Means testing for Social Security benefits (wage, unemployed, jobs, paying)

[Escort Rider]

Originally Posted by Mircea

Formula. Singular. I don't really see where lower wage earners are subsidized, but then I'm too damn lazy to throw it on a spread sheet and look at it.

This is the formula (singular)....

To compute PIA: (1) 90% of AIME below the first bend point; plus (2) 32% of AIME in excess of the first bend point but not in excess of the second; plus (3) 15% of AIME in excess of the second bend point.

The first bend point changes annually. It is currently $767 but is projected to increase to $792 for 2013.

You get your print-out from SSA showing your monthly earnings (the calculation actually starts at age 21). Then you adjust your monthly earnings to the Wage Index. That converts all of your earnings to Year 20NN Dollars (the year in which you file for retirement benefits), because $2,000 in 1983 is not the same as $2,000 today.

Once you do that, you calculate your average monthly earnings. Monthly, not yearly, Monthly.

Having determined your average monthly earnings, let's say $1,000 per month, then...

1] you get 90% up to the first bend point of $767, or......$717.30

2] you get 32% of the amount over $767, but less than the 2nd bend point of $4,624.

$1,000 - $767 = $233 * 32% = $74.56 + $717.30 = $792 per month as a benefit.

Note that someone who has never earned more than minimum wage, and worked 40 hours per week from age 21 to full-retirement date will receive $763/month at present.

Let's say someone had average monthly earnings of $4,000 per month.....

1] you get 90% up to the first bend point of $767, or......$717.30

2] you get 32% of the amount over $767, but less than the 2nd bend point of $4,624.

$4,000 - $767 = $3,233 * 32% = $1034.56 + $717.30 = $1,752/month.

Any subsidy there?

I think not.

Let's say someone had average monthly earnings of $6,000 per month....

1] you get 90% up to the first bend point of $767, or......$717.30

2] you get 32% of the amount over $767, but less than the 2nd bend point of $4,624.

$4,624 - $767 = $3,857 * 32% = $1234.24 + $717.30 = $1951.54

3] you get 15% in excess of the 2nd bend point....

$6,000 - $4,624 = $1,376 * 15% = $206.4 + $1,951.54 = $2,158

Subsidy?

Nope.

The maximum monthly benefit is $2,513. Just eye-balling it, if you earn more than $85,000 per year then you might be able to possibly make an argument that you are subsidizing low class people. I mean low income people (sorry).

Those who take retirement at age 62 never get 100% of their calculated benefits. Those born after 1960 who retire at 62 only get 70% of their calculated benefits for the rest of their lives (and their spouse only gets 35% of the benefits).

Mircea

O.K. with the formula (singular), I can go along with that, although it's really just semantic quibbling. Probably I was thinking of the three different multipliers within the formula and typed the "s". One can think of it as three different formulas applied after each of the three bend points.

But you are wrong about the lack of subsidy. All you have to do to see the subsidy is look at the bend points themselves! Since everybody is paying FICA taxes at the same rate (up to the cap, but since the benefits are also capped at the same point, that whole issue is moot for this discussion), but the benefits do not accrue at the same rate; that is the subsidy right there. Lower income workers receive a greater percentage of their total wages subject to FICA taxation back as benefits than do higher income workers. That is really quite simple and straight-forward; it is not tricky or sophisticated in any way. You are normally so incisive and so perceptive that I am actually surprised. I believe you are not seeing the forest for the trees.

Note that I am not arguing whether the greater rate of return (not absolute return) for low income workers is good, bad, or indifferent. It is provided for by law, and I was describing it.

[jtur88]

Originally Posted by Mircea

You just said Social Security was insurance. Make up your mind.

Most conventional insurance sold in the private sector has some kind of a cap on benefits. Your car liability does. You health insurance does. Your property insurance does, at the market or replacement value of the loss. But it is not means-tested. I proposed a lower cap on benefits, which is already capped, and not a means test. There, see? I made up my mind.

Someone earning $85K is a millionaire. Imagine that.

Your figures, you justify them. I said "millionaires can get $30K in SS benefits." Prove me wrong. Anybody who made $87K during their working lives should be a millionaire, if they stuck to a good retirement plan, and it's not up to the rest of us to bail them out with nearly the national median working wage if they didn't.

