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Author: ResNullius Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76237  
Subject: Means Testing SS Date: 1/12/2011 2:52 PM
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While having some lazy time this morning, I Googled "means testing social security," and I was very surprised at the number of articles that were listed from relatively influential politicians from both Parties. What really was interesting was the fact that so many articles talked about completely eliminating SS payments to people with non-SS income of greater than $60K. I find that hard to believe, but there were many articles that used that the same number as the cut-off point. I've alwasy figured that the politicians wouldn't touch anyone with non-SS joint (husband and wife) of $250K, possibly as low as $150K, and never to totally cut them off. It will be interesting to see how this debate plays out.
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Author: temsike Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68218 of 76237
Subject: Re: Means Testing SS Date: 1/12/2011 7:25 PM
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Somebody with $60K/year non-SS retirement income has somewhere between $1M and $1.5M in financial assets.

That person or couple is easily in the top 10% as far as wealth goes in the USA.

It makes sense.

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Author: reallyalldone Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68219 of 76237
Subject: Re: Means Testing SS Date: 1/12/2011 7:47 PM
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Somebody with $60K/year non-SS retirement income has somewhere between $1M and $1.5M in financial assets.

Or has a pension, public or private.

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Author: Goofyhoofy Big funky green star, 20000 posts Top Favorite Fools Top Recommended Fools Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68220 of 76237
Subject: Re: Means Testing SS Date: 1/12/2011 7:55 PM
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...and you have just turned Social Security into a welfare program.

How long after that before people start complaining about "supporting the loafers" and the program is destroyed? Why, I can almost read the mises report now: "If not for this egregious handout to those who will not plan ahead, people would save and prepare themselves for retirement, instead of leading us down this SOCIALIST path!"

The Wall Street Journal weighs in: "If only the government would stop handing out the hard earned money to those who fail to save, productivity would go UP and taxes would go DOWN!"

Rush Limbaugh adds: "It's about time people woke up and stopped giving handouts to all these lazy bums!"

And Glenn Beck says "You may think I'm crazy, but I'm not. I don't see why I should pay Social Security taxes so that some fat America hating loser can sit around eating chocolate bars all day, while I have to work so hard making my $50 million a year crying on TV."

No, "means testing" is the first step to destroying the program, that is unless you think "welfare" is suddenly going to take on a shiny patina that it doesn't seem to have at the moment.
 


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Author: JAFO31 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68221 of 76237
Subject: Re: Means Testing SS Date: 1/12/2011 8:58 PM
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Goofyhoofy: "...and you have just turned Social Security into a welfare program."

Social Security has always been a welfare program.

It is a wealth transfer from thsoe with earned income to those who qualify to receive the benefits.

From inception until rouhgly 1983, SS was largely pay as you go, and many early retirees collected way more than then paid into the system and more than any actuarially sound pension could have paid.

"Social Security is expected to replace about 40 percent of pre-retirement earnings of average earners; 80 percent for the lowest earners; and 27 percent for those at the maximum taxable wage base of $80,400, [this from some years ago] according to the Social Security Administration." [but relative percentages have not changed since then]

http://cbs.marketwatch.com/news/story.asp?siteid=mktw&di...

"The benefit formula is a three step formula based on AIME (Average Indexed Monthly Earnings). The annual earnings on which this average earnings figure is based have the same caps as were used on the tax side. The formula for the benefit is then 90% of the first $x of AIME plus 32% of the next $y of AIME plus 15% of the balance of AIME. x and y are indexed yearly."

IOW, benefits are (and have been tipped) in favor of low wage earners.

Since roughly 1983, "[s]ome people have to pay federal income taxes on their Social Security benefits."

http://www.ssa.gov/planners/taxes.htm

Taxing SS benefits of some recipients and not other recipients is also a forms of means testing.

The current tax system also creates a very large marginal tax for some recipitents of social security - 46.25% - higher than any normal tax bracket under current US system.

E.g., http://www.bogleheads.org/wiki/Taxation_of_Social_Security_b...


