Social Security Needs Small "Tweaks"

[Purron]

The Associated Press: AP Exclusive: Social Security needs small 'tweaks'

The report being released Tuesday should be interesting. I'll look forward to hearing what folks around here have to say about it.

 

[ronocnikral]

small tweak #1: put congress and government employees on social security.

 

[MasterBlaster]

The small tweak is that you early retirees must have too much money.

So we are cutting you off and giving it to more deserving people.

 

[ziggy29]

Compared to Medicare, public pensions at all levels and other unfunded liabilities, Social Security is a very easy "fix."

 

[rescueme]

The small tweak is that you early retirees must have too much money.

So we are cutting you off and giving it to more deserving people.

Well, I really was not an "ER", and I am SS age (62 - although not yet collecting).

Where do I sign up to get my "goodies" .... ?

 

[Independent]

small tweak #1: put congress and government employees on social security.

That tweak happened about 25 years ago.

 

[clifp]

Some of the options in a report being released Tuesday by the committee are politically dangerous, such as increasing payroll taxes or reducing annual cost-of-living increases for Social Security recipients. Others, such as gradually raising the age when retirees qualify for full benefits, wouldn't be felt for years but would affect millions.

Rather than gradually raising the age that you are eligible, if the just made one eligible for social security the month after you died it would it instantly fix the system .

 

[Gone4Good]

This has always been true and belies some of the hyperventilating that goes on about these programs. The headline is always eye-catching . . . "Social Security Underfunded by $5 TRILLION!". But little attention is paid to the fact that those estimates cover 75 years. Small changes make a big impact over such a long forecast period. Slow the benefit growth a little, raise taxes a little, and presto, problem solved.

But that assumes people will approach the problem reasonably. And unfortunately we can't expect that. Thus, slowing the growth of benefits means "You're starving grandma" and any tax increase means "You're a Stalinist".

 

[ziggy29]

Right now, the phase-in for increased full retirement age (from 65 to 67) occurs from 1938 to 1960. I suspect they will suggest continuing it upward from 1961 until a point where the full retirement age hits 70. (That is, 1961 = 67 and 1 month, 1962 = 67 and 2, et cetera -- or something like that).

 

[jIMOh]

tweak #1 have the politicians contribute and collect benefits
tweak #2 have government employees contribute and collect benefits
tweak #3 index benefits to life expectancy and keep life expectancy fixed for all future years (if current statistics show the average person collects for 25 years, make sure all future years have average benefits paid per person be 25 years)
tweak #4 gradually raise the benefit age and lower the payroll tax (revenue neutral move)
tweak #5 gradually raise the benefit and lower the payroll tax (revenue neutral move)
tweak #6 eventually lower payroll tax so its insignificant if people contribute or collect and eliminate the system in about 300 years

 

[ziggy29]

tweak #1 have the politicians contribute and collect benefits

They have since 1984. It's a common misconception even to this day that they don't pay into the system.

tweak #2 have government employees contribute and collect benefits

Some do and some don't. The idea was that they were already paying into a pension plan that is likely to be more generous than SS anyway. Plus if we force this, as long as there are public pensions out there we need to deal with the WEP and the GPO as a matter of basic fairness.

tweak #3 index benefits to life expectancy and keep life expectancy fixed for all future years (if current statistics show the average person collects for 25 years, make sure all future years have average benefits paid per person be 25 years)

I like the idea of continuing to increase the retirement age as life expectancy increases, but I think it should probably be done infrequently -- say every 5-10 years -- to avoid chaos and constantly moving the goalposts on retirement planning. At some point it's good for people to have some certainty. Perhaps I'd say that once someone reaches the age of 50 or so, they shouldn't have their retirement age adjusted again (as you get close to retirement age you need more certainty for planning), but below 50 it could be adjusted every 5-10 years.

tweak #4 gradually raise the benefit age and lower the payroll tax (revenue neutral move)

I suspect lowering the payroll tax rate is DOA.

tweak #5 gradually raise the benefit and lower the payroll tax (revenue neutral move)

How is this revenue-neutral? Both raising the benefit amount and lowering the payroll tax put even more pressure on solvency. Or did you mean *lower* the benefit?

tweak #6 eventually lower payroll tax so its insignificant if people contribute or collect and eliminate the system in about 300 years

I'm not against a long-term switch to a system whereby people "own" a portion of their contributions instead of just relying on future generations and their ability/willingness to keep the deal, but I doubt that SS will ever completely be eliminated.

My biggest concern with raising the retirement age is that there is already rampant age discrimination and not many want to hire the older folks any more. Increasing the age at which they can collect will mean more older people in the job applicant pool when those already there have enough trouble finding work already.

 

[clifp]

Tweak 1 and 2 have been true for federal employees since 1983. The majority of state workers are also covered by SS, only a few public safety workers are exempt.

I wonder why this urban legend persists so long, especially about politicians.

 

[Nodak]

Anyone hired by the Government after 1 Jan 1984 participates in the Federal Employee Retirement System that is based on Social Security.

 

[Purron]

Anyone hired by the Government after 1 Jan 1984 participates in the Federal Employee Retirement System that is based on Social Security.

Yup. I can personally attest to this fact. CERS employees, hired before 1984, don't participate in Social Security. FERS employees, hired after 1984, do. Not many CERS folks left in the federal service.

 

[Gumby]

Most government employees do pay social security taxes. Those who don't pay into the system don't receive social security benefits. If you work in a non-SS job and get a pension and also worked in a SS job, you are dealt with by the Windfall Elimination Provision Windfall Elimination Provision JmiOH, you really need to find a new strawman.

