Social Security 2029

[Serenity1944]

I posted the following solution in another SS forum:

The government took from the Social Security fund to finance the Iraqi war. I feel the government needs to PUT IT BACK! If the politicians cannot find money to do it, then the fair thing to do would be put half the amount spent on that war into our Social Security fund from the politicians' retirement fund!

[jman07]

Originally Posted by Serenity1944

I posted the following solution in another SS forum:

The government took from the Social Security fund to finance the Iraqi war. I feel the government needs to PUT IT BACK! If the politicians cannot find money to do it, then the fair thing to do would be put half the amount spent on that war into our Social Security fund from the politicians' retirement fund!

Source? Doesn't sound right to me.

Anyways. All they are going to do is raise taxes to maintain social security benefits.

[Malloric]

Originally Posted by TexasLawyer2000

Removing the caps on SS won't fix it. If you remove the caps, it just takes in more money and pays more out.

There's only two solutions:

1. Increase the FICA rate.
2. Subsidize the program with funds from elsewhere.

I think the best idea is to eliminate SS for anyone who hasn't been born yet (don't collect from them when they start working). Then subsidize the program via other tax funds to pay out what is due for those who were promised SS (while still collecting from their paycheck while they work). Short term loss, for long term gains.

There's no reason to think that. Social Security is not a defined benefit/defined contribution system. Congress at any time, for any reason, can arbitrarily decide to change what it pays. Moreover than just that, it's not like what you pay into social security has any linear relationship to what you get out. High income earners receive far less money relative to what they put in compared with low-income earners. That effect is quite pronounced. You can use the quick calculator to see that

Born in 1950 making 20k/yr is $828 at full retirement.
... making $40k/yr is $1,189 (2x income = 1.43x benefit)
... making $80k/yr is $1,911 (4x income =2.3x benefit) [from 40 to 80k, income benefits are 1.6x.]
... making $100k/yr is $2,138 (5x income = 2.58x benefit)
... making $108k/yr is $2,206 (5.4x income = 2.66x benefit) [8k= $68]
... making $116k/yr is $2,274 [8k=$68], flat above $100k.
... making $48k/yr is $1,334 [8k= $145], not yet in the punitive stage like at $100k.
... making $88k/yr is $2,037 [8k=$126], in the punitive stage but not fully.
... making 28k/yr is $972. [$8k is $144], rounding?
$40k-$80k is interesting in that you get more benefit going $40k to $80k than $20k to $40k. Somewhere around $40k you stop getting the substantial wealth transfer goodness that the working poor receive from higher income earners but aren't really at the punitive stages until closer to $80k. Basically, seems like you receive a base of X dollars regardless of what you earn and then more for each dollar you do earn which begins to fall. There's a lot of people that are very knowledge about this as for many of us like myself, we can control our income to stay out of the punitive stage. It's something I'll need to talk with a CPA/financial planner about in the future. By forming an S or C corp I can draw a reasonable salary and take the remainder as draw on capital avoiding the getting too deep into that punitive range.

Last one provides some interesting analysis. At $20k, making an additional $8k in income means your social security increases by $144. At $100k, making an additional $8k in income means your social security increases by just $68. So even if they kept it at the current margins they'd take in a lot more than they'd pay out by increasing the cap. There's no reason to suggest they'd do that, however, rather than continue the current scheme where the higher your income gets the more the benefit falls off.

Additional solutions above (1) and (2):
3. Increase retirement age
4. Reduce benefits. Historically this has been done only for the middle-class, so the benefits to those making under $40k/yr most likely would not see any change.
5. Increase the cap on income.

Personally, I'd increase the retirement age by a year, increase the cap to $150k, increase the wealth transfer aspect by slightly cutting benefits gradually on those making over $80k/yr but leave the benefits alone for everyone else. Everyone pays a bit more (increased retirement age), tax rate remains the same, those making between $80k-$118k get a slight benefit cut while those making enough over $118k would see a greater benefit but also see more of their income taxed. If those changes aren't enough, then I'd be receptive to a tax rate increase in conjunction with benefit reduction.

[Malloric]

Originally Posted by Serenity1944

I posted the following solution in another SS forum:

The government took from the Social Security fund to finance the Iraqi war. I feel the government needs to PUT IT BACK! If the politicians cannot find money to do it, then the fair thing to do would be put half the amount spent on that war into our Social Security fund from the politicians' retirement fund!

That's never been how it worked. The Trust Fund has always been invested in special issue treasuries (basically normal treasuries but they can always be exchanged at face value say should interest rates increase whereas the normal issue treasuries you or I can buy would then be discounted). Say the interest rate goes up to 5% from 2.5%. No one is going to pay $100k for an instrument that pays 2% and matures in 28 years versus buying one for $100k that pays 5% and matures in 30 years. The special issue means the Trust Fund can take their 30-year treasury that doesn't mature until 2035 today and get its $100k face value back any time it wants. That's really how it's always been. The issue arises only when the government no longer has the money to pay its obligations. Trust Fund shows up with at the door and says we want our $100k and they go, sorry no money, can't pay. But that's how it's always been.

The alternative is you could say that the Trust Fund should start diversifying especially since the return on lending the government money is so pathetic right now... Maybe. That would require Congress to change the law for one. Secondly, a lot of municipal governments did just that. They took their pension trust funds and invested them in things like mortgage backed securities and lost their shirts. They did that because they over promised on what they could deliver. Now, if they could get a better return on their measly pension funds. Social Security, however, has better options such as just deciding it's not going to pay out as much money (or any at all). They're not obligated to pay you anything.

[NJBest]

Originally Posted by TexasLawyer2000

Removing the caps on SS won't fix it. If you remove the caps, it just takes in more money and pays more out.

There's only two solutions:

1. Increase the FICA rate.
2. Subsidize the program with funds from elsewhere.

I think the best idea is to eliminate SS for anyone who hasn't been born yet (don't collect from them when they start working). Then subsidize the program via other tax funds to pay out what is due for those who were promised SS (while still collecting from their paycheck while they work). Short term loss, for long term gains.

I agree with you that removing caps doesn't make sense in terms of fixing it, but not for the same reasons, necessarily.

A better solution would be to increase the minimum age to start collecting. Healthcare, the availability of Gyms on every corner, and more availability of healthier and organic foods has increased our abilities into later years of our lives.