Means test for Social Security? Age of retirement based on work type?

Great Debates
1

What do you think of a system that says that people who make or have over a certain amount of money are entitled to less assistance from the government via social security ?

Personally, I think it’s almost a good idea in theory, but that it would and could never happen. It came up in a conversation with my parents, who are approaching retirement age, the other day. Naturally, they hated the idea and kept saying "you’ve just cut off your own parents! ". However, it seemed like they hated it because it would deprive them of money first, and then thought of other reasons afterwards. So here are some thoughts:
First of all, NO politician would ever propose such a thing and be elected / re-elected. It would be political suicide . Old people vote reliably, and they typically vote for what’s in their own interests, not necessarily what’s in the best interests of the community ( e.g. school funding ).

Second of all, it could be viewed / skewed as almost ‘punishing’ successful people / ‘rewarding’ those who didn’t have the foresight or will power to save for retirement, much as some people argue that about income tax. Of course, there are many other factors that go into how much one might have saved for retirement. Obviously someone who inherited a lot of money, had enough seed money to start out with that they were able to make a lot from investments / real estate, or was in a highly paid profession will find it easier to put some money aside than a waiter / store clerk / warehouse stocker will, even if they both worked just as long and hard as each other. This point is also highly debatable, I’m aware.

Third of all, I believe it would lead to widespread cheating and gaming of the system so that rich people could hide their true assets in order to collect SS benefits. It would be the modern day analog of scenes from the old days when people would hide all their valuables when the tax man knocked at the door in order to hide their true wealth, pretend to be poor, and thereby be taxed less.

On the other hand, given that there is a finite amount of money to go around, is it the best or wisest idea to give the same amount of money and benefits to a millionaire as to an indigent senior citizen? Putting aside notions of who earned / contributed more, if the government only has $100 to give, would it be the best practice to give it to the person with $3,000 or the person with $3,000,000? Maybe the person with $3,000,000 worked their ass off all their life to be successful and made many sacrifices to save money , while the guy with $3,000 never worked an honest day in his life, was frequently in jail for killing puppies, and blew any cent he got on hookers. OTOH, maybe the guy with $3mil never really worked, just was lucky enough to be born to rich parents, inherited $10mil in seed money, and then was able to collect money from being a slum lord, while the guy with $3k worked his ass off all his life, but doesn’t have money because of some tragedy / sent his kids to college / lost it all, etc. The point is we don’t know, and it would be impossible to generalize because there are too many possible permutations. So, just given the amount of money they have, which one should get the $100, or should they both each get $50?

Another point is that social security was arguably not designed to be what it has become and has to change. My understanding is that it was supposed to help out poor old people in the last few years of their lives after a lifetime of hard work. Life expectancy was lower when they set the age at 65. People were not generally expected to live many decades beyond that, as they more frequently do today. For example, in some districts, police and fire fighters can retire at age 50 with full benefits and 100% pay being given to them or the spouse that survives them for the rest of their lives. Now, you can argue that they deserve it and that in some districts they put their lives on the line, I’m just saying that social security arguably wasn’t intended to be giving people full pay for 30+ years (more if the spouse is considerably younger) and that it has been demonstrated many times that the system cannot survive in it’s current state for much longer; it is just not possible .

That’s another issue, should there be separate ages for retirement based on the type of work? I.e. if someone sits at a desk all day, I think the age at which they can retire with full benefits (not full pay) should be raised to at least 70. I am a teacher and I walk around all day ( never want to be one of those teachers that sits at their desk all day), but I think my retirement age should be raised to 72 (I am 30 now, FWIW) because walking around is nothing compared to the physical demands made on my body when I take side jobs at restaurants. My mentor is 80, but he is still going strong and loves it. However if someone is a lumberjack, has one of those horrible warehouse stocking jobs, or some other physically demanding job, then the age should stay at 65 or perhaps be lowered because of the reality of what such work does to a 65 yr old body, and what that body can be expected to do.
Well, this wall of text is already too long, rambling, and devoid of several key points I’m sure, but what say you?

TL:DR - Should the government give less money in social security to people who already have a bunch of money and arguably don’t really need it?

Should someone who does back breaking physical labor be allowed to retire earlier than someone who sits at a desk?

2

It’s not assistance from the government. It’s a program I was forced to pay into, as well as my employers, for over 50 years.

Fire fighters and LEOs who retire at 50 or so, often after 30 years service, are getting those benefits through pension plans. In many cases they do not qualify for social security because they are receiving a “government” pension. If they do get SS, it may be a reduced amount because of that pension.

Should folks who plan to make a lot of money be able to opt out of social security?

3

Some of this already happens. 1) SS payments max out at about $2500/month regardless of how much you made. 2) SS payments end up being taxed if you have lots of IRA/401K income.

No. To hard to administer and everyone ‘wears out’ at a different rate and for different reasons.

4

Means testing causes problems. Those who have paid into the program all their lives feel they ought to get their due even if they’re financially stable without it. For those who have just enough to get by want SS payments to give them a better life. Someone has to reture quite wealthy not to notice whether or not they collect their SS. And even then they’ve paid into the system on the current basis and they should get the return that was promised.

On the other hand maybe there could be incentives to have people forgo their SS payments if they don’t need them. Perhaps the benefits can be passed to their children or a lump sum payment instead of payments for an undetermined length of time.

