Net Worth test for SS cuts

[Dtail]

I have a problem with means based testing just to start with. To me it is inequitable that two people who have identical earnings history and therefore identical SS retirement benefits before any means-based adjustments could have different SS retirement benefits because one was a saver and the other was a spender. Totally unfair and un-American.

Yup, that is a big point which of course is very important to how many folks on this forum got to where they are.
I don't believe they will actually go this route, but who knows.

 

[Dtail]

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

How much would that get us?

 

[MichaelB]

How much would that get us?

For SS, around $200B for the first decade. It compounds, so the second decade would be greater savings.

For other budget deficit / public spending, another $100B Or so the first decade.

 

[MRG]

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.

My father's father was killed at work in June of 1929. The depression started that October. SS didn't exist then. My grandmother had 3 children at home and no work experience. She started baking for the townspeople and eventually would get some insurance money to buy a house and a business she worked at until she died.

My father was 11, and scared. He thought they would all starve to death. It wasn't pretty to see, I was afraid of the story.
I only saw him talk about it a couple times, but the look on his face was that a a small terrified child.

No one should have that kind of fear.

 

[Koolau]

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.

Yeah, thanks for the review. I think we all know this.

What I'm saying is: "I gave at the office." I don't want to save SS again. Let someone else save it this time.

 

[AudiDudi]

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.

Have you read about Ida May Fuller? (hint: she received the first social security check)

Ida May Fuller - Wikipedia

en.wikipedia.org

 

[Koolau]

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.

Unless you're on the receiving end of said drone.

 

[Fermion]

Have you read about Ida May Fuller? (hint: she recveived the first social security check as I recall)

She paid in $24.75 and got back $22,888.92

It is almost like she got in on early bitcoin.

 

[Koolau]

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?

They could have done what I did and invest in things like equites, bonds, MYGAs etc. (Yes I realize that wouldn't have actually happened - it was suggested and rejected). BUT, it w*rked for me and most of the folks here.

 

[Irishgirlyc58]

Yes, totally unworkable... and that is the reason that all current means testing is income based. The only thing close to new worth based is the estate tax but that is a once in a lifetime thing and is a big hassle to get appraisals for assets that are not readily marketable and lots of gray areas... it can't be done annually.

Medicaid, food stamps, and cash assistance certainly used to be means tested. Some still are.
I’m not saying SS should or should not be but I don’t think it’s totally unworkable.
I think most people would not like how it would have to work.

 

[Koolau]

Medicaid, food stamps, and cash assistance certainly used to be means tested. Some still are.
I’m not saying SS should or should not be but I don’t think it’s totally unworkable.
I think most people would not like how it would have to work.

There are already "restrictions" on SS - For instance, you have to have reached a certain age and have paid in for a certain amount of time (and the payout is based on how much you paid in - to a certain extent). But adding on restrictions on SS (like we require for receiving food stamps) just seems "wrong."

 

[Irishgirlyc58]

There are already "restrictions" on SS - For instance, you have to have reached a certain age and have paid in for a certain amount of time (and the payout is based on how much you paid in - to a certain extent). But adding on restrictions on SS (like we require for receiving food stamps) just seems "wrong."

Oh- I agree! That doesn’t mean that it couldn’t be done. I also think it would cost more than it saves.

 

[pb4uski]

Medicaid, food stamps, and cash assistance certainly used to be means tested. Some still are.
I’m not saying SS should or should not be but I don’t think it’s totally unworkable.
I think most people would not like how it would have to work.

Your not getting it. We're not saying that means testing is unworkable, we're saying that means testing based on net worth is unworkable. Try to keep up.

 

[GenXguy]

Medicaid, food stamps, and cash assistance certainly used to be means tested. Some still are.
I’m not saying SS should or should not be but I don’t think it’s totally unworkable.
I think most people would not like how it would have to work.

Senior medicaid and the ACA Medicaid Expansion are both still means tested for income. Senior medicaid is also means tested on assets. I don't think SS should be means tested on assets.

 

[Irishgirlyc58]

Senior medicaid and the ACA Medicaid Expansion are both still means tested for income. Senior medicaid is also means tested on assets. I don't think SS should be means tested on assets.

Yes- I was referring to the asset test since that was the topic. Not all states eliminated the asset test for Medicaid for 65 and older.
I worked over 35 years in these programs.

