The Motley Fool Discussion Boards

Previous Page

Investing/Strategies / Retirement Investing

URL:  https://boards.fool.com/goofyhoofy-quotand-you-have-just-turned-29025911.aspx

Subject:  Re: Means Testing SS Date:  1/12/2011  8:58 PM
Author:  JAFO31 Number:  68221 of 96381

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

Social Security has always been a welfare program.

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

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

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

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

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

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

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

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

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

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

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


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

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

Regards, JAFO
Copyright 1996-2019 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us