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Author: tmeri Big gold star, 5000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 749403  
Subject: OT: On Fixing Social Security Date: 6/14/2004 5:54 PM
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Social Security is obviously broken, and the longer we wait to fix it, the worse the problem is getting. One of the things that bugs me about SS is that proposed solutions never actually get rid of it. My other complaint about proposed solutions is that they are patently unfair.

Of course, all programs are inherently unfair. But we should strive to make any solution as fair as possible. Any solution should also eliminate the program or replace it with one that is truly self-sustaining.

Here is my proposal for such a fix:

1. Eliminate social security payroll taxes today.
2. For the purposes of future SS benefits, calculate them as though everyone quit working today. If you've been working for only 10 years, you'll get the benefits that you would if you quit today. It won't be much, but then you haven't contributed as much as someone who paid SS tax for 40 years.
3. SS benefit payments according to #2 would be put on the government's books. No more of this phony double-bookkeeping. (Double-entry bookkeeping would still be allowed, of course. <g>)
4. Allow everyone who works to contribute to a new kind of tax-deferred account the same amount they would have paid in SS taxes. They will pay income taxes on the amount contributed, just as they would have for SS payroll taxes. (No net change to them.) They would begin withdrawing at their SS eligibility age. Income taxes on withdrawals would be assessed exactly as they are on actual SS income.


This seems fair to me. Of course, someone will find a group that they think is being ripped off, but you'll need to explain why. Anyone who is near to retirement can count on the benefits they've earned up until now. If they've already stopped working, their benefits will be exactly the same as if SS had never changed. If they are still working, they can redirect their payroll taxes to an even better plan. The new plan would never go bust.

The burden of fixing this falls on those paying income tax. That is a large burden, to be sure, but of course, we could use the SS trust fund to help offset it. HAHAHAHAHAHAHAHA! Seriously, I don't think there is any actual money in this trust fund, but if there is some lying around somewhere off the books, it should be invested and then used to offset budget increases used to pay SS benefits.

The brunt of the burden is born upfront and gradually decreases to zero in some number of years.

I leave the other details as an exercise for discussion. What about employers' contributions? Should we require people to invest in the new plan or make it optional? What do we do with idiots who won't save for retirement? What about people who had fewer than 40 quarters of work?

Now if only we could find a solution to Medicare...

- tmeri
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Author: inparadise 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: 172836 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/14/2004 6:50 PM
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I wonder how the employer would come out on this. When we looked into DH's pension, the initial calculation of what he would get was very high. The next step however was to subtract out your social security benefit from the pension. Would stopping the employer's contribution to Soc. Sec. be enough of a fix, I wonder.

IP

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Author: pekinrobin Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 172837 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/14/2004 7:46 PM
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They just released a study today showing Social Security is funded through 2052. So your very first assumption, that Social Security is broken, is fundamentally wrong.

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Author: tmeri Big gold star, 5000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 172838 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/14/2004 7:47 PM
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inparadise writes:

I wonder how the employer would come out on this. When we looked into DH's pension, the initial calculation of what he would get was very high. The next step however was to subtract out your social security benefit from the pension. Would stopping the employer's contribution to Soc. Sec. be enough of a fix, I wonder.

IP



I don't believe those two bolded things are related in any way. Your husband's company is not likely offering a pension based on their contribution to social security.

My company offered a similar benefit, but they phrased it differently than your husband's company did, and it's easier to understand because they started with just the company benefit if there were no SS.

Here's an example. You earn a certain benefit from the company, let's pretend it's $2000/month for your pension. Then you calculate your SS benefit whenever you are going to take it. Let's pretend that you can get $800/month at age 62. You are given two choices:

1. $2000/month for life from the company.
2. $2400/month from the company until age 62, then $1600/month from the company plus $800/month from SS for the remainder of your life.

Something like that, it's not just split in half the way I did it, but calculating it depends upon a bunch of actuarial junk I'm not going into. The point is that the amount you get doesn't change when you start getting SS; just the source of the money is different. My guess is that employers would stop offering option 2.

- tmeri

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Author: tmeri Big gold star, 5000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 172840 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/14/2004 7:52 PM
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They just released a study today showing Social Security is funded through 2052.

Yeah, I heard that. The number goes up, the number goes down, and it depends upon who looks at it. Today if Democrats investigate, it'll be broken sooner than later. Next year, it'll be the Republicans saying it'll be broken sooner than later.


So your very first assumption, that Social Security is broken, is fundamentally wrong.

Naw. The assumption is fundamentally correct, and your very post proves it. You assert that in 2052, SS goes bust. If SS is not self-sustaining forever, it is broken. It's just a question of how long before the pain starts.

What are you going to do, wait until it breaks? The sooner we fix it, the less painful it would be.

- tmeri

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Author: VesperLynd Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 172841 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/14/2004 7:53 PM
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link please :)


VL

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Author: ravvt Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 172845 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/14/2004 8:41 PM
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link please :)


If you are among those who wring their hands in worry about the current deficit (which stands as of 6/15/04 at $7.223 trillion), you will really go apoplectic about the current unfunded liability in the Social Security program:

“Over the next 75 years, the program faces $26.4 trillion in unfunded liabilities. This translates into $4.9 trillion that must be invested today in order not to cut benefits or raise payroll taxes to pay for the promised level of benefits.”

http://www.socialsecurity.org/pubs/articles/bb-01-27-04.html

Also see: http://www.concordcoalition.org/facing_facts/alert_v9_n3.html


If you add the unfunded liabilities of the Medicare program to that, you are looking an additional $78 trillion over the next 75 years.

http://www.parapundit.com/archives/002013.html


Cato Institute Plan for Social Security Reform:

The 6.2 Percent Solution: A Plan for Reforming Social Security
by Michael Tanner

http://www.socialsecurity.org/pubs/ssps/ssp-32es.html


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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: 172846 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/14/2004 8:42 PM
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They just released a study today showing Social Security is funded through 2052. So your very first assumption, that Social Security is broken, is fundamentally wrong.

That same study also stated that around 2010 or 2012 SS will start paying out more money that it will be taking in. That sound like its broke to me. So it will take longer to go broke in this study than previous studies, big deal. Its still broke.

JLC


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Author: OldOne Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 172860 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/14/2004 11:28 PM
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They just released a study today showing Social Security is funded through 2052. So your very first assumption, that Social Security is broken, is fundamentally wrong. <P>

Actually Social Security is broken (and broke) today. As in right this minute.

The "Social Security Trust Fund" is nothing but a gimmick, an accounting trick. The government collects SS taxes, pays current benefits, and puts the rest in the US Treasury. What they get back is special treasury notes, which bear a miserably low rate of interest. There is no money backing these notes, only the promise of the government to repay money.

What happens to the money that the SS administration puts into the US Treasury? Sit down now, but it gets spent evey year in exactly the same way as any other taxes collected. In fact, the US supreme Court has ruled that there is nothing special at all about SS taxes, and the government has the right to spend them just like any other taxes.

The only thing in the "SS Trust Fund" are promises by the government to pay money back, which are based on the government's ability to levy taxes.

Now, why do I say it is broke right now? Well, every year as more & more people retire SS is obligated to pay more benefits. The bottom line is that there is less & less money to be transferred to the treasury.

What this means is that either the government must reduce spending somewhere else (don't hold your breath) or collect more taxes. Or, the old standby of just running a deficit works too. But this will bring inflation.

Very simply, you can think of the government's income as taxes plus Social Security taxes and their outgo as federal budget plus Social Security. The government is addicted to the extra money it gets from SS taxes and is going to start going into withdrawal when the money has to be paid in SS benefits.

When does this happen for real? My best guess is in 3 years when the first of the boomers reaches 62 and becomes eligible for early benefits.

It is politically extremely difficult to reduce or delay benefits once they have started being paid.

I was born in 1945 and I intend to start collecting at 62, as soon as I can. Unless there is an economic miracle by 2010 the system will be on the ropes, and by 2015 will be collapsing.

This "solvent through 2052" is nothing but a politician's trick.

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Author: tjscott0 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 172863 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/15/2004 12:58 AM
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They just released a study today showing Social Security is funded through 2052. So your very first assumption, that Social Security is broken, is fundamentally wrong.

http://www.nytimes.com/2004/06/15/politics/15benefit.html

For the new report, the Congressional Budget Office developed its own Social Security model, which assumed that earnings and productivity would grow faster than the administration assumed and that inflation would be somewhat lower and interest rates somewhat higher.

As with most administrations running for re-election; i expect Dubya economic forecast is pretty rosy. These guy's forecast are even rosier. We can put these guys forecast with the gov't report that terrorism has decreased. That would be in the round file.

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Author: inparadise 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: 172868 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/15/2004 7:08 AM
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My best guess is in 3 years when the first of the boomers reaches 62 and becomes eligible for early benefits.

We Boomers don't seem as a group to have all that much a tendency to pass up expensive toys and save for retirement. I wonder just what percentage is going to be able to retire at 62?

IP



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Author: ItGoesToEleven Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 172869 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/15/2004 7:42 AM
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"We Boomers don't seem as a group to have all that much a tendency to pass up expensive toys and save for retirement. I wonder just what percentage is going to be able to retire at 62?

IP"


The percentage that zigged while others zagged.


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Author: chooey98 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 172870 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/15/2004 9:07 AM
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They just released a study today showing Social Security is funded through 2052. So your very first assumption, that Social Security is broken, is fundamentally wrong.


Cool. I'll be 100 then.

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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: 172910 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/15/2004 8:20 PM
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Cool. I'll be 100 then.

But will you be able to retire at 100? :0

JLC


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Author: chooey98 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 172924 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/16/2004 9:07 AM
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Cool. I'll be 100 then.

But will you be able to retire at 100? :0

JLC


Oh, long before then, for sure. And, by age 100, probably "retired permanently"!. ;-)

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Author: spletcher Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173005 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/17/2004 12:08 PM
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>> They just released a study today showing Social Security is funded through 2052. So your very first assumption, that Social Security is broken, is fundamentally wrong. <<

All that means is that the [fictional] "trust fund" will have a theoretical balance above 0 until that time. But as another posted has noted, there is no actual trust fund, just a bunch of IOUs from the federal gov't. There is NO money available now -- we are current running huge deficits, including spending all SS taxes -- nor will there be in the future without massive tax increases. Some are already talking about increasing the SS tax by 1% (i.e. to 7.2 for worker and employer). But that won't be enough given the enormous unfunded liabilities of the system.

What's most ironic is that if any private company attempt to set up such a Ponzi scheme or unfund their pension accounts by this much the Fed gov't would accuse them of fraud ... and rightly so! But as long as it's the Fed gov't perpetrating the fraud, it's OK.

I think we should take another step and eliminate Congressional members' retirement benefits. Since they designed and support this SS system, they should have to live under it. Let them have to save twice for their own retirement, in 401Ks and IRAs, like everyone else who works is forced to do, without having a huge federal pension to fall back on. Maybe then they would actually try to reform/end this fraud.

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Author: ogrecat 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: 173007 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/17/2004 12:18 PM
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I think we should take another step and eliminate Congressional members' retirement benefits. Since they designed and support this SS system, they should have to live under it. Let them have to save twice for their own retirement, in 401Ks and IRAs, like everyone else who works is forced to do, without having a huge federal pension to fall back on. Maybe then they would actually try to reform/end this fraud.

They do.

Have you been reading forwarded emails?

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Author: patchdodd 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: 173008 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/17/2004 12:19 PM
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But as another posted has noted, there is no actual trust fund, just a bunch of IOUs from the federal gov't.

This isn't exactly true. There is a trust fund and it is invested in Treasuries which is a fairly responsible practice.

The real crime is that when the federal government talks about debts and deficits they conveniently omit their debt to the trust fund. Our government hasn't run a real surplus since 1960 (we nearly did in 2000) despite what some people claim.

http://www.publicdebt.treas.gov/opd/opdhisto4.htm

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Author: patchdodd 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: 173010 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/17/2004 12:32 PM
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Since they designed and support this SS system, they should have to live under it. Let them have to save twice for their own retirement, in 401Ks and IRAs, like everyone else who works is forced to do, without having a huge federal pension to fall back on. Maybe then they would actually try to reform/end this fraud.

They do.

Have you been reading forwarded emails?


No they don't. Congressmen have pensions that vest at five years and currently guarantee a minimum of $49k/year.

Maybe you should use your 'composing snide commentary' time for reading a little more closely instead.

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Author: deboernk One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173013 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/17/2004 12:37 PM
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Tmeri,

You lost me on this one. (Granted that is not that hard to do at times).

How is the govt going to pay the current SS recipients if there is no more SS revenue?

As I understand it the system now is just a money in and money out program. No real reserves. And even if there are some kind of reserves I am sure they would soon be gone if the incoming funds stopped suddenly.

Neil

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Author: deboernk One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173015 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/17/2004 12:41 PM
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I wonder, what is our debt today compared to what it was in, say, 1950 in terms of the real value of money.

How many loaves of bread, for instance, was our debt worth in 1950 compared to today?

Anyone figured that out?

Thanks, Neil

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Author: pauleckler Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173018 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/17/2004 12:50 PM
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Good point, Neil. There are those liabilities out there to pay off.

Secondly, Tmeri. Your ideas sounds simple enough. But it still faces the problem that it puts the risk of insufficient retirement income on the individual. Upper middle class of the type that usually haunts the boards of TMF may be able to learn to manage their investments. But Social Security covers millions who are not that sophisticated. Some may not even be able to read.

The govt guarantee offered now by Social Security is a major asset. Any plan that replaces it must also have this guarantee. Otherwise, the working poor who pay in but don't have enough to retire on will likely be quite unhappy. Read social unrest. Class war. Civil war. This is not a solution.

Social Security could do better if its funds were invested better. I think everyone agrees on that much. The problem is we cannot agree on how to invest those funds without casuing problems in the private sector. Hence, the preference for sending every individual through the Wall Street mill.

What ideas do we have for a better investment system for Social Security funds? Taking some more risk for better returns and then backing that with a minimal govt guarantee (like insurance companies offer on annuities) sounds like a better solution to the problem.

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Author: gilbertinpdx Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173023 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/17/2004 1:06 PM
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Lets get back on track to the original post please.

What would happen if all aspects of the original post were adopted?:
1. Contribution from employees stop going to SS, and are instead diverted to an IRA.
2. SS benefits are paid out (at retirement age) based on what you have contributed at that point.

The problem, as I see it, is that SS system is not based on a private industry model (where future benefits are supposed to be fully funded), but instead is designed such that current worker's payments are used to pay to current retiree's benefits. This goes back to the original set-up. I believe retirees in the first days of the program received benefits, even though they never made contributions. In other words, they were paid benefits, but never contributed a dime.

What if Employer contributions continued to go into the SS system to offset the shortfall? If new benefits stopped accrueing, but the employer contributions kept coming, would the system be fixed?

I would much rather be in charge of my contributions, even if the employer portion was diverted elsewhere. My return (and ultimate payout), contributing 6% of my income would be much better than the government's.