5

The SS system already is means tested in a way. The tax only applies to the first 9k a month or so in income but the benefit is measured via a 90-32-15 system. The first $800 or so in taxable income results in a benefit of 90% of the taxes you pay, the next 3k-ish results in a 32% return, the next 4k or so results in a 15% return. So someone who pays SS taxes on 1k a month will make a far higher return (about $800/month) than someone who pays SS taxes on 9k a month (about $2500/month in benefits). The person who pays 9x more taxes only gets 3x the benefits. Plus if your single income is higher than 25k or your joint income is higher than 32k you have to pay federal income taxes on SS benefits which are probably only 10-20% for the vast majority of retirees who do pay SS taxes.

Which is fine by me being progressive and all, but SS is already a progressive system. Times like this I’m glad the public aren’t too informed, if they knew about that aspect of SS then I’m sure Frank Luntz would be all over it calling it the ‘success punishment scale’ or something and all the fox news viewers who would be eating dog food under the ‘fair’ system would be clamoring for it the same way they are opposed to an estate tax they’ll never be rich enough to pay.

If a person truly is rich, I don’t think losing SS benefits would mean much to them. But that is for the truly rich, not just the well off or upper middle class.

Should someone who does manual labor be allowed to retire early? They should retire early, but I don’t know how you’d set the system up for them w/o public backlash.

People like Paul Krugman have written about how the growth in life expectancy has not really benefited the bottom economic and educational rung(s) of society. We are seeing life expectancy go up maybe a year a decade, but most of that is due to college educated professionals. People with HS or lower educations are stagnating. So whenever someone says we should raise the SS age because people are living longer, they mean that people who haven’t seen life expectancy go up in 30 years should work longer because doctors and office clerks are living longer. It is a sham. But I don’t know how you’d institute a policy where your SS benefits are determined by your job w/o creating a ton of bureaucracy and public backlash.

6

Ahh, I see. Dang. Well, I suppose that would be the key point I was missing, thank you.

7

Right, I agree, and as someone who has worked full / nearly full/ over time continuously since I was legally able to at age 14 and always paid into the system I would like to think I would deserve it more than some people I know who have never worked an honest day in their lives.
However, this is partly predicated on the notion that SS HAS TO change, it’s just a question of how and exactly when. So while I would like for it to be available to improve my quality of life if I live long enough to retire, I would rather see it go to someone who would die without it or be seriously hurting. This being under the assumption that we can’t both have it. Obviously if we could, I would opt for that.

8

SS can be kept solvent using various methods.

Decrease benefits by doing one or more of the following:
Increase the retirement age
Means testing the program
cutting benefits (either across the board or at the higher ends)

Increase revenue by:
Raising the cap from 110k
Raising the tax rate from 12.4% (split 50/50 employer/employee)

You can also work on immigration changes to change the number of working employees per retiree, etc.

But there are lots of ways to keep the system solvent. Raising the cap alone will keep the system solvent until the 22nd century.

Raising the tax rate from 12.4% up to 15% and keeping the cap will keep the system solvent until the 22nd century and I think into perpetuity.

The insolvency of SS is overstated in the media. In part it is overstated because of an alliance between conservative politicians and financial advisers. The politicians want to privatize it because they don’t like the idea of a public retirement system, the financial system wants to privatize it because they get to take 2-4% of the revenue off the top for managing the money (at $800 billion a year that is close to $30 billion a year in management fees).

9

No. That’s the price of civilization.

10

Means testing should be avoided. It adds complexity, motive for cheating, requires more paperwork, etc. Also, since the government (IRS) does not explicitly track citizen’s wealth it won’t have the desired effect: high-income earners who failed to save (whether due to medical expenses, bad loans to relatives, high living) will be denied the pension they need (and some low-income earners will get a pension they don’t need).

Means testing is a bad idea. Just let the rich get their SS pensions. As Wesley Clark points out upthread, the SS program already has progressive features, and can be made more so: the cap on taxable income should be raised.

The “impending SS insolvency” is an issue which is HUGELY exaggerated by the right-wing hypocrites. (Medicare cost is a real problem, but that involves uncontrolled health costs, not tax policy.)

11

Just to give an Australian perspective all social security is means tested against earnings and assets. We don’t pay into a SS bucket but it is taken from general revenues. We do have a separate system called superannuation [from what I understand much like a 401K] and again if this is sizable you would expect to get the old age pension reduced.

My goal is to have enough in my super to retire without needing a pension as I suspect that by the time I retire the pension will be crap.

Good system and seems to work out OK for 99% of people.

12

Deciding what an honest day’s work is would be quite an undertaking I think. I’m kind of curious what your definition is but that would throw the debate off track.

More generally… what would you all think if certain work types got better benefits but also had to pay more into the system?

13

Mean testing would transform social security from an insurance benefit that you paid for into another form of welfare.

I think we can maintain the solvency of social security by lifting the cap on social security.

14

Problem is, then it still becomes welfare, since the moderately wealthy will now be paying in a lot more than they get out.

How about this? Just let SS pay out what it can(75% after about 2030), without messing with the system, and supplement poor seniors’ income with food stamps? It’s a means test without really making any changes.