Time to remove the cap on Social Security (Christmas, compared, economy)

[Danno3314]

Originally Posted by jimhcom

There may have been a time when the $106,000 cap on Social Security made sense, but today it does not. That time would have been before Congress stole the money from the trust fund. That time would have been when wealth was more evenly distributed between the working class and the ruling class. That time would have been when the economy was in better shape than it is now. Capping the Social Security tax amounts to a tax break for the rich at a time when neither the program nor the country can afford it. Does it make sense to have to borrow money for benefits beginning in 2017 when the rich are not paying tax on their total income? It is time to end tax breaks for the wealthy and start doing what makes sense.

What about the self-employed that have to pay twice the amount that others who are not self-employed have to pay? Being self-employed doesn't mean you're rich.

[saganista]

Originally Posted by jdevelop2

Simply not true. The average investor can easily invest in mutual funds, which, historically out perform SS returns.

US securities markets have lost some $7 trillion in this recession. SS has lost $0. Over the first decade of the new century, the DJIA is down 16% and the more diverse S&P 500 is down 29%. By your supposed historical rule, each should have considerably more than doubled by now. That's a lot of falling behind the theoretical curve that's occurred there. Few will ever catch up. Those who put up another 40 quarters of credit in SS over that decade will meanwhile have fared much better. They have remained right on track.

Originally Posted by jdevelop2

There is nothing complex about investing in mutual funds. According to the A.C. Neilson Co, the average American spends 4 hours a day watching TV. Give me a freaking break.

Oh, it's a simple enough thing to open up your 401-k statement and read that you'll have to work at least another decade longer than you thought before you can afford to retire. Nothing complex about that at all. You are like the survivor of the Titanic claiming that it was easy. Anyone could have done it. Well no, the facts tell a very different story. The typical investor and the successful investor are two different things. You should try to keep that in mind.

Originally Posted by jdevelop2

Many, many people use and rely on SS as their retirement or investment plan.

Many, many people are also fond of tunafish sandwiches, which has just as much to do with whether SS is actually a social insurance program or not.

Originally Posted by jdevelop2

True. However, I SAID for simplicity's sake. BOTH amounts would be cut in half giving the SAME RATIO. So whats your point??

Math Refresher: Compound functions are not linear. The higher the assumed interest rate, the greater the degree of front-loading distortion that will be introduced by your simple but corrupting income curve assumptions. By the time you reach an also unrealistic rate of 9%, your error will cause the result to be nearly triple what a more practically estimated income curve would have produced. So no, the ratio will not in fact be the same at all. You've even put actual numbers into the units-digit of your dollar forecasts as if these were precise calculations of some sort. In fact, they are so far off the mark as to be darts thrown in the dark that have stuck in a wall other than the one the dartboard is hanging on.

Originally Posted by jdevelop2

I disagree that it is 2% over the COL. Care to quantify the value derived from the components you mentioned? I would take the extra returns received from a higher rate than these components ANY DAY OF THE WEEK.

The figures vary over time with changing conditions, but the SS disability component is roughly equivalent to a $350K private sector disability policy, while the life insurance component is the equivalent of about a $400K private sector policy. Check out current private sector premiums for such products and add those to your ROI calculations.

Originally Posted by jdevelop2

Both numbers I used were not adjusted for COL, so the ratio remains true. You don't include the limited ability to earn other income and still receive full SS benefits.

Per the above, the ratio you calculated is meaningless altogether, and 70% of SS recipients pay no taxes at all on their benefits. For the bottom half of the wealthiest 30%, the taxes they do pay are trivial, and for the rest, the combination of their benefits and their outside incomes leaves them quite able to afford the taxes. Your focus on this issue suggests to me that you are only doing some anti-tax whining about your own situation.

Originally Posted by jdevelop2

Why the hell would you agree to an annual fee of 1.5% of fund balances?? Their are plenty of well performing funds that charge no where near this.

Mutual fund expense ratios had been slowly falling for years, but that is now in the past. Expense ratios have increased an average of 5% over the past year, bringing the average domestic equity fund back to 1.39% by this past July. Ratios for any privatized SS program would of course be substantially higher.

