No. of Recommendations: 7
intercst posted a comment on SS benefits and the age to to start benefits. This post reminded me of a common theme - that people expect/wish to get back all the funds they pay into the system.

While not technically insurance, SS functions that way. People pay funds, they get benefits and a system (that has costs) administers the money.

I have never experienced people feeling they should get all their auto or home owners insurance premiums back. Certainly most people do not get their life insurance or health insurance premiums back.

What is different about social security?
Print the post Back To Top
No. of Recommendations: 2
What is different about social security?
Probably because the program is promoted in that way. It is "your account", "your benefits," and "your money."
Print the post Back To Top
No. of Recommendations: 3
What is different about social security?

Politics.
Print the post Back To Top
No. of Recommendations: 5
Certainly most people do not get their life insurance or health insurance premiums back.

What is different about social security?


You are not illustrating an apples to apples comparison.

The core of SS is not like a form of insurance. It is more like a pension plan. SSDI is a form of insurance.

If someone lost their pension plan or earned less from it than they paid in, you could bet people would not be overly excited about their pension program.

If you want to compare this to insurance, then:

1. Life insurance does provide a specified return to either the owner or the beneficiary. People (or their estate or their benes) do indeed get their life insurance back, and usually a lot more, if it is something other than term life - but even then some term life now comes with...

2. Guaranteed Return of Premium is a way to structure a policy to return every dollar you invested.

All else being equal, SS should provide a guarantee return of premium to the estate or the benes. It is extremely unfortunate that some people pay into SS all their lives and their spouse or their kids lose out on all that lost wealth because of the early death of the contributor.

If this money is REALLY being invested then there is absolutely no reason or justification for someone (or their estate) not at least getting back what they put in.

Note my position has nothing to do with private accounts or investing SS in the stock market or with ending SS, but if we are going to have it, we shouldn't have a system that isn't often regressive for those that need it the most.
Print the post Back To Top
No. of Recommendations: 25
While not technically insurance, SS functions that way.

Social Security isn't insurance. It doesn't function like insurance. It's not even close.

It is a welfare benefit for the elderly and disabled funded by a tax on earned income.

It is vital to remember that what you pay to social security is a TAX. It's not insurance. It's not a pension program. It's a tax. There is no account with money in it set aside for your personal benefits. The money is gone and no longer yours. It belongs to the government.

On the other side, unlike insurance, you have no legal guarantee of any benefits. Congress is free to change the benefits under the social security program at any time in any direction for any reason. If an insurance company tried to do that, you would likely be successful in your suit for breach of contract.

Hence, my previous one-word answer. When taxes and welfare benefits are involved, politics are involved.

Much of the attitude problems come from a misunderstanding of this very simple concept.

--Peter
Print the post Back To Top
No. of Recommendations: 0
Congress is free to change the benefits under the social security program at any time in any direction for any reason.

That Congress won't do this, even when it seems advisable, is probably the ONLY benefit I see from the members' drive to remain in Congress.

Bob
Print the post Back To Top
No. of Recommendations: 4
What kind of pension plan do you have?

I have a pension plan. This was a corporate pension plan, so I had a choice of how I wanted it to pay out. I opted to receive the payment monthly for life. If I die next week, the extra money stays in the plan. If I live to be 200 years old, they still have to pay. That's how this kind of pension works.

Remember the old pension plans? They may still exist, though they've largely been replaced by IRAs. The company contributes to the plan for you. If you leave before you vest, the money stays in the account for the benefit of other beneficiaries. I left a couple of companies and didn't get a dime back.
Print the post Back To Top
No. of Recommendations: 1
I have a pension plan. This was a corporate pension plan, so I had a choice of how I wanted it to pay out. I opted to receive the payment monthly for life. If I die next week, the extra money stays in the plan. If I live to be 200 years old, they still have to pay. That's how this kind of pension works.

And if you died before receiving any vested benefit, your spouse still retained all the income. Your spouse would not have to pick the higher of the two "pensions", effectively losing half of the money they and their employer contributed to SS.

And if you were already receiving it and you selected life or joint life with period certain or life or joint life with installment refund, you or your heirs would be assured to receive a specific dollar amount that cannot be lost due to your early demise.


Hawkwin
Who notes that it is generally a "bad thing" to have system where government receives a substantial financial benefit when people die before they collect any SS benefits - sort of like a predatory insurance company.
Print the post Back To Top
No. of Recommendations: 1
It is vital to remember that what you pay to social security is a TAX. It's not insurance. It's not a pension program. It's a tax. There is no account with money in it set aside for your personal benefits. The money is gone and no longer yours. It belongs to the government.

