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I know a few people who collect SS who are worth many millions of dollars and obviously do not need the money. Whether it is fair or not if they paid in all that money and would get no SS at all I cannot say. While I was living in a very high property tax area in NJ and was paying a good portion towards school costs without any school age children I still had to bear some of the cost of that. I guess you could liken that to paying into some sort of program to help those in old age with little to no means and getting nothing back.
A society can be judged on how they help those who are less fortunate. Will there be some who scam the system? Sure but the good outweighs the bad.
Means testing is not going to be a fluid solution with predictable yearly costs for SS. We are in a long Bull market and just watch what a bear market does for SS cost when incomes fall and more become eligible for SS. I can see financial products being offered now designed to keep you under a means cap threshold. Designed by industry brains to work within the new SS guidelines. There are those I hear who don't like to leave money on the table even when they have what someone else considers to be a lot.
With all the attention given to this problem, it might be helpful to remember that today's government deficit and debt have nothing to do with Social Security. The funding for SS is solid for the next 20 years, at least. Meanwhile, the general budget is hemorrhaging red ink, right now, every day, in huge amounts. Perhaps our "leaders" should get this under control before messing with SS.
But then our "leaders" would have to direct our attention to Medicare costs.
It isn't just what works to fix SS. It is also what works and doesn't create other unintended consequences. Government programs and policy including SS already have unintended consequences some SS related that it is suggested be done away with. Human behavior is just that and it will overwhelmingly be those with the most acting in their own self interest when it comes to money.
I really don't get how even those with less compassion can't be swayed by logic. I admit to allowing my concern for others influence my politics. I also know that there aren't enough of us who have the means to see to those less fortunate without those who aren't as concerned. Logic says we have to get everyone with means to pitch in or we can't provide enough assistance. The flip side is that no matter how cold hearted some people may be, they know that public policy has to provide a safety net. You don't let homeless children starve. Because of income and wealth inequality, we have to ask those with more to pay more, and not just by % unless we start the % above what it costs to live decently, not just barely survive.
I really don't get how even those with less compassion can't be swayed by logic. I admit to allowing my concern for others influence my politics. I also know that there aren't enough of us who have the means to see to those less fortunate without those who aren't as concerned. Logic says we have to get everyone with means to pitch in or we can't provide enough assistance. The flip side is that no matter how cold hearted some people may be, they know that public policy has to provide a safety net. You don't let homeless children starve. Because of income and wealth inequality, we have to ask those with more to pay more, and not just by % unless we start the % above what it costs to live decently, not just barely survive.
The notion of a societal safety net encompassing programs like SS, Medicare, Medicaid and decent affordable/subsidized housing is a fairly recent historical phenomenon mostly in Europe and North America. It has no history of sustainability and in fact the nature of our current discussion is not whether to, but how to sustain it. It is a challenge not just here but in other nations and societies that have tried and our now challenged to sustain. Witness much of Europe. It is also a reality that many realize how expensive retirement is and can be without public assistance and want to avoid being a burden on society and want to pay their own way. Thus millions to pay for medical cost themselves. to pay for nursing home care themselves. We always have people reminding us how one medical problem can wipe you out, how nursing home care can wipe you out, how unexpected expenses can dent your retirement etc etc etc. So why not prepare to be able to take care of your self? Does self reliance still not have value in our society? Some do appreciate the true cost of retirement and have done things to properly position themselves. Some realize how a streak of bad luck can destroy the things you did right and render you in a very different situation then you planned for. We are so often reminded of that in this forum. So how many of us who got hit with bad luck wish we did have a few million more than we did to get us and our families thru a tough situation? The nature of human intelligence is the ability to adapt and there are those focused first and foremost on the ability of their family to adapt and sustain their economic well being. In many cases it is what got them there. It is often not mean spirited but often what is carved in their psyche and yes they do listen to financial consultants about how much you need in retirement often when others don't and down play that amount. NEG often reminds us about the millionaire doctor who went into a nursing home and was broke after awhile and needed Medicaid to stay in. Bet he wished he had a few million more.
TurbogP,
You make a lot of valid points both ways. We think a lot a like. I think people who plan well, stick to it and never have a crisis derail their plans deserve to enjoy an above average retirement. I hope to be one of those people and I am on the right trajectory and under 10 years away so I stand a pretty good chance of making it. I am not trying to better my situation.
Being self centered is normal and natural. Healthy even. Caring about the greater good is more of an acquired taste. But I really think it is logical, not just compassionate. In free enterprise we have winners and losers. It's not a game of Monopoly though; when someone loses it would be fatal if we didn't support them. We do it through a hodge podge of programs to address various individual needs. Not very efficient and makes us debate the issue on too many different fronts IMO.
TurbogP,
You make a lot of valid points both ways. We think a lot a like. I think people who plan well, stick to it and never have a crisis derail their plans deserve to enjoy an above average retirement. I hope to be one of those people and I am on the right trajectory and under 10 years away so I stand a pretty good chance of making it. I am not trying to better my situation.
