What's the big deal with Social Security?

[Quartz]

I've just been reading Fred Thompson's plan for Social Security here (http://www.washingtonpost.com/wp-dyn/content/article/2007/11/09/AR2007110902270.html?nav=rss_politics) and I'm wondering what the big deal is? America doesn't have a welfare state like we do in Britain, does it? Clue me in. Or is this simply a last gasp for press time from a failing candidate?

[BrainGlutton]

We don't have a full welfare state but we do, since the New Deal, have the Social Security system, which taxes (in a "payroll tax," separate from and less progressive than the income tax) younger, working people to fund retirees' pensions (and also disability pensions). But when the system was set up no one imagined medical progress would enable so many people to live so long in retirement. The system pays out a lot more now than it did in the 1940s, even adjusting for growth in the total population. Thus, we have what some expect may be a financial crisis in the SS system (though there is some skepticism). Bush made an issue of trying to "save" SS by "reforming," i.e., privatizing it; he failed to overcome an unexpected level of political opposition, especially from the American Association of Retired Persons, but the issue is not yet dead. Thompson appears to be proposing a different approach. cutting benefits by gradual stages.

That's what the big deal is.

Or is this simply a last gasp for press time from a failing candidate?


That too.

[Quartz]

So why don't you just do what we've done here and increase the state retirement age?

[What Exit?]

So why don't you just do what we've done here and increase the state retirement age?
We're doing that already, Social Security is currently broken for the future and it seems like a bad bet to count on it being there if you are under 50. I am expecting it not to be there for me or at least only at an insufficient level and only after I am 70.

[Kimstu]

We're doing that already, Social Security is currently broken for the future and it seems like a bad bet to count on it being there if you are under 50. I am expecting it not to be there for me or at least only at an insufficient level and only after I am 70.

I'm under 50, and I'm expecting SS to be there for me, simply because I haven't seen any plausible justification of this pessimistic outlook. Yes, I know there have been several well-funded PR campaigns pushing the view that SS is doomed, but they seem to be pretty light on actual evidence.

Of course, it depends on what you mean by "at an insufficient level", too. I definitely agree that SS retirement benefits by themselves are not going to be adequate as replacement income for a middle-class person hoping to maintain a middle-class lifestyle. But then, AFAICT they never were, and were never intended to be.

And yes, the official retirement age is going up; my generation will be entitled to full SS benefits only at age 67 (though we could take reduced benefits at 65), and will get more money if we delay retirement till 70. I don't really see a problem with that. As life expectancy increases, and as average education levels increase, thus delaying more people's entry into the full-time workforce until their early- to mid-20s instead of their late teens, why shouldn't we expect to delay retirement?

[Magiver]

I've just been reading Fred Thompson's plan for Social Security here (http://www.washingtonpost.com/wp-dyn/content/article/2007/11/09/AR2007110902270.html?nav=rss_politics) and I'm wondering what the big deal is? America doesn't have a welfare state like we do in Britain, does it? Clue me in. Or is this simply a last gasp for press time from a failing candidate? The concept of investing the money individually instead of a tax-forward social net is what we're talking about. It's not a new or untested idea. Other countries and even municipalities within the US have done this with great success. People are still required to put money away but it becomes personal wealth upon retirement.

[Voyager]

Social Security today is not in nearly as bad shape as it was in the '80s, when a bipartisan commission reformed it. Under certain pessimistic assumptions the system will indeed run out of money eventually, but minor tweaks, such as increasing maximum income for which the tax is taken out, and increasing the retirement age, will fix it.

The reasons the Bush plan flopped so badly was that none of the proposals would actually have helped, he wasn't convincing that there was a problem, and it was clear the real reason for the so called crisis was right wing hate for a successful government program. That's current right wing - Reagan was very good about facing the problem realistically.

There are lots of numbers in the threads that ran during the debate.

[Martin Hyde]

We don't have a full welfare state but we do, since the New Deal, have the Social Security system, which taxes (in a "payroll tax," separate from and less progressive than the income tax) younger, working people to fund retirees' pensions (and also disability pensions).

The social security portion of payroll taxes is actually entirely regressive. It's a flat 6.2% rate which applies to your checks whether you're making $400 a week or $4,000. To add to that, once you've made over $97,500 in a calendar year, any further earnings aren't subject to the Social Security portion of the payroll taxes. It's definitely a tax shouldered more by the poor than the rich.

[What Exit?]

I'm under 50, and I'm expecting SS to be there for me, simply because I haven't seen any plausible justification of this pessimistic outlook. Yes, I know there have been several well-funded PR campaigns pushing the view that SS is doomed, but they seem to be pretty light on actual evidence.

