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Thursday, July 15. 2010
Washington is talking about raising the "retirement" age, whatever that means. Since when did the US have a "retirement age"? Most Americans like to work hard: it's part of being an American.
In fact, most (non-unionized) Americans are willing to work harder and longer if their compensation is commensurate with their time, effort, and skills.
Still, re Social Security, that might be a good idea, since people live longer and healthier, and the golf courses around here are getting too crowded with totally functional codgers while other guys their age are still making a useful contribution to society and to themselves.
Plus they are talking about income-adjusting, ie means-testing, Social Security. Should be done. What bugs me about the notion of government income-based entitlements is that they disregard wealth. Why should I be working to pay the Social Security payments for people with a paid-off condo in Vero Beach and a house in Granby, CT - and a state government pension or a hefty IRA or an old-time corporate pension, just because their retirement fixed-income is relatively low in retirement?
Go ahead, argue this with me if you wish (but I can anticipate all of the historical arguments).
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I agree with you to a certain extent, that we can't not look at wealth. But before we start making folks work longer, and changing social security into welfare, we should really look at making sure we're not wasting money elsewhere.
For example, though this is a state budget, the New York Transit wastes so much money, they could hire lots more with the same money if they squashed some salaries, or cut some taxes, plug some budget holes, etc.
Government grandiosity should suffer before the people's.
http://www.businessinsider.com/mta-salaries-2010-6 That's the link I wanted to post but it wouldn't let me.
This would be politically very unpopular, but what about a 'claw back" provision for Social Security?
Give the Government claim to a person's estate equal to the amount of social security paid out? Since no interest is calculated on money paid in, none would be calculated on money paid out.
Is it fair for the taxpayers to pay for a person's retirement so the heirs can collect the retirees savings?
I am sure some could beat this plan via astute estate planning but some would not. The question is how much of the SS fund would it conserve?
Good idea? Bad?
Sure. Just give me back all the money I paid into FICA over my 45 years of working and I'll forego the retirement annuity. I won't even ask for interest.
If you drop the fiction that SS is a mandatory personal insurance account, then call it WELFARE.
I like the means-testing. I don't need it, so I'll stop paying.
Wealth adjusted? So if I saved my money and paid off both houses, while you drove fast cars and partied - you get paid more by social security?
Tell me now so I can go sports-car shopping this weekend.
Okay, I'll argue with you.
Social Security was passed as a pension plan. It never exactly was one but that was the pitch and that has been the pitch ever since. You pay into an account, which has your name and an ID number and all the trappings of an investment or a savings account. Then, when you reach statutory eligibility, you begin drawing the funds. If you die early, your estate has nothing to distribute. If you live longer than average, you get more out of the deal. Life insurance and annuities work the same way.
Social Security is also mandatory. I can't pick whether to take part, I can't pick the investment portfolio, I can't decide how much to draw or use the supposed principal of the account.
The whole thing should never have happened this way, I agree, but it did happen. Means-testing Social Security occurred when people paid in and when it paid out. I have a military pension, a 401(k) in trouble, a few other investments and Social Security. I'm already going to be a loser on SS, and means-testing would probably make it worse.
Step 1 - freeze the benefits formulas and lock the program away from the politicians. Spin it off into an independent agency, like the ones that handled war pensions. No more lollipops for voters that cost more than what was taken in.
Step 2 - let workers below a certain age opt out. Want to insure old age does not equal poverty, as it did pre-SS? Define rules for obligatory - but private - pension/health plans, as in other parts of the world (like here in Israel).
The government will have to cover the inevitable shortfall. Promises were made.
But that's the only way to close down this circus with a semblance of fairness and sanity.
Maybe they should disregard wealth because in many cases the "wealthy" contributed more to the system to start with, since your forced contribution is based on your income and how long you have been working?
And perhaps because I've been contributing into the system since age 16 (working part-time even while going to school) instead of being some slug of a Sixties type with no income who spent his life up to his 30s trying to find himself, going to graduate school and then living with a guru in Nepal. Why should that slug get the same amount as me, who put so much more in, especially if I worked my tail off during my life while he's still a "community volunteer" with ACORN?
I expect to get back from the government the money I contributed to their retirement program and all the money they have made from it by wisely investing it, since they didn't let me do it with that money. Even if they didn't directly put it in the market, I'm sure they wisely used it to improve the country's infrastructure and education system and other things that will make this a monstrously profitable country by the time I retire, so they will have tons of additional tax revenue to pay me back for my lifetime financial investment in their program.
Are you telling me I got scammed by my own government, and they just took my money and wasted it instead of investing it for my retirement? That sounds like investment fraud. Our government wouldn't do that, would they?
That "account" is a fiction. Your money just goes into the treasury. It's a tax.
It is no pension. Again, it's just a tax, no matter what they call it. And you cannot opt out of a tax.
If it's means tested, it's welfare. Wasn't marketed that way, sold that way, or administered that way. Support others in their retirement as well?
