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The thread title is the title of an article in today's Washington Post. It says, among other things:
Quote:
The total incomes of Americans age 65 or older are equal to 92 percent of the national average income, according to the OECD.
I'm not seeing it.
If that would be true, then Social Security would be collecting an higher percentage of taxes on benefits.
But Social Security is not collecting an higher percentage.
Quote:
Originally Posted by GreenGene
The article also suggested (backed by data from the Organization for Economic Cooperation and Development) that when government retirement programs like Social Security offer more generous benefits, people tend to do less -- in addition to those government retirement programs -- to prepare financially for retirement.
I don't trust the OECD and I don't see the US Social Security system as being "generous."
When a married couple with earnings records high enough can get 80k plus from ss i would say it can be rather generous.
This is generous... but only for those who made the maximum social security wages every year. I think I made the maximum 2 years out of my whole working life, and then they raised it so although I did pretty well salary-wise, I never reached that maximum amount again.
The concept of average people of necessity becoming investors, is recent; it might only be say 40 years old. The concept of overall frugality has been operative since the Neolithic revolution, but the need for becoming an investor for funding one's retirement, is a novelty.
It's a novelty designed to force people to pay more and more of what could be their retirement money to someone else.
We look at a mutual fund's expense ratio and it says 1% and shrug our shoulders and thing "that isn't much" Plug that into a spreadsheet and take that 0.083% out of your monthly balance and over six years, you lose one full year to the manager. Maybe that's fair and maybe it's not, but my grandparents just retired on 1970's ( pre-reform ) social security and a $150k cd and a paid-off house. Adjusted for inflation, that $150k cd is $660k, but it only pays $1,100/month with today's current 2%. 1975's inflation-adjusted rate would be over $3k/month.
It may very well be that the pensioner of the 1970's only was making a real return of 2% many years ( because of inflation ), but for a frugal old person of 2005 or so with that $660k, they now make only 1/3rd of their previous dollars they got not that long ago. The temptation to go with investments they don't understand and learn the concept of losing money some years becomes irresistible.
People have no idea how much they are paying for the advice they are getting.
Quote:
Originally Posted by Burger Fan
Quote:
Originally Posted by ohio_peasant
The only difference between a 401K and my pension is that with a pension the benefit is defined.
And this is an absolutely staggering difference!
With a defined-benefit pension, there is no palpable risk to the recipient, ...
You can't really say that. If you were GM management, that's gone. If you retired with an airline, you are on the government plan so that instead of being able to eat out once or twice a month, you get to carry out some hamburgers and fries.
If you worked in Detroit, so far, your pension hasn't been cut, but the funding is still insolvent. Most states have insolvent pension funds that assume a hopeless 8% return, but in reality ... not so good. If I was a pensioner in Detroit - only ten years in or so - I would fear for they payments when I passed 70. If you spent your working life their and you are in your 50's or 40's it's worse. Lots of Ohio, Indiana, et. al. cities just haven't hit the fan yet. The states are less than a generation from a serious failure.
Back to Wall Street, they want state and municipal governments to pay them to manage their stuff and sometimes, one of those governments tries to get fancy with derivatives and in 2008, their funding got hosed.
Social Security used to generate a surplus, but coincidentally, when the current administration took over from the previous one, the fund started to run a deficit. Even if the trust fund was meaningful. the fund is still insolvent, so as some of the other posts have noticed there are all kinds of taxes and "elegibility tests" adjusting the COLA rate, and coming; higher taxes for younger people who are not going to get nearly the benefits their parents got.
If you work for the government, it is meaningless to hear a "promise" from a politician. A government job is supposed to be a lower-pay/higher-benefit job that provides a guaranteed pension, but for many governments, the pay is more than what their taxpayers make. What happens when that modest $30k pension only has minimum-wage employees to pay the taxes?
Some congresscritter/counselcritter is out their - long ago retired - not worrying at all about that problem.
I don't trust the OECD and I don't see the US Social Security system as being "generous."
I trust the OECD. I know some of the people who collect data that are used by the OECD and they are the most diligent and boring people you'll ever meet. Macroeconomists with government jobs.
The US Social Security system is generous relative to what you put in, unless you have a high income; it's not generous relative to a hypothetical 'ideal' national pension system.
I trust the OECD. I know some of the people who collect data that are used by the OECD and they are the most diligent and boring people you'll ever meet. Macroeconomists with government jobs.
The US Social Security system is generous relative to what you put in, unless you have a high income; it's not generous relative to a hypothetical 'ideal' national pension system.
And that's one of the challenges related to reform. Those paying in the most and receiving the most get proportionately less and pay more in SS taxes already and so many reform ideas would have them get hit even harder. The support for SS and other retirement reform( including pensions) is more tenuous with benefit holders than the mainstream media might suggest. Especially as you move up in income groups.
Presented without comment ( but I'm sure there will be some ).
Cite: taxfoundation
Again a reminder that when you hit the ceiling they stop taking it out and you get a larger pay check until the start of the next year. If you increase benefits for those making over the max increasing the ceiling isn't as bad a hit. They are already proportionately getting less back so more of less isn't as bad knowing your eventual benefit will be greater. I always thought it funny that I got the increase in income only to have it taken back. It could in the aggregate impact Holiday season spending if folks have less to spend when compared to previous years at that time.
Presented without comment ( but I'm sure there will be some ).
Cite: taxfoundation
The social security tax rate is 6.2% to the maximum taxable base. The additional 1.45% medicare tax is UNLIMITED.
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