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Author: tmeri Big gold star, 5000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173024 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/17/2004 1:09 PM
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How is the govt going to pay the current SS recipients if there is no more SS revenue?

It would have to go on the regular budget, paid by regular income taxes. I actually like this plan because it would make the budget appear to be much more huge and we might have more clamoring for cutting expenditures. The double bookkeeping that Congress is doing is just a shell game and makes the deficit look much smaller than it actually is. But my plan calls for benefits to end at some point, so it would be a temporary item in the budget.


As I understand it the system now is just a money in and money out program. No real reserves. And even if there are some kind of reserves I am sure they would soon be gone if the incoming funds stopped suddenly.

Actually, more SS taxes are collected than are needed to pay benefits. The problem is that the rest is spent on other regular budget items, and the government issues bonds or something as promises to repay. But that needs to stop. That's why we should put it on the regular budget.

All of these reports saying things like "SS is solvent until 2052" are so phony. It isn't solvent today! Whatever we don't spend on SS benefits gets spent on the Department of Education, Congressional pensions and pay raises, boondoggles for Congressmen, etc. The excess in SS tax is being used to support the regular budget, and since we are running a deficit, we are not collecting enough SS tax to pay all of the expenditures we use it for. Therefore, we are not collecting enough to cover all costs, and it is not solvent.

- tmeri

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Author: jackmitch Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173026 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/17/2004 1:16 PM
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Unfortunately there is more heat than light in the debate on Social Security. Many politicians try to frame the debate in such a way that anyone who criticizes Social Security is castigated as un-American or as a right-wing alarmist.

The fact is that Social Security as it now exists is flawed in that it is not actuarily sound. That is, taxes collected today are primarily used to pay benefits due today, rather than being invested to pay future benefits that will ultimately be owed to the persons paying today's taxes. Thus the viability of Social Security depends upon being able to set a tax rate that is sufficient to cover current benefits being paid out.

If the number of taxpayers equals the number of persons receiving Social Security benefits, then on average, each taxpayer must pay in taxes an amount equal to the average recipient's benefit. With this one-to-one balance between taxpayers and recipients, if the average annual Social Security benefit is $20,000, then each taxpayer, on average, must pay $20,000 in Social Security taxes. I think we all would agree that this level of tax is unworkable. Wage earners cannot afford to pay $20,000 in Social Security taxes plus state and federal income taxes, sales taxes, real estate taxes, and still meet their remaining obligations.

For the first 30 years or so of its existence, the fact that Social Security is not actuarily sound was not obvious to most because there were far more workers (taxpayers) than recipients. In its early days, the ratio was on the order of twenty to one. Thus each taxpayer had to bear the burden of only a fraction of the money paid to each recipient. However, as more people have retired, as life spans have increased, and as the growth in U. S. population has slowed, this ratio has moved progressively toward one to one.

In theory, of course, a one-to-one ratio of taxpayers to recipients is not the worst that could happen. It is entirely conceivable that with advances in medicine, the average life span of retirees could increase to the point that there are more recipients than taxpayers. One can quickly see that a retirement income system designed in this manner is doomed. The only question is, how long can it survive?

Survival of the current system can be prolonged by tinkerng with tax rates, benefit levels, and the age for benefit eligibility. But these are only stop gap solutions. They do not fundamentally fix Social Security. In fact, in the absence of a design change (such as privatization), there is no fix -- only delaying actions.

So although Social Security is not yet "broke," it is indeed broken, and it is advancing inexorably each day toward insolvency. The system needs a total overhaul, but politcially, that will not be easy since the Democratic Party has made Social Security a sacred cow. It requires enormous courage for a politician to even suggest that the current system should be changed.

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Author: Davem105 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173027 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/17/2004 1:26 PM
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How are you catagorizing those who receive SS due to disability and who, consequently, may be considerably younger than those who actually retire at the appropriate age? Or the minor children who receive based on a disabled or deceased parent?

One more complication which must be thrown into the mix, (at least as of 1974,) is the program called SSI, (Suplementary Security Income.) This pays a beneficiary, who has right from those who have never worked a day in their lives to those who've not paid in their 40 quarters, a minimal income; I don't know the present numbers but I'm guessing between five and six hundred monthly.

I also do not know what the numbers of disabled VS seniors receiving SS are, so the actual dollar amounts may not be significant. Haven't studied the issue, to be honest.


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Author: ogrecat 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: 173028 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/17/2004 1:29 PM
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My return (and ultimate payout), contributing 6% of my income would be much better than the government's.

I'm sure it would.


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Author: tmeri Big gold star, 5000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173029 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/17/2004 1:33 PM
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Good point, Neil. There are those liabilities out there to pay off.


Please reread my original post. I did not suggest not paying SS benefits.

I seem to be the only person to notice that SS taxes have been collected for two different purposes--SS benefits, and regular budgetary items. Money can't be spent two different ways. Since for years we've been spending SS taxes on regular budgetary items, it makes sense that the regular budget should now pay up. Put SS on the budget, and freeze the accumulation of benefits. Pay off what we owe. At the same time, replace it with a self-sustaining system.


The govt guarantee offered now by Social Security is a major asset. Any plan that replaces it must also have this guarantee. Otherwise, the working poor who pay in but don't have enough to retire on will likely be quite unhappy. Read social unrest. Class war. Civil war. This is not a solution.

Social security is enabling the working poor to happily retire?? Or even retire at all?

And what is this guarantee? I thought the Supreme Court had made clear that no one is guaranteed SS benefits.


The problem is we cannot agree on how to invest those funds without casuing problems in the private sector. Hence, the preference for sending every individual through the Wall Street mill.

Yes, IRAs were a HUGE mistake.

- tmeri

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Author: pauleckler Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173035 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/17/2004 1:49 PM
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<Good point, Neil. There are those liabilities out there to pay off.

Please reread my original post. I did not suggest not paying SS benefits.>

But now, Tmeri, you propose doubling one of the largest US govt expenditures. Once to pay benefits for the old plan; and once to fund the new plan.

How are you going to finance this? New taxes? Borrowing? I don't think Wall Street is going to like this plan. And the US economy--that really is our only hope of funding Social Security in the future--will probably not prosper.


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Author: PhuzzT Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173037 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/17/2004 1:50 PM
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For deboernk (using http://eh.net/hmit/ppowerusd/ ):
$1,966,496,124,575.67 in the year 2003 has the same "purchase power" as $257,357,352,351.04 in the year 1950.


And for what it's worth. I remember attending a lecture by Modigliani (see Foolish tribute at http://www.fool.com/news/commentary/2003/commentary031008DY.htm) several years ago where he addressed this topic. I think it was based on this paper:
http://web.mit.edu/francom/ssecurity/Web%20Version/Abstract.htm

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Author: BuildMWell Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173039 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/17/2004 1:56 PM
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"If you are among those who wring their hands in worry about the current deficit (which stands as of 6/15/04 at $7.223 trillion), you will really go apoplectic about the current unfunded liability in the Social Security program: Over the next 75 years, the program faces $26.4 trillion in unfunded liabilities...." - ravvt

This is really a very simple problem. Who owes the $7.223 Trillion of National Debt? The answer is, "You and me and all other taxpayers in America." The government is us and we are the government...who else will pay the debt?

Likewise, who will pay the $26.4 Trillion that is promised to us? The answer is, "You and me and all other taxpayers in America." Who else will pay it?

Thus, we can simply erase the national debt by sending an invoice to every living American. We can then let them agree to deduct their bill from their Social Security promise less applicable interest. Let's see: National Debt is $7.223 Trillion divided by 290 million people in America equals $24,907.00 per person. It will cost just $0.37 per person to mail that invoice.

Now, let's look at the other side of the equation. Of the $26.4 Trillion, you said, "This translates into $4.9 trillion that must be invested today in order not to cut benefits or raise payroll taxes to pay for the promised level of benefits." Thus, the "real" National Debt is just $2.232 Trillion. If we wait just a few more years and let the National Debt go up a little more, we can perfectly balance the National Debt (Our personal liability) with the Social Security Liability (Our personal asset). The government will have no debt and no social security to pay. Meanwhile, our personal books will still balance so everything works out fine all around.

However, the unfunded debt INCLUDING Medicare is approximately $44.2 Trillion. If we subtract the $26.4 Trillion of Social Security Debt from that figure, the unfunded promise of Medicare alone is a paltry $17.8 Trillion. Using the same percentages you used for the $26.4 Trillion to come up with the needed investment of $4.9 Trillion, it will require $3.3 Trillion to fund the Medicare piece. The total required to fund Social Security PLUS Medicare is $7.8 Trillion which is just $577 Billion under the present debt. With just a couple more years of huge deficits, we can make this whole thing work out to perfection. No debt, no entitlements!

Now, some folks may decide to send in the $24,907.00 of their piece of the National Debt in order to keep their Social Security promise. The government can invest that money to pay the future promise. But, I doubt there are many folks stupid enough to send that $24,907.00 to a politician. Any sane American knows that their money will be squandered in a heartbeat. I trust that the majority of us are sane and will jump at the chance to dump our $24,907.00 debt by dumping our $24,907.00 promised asset.

Some will owe far more than their Social Security benefit is worth while others will be owed more in S/S benefits that the Debt, but the interest on the debt side money will quickly eat up all of their Social Security asset. Thus, they will quickly agree to forego the social security benefit just to see the debt dissappear. There will be some winners and some losers, but that's life.

Now, once the Fed mails the invoices, the Government is immediately debt free and Social Security and Medicare are dead. There is no money to pay out because no one is in a position to collect, unless they mail a check for $24,907.00 to Washington. Everyone else will immediately have to fund their own retirement without any help from Uncle Sam. Most will just direct their present S/S funds to an IRA and be far better off at retirement.

If anyone is broke because of this simple accounting change, they go onto welfare and become a ward of the State. The expense for these few people will be paid from increased tax revenues which will automatically result from gains in personal income taxes at both the State and Federal levels that accrues since the social security taxes will not being taken out of a worker's paycheck. Every worker gets an immediate 12% raise which is taxable at his or her tax rate. But, it is his or her money to invest.

See how easy this is? I have just solved the nation's two greatest problems after terrorism and I have taken over 50% of the politics out of Washington, DC. We can cut the salaries for all politicians by 50% and send them home for 6 months each year. We can stop collecting social security taxes, close the bogus trust fund, tear up all of the bad IOUs and close the social security administration offices all over America. There will be no need for any of that foolishness.

So, think about it. It will work just fine. Try to imagine what you will do with an invoice for $24,907.00. If you happen to be married, it will be $49,814.00. If you are a "perfect" family of four, look for $99,628.00. But, it will be the best hundred grand you ever spent...and it costs you nothing! Just agree to give up all claims to Social Security and Medicare for you, your spouse, and your two children.

The rest is up to the Government. They have no social security to fund so 50% of their budget is instantaneously gone. They still will need to deal with Medicaid which is already a welfare entitlement. Social Security will become a welfare entitlement for those who are destitute. Normal working people will fund their own retirement just like we do today because we cannot trust that any of these silly programs will be here for us.

I welcome the day that my Federal Government invoice arrives! I cannot wait to cancel my Social Security and Medicare promises along with my piece of the National Debt. After all, to whom do I owe that debt and who will I collect my money from? ME, Myself and I! Who else will take care of me? Who else should?

This is really not that hard to see if you look at it correctly. It is all just accounting. ASSETS-LIABILITIES = NET WORTH. In this case, our net worth is zero. The sooner we write off this losing proposition, the sooner we can get on with solving our real problems, like socking away a real retirement for ourselves. The first step is to stop sending our retirement money to Washington. That is where the problem began in the first place. All they can do with our retirement money is to spend it and/or use it to buy votes! Neither helps us at all.




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Author: pauleckler Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173041 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/17/2004 2:07 PM
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<Social security is enabling the working poor to happily retire?? Or even retire at all?

And what is this guarantee? I thought the Supreme Court had made clear that no one is guaranteed SS benefits.>

Yes, tmeri. The present SS system allows people who meet minimum requirements to collect minimal benefits. Those who meet the minimum requirement do quite well compared to those who max the system, and likely will be lucky to get their money back--much less any return on investment--especially if those benefits are taxed away.

Yes, tmeri. Social Security is backed by the full faith and credit of the US government. So yes, unless they change the law, they do owe you the benefits. And that is guaranteed by the future taxing power of the US govt. It is in fact this guarantee that we are talking about when we worry about the future of Social Security. The concern is that future generations will be unwilling or unable to keep that promise.

Congress might change the law, but in essence a Social Security check is as good as a Treasury bond or paper money.


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Author: Pituophis Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173042 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/17/2004 2:10 PM
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I don't normally read this board but TMF sent me an email that this was a hot topic <ggg>.

First, I don't understand why anyone would consider the Social Security issue OT on a board about retirement.

Second, I agree with whoever said that the basic premise of the initial post is completely wrong - not only is SS, which was begun 70 years ago by FDR to alleviate the abject poverty, to which the richest nation in the world was subjecting its elderly, FAR from being broken, it is the most successful government program EVER...IMO.

ONLY NOW (or relatively soon) as the baby boomers are retiring and the population ages is the formula reaching a stage where, at some point, it will not be self supporting.

Supply siders, mainly the very wealthy, and overrated ideologue "economists" like Milton Friedman who equate giving ANY support to the less fortunate, with a loss of freedom (what a crock!), have been waging an all out propoganda war against, social security and all other forms of social spending, over the last few decades. The fact that many seemingly knowledgable people seem to hold the opinion that SS is broken, is evidence to me that the supply siders are winning some significant propaganda battles.

How much do YOU think the SS program has contributed to our national debt? Maybe most people on this board are smart enough to get the answer to that question right, but I'll betcha a big majority of Americans would answer that SS has contributed A LOT to the national debt. The actual answer, of course, is ZERO.

But the SS Trust Fund has been robbed over the past couple of decades to pay the governments OTHER bills. Why couldn't the government pay its other bills. Because (especially beginning with Reagan) the government decided to increase military spending enormously while cutting taxes to the wealthiest Americans and to borrow from the SS trust fund (and print money) to pay for those tax cuts and tanks. Follow the bouncing ball to see that means that those payroll taxes that you and I pay in with every paycheck to insure that we don't have to forage in garbage cans in our twilight years, just in case all else fails, are going directly into the pockets of those that need it the least - this year the trust fund was pillaged to give tax credits for SUVs over 6000 lbs, for education...in Iraq, and recently the house passed an energy bill, which will result in a raid on the trust fund for the elderly poor, in order to give tax credits to the poor starving oil industry.

A recent CBO (I believe) study demonstrated that a few minor fixes could keep the SS system solvent until the year 2070.

The aristocrats - the supply-siders and Friedmanists, are winning the propaganda battle and the cynic in me imagines that they will win the war. Don't think about it too long, no, don't think about it at all, just repeat after me: Social Security is broken, social security is broken, social security is broken...what is good for halliburton is good for america...

We will eventually face economic crisis in the U.S. and SS will probably be "reformed" solidifying the U.S. position as the meanest democracy in the world.