Of course, it depends on what you mean by "at an insufficient level", too. I definitely agree that SS retirement benefits by themselves are not going to be adequate as replacement income for a middle-class person hoping to maintain a middle-class lifestyle. But then, AFAICT they never were, and were never intended to be.
I'll tell you what, I will keep my trust in my investments, 401k and assets and I will continue to treat SS as a nice bonus if it is there.

My parents are 76 and mainly living off of SS and some very small pensions and a small sum from selling their house. I don't see any proof that SS will allow for this in 29 years when I am 70. If I am wrong, it won't hurt me at all, If I am right and someone counts on SS to provide a large portion of their retirement, they might end up barely scraping by or in public elderly warehousing. ;)

If you can show me some proof that SS is still likely to provide a similar level of support in 2036 as it does today, I will be glad to learn this wonderful news.

Jim

[Lumpy]

The Social Security program is essentially a way to bypass the traditional American horror of anything smacking of socialism. It was sold as a "retirement fund" even though most retirees get far more money out of the system then they ever pay in. The Social Security "fund" is nothing more than holdings of US bonds- government obligations to payed by future taxes. And since more money is being taken in in payroll deductions than is currently being payed out, the "sale" of the bonds masks just how big the yearly government deficit is. As said upthread, this worked fine when people didn't routinely live to their 80s and 90s, and when the population was expanding enough that the whole system could work like a pyramid scheme. The worry is that on the day when current payroll taxes no longer covers current benefits, the system will overnight be transformed from a cash cow to a gargantuan liability. Social Security is just one facet of the continuing worry in the US about "entitlements": things that the government is going to be obligated to pay for someday.

[Voyager]

I'll tell you what, I will keep my trust in my investments, 401k and assets and I will continue to treat SS as a nice bonus if it is there.

My parents are 76 and mainly living off of SS and some very small pensions and a small sum from selling their house. I don't see any proof that SS will allow for this in 29 years when I am 70. If I am wrong, it won't hurt me at all, If I am right and someone counts on SS to provide a large portion of their retirement, they might end up barely scraping by or in public elderly warehousing. ;)

If you can show me some proof that SS is still likely to provide a similar level of support in 2036 as it does today, I will be glad to learn this wonderful news.

Jim
Exactly what proof are you looking for? It is possible that nutters will take over, take the vote away from the retired, and trash the system. It ain't too likely. Remember Bush at the height of his power got clobbered when he tried to change the system.

Now, the fact that in the old days companies had pensions shows that no one thought that SS alone was going to make the retired wealthy. However it sure beats nothing. I'm 55, and kind of thought like you did until I looked at the numbers on my report, and found that our SS makes a big difference. Most of my income will come from my investments and 401Ks, but even for me, with a very nice retirement savings pot already, SS is nothing to sneeze at.

BTW, I wonder if anyone counts the contributions by the illegal immigrants which they'll never get back.

[Kimstu]

If you can show me some proof that SS is still likely to provide a similar level of support in 2036 as it does today, I will be glad to learn this wonderful news.

Magical moving goalposts. You started out by saying that it was a bad bet to count on SS being there at all, and then modified it to say that you expected SS to be there only at an undefined "inadequate level" when you turn 70, and now you're asking for "proof" that SS will provide the same level of support to you in 2036 as it's providing to your parents today.

If you will tell me what your parents' SS benefit amount is, and how much other income they have from their pensions and home sales, and what their average indexed monthly earnings were when they were contributing to SS, and how many years they contributed for, and what your average indexed monthly earnings are now, and how many years you expect to contribute to SS by 2036, I'll go over to the SS homepage and attempt to find out whether your expected retirement benefit will be comparable to theirs in terms of replacement income.

[Der Trihs]

Exactly what proof are you looking for? It is possible that nutters will take over, take the vote away from the retired, and trash the system. It ain't too likely. Remember Bush at the height of his power got clobbered when he tried to change the system.

Now, the fact that in the old days companies had pensions shows that no one thought that SS alone was going to make the retired wealthy. However it sure beats nothing. I'm 55, and kind of thought like you did until I looked at the numbers on my report, and found that our SS makes a big difference. Most of my income will come from my investments and 401Ks, but even for me, with a very nice retirement savings pot already, SS is nothing to sneeze at.

BTW, I wonder if anyone counts the contributions by the illegal immigrants which they'll never get back.Yes (http://www.nytimes.com/2005/04/05/business/05immigration.html?ei=5090&en=78c87ac4641dc383&ex=1270353600&partner=kmarx&pagewanted=all&position=); and they are doing so by billions of dollars.

As the debate over Social Security heats up, the estimated seven million or so illegal immigrant workers in the United States are now providing the system with a subsidy of as much as $7 billion a year.

