Status of Social Security Changes

[TromboneAl]

What's the current status of the plans to change social security? Has this been dropped completely (fine with me), or is something going to happen with this?

 

[moghopper]

What's the current status of the plans to change social security? Has this been dropped completely (fine with me), or is something going to happen with this?

I haven't heard a peep recently.

Nothing will be done until it is too late.

"It's off the radar," said Sen. Gordon H. Smith, Oregon Republican, adding that hurricane relief is much more important now, and Social Security is an issue "we'll eventually deal with" down the line, though not likely this year.
"Social Security? I think not much is going to happen there this year," agreed Sen. Judd Gregg, New Hampshire Republican.
"I can't imagine President Bush is going to go back to it," Sen. Richard J. Durbin, Illinois Democrat, said of Social Security.
"That is not likely to be part of any future agenda in Congress," he said, clarifying that he meant not the near-future agenda at least.
Senate Finance Committee Chairman Charles E. Grassley, Iowa Republican, said he will continue talking to his colleagues to try and reach agreement on a Social Security bill, but conceded the issue now ranks about fourth or fifth on his agenda. His top priorities now are crafting Hurricane Katrina relief legislation, helping fellow Judiciary Committee members fill the Supreme Court vacancies, dealing with must-pass spending bills, addressing budget-reconciliation legislation, and then tackling Social Security.

 

[HFWR]

My plan:

1. Raise retirement age to an actuarily sound number.
2. Remove maximum earnings cap.
3. Invest in broad range of equities/bonds/commodities.
4. Lock box; i.e. off-budget.

Do these things in 2016, after I've reached 62...

 

[Cb]

Here's what my crystal ball says:

- This Bush feller seems to spending down his "political capital" fairly quickly lately.

- I think he'll be lucky to get a few gratuitous tweaks to tax-favored savings plans like HSA's, IRA's, 401K's etc at this point.

- We'll therefore have to wait out another complete political cycle until we've got a lame duck prez & a willing congress. That might be another 8 to 50 years

The AARP will see to it that anyone in their mid-40's now will be largely untouched by whatever fixes occur in 8 - 50 years.

But we won't get off scott-free, because they'll have to trim bennies in some form, and tax the bejesus out of the worker bees. So I think to be prudent you might want to trim 1.743761% off your future domestic equity returns as the tax load slows economic growth.

But being the simple sort of guy that I am, I just lop 25% off the SSA's current projections for me and the wife.

Cb

 

[Cut-Throat]

What's the current status of the plans to change social security?  Has this been dropped completely (fine with me), or is something going to happen with this?

As Warren Buffett said recently paraphrased - "He did not understand why Bush was so concerned with a Budget problem that may happen 30 years from now, when he (Bush) was creating an even bigger one today with deficiet spending".

And of course he (Buffet) knows that the real reason that Bush was trying to eliminate Social Security was for his "conservative legacy". - "The man that brought down the New Deal of FDR"

Bush has used up any 'political capital' that he had on Iraq. Even his own party in Congress is distancing themselves from him. Social Security does need to be tweaked, but after the deficiet spending and Medicare are dealt with. And thank God, it will be someone other than Bush doing the tweaking!

 

[TromboneAl]

How about a big round of applause for the inefficiencies of government!

 

[Beststash]

Clap, Clap, Clap......I hope you are correct - 55 in December. I do hope that National Healthcare is in the near future 

 

[moghopper]

Soylent Green

 

[uncledrz]

Nothing has changed.  We work all day and send 15% of the fruits of our labor to the government for them to spend.  They use it to fund the deficit or to give money to old people to spend who didn't have the foresight to save for retirement.

only 15%? how did you work that out?

the old people probably have tons of dough, and are spending it just the same. JG must be pretty close by now.

Uncledrz

 

[youbet]

1. It's interesting that despite being a smart fella, FDR created a flawed system based on flawed assumptions. He should have built in a method for increasing SS tax collections to account for the number of retired people increasing relative to the number of working people. If he didn't see that coming, he was the only one.

2. The "fix" will happen post Bush. It will involve punishing those who have saved by applying means testing. You can count on it.

3. This is America. We have to have winners and losers. It's our culture.

youbet

 

[Andre1969]

I'm guessing the 15% is roughly what you put into SS, (7.15% or whatever) plus the match your employer puts in for you. Which would come up to 14.3% total. When you throw on Medicare it's actually 7.85%/15.7%


My attitude with SS is that I'm just planning on not getting any at all. Pretending that it's simply not there. That way, whatever is left of the system by the time I can collect will be a pleasant surprise. I'm only 35 right now though, so 62 is still a long ways off!

 

[Eagle43]

2. The "fix" will happen post Bush. It will involve punishing those who have saved by applying means testing. You can count on it.

3. This is America. We have to have winners and losers. It's our culture.

youbet

You bet your sweet bippie. Your #2 is gonna happen and it's gonna p*** me off. As to #3, government picks winners and losers. But, they, the guvmint officials, always win, and seldom are held responsible.

 

[Alan]

1.  It's interesting that despite being a smart fella, FDR created a flawed system based on flawed assumptions.  He should have built in a method for increasing SS tax collections to account for the number of retired people increasing relative to the number of working people.  If he didn't see that coming, he was the only one.

