Skip to comments.Plan Could Cut Social Security for Young Workers
Posted on 01/04/2005 12:46:03 PM PST by RetiredArmy
Plan Could Cut Social Security for Young Workers
Tuesday, Jan. 4, 2005
WASHINGTON Future Social Security benefits could be cut almost in half for some younger workers under a plan President Bush is considering for overhauling the nation's retirement system.
Bush so far has refused to discuss the difficult financial trade-offs that would be required to remake the system to let younger workers divert some of their payroll taxes into personal investment accounts. He has said he will use as a model proposals from his 2001 Social Security commission to craft a proposal that Congress will consider this year. Under the commission plan that lawmakers said Tuesday was being discussed as the framework for the overhaul, Social Security benefits for younger workers would be cut by 0.9 percent to 45.9 percent from traditional benefits. Investments in the personal accounts would be counted on to make up the loss in income.
Supporters of Bush's idea argue that the current projected level of traditional benefits is not guaranteed in any case, and they note that the Social Security system is projected to start running a shortfall in 2042.
``Social Security has promised to pay benefits way in excess of what it's going to be able to pay,'' said David John, Social Security senior analyst at the Heritage Foundation.
But opponents claim the Bush administration is exaggerating the problem. The retirement system will be able to pay full promised benefits until 2042, and then will be able to cover about 73 percent, they say.
``The Bush administration has finally acknowledged that the centerpiece of its plan to radically overhaul Social Security is a benefit cut of more than 40 percent in the coming decades for every American senior,'' said House Democrat leader Nancy Pelosi, D-Calif. ``This is the equivalent of forcing seniors today to live at a 1940s standard of living.''
But Senate Majority Leader Bill Frist, R-Tenn., said any change to the system would not affect current retirees. ``Young people today recognize it's their money they're putting into Social Security,'' Frist said Tuesday on CNN. ``They own that money. They would like to be able to invest in personal accounts if they want to, a nest egg that can help them in later retirement.''
Cuts would occur by changing the formula used to calculate benefits to address the system's future shortfall. The growth in benefits would be slowed dramatically by tying them to inflation rates instead of wages. The rate of inflation grows more slowly than wages over a person's lifetime.
For example, a person retiring at age 65 in 2021 with a two-earner income of $35,277 is promised $1,194 in monthly benefits, in 2001 dollars. If the formula is changed, the monthly benefit would be reduced by 0.9 percent to about $1,088 a month.
The younger the worker, the more dramatic the cuts. For a person retiring at age 75 in 2075, the monthly promised benefit of $2,032 would be cut by 45.9 percent to $1,099 a month. Investments in the personal account would be expected to make up the difference.
Well of course it would be cut, they will have a part of what they would have got in a savings account somewhere. Where is the news in this?
Ummm...someone needs to invest in a calculator.
Wow thats pretty high figure for benefits. Last I heard the highest was about $500 to $1500 for an average earner isnt it? It certainly isn't something that you can negotiate.
They miscalculated the amount in the paragraph above, as well. Or they think that .9% = 9%.
My wife and I both hope we can get our money out of this ponxy scheme. We woulf love to invest it our way. And yes we are investing and planning a retirement based on the assumption that SS will not be there.
$2,032-$1,099 = $933/$2,032 = 45.9%
I'd let them keep all of mine to date if they'd let me out now...
Nancy Pelosi, Dumbass-Calif. ``This is the equivalent of forcing seniors today to live at a 1940s standard of living.''
..it was never supposed to be to enough to retire on, it was to be as it was called, "supplemental" income.
Senate Majority Leader Bill Frist, R-Tenn., ``Young people today recognize it's their money they're putting into Social Security,'' Frist said Tuesday on CNN. ``They own that money."
He's wrong, too . Any money that goes to Washington has a great chance of never coming back.ever.
Someone = ravingnutter. ;O)
20 yrs from now the young who will be told to shoulder this burden might not have too many ethics that will get in the way of senior abortions...voluntary or otherwise...
How about just raising the retirement age one month every year?
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I love how Pelosi glosses over the fact that to keep things as they are, she'd force people who are still paying into the system to live at a 1940s standard of living.
I am with you--don't reform it with these stupid accounts. END IT NOW. LET US OUT! YOU CAN KEEP ALL THE MONEY, and even cash out the seniors with big fat checks! JUST LET US GO!
Even Ponzi didn't MAKE people pay in at the point of a gun.
Honestly, even if it does-ha ha-get FIXEd, there is certainly no harm in planning as if it wouldn't, that's for sure. Too many people are putting all their eggs into one basket, all right.
If you max out your deposit to $12K a year and get even a few points of match then you are looking at close to $15K a year. In seven years that's $150K, 14 years it's $450K, in 21 years it's over a million and in 28 years you have $2.2 million.
The government can keep my SS provided they let my taxes go on my retirement accounts. My goal is to retire before 60 with about $3 mil in today's money and the value of my current house paid for.
Even if the social security money wasn't invested, just having it in savings and building up would make quite a little nest egg.