Being self centered is normal and natural. Healthy even. Caring about the greater good is more of an acquired taste. But I really think it is logical, not just compassionate. In free enterprise we have winners and losers. It's not a game of Monopoly though; when someone loses it would be fatal if we didn't support them. We do it through a hodge podge of programs to address various individual needs. Not very efficient and makes us debate the issue on too many different fronts IMO.
Social Darwinism is alive and valid. It is that instinct which motivates financial markets and is why to many capitalism is the logical economic system even with winners and losers. It is the wealth creation of that process than enables us to have debates on the use and distribution of that wealth. Destroy self initiative and you have what has yet to be proven to work. Even the great Communist/Socialist adventure in China failed to produce the wealth and quality of life that the introduction of Capitalism has. I know this sounds cruel but it may have merit. Traditionally in most cultures the aged were dependent on their children and the success of their children as adults to sustain them in old age. Today we have the great social net and seniors are not dependent on their children for survival but the greater society and others children. If we did not have that social net and you were truly dependent on the success of your children do you think the poor would do a better job of raising their kids to be productive self sustaining adults? Just wondering!
And there in is the path for creating support for Privatization. By a certain age many affluent folks will realize that there current financial path is going to decrease their SS benefits and the value added benefit of saving will decrease. They will realize they are better off saving on their own. As with pension reform financially sophisticated employees are beginning to believe that with increased contributions and decreased benefits they are better off without the pension and saving on their own and having a nest egg they control and can keep. Imagine if they tamper with spousal benefits as some advocated it will be even more advantageous to have your own nest egg instead.
And when the markets crash again, what then? Boom and bust cycles are not unknown to have occurred, nor are layoffs, businesses going out of business, catastrophic illnesses and injuries, etc. Affluence can be oh, so fleeting. And for the nonce, despite the vagaries of privatization, Social Security just keeps chugging along.
IMO, lots of people confuse SS as an investment, when it is actually insurance. An investment would eventually stop paying out if you lived too long. An annuity would keep paying because it is also insurance. Might not be packaged that way but at least part of the cost is to ensure a perpetual payout. Anyway, some people get more out than they put in; yes that is what happens when you share risk. The risk being shared is that you and/or dependents will outlive other sources of income. SS makes sure you at least have something. Once people run out of other sources, which is the day of the first payment if they have no other sources, SS needs to provide enough income for bare necessities even if that makes it highly likely the payout will exceed the taxes the individual payed in to help fund the program.
As galaxyhi pointed out, the first recipients didn't pay the tax for the program at all because the tax wasn't collected while they were working. It was really obvious at that time that it was an insurance program. Along the way, we have lost sight of that. People want all their money back. That's not how it works. This is a social program; you pay in based on ability to help fund it and you take out based on how long you live (or in some cases what is paid out to your dependents). I say this as a wage earner who has paid the cap every year for quite some time; I have likely paid more than I will see but that's okay. Unless there is a crisis that affects my personal finances, I should be fine.
SS is not an investment or insurance (I am not addressing the disability or survivors benefits aspects of the program, which were not the subject of Christie's proposal).
From Wiki:
Quote:
Insurance is the equitable transfer of the risk of a loss, from one entity to another in exchange for payment. It is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. An insurer, or insurance carrier, is selling the insurance; the insured, or policyholder, is the person or entity buying the insurance policy. The amount of money to be charged for a certain amount of insurance coverage is called the premium. Risk management, the practice of appraising and controlling risk, has evolved as a discrete field of study and practice.
The transaction involves the insured assuming a guaranteed and known relatively small loss in the form of payment to the insurer in exchange for the insurer's promise to compensate (indemnify) the insured in the case of a financial (personal) loss. The insured receives a contract, called the insurance policy, which details the conditions and circumstances under which the insured will be financially compensated.
In the quote above I've underlined the criteria that the SS program does not meet. One of the most important is there is no contract that obligates the government to pay anyone anything in return for the taxes you pay into the system. The benefits can be adjusted at any time by the government. The other is that the payout is not dependent on a contingent and uncertain loss or risk.
So SS is nothing more than a government program in which taxes are taken from employers and current employees and used to fund the payment of benefits to those who are currently retired. Calling it insurance or an investment clouds the issue.
In addition to the proposed fixes I listed earlier in this thread I'd like to see the system transition to a program that would have some characteristics of an investment, namely that there be accounts that are owned by the individual. Think of it as a mandatory savings program with carefully controlled investment options.
You might layer on top of that an insurance program where in return for a fee that all would pay those who experience poor outcomes due to the timing of their retirements would have their benefits adjusted. This could take the form of a guaranteed minimum return on your payments into the system. The trick would be setting the premiums and minimum return so that it was sustainable.
And when the markets crash again, what then? Boom and bust cycles are not unknown to have occurred, nor are layoffs, businesses going out of business, catastrophic illnesses and injuries, etc. Affluence can be oh, so fleeting. And for the nonce, despite the vagaries of privatization, Social Security just keeps chugging along.
I noted that previously and with market busts and means testing the number eligible for benefits goes up and with layoffs receipts go down. So how to reform and maintain sustainability over various economic cycles. We now have more of a boom mentality so will that cloud our thinking on how to deal with a down cycle or worse scenario as you note.
Last edited by TuborgP; 04-18-2015 at 09:04 AM..
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