[texdav]

Originally Posted by Mircea

Um, I don't want to be the bearer of bad news, but Social Security is already means tested.

If you are single and your income exceeds $25,000 then 85% of your income is taxable. If I'm not mistaken, 50% goes directly to the Social Security Administration and not to the General Fund. The other 35% goes directly to the HI (Medicare) Trust Fund.

If you file jointly and your income exceeds $32,000 then your

If you file separately, then the threshold is $0.

Note that those amounts are fixed (not floating or adjusted) and so each year more and more people are means tested.



Why don't you read this very informative section of United States Code...

42 USC § 402 - Old-age and survivors insurance benefit payments

(a) Old-age insurance benefits Every individual who—
(1) is a fully insured individual (as defined in section 414 (a) of this title),
(2) has attained age 62, and
(3) has filed application for old-age insurance benefits or was entitled to disability insurance benefits for the month preceding the month in which he attained retirement age (as defined in section 416 (l) of this title), shall be entitled to an old-age insurance benefit for each month, beginning with—

I took the liberty of high-lighting the operand, so you can understand better.

PS...your poll sucks.

Testing...

Mircea



Formula. Singular. I don't really see where lower wage earners are subsidized, but then I'm too damn lazy to throw it on a spread sheet and look at it.

This is the formula (singular)....

To compute PIA: (1) 90% of AIME below the first bend point; plus (2) 32% of AIME in excess of the first bend point but not in excess of the second; plus (3) 15% of AIME in excess of the second bend point.

The first bend point changes annually. It is currently $767 but is projected to increase to $792 for 2013.

You get your print-out from SSA showing your monthly earnings (the calculation actually starts at age 21). Then you adjust your monthly earnings to the Wage Index. That converts all of your earnings to Year 20NN Dollars (the year in which you file for retirement benefits), because $2,000 in 1983 is not the same as $2,000 today.

Once you do that, you calculate your average monthly earnings. Monthly, not yearly, Monthly.

Having determined your average monthly earnings, let's say $1,000 per month, then...

1] you get 90% up to the first bend point of $767, or......$717.30

2] you get 32% of the amount over $767, but less than the 2nd bend point of $4,624.

$1,000 - $767 = $233 * 32% = $74.56 + $717.30 = $792 per month as a benefit.

Note that someone who has never earned more than minimum wage, and worked 40 hours per week from age 21 to full-retirement date will receive $763/month at present.

Let's say someone had average monthly earnings of $4,000 per month.....

1] you get 90% up to the first bend point of $767, or......$717.30

2] you get 32% of the amount over $767, but less than the 2nd bend point of $4,624.

$4,000 - $767 = $3,233 * 32% = $1034.56 + $717.30 = $1,752/month.

Any subsidy there?

I think not.

Let's say someone had average monthly earnings of $6,000 per month....

1] you get 90% up to the first bend point of $767, or......$717.30

2] you get 32% of the amount over $767, but less than the 2nd bend point of $4,624.

$4,624 - $767 = $3,857 * 32% = $1234.24 + $717.30 = $1951.54

3] you get 15% in excess of the 2nd bend point....

$6,000 - $4,624 = $1,376 * 15% = $206.4 + $1,951.54 = $2,158

Subsidy?

Nope.

The maximum monthly benefit is $2,513. Just eye-balling it, if you earn more than $85,000 per year then you might be able to possibly make an argument that you are subsidizing low class people. I mean low income people (sorry).

Those who take retirement at age 62 never get 100% of their calculated benefits. Those born after 1960 who retire at 62 only get 70% of their calculated benefits for the rest of their lives (and their spouse only gets 35% of the benefits).

Formulating...

Mircea



Fair? So, you're claiming that the cost-of-living is uniform throughout the US?

How is it fair that one person gets $1,000/month, but due to the cost-of-living $1,000 is only worth $650/month?

How is it fair that one person gets $1,000/month, and due to the cost-of-living $1,000 is worth $1,500/month?

Can you explain that? If States ran their own Social Security programs, cost-of-living would not be an issue.

Also, explain how it is fair that a minimum wage worker should pay $96/month in FICA taxes and get only $763/month in benefits, when the very same worker could be paying $21/month in insurance premiums to a private insurance fund and receive $1,600/month in benefits?

Is there some kind of Lib-logic at work here?

Paying 400% less in premiums and getting 200% more in benefits is evil?

