CATO Institute - The 6.2 Percent Solution: A Plan for Reforming Social Security
Posted on 01/04/2005 12:46:03 PM PST by RetiredArmy
Plan Could Cut Social Security for Young Workers
NewsMax.com Wires
Tuesday, Jan. 4, 2005
WASHINGTON – Future Social Security benefits could be cut almost in half for some younger workers under a plan President Bush is considering for overhauling the nation's retirement system.
Bush so far has refused to discuss the difficult financial trade-offs that would be required to remake the system to let younger workers divert some of their payroll taxes into personal investment accounts. He has said he will use as a model proposals from his 2001 Social Security commission to craft a proposal that Congress will consider this year. Under the commission plan that lawmakers said Tuesday was being discussed as the framework for the overhaul, Social Security benefits for younger workers would be cut by 0.9 percent to 45.9 percent from traditional benefits. Investments in the personal accounts would be counted on to make up the loss in income.
Supporters of Bush's idea argue that the current projected level of traditional benefits is not guaranteed in any case, and they note that the Social Security system is projected to start running a shortfall in 2042.
``Social Security has promised to pay benefits way in excess of what it's going to be able to pay,'' said David John, Social Security senior analyst at the Heritage Foundation.
But opponents claim the Bush administration is exaggerating the problem. The retirement system will be able to pay full promised benefits until 2042, and then will be able to cover about 73 percent, they say.
``The Bush administration has finally acknowledged that the centerpiece of its plan to radically overhaul Social Security is a benefit cut of more than 40 percent in the coming decades for every American senior,'' said House Democrat leader Nancy Pelosi, D-Calif. ``This is the equivalent of forcing seniors today to live at a 1940s standard of living.''
But Senate Majority Leader Bill Frist, R-Tenn., said any change to the system would not affect current retirees. ``Young people today recognize it's their money they're putting into Social Security,'' Frist said Tuesday on CNN. ``They own that money. They would like to be able to invest in personal accounts if they want to, a nest egg that can help them in later retirement.''
Cuts would occur by changing the formula used to calculate benefits to address the system's future shortfall. The growth in benefits would be slowed dramatically by tying them to inflation rates instead of wages. The rate of inflation grows more slowly than wages over a person's lifetime.
For example, a person retiring at age 65 in 2021 with a two-earner income of $35,277 is promised $1,194 in monthly benefits, in 2001 dollars. If the formula is changed, the monthly benefit would be reduced by 0.9 percent to about $1,088 a month.
The younger the worker, the more dramatic the cuts. For a person retiring at age 75 in 2075, the monthly promised benefit of $2,032 would be cut by 45.9 percent to $1,099 a month. Investments in the personal account would be expected to make up the difference.
I agree. Considering that SS is broke I would say this looks like a $1099 INCREASE for future SS recipients.
Pelosi denies murdering millionaire during intense cross-examination
http://courttv.com/trials/pelosi/120804_ctv.html
but she could murder our hopes of ever seeing real reform.
"I'd gladly turn over every cent "invested" in my SS account for the past 20+ years if we could go to private accounts. In a heart beat. I'd come out ahead, too. Way ahead."
but you'd lose out on that huge 3% return on your confiscated, I mean contribution.
I wonder what the definition is "young" is here. I'm 46. I hope I'll be able to invest some of my SS into a private account.
That is an excellent point, I'm going to have to stop calling it a Ponzi scheme. "Extortion racket" would be more accurate.
Thanks--I'll try not to let it be the last one. :)
Cash the government can't touch right now will always be alluring to Rats in the future.
Consider stashing some in the smaller non-EU banking capitals like Zurich and Lichtenstein, after the egg gets big enough. That is NOT a suggestion I'm making with my tinfoil undies on--just one that makes sense given the rats' proclivities for screwing seniors with any money. I'm not saying go buy gold or platinum, or bury your dough under a rock. I would just consider the government's switcheroos in the past and cover yourself.
Whole life insurance policies accrue value tax-free, and can be drawn down tax-free, but you're right, I wouldn't count on that staying that way fifty years from now if the Democrat party survives that long.
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