While it has been evident for years that illegal immigrants pay a variety of taxes, the extent of their contributions to Social Security is striking: the money added up to about 10 percent of last year's surplus - the difference between what the system currently receives in payroll taxes and what it doles out in pension benefits. Moreover, the money paid by illegal workers and their employers is factored into all the Social Security Administration's projections.

[What Exit?]

Magical moving goalposts. You started out by saying that it was a bad bet to count on SS being there at all, and then modified it to say that you expected SS to be there only at an undefined "inadequate level" when you turn 70, and now you're asking for "proof" that SS will provide the same level of support to you in 2036 as it's providing to your parents today.

If you will tell me what your parents' SS benefit amount is, and how much other income they have from their pensions and home sales, and what their average indexed monthly earnings were when they were contributing to SS, and how many years they contributed for, and what your average indexed monthly earnings are now, and how many years you expect to contribute to SS by 2036, I'll go over to the SS homepage and attempt to find out whether your expected retirement benefit will be comparable to theirs in terms of replacement income.
I don't think if you reread my post, I actually said it would definitely be gone, in fact, I didn't say much at all.
We're doing that already, Social Security is currently broken for the future and it seems like a bad bet to count on it being there if you are under 50. I am expecting it not to be there for me or at least only at an insufficient level and only after I am 70.
I am sorry, I really did not mean to get on a debate on this.

Maybe you did not understand me, I would honestly be happy if you show me why SS will be okay when I am 70. I would love to be wrong in my belief.

Obviously I will not be providing any of my parents finacials information, that was a little silly to ask wasn't it?

You are making claims that to me are new. I have never been involved in a SS debate here, assume I posted in ignorance and resolve that ignorance. I guess I bought all the Republican and Democratic hype over the last two decades that made me very pessimistic about SS.

I have no agenda in this debate and hopefully I am wrong.

BTW: Voyager, I am sad to report I work with otherwise smart people whose plan for retirement is nothing more than the sale of their house that they have a home equity loan on, SS and a small 401k. Again, I hope I am wrong, that would be great.

Interesting point on the illegals. Are they actually helping to prop up the Social Security system?

Jim

[Kimstu]

Maybe you did not understand me, I would honestly be happy if you show me why SS will be okay when I am 70.

And I'll be happy to attempt that, if you will give me some reasonable idea of what you mean by "okay".

Are you afraid that in 2036 SS benefits will simply disappear altogether? That they will be price-indexed rather than wage-indexed and therefore will supply less replacement income? That they will be replaced by a privatized pension scheme that will be burdened with heavy transition costs and overheads? Or what?

A good place to start would be with your annual Social Security Statement (http://ssa-custhelp.ssa.gov/cgi-bin/ssa.cfg/php/enduser/std_adp.php?p_faqid=129&p_created=975699798&p_sid=VVZoZvQi&p_accessibility=0&p_redirect=&p_lva=&p_sp=cF9zcmNoPTEmcF9zb3J0X2J5PSZwX2dyaWRzb3J0PSZwX3Jvd19jbnQ9MTIsMTImcF9wcm9kcz0mcF9jYXRzPTEyLDc5JnB fcHY9JnBfY3Y9Mi43OSZwX3NlYXJjaF90eXBlPWFuc3dlcnMuc2VhcmNoX25sJnBfcGFnZT0x&p_li=&p_topview=1). Are you worrying that your estimated monthly retirement benefit will be less than the statement says? Or do you think that that benefit is significantly smaller than the one your parents are getting, even allowing for differences in income and years of contribution? (And if so, then yes, I'm afraid you are going to have to back that up with some facts and figures about your parents' SS history, although of course it need not and should not include any specific clues to their individual identities or actual financial records.)

Give me a reasonably quantitative idea of what you expect to receive from SS (compared to what you think members of your parents' generation are receiving from it), and I'll be happy to try to figure out whether and why your expectations seem reasonable or unreasonable.

You are making claims that to me are new. I have never been involved in a SS debate here, assume I posted in ignorance and resolve that ignorance. I guess I bought all the Republican and Democratic hype over the last two decades that made me very pessimistic about SS.

'Sokay, I don't mean to snap at you. And I think it is definitely smart to work on your private retirement savings rather than just being blindly optimistic about the ability of SS to support you. But that doesn't mean you ought to just be blindly pessimistic about the ability of SS to support you, either. Certainly, there are some serious issues to be concerned about with regard to SS, but there's also been a lot of unscrupulous hype designed to get people panicking about it, too.

[What Exit?]

And I'll be happy to attempt that, if you will give me some reasonable idea of what you mean by "okay".

Are you afraid that in 2036 SS benefits will simply disappear altogether? That they will be price-indexed rather than wage-indexed and therefore will supply less replacement income? That they will be replaced by a privatized pension scheme that will be burdened with heavy transition costs and overheads? Or what?