I don't think FDR created a flawed system It is the system in which SS runs that is flawed. SS was tweaked some years back when the salary cap at which contributions stops began to rise and continues to rise ($90k this year I think). It is the continuing bunch of cretins who can't keep their hands of all the SS surplusses, prefering to spend today to get elected tomorrow and to hell with next weeks reitirees. After all they know they won't have to depend on SS.

 

[maddythebeagle]

2. The "fix" will happen post Bush. It will involve punishing those who have saved by applying means testing. You can count on it.

Another reason to retire in your 40s. You will be living on investment income (no ss and medicare tax) and then burn into your savings enough so at age 65 or 70, whatever it will be, you wont have to worry about means testing....

 

[Mr._johngalt]

only 15%? how did you work that out?

the old people probably have tons of dough, and are spending it just the same.  JG must be pretty close by now.

Uncledrz

You got the "old" part right.

JG

 

[Gone4Good]

It is the continuing bunch of cretins who can't keep their hands of all the SS surplusses, prefering to spend today to get elected tomorrow and to hell with next weeks reitirees.  After all they know they won't have to depend on SS.

Although this is certainly true, currently there is no mechanism by which government can "save" the SS surplus even if it wanted to. If the government was in the black, after they repaid the national debt, they would either have to lower taxes or increase spending. I think most people on these boards would agree that we would not want the Federal Government using surpluses to buy private assets (e.g. equities). That is one of the virtues of private accounts. The accounts act as "lock boxes" which would force the government to find some other means of supporting itself rather than raiding our national retirement program.

I agree with others on this board that SS reform is dead and that those of us who are saving will be forced to pay for those who aren't.

 

[Alan]

The UK has a similar system to the US for funding pensions. The taxes collected from employers and employees are used to buy government bonds and go into a Trust fund etc. In the EU countries there is no such trust fund anywhere and today's workers fund today's retirees with no trust fund. This has been one of the major road blocks to the UK joining the EU monetary system.

Back in 1989 the UK introduced private accounts where taxpayers could forgo paying part of their FICA payments in favor of investing the funds in approved private retirement accounts and receive less government pension at 65. I think the FICA is 7.5% and you can choose to invest 4% privately. Unfortunately it has been a bad deal all round. A lot of younger folks (like my wife's baby brother - a very successful lawyer) jumped on board. He has been telling us how poorly his investments, and his colleagues, had been faring and a few months back NPR did a piece on the great UK experiment.

I think the main problem is that the restrictions and management fees of qualified programs just don't produce the same returns guaranteed by the goverment pension.

We could say that what the UK did won't happen to us but I just don't believe it, even for the money-savvy among us.

 

[Michael]

I think the main problem is that the restrictions and management fees of qualified programs just don't produce the same returns guaranteed by the government pension.

Maybe they would be better off dropping taxes on capital gains, dividends, and interest. Then people could invest in low cost index funds, and not have to fuss with all of the fees added on by the political process in "qualified programs".

 

[Alan]

Maybe they would be better off dropping taxes on capital gains, dividends, and interest.  Then people could invest in low cost index funds, and not have to fuss with all of the fees added on by the political process in "qualified programs".

Within the UK qualified programs there are no taxes on capital gains, dividends, and interest. Taxes are only paid after retirement when you start withdrawals just like the 401(k) plans here. And what a mess lots of folks have made of their 401(k)'s here. My own company offers an aggressive growth fund and a technology fund. I avoided both, but I know several folks, close to retirement, who completely screwed themselves by putting all of their assests into these funds which absolutely tanked a few years ago.

If private accounts do come into being I think they would benefit a small percentage of investors, and I would not expect the take up to be very high anyway. 401(k)'s have been around for many years and the participation rate is remarkably low, and Hewitt Associates reports that of those who do participate less than 25% of them have $5,000 in their accounts.

 

[moghopper]

Hewitt Associates reports that of those who do participate less than 25% of them have $5,000 in their accounts.

For those who are nearing retirement the numbers seem a little better, but still not good = according to this article from the Wharton school.   "The average 401k balance for workers over age 55 is just above $70,000 and the median is $30,000."

 

[Michael]

If private accounts do come into being I think they would benefit a small percentage of investors

I wasn't suggesting private accounts, or any sort of qualified plan. I was suggesting that all taxes be removed on capital gains, dividends, and interest for everyone. Everyone would have an equal opportunity to invest for their future in low cost accounts, regardless of who they work for.

 

[Alan]

Michael,

Apologies - I misunderstood. I think I agree with you as the financially savvy manage to shelter a lot more of their unearned income in tax advantaged accounts.

Moghopper,

Thanks for the Wharton School link which also discusses some of the problems with the company pension plans. In the UK private pension plans got a double whammy. A few years ago (still under Tony Blair) the government looked at the extremely well funded company pension accounts and changed the law so that funds going into those accounts were taxed. The sharp drop of funds flowing into the accounts plus the big drop in the stock market has left many company plans in deep doo doo and there is still much debate going on as to how to fund the increasing numbers of those funds going belly up leaving their retirees high and dry.

 

[moghopper]

The sharp drop of funds flowing into the accounts plus the big drop in the stock market has left many company plans in deep doo doo and there is still much debate going on as to how to fund the increasing numbers of those funds going belly up leaving their retirees high and dry.

A friend of my wife just married an English lad this summer. His dad (and I have to admit, I don't have the whole story) seems to have lost his entire pension due to some shenanigans.