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Old 02-26-2016, 10:08 PM
 
Location: North West Arkansas (zone 6b)
2,673 posts, read 2,014,955 times
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The problem to me is that more and more people will not have a defined pension plan and soon SS payments will probably get phased out.

the following bit of history was told to me by an acquaintance who is a history buff but I have not confirmed his statements:

Quote:
when social security was initially created the average life expectancy was less than 65 and the numbers of tax payers for each retiree drawing benefits was 6:1.

Today, the average life expectancy is much higher than 65 and the numbers of tax payers for each retiree drawing benefits has flipped to 1:6
he implied that social security is doomed and I think it's more than likely the reason why so many people are talking about delaying their payments to maximize their monthly income... they are paid marketers to fool people into delaying drawing their social security benefits in order to prevent them from using it when they die before the payments ever start.
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Old 02-26-2016, 11:02 PM
 
Location: Ohio
19,929 posts, read 14,242,533 times
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Quote:
Originally Posted by gunslinger256 View Post
The problem to me is that more and more people will not have a defined pension plan and soon SS payments will probably get phased out.
Social Security payments will not "probably get phased out."

Quote:
Originally Posted by gunslinger256 View Post
the following bit of history was told to me by an acquaintance who is a history buff but I have not confirmed his statements:

Quote:
when social security was initially created the average life expectancy was less than 65 and the numbers of tax payers for each retiree drawing benefits was 6:1.
It was 46:1 and Average Life Expectancy is irrelevant, since Social Security actuarial science was based on Life Expectancy at Age 65. In 1940, Life Expectancy at Age 65 was 11.9 years for men (76.9 years total), and 13.4 years for women (78.4 years total).

In 1983, when Social Security was reformed, Life Expectancy at Age 65 was 14.0 years for men (79 years) and 18.4 years for women (83.4 years). The FICA payroll tax was increased accordingly to account for population changes.

Quote:
Originally Posted by gunslinger256 View Post
Quote:
Today, the average life expectancy is much higher than 65 and the numbers of tax payers for each retiree drawing benefits has flipped to 1:6
The current rate is 2.5:1 (workers to beneficiaries), projected to fall to 2:1 by 2035.


Quote:
Originally Posted by gunslinger256 View Post
he implied that social security is doomed and I think it's more than likely the reason why so many people are talking about delaying their payments to maximize their monthly income... they are paid marketers to fool people into delaying drawing their social security benefits in order to prevent them from using it when they die before the payments ever start.
Social Security is financially insolvent, but not necessarily "doomed."

The decision to delay Social Security payments to maximize benefits has nothing to do with conspiracy theories.
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Old 02-26-2016, 11:56 PM
 
6,353 posts, read 5,163,159 times
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Quote:
Originally Posted by Mircea View Post
Social Security payments will not "probably get phased out."
True that.

Quote:
It was 46:1 and Average Life Expectancy is irrelevant, since Social Security actuarial science was based on Life Expectancy at Age 65. In 1940, Life Expectancy at Age 65 was 11.9 years for men (76.9 years total), and 13.4 years for women (78.4 years total).
The overall life expectancy was not completely irrelevant, since SS depended on a lot of people contributing all their lives and then dying before they were old enough to collect benefits. The number of people in this situation depends on the overall life expectancy, not the life expectancy at age 65.
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Old 02-27-2016, 04:25 AM
 
71,649 posts, read 71,777,271 times
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The problem is terminology. It isn't life expectancy it is average life expectancy that is meant.

Average life expectancy is the 50% point where 1/2 go on.

For a 65 year old it is 83 today for a man , 85 for a women and 87 for a couple.

That is only the 50% point.
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Old 02-27-2016, 04:57 AM
 
13,923 posts, read 7,416,674 times
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Quote:
Originally Posted by Larry Siegel View Post
True that.