A good place to start would be with your annual Social Security Statement (http://ssa-custhelp.ssa.gov/cgi-bin/ssa.cfg/php/enduser/std_adp.php?p_faqid=129&p_created=975699798&p_sid=VVZoZvQi&p_accessibility=0&p_redirect=&p_lva=&p_sp=cF9zcmNoPTEmcF9zb3J0X2J5PSZwX2dyaWRzb3J0PSZwX3Jvd19jbnQ9MTIsMTImcF9wcm9kcz0mcF9jYXRzPTEyLDc5JnB fcHY9JnBfY3Y9Mi43OSZwX3NlYXJjaF90eXBlPWFuc3dlcnMuc2VhcmNoX25sJnBfcGFnZT0x&p_li=&p_topview=1). Are you worrying that your estimated monthly retirement benefit will be less than the statement says? Or do you think that that benefit is significantly smaller than the one your parents are getting, even allowing for differences in income and years of contribution? (And if so, then yes, I'm afraid you are going to have to back that up with some facts and figures about your parents' SS history, although of course it need not and should not include any specific clues to their individual identities or actual financial records.)

Give me a reasonably quantitative idea of what you expect to receive from SS (compared to what you think members of your parents' generation are receiving from it), and I'll be happy to try to figure out whether and why your expectations seem reasonable or unreasonable.

'Sokay, I don't mean to snap at you. And I think it is definitely smart to work on your private retirement savings rather than just being blindly optimistic about the ability of SS to support you. But that doesn't mean you ought to just be blindly pessimistic about the ability of SS to support you, either. Certainly, there are some serious issues to be concerned about with regard to SS, but there's also been a lot of unscrupulous hype designed to get people panicking about it, too.
Thanks, I was a little startled by the original response.

I guess I bought into the hype. My entire adult life, I have pretty been reading about how SS would be insolvent by 2020 or we won't have enough money going in and they would have to drastically reduce benefits, or the Baby Boomers would consume most of the SS pool. Then I hear these plans by Bush and others to change SS completely or privatize it. etc.

I am worried that SS won't have enough money to provide the benefit listed, I am also fearful that the age of retirement will be pushed out further and as I plan to retire by 65, I already know SS won't be there as it was for my parents.

I don't have exact figures, I have largely ignored SS as I was not counting on it.

Why to you feel it will be able to stay solvent? What if anything has changed? Why aren't the Boomers a Social Security Bomb?

Jim

[DanBlather]

The concept of investing the money individually instead of a tax-forward social net is what we're talking about. It's not a new or untested idea. Other countries and even municipalities within the US have done this with great success. People are still required to put money away but it becomes personal wealth upon retirement.
Great idea, let's do that with money for Defense and roads. Let it accumulate for a few years in a nice investment and then it will be worth more. But oops, can't do that becuase we need to spend the money now. Same thing with SS; the SS taxes you pay today are used to pay out benefits to people who are retired. There is some small percent that goes in a "reserve", but it ain't much.

Besides, if people can invest their own SS taxes what happens if they had put it in something like Enron thyat goes belly up? Do we let them eat dog food?

We already have 401Ks and other programs that let you save pre-tax money. SS is a safety net.

[Malodorous]

Why to you feel it will be able to stay solvent? What if anything has changed? Why aren't the Boomers a Social Security Bomb?

The problem of having all the Boomers retire and have to rely on their less numerous progney to support their SS payments was forseen in the 80's. The solution was to have the boomers pay extra into SS, put that extra money into treasury bonds and then use it to make up the difference when they retire.

According to some demographic projections, the extra collected may only take us through to 2048 or so. But its pretty misleading to call that a crisis, as it 1) 40 years in the future, 2) The Demographic outlook may change between now and then 3) Its not so hard to come up with a few changes in the intervening 40 years that will make the program more solvent if things don't improve.

[Dangerosa]

I'm more concerned about Medicare than Social Security. Health costs WILL outpace inflation. We can do more and more to keep someone alive every year - often at huge costs. And as a society, life is sacred to us - we spare no expense in maintaining it.

My sister used to work in the ICU at the V.A. She had men in their 80s and 90s, kept alive - non-responsive - on life support for MONTHS - because next of kin would not let go. Now, that's a different government pot of money - but the nature of people is the same.

My retirement funds will get us through just fine - IF we don't have thousands in insurance and medical expenses each month.

[What Exit?]

The problem of having all the Boomers retire and have to rely on their less numerous progney to support their SS payments was forseen in the 80's. The solution was to have the boomers pay extra into SS, put that extra money into treasury bonds and then use it to make up the difference when they retire.

According to some demographic projections, the extra collected may only take us through to 2048 or so. But its pretty misleading to call that a crisis, as it 1) 40 years in the future, 2) The Demographic outlook may change between now and then 3) Its not so hard to come up with a few changes in the intervening 40 years that will make the program more solvent if things don't improve.
Again I am not saying you are wrong, but could you point to a few of the projections that you know of? As usual I would like to educate myself.

