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The thought of Wall Street pros "investing" Social Security funds makes me shudder with horror.
Some of states, though underfunded, have gotten pretty good returns on what they were given to invest.
What makes me shudder is that so few people will accept that social security will have to change. The further we let it ride, the more acute that change will need to be. That change could be an attempt to gain a greater return, perhaps by taking some of the Fannie Freddie portfolio or by investing in equities. If we want to reduce benefits instead that should be laid out. With compound interest the cuts may not be that bad. Finally there’s taxes... but realistically do we really want to tax labor more?
But we can’t realistically talk about it because blind wishful thinking continues to have people say there isn’t a problem.
What makes me shudder is that so few people will accept that social security will have to change. The further we let it ride, the more acute that change will need to be.
Social Security only needs one more tax increase to make it solvent in perpetuity.
So long as Social Security could keep getting new entrants to keep the ratio of workers to beneficiaries at 46:1, the scheme was sustainable, but as soon as the ratio started to decline, the only way to keep it solvent was to continually increase the FICA payroll tax.
The last time the FICA payroll tax was increased was 28 years ago. Prior to that rate increases averaged every 2.5 years.
The good news is the ratio of workers to beneficiaries has stabilized.
From this point on the ratio will always be from 2.2:1 to 2.8:1. Knowing that, you just need to make one last adjustment to get the program solvent.
You can eliminate the wage cap if you want, but that won't save Social Security. You'll still have to increase the FICA tax 1.8%-2.2%. That will create a small balance in the OASI Trust Fund over time, only about $500 Billion. After 2042, you'll get a slight reprieve and the Trust Fund balance will approach $1 TRILLION, and that's the way it will stay through 2090.
But at the end of the day, who is in a better position to decide what happens to an individual's money?
The individual herself?
Or elected Congressmen & Senators -- who, by the way, have their own gold-plated pensions & Cadillac health care at taxpayer expense?
Quote:
Originally Posted by Lowexpectations
I don’t think the average person is really in a better position to decide and really neither are policiticans
I understand your point.
At the same time, I know financially responsible young couples wish to purchase their first house... and they are struggling to save a down payment. They sure wish they had access to their own money (the employer & employee SS withdrawals) to save for that downpayment.
A down payment for a starter home in the expensive Bay Area exceeds the full boat asking price of that same property in a low-cost fly-over state, of course.
Social Security only needs one more tax increase to make it solvent in perpetuity.
This. And the program in 2018 is close enough to cash flow neutral that there is no reason to have a big tax hike now. Once you accept that there is no such thing as a "Social Security Trust Fund" because the money was already spent, it's merely a matter of hiking payroll taxes in some way to get the program back to cash flow neutral before borrowing money becomes a huge problem. Rich people correctly don't want to pay the tax hike now. That just perpetuates the "Trust Fund" charade. We can limp along unchanged for a decade before the borrowing starts to cause pain.
This. And the program in 2018 is close enough to cash flow neutral that there is no reason to have a big tax hike now. Once you accept that there is no such thing as a "Social Security Trust Fund" because the money was already spent, it's merely a matter of hiking payroll taxes in some way to get the program back to cash flow neutral before borrowing money becomes a huge problem. Rich people correctly don't want to pay the tax hike now. That just perpetuates the "Trust Fund" charade. We can limp along unchanged for a decade before the borrowing starts to cause pain.
I’ve read that the jobs growth and high wages is how Trump want to solve SS problem.
At the same time, I know financially responsible young couples wish to purchase their first house... and they are struggling to save a down payment. They sure wish they had access to their own money (the employer & employee SS withdrawals) to save for that downpayment.
A down payment for a starter home in the expensive Bay Area exceeds the full boat asking price of that same property in a low-cost fly-over state, of course.
That's not what Social Security is for. Social Security is a social democrat program to transfer money from affluent people who can afford to buy houses to less affluent people who would otherwise starve in their retirement. It's a tax. It's not an investment plan. I'm career high income. I'd be way better off with 40 years of 15.2% of my gross earnings put in the market than confiscated from me and my employers to fund Medicare and Social Security. Instead, that money was taxed from me and my employers and spent either to pay Social Security & Medicare bills or tossed into general spending as a faux IOU.
The only way to make the program palatable back in FDR days was to open up the pension to everyone. The payout is massively progressive. It has to be or the bottom half of the elderly would starve.
I’ve read that the jobs growth and high wages is how Trump want to solve SS problem.
Sounds great. Where are the programs that are going to achieve that? The Trump tax cut certainly didn't. You have to boost the wages of the bottom half of the country bigly. Those people don't have 21st century job skills. Who's making that happen?
Last edited by toosie; 12-11-2018 at 04:06 AM..
Reason: Edited out partisan jab
Sounds great. Where are the programs that are going to achieve that? The Trump tax cut certainly didn't. You have to boost the wages of the bottom half of the country bigly. Those people don't have 21st century job skills. Who's making that happen? .
With strong economy, people working longer, paying into the system, aka my sister and my brothers are good examples, most of them are already FI, they just don’t RE for the FIRE.
Many young people are now finally employed, the tax they pay is going to fill up the coffer. One of my kids got 10% raise this year, many years before that nothing for some kids, they be lucky if they get a job. The strong economy lifts all boat and not just the ones with higher education.
Last edited by toosie; 12-11-2018 at 04:08 AM..
Reason: Edited partisan jab from quote - and orphaned response
With strong economy, people working longer, paying into the system, aka my sister and my brothers are good examples, most of them are already FI, they just don’t RE for the FIRE.
Many young people are now finally employed, the tax they pay is going to fill up the coffer. One of my kids got 10% raise this year, many years before that nothing for some kids, they be lucky if they get a job. The strong economy lifts all boat and not just the ones with higher education.
I would be shocked if the increased tax revenue can fill the coffers when spending is so high.
Last edited by toosie; 12-11-2018 at 04:08 AM..
Reason: Edited quoted post
With strong economy, people working longer, paying into the system, aka my sister and my brothers are good examples, most of them are already FI, they just don’t RE for the FIRE. Many young people are now finally employed, the tax they pay is going to fill up the coffer. One of my kids got 10% raise this year, many years before that nothing for some kids, they be lucky if they get a job. The strong economy lifts all boat and not just the ones with higher education.
The economy has been strong for quite a few years. It is misleading to say this all happened in 2017
Last edited by toosie; 12-11-2018 at 04:09 AM..
Reason: Edited quoted post
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