Modeling Social Security 2033 Insolvency

[CRLLS]

I would be more concerned about some aggressive person/algorithm going thru old applications and finding an error in the benefit amount. In such cases, SSA typically readjust the benefit. I have read of cases where the SSA had decided an error in benefits was made (somehow?) and not only reduced the benefit going forward but also started clawing back any previous overpayments. I am not suggesting any fraud was committed.

 

[rembrandt]

I would be more concerned about some aggressive person/algorithm going thru old applications and finding an error in the benefit amount. In such cases, SSA typically readjust the benefit. I have read of cases where the SSA had decided an error in benefits was made (somehow?) and not only reduced the benefit going forward but also started clawing back any previous overpayments. I am not suggesting any fraud was committed.

I have a friend who works the system and got SS disability benefits and got paid FRA from age 60. She would cry on the phone to the agent and got it approved. She is not anymore disabled than me, and I am not disabled. She chose to stop working at 60. In her own words, when she quit working, her ex-colleague challenged her to get SS disability payment without using a lawyer. She took on the challenge and won.

I think there is some confusion here. RetiredHappy has the friend who comes close to committing fraud. See above.

 

[CRLLS]

I think there is some confusion here. RetiredHappy has the friend who comes close to committing fraud. See above.

No confusion here.

 

[Exit 2024]

My take on the solution :
1. Tax all wages (remove the cap)
2. Because of #1 implement one more bend point at 5% to limit benefits for ultra wealthy+ implement cap on benefits (basically one more bend point with 0%)
3. Increase Tax by 2% but all on employer side (in conjunction with reducing crop tax rate - they should share gains from tax reductions)
4. Eliminate Spousal benefit as it is set today but give each woman or men (parents can choose) 3 years of credit for each child (amount could be discussed but for example at least minimum wage) - I do believe we should recognize child bearing as a "work" for benefits of the society. Spouses that did not work and did not have children should not get anything but widow(er) benefit when her/his spouse will die.

I tried to model it here The Social Security Reformer - Interactive Tool
#1 and #3 alone will close 119% of the gap.
#2 and #4 is not on the list

I also one more option listed in the tool

Expand Benefits for Widow(er)s as for some people who rely on SS a lot going from 2 payments to 1 could be life changing not in a good way. So here at least opportunity to get 1.5 if benefits are similar. In my view it worth extra 3% gap, as above are already over 100%.

 

[GenXguy]

4. Eliminate Spousal benefit as it is set today but give each woman or men (parents can choose) 3 years of credit for each child

A year of "credit" with no SS taxers paid isn't going to increase their SS benefit based on their own earnings, assuming they work the minimum 40 quarters. It's not "work" or just a "credit" that adds to your social security earnings, it's the amount of earnings that you paid SS taxes on that adds to your SS earnings. A stay at home mother with no income isn't paying into SS. Anyway, the idea of eliminating spousal benefits completely it good, as I've said multiple times.

At the moment, current changes being legislated for SS could make the trust fund run out even more quickly.

 

[Exit 2024]

A year of "credit" with no SS taxers paid isn't going to increase their SS benefit based on their own earnings, assuming they work the minimum 40 quarters. It's not "work" or just a "credit" that adds to your social security earnings, it's the amount of earnings that you paid SS taxes on that adds to your SS earnings. A stay at home mother with no income isn't paying into SS. Anyway, the idea of eliminating spousal benefits completely it good, as I've said multiple times.

At the moment, current changes being legislated for SS could make the trust fund run out even more quickly.

That is exactly what I think should happen - add at least minimum wage amount for those years in leu of earnings. Yes, taxes will not be paid but for current spousal benefits taxes are not paid either. Parent with 2 children will get 6 years credit and still will need 4 more to qualify for SS, currently spouse does not have to work at all to get spousal benefits and no children.

In proposal above (#4) let say he/she worked those extra 4 years for minimum wage also and no more - AIME would be ($15,080*10)/35/12 = $359 and PIA=$323 (all ignoring inflation adjustments) That is way smaller than majority of spousal benefits and still require to have 2(!) children and 4 years of work. Out of that $323 60% was not covered by taxes, 40% are earned. So to give one parent extra up to $97 per child (or less - depending on the earning history vs bend points) in addition to earned SS is reasonable in my view. Of cause others can disagree, it is just my take on the issue of spousal benefit.

 

[RetiredHappy]

Just get rid of the spousal benefits. Parents already get plenty of tax credits for their children when filing tax returns if their income level qualifies.

Having children is a choice and for most part, stay at home spouse is also by choice. Why should taxpayers pay for their choices?