Why are candidates on both sides still talking about SS as a scary issue? I know Thomson and Obama have both brought it up recently. I have heard McCain talk about it in the past. Hillary seems to agree with the bulk of the posters in thread.

Jim

[DSYoungEsq]

Why are candidates on both sides still talking about SS as a scary issue? I know Thomson and Obama have both brought it up recently. I have heard McCain talk about it in the past. Hillary seems to agree with the bulk of the posters in thread.

Jim
Jim, why do you think they are talking about it as a scary issue? If you are on the outside, and you are trying to get in, what better way than to point at those who are on the inside and say, "These folks are making it so that you will be [insert favorite bogeyman here]!" Social security is a bogeyman, and an easy one to employ because no one without some significant accounting and financial background can really know for sure what is going on with it. Thus, the common masses cannot easily be educated to understand that it IS a bogeyman.

In short, it's politics as usual. <sigh>


Which is NOT to say that there don't have to be adjustments made, but they do that all the time, so it's not that big a deal...

Doug

[jimmmy]

I would add that the "big deal" is some (http://money.cnn.com/2007/04/10/pf/retirement/ebri_survey_2007/index.htm) percentage, [probably less than 75% but more than 25%, but I am not sure what the exact number is] are entirely or so-close-to-entirely-that-it-doesn't-really-matter dependent on Social Security to retire at all.

[RTFirefly]

Thanks, I was a little startled by the original response.

I guess I bought into the hype. My entire adult life, I have pretty been reading about how SS would be insolvent by 2020 or we won't have enough money going in and they would have to drastically reduce benefits, or the Baby Boomers would consume most of the SS pool. Then I hear these plans by Bush and others to change SS completely or privatize it. etc.

I am worried that SS won't have enough money to provide the benefit listed, I am also fearful that the age of retirement will be pushed out further and as I plan to retire by 65, I already know SS won't be there as it was for my parents.

I don't have exact figures, I have largely ignored SS as I was not counting on it.

Why to you feel it will be able to stay solvent? What if anything has changed? Why aren't the Boomers a Social Security Bomb?

JimBecause the hype has been just that - hype. A lot of it has been for the purpose of creating popular support for hefty changes to Social Security. It's hard to get public support for fixing a program that ain't broke, so...

From the 2007 OASDI Trustees' Report (http://www.ssa.gov/OACT/TR/TR07/II_project.html#wp105057) (scroll down to just above the second graph):
Under the intermediate assumptions, the OASDI cost rate is projected to decline slightly in 2008 and then increase up to the 2007 level within the next 2 years. It then begins to increase rapidly and first exceeds the income rate in 2017, producing cash-flow deficits thereafter. Cash-flow deficits are less than trust fund interest earnings until 2027. Redemption of trust fund assets will allow continuation of full benefit payments on a timely basis until 2041, when the trust funds will become exhausted. This redemption process will require a flow of cash from the General Fund of the Treasury. Pressures on the Federal Budget will thus emerge well before 2041. Even if a trust fund's assets are exhausted, however, tax income will continue to flow into the fund. Present tax rates would be sufficient to pay 75 percent of scheduled benefits after trust fund exhaustion in 2041 and 70 percent of scheduled benefits in 2081.
A few things:

1) One's future benefits increase with wage levels until one begins drawing Social Security benefits, and then they go up on a modified cost-of-living basis. This means that the future benefits they're talking about are considerably greater than today's, relative to the cost of living. It's those benefits that may have to be cut 25-30% in 2041 and beyond, if we don't do anything at all.

IOW, if we do nothing at all, and benefits have to be cut 25% in 2041, the benefits of the typical new retiree in 2050 will still in all likelihood have more purchasing power then, than do the benefits of the typical new retiree today.

We might want to do something about that, but if we didn't, it wouldn't be the end of the world. And it's the sort of thing that can wait for a solution a few years down the road, after we've dealt with more urgent problems - global warming, the increase in health care costs in America (which threatens the actuarial health of Medicare much sooner and more severely than Social Security is threatened), stuff like that.

2) Note the words "intermediate assumptions" at the beginning of the quote. There are also a set of optimistic and pessimistic projections, which are shown in a graph at the bottom of the page. Under the pessimistic assumptions, the Social Security trust fund empties out about 10 years earlier. Under the optimistic projections, the trust fund never runs dry.

So the best-case actuarial scenario is that a fix is never needed. The worst-case actuarial scenario is that benefits need to be cut 25-30% in 2031, from a substantially higher benefit level than we have now.

