Net Worth test for SS cuts

[rk911]

I indicated in my post that FICA IS a tax, NOT a confribution. We pay property taxes that include our public schools. Not having children we get no direct benefit but we still pay our share . Yes, schools benefit, in theory, everyone.

As I also said in an earlier post SS is in immediate need of a radical makeover in order for it to continue to exist in its present form. Means testing MIGHT very well be a start of those changes. But in my mind IF means testing is going to happen then net worth is not appropriate to use as it can include items that may not have definitive value. MAGI MIGHT be a better measure but even that has problems. For example all of our IINT and DIVs are re-invested and never hits our pockets and yet they're included in MAGI.

Whatever is done it can't be overly complicated even though the govt specializes in complicated. The best suggestion I've heard is to start the move to privatization. Workers over age X are unaffected. They stay in SS, nothing changes. Younger Workers between ages Y and X can elect to stay completely in the system or privatize a potion of their FICA into private accounts with the rest going into SS. Workers younger than Y will choose their own path forward without a govt social net.

 

[street]

Crazy!!!!!

 

[pb4uski]

I indicated in my post that FICA IS a tax, NOT a confribution. We pay property taxes that include our public schools. Not having children we get no direct benefit but we still pay our share . Yes, schools benefit, in theory, everyone.

As I also said in an earlier post SS is in immediate need of a radical makeover in order for it to continue to exist in its present form. Means testing MIGHT very well be a start of those changes. But in my mind IF means testing is going to happen then net worth is not appropriate to use as it can include items that may not have definitive value. MAGI MIGHT be a better measure but even that has problems. For example all of our IINT and DIVs are re-invested and never hits our pockets and yet they're included in MAGI.

Whatever is done it can't be overly complicated even though the govt specializes in complicated. The best suggestion I've heard is to start the move to privatization. Workers over age X are unaffected. They stay in SS, nothing changes. Younger Workers between ages Y and X can elect to stay completely in the system or privatize a potion of their FICA into private accounts with the rest going into SS. Workers younger than Y will choose their own path forward without a govt social net.

You said "Well, FICA withholding is a tax, not a contribution to a retirement account" in direct response to my post which suggested to me that you though that I had said that FICA was a contribution to a retirement account.

I disagree with your suggestion that just because it is a tax that it doesn't need to be equitable. Taxes should be equitable too.

There are reasonable options available to reform SS. I don't think privatization is an answer and forced contributions to a privatized SS is likely to be unconstitutional. As I recall, that is part of the reason why SS was framed as a tax rather than as a forced retirement savings. For the same reasons, the penalty for not buying health insurance under ACA was framed as a tax.

We have seen that voluntary retirement savings has been ineffective since Americans tend to not save for retirement as well as they should. If younger people have an option to follow a path without a govt social net it seems to me highly likely that we will end up with more senior poverty in a generation or two... right back were we were when we needed to put SS in place.

 

[rk911]

You said "Well, FICA withholding is a tax, not a contribution to a retirement account" in direct response to my post which suggested to me that you though that I had said that FICA was a contribution to a retirement account.

I disagree with your suggestion that just because it is a tax that it doesn't need to be equitable. Taxes should be equitable too.

There ae reasonable options available to reform SS. I don't think privitazation is an answer and forced contributions to a privatized SS is likely to be unconstitutional. As I recall, that is part of the reason why SS was framed as a tax rather than as a forced retirement savings. For the same reasons, the penalty for not buying health insurance under ACA was framed as a tax.

We have seen that voluntary retirement savings has been ineffective since Americans tend to not save for retirement as well as they should. If younger people have an option to follow a path without a govt social net it seems to me highly likely that we will end up with more senior poverty in a generation or two... right back were we were when we needed to put SS in place.

Apologies for the misunderstanding.

The low rate of voluntary savings for retirement might likely be due to the certainty of SS. If that were no longer an option voluntary savings and investments would likely increase.

 

[pb4uski]

^^^ I think you are giving people much more credit than they deserve. I'm not buying that idea. Since most people know that SS is financially challenged I doubt that they are counting on it. I know I wasn't counting on it and still am not but I am glad it will be there.

 

[GenXguy]

I always counted on SS, just not the promised amount. But I have no faith in younger generations to save enough on their own that they can make it without SS.

 

[Sunset]

.....

The low rate of voluntary savings for retirement might likely be due to the certainty of SS. If that were no longer an option voluntary savings and investments would likely increase.

Nope.
Prior to SS, the poverty rate of old people was extremely high because people didn't save enough, once SS started paying it lifted many of those seniors out of poverty.

Many folks I see today still don't save for retirement and are instead often in debt and refinancing the home for a vacation. They get SS statements while working so they know SS will be a meager retirement if they don't save. Yet they don't save.