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Author: hopeohara Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173043 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/17/2004 2:26 PM
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I suspect that no matter what fix is proposed or implemented, the basic rationale for Social Security will remain - the presence of people who either won't (their own fault) or can't (due to circumstances beyond their control) fund their own retirement. When this begins to happen again (after SS as we know it is abolished), government, at the behest of people who believe that a society is only as good as it treats the least of its members, will establish another welfare type program.
To truly fix the SS system, we have to eliminate the fundamental inequities in our society. I don't see it happening.

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Author: tmeri Big gold star, 5000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173045 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/17/2004 2:30 PM
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But now, Tmeri, you propose doubling one of the largest US govt expenditures. Once to pay benefits for the old plan; and once to fund the new plan.

How are you going to finance this? New taxes? Borrowing? I don't think Wall Street is going to like this plan. And the US economy--that really is our only hope of funding Social Security in the future--will probably not prosper.



I give up. If you won't at least read, I'm not going to keep explaining it twice.

- tmeri

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Author: fleg9bo 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: 173048 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/17/2004 2:35 PM
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I give up. If you won't at least read, I'm not going to keep explaining it twice.

- tmeri


Oh, come on, explain it twice one more time.

--fleg

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Author: mainelegal Two stars, 250 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173051 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/17/2004 2:38 PM
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<what is good for halliburton is good for america...

We will eventually face economic crisis in the U.S. and SS will probably be "reformed" solidifying the U.S. position as the meanest democracy in the world.>

I'm also here because it's a "hot topic." Every policy and election cycle is an opportunity to learn, for those so inclined, and the regular people won't tolerate america being mean for long. Maybe, not even past November.

As for Social Security and the non-existent "trust fund," the system was designed for intergenerational transfer. It's not an investment, it's an expense. It can't be compared with pension funds or individual accounts like IRAs or 401 Ks.

For those addicted to accounting heroics on this topic, perhaps they could parse out the fair rental value of the interstate highways, ports, educational systems, parks and libraries, and compare those to the costs of making SS payments to those who have bequeathed them to us.

No value should be attached to international peace and good will, we have seen how easily that is squandered.

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Author: tmeri Big gold star, 5000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173052 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/17/2004 2:40 PM
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I suspect that no matter what fix is proposed or implemented, the basic rationale for Social Security will remain - the presence of people who either won't (their own fault) or can't (due to circumstances beyond their control) fund their own retirement. When this begins to happen again (after SS as we know it is abolished), government, at the behest of people who believe that a society is only as good as it treats the least of its members, will establish another welfare type program.


Do people have a right to retire, even if they can't afford to on their own?

- tmeri

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Author: tmeri Big gold star, 5000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173053 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/17/2004 2:42 PM
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:-)

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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: 173063 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/17/2004 3:16 PM
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pauleckler:

<Social security is enabling the working poor to happily retire?? Or even retire at all?

And what is this guarantee? I thought the Supreme Court had made clear that no one is guaranteed SS benefits.>

"Yes, tmeri. The present SS system allows people who meet minimum requirements to collect minimal benefits. Those who meet the minimum requirement do quite well compared to those who max the system, and likely will be lucky to get their money back--much less any return on investment--especially if those benefits are taxed away."

Agreed.

"Yes, tmeri. Social Security is backed by the full faith and credit of the US government."

No, not generally; it would be accurate to the extent the SS "Trust Fund" holds treasury paper.

"Congress might change the law, but in essence a Social Security check is as good as a Treasury bond or paper money."

Current checks are very different from future claims.

Regards, JAFO
(posted before reading entire thread)





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Author: protoplasm72 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173064 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/17/2004 3:16 PM
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I don't think anyone has mentioned it yet but 65 was chosen as the retirement age in part because the system was seen to be sustainable with that retirement age. Since the 1930's when SS started the average life expectancy of an American has gone up about 10 years. This fact alone means that a larger percentage of people are drawing benefits then were ever expected. The retirement age needs to be tied to the average life expectancy for this pyramid scheme... I mean brilliant government plan to even have a chance to be sustainable.

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Author: intercst 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: 173065 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/17/2004 3:21 PM
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mainelegal writes,

<<<what is good for halliburton is good for america...

We will eventually face economic crisis in the U.S. and SS will probably be "reformed" solidifying the U.S. position as the meanest democracy in the world.>>>

I'm also here because it's a "hot topic." Every policy and election cycle is an opportunity to learn, for those so inclined, and the regular people won't tolerate america being mean for long. Maybe, not even past November.

As for Social Security and the non-existent "trust fund," the system was designed for intergenerational transfer. It's not an investment, it's an expense. It can't be compared with pension funds or individual accounts like IRAs or 401 Ks.

For those addicted to accounting heroics on this topic, perhaps they could parse out the fair rental value of the interstate highways, ports, educational systems, parks and libraries, and compare those to the costs of making SS payments to those who have bequeathed them to us.

No value should be attached to international peace and good will, we have seen how easily that is squandered.


I think this is the real "Post of the Day".

intercst


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Author: XCgeoff Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173068 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/17/2004 3:31 PM
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Second, I agree with whoever said that the basic premise of the initial post is completely wrong - not only is SS, which was begun 70 years ago by FDR to alleviate the abject poverty, to which the richest nation in the world was subjecting its elderly, FAR from being broken, it is the most successful government program EVER...IMO.


Obviously you and I must be on far opposite ends of the political spectrum, but I can't help but absolutely disagree with your thoughts. I believe that it is an individual's responsibility to save and prepare for retirement and Social Security is a fine example of a well meaning government program that just grew fatter and fatter and is out of control, but that's a whole another topic.

Here is why Social Security is broken: It is a fundamentally flawed business model. The money you invest into social security does not belong to you or go into an account with your name on it. The money you pay in goes to pay the benefits of the current recipients. When the program was created there were about 40 workers paying into the system to support every recipient. Today there are 3 workers for every recipient and it is projected that in 2050 there will be 2 workers for every retiree. In 1935, the payroll tax was only 1% on the first $3000 of income. I'm not sure what that $3000 equates to in today's money, but the payroll taxes are significantly less than the 12.4% on the first $87,000.

Since 1940 the average life expectancy was 61.4 for men and 65.7 for women. Today it is 74.2 for men and 79.5 for women. People are living longer so unless the retirement age keeps being raised, people will collect more benefits than before.

One of the scariest things is the amount of people that depend so heavily on SS for their retirement. 64% depend on SS for at least half of their retirement income and 29% depend on it for at least 90% of their retirement income.

If you were to calculate the rate of return on your "investment" into social security, based on the money you paid into the system and the benefits you received, it would be in the whopping low 1% range. I'm only 25 and chance are i'll pay more into the system over my career than I'll receive in benefits.

If I were to have the SS payroll tax withheld from my checks and put into a safe bond fund yielding a paltry 4%, I'd be much wealthier at retirement.

So instead of sounding like a broken record and whining about it needing to be changed, I'll make some suggestions on what could be done to fix it. Presently SS is taking in more money than it pays out. That's a fact we can all agree on. This buys some time to make the changes without shortchanging people who have paid into the system for years. We can continue to pay out benefits while we transition to a completely different system. I'll put my ideas in my next post so they don't get lost in this one.


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Author: Schky One star, 50 posts Old School Fool Global Fool Motley Fool One Everlasting Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173069 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/17/2004 3:31 PM
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Perhaps I missed it, but no one has mentioned that when SS was fixed in the early 80's, it was changed from a pay as you go system to a pay in advance system. The idea is that we would pay more FICA taxes to make sure that there would be money there when we all retired. For example, from 1999-2002, if we had just paid in FICA what was needed to cover payouts in benefits, we would all have $1200 more (on average) in our pockets at the end of a year than we did.

What has happened in practice, as has been pointed out, is that this money was spent as though it were income tax, which means it was used to subsidize tax cuts. Since there is a cap (87,000) on the amount of salary that is subject to FICA tax, this has amounted to a subsidy of tax cuts for those who are better off, by those who are poorer. (For every dollar earned over 87,000, you get 6.2 cents extra take home pay).

They also removed the minimum benefit as part of the 'shared pain' of paying more and getting less. This was part of the original FDR plan, which was supposed to protect those people who are paid 'under the table' (like household workers), and so don't have a work history.

Personally, I agree with you that the original idea of SS was wonderful. But as it stands now, it doesn't seem to have much resemblence to the original intent of those who created it. Those who spent their lives working in peoples kitchens don't get anything, while the rest of us are busy working to fund income tax cuts for the wealthy. Hard to view that as a succesful government program.

And since both parties are culpable, it's nearly impossible to get it fixed, since there is no political advantage (and a lot of potential embarrasment) to raising the real issues.

I also agree with you that many of those who are bashing SS stand to gain a lot. If we switch to private savings accounts, then those are a lot of nice fees for financial institutions to pocket. Just because people have a financial or ideological axe, doesn't mean there isn't also a serious problem.

Scott


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Author: XCgeoff Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173070 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/17/2004 3:38 PM
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Here's my idea for a new social security program-

The new social security system will be set up somewhat like an IRA for lack of a better analogy. The 6.2% I pay of my salary will automatically be withheld by the SSA. I can choose to save or invest this money with any institution. I could put it in a savings account in a bank, I can invest in bonds, stocks...basically anywhere I could open an IRA. I will then direct the SSA where to send my money. If I want it to go to an account at Vanguard or Fidelity or Ameritrade, they will send MY money to MY account there and I can invest it as I please. As a default, while the SSA holds my money, it will be invested in US government securities yielding a miniumum of 4% annually and protected against inflation. This way people who don't want to invest in the market or are too lazy or whatever will still have more money at retirement than they would get with the current system. The 6.2% the employer pays will go the SSA to continue paying benefits to people currently in the system. By 2050, most of the current retirees and baby boomers will be dead or close too it and anybody retiring at that point will have been in this new system for their entire life.

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Author: skrappy73 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173071 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/17/2004 3:44 PM
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Look, I understand that the SS System is flawed. We need to get rid of it, and sooner than later is better thatn never. I would be willing to pay in for the next ten-fifteen years to see it cover the retirement of some that may need it. I will plan on recieveing nothing, if only to make a sacrifice to protect the future from this debacle. Set up the calender now and start tapering the values according to time and contribution. Set the date and plan on what is already there with conservative yearly estimates, maybe it will last till 2052, don't care, let's not wait to see, let's PLAN... Let's all make some sort of sacrifice to fix it and get it behind us...

Skrappy

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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: 173074 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/17/2004 3:58 PM
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XCgeoff: "Obviously you and I must be on far opposite ends of the political spectrum, but I can't help but absolutely disagree with your thoughts. I believe that it is an individual's responsibility to save and prepare for retirement and Social Security is a fine example of a well meaning government program that just grew fatter and fatter and is out of control, but that's a whole another topic.

Here is why Social Security is broken: It is a fundamentally flawed business model."


Much (most) of government would be a flawed business model.

"The money you invest into social security does not belong to you or go into an account with your name on it. The money you pay in goes to pay the benefits of the current recipients. When the program was created there were about 40 workers paying into the system to support every recipient. Today there are 3 workers for every recipient and it is projected that in 2050 there will be 2 workers for every retiree. In 1935, the payroll tax was only 1% on the first $3000 of income. I'm not sure what that $3000 equates to in today's money, but the payroll taxes are significantly less than the 12.4% on the first $87,000."

$41,408.76 in 2004 per the inflation calculator at http://www.bls.gov/cpi/#data

Of course, the program also pays to considerably more people who did not pay into the system in 1935, too.

"Since 1940 the average life expectancy was 61.4 for men and 65.7 for women. Today it is 74.2 for men and 79.5 for women. People are living longer so unless the retirement age keeps being raised, people will collect more benefits than before."

That is the wrong date to review. You should really look at life expectancy for those who reached adulthood - call it 18. All the early deceased infants and youths never paid into SS, but skew at birth life expectancy, which is what you are using. I will agree that it has risen, but I doubt it is as much as you suggest.

"One of the scariest things is the amount of people that depend so heavily on SS for their retirement. 64% depend on SS for at least half of their retirement income and 29% depend on it for at least 90% of their retirement income."

Agreed. OTOH, if you look at Maslow's hierarchy of needs, saving for future retirment is not at the top of the list. See e.g., http://web.utk.edu/~gwynne/maslow.HTM http://www.lifeworktransitions.com/tofc/tofc.html

"If you were to calculate the rate of return on your "investment" into social security, based on the money you paid into the system and the benefits you received, it would be in the whopping low 1% range. I'm only 25 and chance are i'll pay more into the system over my career than I'll receive in benefits."

Rate of return is a less than ideal analysis of a pay as you go system. Rate of return implies an investment based system.

"If I were to have the SS payroll tax withheld from my checks and put into a safe bond fund yielding a paltry 4%, I'd be much wealthier at retirement."

Assuming that you live to retirment, probably.

"So instead of sounding like a broken record and whining about it needing to be changed, I'll make some suggestions on what could be done to fix it. Presently SS is taking in more money than it pays out. That's a fact we can all agree on."

Agreed.

Regards, JAFO



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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: 173075 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/17/2004 4:02 PM
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XCgeoff: "Here's my idea for a new social security program-

The new social security system will be set up somewhat like an IRA for lack of a better analogy. The 6.2% I pay of my salary will automatically be withheld by the SSA. I can choose to save or invest this money with any institution. I could put it in a savings account in a bank, I can invest in bonds, stocks...basically anywhere I could open an IRA. I will then direct the SSA where to send my money. If I want it to go to an account at Vanguard or Fidelity or Ameritrade, they will send MY money to MY account there and I can invest it as I please. As a default, while the SSA holds my money, it will be invested in US government securities yielding a miniumum of 4% annually and protected against inflation."


Of course, that is much better than TIPs and I-Bond now paper, so are you sugegsting that the government must create a special class of paper just for SSA-IRA accounts? One that pays more than market?

"This way people who don't want to invest in the market or are too lazy or whatever will still have more money at retirement than they would get with the current system. The 6.2% the employer pays will go the SSA to continue paying benefits to people currently in the system."

How will you pay the current shortfall? The current SS surplus is nowhere near 50% of SS revenue. Do you plan to raise income taxes, increase the deficit and thereby likely increase interest rates, or something else?

Curiously, JAFO





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Author: Allisonh2 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173076 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/17/2004 4:06 PM
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Cool, I'll be 99 by then........:)

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Author: Allisonh2 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173077 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/17/2004 4:09 PM
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Cool, I'll be 99 by then........:)


Referring to the 2052 dates mentioned a couple days ago!! I'm behind on reading obviously, been working too hard, waiting for my social security date to kick in!!

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Author: eldetorre Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173079 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/17/2004 4:21 PM
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Start by simplifying.
-Social security should only be a retirement system. Not a welfare system.
-It should only pay benefits to those that contributed.
-It should only pay benefits in direct proportion to what was contributed.
-There should be no beneficiary but the person who contributed.

Mandate that everyone open a retirement account and contribute to it regularly.