How is that evil?



You already are means testing.

Not exactly well-informed are you?



You just said Social Security was insurance. Make up your mind.

Do you have some kind of crystal ball that let's you see how people's lives will turn out in the future?



You really out to stay out of economic discussions. Anyone earning $85,000/year will get the maximum monthly benefit of $2,513/month or $30,156/year.

Someone earning $85K is a millionaire. Imagine that.

And since the threshold is $25,000 then that means 85% of their income is taxable.

Yeah, that would be the means test that you pretend doesn't exist.

Not impressed...

Mircea



Actually they wouldn't need welfare. A minimum wage worker would pay about $21/month for a privately funded retirement insurance plan ---- 400% less than they're paying now --- while getting 200% more in benefits.

The problem with that is Liberals would not be able to lord over people and hold them hostage with threats of cutting their COLA or reducing their benefits or raising the payroll tax rates.

Realistically...

Mircea

Hate to break it to you but I am married and mine is tax at 85%. Its not social security law but its IRS that give a deduction depending on income.Heck 85% is 15% not taxed :I wish all my income was based on that IRS law on SS taxable icome.

[Zelva]

THANK YOU posters!! I have learned A LOT about social security via your professional and insightful posts!!
Seriously ---> thank you!!

[villageidiot1]

Originally Posted by Escort Rider

First, a vocabulary correction: In both the poll and the OP, the word "socialize" was used where the context clearly calls for "subsidize".

You appear not to know that higher wage earners already subsidize lower wage earners. The formulas used to calculate Social Security retirement benefits return to the lower wage earners a greater precentage of their earnings in the form of benefits than they do to higher wage earners. Any further and additional means testing would increase this subsidy, of course.

You raise an issue of fundamental fairness, with which I agree for the most part. However, it is very important, one way or another, to avoid having large numbers of totally destitute seniors out there, many of whom are too old to have the option of returning to work as a personal solution.

The line in bold is the only thing that is relevent to this discussion. And the point that changes must be made to Social Security to keep it solvent. I can't believe people really disagree with this.

[CaptainNJ]

i think it should be welfare so we dont have so many destitute seniors. but i think we should also recognize that these seniors were always poor defenseless grandpa's and grandma's. they were teens, adults and middle aged before becoming geezers and they had the responsibility to plan and save for their own retirement. now, i understand sometimes things happen beyond people's control and its nice to have a safety net. but most of the time those things are within a persons control and they should pay or prosper for their decisions.

[villageidiot1]

Originally Posted by CaptainNJ

i think it should be welfare so we dont have so many destitute seniors. but i think we should also recognize that these seniors were always poor defenseless grandpa's and grandma's. they were teens, adults and middle aged before becoming geezers and they had the responsibility to plan and save for their own retirement. now, i understand sometimes things happen beyond people's control and its nice to have a safety net. but most of the time those things are within a persons control and they should pay or prosper for their decisions.

It's nice to say that people should have the responsibility to plan and save for their own retirement but you need to get out and meet some of the common people walking through the aisles at Walmart. There is a huge segment of the population that is living paycheck to paycheck or unemployed. Many of these people are not smart enough to think about retirement or have no idea how much they should have saved. There is a large chunk of the population that doesn't even have enough understanding of arithmetic to start to plan for retirement.

[CaptainNJ]

Originally Posted by villageidiot1

It's nice to say that people should have the responsibility to plan and save for their own retirement but you need to get out and meet some of the common people walking through the aisles at Walmart. There is a huge segment of the population that is living paycheck to paycheck or unemployed. Many of these people are not smart enough to think about retirement or have no idea how much they should have saved. There is a large chunk of the population that doesn't even have enough understanding of arithmetic to start to plan for retirement.

rather than insult them, maybe we should try to include some kind of home finance in basic public education. we should also give people enough respect to expect them to act like responsible adults.

[treasurekidd]

we should also give people enough respect to expect them to act like responsible adults.

I agree. I'm sick to death of you hearing you people argue for keeping broken and insolvent systems in place because "the people" are to stupid and lazy to take care of themselves. About the only thing they are smart enough to be allowed do is vote, right?

[pvande55]

Those with higher incomes vote more regularly and make more campaign contributions. They are the ones the politicians listen to. Means testing is a sneaky way to reduce Social Security and either eliminate it or make it a welfare subsistence program.