 

[jIMOh]

They have since 1984. It's a common misconception even to this day that they don't pay into the system.



Some do and some don't. The idea was that they were already paying into a pension plan that is likely to be more generous than SS anyway. Plus if we force this, as long as there are public pensions out there we need to deal with the WEP and the GPO as a matter of basic fairness.



I like the idea of continuing to increase the retirement age as life expectancy increases, but I think it should probably be done infrequently -- say every 5-10 years -- to avoid chaos and constantly moving the goalposts on retirement planning. At some point it's good for people to have some certainty. Perhaps I'd say that once someone reaches the age of 50 or so, they shouldn't have their retirement age adjusted again (as you get close to retirement age you need more certainty for planning), but below 50 it could be adjusted every 5-10 years.



I suspect lowering the payroll tax rate is DOA.



How is this revenue-neutral? Both raising the benefit amount and lowering the payroll tax put even more pressure on solvency. Or did you mean *lower* the benefit?



I'm not against a long-term switch to a system whereby people "own" a portion of their contributions instead of just relying on future generations and their ability/willingness to keep the deal, but I doubt that SS will ever completely be eliminated.

My biggest concern with raising the retirement age is that there is already rampant age discrimination and not many want to hire the older folks any more. Increasing the age at which they can collect will mean more older people in the job applicant pool when those already there have enough trouble finding work already.

I stand corrected on #1 and #2.

#3-6 are about the payroll tax more than the benefit... over the last 70 years the payroll tax has gone up 1200%... from 1% to 12.4% now.

They did not need to increase the tax to pay current benefits, they increased it to fund wars and political pet projects, so my thought is reverse that trend...

drop tax by .1% (to both employers and workers) and raise the benefit age so move is revenue neutral
and repeat this each year for about 100 years (drops tax 10% down to 2.4% total or 1.2% each). Raising benefit age and indexing benefits to life expectancy (so if average life expectancy now to collect is 25 years, in 100 years, its still 25 years).

If people want to throw it in that as age to collect increases, the payroll cap also increases (so more revenue is collected) I am moderately OK with that too.

 

[LARS]

Interesting thoughts on this very issue here today: charles hugh smith-Demographics and the End of the Savior State

Biggest point he makes, which seems compelling, is that demographics are the real problem (number of workers per number of SS recipients).

 

[travelover]

............demographics are the real problem (number of workers per number of SS recipients).

That's the same problem Ponzi ran into.

 

[ronocnikral]

i also stand corrected...elimination of FERS and CSRS would be better. That way, all congress would have to stand on is social security, just like the average joe.

I've been working for 5 years, 3 of which I have generously made the max SS contributions. I would sign on the dotted line today never to receive any SS benefits if I never again have to pay into it (and I'd even be generous enough to finish out this year as well). Sigh...as LARS points out, that will never happen, as I have to continue to feed money into this sham for those drawing benefits.

 

[ziggy29]

i also stand corrected...elimination of FERS and CSRS would be better. That way, all congress would have to stand on is social security, just like the average joe.

CSRS already is eliminated, at least for new hires. Has been for a long time. The extremely fortunate folks who got the CSRS retirement deal have been at it for a long time and were grandfathered under the changes.

 

[Purron]

I would sign on the dotted line today never to receive any SS benefits if I never again have to pay into it

If you and others were given this option I bet lots would sign on the dotted line. You impress me as the type who would take care of your money and plan for the future. Others would just blow the money. Plus even good money planners could have bad luck, health problems or other circumstances resulting in ending up elderly, unable to work, and broke.

I can't see most Americans allowing elderly people to starve to death. Therefore, a taxpayer funded welfare system would end up supporting them and I'd end up carrying a heavier burden to support those who didn't pay into the system.

 

[MasterBlaster]

Interesting thoughts on this very issue here today: charles hugh smith-Demographics and the End of the Savior State

Biggest point he makes, which seems compelling, is that demographics are the real problem (number of workers per number of SS recipients).

The article points out the big problems coming our way. However it ignores the changes that will inevitably come to make the system (more)affordable. If everything stays the same, then yes his charts reflect the problem entitlements will cause. It is unreasonable to assume that those paying for it all won't push back for some sort of system that is more affordable.

This whole topic is better covered by Kotlikoff and Burns book "The Coming Generational Storm".

 

[Nodak]

If you and others were given this option I bet lots would sign on the dotted line. You impress me as the type who would take care of your money and plan for the future. Others would just blow the money. Plus even good money planners could have bad luck, health problems or other circumstances resulting in ending up elderly, unable to work, and broke.

I can't see most Americans allowing elderly people to starve to death. Therefore, a taxpayer funded welfare system would end up supporting them and I'd end up carrying a heavier burden to support those who didn't pay into the system.

Though it bothers me as a libertarian to do this I think you are absolutely right.

 

[Purron]

Here's a link to the full report released today:

United States Senate Special Committee on Aging&

Here's an article discussing it:

12 Ways to Fix Social Security - Planning to Retire (usnews.com)

 

[Independent]

... I would sign on the dotted line today never to receive any SS benefits if I never again have to pay into it (and I'd even be generous enough to finish out this year as well). Sigh...as LARS points out, that will never happen, as I have to continue to feed money into this sham for those drawing benefits.

Social Security is almost unique among gov't programs in that it's possible for an extended family to effectively opt out of both the tax and benefit portions.

If your parents agree with you, they can collect their SS benefits, but send the money to you and your siblings to offset your SS taxes. When you're old enough to get benefits, you can do the same for your children.

This will (approximately) eliminate your taxes and your benefits.