"No, "means testing" is the first step to destroying the program, that is unless you think "welfare" is suddenly going to take on a shiny patina that it doesn't seem to have at the moment."

You rant made for an interesting read, but you are least 25+ years behind reality on this one (and more like 70+ years).

Regards, JAFO

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Author: madbrain Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68222 of 76237
Subject: Re: Means Testing SS Date: 1/12/2011 9:51 PM
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Isn't it already means-tested, anyway ?

Up to 85% of your SS income may be taxable if you have other income. So you are already penalized for making more. Some of your benefits already get taken away in that case.

This is a form of income testing. I am not sure that it's the same as means testing.

You could also evaluate someone's assets - whether they are generating income or not - and deny the SS benefits if the assets exceed a certain amount.

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Author: madbrain Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68223 of 76237
Subject: Re: Means Testing SS Date: 1/12/2011 10:29 PM
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JAFO31,

You rant made for an interesting read, but you are least 25+ years behind reality on this one (and more like 70+ years).

I *think* he was being sarcastic. Goofyhoofy, please say it is so.

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Author: Rayvt Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68224 of 76237
Subject: Re: Means Testing SS Date: 1/12/2011 10:50 PM
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...and you have just turned Social Security into a welfare program.
...
No, "means testing" is the first step to destroying the program, that is unless you think "welfare" is suddenly going to take on a shiny patina that it doesn't seem to have at the moment.


Oddly enough, FDR knew this and that's exactly why he had SS set up the way it is. He in fact said that if SS was something other that "pay in when you are working and get a check when you retire", then people would (rightly) call it welfare and would disdain it. Not being means- tested was a critical part of Social Security.

Of course, means testing will be the death-knell of SS. People will realise that they pay 15% of their salary into SS and will get means-tested out of receiving anything when they retire, and revolt. (OF course, young people already know that SS won;t be there for them when they retire. Making it explicit by assing meas-testing will kill it.)

SS is already hanging by a thread. Adding means-testing will break it.

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Author: ziggy29 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68225 of 76237
Subject: Re: Means Testing SS Date: 1/13/2011 7:54 AM
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>> Of course, means testing will be the death-knell of SS. People will realise that they pay 15% of their salary into SS and will get means-tested out of receiving anything when they retire, and revolt. (OF course, young people already know that SS won;t be there for them when they retire. Making it explicit by assing meas-testing will kill it.) <<

It depends. Almost all the means testing we've done so far is based on income, not total assets or net worth. For the last few years I've been increasingly "engineering" our personal finances to maximize our ability to retire with fairly high net worth and modest taxable income. If the increasing trend of means-testing goodies continues to focus on income, I'm pretty sure we could get by pretty well on $50K annual income or less, especially if that gives me heavily means-tested health care subsidies that I'd start losing rapidly with higher income. And some of that will be non-taxable return of capital and Roth investment withdrawals.

It feels a little dirty, but my only choices seem to be to have the system give me a raw deal or for me to exploit the system. And if those are the only options, then I plan to exploit the system.

#29

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Author: ResNullius Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68226 of 76237
Subject: Re: Means Testing SS Date: 1/13/2011 8:30 AM
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It depends. Almost all the means testing we've done so far is based on income, not total assets or net worth. For the last few years I've been increasingly "engineering" our personal finances to maximize our ability to retire with fairly high net worth and modest taxable income. If the increasing trend of means-testing goodies continues to focus on income, I'm pretty sure we could get by pretty well on $50K annual income or less, especially if that gives me heavily means-tested health care subsidies that I'd start losing rapidly with higher income. And some of that will be non-taxable return of capital and Roth investment withdrawals.

Based on the articles I've read on means testing, the soft-hearted have already figured out that they need to determine fiancial status based on MAGI, not AGI, which would include money received from tax-exempt bonds and such.

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Author: JLC Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68227 of 76237
Subject: Re: Means Testing SS Date: 1/13/2011 9:32 AM
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The Wall Street Journal weighs in: "If only the government would stop handing out the hard earned money to those who fail to save, productivity would go UP and taxes would go DOWN!"

