added to the debt of the country... the $35 or $36 trillion is due to other spending...

I would change that to: "SS does not YET add to the deficit".
Agree with others that they will end up borrowing the shortfall after 2033 and so the SS WILL add to the deficit - BIG TIME!

 

[threeonesix]

Add to all of this the possibility of removing several million non-citizen workers paying into SS without the possibility of ever collecting a dime. That doesn't remove a huge amount from SS revenue, only a few billion annually (for now), but it's more than an insignificant amount.

Trust the Fearless Leaders, right? Right??

 

[Gumby]

MODERATOR NOTE: Let's avoid politics. Thanks.

 

[pb4uski]

I would change that to: "SS does not YET add to the deficit".
Agree with others that they will end up borrowing the shortfall after 2033 and so the SS WILL add to the deficit - BIG TIME!

Perhaps you are correct, but under current law SS cannot spend more than it has taken in and cannot borrow so it would take an act of Congress for SS to add to the deficit. I'm skeptical that will happen and certainly hope that it doesn't.

 

[pb4uski]

Add to all of this the possibility of removing several million non-citizen workers paying into SS without the possibility of ever collecting a dime. That doesn't remove a huge amount from SS revenue, only a few billion annually (for now), but it's more than an insignificant amount.

Trust the Fearless Leaders, right? Right??

Ah, that's just unintended consequences.