That's what the system actuaries say, and AFAIK, nobody's ever challenged their integrity or accuracy in any way that's been specific enough to be meaningfully debated.

What is projected to happen (under the intermediate projection) is that the government will have to pay back, between 2027 and 2041, the money it's been borrowing (and paying interest on) from the Social Security trust fund. As that happens, the Treasury will have to find other lenders to replace Social Security, and the rate of interest probably will be slightly higher.

Really, the best thing to do about Social Security right now is to get the General Fund's finances in better shape, so that it won't have to borrow so much money down the road.

[What Exit?]

Because the hype has been just that - hype. A lot of it has been for the purpose of creating popular support for hefty changes to Social Security. It's hard to get public support for fixing a program that ain't broke, so...

From the 2007 OASDI Trustees' Report (http://www.ssa.gov/OACT/TR/TR07/II_project.html#wp105057) (scroll down to just above the second graph):
...
Thank you for this excellent post. This turned into a very educational thread. I still won't be relying on SS to retire, but it sounds like it will make it a lot easier once I hit around age 70.

I will cease spreading doom and gloom about it in the future. I have been guilty of this for quite some time.

Please consider ignorance fought.

Jim

[RTFirefly]

Thank you for this excellent post. This turned into a very educational thread. I still won't be relying on SS to retire, but it sounds like it will make it a lot easier once I hit around age 70.

I will cease spreading doom and gloom about it in the future. I have been guilty of this for quite some time.

Please consider ignorance fought.

JimThanks muchly. I wouldn't want to rely on SS for the bulk of my retirement, since I plan to continue to live the upper-middle-class lifestyle until they wheel me off to the nursing home, and SS certainly won't support that by itself.

But I feel comfortable in relying on it as one leg of a triad of funding sources for retirement, with the other two being employment-based retirement funds, and my wife's and my personal assets and investments. Between all that, life should be good, say, around 2023. :) And for those who work at WallyWorld and probably won't have anything besides Social Security when they retire, I'm damned glad it's more secure than the rumor mill makes it out to be.

[Voyager]

BTW: Voyager, I am sad to report I work with otherwise smart people whose plan for retirement is nothing more than the sale of their house that they have a home equity loan on, SS and a small 401k. Again, I hope I am wrong, that would be great.

Jim
My daughter's boyfriend is going nuts, because his parents are doing exactly this (though his mother has a pension which might help.) SS isn't designed to provide a complete middle class retirement income. It will be there.

Given the average debt. and the average savings, I'm betting we will able to hire retired people as servants cheap when we're retired. :)

[Voyager]

Thank you for this excellent post. This turned into a very educational thread. I still won't be relying on SS to retire, but it sounds like it will make it a lot easier once I hit around age 70.

Jim
One last thing. You'll see if you look at your report that you get significantly greater benefits if you put off drawing them until later - 70 is pretty good, IIRC. But you have the choice. It might even be worth eating into capital a bit to put off officially retiring until later - I haven't run the numbers, so I'm not positive.

Medicare is far the bigger problem. Maybe we'll have UHC by then so it won't be as much of an issue. (Because overhead will be decreased in a single payer system)

RTFirefly, I think I recall reading that in the past the optimistic scenario has been the most accurate. Do you remember seeing this? That's no excuse not to plan for the intermediate one, of course.

[Cyberhwk]

As life expectancy increases, and as average education levels increase, thus delaying more people's entry into the full-time workforce until their early- to mid-20s instead of their late teens, why shouldn't we expect to delay retirement?Can someone else elaborate on this. Is it just the "I'm sick of working and want to retire NOW" opinion that makes supporting raising the retirement age such a death wish politically or is there some actual logistical problems with it too?

[Quartz]

Thank you for this excellent post. This turned into a very educational thread.

Likewise.

[ParentalAdvisory]

Besides, if people can invest their own SS taxes what happens if they had put it in something like Enron thyat goes belly up? Do we let them eat dog food?

An index fund should prevent that, not that an index fund couldn't go belly up though. But if all the companies in an index fund are going belly up, there are bigger problems in the world.

[Dinsdale]

I guess I should stop being surprised at how many ostensibly intelligent folk insist on manitaining ignorance, rather than taking the minimal steps that would dispel their groundless concerns.

Thanks, RTF, from saving such folk the trouble of a 30 second google search (or the 5 seconds it would take to type www.ssa.gov).

[RTFirefly]

RTFirefly, I think I recall reading that in the past the optimistic scenario has been the most accurate. Do you remember seeing this? That's no excuse not to plan for the intermediate one, of course. I heard it too, but I don't have anything handy to support it with, and I can't remember who it was who made that claim, or what sort of supporting evidence they had. So I wasn't going to say anything.