The overall life expectancy was not completely irrelevant, since SS depended on a lot of people contributing all their lives and then dying before they were old enough to collect benefits. The number of people in this situation depends on the overall life expectancy, not the life expectancy at age 65.
It kind of doesn't matter. What matters is that Social Security is already cash flow negative. Money is coming out of the general fund to pay Social Security checks. It is being called "interest" at the moment but that is a charade. In a half dozen years, it will be called "trust fund repayment plus interest ". It's federal income tax money that isn't being spent on other programs. Payroll taxes need to go up in some way to get Social Security back to cash flow neutral or it creates a federal budget calamity. Probably with further "reform" to bump ages and further means test benefits. I'd expect a 100% taxable bracket for Social Security with maybe $100k in income and a symbolic phasing out of the benefit at some higher income level. It's hard to guess who will pay the extra payroll tax. It should be broad based but it probably will land on the 5%ers in the form of a lifted cap and taxing passive income the way they did with Medicare.

I've written about it before but they're not going to ditch the Social Security program. The bottom half of retirees would starve 30 years out. They have no defined benefit pensions and little retirement savings. It's hard to predict when the next overhaul of the program will happen but it's coming. I think they'll kick the can down the road for a decade since that's when the negative cash flow really kicks in as the late boomers start collecting.
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Old 02-27-2016, 06:05 AM
 
Location: Woodbury, MN
1,465 posts, read 1,534,415 times
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That's shocking, but not surprising that so many people near retirement age haven't saved a dime for retirement. Too many people live their lives for today and do not live below their means. If people actually lived below their means and saved more money, you'd see very few luxury cars on America's roads. I think saving only $500K isn't enough, although people retire with less and lower their standard of living. I'd like to see a breakdown of the percentages in the $500K to $10M or more category.
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Old 02-27-2016, 06:35 AM
 
Location: Washington State
18,554 posts, read 9,592,797 times
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Anybody know if the average is wealth accumulated or just money saved up? We have money saved up in 401K, money saved in banks, houses that are paid off that we rent for retirement income, etc. so not sure which portion they would count.
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Old 02-27-2016, 06:51 AM
 
Location: Great State of Texas
86,093 posts, read 72,525,560 times
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The article was about savings.
Among those 41% that have little to no savings...over 1/2 own their home and 1/3 have pensions.
So it's not really like they have "nothing".
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Old 02-27-2016, 07:08 AM
 
13,923 posts, read 7,416,674 times
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Quote:
Originally Posted by HappyTexan View Post
The article was about savings.
Among those 41% that have little to no savings...over 1/2 own their home and 1/3 have pensions.
So it's not really like they have "nothing".
When push comes to shove, what matters is net worth, the number for your monthly pension check on your Social Security statement, and any pensions you might have. Retirement savings is the only number with data so you can't see where people really stand.

I think that more than half of all the late-Boomers in this data set are basically F'ed. Low net worth, a small-ish Social Security check, and either no defined-benefit pension or just a very small one. Most are going to be very close to the poverty level. There's no place to put them. We'd have to be doing a crash project to construct elderly housing and that's not happening. Their Millennial kids aren't doing well so few will have the option of an in-law apartment.
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Old 02-27-2016, 07:13 AM
 
71,649 posts, read 71,777,271 times
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Like most mantra's live below your means is another useless one for most folks.

At retirement they have their savings , social security , maybe a pension so the problem is what amount a year is living below my means ? Most folks are clueless as to how to judge just what is a budget that is living below their means.

Pulling 3.5%-4% inflation adjusted from your savings maybe to conservative most of the time if you have 40% in equity's.

Pulling 4% inflation adjusted has been to risky from just cash instruments.

So while example 1 is likely living below your means ,example 2 is not.

So the first question is you need to be educated enough to understand just what your means are.

Other wise live below your means is about as meaningful as don't buy stocks that will go down.

When you have a pension the pay check never stops , same with social security. You know what your means are the same as when working . But when living off your own pile of savings and it has to last longer then you do it is more complex.

Last edited by mathjak107; 02-27-2016 at 07:43 AM..
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