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Author: tjscott0 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173085 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/17/2004 4:59 PM
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I wonder, what is our debt today compared to what it was in, say, 1950 in terms of the real value of money.

How many loaves of bread, for instance, was our debt worth in 1950 compared to today?

Anyone figured that out?

Thanks, Neil


Here is a link to credit debt:

http://research.stlouisfed.org/fred2/series/CMDEBT/97/Max

Here is link to calculator of value of dollar:

http://woodrow.mpls.frb.fed.us/research/data/us/calc/

Here is a link to compare one's debt with national average:

http://moneycentral.msn.com/content/SavingandDebt/P70581.asp

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Author: GretchHub Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173088 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/17/2004 5:04 PM
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I don't think there is enough money in the trust fund to pay out everyone who has contributed in. The SS trust fund was never a self funded fund. It was always a people working now pay for the retired people fund, the first people to recieve benefits never payed anything into the fund. I would have to count myself in the short changed group if I don't even get back what I put in.

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Author: XCgeoff Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173089 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/17/2004 5:19 PM
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Jafo Wrote:

How will you pay the current shortfall? The current SS surplus is nowhere near 50% of SS revenue. Do you plan to raise income taxes, increase the deficit and thereby likely increase interest rates, or something else?



One potential solution would be to eliminate the limit the $87,000 cap. I see that happening down the road anyways as none of the politicians really want to make any real changes and that is one of the move obvious moves to extend the solvency of social security. Besides eliminating the cap would only affect "the rich" so it would be politically popular I'd imagine. I'd have to see how much that brings in. Next option is to eliminate benefits to people with either large net worths and/or large incomes in retirement. I fully intend to fund my retirement with enough money that my projected social security benefits will be immaterial. I would look for other areas to cut spending as well. Increasing the deficit and raising taxes shouldn't be an option.

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Author: gulfsailor8 Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173090 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/17/2004 5:23 PM
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Just to jump in the middle,

What do you think will happen as to opposed to what should. As I see it with more "old people" voting than "young people" congress isn't going to do anything good.

I was down visiting the local SS office, armed guard, agent behind protective windows etc. Somehow I don't think that the people (clients) there knew what an IRA was. The major effort was to qualify for disability or other payments.

Prediction, in order to establish "fairness" (and extend the payments) the benefits will be "means tested" and if your retirement income is over a certain amount your benefits will be reduced. Because it is not "fair" that I chose to save and invest in IRA that I get more in retirement. (It is also not "fair" that some of my children can't invest in Roth IRA's that is hardly a "generous tax cut to the "wealthy" who don't need it.")

We have three children who are working and contributing to SS so we can retire.

Regards, RBB


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Author: tjscott0 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173091 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/17/2004 5:29 PM
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tmeri sez:
Social security is enabling the working poor to happily retire?? Or even retire at all?

And what is this guarantee? I thought the Supreme Court had made clear that no one is guaranteed SS benefits.


paul replies:

Yes, tmeri. The present SS system allows people who meet minimum requirements to collect minimal benefits. Those who meet the minimum requirement do quite well compared to those who max the system,

Paul the following supreme court case shows that level of benefits or eligibility requirements are not fixed & are subject to the whims of Congress. Payment of FICA taxes do not give an individual a legal contractual right to benefits.

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


Of course, it would be political suicide for Congress to screw around with Social Security. They will problably reduce benefits by making SS benefits taxable. If this is insufficient to correct the situation; Congress will be forced to reduce benefits.

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Author: bobleaman Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173094 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/17/2004 6:18 PM
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We could fix SS overnight if we had the guts to do it. Why not eliminate the cap on SS earnings?

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Author: fleg9bo 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: 173096 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/17/2004 6:32 PM
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We could fix SS overnight if we had the guts to do it. Why not eliminate the cap on SS earnings?

I'd be OK on eliminating the cap on earnings if we also eliminated the cap on benefits paid. Otherwise it's just another "soak the rich" scheme, a huge tax hike on folks earning over $87K adjusted.

--fleg

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Author: DazDo Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173097 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/17/2004 6:37 PM
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spletcher said:

I think we should take another step and eliminate Congressional members' retirement benefits. Since they designed and support this SS system, they should have to live under it. Let them have to save twice for their own retirement, in 401Ks and IRAs, like everyone else who works is forced to do, without having a huge federal pension to fall back on. Maybe then they would actually try to reform/end this fraud.
----------------------------------------------------------------------
Personally, I think that's where the biggest problem is. Members of Congress don't have to worry about living under the SS system, so they really don't have to care whether it gets fixed

I'd like to see them live like I do for just one month. Perhaps that would enlighten them.

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Author: greyh Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173102 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/17/2004 7:06 PM
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--------------------
Start by simplifying.
-Social security should only be a retirement system. Not a welfare system.
-It should only pay benefits to those that contributed.
-It should only pay benefits in direct proportion to what was contributed.
-There should be no beneficiary but the person who contributed.
--------------------

Quite the opposite. It is, and should be, ONLY a welfare system. It should exist to provide only the minimum necessities to those that cannot care for themselves.

Want more? Save it yourself. We are responsible for our own retirement, but if you can't, or won't? Then you will make do with the minimum handout provided by the government.

But if you don't need it, you shouldn't get it. It should not pay anything to people above a certain income. i.e. if your tax form shows too much, you don't get any.

The system will never be completely "busted" (previous posts) when it is always taking in money, but benefits paid out will just have to be reduced to match.



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Author: BuildMWell Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173104 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/17/2004 7:16 PM
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"Prediction, in order to establish "fairness" (and extend the payments) the benefits will be "means tested" and if your retirement income is over a certain amount your benefits will be reduced." - gulfsailor8

I would have agreed with you five years ago...today I know you are incorrect. Means testing is not required at all. The existing tax code already does the means testing automatically. You have to envision the big picture to see it.

I do income taxes each year for a number of retired people including me. I am not old enough yet to take my Social Security and that is what led me to see the future so clearly. I hope that I can explain this without getting too much into the real numbers.

Let's start with a low income retiree. This person has minimal income from investments and lives mostly off of Social Security. This person will show little income above and beyond Social Security and only a very small portion of that person's income will be taxed. He or she keeps almost 100% of the income from Social Security plus the investment income. He probably pays little or no income tax.

Now, let's increase the income from investments for the next retiree. This person has, say, $70,000/year in dividends, $15,000/year from S/S and has $10,000/year in deductions. That tax payer will relinquish virtually every dime of Social Security income to taxes. The $70,000 in dividends will be taxed at about 13% for a total outlay of $9100 but 85% of the S/S income will be taxed at the higher tax rates based on the total income. Thus, that retiree will lose the entire $15,000 of social security back to the government. There is no means testing required...that tax payer has been "means tested" by the existing tax code and the government took back their gift of Social Security. At least, the tax payer does not lose any money as S/S will pay the taxes. The Federal Government breaks even while the State Government still makes out like a bandit.

Now, take the last retiree. This person has paid the top tax on S/S for many. many years, He has saved and invested wisely and has $200,000/year in dividends and capital gains. This tax payer will never get more than the maximum payment from S/S which will place his S/S income at under $20,000/year, 85% of which is taxed at the 37% tax bracket. His $200,000 is taxed close to 15% so he owes $30,000 in income tax plus he returns about half of his S/S income to Uncle Sam. His S/S might pay half of his income taxes. He matches that in additional income tax. He has definitely been means tested without any means test. His $40,000 tax payment will fund a good number of poorer S/S recipients.

There are two important things to see here. First, the whole idea that Social Security will go broke is bogus. The more people who fund their own retirement, the more "income" taxes they will pay in retirement. S/S may seem broke on paper, but the revenues from income taxes will make up lots of the difference. Nobody talks about this phenomina. But, it is fact. I see it every time I do taxes for the oldsters.

The other thing that no one sees is that giving people the ability to invest for their own retirement not only gets the governemnt out of the retirement business but it generates far more income tax since it is the people who will become a burden to the system in the future who will actually become net tax payers with their own money in the system. This generates even more income tax revenues in the future. The rich already pay their own way...by design. Plus, they pay for lots of poor folks.

The key to this whole thing is growth. As people invest for retirement, stocks will have to go up in price. Having those shares tied up in retirement accounts tends to generate wealth along with the growth. It is a chicken and egg thing. Wealthy people resist selling their stocks since they generate their dividend income while capital gains "guarantee" that 15% of their capital is going away plus the state taxes. The rich hold onto their wealth.

But, think about it, if we all have personal accounts, we will all be getting richer than we would be if Uncle Sam runs the show. Uncle Sam has no way to "save and invest". He can only spend. Only individuals can save and invest. But, they then have income that is taxed. The government will be better off if everyone gets rich together. In this light, Social Security is a drag on the government and on the economy since it robs capital from America that could be invested. Plus, the more income we allow people to make, the more they buy which is good for business. After all, we cannot take it with us. Money is here to be enjoyed. But, you cannot enjoy it unless you have enough.

Conversely, the government sucks the life out of American Capitalism through too much taxation. By wasting that capital, they keep people poor. I can think of no reason that we need the Government involved in our retirement...none. We can do it if we have to...the key is some people will not do it on their own. The laws need to make it manditory that everyone save if they do not pay into Social Security. But, since S/S is manditory now, it makes sense that personal saving can be made manditiory today.

Social Security makes way too may folks into wards of the State. Why should we have to hold out our hands to the Federal Government to get our own money back? Does that make any sense? But, that is exactly what we all have to do...rich and poor alike. Then, the poor keep theirs and the rich merely mail theirs back to Washington. The very rich pay even more money into the system. That is just stupid as far as I am concerned. Why not just let us keep our money to begin with? We can use it far better and do much more for ourselves and for the Country. What good does it do to give our hard earned money to the bureaucrats? I am sorry, I just cannot see it.

Anyway, we surely will not need means testing. I hope that I have made that clear. That is already covered. What we need is to do away with this stupid ponzi scheme all together. It would be so much nicer if the governemnt was not in the picture at all. They are just overhead...a net loss. There is no value added any longer.





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Author: chooey98 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173108 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/17/2004 7:22 PM
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Since there is a cap (87,000) on the amount of salary that is subject to FICA tax, this has amounted to a subsidy of tax cuts for those who are better off, by those who are poorer. (For every dollar earned over 87,000, you get 6.2 cents extra take home pay).


I've never understood the reasoning behind this cap. If this cap were lifted, it would help fund the system. Of course, if the feds are just going to spend it anyway, forget it!

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Author: msmittle Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173111 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/17/2004 7:33 PM
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I like the idea, but compare your answer on the Social Security debate with the answers in the recently released book, "The Coming Generational Storm: What You Need to Know About America's Economic Future", written by Laurence J. Kotlikoff and Scott Burns.

This is a fantastic book that studies the effect of Social Security, Medicare and Medicaid on the generations to come, using generational accounting. It promises a scary future if politicians (Republicans and Democrats) continue on their current course. The authors present their own plan for fixing SS, Medicare, and Medicaid. They also present what you can do assuming the government continues its current course of doing nothing.

Regards.



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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: 173114 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/17/2004 7:45 PM
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XCgeoff:

JAFO: <<<<How will you pay the current shortfall? The current SS surplus is nowhere near 50% of SS revenue. Do you plan to raise income taxes, increase the deficit and thereby likely increase interest rates, or something else?>>>>

"One potential solution would be to eliminate the limit the $87,000 cap."

That would increase the SS liabilities, too, by approximately 15% of the collections (and really screw high earned income people).

From my notes:

"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, according to the Social Security Administration."

http://cbs.marketwatch.com/news/story.asp?siteid=mktw&dist=nwtam&guid=%7B4D8A6678%2D1120%2D46C7%2D9E5B%2DE6ACB01675BE%7D

27% * 80,400 = 21,708 or 1809/month

SS Benefits

"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."

CF 104734 at http://boards.fool.com/Message.asp?mid=20121272

"I see that happening down the road anyways as none of the politicians really want to make any real changes and that is one of the move obvious moves to extend the solvency of social security. Besides eliminating the cap would only affect "the rich" so it would be politically popular I'd imagine. I'd have to see how much that brings in."

I suspect it would not bring in as much as you suspect because SS taxes only earned income - not dividends, capital gains, or other unearned income. Except for athletes and other entertainers, and some CEO types, unearned income is a surprisingly large share of total income for the high income group.

If you really want to see the numbers, you could look at Medicare collections (1.45% versus 6.2% for SS, x2 for employer payments) for the last several years, because it has been uncapped for awhile.

"Next option is to eliminate benefits to people with either large net worths and/or large incomes in retirement."

BMW has shown that this is already generally true.

"I fully intend to fund my retirement with enough money that my projected social security benefits will be immaterial."

Generally, I concur, but I would use teh word gravy instead of immaterial.

"I would look for other areas to cut spending as well. Increasing the deficit and raising taxes shouldn't be an option."

Everybody favros cutting spending as long as they do not need to specify which spending! And eliminating the cap would be raising taxes.

Regards, JAFO



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Author: ogrecat 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: 173116 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/17/2004 7:49 PM
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If I were to have the SS payroll tax withheld from my checks and put into a safe bond fund yielding a paltry 4%, I'd be much wealthier at retirement.

And will use that money to support your parents and grandparents?

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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: 173117 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/17/2004 7:49 PM
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tjscott0: "Of course, it would be political suicide for Congress to screw around with Social Security."

Who else remembers the gray panthers rock&rolling Dan Rostenkowski's car?

"They will problably reduce benefits by making SS benefits taxable. If this is insufficient to correct the situation; Congress will be forced to reduce benefits."

Benefits are already taxable, to a certain extent. Raising the age even further (more than the plan already in place) would be my guess as to next expected cut in benefits (or adjusting the COLA ,hedging my bets>).

Regards, JAFO




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Author: ogrecat 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: 173118 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/17/2004 7:54 PM
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-There should be no beneficiary but the person who contributed.

Screw the widows and orphans - I can dig it.

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Author: acm4tax Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173119 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/17/2004 7:56 PM
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Here is my proposal for such a fix:

1. Eliminate social security payroll taxes today.
2. For the purposes of future SS benefits, calculate them as though everyone quit working today. If you've been working for only 10 years, you'll get the benefits that you would if you quit today. It won't be much, but then you haven't contributed as much as someone who paid SS tax for 40 years.
3. SS benefit payments according to #2 would be put on the government's books. No more of this phony double-bookkeeping. (Double-entry bookkeeping would still be allowed, of course. <g>)
4. Allow everyone who works to contribute to a new kind of tax-deferred account the same amount they would have paid in SS taxes. They will pay income taxes on the amount contributed, just as they would have for SS payroll taxes. (No net change to them.) They would begin withdrawing at their SS eligibility age. Income taxes on withdrawals would be assessed exactly as they are on actual SS income.


This seems fair to me..


It DOESN'T seem fair to me.

