No link yet, but I’m listening to All Things Considered: Bush has just announced a new plan to make Social Security solvent by slashing its benefits through means-testing. Under “indexed benefits,” what you get would be based on your pre-retirement income. All but the bottom third of SS recipients would see their promised benefits significantly reduced. The plan purportedly would reduce the system’s expenditures by 70% over the next 20 years.
That will be the effect for a lot of people, yes. The presumption is that if they have such an income for so long that they paid in large amounts then they probably have private savings for retirement or assets they had purchased during their working careers that they can live off of during retirement.
Honestly, I’m starting to wonder about why we need “social security” at all, especially if it’s going to be means tested and based on private investments.
Why not just scrap it and replace it with welfare for needy elders, the disabled, and government subsidized life insurance? Wouldn’t that accomplish the same goals and give middle-to-upper income people more control over their retirement funds?
That’s pretty much what the proposals will amount to. The upper two-thirds of SS recipients will get lower payouts, reducing the payouts by up to 70% according to the article, and the payroll taxes will go to providing for those who have less independent means. It’s just that politicians aren’t honest enough to change the name of SS to welfare and to pretend it isn’t universal anymore since the taxes certainly will be. The 70% freed up by cutting benefits to those with some level of means to support themselves will probably be used to cushion the transition to private accounts.
Hell, I’m all for welfare, just call it welfare. None of this obfucation and half-measures.
The “privatization” thing worries me more. I still won’t be able to chose exactly how much or how to invest, and it gives the government a direct nudge into the stock market. The government would become the largest shareholder in the US! Their interests and the interests of the corporations the investmnets lie in would become one and the same. That’s not privatization, that’s damn near socialism.
Well, I advocated means-testing social security a long time ago. Just don’t call it a *cough cough * tax hike on the rich, which it is, and he might even get Republicans to buy in.
Since Social Security is such an abysmal investment mechanism, might as well turn it into a welfare program. If you’re poor and elderly, you’ll get help. If you came through life with a wad of assets, well sorry, you’re just going to have to cash some of them in and pay for your retirement. A lot of people in reasonably high brackets almost always have their own retirement plans and savings, and are usually house-rich, in that they may own a nice home with the mortgage paid. If they have to, they can take a reverse mortgage and pay for their retirement that way.
A retiree has no income, just assets that may be dividends or income of some sort. For example, I’m 65, and have $6 million dollars of accumulated assets. But no income. I’m going to live off the interest/dividends/whatever from that as long as I can until I die.
Am I wealthy? Should I get SS? Am I wealthy because of the asset amount, or because of how I’ve structured the payout?
At some point I will start living off of the principle. The gamble is to structure things based on how long I will live, which is difficult to guess. If assets aren’t counted, can I just restructure the payout, and then not be considered wealthy, and now receive SS?
As always, the Devil will be in the details. If we are looking at Richard Poser’s progressive indexing scheme, the “well off” who are looking at benefit cuts are the people who have had working income of no more than $20,000. Whether that is earned income or total income I don’t know but you would think that it is total income.
It does seem to me that a need or means test for the program does work a radical change and sets the whole SS system up for failure. Just what sort of a reaction do you expect to get from the guy who makes, say, $60,000 per annum, kicks in 6% of his salary, or if self employed 12% of his net income, and is then told that his retirement benefits are going to be reduced? Just as soon as that happens you have created a man who can rationally think that he is being screwed and a man who has no self-interest is seeing SS preserved.
The President (and Mr. Poser’s scheme) effectively transforms SS from universal social insurance into a dole. At the same time it deprives the program of the wide support and acceptance it has enjoyed among the fully employed who have seen it as the cornerstone of financial security in old age. With a reduction of benefits those people who have looked to SS as their retirement income or as a substantial supplement to their own retirement income can no longer have that assurance. In the absence of that assurance I cannot imagine that the program will retain its broad political support.
One might think that the President’s scheme (with all its Robin Hood connotations) is little more than an incremental step toward the phase out of SS.
While I have little doubt of that I have always supported means-testing of SS to return it to the concept of helping those in need (a dole, if you feel so) rather than a straight entitlement.
My grandparents are worth more than twenty million dollars. Yet they get social security.
My mother in law is 75 and has more than $1,000,000 in investments generating income PLUS about $7,000 per month in retirement benefits and military pension from her deceased husband. Yet she gets social security (a reduced amount due to her working for the federal government for 30 years, though).
My mother is one of the top economist in her field and was well off enough to effectively write her own semi-retirement (she teaches now and writes development grant proposals for native american reservations). In a few years she’ll start drawing social security.
My father? Also semi-retired. Accepts some consulting contracts every now and again because he has three boys from a late-in-life second marriage who are all in college at the same time. Just told me he’d completed one this week that met his annual revenue goal for the year…in April. Lives in a gated community in Broward County, FL. Will shortly qualify for social security.
So, at least in my personal family history, there are a lot of people going to be drawing on the system who don’t, in any way, need it. That, to me, is a fine argument for means testing. If you want to call it a ‘dole’ or ‘welfare’ or ‘let’s make sure our old people aren’t starving in the streets’ and tax me for it…that’s fine by me. At least we’re honest about what we’re doing and it’s a worthy goal to be striving towards.
You know I can’t help but wonder what sort of reaction Bill Clinton would have gotten had he tried this.
In any case, reducing the total amount of the payout as this proposal does is certainly one way to bring the system back into balance. SS is already welfare, kids flipping burgers are working one hour out of eight to pay for golf tees for retired seniors.
If SS is meant to be an investment then it’s not fair, if it is meant to be a ‘insurance’, then It’s fair. I think we need to define what we want SS to be and what was the origonal concept for SS.
Yeah, that’s the problem I’m having right now. As it stands right now, SS is a “guranteed” source of income for retirement. A small one, yes, but as it stands a more secure and easier to build one than truly individual investments would be. Even if my investments tank, or I’m foolish enough not to make them, there’s always SS to make up some backbone.
In this plan, it won’t be there unless I’m truly needy. “Needy” being defined by the government. I cannot plan on it making up any significant part of my retirement income. Now, I don’t have any fundamental problem with that, but it is quite a difference from what SS is now, and thus will naturally be met with lots of resistance.
When was that?