While that is most certainly true, the benefit one receives from SS is directly based on the amount of tax one paid into the program. It isn't like other taxes that go to the general fund where you have no connection at all between what you pay and, for example, how much you get back in the form food stamps.
Print the post Back To Top
No. of Recommendations: 5
Hawkwin: "All else being equal, SS should provide a guarantee return of premium to the estate or the benes. It is extremely unfortunate that some people pay into SS all their lives and their spouse or their kids lose out on all that lost wealth because of the early death of the contributor."

A surviving spouse can collect survivors benefits, and so can minor children, and the surviving spouse can still collect on the deceased's account.

https://www.ssa.gov/pubs/EN-05-10008.pdf

https://www.ssa.gov/planners/survivors/ifyou.html

It is not "lose out on all".

Regards, JAFO
Print the post Back To Top
No. of Recommendations: 0
Social Security isn't insurance. It doesn't function like insurance. It's not even close.

ABSOLUTELY!

Benefits promises far exceed dedicated tax revenues:
http://www.concordcoalition.org/social-security/social-secur...

http://www.concordcoalition.org/issues/entitlements/what-soc...
Myth: Each worker has his or her own Social Security retirement “account” at the Social Security Administration.
Fact: No—Social Security is not a personal investment program. It is a “pay-as-you-go” Federal entitlement program where current workers fund benefits for current retirees and disabled Americans.
Print the post Back To Top
No. of Recommendations: 8
GWPotter asks,

While not technically insurance, SS functions that way. People pay funds, they get benefits and a system (that has costs) administers the money.

</snip>


Actually SS is "social insurance" (i.e., insurance against being impoverished in old age.)

https://en.wikipedia.org/wiki/Social_insurance

A lot of people seem to be confused that SS is some kind of investment account like an IRA/401k and expect an investment return like the S&P 500. That confusion seems be sown by those who would privatize SS and turn it over to Wall Street where it would be sucked dry with fees.

Social Security a better deal than I thought?
http://www.retireearlyhomepage.com/betterdeal.html

</snip>


intercst
Print the post Back To Top
No. of Recommendations: 0
It is not "lose out on all".

Ya, don't pick my nit.

For couples that both contributed with adult children, you effectively lose all - either your own or your spouses.


Regardless, there is no assurance that a person or their family will get back at least the amount of their contributory tax (minus the disability allocation). I find that to problematic especially in the case of early death.
Print the post Back To Top
No. of Recommendations: 9
Benefits promises far exceed dedicated tax revenues:
http://www.concordcoalition.org/social-security/social-secur...


I suppose that depends on your definition of "far exceed". The chart at that link roughly matches information I've heard elsewhere, but it is drawn to fool those who aren't paying close attention. The bottom of the chart is not zero. The visual difference between the two lines looks far larger than it really is. Had the bottom been set to zero, the distance from the bottom of the chart to the income line would be 3 times the distance from the income line to the expense line. This is an exceedingly common way to manipulate charts to make them tell whatever story the creator of the chart wants it to tell.

Starting somewhere around 2050 receipts will be about 75% of promised benefits. Clearly, that situation can't exist indefinitely,** but it's also not a situation where all benefits stop completely. Worst case, retirees and the disabled will have to take a 25% cut in benefits across the board. Of course, that pain will not be spread evenly, and how it is spread is a question requiring serious political discussion and not the sound bites we typically get from the news media and politicians. And internet discussion boards.

--Peter


** I suppose it could continue indefinitely, but the shortfall would need to be made up through some combination of taxes (other than the current Social Security tax), borrowed money, and outright printing of money.
Print the post Back To Top
No. of Recommendations: 0
Social Security isn't insurance. It doesn't function like insurance. It's not even close. It is a welfare benefit for the elderly and disabled funded by a tax on earned income.

Nonsense - social security is insurance - and a very viable insurance.

Thus far, the social security trust fund received $2.7 Trillion (with a T) more than it has paid out.


-=Ajax=-
Print the post Back To Top
No. of Recommendations: 3
Nonsense - social security is insurance - and a very viable insurance.

OK. Show me your insurance contract.

Thus far, the social security trust fund received $2.7 Trillion (with a T) more than it has paid out.

True. But solvency today does not imply solvency tomorrow. My recollection of the numbers is that this surplus will start going down in the next decade. And it will be gone in 3 decades (give or take a couple of years). At which point your "insurance" policy will be adjusted in one way or another.

--Peter
Print the post Back To Top
No. of Recommendations: 0
True. But solvency today does not imply solvency tomorrow. My recollection of the numbers is that this surplus will start going down in the next decade. And it will be gone in 3 decades (give or take a couple of years). At which point your "insurance" policy will be adjusted in one way or another.