There are people who won't save for retirement since they can't even pay today's bills because they're low wage earners, mentally impaired, or disabled. To set up a system that puts the financially unwise in charge of making this decision (to save for retirement) themselves is not what the social security system was set up to do. It was to insure some set amount would be paid to everyone who lived long enough who had worked. It then expanded to include disability payments for those who became disabled or were dependents of a disabled person. Further it includes payments to the widows and widowers of those who had paid into the system.

I see people who haven't been able to find meaningful jobs find self employment. They have no employer to foot 1/2 the social security tax they must pay. I'd like to see their ss tax lowered more than the approximate 1% it is now if their earnings are below a certain amount and a gradual phase out of that reduction if their earnings exceed an amount determined by the number of dependents they have.

I think the cap should be taken off the top of taxable ss wages and the rate lowered slightly after wages exceed $100,000 for example. But to terminate the system today and turn the decision over to everyone to plan for their own retirement would be creating a whole new problem when those who never chose or were unable to contribute to a retirement plan come of age.

Your audience to this way of thinking is not taking into account those unable to save for themselves.

Maybe to deny benefits to those who need it least and allow them a charitable contribution from their taxes for the amount they give up is another option.

I don't know if there is any total solution to the problem, but as a humane society, we can't turn our backs on those who can't afford to prepare for a retirement. And the only way to protect those individuals is to have those of us who can afford it, to set aside a little for those who will never be able to take care of themselves.

Arleen



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Author: ogrecat 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: 173120 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/17/2004 8:00 PM
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I think we should take another step and eliminate Congressional members' retirement benefits. Since they designed and support this SS system, they should have to live under it. Let them have to save twice for their own retirement, in 401Ks and IRAs, like everyone else who works is forced to do, without having a huge federal pension to fall back on. Maybe then they would actually try to reform/end this fraud.
----------------------------------------------------------------------
Personally, I think that's where the biggest problem is. Members of Congress don't have to worry about living under the SS system, so they really don't have to care whether it gets fixed


http://inaugural.senate.gov/reference/resources/pdf/retirement.pdf


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Author: ogrecat 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: 173121 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/17/2004 8:03 PM
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Want more? Save it yourself. We are responsible for our own retirement, but if you can't, or won't? Then you will make do with the minimum handout provided by the government.

Didn't spending all their money in riotous living help sustain the economy?

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Author: emmah123 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173123 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/17/2004 8:06 PM
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Regarding Social Security- Ms/Mr Tmeri, as a 55 year old who has not saved enough money for retirement I find your response both alarming and unsatisfactory. I have 2 children both young adults. I have spent in excess of $200,00 on their education. I have not borrowed any money. When my children were young, I worked part time and attempted to save some of my salary toward their education. A "wonderful" stock broker encouraged my husband and I to invest in a crummy mutual fund which did not produce the savings I had intended. So, while I had a little amount saved for college I of course did not have what was required. When my daughter was a senior in high school, I returned to work full time. My entire take home pay for the past 9 years has gone to my children's education. There is no way that the average American can both pay tuition and save for retirement at the same time. I am sure there are many Americans in my situation. Judging from the "excellent" college savings information that I recived from this so called expert professional, I can imagine what the average American who has no information about investing will wind up with when retirement comes withoiut the safety net of Social Security. I support the conmcept of social security and if the money was used appropriately, it would not be in the mess it is today.

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Author: pauleckler Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173129 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/17/2004 8:23 PM
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Tmeri, there's an easy way to fund that Social Security liability. Sell some state or region.

Of course, we would want to sell it to some entity with a first rate credit rating. But not to worry, we can take a leaf from some of the Wall Street wheeler dealers. Take back a mortgage on the property sold and put a lock box on their tax revenues. That gives the buyer incentives to enhance performance of the property to pay down its debt. It also means that residents of the property pay for their own freedom.

The hard part will be deciding what to sell. Some say Mexico might like parts of the Southwest. Texas? California? Canada might like some of the northern states: Alaska? Washington? Montana? N. Dakota? Minnesota? Wisconsin? Michigan? Cuba might be interested in Florida. Puerto Rico? Virgin Islands? Hawaii is an outlier. Easily lopped off. Some Indian tribes might like their own reservations. Oklahoma? Maine? Parts of the South might still like to buy their independence. Mississippi? Alabama? Carolinas? Virginia?

Who knows. Someone could be interested in buying our rights in Iraq.

Think about it. A trillion dollar deal. One of the biggest land deals in history. Think of all the maneuvering just to decide what some of these things are worth.

Wouldn't you like to be the real estate agent on this deal?

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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: 173144 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/17/2004 9:06 PM
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I guess I'll just hopscotch through a few of these:

Of course, someone will find a group that they think is being ripped off, but you'll need to explain why. Anyone who is near to retirement can count on the benefits they've earned up until now.

How does that get paid? It takes the contributions coming in to pay the benefits going out. If you stop the contributions coming in, there ain't no money, honey. You want to pay it out of a different pocket? Why is that better?

you'll need to explain why.

Social Security is a multi-level program. It also provides insurance for families in which the breadwinner dies, it provides disability insurance and more. It is more than just "retirement", so you should figure those additional costs into the system, or you can ignore them and let widows and their children and the disabled slide into poverty.

Naw. The assumption is fundamentally correct, and your very post proves it. You assert that in 2052, SS goes bust. If SS is not self-sustaining forever, it is broken.

Please. Nothing is forever. The Roman Empire wasn't forever. Get a grip, here. We're talking about a program which has run effectively for 70 years, which accomplished nearly all of its original goals, and which looks to be able to continue doing so for another 50 years.

It's also one which, according to most economists, helps lube the pump during recessions by providing money which people actually spend (because they need to.) In so doing, it ameliorates recessions from the worst whipsawing (and bank panics) which used to seize the American economy until the 1930's.

The "Social Security Trust Fund" is nothing but a gimmick, an accounting trick. The government collects SS taxes, pays current benefits, and puts the rest in the US Treasury. What they get back is special treasury notes, which bear a miserably low rate of interest. There is no money backing these notes, only the promise of the government to repay money.

True enough. That "promise", incidentally, is made of Treasury Bonds, which world markets consider the safest, surest, most trustworth, most reliable investment in the world. No, there is not a big room full of money somewhere. Yes, the promise of the US Treasury to pay future obligations is pretty solid. At the very least it's a lot more than "a trick". Can it be changed sometime in the future? See above response to "forever".

This goes back to the original set-up. I believe retirees in the first days of the program received benefits, even though they never made contributions. In other words, they were paid benefits, but never contributed a dime.

Not true. SS taxes were collected for two years before any benefits were paid. Even then, benefits were staggered based on contributions (although I doubt it worked out to be perfectly level. Heck, it doesn't work that way now. If you die young, you lose. If you live forever, you make out.)

Do people have a right to retire, even if they can't afford to on their own?

Not necessarily. But then you have a lot of 82 year olds hanging around the sidewalks looking to turn tricks because Wal-Mart won't hire them. Personally, I'd rather have the Social Security program.

I don't think anyone has mentioned it yet but 65 was chosen as the retirement age in part because the system was seen to be sustainable with that retirement age. Since the 1930's when SS started the average life expectancy of an American has gone up about 10 years. This fact alone means that a larger percentage of people are drawing benefits then were ever expected

Partly true. Most of the "increased life expectancy", however, is due to declining infant mortality rates. If you get through that period (as more do, now) then you will contribute to the program, and get benefits out of the program. (It is true that in the past decade or two the end of life period has been increasing thanks to substantiallly more - and better - emergency intervention. But the larger part of "increased life span" has come in a period which is irrelevant to 'Social Security' i.e. infants and children who never paid in, and will never take out, because they died.)

Obviously you and I must be on far opposite ends of the political spectrum, but I can't help but absolutely disagree with your thoughts. I believe that it is an individual's responsibility to save and prepare for retirement and Social Security is a fine example of a well meaning government program that just grew fatter and fatter and is out of control, but that's a whole another topic.

That's fair enough. Just understand that when SS was "invented", more than half of elder Americans lived in poverty. It also happened to come at a time when other political systems were promising better economic equality, and the idea that a large group of "used up" citizens were susceptible to such entreaties. Here's a fuller explanation, if you're interested:
http://boards.fool.com/Message.asp?mid=20177604

Social Security was not only "humanitarian", it was political. It has also turned out to be generally good for the economy during weak periods, although I acknowledge that it might have the opposite effect during high water marks. Dunno. Overall it has done what it set out to accomplish, and I'm glad that my father-in-law gets a check (after all, he fought in the Battle of the Bulge and paid into the system for 40 years) so he doesn't have to come live in a room in my attic.
 




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Author: tmeri Big gold star, 5000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173155 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/17/2004 11:33 PM
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emmah123 opines:

Regarding Social Security- Ms/Mr Tmeri, as a 55 year old who has not saved enough money for retirement I find your response both alarming and unsatisfactory.

She then goes on with problems she has had funding various things she wanted, having nothing to do with social security. OK, emmah123, life is hard, I'll grant you that. You find my proposal "alarming and unsatisifactory," but you don't say why. Did you read it carefully, or are you just alarmed and assuming that it won't be a good deal for you personally? I did not propose to take away your social security benefit. I did propose to freeze it where it stand now, then give you the opportunity to invest further payments you would have made in social security in something better. You should come out ahead on this plan.

So why are you complaining? Your problem seems to be that you are wasting money paying for bad investment advice:

A "wonderful" stock broker encouraged my husband and I to invest in a crummy mutual fund which did not produce the savings I had intended.

So fire him. Put your money in a low cost index fund. You've had the same opportunities I've had. Make the most of them.

My entire take home pay for the past 9 years has gone to my children's education. There is no way that the average American can both pay tuition and save for retirement at the same time.

Is there some reason your children are unable to work? My nephew is in college, and when he was about to enter college, he came to his parents one day and announced that he intended to work and save his money so that he could pay for his own college education. His parents had expected to pay that for him, so this was his gift to them. Why don't your children help out? My nephew is not a gifted student, far from it. He's just a hard worker who is disciplined and willing to sacrifice for what he gets in life. His parents will not have to pay a cent for his education. Any reason why your children couldn't do the same? All it takes is character, hard work, and a reasonable expectation in life. Of course, if they are expecting to go to toney private universities you're hosed. But they don't need that, really.

- tmeri

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Author: tmeri Big gold star, 5000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173162 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/17/2004 11:57 PM
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How does that get paid? It takes the contributions coming in to pay the benefits going out.

To Goofy and everyone else that didn't bother to read what I wrote:

I'm gettin' just a tad frustrated with you guys. Many of you are responding to my post without reading it. I'm not responding to anything else where people make it so patently clear that they did not read what I wrote.

Is asking that people read what you wrote before they jump in with reasons why it won't work too much to ask? Apparently so.

Goofy, I'm sorry to say, I'm not reading the rest of your post (and obviously not going to respond to it, since I'm not reading the rest). It's too long and scrolly, and you insulted me by not bothering to read mine, so I won't take up the board's time with straigtening out what I expect is a host of twistings and misstatements of my proposal. Sorry. I just don't have time to engage people in conversation that are making so little effort to carry on an intelligent one.

- tmeri

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Author: Banal Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173167 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/18/2004 12:19 AM
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I would like the freedom to opt out of the social security system. I would be happy to forfeit the 20 years of contributions I have already made. I would just like to not be subject to payroll taxes for the remainder of my life and I will take care of saving for my own retirement.

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Author: tmeri Big gold star, 5000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173171 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/18/2004 12:24 AM
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I would like the freedom to opt out of the social security system. I would be happy to forfeit the 20 years of contributions I have already made. I would just like to not be subject to payroll taxes for the remainder of my life and I will take care of saving for my own retirement.


You are sooooooo in luck! And you've come to the right board. Have you considered retiring early? I did, and now I don't pay any social security taxes or even medicare taxes.

- tmeri

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Author: OldOne Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173179 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/18/2004 1:06 AM
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Prediction, in order to establish "fairness" (and extend the payments) the benefits will be "means tested" and if your retirement income is over a certain amount your benefits will be reduced. <P>

Don't look now, but SS has already been "means tested". Let me explain.

When SS started, the benefits were not taxed. Great idea, why have the government give something away and then take part of it back?

Then in the 60's or 70's the politicians couldn't keep their hands out of your pockets and 50% of SS payments became taxable. Then in the 80's they made it 85% of the benefits which were taxable.

I live in CA, and have enough other income so that my benefits will be taxed at the highest rate. Essentially my SS payment will be only 60% of the payment to a person with no other income. If that isn't a "means test" I don't know what is.

One of the big problems I have with means testing is that it penalizes the ants and rewards the grasshoppers. Exactly the opposite of what the government should do.

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Author: OldOne Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173182 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/18/2004 1:36 AM
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This isn't exactly true. There is a trust fund and it is invested in Treasuries which is a fairly responsible practice. <P>

Believe me, there is no real money in the trust fund. This is one of those paradoxes of economics which may be hard to understand.

As an individual, it is responsible for you or I to invest in Treasuries. That is because the government (millions of taxpayers) has promised to pay them back.

On the other hand, it is completely irresponsible and an accounting fiction for the government to invest in Treasuries. The government has just lent itself money, which works just about as well as you taking $20 out of one pocket and putting it in another before spending it. Once you have spent it out of your left pocket, it is gone. You can say that your left pocket owes it to your right pocket, but there is nothing there to pay it back.

Now, if the SS Trust Fund had been invested in Japanese or British Treasury notes that would have been prudent. The Japanese or British taxpayers would be on the hook to pay our retirements. But if that had been done, our congress couldn't have spent the money...


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Author: lifeforcedanceri Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173186 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/18/2004 2:30 AM
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I have news for you. Social Security never has been and never will be in financial trouble. It is easily the most successful federal program ever. The social security system is literally awash with money--so much so that social security is used to prevent the country from going into bankruptcy. Claiming that "of course" the system is broken is similar to the neocons also being wrong about there being a collaborative relationship between Al Queda and Iraq-- the more it is proven not to be the case, the more the neocons assert repetitively their delusions. We armed Osama against the Russians in Afghanistan. We armed Hussein in his murderous war with Iran. We keep supporting lying leaders on matters of life and death. I am sick of Bush making the USA the connecting link between miscreants. Why do we insist on dealing with these hoodlums?

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Author: voyager556 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173187 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/18/2004 3:27 AM
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tmeri,

Kudos for hanging in there on a thread which contains posts ranging from erudite to the pedantic -- and yes, I did read them all.

As to the premise of your original post, I would agree that you, I and others on the board could generate better returns for ourselves if permitted to invest our SS contributions privately. As stated, however, the premise seems to miss (or at least understate) two realities which were beautifully described in the Modigliani link - a must read - provided by PhuzzT:

see http://web.mit.edu/francom/ssecurity/Web%20Version/Abstract.htm

namely,

1. taxes are a wealth redistribution mechanism (not an investment vehicle) and SS is clearly a tax
2. political reality - while SS may be the political "third rail", regardless of your politics, most could support the idea of making SS actuarialy sound and less subject to political manipulation

And finally, at the risk of sounding more liberal than I am, SS is a SOCIAL program and most would agree that providing for the elderly/less fortunate in society is both a legitimate function of government and the right thing to do. Are there abuses? Certainly. Should we scrap it as a result? I would argue no. Instead, why don't we just apply some of this great Foolish energy to getting SS on sound financial footing for those who really need it and not really worry about what's likely to be a smallish benefit to us that will be taxed away anyway?