IIRC, these claims were made in some blogs (I'm guessing one was Eschaton, since Atrios has a background in economics) back in early 2005, when Bush was trying to 'fix' Social Security. And again IIRC, the claims were that in the preceding years, the data had been falling in between the intermediate and optimistic projections.

But like I said, I don't have anything solid - just recollections that people said this.

[RTFirefly]

I guess I should stop being surprised at how many ostensibly intelligent folk insist on manitaining ignorance, rather than taking the minimal steps that would dispel their groundless concerns.

Thanks, RTF, from saving such folk the trouble of a 30 second google search (or the 5 seconds it would take to type www.ssa.gov).
Of course, if they go there and find the Q&A (http://www.ssa.gov/qa.htm) about Social Security's future, they'll encounter a slanting of the facts that makes the whole thing sound a good deal scarier than the Trustees' Report (http://www.ssa.gov/OACT/TR/TR07/) makes it out to be. So the SSA site plays on both sides in the battle against ignorance.

[What Exit?]

I guess I should stop being surprised at how many ostensibly intelligent folk insist on manitaining ignorance, rather than taking the minimal steps that would dispel their groundless concerns.

Thanks, RTF, from saving such folk the trouble of a 30 second google search (or the 5 seconds it would take to type www.ssa.gov).
Gee, Dinsdale, why don't you show me this easy google search worth of information instead of being so insulting.

[Dinsdale]

Gee, Dinsdale, why don't you show me this easy google search worth of information instead of being so insulting.

Because I've posted exactly such facts and links in any number of SS threads in the past, and I guess I didn't feel like it this morning.

For someone to say I am expecting [SS] not to be there [when I need it] betrays an almost willing ignorance. (Another aspect of ignorance reflected in such remarks is each individual's inability to predict when he or his relatives might become eligible for SS bens.)

It is very easy for anyone with a passing familiarity with the internet to find the current projections concerning the trust funds, as well as the implications should nothing be done in the meantime. Yet, for whatever reason, a huge number of people apparently get some satisfaction from repeating this utterly ignorant statement. IMO, your statement indicated either ignorance, or a desire to score some other policy points.

[What Exit?]

Because I've posted exactly such facts and links in any number of SS threads in the past, and I guess I didn't feel like it this morning.

For someone to say I am expecting [SS] not to be there [when I need it] betrays an almost willing ignorance. (Another aspect of ignorance reflected in such remarks is each individual's inability to predict when he or his relatives might become eligible for SS bens.)

It is very easy for anyone with a passing familiarity with the internet to find the current projections concerning the trust funds, as well as the implications should nothing be done in the meantime. Yet, for whatever reason, a huge number of people apparently get some satisfaction from repeating this utterly ignorant statement. IMO, your statement indicated either ignorance, or a desire to score some other policy points.
Well, I will accept the ignorance point, but as I pointed out, I have never been in one of these SS debates before. I have no clue what policy points could be scored as candidates on both sides have talked about SS would fail in upcoming years.

I am sorry you can be bothered to throw insults into an already resolved issue and yet not be troubled to back it up with these quick Google links. My Google-Foo was no help a few nights ago and it was not until RTFirefly's really excellent posts (in striking contrast to yours) that anyone really cleared this up for those of us that did remain ignorant.

Jim

[Quartz]

I guess I should stop being surprised at how many ostensibly intelligent folk insist on manitaining ignorance, rather than taking the minimal steps that would dispel their groundless concerns.

You know, some of us aren't Americans, so wouldn't have the background knowledge to understand even if we knew where to start.

[papaw]

I will be 65 in December of this year, and will be eligible for full benefits at age 65 + 10 months. At that time the amount will be about $1200 a month. I don't intend to retire yet, but I may take that sum per month and make sure that I don't make a taxable income over the limit at which my benefits would be reduced.
I never figured SS would be enough to live on in my old age.
One of the big problems with SS AFAIK is the large portion of the fund that has been used by the government by "borrowing" from SS, contrary to the way it was set up originally.

[Voyager]

I never figured SS would be enough to live on in my old age.
One of the big problems with SS AFAIK is the large portion of the fund that has been used by the government by "borrowing" from SS, contrary to the way it was set up originally.
Originally people got more money than they put into the system, which was the point. As for borrowing, the money gets put into government bonds, which is by definition the government borrowing from the system in a sense. I suppose that it could have been put into stocks from the start, but I suspect that this didn't seem like such a good idea 4 years after the 1929 crash. I think the real problem, if I got it right, is that borrowing from SS makes the actual deficit seem smaller.

BTW, I think I read about the optimistic projection in Krugman's column in the Times. I'll see if I can find it and if he gives a cite.

