Inflation is giving lower income retirees smaller COLA increases

[JBTX]

No, your Social Security COLA percentage is the same. The increasing taxation may change your net after tax dollar increase, but that's not the same thing as saying you get less of a COLA.

With minor variations, you've repeated this same complaint many, many times here. Everyone has had since 1983 (when I was 24 years old) to become accustomed to the fact that Social Security will be taxed (and since 1993 to understand that up to 85% can be taxed) depending on income. If you don't understand that now, you never will. And if you do understand it but don't like it, that's why you have representation in Congress; complain to them.

Not knowing the history here and I am too lazy to Wade through the numbers, I could see it being plausible that net, after taxes, the net increase may lag inflation because the floors of social security taxation at 50% and 85% are not indexed for inflation, where as all other forms of tax brackets are indexed for inflation.

That’s not the same as saying the CPI adjustment is less. It is just bracket creep. Prior to the early 80’s income tax levels were not indexed for inflation and there was bracket creep even for income taxes. The tax cut bills in the early 80s eliminated tax bracket creep.

 

[youbet]

In 1960, the United States Supreme Court ruled that you don't have a vested property interest in Social Security. See Flemming v. Nestor, 363 U.S. 603 (1960). It is just another tax while you are working and is not earmarked or set aside for you personally in any way, as a private pension or annuity would be. So you can do all the calculations you want, but they, and your reliance on the words "Trust Fund," are ultimately unavailing.

+1 Gumby. Right on!

Thus is why the one and only way to save SS for those who actually need it is to means test the benefit and reduce/eliminate payments to those who have higher non-SS incomes. I think that financially secure folks like you and I need to speak up more regarding the social justice that means testing SS would provide and that "Flemming v. Nestor" paves the way.

 

[marko]

+1 Gumby. Right on!

Thus is why the one and only way to save SS for those who actually need it is to means test the benefit and reduce/eliminate payments to those who have higher non-SS incomes. I think that financially secure folks like you and I need to speak up more regarding the social justice that means testing SS would provide and that "Flemming v. Nestor" paves the way.

As far as means testing for SS, I think it should be 1) an opt-in condition for those who feel strongly about it or 2) not apply to current beneficiaries. Unlikely, I know, but equally unlikely to happen at all in our lifetimes....just don’t see the political will.

 

[pb4uski]

+1 Gumby. Right on!

Thus is why the one and only way to save SS for those who actually need it is to means test the benefit and reduce/eliminate payments to those who have higher non-SS incomes. I think that financially secure folks like you and I need to speak up more regarding the social justice that means testing SS would provide and that "Flemming v. Nestor" paves the way.

WADR, I totally disagree and I don't think that Gumby was advocating for what you wrote. What you would propose would just make SS just another welfare program and would quickly erode the public support that the program has. The program has high popular support because people believe that they will ultimately get something for their tax contributions. Most people don't know that the benefit calculations and taxation are skewed to help lower income people and I have no problem with that skewness.

Besides, that approach would reward spenders and penalize savers. You could have two people with exactly the same contribution history and the saver gets reduced or no benefits and the spender gets full benefits. That is warped.

It would also increase political pressure to gut or eliminate the program by those paying taxes in that know they will never get any return. Just plain a very bad idea... you betcha!

 

[Aerides]

Besides, that approach would reward spenders and penalize savers. You could have two people with exactly the same contribution history and the saver gets reduced or no benefits and the spender gets full benefits. That is warped.

Yes...imagine the conversations we have now about ACA subsidies and managing income, we'd have that, x10 about managing ways to keep assets low/hidden to maximize SS payments. Between trusts, gifts, moving accounts around, you name it, those with money can find a way to make it look smaller when they want to.

 

[youbet]

The whining and crying begins....... !!

 

[pb4uski]

^^^ Not whining or crying at all. Just dialogue on a genuinely bad idea from a public policy perspective.

 

[youbet]

^^^ Not whining or crying at all. Just dialogue on a genuinely bad idea from a public policy perspective.

It's fun to watch how people's take on graduated tax rates, income related benefits, etc., changes when the specific subject is going to impact them personally!

 

[marko]

Yes...imagine the conversations we have now about ACA subsidies and managing income, we'd have that, x10 about managing ways to keep assets low/hidden to maximize SS payments. Between trusts, gifts, moving accounts around, you name it, those with money can find a way to make it look smaller when they want to.

And once again, the tax accountants are the winners. As demonstrated time and again, the rich have plenty of options.

 

[skyking1]

I think both pb4ski and marko made spot-on assessments of the popularity of the program and what means testing would ultimately do.

 

[marko]

It's fun to watch how people's take on graduated tax rates, income related benefits, etc., changes when the specific subject is going to impact them personally!

The only thing worse are plans designed for others by those who are not impacted personally.

 

[youbet]

The implementation of personal income taxes was quite unpopular, but most pay them, popular or not.

 

[youbet]

The only thing worse are plans designed for others by those who are not impacted personally.

Can't argue with that although I don't see a lot of difference. Skin in the game is a good thing.

 

[Gumby]

+1 Gumby. Right on!

Thus is why the one and only way to save SS for those who actually need it is to means test the benefit and reduce/eliminate payments to those who have higher non-SS incomes. I think that financially secure folks like you and I need to speak up more regarding the social justice that means testing SS would provide and that "Flemming v. Nestor" paves the way.