You forgot Nancy Pelosi mugging for the camera with her overly botox injected face touting how unemployment checks are the greatest economic stimulus and how she is crafting more legislation to make more people unemployed.

...and you have just turned Social Security into a welfare program.

News flash. It already is. When you have people getting social security that haven't paid into it and then throw on top people getting drastically more than they've paid into it, its a "welfare" program.

Personally, everyone should have the option of opting out. If you do, you get to keep your SS with holding taxes. But if you go belly up in retirement, tough. If you stay in, you only get what you put in.


JLC, who is not counting on ANY SS in retirement for several reasons

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Author: Goofyhoofy Big funky green star, 20000 posts Top Favorite Fools Top Recommended Fools Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68229 of 76237
Subject: Re: Means Testing SS Date: 1/13/2011 10:58 AM
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Social Security has always been a welfare program.

It is a wealth transfer from thsoe with earned income to those who qualify to receive the benefits.


Well, no. In order to "qualify" for the benefits, you (or a spouse) must have paid in to the system. This is completely unlike "welfare", which has no such requirement.

From inception until rouhgly 1983, SS was largely pay as you go, and many early retirees collected way more than then paid into the system and more than any actuarially sound pension could have paid.

Partially, but largely not true. Social Security was passed in 1935. The first benefits were not paid out until 1937. The first benefits were a trifling 17¢. (Oh. And that was a lump sum annual payment. Monthly payments, similarly tiny, were not paid until 1939.) While there was undoubtedly imbalance, this is not different than an annuity or an insurance program which also has imbalance, depending on the longevity of the recipient or how the annuity's 'investments' do, or other factors. Again, I acknowledge that it's not "perfectly equal." It was never intended to be.

As for your "actuarially sound" comment, that's pretty generally wrong too. The Social Security taxes were sufficient to fund the program until the benefits were changed.. At inception, only the wage-earner could receive those benefits. After a few years spouses were included, and the rates were raised. And after several more years minor dependents were included, and the rates were raised again. But at no time was the program "actuarially unsound", at least until the potential benefit pool was enlarged, at which time the rates were adjusted to meet the new reality. Social Security's "problems" come because of two factors, 1) increased longevity (which is actually the minor problem) and 2) the size of the baby boom thanks to World War II. Neither of these is particularly insolvable, unless we choose to make it so.

I am curious though. Do insurance premiums never change? When hurricanes roar through Florida, do insurers not make adjustments based on changing conditions? Why do you think Social Security should be exempt from adjustments, but private market insurers not be?

Since roughly 1983, "[s]ome people have to pay federal income taxes on their Social Security benefits."

Yes. We have a graduated income tax. That Social Security is called "income" shouldn't be a surprise. It probably should have been from the beginning.

IOW, benefits are (and have been tipped) in favor of low wage earners.

The "tip" is quite modest, and if that is what you are using to define it as a "welfare" program, well, it seems a minor point, at least to me. And high income earners stop paying any SS security taxes at all after their first $106,000 or so, so I'm not really convince how awful this is.


http://www.bogleheads.org/wiki/Taxation_of_Social_Security_b......

The taxation of Social Security is not a "social security" issue, it is a taxation issue. We tax capital gains at different rates, too. Does that make them a "welfare program"? I have some tax-free muni-bonds. Are they a "welfare program?"

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Author: 0x6a74 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68230 of 76237
Subject: Re: Means Testing SS Date: 1/13/2011 2:59 PM
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IOW, benefits are (and have been tipped) in favor of low wage earners.

The "tip" is quite modest,



just curious ...and numbers on how much of a 'tip'?


( i'm pretty close to the max top, but don't feel overly oppressed ..and have known of people at the other end .... VERY low )

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Author: madbrain Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68231 of 76237
Subject: Re: Means Testing SS Date: 1/13/2011 4:00 PM
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Rayvt,


Oddly enough, FDR knew this and that's exactly why he had SS set up the way it is. He in fact said that if SS was something other that "pay in when you are working and get a check when you retire", then people would (rightly) call it welfare and would disdain it. Not being means- tested was a critical part of Social Security.