Best,
V.



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Author: cattleman22 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173189 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/18/2004 8:03 AM
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{{abject poverty, to which the richest nation in the world was subjecting its elderly}}


That is an interesting theory. So our nation predetermines which people will be subjected to living a life of poverty and which people will be rich? It must suck to live life with the philosophical baggage like that.





{{ONLY NOW (or relatively soon) as the baby boomers are retiring and the population ages is the formula reaching a stage where, at some point, it will not be self supporting.}}


It is called a pyramid scheme. This always happens.



{{Supply siders, mainly the very wealthy, and overrated ideologue "economists" like Milton Friedman who equate giving ANY support to the less fortunate, with a loss of freedom (what a crock!), have been waging an all out propoganda war against, social security and all other forms of social spending, over the last few decades.}}


I think you are engaging in class warfare. Why would the wealthy care about SS? SS taxes only apply to earned income. How much earned income do the wealthy receive? Plus less than the first $100,000 is even taxed for SS. It is not just the very wealthy do not like SS.


So let me get this straight. If I were to take money from you at gunpoint, I would not have deprived you of your freedom to do what you want with your own property? I think it is your thinking that is a crock.



c

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Author: cattleman22 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173190 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/18/2004 8:06 AM
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{{To truly fix the SS system, we have to eliminate the fundamental inequities in our society. I don't see it happening. }}


a recent link to this board went to a study that showed that something like 70% of the variation in wealth at retirement was due to personal choice to save. Random chance events such as inheritance or catastrophic medical expenses explained about 7%, income explained about 7%, and investment choices explained about 7% of the variation.

The greatest wrong is that the government thinks those who chose to save should subsidize those who chose not to save.



c

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Author: cattleman22 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173191 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/18/2004 8:32 AM
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{{I'm gettin' just a tad frustrated with you guys. Many of you are responding to my post without reading it. I'm not responding to anything else where people make it so patently clear that they did not read what I wrote.}}


I think you must now be in cattleman world. I know that people seem to enjoy responding to what they imagined I posted rather than responding to what I actually posted.



c

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Author: deanwoodward Big gold star, 5000 posts Top Recommended Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173201 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/18/2004 10:26 AM
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We will eventually face economic crisis in the U.S. and SS will probably be "reformed" solidifying the U.S. position as the meanest democracy in the world.

Wahh, wahh, wahh. Do you want cheese with that whine?

Social Security is, and has always been, a Gov't-sanctioned Ponzi scheme. If any other entity but the U.S. Gov't tried this, that's what they would be charged with. Taking money from Party A to pay Party B, with the assurance that Party C will pay for Party B when B is able to retire. It's a scam, and it costs each of us over 15.3% of our pay every year. Think about what you could do with an extra 15.3% of your salary.

But, you say, it's only 7.65%. Wrong. Your employer has to match this amount, dollar for dollar. The reason the scam works is because it's 'painless', in the sense that it comes out of your pay before you get it. If each of us got paid this amount, and had to write a check to Socialism Security every month for 15.3% of their salary, how many people would consider it a great deal THEN?

I'm guessing not very many.

But Socialism Security does give the politicians more control over how we spend our retirements, giving us back a fraction of the money we put in, and many of us think it's a great deal; usually, those who are bad at math. Social Security is one of the greatest scams and ripoffs in the history of Western civilization.

Dean


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Author: readyteddy Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173202 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/18/2004 10:38 AM
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Me I retired early. Haven't got my Social Security yet, but hopefully I will get something back.

If the conservatives get their way, I won't need it. Letting John Q. public manage his own money will be like shooting fish in a barrel for a finacial professional like myself.

I mean, were'nt these same folks that want to control their own invetments buying internet stocks at eight bazillion times earnings only three four years ago? I'd have to go back to work. So many suckers, so little time.....

Lots of folks think these private accounts would be some kind of panacea. Me, I am not so sure. If all that money now going into Social Security was invested prudently in the private economy, it might drive returns down to the level of population growth. That won't feed the bulldog.

I like the current inefficiencies better. "The devil you know", and all that rot. Either way, one thing I do know is grownups take care of themselves.



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Author: synchronicity Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173209 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/18/2004 11:36 AM
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I'm glad that my father-in-law gets a check (after all, he fought in the Battle of the Bulge and paid into the system for 40 years) so he doesn't have to come live in a room in my attic.

Could be worse. Your dad could have to move in with you, and he'd stop you from blowing up toaster ovens for fun.

-synchronicity

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Author: deanwoodward Big gold star, 5000 posts Top Recommended Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173210 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/18/2004 12:04 PM
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Get a grip, here. We're talking about a program which has run effectively for 70 years, which accomplished nearly all of its original goals, and which looks to be able to continue doing so for another 50 years.

Just because a program succeeds in moving money around doesn't mean that it results in a positive social benefit. In fact, it is a burden to society.

Just understand that when SS was "invented", more than half of elder Americans lived in poverty.

Umm, I think more than half of ALL Americans were in poverty during the Great Depression.

Social Security was not only "humanitarian", it was political.

Damn right it was. It's a brilliant political move to take money from people, and look good when you actually give some of it back 30 years later. Most people don't understand you're ripping them off, because the costs are never explained. Sort of like being forced to invest in an underperforming mutual fund without ever being permitted to see the prospectus, and never being able to vote on changes in the fund's policy. What a deal.

Overall it has done what it set out to accomplish...

That being the Government getting ever more control over people's lives, because, after all, the Government knows better.

...and I'm glad that my father-in-law gets a check (after all, he fought in the Battle of the Bulge and paid into the system for 40 years) so he doesn't have to come live in a room in my attic.

But how much better off could he have been if the money that was taken from him had been invested? That, I believe, is the key point. Looking only at what you get from Social Security is simplistic. Look at what you had to give up in sacrificed earnings on that money to get that meager check, and you'll realize that it's a ripoff of historic proportions. I think the average rate of return on what people get from Social Security is around 2%. That's less than inflation. Ripoff? You bet.

When you realize that Social Security is based on the failed premise that moving money around benefits society, it is obvious that no matter how much the system is 'reformed' or 'reinvented', the assets tied up in it CANNOT CREATE VALUE. Therefore, everyone is WORSE off than they otherwise would be if they could invest the money themselves. Only in America can we have a system that undeniably destroys wealth that everyone is afraid to touch simply because it's a program that has existed for 70 years. If flawed systems were permitted to exist simply because people had grown dependent on them, then slavery would never have been outlawed.

Dean



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Author: eldetorre Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173215 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/18/2004 12:51 PM
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No don't screw the widows and orphans. They can get welfare.

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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: 173216 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/18/2004 1:03 PM
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deanwoodward: "Social Security is, and has always been, a Gov't-sanctioned Ponzi scheme. If any other entity but the U.S. Gov't tried this, that's what they would be charged with. Taking money from Party A to pay Party B, with the assurance that Party C will pay for Party B when B is able to retire. It's a scam, and it costs each of us over 15.3% of our pay every year. Think about what you could do with an extra 15.3% of your salary.

But, you say, it's only 7.65%. Wrong. Your employer has to match this amount, dollar for dollar. The reason the scam works is because it's 'painless', in the sense that it comes out of your pay before you get it. If each of us got paid this amount, and had to write a check to Socialism Security every month for 15.3% of their salary, how many people would consider it a great deal THEN?

I'm guessing not very many."


You are wrong as to the math.

First, if you count the 7.65% employer contribution as salary for the numerator, then to be accurate you must also count it for the denominator. Thus, the calculation would by 15.3%/107.65% = 14.21%, not much better but not 15.3% either.

Second, you have lumped medicare 1.45% employee portion into discussion that [previously was limited to SS.

Third, you have an embedded assumption that if FICA contributions were not required from the employer, that those funds would be paid to the employee; but I have never seen any validation for that assumption.

"But Socialism Security does give the politicians more control over how we spend our retirements, giving us back a fraction of the money we put in, and many of us think it's a great deal; usually, those who are bad at math. Social Security is one of the greatest scams and ripoffs in the history of Western civilization."

How much you get back depends upon how long you and your spouse live; in addition, if you look solely at gross dollars contributed ("money we put in"), I suspect that it is even more favorable; I strongly suspect that you meant to include some kind of implied investment return, too, but did not do so.

Regards, JAFO
(posted before reading entire thread)



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Author: ogrecat 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: 173217 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/18/2004 1:09 PM
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No don't screw the widows and orphans. They can get welfare.

And the welfare comes from taxes.




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Author: eldetorre Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173219 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/18/2004 1:25 PM
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The point is to avoid unnecessary expenditures. You assume all widows n orphans would be destitute. I'm saying support only those that need assistance, don't automatically throw money at people who haven't paid into the system.

Also it galls me that immigrant seniors who've never contributed are being supported as well.

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Author: deanwoodward Big gold star, 5000 posts Top Recommended Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173230 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/18/2004 3:53 PM
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JAFO,

Good points. The basis for the 15.3% is what you currently consider your gross income, which is equal to 14.2% of the amount equal to your current gross plus the employer contribution. For simplicity, I chose 15.3% of your current gross, because it's more understandable.

As to whether the employer would pay the employee this 7.65% contribution, I'll agree that it's a matter of opinion as to whether it, and how much of it, would go to the employee. But I tend to think that it's reasonable to assume that some would go to the employee, and some toward reinvestment, etc. It's certainly not going to go all to the company bottom line, because the laws of supply and demand still apply (thankfully, but there are those that would suppress them). However, I believe that every dollar that stays in the private sector is still going do much more for societal benefit than a dollar going to the Gov't.

The 1.45% is accurately going to a different purpose, but it's still taken out for what the Gov't deems necessary, not what the employee deems necessary. Again, it's using the force of the Government to take care of people because we have as a society deemed that people can't take care of themselves. It's still part of the problem, not the solution.

I realize that an individual, and even most individuals, may in fact get more out than what they put in. But the issue is again with opportunity cost. If that money had been yours to begin with, and you invested it in a 50/50 mix of stock index and bond index funds, we would all be WAAAYYY better off than with SS. But the Gov't gets their cake and they eat it too with SS. They get more power over people, and they get to look like great benefactors when they give people back THEIR OWN MONEY. And, they're pretty much not accountable to the working public, because the members of the working public each feel powerless to change the situation, even if they wanted to. (Senators and Presidents believe that, too.) And a great many people simply don't see that there is a problem. If anything, SS can give people a false sense of security. Social Security should be renamed Barely Above Poverty, because that's where you'll be if you rely on it.

Supporters of Social Security support the thinking that Social Security has to be mandatory, to keep our elderly out of poverty. This, in turn, is based on the premise that people wouldn't do it voluntarily. As it's currently set up, of course not, because the numbers suck! By way of example, I'd like to set up a finance company. Everyone pays me 14% of their gross salary for their entire working life, and I'll give them a small monthly check for their entire retirement. I reserve the right to change the amounts people get when they retire whenever I feel like it. Any takers?

Dean

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Author: mcain6925 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173236 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/18/2004 4:45 PM
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But as another posted has noted, there is no actual trust fund, just a bunch of IOUs from the federal gov't.

I have never understood how anyone can seriously make this argument. The trust fund holds US Treasury bonds. So do the central banks of Japan and China (almost $1T between them). So do pension plans all over the world. Why? Among other reasons, because US Treasury bonds are regarded as the SAFEST INVESTMENT IN THE WORLD. To assert that the bonds held by the Social Security Administration are worthless is to assert that the bonds held by pension funds and foreign governments are also worthless. You can't have it both ways -- if the SSA is bankrupt because its bonds are worthless, then the private pension plans are bankrupt too.

Well, you can have it both ways under one condition -- the US will choose to voluntarily default on a selected portion of its outstanding bonds. And the people that we will screw, in general, are elderly US citizens. NOT GOING TO HAPPEN.

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Author: randallpouwels One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173238 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/18/2004 5:14 PM
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People keep mentioning Government Bonds. Well, yes, but if Social Security contributions go to Government Bonds, that doesn't quite make it "money in the bank," so to speak. Bonds ARE a form of Government IOU, i.e. Government debt. The ability of the U.S. Government to honor this debt depends on its ability and WILLINGNESS to tax to cover that debt. Therefore, I have another solution to this problem: the Government can meet that obligation simply by restoring the tax breaks they've squanderewd away on the upper 1-2% under dubya (dumya) the past three years, PLUS stop the friggin' corporate welfare: impose an AMT on corporations.

You see, the REAL problem here is that Dumya and the Republicans don't -- I mean DON'T -- like New Deal-style social programs, even successful ones like SS. They've been skulking around for years trying to turn back the clock to the Gilded Age or the 1920s. The country has gone off track in recent years by identifying the interests of the Nation with corporate interests and this goofy idea that giving to the rich -- not the truly PRODUCTIVE rich, but the idle rich as well -- somehow is going to help everybody. This country isn't just a motley collection of corporations, and everyone, corporations included, have to realize they have certain obligations to the Nation as well as to their greedy selves and to stock holders.

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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: 173250 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/18/2004 7:14 PM
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deanwoodward: "JAFO, Good points."

Thank you.

"The basis for the 15.3% is what you currently consider your gross income, which is equal to 14.2% of the amount equal to your current gross plus the employer contribution. For simplicity, I chose 15.3% of your current gross, because it's more understandable."

I do not consider it more simple; in addition (and without accusing you), I have seen people make the claim either because they do not truly understand and/or they simply want to inflate the number to make it seem worse.

"As to whether the employer would pay the employee this 7.65% contribution, I'll agree that it's a matter of opinion as to whether it, and how much of it, would go to the employee. But I tend to think that it's reasonable to assume that some would go to the employee, and some toward reinvestment, etc. It's certainly not going to go all to the company bottom line, because the laws of supply and demand still apply (thankfully, but there are those that would suppress them)."

But it is not a simple either/or response. There will be several constitutencies arguing for access to those 7.65% funds if they become available.

"However, I believe that every dollar that stays in the private sector is still going do much more for societal benefit than a dollar going to the Gov't."

That is a different arguemtna dn I do not car to engage it tonight.

"The 1.45% is accurately going to a different purpose, but it's still taken out for what the Gov't deems necessary, not what the employee deems necessary. Again, it's using the force of the Government to take care of people because we have as a society deemed that people can't take care of themselves. It's still part of the problem, not the solution."

are you an anarchist, then. The government is always part of the probelm and never part of the solution? If not, then I do not think you have proved your point.

"I realize that an individual, and even most individuals, may in fact get more out than what they put in. But the issue is again with opportunity cost. If that money had been yours to begin with, and you invested it in a 50/50 mix of stock index and bond index funds, we would all be WAAAYYY better off than with SS."