 

[GamblingMan]

I don't model SS. It is a fixed number in my calculators. I do use a reduced SS payout (75%) to represent 2033, but I also start my base as if I retired tomorrow, with all the zero years factored in. I am admittedly conservative. I did the exercise and the difference between my low SS number and a more realistic or average number only costs me 6% in Firecalc, or 2 years to get it above 95%. For me, 2033 SS is not a main factor on my retirement year.

 

[GenXguy]

Just get rid of the spousal benefits. Parents already get plenty of tax credits for their children when filing tax returns if their income level qualifies.

Having children is a choice and for most part, stay at home spouse is also by choice. Why should taxpayers pay for their choices?

That's almost exactly what I was going to say.

Childless people are already paying high taxes to educate other people's children, and some people are pushing for taxpayer funded childcare and putting the entire college expense on taxpayers. At some point, people need to pay for their own choices instead of putting that burden on the rest of us.

 

[USGrant1962]

That's almost exactly what I was going to say.

Childless people are already paying high taxes to educate other people's children, and some people are pushing for taxpayer funded childcare and putting the entire college expense on taxpayers. At some point, people need to pay for their own choices instead of putting that burden on the rest of us.

I've always considered local education taxes (whether property tax, local/state income tax or other) to be paying in arrears for my own public education. So childless is irrelevant in my world view.

But I agree that deciding to go to college, whether it is a good or bad decision, should not be on the Federal taxpayer's dime. Though I do think states can do what they want, as a local decision, to subsidize state university systems as an extension of public education.

 

[Koolau]

With the proposed hair cut, I might just be able to quit worrying about IRMAA. How's that for positive thinking?

 

[Flieger]

That's almost exactly what I was going to say.

Childless people are already paying high taxes to educate other people's children, and some people are pushing for taxpayer funded childcare and putting the entire college expense on taxpayers. At some point, people need to pay for their own choices instead of putting that burden on the rest of us.

While I am a proponent for school choice, I don't have a problem paying taxes to help educate those kids that will be taking care of the world going forward. as USGrant1962 said, it's payback.

Also, seeing the dearth of trade skills that exist for a manufacturing base, I likewise don't think college is for everyone, or should be born by the public at large. I guess that is where my personal self-interest/narcissism starts.

Flieger

 

[marko]

With the proposed hair cut, I might just be able to quit worrying about IRMAA. How's that for positive thinking?

Every cloud has a silver lining.

Hey, look at what you'd save on taxes if they eliminated SS altogether!

 

[pb4uski]

I've always considered local education taxes (whether property tax, local/state income tax or other) to be paying in arrears for my own public education. So childless is irrelevant in my world view. ...

+1. Though I would have described it as ignorant rather than irrelevant. Not to mention the benefit of educated citizenry that provide goods and services for all of us (though the slide in the effectiveness of public education is a separate issue and is very concerning).

 

[GenXguy]

I've always considered local education taxes (whether property tax, local/state income tax or other) to be paying in arrears for my own public education. So childless is irrelevant in my world view.

While I am a proponent for school choice, I don't have a problem paying taxes to help educate those kids that will be taking care of the world going forward. as USGrant1962 said, it's payback.

It looks like the point was missed, which was based on an earlier post suggesting that people who had kids should be given SS credits and earnings credit for SS taxes that they never paid into the system, on top of all these other benefits they are already receiving at the expense of other taxpayers - education, child tax credits, "expanded" child tax credits, tax exemptions, potentially free child care, etc. It wasn't about eliminating education related taxes.

The public education related taxes are not "payback" in my case. I went to a lower cost school district in a completely different area than the high tax area I'm paying taxes in now, and not everyone is paying the same amount, even here. Some people never own property to pay those property taxes for education. The fact is we (some of us) are paying for other peoples' kids' current education - not our own - that's in the past. But anyway, I wasn't suggesting that be changed, only that at some point, people should start paying for their own kids instead of putting the burden on other taxpayers in reference to some of these things mentioned, like the SS suggestion for people who had kids. If the spousal benefit is to be removed, then just remove it, don't add in some crazy exception for having kids.

 

[marko]

It looks like the point was missed, which was based on an earlier post suggesting that people who had kids should be given SS credits and earnings credit for SS taxes that they never paid into the system, on top of all these other benefits they are already receiving at the expense of other taxpayers - education, child tax credits, "expanded" child tax credits, tax exemptions, potentially free child care, etc. It wasn't about eliminating education related taxes.

The public education related taxes are not "payback" in my case.

I never had kids, never went to public school. In a way my parents paid for not only my education but also for a portion of other's kids as well.