So what? Does your health care policy stay the same price every year? Do the benefits ever change?
Print the post Back To Top
No. of Recommendations: 40
t is extremely unfortunate that some people pay into SS all their lives and their spouse or their kids lose out on all that lost wealth because of the early death of the contributor.

And I think it's unfortunate that I pay lots of money for fire insurance on my house and will probably never get to collect. That's how it works. If everybody got to collect everything they ever put in to Social Security, including inheritors, then benefits would have to be lower, or the amounts put in would have to be higher.

As it is, I am unable to reconcile the complaints that "people don't get back what they put in", and yet apparently the system is disgorging so much money that "it is going broke." Either people (in aggregate) are getting more out than they put in, or the system isn't going broke. Which is it?

It is vital to remember that what you pay to social security is a TAX. It's not insurance. It's not a pension program. It's a tax. There is no account with money in it set aside for your personal benefits. The money is gone and no longer yours. It belongs to the government.

Your attitude seems to reek of politics, rather than evaluation of how the program functions. The money doesn't belong "to the government", it is being paid out to others who are elderly and (usually) no longer employable.

On the other side, unlike insurance, you have no legal guarantee of any benefits. Congress is free to change the benefits under the social security program at any time in any direction for any reason. If an insurance company tried to do that, you would likely be successful in your suit for breach of contract.

And yet insurance companies go broke all the time, and could potentially take every time you have ever sent them and give you nothing. About 10 such events happen every year. (Around 400 such companies have gone bankrupt in the past four decades.) Luckily, it is the [state] governments which backstop your "investments" in these things, even though there is no equivalent to the FDIC which mandates they do so.

If you work for 10 years, then never contribute another penny, you still are entitled to some social security benefit. By contrast, if you buy a term life product and then stop paying on it, you get nothing. Worse, if your company goes out of business and you decide at age 50 (pick a number) to restart, you will likely have to pay more, perhaps a lot more, and depending on your health you may not be able to get insurance at all.

PS: Congress can and does change laws all the time. They could - and have - for instance, change the taxation structure on investment products such as insurance payouts. That's what Congress is for, to keep updating laws and programs for the benefit of a stable society.

It is vital to remember that what you pay to social security is a TAX. It's not insurance.

It's as though the word "TAX" gives you convulsions. The Social Security system has worked pretty well for 80 years, far longer than most insurance companies have been in business, and unlike more than 1,000 of them which are no longer in business - it is still paying benefits to millions of seniors across the country. Perhaps a bit less spittle and a tad more reason would be in order?
Print the post Back To Top
No. of Recommendations: 8
Perhaps a bit less spittle and a tad more reason would be in order?

I'm just calling a spade a spade. And I thought I was using a fair amount of reason. The usual attitudes I hear (and apparently the thread initiator hears) are that "my payments into social security are (or should be) mine. I should be able to get them back and invest them as I choose because I could do a whole lot better than the government does."

The only logical response to that is that attitude comes from a complete misunderstanding of the social security system. It is not insurance. There is no binding contract between you and the government promising benefits in the future. The only guarantee is that earnings from your labors are generally subject to the tax currently. There is a handshake promise (which has been generally met, I would add) that you will qualify for benefits down the road based on your payments into the system. But those benefits are not binding and are subject to the whim of Congress. (And again I admit freely that Congress has generally taken that handshake promise seriously and is not using their power to adjust at will lightly.)

Granted, Social Security functions much like insurance - or more correctly an annuity. And it can be analyzed like such an annuity. But when you get down to the brass tacks, it is not insurance and the government is not an insurer. It's a [mostly] self funded welfare system for the elderly and disabled. Giving people an actual account and allowing them to direct its investment to any extent would be a significant change to the system and will almost certainly have multiple unintended (although likely foreseeable but ignored) consequences.

That last part is what gets me into spittle territory. Which, I suspect, is fairly close to your own opinions.

--Peter
Print the post Back To Top
No. of Recommendations: 2
I have a pension plan. This was a corporate pension plan, so I had a choice of how I wanted it to pay out.

Which may disappear or radically change with a bankruptcy or a merger.

There have even been cases where the corporation illegally raided the 401K accounts in order to get operating funds, then gone belly up.
Print the post Back To Top
No. of Recommendations: 0
Does your health care policy stay the same price every year? Do the benefits ever change?

So you have a multi-year health care insurance policy?