That just ain't right.
#10--Exactly, the money was stolen from me under false pretenses.
And I will hold the government responsible for that theft, one way or another. So don't expect me to willingly cooperate in any "reform" of the system that diminishes my vested "rights" in my "account." They can damn well cut out their social programs until they pay me what they owe me.
As far as I see it, I am the type of citizen who has been supporting the "system" all my life while others have been taking from it. And I have about had enough.
While we are at it why don't we withhold retirement payments for members of congress if they have a certain level of wealth or a wealthy partner.
There's no doubt that SS has been horribly mismanaged (read: our money was stolen - do you really believe borrowed? - so that politicians could spend it on more "good ideas", is a bad deal (you have no option to participate or not, you're SS "contributions" can not be passed down, SS is a bad investment even compared to govt. bonds, and is a Ponzi scheme that end up costing taxpayers (that's you and me - wait a minute, didn't I already pay into this thing? You mean I have to pay again?!!) a fortune, and it is a lie because it is not treated like an insurance policy that it claims to be.
Having said that, I am totally against means testing it. Even if it is almost a welfare program, it is not - yet. If it is means tested, then it becomes one and yet another place where our government lies to us. There are enough of them already!
Now, on its face it does not seem fair that Bill Gates and I will recieve the same SocSec payout. OTOH, he paid in the same amounts as I did: had we both bought the same amount of of Amazon stock, should he not be paid the dividends because he has other resources?
The over-65 hold the largest amount of assets in the US.
They accumulated it, so good for them. But why should youngsters, with no assets, be giving them money?
Why are our kids paying Warren buffet $2400/month? Or whatever it is? Or Bob Dylan?
As I say, SS is just another tax under a false name. Let's make it a means-tested welfare program for the poor over 70 (beginning with those now age 40 or 45), and get rid of the pretense and lies about "pension" and "promises."
There are no promises in politics. Everybody knows that.
The reason our kids are paying Warren Buffet is two fold - first, Warren is not giving up his SS (if he is getting SS, some rich oldsters gave their SS payments back. e.g. Hugh Downs).
Second, the program was mismanaged into a Ponzi scheme so that current recipients are payed out of current "contributions".
Actually, the main mismanagement is the Federal Budget since if it were not running huge deficits (that used to be small enough to be largely masked by SS surpluses) the system would be healthier, though the system is pretty unsound actuarially anyway.
One reason that I, among many others, will need Social Security is because the money was taken from me by administrative decree. I didn't have the option of investing it or wasting it; I never had my (sometimes careless) hands on it. The system was designed to make me dependent on it, and succeeded.
I am sure that Warren Buffet and Bob Dylan pay back a lot more in income tax than they receive in Social Security benefits. I'm betting that JK Rowling's first book brought Scotland enough taxes to pay back all her welfare payments while she was writing.
To a minor extent SS is means tested. I pay federal income tax on mine which reduces it by about 15%.
But the topic is to save SS and that income tax takes money from the SS fund and puts it in the Treasury. That hardly helps SS solvency.
It makes no sense to let SS go broke. So I won't endorse pretending for a while longer that matters will improve.
Nor can I endorse some fig leaf such as printing money at the Fed, exchanging it for Treasuries, and giving the money to the SSA.
That would be insanity compounded; the Treasury would end up retrieving (though the FIT) a portion of money they gave to the SSA.
The only solution is to reduce benefits or increase revenue from SS taxes. IMO the latter is marginally possible but ultimately insufficient. Benefits must be reduced.
We can make immediate uniform payment reductions of small amounts. Or postpone the age at which benefits are drawn. Or start means testing with some excluded from any SS payments.
Take your choice. I favor all three in moderation. Politically that lets all concerned know the problem is serious and the solution involves some sacrifice by all.
No solution is free. Reducing benefits means some people will be forced onto welfare or be supported by relatives. Means testing has an administrative cost and gets messy.
SS is an insurance program against the possibility of you outliving your savings. It's an inflation-adjusted annuity.
The advantage is that you couldn't easily save enough to live on for your longest possible life, but you can easily save enough for the average life.
So you get this annuity, Social Security, that starts paying at "retirement age," which is what they're correctly talking about raising. If you want to retire later, fine, you still get the annuity; if you want to retire earlier, fine, but bridge the gap to retirement age on your own dime.
The retirement age is whatever age balances out the demographics. If is too little pay-in, raise it until there isn't.
Means testing and income testing and so forth changes the insurance into a welfare deal. As if only the poor should be paid by their fire insurance if their house burns down.
(Only the government can offer a inflation protection; it's not an insurable event. All your policies go bad at once. And the company has to be around for forty years, which isn't easy to arrange.)
Raising the social security benefit age is simply wrong. If I had a desk job with government, sure, I could show up till I'm 80. But I'm swinging a hammer and digging ditches all day. My back is screaming every evening and I still have close to twenty years to go! I expect to use my social security to help pay my rent while I'm greeting you at the entrance and passing you a shopping cart.
