Social Security vs. politician's fund

[hankhawk]

I received in my email, and want to know your reaction to
it – whether it’s factual and worth making an issue out of
it with our politicians. If it has some incorrect information,
I’d appreciate knowing what is correct and exactly where
to find that information. Thanks

SOCIAL SECURITY: This is worth the read… short and to the point!

Perhaps we are asking the wrong questions during election years. Our Senators and Congressmen do not pay into Social Security and, of course, they do not collect from it. Social Security was not considered suitable for persons of their rare elevated status in society.

They felt that they should have a special plan just for themselves. Many years ago, they voted in their own benefit plan. Throughout the years, no congressman has felt the need to change it. Why would they? After all, it’s a fantastic plan. It works like this:

When a Congressman or Senator retires, they continue to draw the same pay as when they were in the Senate or the House, until the day they die. The only condition is that the amount may INCREASE from time to time for cost of living adjustments.

For example, one Senator and one Congressman and their wives may expect to draw $7,800,000.00 (that’s seven MILLION, eight hundred thousand dollars!), with their wives drawing $275,000 during the last years of their lives. (This is calculated on anaverage life span.)

The cost to Senators and Congressmen? $0.00… Zero… Zilch… Nada!!! This little perk they voted for themselves costs them NOTHING! It is totally free to them. You and I pick up the tab for this plan. The funds for this fantastic retirement plan come directly from the General Fund… our tax dollars at work!

From our own Social Security Plan, which you and I pay (or have paid) into – every payday until we retire (which amount is matched by our employer) – we can expect to get an average of about $1,000.00 per month after retirement. Or, in other words, we would have to collect our average of $1,000.00 monthly benefits for 68 years before we could equal a Senator or Congressman’s extraordinary retirement benefits!!

Social Security could be very good if only one small change was made. And that change would be to jerk the Golden Fleece Retirement Plan out from under the Senators and Congressmen. Put them into the Social Security plan and watch how fast they would fix it!

[Kimstu]

Good news—it’s an urban legend! One thing at least to cross off the list of stuff you’re mad at your Congressman about.

[Pencil_Pusher]

I always find this sort of thing amusing. Who cares? Really. With all the problems in government right now, this is hardly a blip on the radar.

You know what, I don’t minde. Even more than that, its probably a good thing. The last thing I want is to give Congresspeople MORE of a reason to be the money-driven slimebags they currently are. There is simply too much money in politics right now. The solution is NOT to cut their pay/benefits. All that would do is further limit the pool of possible candidates to people who are independantly wealthy.

[Kimstu]

Oh thanks, Pencil Pusher. Here I thought I had headed off a debate about a non-existent issue, and now you’re gonna start a fight about whether we should be upset about it if it weren’t non-existent.

[december]

*Originally posted by Kimstu *
**Good news—it’s an urban legend! One thing at least to cross off the list of stuff you’re mad at your Congressman about. **

I will take snopes’s word that the figures in the OP are exaggerated. However, a careful reading of snopes shows that the Congressional pension is more exorbitant than it appears.

As of 1998, the average annuity for retired members of Congress was $50,616 for those who retired under CSRS and $46,908 for those who retired under FERS. Not bad, but not the highway robbery this piece makes it out to be.

Snopes doesn’t say how long the average Congressman served. Of course, some serve for many years, but others only a term or two. Suppose that the average retired Congressman served for 8 years. Then s/he would be receiving a pension of $46,908 - $50,616 for only 8 years of service. Also, I would assume that their pensions will escalate with inflation.

It is not true that Congressmen “paid nothing in on any kind of retirement,” and that their pension money “comes right out of the General Fund.” Whether members of Congress participate in the older Civil Service Retirement System or the newer Federal Employees’ Retirement System (FERS), their pensions are funded through a combination of general tax provisions and contributions from the participants. Right now, members of Congress in the FERS plan must pay 1.3% of their salary to FERS and 6.2% in Social Security taxes.

I presume Snopes is right that Congressmen didn’t pay nothing. However, we can deduce that the bulk of their retirement does indeed come out of the general fund. By comparisonl, Social Security benefits are paid entirely from Social Security assessments.

Since 40 years of Social Security assessments is needed to pay an average retiree $12,000 a year, it’s obvious that around 8 years of Social Security assessments plus a meager 1.3% isn’t remotely enough to pay around $50,000 a year.

So, the general thrust of the urban legend is true. Congressmen do indeed get remarkably generous pensions.

[jshore]

*Originally posted by december *
So, the general thrust of the urban legend is true. Congressmen do indeed get remarkably generous pensions.

Well, I would have to see how this compared to the pensions of others with similar levels of education, or with others in government service, or … before deciding how bad it is.

Hell, it is peanuts compared to pensions paid for CEOs in industry. I seem to recall that the CEO who drove Xerox into the ground in his remarkably short tenure before being fired gets something like (my memory is getting hazy here) $600,000 / yr per life. [Mind you, this is a total failure of a CEO…A “success” like Jack Welch is getting way more.]

So, while the thought that I am paying the likes of Trent Lott $50,000 a year in retirement doesn’t bother me nearly as much as that. (Let alone what I am paying him not in retirement…Hell, I’d be willing to take up a collection to have his pension match the CEO of Xerox if the bugger would retire now in return!)