The above claims are simply not true.

SS pays for disability income, wouldn't you say that's somewhat of a welfare program ?

I don't expect to live to SS retirement age. I want to retire before 62, maybe between age 50 and 55. When can I get my SS retirement money back ? Many people don't make it to that age either even if they don't know it. And don't tell me about SS survivor benefits, I can't be legally married so my partner won't get survivor benefits if I die before him.

The truth is that SS is and has always been a system of redistribution of wealth. Taxes paid today pay for current retirees' retirement. Not for your own retirement.

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Author: madbrain Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68232 of 76237
Subject: Re: Means Testing SS Date: 1/13/2011 4:10 PM
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Well, no. In order to "qualify" for the benefits, you (or a spouse) must have paid in to the system. This is completely unlike "welfare", which has no such requirement.

It depends on which benefits. For Supplemental social income (SSI) you don't need to have contributed. Even some non-citizens (refugees) can get it. I know people in that situation.

The benefits are very small though, less than social security retirement benefits.

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Author: madbrain Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68233 of 76237
Subject: Re: Means Testing SS Date: 1/13/2011 4:11 PM
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Goofyhoofy,

The "tip" is quite modest, and if that is what you are using to define it as a "welfare" program, well, it seems a minor point, at least to me. And high income earners stop paying any SS security taxes at all after their first $106,000 or so, so I'm not really convince how awful this is.


It is high wage earners who pay, not high income earners, unfortunately. If your income is from non-wage sources, then you don't pay SS taxes. That seems somewhat unfair.

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Author: JAFO31 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68234 of 76237
Subject: Re: Means Testing SS Date: 1/13/2011 4:24 PM
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0x6a74:

JAFO: <<<IOW, benefits are (and have been tipped) in favor of low wage earners.>>>

GH: {{{The "tip" is quite modest,}}}

"just curious ...and numbers on how much of a 'tip'?"

Almost 3:1 in favor of bottom from top to bottom and 2:1 in favor of bottom from middle to bottom and 1.5:1 in favor of middle from top to middle, all based upon percentage of income replaced.

From my earlier post:

"Social Security is expected to replace about 40 percent of pre-retirement earnings of average earners; 80 percent for the lowest earners; and 27 percent for those at the maximum taxable wage base of $80,400, [this from some years ago] according to the Social Security Administration." [but relative percentages have not changed since then]

http://cbs.marketwatch.com/news/story.asp?siteid=mktw&di......

"The benefit formula is a three step formula based on AIME (Average Indexed Monthly Earnings). The annual earnings on which this average earnings figure is based have the same caps as were used on the tax side. The formula for the benefit is then 90% of the first $x of AIME plus 32% of the next $y of AIME plus 15% of the balance of AIME. x and y are indexed yearly."


http://ssa.gov/pubs/10070.html [Looks like 2010 numbers to me]

"Step 5:

Multiply the first $761 in Step 4 by 90%. . $__________________

Multiply the amount in Step 4 over $761 and less than or equal to $4,586 by 32%. . . . . . . . . . . . . . . .$__________________

Multiply the amount in Step 4 over $4,586 by 15%. $__________________ "


AIME of $4,586 equates to annual earned income of $55k+ a little

And maximum AIME was $8,900 (monthly equivalent of $106,800 annual cap)

If i did the math right, if monthly AIME were 4,583.33 ($55k equivalent), benefits would be $1908.05/month whereas if monthly AIME were $8,900 ($106.8 equialent) benefits would be $2,547.15.

The latter person paid almost twice as much SS tax (1.94x or 94% more) but receives only 33.9% more benefits (647.10/1908.05). 94/33.9 is a 2.77x tip.

That might be "modest" in GH's world, but I do not consider it a "modest tip".

Regards, JAFO

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Author: Goofyhoofy Big funky green star, 20000 posts Top Favorite Fools Top Recommended Fools Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68235 of 76237
Subject: Re: Means Testing SS Date: 1/13/2011 4:34 PM
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Even some non-citizens (refugees) can get it. I know people in that situation.