That is a huge IF. What is the corollary to Murphy's law that states that spending rises to meet revenue? IOW, I suggest that some percentage (and probably not an insignifcant percentage) of the population would not invest any portion of those funds, but would consume them currently. Once again, I point to Maslow's heirarchy of needs, and note that retirement savings is well down the list.

"But the Gov't gets their cake and they eat it too with SS. They get more power over people, and they get to look like great benefactors when they give people back THEIR OWN MONEY."

It is not their own money. SS is a wealth transfer system, and the money you and I paid in is mostly long gone. So when (if, for the pessimists) we collect some, we are not getting back our own money.

"If anything, SS can give people a false sense of security. Social Security should be renamed Barely Above Poverty, because that's where you'll be if you rely on it."

So? SS was never intended to be a sole means of support.

"Supporters of Social Security support the thinking that Social Security has to be mandatory, to keep our elderly out of poverty. This, in turn, is based on the premise that people wouldn't do it voluntarily."

Actually, I think history shows that the premise is not ill-founded.

Regards, JAFO



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Author: deanwoodward Big gold star, 5000 posts Top Recommended Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173251 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/18/2004 7:16 PM
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Randall,

You have really bought into the whole class warfare schtick of the Left, haven't you? It's always the rich that are causing the problems.

For the record, I agree with you in opposing corporate welfare, and I oppose them as much as I do farm subsidies. If the market says that it's not profitable to do something, then DON'T DO IT. Yet many on the Left and the Right want to give away taxpayer money to their constituents, and we all collectively get to foot the bill.

However, I completely disagree with you that Social Security has been a success, unless your measure of success is 'creating a wasteful Government bureaucracy that simply moves money around, and tries to take credit as if it produced it in the first place'.

Social Security is taking your money, and in effect giving you 'credits', that you can collect in retirement. The trouble is, you would do MUCH better investing the money in just about ANYTHING than giving it to Social Security. You are getting ripped off every day, and yet you are happy about it, because 'at least those rich people can't take that away' or some other such nonsense. If you looked at the money you contributed to Social Security as YOUR money, NOT the Government's money, I believe you might see things differently.

Dean

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Author: BonsaiCarole Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173261 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/18/2004 11:27 PM
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I enjoyed your solution, though I do not believe that there is a plan that will never go bust.

I would like to add to the proposal.

Eliminate the golden parachute that our Senators and Representative receive. For just one term, they receive their salary for life paid for by none other than you and I as they contribute NOTHING for their retirement plan. Now that is a deal I want. Put them on SS and take the money we pay for their golden parachute and put it into SS. Now lets see how fast changes occur.

If you have not contribute to SS, then you do not collect. Get the illegal aliens off the payroll. The operative word is illegal so why am I paying for them. If they did not pay in ONE cent, why should they collect. Let us use the SS plan the way it orginally was meant to be used - income for retiring seniors. It has become another entitlement that we pay for, but may never receive any benefit from. That needs to stop.

These solutions can also be applied to medicare which is being bleed dry by people who did not or do not contribute.

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Author: protoplasm72 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173263 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/19/2004 1:36 AM
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I recently received this as an email so I have no idea how accurate it is.


Franklin Roosevelt, a Democrat, introduced the Social Security (FICA) Program. He promised:

1.) That participation in the Program would be completely voluntary,
2.) That the participants would only have to pay 1% of the first $1,400 of their annual incomes into the Program,
3.) That the money the participants elected to put into the Program would be deductible from their income for tax purposes each year,
4.) That the money the participants put into the independent "Trust Fund" rather than into the General operating fund, and therefore, would only be used to fund the Social Security Retirement Program, and no other Government program, and,
5.) That the annuity payments to the retirees would never be taxed as income.

Since many of us have paid into FICA for years and are now receiving a Social Security check every month -- and then finding that we are getting taxed on 85% of the money we paid to the Federal government to "put away," you may be interested in the following:

Q: Which Political Party took Social Security from the independent "Trust" fund and put it into the General fund so that Congress could spend it?

A: It was Lyndon Johnson and the Democratically-controlled House and Senate.

Q: Which Political Party eliminated the income tax deduction for Social Security (FICA) withholding?

A: The Democratic Party.

Q: Which Political Party started taxing Social Security annuities?

A: The Democratic Party, with Al Gore casting the "tie-breaking" deciding vote as President of the Senate, while he was Vice President of the U.S.

Q: Which Political Party decided to start giving annuity payments to immigrants?

A: That's right! Jimmy Carter and the Democratic Party. Immigrants moved into this country, and at age 65, began to receive SSI Social Security payments! The Democratic Party gave these payments to them, even though they never paid a dime into it! Then, after doing all this lying and thieving and violation of the original contract (FICA), the Democrats turn around and tell you that the Republicans want to take your Social Security away! And the worst part about it is, uninformed citizens believe it!


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Author: MSHH Big funky green star, 20000 posts Top Recommended Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173264 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/19/2004 2:21 AM
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Great thread. I don't think it was mentioned but perhaps a start to a solution might be to, when in a hole, quit digging. Or at least dig up, as Mo the Bartender told Homer to do.

The 540 billion dollar (for ten years) Bush-approved Medicare drug bill.

I know someone has already pointed out that all these different bills will eventually be paid from the same source--the taxpayer. So Social Security or Medicare--it matters not.

Another plan might be the Canadian model. Simply collect enough taxes to pay for the promises that have been made. Perhaps too exotic of a solution.

I think this is #100 in the thread. I don't know what prize comes with that. Perhaps TMF will let me know.

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Author: ogrecat 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: 173265 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/19/2004 7:35 AM
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Eliminate the golden parachute that our Senators and Representative receive. For just one term, they receive their salary for life paid for by none other than you and I as they contribute NOTHING for their retirement plan. Now that is a deal I want. Put them on SS and take the money we pay for their golden parachute and put it into SS. Now lets see how fast changes occur.

For the hundredth time:

http://www.snopes.com/politics/taxes/pensions.asp

http://www.c-span.org/questions/weekly68.htm

http://inaugural.senate.gov/reference/resources/pdf/retirement.pdf


I recently received this as an email so I have no idea how accurate it is.

Franklin Roosevelt, a Democrat, introduced the Social Security (FICA) Program. He promised:
...


http://www.snopes.com/cgi-bin/news/ultimatebb.cgi?ubb=get_topic;f=3;t=000003

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Author: cattleman22 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173269 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/19/2004 11:07 AM
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{{You see, the REAL problem here is that Dumya and the Republicans don't -- I mean DON'T -- like New Deal-style social programs,}}


You are right. These programs are unConstitutional. The Constitution is quite clear about the federal government having the power to promote the GENERAL welfare, not the specific welfare of a specific person.


{{this goofy idea that giving to the rich -- not the truly PRODUCTIVE rich, but the idle rich as well -- somehow is going to help everybody}}


How do you determine who the productive rich are and the idle rich are? Would you say that the productive rich are more likely to have earned income? Or are the productive rich more likely to be like Kerry's wife who paid 0% tax on over 50% of her multi million dollar income?


c

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Author: frankjr101 One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173296 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/19/2004 5:17 PM
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It'd be good for all of us if political parties would put some effort into improving it; not using it to get votes.

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Author: telegraph 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: 173297 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/19/2004 6:08 PM
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frank: It'd be good for all of us if political parties would put some effort into improving it; not using it to get votes.


Improving it in what way?

a) so that people who get social security get more money each month to live on?

or

b) reduce the tax burden on those 18-45, who likely won't see much from Social Security anyway, and have to work until 75 or 80, or later to collect SS, since they will likely live to 90-100 years of age??


everyone has a different idea of what 'improved' means....and who pays for it!....

And in 15 or 20 years, when the average age of the voter is 65 or higher, what do you think they will vote for themselves?????


t.



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Author: mcain6925 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173301 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/19/2004 8:38 PM
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Supporters of Social Security support the thinking that Social Security has to be mandatory, to keep our elderly out of poverty. This, in turn, is based on the premise that people wouldn't do it voluntarily.
==========
Actually, I think history shows that the premise is not ill-founded.


Indeed. Although I might suggest that the historical fact is closer to "many people can't do it." IIRC, consider three facts -- (1) if you save in order to provide your own retirement completely, and intend to retire at age 65, you need to save about 15% of your gross income starting in your early 20s. You'll also need to earn on the near order of 10% per year on your savings. (2) 25% of the people working in the US earn less than $10/hour. $10/hour works out to about $20,000 per year. For a family of four, that's just a bit above the poverty line. (3) Many of those people don't get medical benefits either. These are people who are one major medical bill away from being wiped out. Imagine being 55 and having your life savings disappear to pay the hospital bills from an accident.

When Social Security was created (and the larger means-tested Old Age Assistance program which was later absorbed into SS), extreme poverty among the elderly was a serious problem. At that time, during the middle of the Great Depression, the US decided that as a country we were rich enough to do something about that problem. By any sane measure, the US is a much richer country now than it was then. Granted, SS has some implementation problems. But I'd hate to think that at the same time we have become so much richer than our grandparents and great-grandparents, we have also become so much less compassionate.

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Author: MizL Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173303 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/19/2004 10:06 PM
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b) reduce the tax burden on those 18-45, who likely won't see much from Social Security anyway, and have to work until 75 or 80, or later to collect SS, since they will likely live to 90-100 years of age??


Life changes. There are medical advances every day that we never dreamed of. I barely think that people will work until 75 or 80, but if they do, I think it'll be because there's a different social climate and their health will allow them to work. Personally, I don't want to live that long.

I didn't have a darn thing to retire on since I never had a 401(k) or an IRA. I'm grateful for the SS I'm getting - even though it's a few hundred less than my EXH gets (who worked at a nice salary for my Dad in order to get this money.) I never expected the government to take care of me and it doesn't. My income is much more than the SS. It helps.

When I don't want to ride in my car, much less put the top down on a sunny day, just let me slip away into my WDE (whole death experience.)

MizL





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Author: Davem105 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173304 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/19/2004 10:21 PM
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wHY DON'T WE ALL FACE IT; WE *DO* WANT THE GOVERNMENT TO TAKE CARE OF WHAT WE PERCEIVE AS OUR NEEDS, PRIMARILY THE NEED TO DRIVE OUR CARS.

pERHAPS WE SHOULD ALL BE CHARGED WITH BUILDING-MAINTAING OUR OWN ROADS.

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Author: telegraph 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: 173305 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/19/2004 10:35 PM
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When Social Security was created (and the larger means-tested Old Age Assistance program which was later absorbed into SS), extreme poverty among the elderly was a serious problem. At that time, during the middle of the Great Depression, the US decided that as a country we were rich enough to do something about that problem. By any sane measure, the US is a much richer country now than it was then. Granted, SS has some implementation problems. But I'd hate to think that at the same time we have become so much richer than our grandparents and great-grandparents, we have also become so much less compassionate.

When SS was created, the average life expectancy after retirement age was aboutr 18 months.

If you accept that as a premise today, we will take the average life expectancy, take off 18 months, and you agree to work to that age? For men, that is currently about 82-84, and for women about 88.

That OK with you??????

The main thing that has changed is instead of living to 65, you are now living another 20 years, and expect to be 'retired' living off the gov't for all of them.




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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: 173310 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/19/2004 11:44 PM
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telegraph:

<<<When Social Security was created (and the larger means-tested Old Age Assistance program which was later absorbed into SS), extreme poverty among the elderly was a serious problem. At that time, during the middle of the Great Depression, the US decided that as a country we were rich enough to do something about that problem. By any sane measure, the US is a much richer country now than it was then. Granted, SS has some implementation problems. But I'd hate to think that at the same time we have become so much richer than our grandparents and great-grandparents, we have also become so much less compassionate.>>>

"When SS was created, the average life expectancy after retirement age was about 18 months.

. . .

The main thing that has changed is instead of living to 65, you are now living another 20 years, and expect to be 'retired' living off the gov't for all of them."


I seriously doubt that circa 1935 the average life expectancy of a 65 year old was 18 months.

Do you have a citation to some data for support?

If not, I suspect that you are looking at life expectancy at birth in 1935, which is an entirely different issue, and which skews way young because of infant mortailty and childhood deaths.

Curiously, JAFO
(posted before reading entire thread)


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Author: MizL Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173334 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/20/2004 12:39 PM
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Good point here in using life expectancy after attainment of adulthood - which eliminates the "skews way young" view. This article goes on to say that we aren't, in fact, living much longer than we did back then. Maybe 5 years or so.


"If we look at life expectancy statistics from the 1930s we might naturally come to the conclusion that the Social Security program was designed in such a way that people would work for many years paying in taxes, but would not live long enough to collect benefits. Life expectancy at birth in 1930 was indeed only 58 for men and 62 for women. But life expectancy at birth in the early decades of the 20th century was low due to high infant mortality, and someone who died as a child would never have worked and paid into Social Security. A more appropriate measure is probably life expectancy after attainment of adulthood.

As Table 1 shows, the majority of Americans who made it to adulthood could expect to live to 65, and those who did live to 65 could look forward to collecting benefits for many years into the future. So we can observe that for men, for example, almost 54% of the them could expect to live to age 65 if they survived to age 21, and men who attained age 65 could expect to collect Social Security benefits for almost 13 years (and the numbers are even higher for women)."

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

MizL





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Author: telegraph 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: 173340 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/20/2004 1:40 PM
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MizL:
As Table 1 shows, the majority of Americans who made it to adulthood could expect to live to 65, and those who did live to 65 could look forward to collecting benefits for many years into the future. So we can observe that for men, for example, almost 54% of the them could expect to live to age 65 if they survived to age 21, and men who attained age 65 could expect to collect Social Security benefits for almost 13 years (and the numbers are even higher for women)."


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

The way I read this, of those alive at 21, the average life expectancy was 65, and that means that about the folks were dead before 65, yet probably paid in for 30 or 40 years into SS. Keep in mind that in 1930, only a tiny percentage of folks went to college, and many started working at age 16...both my parents did in 1932. So people contributed to SS for 40-45 years or MORE. And even those that died before 21 may have contributed some by working from age 16 on.

So about half the men were dead at 65, never collecting a dime in SS benefits...and I don't think you could even retire early at 62 in those days.... now, instead of 55% reaching 65 if alive at 21, it is over 70 %, a near 30% increase in people alive to collect SS. So, only 1 in 3 doesn't make it to collect SS.....

On top of that, folks live another 30% longer than before......

And with the baby boomer population bubble, we have a lot more folks expecting to retire, with a lot less in pensions and savings....

So more folks will live to collect SS, collect it for longer, and fewer pay in but die convenienlty for the system which pays them nothing, and someone else has to pay, or the system will collapse upon itself.

The only way to compensate for folks living longer is to reduce the benefit, if started early, even further, with the expectation that you will collect your money over a 30% longer period (thus reducing the amount accordingly) so you collect the same amount as if you had died 3 years earlier. Otherwise, the working folks will have to anty up 30% more, and do it for 50% more folks.......with nothing set aside for their retirement benefits when they retire.....hoping that someone will be working hard when they retire to pay their SS.

t.