 

[RetiredHappy]

It looks like the point was missed, which was based on an earlier post suggesting that people who had kids should be given SS credits and earnings credit for SS taxes that they never paid into the system, on top of all these other benefits they are already receiving at the expense of other taxpayers - education, child tax credits, "expanded" child tax credits, tax exemptions, potentially free child care, etc. It wasn't about eliminating education related taxes.

The public education related taxes are not "payback" in my case. I went to a lower cost school district in a completely different area than the high tax area I'm paying taxes in now, and not everyone is paying the same amount, even here. Some people never own property to pay those property taxes for education. The fact is we (some of us) are paying for other peoples' kids' current education - not our own - that's in the past. But anyway, I wasn't suggesting that be changed, only that at some point, people should start paying for their own kids instead of putting the burden on other taxpayers in reference to some of these things mentioned, like the SS suggestion for people who had kids. If the spousal benefit is to be removed, then just remove it, don't add in some crazy exception for having kids.

+1 Very well said.

For the record, I was not educated in the US and paid full freight for private school education for my child. When I was working for megacorp, I was paying up to the highest or second highest rung of the tax bracket. So, no in my case, there is not a "paying in arrears" for my education. Families with children and non-working spouses already receive a ton of financial benefits. We are talking about fixing SS insolvency here, and not about property tax and school bonds.

 

[GenXguy]

I never had kids, never went to public school. In a way my parents paid for not only my education but also for a portion of other's kids as well.

I never had kids, either. I've actually heard some people complaining about paying taxes for the public school system because their own kids had already graduated from public schools. Well, at least they had kids that went through the public school system.

 

[Exit 2024]

Nothing crazy about counting child bearing as socially significant contribution to society, it is the next generation and to be that adamant about not helping their education and even existence is very narrow sighted. Similar proposals were successfully implemented in some developed countries to support their birth rates. I know for US it is not an urgent problem right now, but it will come to it eventually.

Back to the topic - on top of elimination of blanked spousal benefits how about elimination of child benefits also. I personally know the family where guy got married at 60, wife 25 years younger, and they got 2 kids right away. Now he is 70, drawing social security, and although wife does not receive any spousal benefits as she is too young, they receive hefty benefits for 2 children. They are laughing that SS is on hook for their kids education as they save all those money for that purpose.

I know total of such payments is much smaller than even spousal benefits (edited: wrong, see post below), which itself is not that large compare to overall SS budget but still it is non-zero amount. Despite the fact that I am ok to have some programs related to the public support of children - SS is not the one to do it. Same as I oppose to use the tax system to distribute child credit money (government child support) or subsidies for working poor (government welfare)

 

[Exit 2024]

Just looked up SS payments by type and have to take my words back, payments for children is higher than for spouses, almost double

Benefits in current payment status

 

[Gumby]

I never had kids, either. I've actually heard some people complaining about paying taxes for the public school system because their own kids had already graduated from public schools. Well, at least they had kids that went through the public school system.

Based on the average cost per pupil and the average property tax in my town, if you had two kids each go through 13 years of public education here, you could never live long enough to pay in property taxes the amount that it cost to educate your children. The businesses and the childless people like me subsidize your children's education. Which is why it makes me especially cranky when parents complain about property taxes.

 

[braumeister]

The businesses and the childless people like me subsidize your children's education. Which is why it makes me especially cranky when parents complain about property taxes.

Because that's what a civilized society does.
"I don't read books so why should I subsidize the library? I don't drive on those streets so why should I support fixing the potholes? I didn't knock the tree down on those power lines, etc., etc., ad nauseam.

The good Education of Youth has been esteemed by wise Men in all Ages, as the surest Foundation of the Happiness both of private Families and of Common-wealths. Almost all Governments have therefore made it a principal Object of their Attention, to establish and endow with proper Revenues, such Seminaries of Learning, as might supply the succeeding Age with Men qualified to serve the Publick with Honour to themselves, and to their Country. -- Benjamin Franklin

 

[Gumby]

Because that's what a civilized society does.
"I don't read books so why should I subsidize the library? I don't drive on those streets so why should I support fixing the potholes? I didn't knock the tree down on those power lines, etc., etc., ad nauseam.

As I have said several times on this board, even though I have no children of my own, I don't mind making my contribution to the future by supporting the schools through my property taxes. However, I do mind, very much, parents who complain about their property taxes. I hope you can see the difference.

 

[braumeister]

I hope you can see the difference.

Of course. I agree and was simply amplifying your comment.

 

[Bikechuck]

After observing the operation of the Federal Government for 50 years? Pessimist all the way.

That's a bit harsh ... as Ross Perot once said "We have the best politicians that money can buy".