Then those people are mistaken. They get nothing from Social Security. They get nothing from any ancillary Social Security programs.

Neither immigrants nor anyone else is able to collect Social Security benefits without someone paying Social Security payroll taxes into the system. The conditions under which Social Security benefits are payable, and to whom, can be found in the pamphlets available on our website.

The question confuses the Supplemental Security Income (SSI) program with Social Security. SSI is a federal welfare program and no contributions, from immigrants or citizens or anyone else, is required for eligibility. Under certain conditions, immigrants can qualify for SSI benefits. The SSI program was an initiative of the Nixon Administration and was signed into law by President Nixon on October 30, 1972.

http://www.ssa.gov/history/InternetMyths2.html

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Author: madbrain Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68236 of 76237
Subject: Re: Means Testing SS Date: 1/13/2011 4:38 PM
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Goofyhoofy,

The taxation of Social Security is not a "social security" issue, it is a taxation issue. We tax capital gains at different rates, too. Does that make them a "welfare program"? I have some tax-free muni-bonds. Are they a "welfare program?"

Well, it is both a social security and a taxation issue.

Other income usually uses a progressive taxation structure, but social security income does not. The regressive way SS income is taxed is clearly intended to take away some of the benefits for people who have other income and presumably don't need the full benefits.

The other thing is that SS taxes are not deductible for the purpose of other income taxes (federal, state, local). Therefore your employee SS premiums have already been taxed. I'm not sure how part of the SS benefits are still allowed to be taxed.

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Author: Goofyhoofy Big funky green star, 20000 posts Top Favorite Fools Top Recommended Fools Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68237 of 76237
Subject: Re: Means Testing SS Date: 1/13/2011 4:39 PM
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That might be "modest" in GH's world, but I do not consider it a "modest tip".

It is modest, because lower wage earners have lower life expectancies than high wager earners. Therefore, even though they get a higher relative payout, you are looking only at "each month", versus the total payout over their (average) lifetime.

http://www.cbo.gov/ftpdocs/91xx/doc9104/LifeExpectancy_Brief...

The latter person paid almost twice as much SS tax (1.94x or 94% more) but receives only 33.9% more benefits (647.10/1908.05). 94/33.9 is a 2.77x tip.

Now multiply it by the total (expected) payout over their respectively different lifetimes and see what you get.

I am not saying it's "exactly the same." Nothing could ever be "exactly the same." I am saying that the differences are modest, overall, which is how actuarially sound systems work.
 


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Author: 0x6a74 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68238 of 76237
Subject: Re: Means Testing SS Date: 1/13/2011 5:05 PM
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Almost 3:1 in favor of bottom from top to bottom and 2:1 in favor of bottom from middle to bottom and 1.5:1 in favor of middle from top to middle, all based upon percentage of income replaced.


ah ..... thanks. Makes sense (and seems fair To Me)


.http://ssa.gov/pubs/10070.html [Looks like 2010 numbers to me]


i've seen and played with that form ..but couldn't get an overall sense of what it was trying to do.

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Author: JAFO31 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68239 of 76237
Subject: Re: Means Testing SS Date: 1/13/2011 6:31 PM
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Goofyhoofy:

<<<That might be "modest" in GH's world, but I do not consider it a "modest tip".>>>

"It is modest, because lower wage earners have lower life expectancies than high wager earners. Therefore, even though they get a higher relative payout, you are looking only at "each month", versus the total payout over their (average) lifetime.

http://www.cbo.gov/ftpdocs/91xx/doc9104/LifeExpectancy_Brief...... "


<<<The latter person paid almost twice as much SS tax (1.94x or 94% more) but receives only 33.9% more benefits (647.10/1908.05). 94/33.9 is a 2.77x tip.>>>

"Now multiply it by the total (expected) payout over their respectively different lifetimes and see what you get."

Your URL does not appear to supply the necessary information.

"In 1980, the difference in life expectancy at age 65 between the highest and lowest socioeconomic groups was 0.3 years. By 2000, the difference had grown to 1.6 years. That increase in the gap equals more than 80 percent of the increase in overall average life expectancy at age 65 over that period."

