We are in a mess because people are not saving enough. This plan would discourage saving.
Rich people can maneuver to reduce their taxable income, by owning municipal bonds instead of corporate bonds and non-dividend-paying stocks instead of dividend payers. I don't think SS benefits should depend on how you invest.
Are we going to means-test the benefits of government retirees, too? No one "needs" a pension more than $100K.
The whole presentation is trying to hide the fact that Christie is proposing large scale, government sanctioned, robbery.
If I have no choice but to contribute and then lose everything because I was too successful - why work?
BTW - I will listen to the apologists the moment ALL Federal retirees, past, present, and future, agree to live on $ 100,000 annual retirement so they can “keep” their entire social security monthly, taxed, returns.
“But saying that someone who has paid into the system his whole life should get nothing because he has a lot of other income in retirement seems wrong to me.”
I would agree, if the money were still there. But those people ALSO VOTED, collectively to have the government spend loads of money while keeping tax rates down. In other words, the money was never put aside - IT WAS SPENT as fast as it came in.
So now it’s no longer getting THEIR money back, but instead it’s TAKING money from my kids and grandchildren. They ARE NOT entitled to that money any more than my neighbors are entitled to it. My kids did NOTHING WRONG and should have NO OBLIGATION to pay tribute to these people.
But I’ve had this debate before, and half of the people ON THIS SITE have no problem at all in having the government use the power of their guns to TAKE the money that voters demand, from my kids. One can only imagine the reception that Christie will get from the left.
So Christie won’t get anywhere with this...and my kids will have to live in a crap country because of it.
(and by the way, I still hate Christie and likely would not even vote for him if he is the nominee...but he is right here)
Not my fault the Congress spent it all already. Find another solution.
I suppose people that do desk work or similar non physical non demanding work might be able to work til age 70 but not those that actually get off their fannies and actually WORK.....
The Communist Wing of FR comes out on these sorts of posts.
A conservative KNOWS that when the government “gives” you a dollar that it has to come from somewhere.
I’d go a step further than our NJ friend.
SS should be stopped immediately - payments in, as well as payments out.
It is nothing more than an entitlement program just like welfare.
Nobody has a right to a check for life from government. Nobody.
For all of you commies who complain that it is “your” money - you are fools - but rather than benign fools, your foolishness is harmful to those Americans who may have a chance at restoring this country (since you didn’t do it) by getting rid of communist throwback programs like “Social Security”.
You f’ed up. You trusted them. That’s your own fault, and if you can’t figure it out by now that you aren’t getting paid like you thought you would, good luck with that.
I am sorry to be the bearer of bad news, but "your" money is long gone. It was paid to your parents and grandparents, almost as soon as you made the contribution. Nearly all of the benefits you receive from Social Security will be recently collected from your children and grandchildren. If you don't have any descendants or they don't contribute enough taxes, it will be from someone else's kids.
Social Security has ALWAYS been an intergenerational transfer of income. There is no balance in your name, and there never has been. Furthermore, you don't have any contractual right to benefits, like you have with a private pension or annuity. All you have is the promise that future politicians will continue to collect higher and higher taxes from people younger than you, and give it to you.
Read that last paragraph again. Congress can change the law at any time, and the only recourse you have is to vote against them. This was affirmed by the US Supreme Court back in 1960, in US v. Nestor.
And I'm going to preempt the other usual complaint now: Social Security wasn't "stolen". If you worked during the 80's-00's, a small portion of your contributions went into the Social Security Trust Fund, because it wasn't needed to pay your parent's and grandparent's benefits. That excess was invested into the equivalent of long-term US Treasury Bonds. Starting a couple of years ago, a small percentage is being withdrawn each year, and it will continue until the Trust Fund is exhausted around 2033. Every dollar is accounted for, and is being paid back with interest.
And, there's another typical complaint: Supplemental Security Income, or SSI. The claim is that Social Security funds are being distributed to people that never contributed to Social Security. But, the Social Security Administration only ADMINISTRATES SSI. These benefits are PAID out of the general fund.
I'm trying to explain these facts to show that stamping your feet and shouting things like "It's my money!" and "They stole Social Security!" is grossly inaccurate, and doesn't help. It's this kind of reflexive reaction from our parents and grandparents that any prevented meaningful reform. We have this problem because we (collectively, especially the Baby Boomer generation) didn't have the courage to fix this problem back in the 80's, when we had the chance. So now, it's going to be painful. And every year it is put off, it's going to be more painful.
It is certainly accurate to say "It's not fair!". But, I want to explain what would actually be "fair". Remember, Social Security is an inter-generational income transfer program. The "fairest" method would be to collect taxes from your children and grandchildren, and distribute them to you. If you have more kids and grandkids, and they work at productive jobs, you'll get more Social Security benefits. If you don't have any kids, you don't get any Social Security benefits. However, please don't think I'm seriously making this proposal.
