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Financial Planning / Social Security Reform

URL:  http://boards.fool.com/nice-thread-let-me-reply-to-some-multiple-posts-30465328.aspx

Subject:  Re: Social Security and US Debt Date:  1/3/2013  10:11 PM
Author:  PuddinHead42 Number:  5263 of 5267

Nice thread, let me reply to some multiple posts.

First, as Obama says, the math just doesn't add up. There are problems.

SS is a pay-as-you go system, which is not a pyramid scheme, but not far from it either. You do depend on the kindness of strangers. People think they have "saved" into the system, but really they paid for their parents and grandparents and now retirees must rely on their children and grandchildren.

There is a surplus now, but we know it will end and then the big trouble starts. We are retiring 10,000 people a day. That is 300,000 a month. So until you see employment increasing by 300,000 a month, you know the "pyramid" is inverted and we are draining money.

There is no "lock box", and won't be. Only if you "owned" your contribution and could invest it like a 401k, would you keep the government from borrowing and spending it. It takes the cash and gives the fund 30 year bonds, which are now yielding squat. The fed is printing money and will pay the fund back with inflated dollars (that are worth less while your cost of living has increased).

There are plenty of fair solutions and everyone must share in the pain. Remember, when this was established, benefits started about a year before you were expected to die, now we live much, much longer. Obamacare is supposed to help us live even longer and constant medical advances will do the same. This is not "fair" to the way the system was implemented.

Ok, some suggestions.
1) I like the ideal of "chained CPI", which measures inflation at a lower rate, thus increases benefits (COLA) slower. This hurts current recipients. Also, this makes tax brackets inflate slower, so it hurts the 53% that pay income tax.
2) let the first $10,000 of dividends+interest be tax free - this will help a number of retirees who have been able to save to supplement their SS. But this is a minor thing.
3) More means testing...if you are getting more than ??thousand in income, then SS is taxed at 50% or 75%. Let's say $100,000 income. This is unfair to people who have been able to save lots of money. Maybe even made sacrifices during live to have enough to retire comfortable.
4) Start pushing back the retirement age (for full benefits). If you are 45, you have to wait 6 extra months. The it is 3 more months for every 5 years (40 year old waits 9 more months now). Or something like that. This gives people enough time to save more money on their own. We love to buy that 60 inch LED RIGHT NOW, but saving for IF you make it to 70 is boring. But at least you know it is coming. That hurts younger people.
5) We need more workers paying in. We can get some from economic growth, but we have to reform immigration to let lots more people in to work. Over the years, I have seen plenty of immigrants that have started with "crappy" jobs like mowing my neighbors lawn, but have slowly grown business from all their hard work. One day they will have a second person, then a third, then a new pick up truck, then they finally talk me in to mowing my lawn for a reasonable price. They did not take this job away from anyone. I was mowing my lawn for free and decided I could now afford to watch football for the price I paid to let someone else do it. Eventually these business are legit and start paying SS, etc. They send their kids to school and the kids get better jobs, and pay SS. We need that. This hurts people who hate foreigner and probably hurts the unions.
6) Raise the cutoff for the payroll tax. It is now about $113k. Probably should not be "infinite" like medicare, but maybe cutoff at $150k now. That hurts people that make over $113k and prevents them from saving as much for retirement ;-)
7) End all pensions for Congress. Make them use SS and their own savings only. All their "speaking fees" are just legal bribes anyway, they can put that in their retirement plan. This hurts the people that refuse to deal with the problem.

there, look at all the shared pain. That is fairness.

I would wager that any two people on this board could sit down and create a fair solution if they were not worried about getting reelected.

They say that in a democracy, you get the government you deserve, and boy do we deserve this one!
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