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Author: mcain6925 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173341 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/20/2004 2:28 PM
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When SS was created, the average life expectancy after retirement age was aboutr 18 months... If you accept that as a premise today, we will take the average life expectancy, take off 18 months, and you agree to work to that age? For men, that is currently about 82-84, and for women about 88... That OK with you?

The first statement is simply false. Summary information from the government actuarial tables can be found at http://www.ssa.gov/history/lifeexpect.html

Men reaching the age of 65 in 1940 had an additional life expectancy of 12.7 years, women 14.7 years. Men reaching the age of 65 in 1990 had an additional life expectancy of 15.3 years, women 19.6 years. By your argument, the retirement age for men in 1990 should have been 67.6, for women 69.6. Over that 50 years, post-65 life expectancy for men increased at a rate of about 0.6 months per year, so extending that trend, the retirement age for men in 2005 should be about 68.5. Is this change in the retirement age, based on maintaining the average of 12.7 years after retirement, okay with me? Absolutely.

A much bigger potential problem from the perspective of financing is the fraction of men who reached 65. Of men born in 1875 (would turn 65 in 1940), and who reached the age of 21, only 53.9% then made it to age 65. The same statistic applied to 1990 is 72.3%. The change for women is similar but not quite so dramatic. So more people who make it to adulthood make it to retirement age and can claim benefits. By the same token, there are many more who make it to 64 and continue to make contributions, so the magnitude of the net effect is rather more difficult to estimate.

Increased participation by women in the workforce also makes a big difference. Between 1940 and now, women's participation increased enormously. Of course, that participation is one of the reasons that the US economy grew as much as it did over that period. Women live longer than men (medical studies have identified multiple ways that testosterone is hazardous to your health). The greater inclusion of women should also have resulted in an adjustment upwards.

As I said in my original post, there are problems in the implementation details of Social Security. Benefits adjustments have probably been too generous (the CPI for the population as a whole does not necessarily mirror inflation as experienced by those over age 65). There probably ought to be some means tests. Certainly someone drawing a $250,000 annual pension ought not to be eligible (but what about someone drawing a $50,000 annual pension? $25,000?). The retirement age should have been adjusted upwards (but the correct adjustment does not push it into the 80s).

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Author: MizL Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173344 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/20/2004 3:39 PM
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telegraph: On top of that, folks live another 30% longer than before


"the average life expectancy at age 65 (i.e., the number of years a person could be expected to receive unreduced Social Security retirement benefits) has only increased a modest 5 years (on average) since 1940." (From the same URL)

Five years longer life than in 1940 isn't going to break the system. We have to figure on deaths, too.

I was just recalling a friend who had 2 children and was divorced from their father who was doing time. He got released, but was murdered some months later. Believe me, this guy could barely hold down a job, and what he contributed to SS had to have been minimal. However, both of his daughters received SS payments until they were 18 and one until 21 because she went on to school.

My Dad owned his business, but when he retired, he and Mom both got SS although she never paid in. I'm sure there are thousands of situations like this one. I think these payments are what's depleting the system more than that people are living longer.

MizL



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Author: voyagergirl One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173345 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/20/2004 4:56 PM
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Hey I LOVE that idea! It's more than irritating to think they not only get huge pensions (somewhere near their actual salaries, I believe) but I also understand they get healthcare benefits as well. And you can bet they won't be shuffling off to the local county hospital for when they get sick!

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Author: voyagergirl One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173349 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/20/2004 5:38 PM
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"Over that 50 years, post-65 life expectancy for men increased at a rate of about 0.6 months per year, so extending that trend, the retirement age for men in 2005 should be about 68.5. Is this change in the retirement age, based on maintaining the average of 12.7 years after retirement, okay with me? Absolutely"


But that assumes these 60+ men and women can keep working until they retire, doesn't it?



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Author: warrl 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: 173351 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/20/2004 5:59 PM
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My best guess is in 3 years when the first of the boomers reaches 62 and becomes eligible for early benefits.

We Boomers don't seem as a group to have all that much a tendency to pass up expensive toys and save for retirement. I wonder just what percentage is going to be able to retire at 62?


Irrelevant.

Taking benefits beginning at age 62 will increase the beneficiary's after-tax income in that year, WHETHER OR NOT the person retires.

The "ME-HERE-NOW" crowd will grab it.

At the very least, people actually retiring SHOULD do so - IMHO of course. The longer they've been drawing benefits before the next SS political crisis, the less likely that their benefits will be cut in that crisis.

In my own case, I figure there's a good chance that there will be an SS political crisis sometime AFTER the day I can start drawing reduced benefits, but BEFORE the day I qualify for "full" benefits at age not-quite-67. By taking reduced benefits ASAP, I will draw about half the "full" benefit. But I figure that if I wait, I'll lose about half the "full" benefit to general reductions and newly-expanded means testing, so I'll get the same amount each month - starting about five years later.

That's a guessing game of course. There is no rational way to determine how future politicians will respond to an SS crisis, because there is nothing rational about either politicians or SS.

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Author: warrl 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: 173354 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/20/2004 6:14 PM
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All of these reports saying things like "SS is solvent until 2052" are so phony. It isn't solvent today!

LEGALLY, SS is in fact solvent today. Its income is more than sufficient to cover its outgo.

Future liabilities? There are none that are legally enforceable.

Yes, I am serious. LEGALLY, Congress could pass a law tomorrow and the President sign it on Tuesday, permanently cutting off all Social Security - and Medicare - benefits, for all current and future retirees, effective immediately. Oh, and continue to collect both taxes. The July 2004 Social Security checks wouldn't go out. And no court would overturn it.

The POLITICAL situation is somewhat different, of course. Such an action would result in a majority of the House of Representatives - including most of those who voted in favor of the measure. Senior citizens vote at a higher rate than other people.

If that happened, the new Congress would enact some replacement program which wouldn't be quite as bad (but would still be disastrous), plus a relief measure for those who were damaged by the brief moment of legislative fiscal sanity.

Politicians, of course, are smart enough to make sure it does NOT happen. So there won't be a sudden elimination of SS. There probably won't even be a big enough change to actually fix the system, and any (inadequate) change that DOES happen will be delayed until leaving the situation alone is politically infeasible.

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Author: HARVEYJACK Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173356 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/20/2004 6:22 PM
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First of all....

Social Security is a fail-safe safety net that is guaranteed by the will of the people. If the will is lost to care for the old, the infirm, and the innocent children of our society, then our government has lost its most basic Judeo-Christian foundation.

You see, Christianity,and yes...Judism is NOT all about making a stink about such issues as homosexuality, abortion Zionism and gun control...! Instead:

"HE has shown you, o man, what is pure and acceptable in HIS sight:
seek JUSTICE
love MERCY, and
walk HUMBILY before your God."

and:

"Pure and undefiled religion before God the father is this:
to visit the widows and orphans in their affliction, and
to keep oneself unspotted from the world."

and:

"By their fruits you shall know them."

It is EASY to tell a true servant of God from an imposter who wishes only to manipulate & profit from religion. Just look at the fruit of their lives. Do they seek justice and mercy for the weak, or just seek to take care of themselves and their own...?

Social Security is the God guided social will of the people to carry out just one of these Godly attributes, the actualization of HIS love of mercy towards the truely needy. Just one way of bringing the kingdom of God a little closer to this earth.

If you wish to improve it, then deny payment of benefits to those who do not truely NEED them.

HJK




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Author: tmeri Big gold star, 5000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 173365 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/20/2004 7:25 PM
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LEGALLY, SS is in fact solvent today. Its income is more than sufficient to cover its outgo.


No, it isn't. As I said before, I seem to be the only soul in the universe that has noticed that SS taxes are collected for two different purposes--SS benefits, and the general fund. Each year that we have a deficit in the regular budget, we spent more than we collected from all sources. Therefore, we are not collecting enough SS taxes today to cover all the things it is being spent on, and it is not solvent. Q.E.D.


One of my personal political goals is to get people to stop making this phony distinction between SS taxes and income taxes. After all, we don't say, "Corporate income taxes collected are spent on government subsidies, and individual income taxes collected are spent on defense..." No, we put it all in one pot, then spend that whole pot and borrow a little more.

Why should we treat SS taxes collected and spent any differently?

Until the people in this country understand the shell game going on, we don't have a prayer of fixing this problem. Even on this thread a number of people have indicated that they've been fooled into believing there is actually money somewhere in a trust fund!

Congress is treating us all like morons. We seem to be doing a good job of accepting the role. We should wise up and tell them to keep only one set of books. Until we have only a single set of books, recognition of the looming entitlement liability can continue to be put off with phony statements like "SS is solvent until the year 2052..."

Now is the time to wake up.

- tmeri

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Author: warrl 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: 173370 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/20/2004 8:25 PM
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One potential solution would be to eliminate the limit the $87,000 cap. I see that happening down the road anyways as none of the politicians really want to make any real changes and that is one of the move obvious moves to extend the solvency of social security. Besides eliminating the cap would only affect "the rich" so it would be politically popular I'd imagine. I'd have to see how much that brings in.

A restaurant-napkin calculation at best.

In 1998, the bottom 80% of the population topped out at $75K household income. And the bottom 95% topped out at $132K household income.

But that's ALL income. Including dividends, capital gains, interest, rent,... so using those numbers won't produce highly accurate results.

Let's say that the top 20% of households have average WAGE income of $132K. Here's another catch: quite a lot of those will be two-worker households with neither one earning more than $87K.

So let's narrow it down and say that 5% of wage-earners go over the limit, with an average wage in that 10% of $132K.
The Social Security revenue generated by eliminating the cap would then be the Social Security tax rate (combined 13%, I believe) times the excess of that average above the cap ($45K) times 1/20 the number of workers in the US population.

In 1996 there were 91 million workers in the US. For convenience, let's go with 100 million.

That leads to a rough estimate of the increase in SS revenues, of $58.5 billion.

SS revenues in 2003 were about $543 billion.

So, very roughly, eliminating the cap would increase revenues by a tenth.

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Author: warrl 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: 173372 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/20/2004 8:40 PM
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And finally, at the risk of sounding more liberal than I am, SS is a SOCIAL program and most would agree that providing for the elderly/less fortunate in society is both a legitimate function of government and the right thing to do.

Most is an organism with thousands of legs and no brain. (It's no coincidence that most was educated in a tax-funded, government-and-NEA-run school.)

The best concise statement I have ever seen of the legitimate function of government:

establish justice, insure domestic tranquility, provide for the common defense, promote the general welfare, and secure the blessings of liberty to ourselves and our posterity

Forcibly taking an innocent and productive person's rightful property away, without that person's current or prior consent, for the benefit of another party who is not productive and does not earn it, does NOT establish justice, insure domestic tranquility, provide a common defense, promote general welfare, or uphold liberty.


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Author: warrl 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: 173374 of 749403
Subject: Re: OT: On Fixing Social Security Date: 6/20/2004 9:14 PM
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But as another posted has noted, there is no actual trust fund, just a bunch of IOUs from the federal gov't.

I have never understood how anyone can seriously make this argument. The trust fund holds US Treasury bonds.


Let's take a good look at the current official arrangement and then at a hypothetical alternative where the trust fund were formally eliminated and its current contents (and future surplus income) confiscated.

Current official arrangement:

Right now, Social Security runs a surplus each year. This means that current Social Security tax collections are greater than current Social Security benefit payments. This surplus is handed over to the Treasury department, which in exchange hands back a stack of non-negotiable interest-bearing bonds payable at the convenience of the Treasury (meaning: if the Treasury decides that paying them would be inconvenient, the Treasury doesn't have to pay them).

In a few years (circa 2010-2011 according to the most recent estimate I've seen) that will no longer be the case. Social Security will be running a deficit. Each year, to make its benefit payments, it must not only spend ALL of its tax collections, but also cash in some of those interest-bearing bonds that are in the trust fund.

Assuming that the Treasury finds it convenient to pay them.

If the Treasury does in fact find it convenient to pay those bonds, where is the money going to come from?

It can come from current taxes. It can come from new government borrowing. It can come from inflating the money supply.

Or if the Treasury finds it inconvenient to pay the bonds, the Social Security Administration can cut benefits.

That's it: tax, borrow, inflate, or cut benefits. There is no fifth source for the money.

Some years later (2052 according to the most optimistic estimate I've ever seen, and assuming that the Treasury finds it convenient to pay off the bonds when the Social Security Administration needs them), the trust fund will be completely exhausted. Social Security won't even theoretically have the money to keep up its benefit payments.

What can be done?

Well, maybe the government will front some money. Which will come from taxes, borrowing, or inflating the money supply. Or maybe Social Security will have to cut the benefits it pays out.

Same four choicies: tax, borrow, inflate, or cut benefits. Still no fifth choice.

Now, let's suppose that on June 21 2004 Congress unanimously votes to formally eliminate the Social Security trust fund and cover any future shortfalls from general revenues. (Don't forget that if Congress passes a law restricting itself, Congress is free to pass another law removing that restriction. The Constitution does not allow an exception to that.)

Situation beginning tomorrow: Social Security tax collections are still greater than benefit payments. Social Security hands the surplus over to the Treasury, which says thank you.

Situation beginning in 2010 or so: Social Security starts running a deficit. It spends its tax receipts for the year on benefits, then turns to Congress for help as promised in 2004.

Congress has three ways it can provide money: current taxes, borrowing, or inflating the money supply. Or Congress can refuse to provide money, and force Social Security to cut benefits.

Situation beginning in 2052: Social Security continues to run a deficit. It still needs for Congress to help. Congress's options: tax, borrow, inflate, or cut benefits.

See, the trust fund - held by the US government and invested in non-negotiable US government securities - makes NO DIFFERENCE AT ALL. Whether you act as if it exists, or act as if it doesn't, beginning in 2010-2011 some portion of currently-forecast Social Security benefits must be paid for from one of these four sources:

(1) Current taxes, NOT including the (2004 version) Social Security tax levies

(2) Borrowing

(3) Inflating the money supply

(4) Cutting Social Security benefits.

Now if the trust fund were invested in negotiable US government securities, then - until it ran dry - Social Security could try to sell some of those securities on the open market. This probably wouldn't work very well with securities payable at the convenience of the payor, so they'd have to be real debt instruments. But then Social Security (an arm of the national government) would be competing for buyers against the Treasury (an arm of the national government), and in practice this would be almost precisely equivalent to new borrowing. Not quite precisely equivalent: it would probably cost more overall.

But if the trust fund were invested in securities issued by OTHER governments and bought on the open market by Social Security, then there would be another source of funds. Namely, those other governments. At least until the trust fund runs out.

(Actually, I am not enthusiastic about seeing the Social Security trust fund invested in other government securities - because as insolvent as the US government overall is, pretty much everyone else is even worse. Most of the industrialized world is looking at a pension crisis that makes Social Security look easy, and much sooner. Most of the non-industrialized world is in deeper debt as a percentage of GDP than the US and has a pathetically sick economy, and political stability is a big issue.)

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