There are always exceptions, but lots don't save even when they could.

 

[Original Wally]

^^^ I think you are giving people much more credit than they deserve. I'm not buying that idea. Since most people know that SS is financially challenged I doubt that they are counting on it. I know I wasn't counting on it and still am not but I am glad it will be there.

I recall WWWAAAYYYYYY back in 1980+/- Pres Reagan said that the system was Sound for the Next FIFTY years (as a way to reduce the THEN worries. And he was right.

 

[Original Wally]

Nope.
Prior to SS, the poverty rate of old people was extremely high because people didn't save enough, once SS started paying it lifted many of those seniors out of poverty.

Many folks I see today still don't save for retirement and are instead often in debt and refinancing the home for a vacation. They get SS statements while working so they know SS will be a meager retirement if they don't save. Yet they don't save.

There are always exceptions, but lots don't save even when they could.

When FDR pushed the plan thru, it was NEVER, EVER actuarially sound: They started paying benefits to people who never put a nickel into the plan. It is a massive Ponzi scheme and ONLY worked this long because of the massive birth rate after WWII.

 

[Koolau]

I recall WWWAAAYYYYYY back in 1980+/- Pres Reagan said that the system was Sound for the Next FIFTY years (as a way to reduce the THEN worries. And he was right.

Yeah, like I said in post 21, "I gave at the office."

I saved SS once and it was less than 50 years ago - more like 40 years ago. How much do I have to do for SS? Oh, and I paid into SS for more than 40 years.

 

[marko]

So after 20,000 threads, 100,000 Excel sheets and thousands of hours of lively, heated debate from hundreds on this forum on "When to take SS?", this joker wants to change the game and force a massive recalculation??

What a heartless ba#$&d!!!

 

[VanWinkle]

And somebody paid him to come up with this load of crap?

 

[mystang52]

2 modifications that wouldn't cure the problem, but would presumably help a little: no annual wage cap on SS contributions, and adjust the inflation increase to recipients (same formula, but then divide by 2?).

 

[bada bing]

When FDR pushed the plan thru, it was NEVER, EVER actuarially sound: They started paying benefits to people who never put a nickel into the plan. It is a massive Ponzi scheme and ONLY worked this long because of the massive birth rate after WWII.

Yeah, like I said in post 21, "I gave at the office."

I saved SS once and it was less than 50 years ago - more like 40 years ago. How much do I have to do for SS? Oh, and I paid into SS for more than 40 years.

The reason you had to "give at the office" is that the original plan was an intentional shell game rip off. The reason they set it up as a demographic pyramid scheme and a Ponzi was to buy votes back in the 40's and 50's with IOUs written on future taxpayers - i.e. you and me. The Reagan and Clinton "fixes" to SS weren't the full changes to get to an actuarial sustainable program, they were just mid course corrections. SS is still going broke because it isn't still isn't in balance for a static population. Whatever "fix" they make for the current shortfall will probably be the last needed for a stable population. That is unless they elect to buy some more current votes again. The sad thing is when SS becomes actuarially sound, you probably won't really like the program. The inherent nature of a pay-go without any time value of money growth will make the payback pretty lackluster compared to a well run pension program, like even worse than it is today. That's why they have to "get the rich to pay their fair share", because in order to offer an attractive payout to the majority voter block someone has to be fleeced.

Do you think that SS would have passed political muster back at inception if it was organized and paid out as it is today ? As it will be when the final fix is in ?

Funny thing is, when FICA is diverted into a reasonable, actuarially sound and invested pension system, as it is for exempt .GOV workers, it provides a better benefit for virtually everyone in the program for the money contributed. Almost no one is interested in the history or crunches the actual numbers behind the SS program. If they did, the program would be a lot less popular than it is.

 

[DogDad]

Seems to me this proposal disqualifies this guy from working for a think tank.

 

[ShokWaveRider]

If means testing ever came to pass it would most likely be for new claimers not us old farts that have been on SS for a while.

 

[jollystomper]

The challenge with evaluating net worth is always "who gets to set the net worth?" After all, it would be in the interest of government to evaluate the net worth of one's non-cash possessions as high as possible. For example, how many of us have to deal with our local assessors office when our homes worth are re-evaluated for property tax? Or for personal property like cars and jewelry, would they assess it at the wholesale or retail value? Or, if one has a pension or annuity, who gets to set its "net worth" value? I see the potential for an incredible bureaucracy. Maybe it is a jobs program .

