I’ve just been reading Fred Thompson’s plan for Social Security here 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?
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.
That too.
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.
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?
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.
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.
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.
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
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.
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.
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.
Yes; and they are doing so by billions of dollars.
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.
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
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. 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
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.
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.
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.
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