1.6 years is 19.2 months. But your citation does not give either category as an absolute, so the question you asked me to perform cannot be calculated from the information you supplied.

If the numbers are 10 years (120 months - 1908.05*120 = $228,966) versus 11.6 years (139.6 months - $2,555.15*139 = $356,699) [collect 1.56x more while paying 1.94x more] you get a much different answer than if the numbers are 2 years (24 months - 1908.05*24 = $45,793.20) versus 3.6 years (43.6 months - $2,555.15*43.6 = $111,405). [collect 2.43x more while paying only 1.94x more].

In addition, your citation uses highest and lowest deciles as the proxies (See Figure 2), but my $55k equivalent is a lot higher than the bottom decile and please note that everyone in the $106,800+ category will not be in the top decile. Thus, you are suggesting an apples to oranges comparision, too.

Furthermore, your cited source disagrees with your initial premise that SS is not a welfare program.

"For Social Security, a widening gap would worsen the long-term shortfall in financing and reduce . . . the extent to which it redistributes resources from high-income to low-income beneficiaries on a lifetime basis."

"WELFARE: An assortment of programs that provide assistance to the poor. The cornerstone of our welfare system is Aid to Families with Dependent Children (AFDC), which was created by the Social Security Act (1935)."

http://www.amosweb.com/cgi-bin/awb_nav.pl?s=gls&c=dsp&am...

"Welfare can take a variety of forms, such as monetary payments, subsidies and vouchers, health services, or housing. Welfare can be provided by governments, non-governmental organizations, or a combination of the two. Welfare schemes may be funded directly by governments, or in social insurance models, by the members of the welfare scheme."

http://en.wikipedia.org/wiki/Welfare

"There are many different types of welfare, but each are generally concerned with a government trying to provide for the welfare of its citizens. This may take place through social welfare provisions, social security, or financial aid."

http://www.wisegeek.com/what-is-welfare.htm

Regards, JAFO

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Author: DrTarr Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68240 of 76237
Subject: Re: Means Testing SS Date: 1/13/2011 8:03 PM
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"We find that the higher income group has a statistically significantly higher mortality rate, contradicting the previous literature. We also find that the younger cohort responded to lower incomes by increasing post-retirement work effort. These results suggest that moderate employment has beneficial health effects for the elderly"

Snyder, Stephen E. and William N. Evans. "The Effect Of Income On Mortality: Evidence From The Social Security Notch," Review of Economics and Statistics, 2006, v88(3,Aug), 482-495.


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Author: w2j2 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68243 of 76237
Subject: Re: Means Testing SS Date: 1/14/2011 8:22 AM
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Unfortunately, you will never destroy this program.
It is basicly just another tax.
When (not if) they start means-testing for it, all our howling will make no difference.

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Author: hockeypop Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68244 of 76237
Subject: Re: Means Testing SS Date: 1/14/2011 8:48 AM
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Well it's always an interesting nexus when conservative agrees with liberal, but I think Goofy has this right. I'm one likely to be means tested, but have supported in our home for the last 20+ years a MIL who has nothing but SS.

She is highly educated for her time and worked for much of her life. Through the circumstances of a bad marriage and the special needs of a child/adult, as well as being "taken" by an investment thief, she has NOTHING. SS makes it barely livable and we make it better. Medicare is amazing for her.

I agree that we extended the SS system and didn't fund that. SS is MUCH easier to fix than Medicare (which is equally if not more important).

We each have our own financial planning assumptions. Mine include SS and assume that it will be totally taxed at my withdrawal rates, which will be higher. After seeing Grandma, and assuming that she represents many others, that's the least I can do. Welfare? I was on a SS commission decades ago and read the original legislation and discussion. Goofy's interpretation, IMO is right. We have fixed a colossal problem with our destitute poor, aren't making anyone rich by ANY means, and should work on fixing it. Frankly, we did it while helping me (one of the lucky ones) a little too.

