From dstark link,
It’s not going broke because we expect the gov will take some action. What action should that be?
So the max SS income that is taxed is $118,500. How hard is it to raise that limit.
It can be a graduated percentage as you make more money. Seems like a no brainer.
Igloo, SS is not going broke because SSA can still pay approximately 77 percent of the benefits in 2033.
We can cut benefits. Taxes can be raised. Sax pointed out, labor can be paid more.
They’ve been raising it, I believe. If that’s enough, that may be the way to go. Or we can trust people with income over FICA limit will successfully invest their savings from excessive FICA and hit them after they retire by phasing out SS benefits. In the end, I would think we will do all three, raise taxes, increase FRA, cut benefits, The gov could pay out of their budget since the gov used up the surplus but not likely to happen.
No brainer? So those who put the most money into SS should get the least out of it? Seems more brainless than no brainer. It is certainly not in the spirit of the original iteration. http://www.ssa.gov/history/genrev.html There were no taxes on SS until 1983. I would have opted out at a young age if the option was given to me. Let me make my own choice to pay in or not. If I don’t pay in, I get zero benefits. I could have done a hell of a lot better investing the money myself.
Would you like to see seniors living on the street in mass? Right now, SS is the only income for more 90% of seniors. I think it’s not a bad price to pay to just avoid that. Besides, I don’t know about “I could have done better” claim. I ran a calculation a while ago comparing the mortgage payment we had for our first house and its present value vs SS payment we made and the present value of SS if paid in lump sum. My house doesn’t beat SS. Details of the calculation is about 100 pages ago.
http://money.usnews.com/money/blogs/planning-to-retire/2014/11/14/5-potential-social-security-fixes
This link may be better…
http://www.washingtonpost.com/wp-srv/special/business/get-there/social-security-fix/
This link works fine, dstark
http://www.usatoday.com/story/money/personalfinance/2014/10/26/three-social-security-myths-you-cant-afford-to-believe/17849183/
This is not accurate:
From the SS web site:
http://www.ssa.gov/news/press/basicfact.html
It’s an important part of retirement, but we aren’t going to see “seniors living on the street in mass” if cuts have to be made.
I think some form of means testing is inevitable, but there are many forms that can take - for example, make 100% of the benefit taxable at higher income levels. Make 125% taxable (in essence, reducing some of the benefit). Use imputed Roth distributions to determine if SS income is taxable. Elimination of all benefit is too drastic at only $200K.
SS has a systemic problem in that it depends on current workers to fund current benefits, and demographics are against it. Scary fact from the web site:
A 25% reduction of people paying into it (essentially, a 25% reduction in taxes collected to fund a year’s benefit) will not be painless to make up.
@iglooo I would never consider a house an investment(at least in the majority of the USA). If I had my SS money to invest myself, it would be in stocks(which is my profession).
It’s interesting how seldom “I could have done better” was heard around 2008/2009. Heck, if I had just invested my homeowner’s insurance premiums in Apple instead of worrying about my house burning down, which by the way it didn’t (a well-kept secret is just how few houses actually do burn down)…
Most people save very little. Even among those who do save, the vast majority invest horribly. In a humane society it falls to us to pay for the after-effects of those who smoke, don’t wear seat belts, or don’t vaccinate their children. Even more clearly it falls to us to pay for those, who through no fault of their own, don’t have the capacity to have a job that pays for a decent life, now or in retirement.
Find the disability fraudsters and punish them enough to deter the next generation. Raise the FICA cutoff a bit. Adjust the bend points to more aggressively favor the lower-wage workers over the higher. SS is not bankrupt, it just needs some tinkering at the margins.
IxnayBob, I agree with you.
If we increase the payroll tax from 12.4 percent to 15.3 percent the shortfall for the next 75 years is gone.
I am not saying we should do this…there are so many ways to go…
SS funding is a very solvable problem.
Yes! I recall talking to someone who owned a shop in a small, rural town. She was having a lot of trouble hiring employees because many, many in the community were making more off their “declared” disabilities and sucking off the teet of the feds and our citizens. Many individuals have legitimate disabilities. But many do not.
As a value investor, I loved 2008/2009. Stocks are the only area where people get more depressed and more frightened when they go on sale. Offer half off all clothing at Lululemon and people would go nuts for it. Offer Lululemon stock at 50% down and they wouldn’t touch it with a ten foot pole. That’s what makes a market!
Long Island Railroad:
They get together on the golf course to commiserate.
@parent1337, you can manage your fear and enthusiasm. So can I. Most people can’t, and continue to buy high and sell low. Since I’m in the accumulation phase, I love a down market.
My point is that giving an opt-out option to SS is likely to be a disaster.
Not sure I agree with that. Lululemon dropped dramatically when they had that little see-through yoga pants “oops” problem in 2013. They handled it well, but still their stock dropped. We grabbed some, and then promptly sold it when it went back up 20%. Grabbing a stock when it drops is a good thing.
parent, I honestly don’t have a problem paying SS taxes so that my parents generation can have a buffer. I also don’t have a problem with increasing the max limit to $200,000 and making it a gradual decrease in % as your income increases after that.
Everyone that could afford to roll their 401k money into a Roth will not have that income affect their SS.
Many people with less were not able to afford that loophole.
As others have mentioned, SS money has not always been kept separate and invested by our gov’t - and our federal deficit is being financed by bonds owned by China, etc. Many can remember the budgeting that had to be done to have the SS funds built up and kept separate…
We have to keep overall entitlement programs by the federal gov’t to stop growing. Clamp down on abuses. Heard that about 49% of Americans are not paying in federal taxes (?) - that sounds a bit high. I don’t have a problem with a large family with breadwinner making a decent salary and they qualify for enough federal exemptions - typically they are raising their kids to being productive taxpayers. I do want people willing to work working and having it better than those that choose to live 100% on government assistance. I am not talking about legitimate disability either. Unfortunately the children and the elderly often suffer because of the irresponsibility of those that choose to live a life of crime, drugs, and other irresponsible behavior. The most vulnerable in our society do suffer, so it is terrible for those that have the crime ridden neighborhood and are not food secure.
I do think instead of federal government ‘helping’ - I like more local level programs and private funding. Less waste and more effective.
For many on this thread, receiving SS payments is expected, but not the only portion of the incoming retirement cash.
Future generations have to have investments early enough to have the time value of retirement funds work for them. Many will also not have employer funded retirement, but have some company match. The benefit is that the money is theirs, so there will be a death benefit of money in the account.
We all have to shift with the changing paradigm, while fighting to have both our federal and state governments work appropriately for the people w/o the waste that currently is going on, and the federal deficit that needs to be worked down.
I don’t have a problem with turning SS into a welfare plan, as long as we acknowledge that it is a handout, not an earned benefit, if people felt shamed by taking it,many would not do so, and it could last a very long time.
However, I think that is unnecessary, as some minor tweaks could keep it solvent.