However, one easy "target" might be one's retirement accounts. Just playing devil's advocate here. The argument could be made that, if one has above $X dollars in retirement accounts, then one's SS should be reduced, since one does not "need" as much (I always hate hearing that when talking about other peoples money). Yes, this penalizes those who were diligent in planning their retirement savings. But being diligent in matters of personal finance is less looked at as doing the right thing, and more looked at as "selfish". But perhaps, on that last point, I am being influenced by some of our relatives and acquaintances we encounter that think, because we have been diligent, that we are expected to "help them out".

 

[Montecfo]

seems like the oft proposed removal of (or alteration of) ceilings on SS contributions is a lot more workable

And benefits delay and change to COLA.

 

[MichaelB]

And benefits delay and change to COLA.

I’m not the betting type, but in this case my money is on the change in COLA, probably with a new CPI methodology.

 

[Chuckanut]

Don’t forget the Law of Unintended Consequences.

A Net Worth test effectively punishes people who saved and invested, lived below their means, etc. For every person who inherits a fortune, or hits the big lottery, there will be hundreds of middle income savers who get punished for their decades of thrifty behavior. This would be another blow to the middle class people trying to better themselves.

Why not just call it what it is - The Big Spender’s Bonus Test.

 

[Steelpony]

Just read about a proposal by Mark Warshawsky (a senior fellow of a think tank ... so take that for whatever it is worth). He proposes using a Net Worth asset test to determine how much of cut you would have to take, vs an income-based means test. Any ideas as to how this test would work? I'm assuming it would have to be assets that can validated by other independent data, such as house property tax assessments, and auto license registration (make/model), IRA and brokerage balances, checking/savings account balances, etc. Similar to a basic net worth calculator: https://www.nerdwallet.com/article/finance/net-worth-calculator
Seems like you would need a brand new sub-department of the SS Admin to deal with all the validation and challenges related to this asset testing (vs just using the existing IRS MAGI data).

This is the article:

What could happen to Social Security benefits in six years if Congress doesn’t act? It depends, experts say

Social Security's trust funds are due to run out, which would prompt benefit reductions. Yet those cuts do not have to affect all beneficiaries, experts say.

www.cnbc.com

"Additionally, the benefit changes would focus on certain net worth thresholds. Those with net worths less than $470,400 in 2025 dollars would be excluded from cuts. Partial benefit cuts would apply to individuals with net worths below $785,400 at the median benefit, according to Warshawsky’s plan."

Of course everyone’s younger than me now. These are facts I believe are true but one should double check all of this if they dispute this post. I was personally present though.

I believe 1983 was the last time SS was “reformed”. So over 40 years ago in anticipation of the baby boomers retiring in the future. I’m from the lead group. The retirement rate the last time I saw it was 10k a day now.

So naturally there developed a huge surplus of funds in anticipation of this future need. So where this huge surplus go? The surplus disappeared in the form of IOU’s to finance the federal government and it’s deficit.

Look up the term lockbox. That proposal gave individual control of their own SS funds or something like that and couldn’t be touched. Of course the Feds stopped that nonsense.

So my point is there’s many easier solutions tor essentially a Ponzi scheme. But unless the Feds are lock boxed out one is just giving more money to the Feds and around and around one goes with never a solution.

So how about a “little something extra for retirement” which is the original idea, stripped back to it’s original purpose over time and have individual accounts with COLA raises chosen by the individual and controlled by them?

In the end the same social problems still exist (no money but that etc.) but maybe the Feds would be forced to find additional financing elsewhere and find better managed solutions with what they have.. Missiles that cost millions to destroy drones that cost 30k would be an example of waste.

 

[pb4uski]

... So naturally there developed a huge surplus of funds in anticipation of this future need. So where this huge surplus go? The surplus disappeared in the form of IOU’s to finance the federal government and it’s deficit. ...

Incorrect.

Where did the surplus go? The SS Trust Fund invested it in a special series of US government bonds just like a pension plan would invest pension plan assets. The investments were throughly disclosed in every annual SS Trust Fund report.

If the US government hadn't issued bonds to the SS Trust Fund then they would have funded deficits through bond issuances to the public. The National Debt includes what the US government owes to the SS Trust Fund.

What did you expect the SS Trust Fund to do with the ~$3T of surplus? Stuff it in a mattress?

 

[Car-Guy]

As usual the rich and/or powerful would be exempt, one way or the other.

Maybe Elon Musk will step in to save the day like he's offering to do with the TSA crisis today. I mean he'd only need to cover the shortfall and "by then", whats a few trillion to him.

 

[Original Wally]

What did you expect the SS Trust Fund to do with the ~$3T of surplus? Stuff it in a mattress?

Of course not! BUT it could have been invested in a conservative mixture of bonds AND equities.

 

[GrayHare]

Of course not! BUT it could have been invested in a conservative mixture of bonds AND equities.

Favoritism and corruption would arise. Even if invested in index funds, which fund(s) would be awarded this huge stack of money?