[december]

*Originally posted by jshore *
**Hell, it is peanuts compared to pensions paid for CEOs in industry. I seem to recall that the CEO who drove Xerox into the ground in his remarkably short tenure before being fired gets something like (my memory is getting hazy here) $600,000 / yr per life. [Mind you, this is a total failure of a CEO…A “success” like Jack Welch is getting way more. **

I certainly agree that some CEOs are receiving way too much pension, particlularly the one who drove Xerox into the ground. (He couldn’t copy the company’s earlier success.) Suppose government officials could not receive a pension if their policies didn’t succeed! :eek:

A Congressmen receives far, far more pension than a worker earning a comparable salary. An aspect I neglected to mention is that the Congressional pension starts at retirement from Congress, not at actual retirement or age 65. According to the nonpartisan National Taxpayers Union, a group that has a long history of accurate Congressional and Presidential pension calculations,

Congressional pensions are typically two to three times more generous than those in the private sector and even more generous than pensions for most federal workers. Plus, the Congressional benefit is protected from inflation with Cost of Living Adjustments (COLAs), a feature that fewer than 1 in 10 private plans offer. Also, Members of Congress enjoy a much lower retirement age with full benefits than private sector employees, Social Security beneficiaries, and most Executive Branch employees.

Congressional retirement benefits are normally calculated by multiplying the years of Member service by 2.5 percent of the average of the three highest years’ salaries. Adjustments are made for other federal service, Members with spouses, or those who retire before age 60.

[december]

*Originally posted by Kimstu *
**Good news—it’s an urban legend! One thing at least to cross off the list of stuff you’re mad at your Congressman about. **

On second thought, I may have been too kind to the Urban Legends Web Site in my earlier post. They had a flat-out error.

The figures given as an example for Senator Bradley ($7,900,000 over the course of his and his wife’s lifetime, culminating in a top payout of $275,000) are simply outrageous amounts with no basis in reality. There is no conceivable way Senator Bradley could draw anywhere near that amount of money though his pension plan.

Actually, since inflation rates are uncertain and life spans are uncertain, it’s conceivable that Bill Bradley and his wife could receive incredible pension amounts.

E.g., suppse a pension pays $100,000 a years, escalates at 5% inflation, and continues for 50 years. The total payout would be $20,934,800. Change the escalation rate to 7% and the total becomes $40,652,893.

[Neurotik]

*Originally posted by december *
**E.g., suppse a pension pays $100,000 a years, escalates at 5% inflation, and continues for 50 years. The total payout would be $20,934,800. Change the escalation rate to 7% and the total becomes $40,652,893. **

So you are assuming Bradley will live to be 110?

And are those the actual figures, or are you just making something up?

[december]

*Originally posted by Neurotik *
**So you are assuming Bradley will live to be 110?

And are those the actual figures, or are you just making something up? **

These are actual figures. For convenience, they assume that the annual escalation factor is the same every year. You can do the calculation yourself. The sum of a geometric series a + ar + ar[sup]2[/sup] + ar[sup]3[/sup] + … + ar[sup]n[/sup] is:

a(r[sup]n+1[/sup] - 1)/(r - 1)

Just substitute
a = first year pension amount
n = number of years collecting a pension
r = 1+ escalation rate
(r - 1) = escalation rate

My example wasn’t specifically about Bradley and his wife. It was about an arbitrary Congressional retiree (or his spouse!) who would live for 50 more years. Since this plan counts them as retiring when they leave Congress, some of them will indeed collect for 50 years and more.

It’s easily possible that Bill Bradley or his wife could live for 30 years following the date he retired from the Senate. Assuming 30 years of pension collection, with 7% inflation and a beginnng pension of $100,000, the lifetime pension payment would be $9,446,079 and the final year’s payment would be $711,426. By comparison, snopes incorrectly said “The figures given as an example for Senator Bradley ($7,900,000 over the course of his and his wife’s lifetime, culminating in a top payout of $275,000) are simply outrageous amounts with no basis in reality.”

.

[barbitu8]

*Originally posted by december *
**Suppose that the average retired Congressman served for 8 years. Then s/he would be receiving a pension of $46,908 - $50,616 for only 8 years of service.Since 40 years of Social Security assessments is needed to pay an average retiree $12,000 a year, it’s obvious that around 8 years of Social Security assessments plus a meager 1.3% isn’t remotely enough to pay around $50,000 a year.

So, the general thrust of the urban legend is true. Congressmen do indeed get remarkably generous pensions. **

Federal employees who began their job after 1985 are under FERS (Federal Employee Retirement System). Those who began their work before are under CSRS (Civicl Service Retirement System), but can elect to come under FERS. FERS pays less retirement than CSRS, since under CSRS there is a sliding scale depending on the years of employment, which begins with 1% and increases incrementally with years of employment, to a maximum of 1.5%, IIRC, of the average of their highest 3 years of pay multiplied by the years of service. HOWEVER, those under FERS are also entitled to the 401(k), called the Thrift Fund, which allows great flexibility in investments: stocks, bonds, international stocks, treasury bills, etc. CSRS employees can do the same, but are limited to their deductions to 5%, IIRC. FERS employees can allocate up to 10%, and the government matches up to 6%. So altho FERS employees get less of a pension, they wind up ahead in most cases with the 401(k). CSRS employees also do not contribute to Social Security, but are covered by Medicare, FICA taxes being assessed against them. FERS employees are also covered by Social Security. So FERs gets the pension, the 401(k), and Social Security.

That is not to say that they are ahead of private sector employees since many companies also have pension plans and 401(k)'s. Since congressmen and senators usually don’t work the 20 years to be fully invested under the general federal plans, they have different rules, and, apparently, they get more than the 1.5% maximum. However, I believe that since 1985, these people are also covered under FERS, which means that they can contribute to and collect Social Security, but I am not sure about this.