The purpose of my "thought experiment" above is solely to get you to think about how Social Security really works, and why we are in this situation. The two biggest factors causing Social Security's shortfall is the fertility rate and life expectancy. The fertility rate has dropped below 2.0 (per woman) and people are living longer in retirement, so the contributor to beneficiary ratio is getting smaller and smaller. And, it will continue to shrink. The only way to reverse it is to increase the fertility rate -- so have more kids, and tell them to have more kids.
Without more (productive) kids, the only way to maintain the current level of benefits indefinitely is to significantly increase taxes, and keep increasing them. The SSA has already evaluated that alternative:
I should note this is based on the SSA's "intermediate" economic and demographic assumptions, and they have historically been too optimistic. The increase of Social Security taxes in 1980 was supposed to "save" Social Security, and you are seeing how well it worked.
At least one poster has suggested they should just eliminate the cap on the payroll tax. This is a common proposal, and is often touted as "the solution". But, all it does it kick the can down the road a bit. One reason: if you eliminate the cap, you also increase benefits for those with wage income above the cap. This is SSA's evaluation of that proposal:
SSA has also evaluated elimination of the cap, with no increase in benefits. Again, it just kicks the can a little farther:
So, let's go back to Christie's proposal. No, it's not fair. But, it's not fair because it rewards irresponsibility. To demonstrate, here's another though experiment:
John and Steve work for the same company their entire life, and earn the same wage/salary. John contributes the maximum to his 401(k), drives a used car, and bought a small house. Steve leases a new car every few years, rents a big house, has a boat in the driveway, and takes an expensive vacation every year. John retires with a huge nest egg. Steve retires with a few thousand dollars in his checking account. John withdraws from his 401(k) every month, generating taxable income. Steve only has Social Security.
By means-testing Social Security benefits, John's Social Security benefits are reduced, and he is penalized for a lifetime of responsible behavior. Steve is rewarded (or at least not penalized) for a lifetime of profligate spending.
This is how Christie's proposal should be countered.
I'll also point out that Social Security is already means-tested. If you examine how benefits are calculated, you will understand how:
http://www.ssa.gov/pubs/EN-05-10070.pdf
You don't have to wade through all of this... just look at step 5. Once your average indexed monthly wage is calculated, that formula is applied. Note that it starts with 90%, then drops to 32%, then finally to 15%. That means that even though you paid a flat tax rate, once your average monthly wage is higher than $5000, you only get another 15 cents added to your monthly benefit for every extra $1.00 in your average monthly wage.
So, further means testing that eliminates benefits on the basis of OTHER income makes the situation even worse, and effectively creates a negative rate of return on investment. I'm sure that someone will do a more detailed analysis if this proposal gets any traction.
Before you start shouting back at me, let me explain my situation: I'm currently making plans for retirement. One of the factors in determining how much we have to spend in retirement is our Social Security benefits. I'm more like John, and we have quite a bit of retirement income and assets. But, I expect Social Security to be significant part of it, once I turn 70. I don't know if I am close enough to retirement to be excluded from this means testing, but I wouldn't be surprised if I am not.
[An aside: I strongly recommend that you ask a financial advisor about when to start Social Security. Depending on your life expectancy and your income from other sources, you may be giving up a large amount of lifetime income if you start at age 62. Drop me a line via FRmail, and I will point you to a website that will show you exactly how much, but there's a small fee.]
If I had the opportunity to invest Social Security contributions on my behalf into a long-term US Treasury Bond each year, I'd have about $1,000,000 right now. And, it would be close to $2,000,000 by the time I turn 70. This is not an off-the-cuff estimate: I've actually calculated it, using the average long-term bond yield each year, and reinvesting dividends. I'd still be holding a number of bonds from the late 80's that paid decent dividends.
If I were to actually receive the benefits currently promised, I'd have to live until about age 102 to collect enough to match the current value of my contributions (at a 4% discount rate). That might happen, but I don't consider it likely. I also don't consider it likely that I'll collect all those benefits, either -- since BY LAW, once the Social Security Trust Fund is exhausted (around 2033), benefits must be reduced to a level that can be sustained by the incoming contributions. Currently, that is forecasted to be a 23% reduction.
I'm planning for that 23% reduction, because the alternative is to raise the taxes on my children and grandchildren even higher than now. I'm even willing to take a further reduction, if Social Security is truly reformed into a private contribution account (like Chile, Australia, and Singapore). But, it's going to take a sacrifice on the part of both the contributors and the beneficiaries to make that work.
However, I'm not willing to take a benefit cut so that "irresponsible Steve" can continue to get his full benefit. But, I have to find a way to boil it down into a "sound bite".
So if I'm responsible enough to plan for my own retirement, have a 401K, Roth IRA, etc.. then Christie is going to means test me OUT of Social Security, a confiscatory plan I'll have paid more than 40 years into, because in his determination "I don't need it."
Some Christie supporter needs to explain it to me exactly how Christie's proposing something different than Obama's wealth redistributionist policies.
I paid into it UNDER FORCE OF GOVERNMENT and it's MY MONEY. I don't CARE what some fat windbag like Christie thinks, I want MY MONEY BACK. Period.
Oh, and Chris Christie? F*** YOU A$$HOLE, you aren't getting my vote.