Originally Posted by jdevelop2

And so because others are IRRESPONSIBLE and make poor choices, I should have to be penalized and pay for their decisions?

You've been touting the ability of the typical investor to do so well on his or her own, yet now you attack these folks for being irresponsible people who make poor choices? That's a little inconsistent, even if more apt than your earlier claims. This is still starting to sound more and more like some sort of all-about-YOU argument, though.

Originally Posted by jdevelop2

Just maybe, if people didn't know that the nanny state would be there to bail them out, they might behave a little more responsibly. But I know that concept flies way over the head of most liberals.

Shouldn't that have been the "cradle-to-grave nanny state", just to keep the meaningless right-wing buzzword intact? There are four current components in the package that makes for a secure retirement: Social Security, Medicare, employment-based pensions, and personal savings. Right now, Social Security is the one that's in the best shape, and you want to take it away. Because you don't think you'll need it. Nice guy.

Originally Posted by jdevelop2

I have a very simplified example since this is a CD thread. Anyone with a basic understanding of investment strategy understands that, you invest in riskier vehicles when your are younger and further from retirement, and as you age and near retirement you begin transitioning into bonds, money markets, cash flowing real estate, and other lower risk and diversified investments. For the non-savvy, many mutual funds are set up to do just this.

You put up a crude and unrealistic example while trying to pass yourself off as some sort of knowledgeable person well-versed in the topic. You rode right over the basic algebra involved, producing an exhibit that could have been torn straight from the superficial internet pages of the right-wing disinformation media.

The availability of life-cycle mutual funds has been a welcome development, but people consistently fail to use them or use them inappropriately. Four out of five who have a life-cycle fund available as a 401-k option still hold a portfolio that is either all stocks or all bonds or is heavily weighted by the stock of the company they work for. The typical investor strikes again.

Originally Posted by jdevelop2

Bottom line: If my analysis is not useful to you, it is most likely due to your lack of education and comprehension of the the subject matter.

I don't think that's actually it.

Originally Posted by jdevelop2

You continue to believe the way you do and I will do the same. I have no question as to who will be doing better come retirement. Its just frustrating to see people like you giving bad advice that will undoubtedly hurt less fortunate people that hear and follow it.

You can believe in the tooth fairy if you want. I'd be a little more down-to-earth than that. I'd also be better off financially than some 99% of people or so, hence my retirement situation will be a good target for you and other ambitious people to shoot for. Meanwhile, the typical investor would be far worse off without Social Security than he or she is with it. Median household income fell to $50,303 last year. It is falling further this year. The inflation adjusted number for 1998 was $51,295. Increasingly, the typical investor lacks not just the savvy but the means to fund a secure retirement on his or her own. SS is the security backbone and backstop. You can't do any worse than what it will provide for you. Unless some bunch of self-serving insouciants have their way.

[saganista]

Originally Posted by workingclasshero

they dont realize they CAN'T, the system was set up that the cap is for both ends. they dont realize that currently the guy who makes exactly 106k pays 6+% (plus the employeers 6+%) into SS, and the guy who makes 1 million pays exactly the same 6+% of 106K....and at retirement the millionare AND the 106k guy will get exaclty the same (the max payout)................if they take the cap out......the guy who make a million will get a BIGGER payout at retirement, because he would have CONTRIBUTED 6+% of a million, not 106k.

In yet another attempt to clear up what seems to be a widespread misconception, a worker earns eventual SS benefit credit based upon tranches of annual income on which he or she pays payroll taxes. The actual levels of both the bend-points that define those tranches and the ultimate wage cap move with cost-of-living adjustments. In general terms however, one earns a lot of benefit credit for taxes paid on the lowest income tranche, and rather little benefit for taxes paid on the highest income tranche. Extending the wage cap would result in added tax revenue for which the lowest possible amount of benefit credit would accrue. Hence, it would be a significant moneymaker for the system (unless other terms of the equation were to be changed at the same time as the wage cap).