Hockeypop

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Author: Goofyhoofy Big funky green star, 20000 posts Top Favorite Fools Top Recommended Fools Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68251 of 76237
Subject: Re: Means Testing SS Date: 1/14/2011 4:49 PM
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1.6 years is 19.2 months. But your citation does not give either category as an absolute, so the question you asked me to perform cannot be calculated from the information you supplied.

If the numbers are 10 years (120 months - 1908.05*120 = $228,966) versus 11.6 years (139.6 months - $2,555.15*139 = $356,699) [collect 1.56x more while paying 1.94x more] you get a much different answer than if the numbers are 2 years (24 months - 1908.05*24 = $45,793.20) versus 3.6 years (43.6 months - $2,555.15*43.6 = $111,405). [collect 2.43x more while paying only 1.94x more].


I'm not sure I'm understanding you here. If the additional life is 19.2 months, then we can calculate the additional payments. At $2,555 per month, Mr. HighIncome gets roughly an additional $49,000 over Ms. LowIncome, who is dead.

What did Mr. HighIncome have to pay for this? Well, here it gets squishy and possibly contentious. I'll try to make this simple, although clearly every case will be different.

I'm going to say Mr. HighIncome started off like most of us, making $20,000 a year, and added $20,000 to that every decade thereafter. (I think most people didn't start off in their 20's making $100,000 a year, although I'm sure a few did.) [This looks to me like someone who climbs the middle-management ladder.]

So Mr. HighIncome looks like this:

Age. . Salary. . . . SS taxes paid
20-30 $20,000/yr = $1200/yr SStax = $12,000 for the decade
30-40 $40,000/yr = $2400/yr SStax = $24,000 for the decade
40-50 $60,000/yr = $3600/yr SStax = $36,000 for the decade
50-60 $80,000/yr = $4800/yr SStax = $48,000 for the decade
60-65 $100000/yr = $6000/yr SStax = $30,000 for the half decade

He pays a total of $150,000 in SS taxes across his earning lifetime.

Now. Ms. LowIncome also pays SS tax. I'm going to say she makes $20,000 for 20 years, and perhaps $30,000 for her final 25 years. She works at WalMart or something, OK?

20-40 $20,000/yr = $1200/yr SStax = $24,000 for two decades
40-65 $30,000/yr = $1800/yr SStax = $45,000 for 25 years

She pays a total of $69,000 in SS taxes across her earning lifetime.

So the difference is $81,000 they have paid in (His $150,000 minus her $69,000), less the $50,000 that he gets in additional payments after Ms. LowIncome is dead, meaning the total difference across both lifetimes is $30k. I guess I don't view that as egregious, although I'm sure some do.

As has been noted by others in this thread (or elsewhere), the low income people are not getting rich on Social Security, quite the opposite.

Furthermore, your cited source disagrees with your initial premise that SS is not a welfare program.

I cannot help what a web page calls it. It wasn't designed as a "welfare" program, and by specifically excluding people who do not contribute in, it does not act as one - although I acknowledge there is some minor redistribution, depending on the case, the length of time, and a host of other variables.

If my calculations are somehow wrong, or my assumptions wildly out of reality, please advise.
 


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Author: 0x6a74 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68253 of 76237
Subject: Re: Means Testing SS Date: 1/14/2011 5:07 PM
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So the difference is $81,000 they have paid in (His $150,000 minus her $69,000), less the $50,000 that he gets in additional payments after Ms. LowIncome is dead, meaning the total difference across both lifetimes is $30k. I guess I don't view that as egregious, although I'm sure some do.


you're maybe arguing cross purposes ..