Social Security Trust Fund - there can't be one. The government must instantly return to the economy every cent it takes in, or the money supply would fall.
SS is simply a general fund tax.
The mechanism of return is to issue a bond to the fund and take the money and spend it. But that has to be done in any case.
You could no more privatize social security, incidently. Everybody can't save to retire at 65 because the demographics don't work out. There's not enough buyers for the stock being sold at 65, so the price falls; that reduces the value of your savings, and (behold) forces you to work longer. Thus raising the retirement age.
You can't defeat the demographics. It's a prior constraint.
At cursory glance I don't mind the idea of the "wealthy" not receiving SS checks. Like someone above said, paraphrasing, why should anyone be paying taxes to send Warren Buffet (or John Kerry or his wife or any Kennedy or Bill Gates) a check for $2400/month (or whatever). They don't need it and it wouldn't pay to heat one of their swimming pools.
That said, what does "wealthy" mean? Just because I save, skip the fancy cars, didn't upgrade the hacienda every few years, and did without some things other people consider necessary to build a buffer for my dottage, why should I forego payment of something for which I was taxed my entire working life (paid SS tax since I was 14 and that was quite some time ago).
Also, those who make more pay more their entire lives. My wife giggles every time she looks at those reports they send us once in a while. She's paid much less into the system than I have (stay at home mom for years, never made as much as I do, etc) and will not get all that much less as payment.
The lower end of the income curve get a much better deal from SS than the higher end.
But the largest argument for not means testing, IMHO, is that I paid the freakin' tax for the purpose of receiving a benefit at some time in later life. I want what I paid for.
One last thing... the idea that people don't keep working just because they've started collecting their SS benefits is false. Many people need to keep working. SS ain't all that much money, especially if you live in a high property tax area. And if you make very much while working your SS payment starts getting taxed. That doesn't happen for some other forms of exempt income.
The system is not fair but it is weighted pretty heavily in favor of those who make less. Penalizing those who saved more (or only rewarding those who didn't save) is not a great idea.
"Means testing" is just another plan for rewarding the spendthrifts and stupids at the expense of hard working thrifty people.
I have been paying into Social Security for 55 years, for the last 30 years at or near the maximum rate. The fact that POS politicians have stolen it all, from everyone, IS NOT MY PROBLEM.
I have a neighbor who I know for a fact has consistently earned considerably more than I have for the last several years. But he took out not one but two second mortgages and spent it on huge elaborate home improvement projects and repeated foreign travel. Now he is in foreclosure. I rather imagine that he has zero savings left as well.
So because we saved, contributed to our 401K, paid off our house early, didn't take expensive international vacations, my neighbor gets Social Security and we don't? Get real!
I have no problem pegging increases in payments to the consumer price index. I don't even have a problem with raising the retirement age; after all, I'm nearing 71 and still working (thanks Washington!). But rewarding deadbeats like my neighbor and punishing the decent people? FORGET IT!
What will happen if SS is means tested is that the cutoff level will creep down over time. Eventually it will become something like, "Oh, you own this little old house, Mr. K? Well then, you have assets. No Social Security for you until you sell the house and live off the proceeds." Only the most irresponsible spenders will be eligible for the program. That's not the result we want, is it?
Commenters on other forums have already said that if SS is means tested, they'll simply hide money and valuables to make themselves eligible. This already happens with Medicaid, which pays for most nursing home expenses in the US and is supposed to be for the poorest. Congress keeps tightening the rules to prevent asset hiding and transfers, but the problem continues.
Once SS is fully means tested, support for the program will evaporate. It will become just like other welfare programs, and with the same problem as those others. A common complaint about them is that you pay taxes and pay taxes to fund them, but if you have a problem and need them, you're told you're not eligible. If SS goes down the same road, no one will be willing to pay a separate tax all their working lives for it once there is little likelihood that they will actually receive benefits from it due to ever harsher means testing. Then the program will die. That's the real goal of Boehner and other politicians who want to institute means testing.
SS was insurance designed in case you outlived your useful working life. It was never designed as a retirement right. In fact originally your retirement date was beyond the average life span. You were never expected to collect! Unfortunately it has morphed in what we have today. So as long as you can work you should work. Past 67, 68, 80 or 100. If by luck (or bad luck) you live beyond your physical ability to work you should collect. The whole concept of retirement to go play golf is a luxury If you can play gold, you can go work. I also believe the rules should be retroactive. Those who have retired or plan on retiring in the next 5 years have know SS was in trouble but chose to do nothing hoping to “get in” before the system starts changing. They were the ones voting, the ones in charge. Why should I pay for their inaction? SS is supposed to be a pack of solidarity between generations. Well, I don’t feel solidarity, I feel screwed.
It is always easy to order a big expensive meal when you know the next person is picking up the tab! Hell with that, stick-em with their tab…