[saganista]

Originally Posted by MotleyCrew

We would be happy with our $100,000 + we have contributed to this system back in our pockets. What a giant ponzi scheme this was.

Just for Background: ALL insurance plans use current premiums to pay current claims, then salt some away as reserves against future claims, and -- in the private sector at least-- suck off some more to send to stockholders and for use in such noble endeavors as advertising, lofty executive bonuses, and building magnificent towers that will define urban skylines.

In any case, if Social Security is a Ponzi scheme, then so are the Hartford, Met Life, All State, GEICO, Liberty Mutual, Progressive, Nationwide, Mutual of Omaha, and all the rest.

[saganista]

Originally Posted by binghiempress

I was actually pleasantly surprised to see that I stopped having the SS taken out of my paycheck at a certain point this year. I don't know that I'd be thrilled if the cap was removed and yes its selfish because even though I pay SS (up to the limit) and medicare, I'm on an H1B visa and am ineligible for those benefits. I have no problem with being ineligible but it is kind of odd that I am forced to pay them.
*puts on flame retardent suit for being an H1B worker*

H1B's are eligible for Social Security benefits on the same terms as any other covered employee. You are vested once you have 40 quarters of covered earnings. Many H1B workers do not reach that 10-year requirement of course, but the US has reciprocal agreements with most other economically significant countries to assure that credit earned under Social Security transfers back to the retirement system of the home country in that case.

[jimhcom]

Originally Posted by Danno3314

What about the self-employed that have to pay twice the amount that others who are not self-employed have to pay? Being self-employed doesn't mean you're rich.

There is no reason why there cannot be provisions for small business, but what about the people who are making 10's and 100's of millions a year? Do you not feel the ultra rich are getting a pass from a system that has given them more that any human deserves?

[checking out]

How about an option to OPT OUT?

I'd gladly sign a contract letting them keep everything I've paid without a penny of benefit just to not have to contribute ever again. BTW: I've paid a considerable amount over my life but I'd be happy to give it away just to be free of the non-sense.

[NewToCA]

Originally Posted by GOPATTA2D

This information is precisely why everyone should have to take and pass a test of basic financial concepts before they can vote.

The limit increases every year. In many years it has increased at a rate higher than inflation. Benefits are capped to the limit, at least in theory. Raise the limit, raise the maximum benefits. Today high income workers subsidize low income workers. Lower income workers recieve a higher rate of return on their social security "portfolio" than high income workers. It is pure wealth redistribution. Now you want more.

For the record, anything other than the annual increase would be a tax increase. Obama has already promised not to raise taxes.

Despite all of the back and forth taking place in this thread, I believe your answer (very early in this thread) really was very accurate and concise.

[GOPATTA2D]

Originally Posted by saganista

In yet another attempt to clear up what seems to be a widespread misconception, a worker earns eventual SS benefit credit based upon tranches of annual income on which he or she pays payroll taxes. The actual levels of both the bend-points that define those tranches and the ultimate wage cap move with cost-of-living adjustments. In general terms however, one earns a lot of benefit credit for taxes paid on the lowest income tranche, and rather little benefit for taxes paid on the highest income tranche. Extending the wage cap would result in added tax revenue for which the lowest possible amount of benefit credit would accrue. Hence, it would be a significant moneymaker for the system (unless other terms of the equation
were to be changed at the same time as the wage cap).

Translation: de facto tax increase.

Since you rightfully point out that SS is an insurance program, please comment on what other insurance company would keep it's customers if it continued to raise premiums on it's best customers in order to pay the claims of it's worst customers'

[KevK]

Originally Posted by jdevelop2

Coming from someone who believes 16 year olds should be allowed to vote.

Yes I do in LOCAL and SCHOOL BOARD elections. Most 16 year olds work, pay taxes and many of them drive. It is all part of growing up and being responsible. They pay taxes on wages and sales and gas and, if they own a car, personal property. In fact there are many 16 year olds that pay MORE in taxes than some 30 year olds. So yes, they should be able to vote in local and school elections. As for state and federal, 18 for now.