IMO -- $30k is not 'modest' (the original claim), but is far and FAR from 'egregious'




As has been noted by others in this thread (or elsewhere), the low income people are not getting rich on Social Security, quite the opposite.



my Mother had a friend living on ONLY SS ..and she just got barely enough to keep her self-respect .. enough for food maybe, bbut not for meds and rent (she lived with her children)



If my calculations are somehow wrong, or my assumptions wildly out of reality, please advise.


it's just so much more complicated ... if you try to take into accounts changes over (maybe) 40 yrs of working [ my first year of full time work, i made $2,516 (my last, something like $90k) and FICA was 4.2% ]



one of the fun things about SS is that ,like the blind guys & the Elephant, it CAN be described in many ways ... i've always seen it as a tax. but then, *I* like the bumper-sticker: "Taxes is the price we pay for civilization")

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Author: madbrain Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68254 of 76237
Subject: Re: Means Testing SS Date: 1/14/2011 5:17 PM
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I'm going to say Mr. HighIncome started off like most of us, making $20,000 a year, and added $20,000 to that every decade thereafter. (I think most people didn't start off in their 20's making $100,000 a year, although I'm sure a few did.) [This looks to me like someone who climbs the middle-management ladder.]


I'm in that group, and I have never had a manager title - and hope I never do, until my brain slows down too much to stay in a technical line of work ;).

I think you somewhat miss the point by looking only at average life expectancies and incomes. Some low income people will live long lifes and collect benefits for a long time, and some high income people will have short lives and never collect a cent. There is a lot of redistribution going on.

Also, aren't you undercounting the SS taxes by half ? There is both an employee and employer paid part.

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Author: Goofyhoofy Big funky green star, 20000 posts Top Favorite Fools Top Recommended Fools Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68258 of 76237
Subject: Re: Means Testing SS Date: 1/14/2011 6:46 PM
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Some low income people will live long lifes and collect benefits for a long time, and some high income people will have short lives and never collect a cent.

That's true. But unless you want my post to be 300,000,000 pages long, you have to deal with "averages." Some people will get screwed. Some people will make out handsomely. That's the way it is with annuities, life insurance, and lots of things in life.

Also, aren't you undercounting the SS taxes by half ? There is both an employee and employer paid part.

That's also true, but I have always doubted that "the other half" is really yours, because if the government stopped collecting it, I seriously doubt the employers would just hand it over to the employees. When corporate tax rates went down, did you get a raise?
 


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Author: madbrain Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68259 of 76237
Subject: Re: Means Testing SS Date: 1/14/2011 9:50 PM
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Goofyhoofy,

That's true. But unless you want my post to be 300,000,000 pages long, you have to deal with "averages." Some people will get screwed. Some people will make out handsomely. That's the way it is with annuities, life insurance, and lots of things in life.


One major difference is that social security taxes are mandatory for wage workers, but annuities and life insurance are entirely optional products that you can choose to purchase or not if they suit you.
I can't opt out of SS even though I don't think I will live past 60 and ever collect benefits. Even if I had a doctor make a statement to that effect, the government would not care. I have probably paid about $150k into the system already counting both employee and employer SS taxes. In my lifetime it will probably be over $300k, or even more, as the maximum SS taxable ceiling keeps getting increased, but not more than my income so far.

But I wouldn't say that I'm getting "screwed" I realize that SS is a welfare program that pays for current retirees however, and SS taxes are part of the price we pay for not putting our current elderly completely out on the street. I do certainly wish that :
a) all income was subject to social security taxes. Not just wage income. Even Warren Buffet has commented about this, the average tax rate on his secretary is higher than his own tax rate.
b) SS had some more flexibility, and that I had the opportunity to choose to take SS retirement benefits earlier, with reduced benefits, or perhaps a reduced benefit period (say, 10-20 years, vs lifetime). As it stands, the mimimum age to collect anything is 62 which I'm unlikely to attain. I'm sure I'm in an unusual situation, but I cannot be the only one.

That's also true, but I have always doubted that "the other half" is really yours, because if the government stopped collecting it, I seriously doubt the employers would just hand it over to the employees. When corporate tax rates went down, did you get a raise?


Neither the employee or employer SS taxes are technically your money.
There is nothing I can do to make the federal government return me the money I paid in SS taxes during my lifetime.
These funds go towards paying current retiree and disability benefits. Not towards your own benefits, which you may or may not ever collect, based on the ever-changing definition of social security eligibility.

When taxes go down, there are several options. The lowering of SS taxes for the year 2011 is part of the stimulus. I believe it is supposed to encourage employees to spend more and employers to hire more. I don't think it will likely have the intended effect.

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