Posted on 10/18/2007 10:07:04 AM PDT by Fred
"There's a role here for the non-profit world, which is itself awash in cash. How about a $100 million ad campaign to demystify Thompson's peg proposal? The baby boomers are a remarkably unselfish crowd, in spite of their reputation."
(Excerpt) Read more at amityshlaes.com ...
Social Security benefits are based on earnings averaged over most of a worker's lifetime. Your actual earnings are first adjusted or "indexed" to account for changes in average wages since the year the earnings were received. Then we calculate your average monthly indexed earnings during the 35 years in which you earned the most. We apply a formula to these earnings and arrive at your basic benefit, or "primary insurance amount" (PIA). This is the amount you would receive at your full retirement age, for most people, age 65. However, beginning with people born in 1938 or later, that age will gradually increase until it reaches 67 for people born after 1959.
Benefit Calculation Examples for Workers Retiring in 2008
"Thompson wants to replace that with a system indexed to the growth in inflation, which typically grows at a lower rate than wages. The result is that now-promised benefits could be cut for some workers by 10 percent in the short term and possibly much more in the longer term, analysts said. Workers under age 60 at the time the plan is adopted would be affected.
The Thompson campaign provided an example under which a $40,000-per-year worker born in 1975 would receive $1,562 per month under the current system, compared with $1,424 a month under Thompson's proposal. An $80,000-per-year worker's benefit would go from $2,469 to $2,085.
For future retirees, instead of having nothing, which is what they're headed for under the current situation that's unsustainable, they would have protection," Thompson said in the Oct. 9 debate in Michigan.
Maybe, but I still haven’t heard a better idea than the PSAs. Why is everyone so adamantly opposed to citizens saving up for their own retirement? Could it be the loss of CONTROL they’ll have to deal with?
(After all, what’s the point of going to DC if not for the opportunity to wield control over the minions...)
You are wrong in your assertion about subsidies for the boomer generation. It is the greatest generation that has received the free ride. Their benefits are vastly out of proportion to the taxes paid. The boomers have unwisely not stopped this Ponzi scheme. We should have demanded means testing of the greatest generation and privatization. Even if there are no benefit cuts, the boomer generation will receive low and negative returns from Social Security benefits.
There is no avoidance of pain on entitlement reform. The baby boom generation (and succeeding generations) have paid enormous taxes to support entitlement Ponzi schemes. The boomers will get substantial benefit cuts. I prefer direct benefit cuts with some degree of choice. I would prefer to fore-go all Social Security benefits with a significant reduction in payroll taxes now (essentially privatization). The dims will not permit this solution. The dims want a massive tax increase instead.
Just some prudent reality and healthy skepticism... That’s all... not working on behalf of any other candidate.
Hold those "can't we all get along" thoughts until after all the primary votes are cast. You may be saying them again or you may be hearing them again.
What you call "prudent reality and healthy skepticism" looks a lot like mindless, destructive cynicism to me.
I agree with most of what you’ve said, except for this
“We should have demanded means testing...”
Means testing would clearly make the program entirely welfare rather than a contribution-based program. It is bad enough that the benefits are skewed toward low-income (and hence low-contribution) workers.
The same is true of lifting the cap on wages subject to SS taxes. It just makes the “return” worse for the high-wage earners.
I think the Treasury should bite the bullet and sell $2T of new 10-year and 30-year Bonds, preferably with a tax-free status, and use the proceeds to pay off the IOUs in the SSTF. Then let the SSTF be managed like any pension fund, investing in the markets worldwide. Together with changing the benefits index from AWI to CPI, the unfunded liability of SS would be closed.
Hah! You really should try a little less negativity. ;-)
The problem is that almost all of the SS taxes collected today are sent out to current retirees tomorrow. If your taxes were diverted to PSAs, then it would not be available to send out to those people already retired. SS would be bankrupt immediately.
It’s true the SSTF has $2T of IOUs, but that would only last about 5 years if there were no continuous stream of new SS taxes coming in.
Social security should have been a means-tested welfare program starting in 1984 when the last major reform (tax increase) was made. The government has no business trying to provide retirement income especially using a generational Ponzi scheme approach. Big socialism is doomed to failure.
