Posted on 04/20/2015 7:27:43 AM PDT by Olog-hai
> advocating means-testing for Social Security retirement benefits...
IOW, NOT entitlements, but Social Security benefits for which I’ve paid? Food assistance, vendored rent, health care, education, none of which I get but am forced to pay for, all okay?
Up yours, ‘holes.
apply a means’ test to those with other souces of income.
Yes, I agree. I would likely be among those getting hit hard through a means-tested approach. I've worked and saved; I've sacrificed because I've chosen to put money away for retirement rather than blow it on frivolous luxuries. It would not be an easy pill to swallow, and I hope whatever plan is devised, those that squandered their resources will be penalized.
FYI
Gov. Chris Christie • New Hampshire Republican Leadership Summit • 4/17/15
https://www.youtube.com/watch?v=hbdBS8C5Fz0
Published on Apr 19, 2015
April 17th, 2015 • New Jersey Governor Chris Christie at the New Hampshire Republican Leadership Summit. The two day event hosted by the Republican Party Of New Hampshire featured possible GOP nominees for the 2016 presidential election. New Hampshire will hold the first ‘primary’ for GOP convention delegates on January 26th, 2016.
It's not basic Social Security payments, which are suppose to provide nothing more than a base income to keep Seniors out of poverty, that can't be paid for. It's all the extra stuff that's included and that the gov has spent the money on things besides its intended use.
I hope whatever plan is devised, those that squandered their resources will be penalized.
I agree. The situation sucks, but I haven't heard any alternatives to remedy the problem. SS has become far too lucrative for many who've never paid into it, or have paid very little into it. The program has been abused, extended to people who have no stake in it, and squandered by politicians along the way.
Any remedies that I've heard of to date all amount to higher taxes and less of a benefit to those who've paid the most.
Then there's people (I'm one of them) who don't collect a full teacher's or other state pension because I didn't work long enough to reach the maximum. After that, I did work most of it self-employed on which I paid SS taxes. Because it would be "double dipping" I only get the minimum on SS instead of what I'm due, which would only be a few hundred dollars a month.
So, here people like myself are, pretty close to "upper poor" by income, being penalized by the feds. I wouldn't mind so much if one could choose to get back what they paid in instead of collecting.
Indeed. But SS is not considered an individual "asset" by the government. If you meet certain conditions, you might get some of it, but not to pass on to your estate. I suppose if your spouse preceeds you in death, you're eligible to some of their SS, but not quite the same.
I wouldn't mind so much if one could choose to get back what they paid in instead of collecting.
In a heartbeat. I'd take this even without any interest.
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 thought 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, Social Security is, and always has been, a welfare program. It was just billed as "retirement security" to get the middle class to buy in.
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".
One thought that occurs to me is that this might be a partial reason why pols traitor us on stopping and reversing the invasion of the US as soon as they get to DC. Do they see increasing our population with people who breed and work as a way to "kick the can down the road" another generation or so, as they'll pay into Social Security for decades before they collect? So what if the invasion of unassimilated millions of lower-income workers destroys the US as we know it. Our pols are about survival for them and tough decisions for another generation.
I "get" your numbers, and they infuriate me. As a nation, we can no longer afford a safety net to keep seniors who've been productive from falling into poverty while keeping it equal and fair for everyone who paid in. But we can afford massive amounts of foreign aid, recreational wars and printing money for bank and stock market bailouts. The US is drowning in indefensible priorities.
Another thing about financing Social Security instead of globalist and high stakes economic interests: If that money is being distributed to seniors, most of it will go directly into the economy, a lot locally, and a lot to improve the quality of life for children and grandchildren. What has to change is priorities. As with Ancient Rome, we're badly over extended and rotting from within. Another thing that has to change: it has to become harder for those of working age to collect handouts and easier to find work.
Again, thank you for your analysis.
How come when I say the same thing its "stomping my feet"?
Illegal aliens are allowed to use stolen SS numbers because the politicians know it is “found money” that will never have to be paid out. It can be argued that if 50 million Americans had not been aborted since 1973, we wouldn’t be in this mess, at least not for several more years.
There is a major flaw in your argument - a presumption that SS must exist. It doesn’t. I’m middle aged (44) and I’d gladly give up all my benefits today - if I were no longer compelled ti invest my income in a Ponzi scheme. I’d be dollars ahead.
As far as intra-governmental transfers go: Politicians from both parties have used this to hide our true deficits. If you get in the weeds and look at the ‘surplus’ years in the 90s (which both Clinton and the Gop congress take credit for), there really wasn’t a surplus....just clever parsing of words with how the accounting was done. So now here today we are really paying for government expenses that happened in the 80s and 90s....paid for by intra-governmental transfers that are now due. Just ponder for a moment how foolish it is that SS surpluses must be invested in government. Essentially taxpayers have been borrowing money from themselves, similar to borrowing from your own 401k...which most believe to be a bad idea. Why couldn’t SS invest their money in anything else...lots of safe investments outperform treasury bonds over time. More importantly, it would have prevented politicians from papering over our true deficits.
Oh well, the surplus days are over, so that ship has sailed. So I will stomp my feet. If the government siezes my benefits because I was a chump and saved for my own retirement, I still have expectations. Could the government at least run the program efficiently and hire somebody who can purge the rolls of 120 year olds, and arrest doctors who write fake ‘bipolar’ diagnosis on SS disability forms for fifty dollars a pop in the ghetto.
It's bad enough that the "But I paid in......they promised me!!" mentality is as widespread as it is in the GOP electorate at large. To find it so well represented here on FR, where you would think the level of economic understanding is a lot higher, is depressing.
I certainly favor the latter.
So do I. Otherwise all SSI becomes is another vote buying scheme.
I specifically said that I was willing to take a benefit cut, just not on Christie's terms.
Are you willing to accept a cut in your Social Security benefits? If not, then you are "stomping your feet".
There's no way out of this mess without it, unless are willing to raise your children's and grandchildren's payroll taxes 50% or more.
For example, selling amnesty by claiming illegals are necessary in order to keep SSI solvent, then claiming we make to much to receive anything anyway.
I may not be able to do anything about it but I sure as hell won't sit chewing cud like livestock for the welfare state.
That sounds appealing, but depending on your age, you may be giving up a lot.
I wrote earlier than I had done the calculations for my contributions. Since I was working during the 80's, I could have invested in long-term US Treasury bonds that were earning double-digit rates. In 1981, the average dividend rate was 13.45%. I'd still be holding 30-year bonds from the late 80's that are paying more than 8%.
My point: that interest adds up. My mythical $1,000,000 balance would consist of only about $300,000 in contributions. The remaining $700,000 would be dividends earned over my working career.
If that offer was made to me, I'd have to carefully consider it, comparing it to the net present value of my expected benefits.
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