Not advocating for anything, just telling people where the law stands with respect to one's entitlement to social security. Congress could eliminate, limit or place other conditions on recipients. And the mere fact that a person contributed to the program and expected to get something out of it would give them no legal right to challenge that. Whether it would be good public policy or politically radioactive are totally separate issues.

 

[youbet]

^^^^

Agree completely.

Didn't mean to imply that you were advocating for any particular type of SS bailout, further means testing or other. Rather, I was pleased to have you point out the Flemming v. Nestor case and its ramifications on changes to SS going forward.

For reasons I can't understand, some folks seem to think that they have a "right" to receive SS benefits calculated by the same rules in place during their contribution years.

 

[pb4uski]

It's fun to watch how people's take on graduated tax rates, income related benefits, etc., changes when the specific subject is going to impact them personally!

Yeah, right. Like it is materially going to impact me personally. Not!

Just a bad idea from a public policy perspective. Why can't you get that?

 

[pb4uski]

.... For reasons I can't understand, some folks seem to think that they have a "right" to receive SS benefits calculated by the same rules in place during their contribution years.

I call BS. Provide a quote to one post in this thread that indicates that "folks seem to think that they have a "right" to receive SS benefits calculated by the same rules in place during their contribution years.".

 

[Gumby]

I call BS. Provide a quote to one post in this thread that indicates that "folks seem to think that they have a "right" to receive SS benefits calculated by the same rules in place during their contribution years.".

To be fair, "some folks" could be just in the general run of the population, not any particular people on this thread. No real reason to have a dust up over that, because I'm sure there are people in the USA who think exactly the way youbet described.

 

[pb4uski]

Ok, but if that is the case then he can clarify but I don't see how his comment is relevant to the dialogue.

I don't think that it was at all a generic comment. It was personal... see posts 56 and 58 in addition to post 65.

 

[MichaelB]

If people treat their SS benefit similarly to their health care insurance, they probably don’t know enough detail to really understand how much they will receive, what the options are or any of the mechanics. They start to learn when it’s time to make choices.

 

[youbet]

To be fair, "some folks" could be just in the general run of the population, not any particular people on this thread. No real reason to have a dust up over that, because I'm sure there are people in the USA who think exactly the way youbet described.

Yeah, that's correct Gumby. In my reply to you, I was just saying that the Flemming v Nestor decision clarified a popularly held misconception regarding SS entitlement. In commenting to you, I was not referring to a particular poster in this thread. Unfortunately, despite Flemming v. Nestor, from what I have read and what I hear on the media, it sounds like the misconception still exists among some.

 

[Sandy & Shirley]

For reasons I can't understand, some folks seem to think that they have a "right" to receive SS benefits calculated by the same rules in place during their contribution years.

WOW, does that ever describe why I make my posts!

I made my FICA contributions for 49 years. Not by choice, but because it was the law! The government told me one thing in 1965 when I made my first payment, then changed things in 1983 and 1993 when they said my benefits would be taxable. I planned my retirement savings based on what the government said I would receive.

And now you are basically saying that the citizens of the United States should never trust the Government of the United States!

 

[pb4uski]

So now, exactly what was it that the government "told" you in 1965 when you made you first payment? I must have missed that mailing... do you still have it?. The government never told me anything. Sounds like a lie to me.

Are you receiving anything different from what the government said that you would receive? No, so what in the world are you complaining about?

Technically and legally, you had the obligation to pay taxes and the government withheld them from your pay as required by law. And now that you are a certain age you will receive certain benefits as provided by law. So I'm not sure what your problem is.

Laws can be changed and sometimes are changed. Grow up and deal with it.

The fact that you misunderstood the deal from the get go doesn't mean that you were deceived, it just means that you misunderstood things.

 

[Aerides]

And now you are basically saying that the citizens of the United States should never trust the Government of the United States!

That's a bit of hyperbole. Being an adult in the world for a few years has taught me that laws of all sorts change. Some better some worse.

The drinking age in my state was 19, then it was changed to 21
I can now drive more than 55mph on most major highways
Many more people are now eligible to serve in the Armed Forces who were previously excluded
My tax rates have changed several times
Things that were misdemeanors are now felonies, and vice versa
FRA moved from 65 to 67 and probably will again

 

[Sandy & Shirley]

So now, exactly what was it that the government "told" you in 1965 when you made you first payment?

Following the enactment of Social Security in 1935, the U.S. Treasury Department issued a series of tax rulings that determined Social Security benefits were not taxable.

Basically, since we already paid taxes on the money we put into the TRUST fund, the money can’t be taxed a second time when we take it back out.



It remained that way until the 1983 legislation. Our half of the money going into the trust fund has already been taxed. The matching funds from our employer are a tax deductible business expense, so half, 50%, of our benefits could become taxable.


Then in 1993 they changed it to 85% taxable for no reasonable reason.


This is exactly the same ruling that is currently in place for Roth IRA accounts. How would you feel if the government changed their mind and said that everything we take out of our Roth IRA is taxable just like what we take out of our traditional IRA?



The only difference between a Roth IRA and the TRUST fund is that the government is not forcing you to contribute to a Roth!