The means testing could have been structured so that current retirees received at least their contributions with some modest interest. The greatest generation has ripped off the rest of us by insisting that they earned their social security benefits. I will use my father as an example. He retired in 1986 at age 62. He has received Social Security benefits for 21 years. His combined payroll taxes were no more than $37,000, probably no more than $30,000. Yet he has received tax free benefits of more than $200,000. My mother has received spousal benefits of more than $130,000. Yet my parents think that they earned their benefits. Their benefits have come out of our retirement savings. Most people pay more in FICA taxes than in their 401K plans. These taxes have been directly diverted from most boomers retirement savings.
Funny, that's what I am saying to you. Are you certain that you're making sense?
I’m not trying to accomplish anything except explain why
Fred and other politicos stay clear of discussing SS.
If you think I’m a Fred guy you’re sadly mistaken.
If your father’s $37,000 plus his employer’s matching $37,000 had been invested as it was paid into all through 40 years of work, it would have built to a tidy sum. Maybe more than enough to have paid what he and your mother have drawn from it.
You got me curious so I WAG’d some numbers into Excel. Beginning with $70/month in 1946 and using average wage inflation of 3.6%, 40 years of SS taxes would have totaled $74K. Your father + employer would have been paying in $300/mo total toward the end. Invested at 7% from the beginning as a 401k would have done, that would have grown to $300K. That would have provided $1600/mo income stream for 25 years — even allowing for 3% COLA so the last year would be at $3300/mo ! The total of all payouts would be $730K over 25 years.
If your $37,000 figure was for the total of employee+employer, the numbers above would just be halved and your parents would still not have exceeded what an investment plan would have provided.
Of course, that was not done. There was no money invested, it was simply used to pay out money to people as they retired, same Ponzi scheme as now.
But I’m not sure we should blame our fathers’ generation. It is actually the people that started collecting SS benefits without having contributed for 30 or 40 years. Our parents’ parents, in other words, that started collecting benefits in the 50’s after paying in for a small portion of their working lives.
But Fred hasn't stayed clear of discussing Social Security. It needs discussing and Fred has shown courage and initiative by raising the issue and putting forward a specific proposal.
Get a mitt and get in the game, friend!
You need to use a risk-free rate in the compounding. Social Security benefits are risk-free. 7% is much too high for a risk free rate especially during the 50s, 60s, and mid 70s.
If the means testing had been started in the mid 80s, everyone would have become aware of the returns instead of complaining about the measly benefits. Means testing would have allowed annuitizing the benefits for at least the wealthy. The greatest generation could have been part of the solution instead of part of the problem. The attitude of the greatest generation has been a large part of the problem.
Everyone is overlooking the biggest financial scam our politicians have pulled for the last 24 years.
In 1983, the SS taxes were pegged to the outgo to pay current retirees— a pay as you go system as established in 1935.
The Social Security Reform Commission was established to deal with the looming demographics of the retiring baby boom generation, which would start to draw benefits in earnest by 2011 and beyond.
So, in 1983, the Social Security taxes WERE RAISED by an amount higher than the pay as you go system that had been in place since 1936. The extra money was to be set aside for the baby boomers, so when the need came in 2011 and onward, the money would be there.
Our congresscritters then took the extra money and instead of investing it, they bought government bonds with it, which instantly gave them tens of billions of dollars more per year to spend on important pork projects to ensure their own reelection. The government gave to SS government bonds, essentially IOUs, for the excess SS funds, and these excess funds were promptly spent by Congress each fiscal year to fund current expenditures.
So, the baby boomers HAVE ALREADY PAID for their SS retirement funds.
So now, in 2011, SS goes to the government, cashes in the bonds to pay for the baby boomers’ benefits. How are the bonds paid for?
Of course, they are paid back with CURRENT TAX RECEIPTS.
So follow this closely.
Since 1983, we have been taxed in excess of the cost of the SS system, which until then had been pay as you go.
This tax money was exchanged for government bonds, which was then wastefully spent by the pols.
To repay SS in 2011 and beyond, the government will have tax the current workers to pay for the bonds that SS will be waving in its face for redemption.
So, NOT ONLY HAVE YOU PAID FOR THESE BENEFITS IN ADVANCE, BUT YOUR CHILDREN WILL PAY TO REDEEM THE SS’s IOUs FROM THE GOVERNMENT.
This means we, the American People, have paid for these benefits TWICE!
This has been the biggest fraud perpetrated on the American people in history.
And most of the pols in DC now were there in 1983.
They all need to be fired, and their Congressional pensions abolished. They can live on SS like the rest of us have to.
Most definitely. The issue is SS reform. I discussed what to expect and the obstacles to be faced. Some reacted emotionally and negatively. It’s a tough issue and that’s a fact. Growling wins no votes.
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