 

[Irishgirlyc58]

Your not getting it. We're not saying that means testing is unworkable, we're saying that means testing based on net worth is unworkable. Try to keep up.

Stop being a jerk.
I’m talking about the asset test which is a form of means testing. Last time I looked net worth = assets.

 

[pb4uski]

Stop being a jerk.
I’m talking about the asset test which is a form of means testing. Last time I looked net worth = assets.

Same to you. Yes, but there is not any currently any asset or net worth means testing... because it is unworkable.

The closest thing we have is the estate tax but that doesn't happen annually, like other means testing based on income but just when you die.

I'm vaguely familiar with Medicaid LTC asset tests but those were very simple as I recall.

I suspect there are good reasons why asset based means testing is less prevalent today, in part because it is unworkable. Let's say that Jim has a $50k a year pension and Joe has an IRA that if converted to a SPIA would pay $50k a year. Who has more assets or net worth? It gets very complicated very quickly.

 

[MRG]

Same to you. Yes, but there is not any currently any asset or net worth means testing... because it is unworkable.

The closest thing we have is the estate tax but that doesn't happen annually, like other means testing based on income but just when you die.

I'm vaguely familiar with Medicaid LTC asset tests but those were very simple as I recall.

I suspect there are good reasons why asset based means testing is less prevalent today, in part because it is unworkable. Let's say that Jim has a $50k a year pension and Joe has an IRA that if converted to a SPIA would pay $50k a year. Who has more assets or net worth? It gets very complicated very quickly.

+1
I worked on two multiple million dollar software development projects to combine share owner mailings for a provider of fund processing. It's a lot harder than people think.

We had the data, what could be easier? How about the registration has to match. Who would think the same person would have a registration with a full middle name vs initials? Millions are like that. How about the trailing spaces are not equal to the nulls that were inserted for many years of the software?

There's hundreds of ways you can't reliably match the data creating the need to for the overhead associated with EOL.

 

[marko]

A two hour visit to you local, friendly tax attorney should cure any agita over net worth testing.

There's a reason they have the second biggest boats in the marina.

 

[joejetski]

Unless you're on the receiving end of said drone.

Phalanx CIWS take them out and a lot cheaper than missiles.

 

[joejetski]

I think that SS can be “fixed”, but it will take phases and several steps with the goal of reducing it over time (generations). Also, means testing on assets is the wrong approach. It will never fly. Here is my thoughts/perspective.
Benchmark it off the max SS possible at age 67 ($4152). By doing this, everyone gets what they are entitled to and paid in for. The approach would be to eliminate the ability to delay and earn more for max earners. Maybe use the top 10%. Then, for the next 10%, extend the time out to age 74, and reduce the additional benefit to 1% a year. For the next 10%, 2% a year, and for the next 10%, 4% a year. This disincentivizes waiting much beyond full retirement for the top 40% without reducing any benefits at full retirement age.
Step 2, raise minimum age to 63. Life expectancy is now over 75. Time for SS to move to. Phase in starting 2030, 1 month per year.
Step 3, gradual phase out SS.
Start with the affluent. Use a 529 structure (529R) to allow funding retirement at birth up to 20 years old. Beneficiary still required to pay in some minimum time/$ amount. Use a non tax deductible structure or payback once beneficiary starts working. Appropriate guardrails against early withdrawals.

Everyone else, govt would fund ($1000-$2000/year with beneficiary payback one they are working.
They would still contribute to SS also.

Eventually, SS dependency would be greatly reduced, likely 2-3 generations (60-90 years).

 

[Montecfo]

I think the fix cannot be so complicated. The fix will require strong consent.

We gave done this before. I expect it to involve the same elements as last time: deferral of retirement age (phased in as before); higher taxes, probably by lifting caps; higher taxes on benefits (maybe for higher incomes) and changes to COLA.

That's what worked before. Everyone has skin in the game Surely we can dial this in, probably at the last minute.

 

[GenXguy]

Changes need made to COLA because SS benefits aren't keeping up with seniors' expenses. So the yearly COLA increase needs to be greater than the current method, but that's not going to help sustain SS.

 

[skipro33]

Since I put my assets in a trust, my net worth is very small.

 

[Montecfo]

Changes need made to COLA because SS benefits aren't keeping up with seniors' expenses. So the yearly COLA increase needs to be greater than the current method, but that's not going to help sustain SS.

Nor will it happen. Skin in the game. SS was never meant to fund all living expenses.