[Ignatz]

I will be 65 in December of this year, and will be eligible for full benefits at age 65 + 10 months. At that time the amount will be about $1200 a month. I don't intend to retire yet, but I may take that sum per month and make sure that I don't make a taxable income over the limit at which my benefits would be reduced.I never figured SS would be enough to live on in my old age.
One of the big problems with SS AFAIK is the large portion of the fund that has been used by the government by "borrowing" from SS, contrary to the way it was set up originally.

papaw, I bolded the phrase above. If you wait until the age when you get full SS, there is no limit to the amount you can earn without having the SS benefit reduced. And the amount of the SS keeps going up as long as you work and pay into the system.

[Malodorous]

As for borrowing, the money gets put into government bonds, which is by definition the government borrowing from the system in a sense. I suppose that it could have been put into stocks from the start, but I suspect that this didn't seem like such a good idea 4 years after the 1929 crash. I think the real problem, if I got it right, is that borrowing from SS makes the actual deficit seem smaller.

The system didn't start running a surplus until the 80's, when they upped the amount people had to pay in to compensate for the eventual Boomer retirement. The decision to invest in Treasury Bonds was made then by, interestingly, a young(er) Alan Greenspan, who was head of the commision appointed to help make the necessary changes.

[Dangerosa]

papaw, I bolded the phrase above. If you wait until the age when you get full SS, there is no limit to the amount you can earn without having the SS benefit reduced. And the amount of the SS keeps going up as long as you work and pay into the system.

No, but SS benefits become TAXABLE very quickly nowadays - which has the same effect.

On the other hand, I personally would rather earn a $1 and pay $.30 in taxes on it, than not earn the $1. Its possible in taxes to actually end up in the hole, but it isn't usual.

[Dangerosa]

An index fund should prevent that, not that an index fund couldn't go belly up though. But if all the companies in an index fund are going belly up, there are bigger problems in the world.


The real problem with this is that the time it takes for an index fund to recover (like from the dot com crash) can be several years. If you are dependent on the principle giving you a return, and it doesn't create that return, you have to dig into the principle. That can create quite an issue for someone who needs the money today to live and won't live the ten years it may take to recover - if it would recover while decrementing the principle.

I know several people who were darn close to retiring (early) when the dot com bubble burst - and most of them are just now darn close to retiring again. And a few who had to go back to work when their investments took a dive.

[DanBlather]

An index fund should prevent that, not that an index fund couldn't go belly up though. But if all the companies in an index fund are going belly up, there are bigger problems in the world.So are you going to require people to put their money in an index fund?

[Cyberhwk]

Can someone else elaborate on this. Is it just the "I'm sick of working and want to retire NOW" opinion that makes supporting raising the retirement age such a death wish politically or is there some actual logistical problems with it too?AHEM.... ;)

[tonedef]

So does the USA have a superanuation or anything similar?
What other countries have this?

[Frank]

AHEM.... ;)
But they are increasing the age at which you can collect full benefits. Gradually.

Someone born in 1942 can collect full benefits at 65+10 months, in 1957 at 66+6, in 1960 at 67. I expect that trend to continue.

[gigi]

And yes, the official retirement age is going up; my generation will be entitled to full SS benefits only at age 67 (though we could take reduced benefits at 65), and will get more money if we delay retirement till 70. I don't really see a problem with that. As life expectancy increases, and as average education levels increase, thus delaying more people's entry into the full-time workforce until their early- to mid-20s instead of their late teens, why shouldn't we expect to delay retirement?But even folks in their 50s are worried about not being hirable. Even those willing and able to work longer may not be able to get jobs, at least at the level they had been. But yeah, you're right that if the years of retirement stay constant but we stay alive longer, we would have to wait to receive the same length of benefits as our predecessors. It's just not clear that we can support ourselves in the meantime.

[Clothahump]

Given that SS is nothing more than a giant Ponzi scheme, the only viable solution is to dismantle it and give the money back. I'd be happy as a clam in mud if I got even 50% of my money back. That's more than I will get out of SS when I retire, and I can do a damn sight better job of investing it for my retirement than the government can.

[BrainGlutton]

Given that SS is nothing more than a giant Ponzi scheme . . .

Bear in mind that the Bush plan to privatize Social Security:

1. Would not have affected the projected shortfall of SS tax receipts or had any net effect on the overall solvency of the system. (http://en.wikipedia.org/wiki/Social_Security_debate_%28United_States%29#Bush.27s_proposal)

2. Was never anything but a cynical scheme to funnel tax money to Wall Street. See "The Trillion-Dollar Hustle," by Thomas Frank, Harper's, January 2002 (here, (http://www.harpers.org/archive/2002/01/0079035) but only if you're a subscriber); and "The 4.7 Trillion Dollar Pyramid," (http://www.harpers.org/archive/2005/04/0080499) by Michael Hudson, Harper's, April 2005.

The "Ponzi scheme" you speak of is honest by comparison -- in fact, is honest, period.