My mom has problems with her prescriptions every year-end because of the policy expiring and a new one beginning, even when it's with the same company.
Print the post Back To Top
No. of Recommendations: 48
All else being equal, SS should provide a guarantee return of premium to the estate or the benes. It is extremely unfortunate that some people pay into SS all their lives and their spouse or their kids lose out on all that lost wealth because of the early death of the contributor.

Well, one, a widow would get survivor benefits. Children under 18 would get survivor benefits under social security.

And second: while SS benefit individuals, certainly, it also benefits society, broadly. There are a lot of taxes I pay that I don't directly benefit from, but I do indirectly benefit because they improve society. I may never need SNAP benefits, but I help pay for them. I hope I never need to "get my money back," but the benefit is there if I do.

Social Security is not insurance for the individual, per se, but rather a tax that goes into a "social insurance program" to ensure that certain segments of people in our society benefit from it.
Print the post Back To Top
No. of Recommendations: 0
I have a pension plan. This was a corporate pension plan, so I had a choice of how I wanted it to pay out.
____________________________

Which may disappear or radically change with a bankruptcy or a merger.

There have even been cases where the corporation illegally raided the 401K accounts in order to get operating funds, then gone belly up.


No. When the company decided to move from pensions to 401ks, they took the vested amount for each employee and bought annuities. It's safe. It's not a lot of money, but it's nice to get something.
Print the post Back To Top
No. of Recommendations: 7
(Peter:)Social Security isn't insurance. It doesn't function like insurance. It's not even close.
It is a welfare benefit for the elderly and disabled funded by a tax on earned income.
It is vital to remember that what you pay to social security is a TAX. It's not insurance. It's not a pension program. It's a tax. There is no account with money in it set aside for your personal benefits. The money is gone and no longer yours. It belongs to the government.

=========================================
I would submit that it actually is a pension program. No, there's no account with a balance that belongs to me. But the same is true in any defined benefit plan.

The longer you work, and the more you make, the larger your benefits - same as any defined benefit plan. And if (OK, WHEN) I die, my benefit will go to my wife for her lifetime, because mine is bigger than hers would be on her own. Pretty similar to any other defined benefit plan.

The government is the administrator, and the contributions are held in a trust fund, whose balance may not be sufficient in the long run. Same as a lot of defined benefit plans. The contributions by the employers and employees are mandatory, and legally classified as a tax, so the IRS does the collecting. But hey, that's how the government does things.

And now that I've been retired for 5 months, it sure feels like a pension, too.

Bill
Print the post Back To Top
No. of Recommendations: 0
The government is the administrator, and the contributions are held in a trust fund, whose balance may not be sufficient in the long run.

If the US can't honor its debt, everyone will be in deep trouble. Every dollar bill out there is also an obligation of the US.
Print the post Back To Top
No. of Recommendations: 0
I think the important point is, in terms of planning when to start benefits etc, it's a fool's errand.

With a regular pension, once you are vested, you can look up the rules, know your benefits and expect them not to change.

Because SS is government benefit program, controlled by congress, they can change the rules on us anytime they want. As the did last year.

So good luck trying to figure out when to take benefits to max out your income from SS.
Print the post Back To Top
No. of Recommendations: 6
As it is, I am unable to reconcile the complaints that "people don't get back what they put in", and yet apparently the system is disgorging so much money that "it is going broke." Either people (in aggregate) are getting more out than they put in, or the system isn't going broke. Which is it?

You really didn't think through that one did you?

There are no individual accounts within SS. It is a paygo system where there are about 3 contributors (people that pay SS tax) for every beneficiary that collects SS benefits.

That is not enough to meet current benefit needs. If there was no Trust Fund surplus, SS would already be effectively broke.

Thankfully, that ratio was much higher in prior years so we did build up a surplus.

That declining trend will accelerate.

https://www.ssa.gov/oact/trsum/

The 2015 reports project that the DI, OASI, and HI Trust Funds will all be depleted within the next 20 years. The following table shows key dates for the respective trust funds as well as for the theoretical combined OASDI trust funds.

------------

SS is clearly going broke.

None of that has anything to do with whether or not someone gets back at least what they put in. A system can create winners and losers irregardless of whether or not it has a growing or falling balance.

I fully expect to profit from SS - but then I am an upper middle class married white male with a working spouse. As long as we both live to our average life expectancy, we will do just fine.

If I was a single black man with adult children, I would not be too excited about the possibility of me or my heirs getting back at least what I put in.
Print the post Back To Top
No. of Recommendations: 0
rharmelink: "There have even been cases where the corporation illegally raided the 401K accounts in order to get operating funds, then gone belly up."

Raided 401-k accounts?

Do you have a few examples of companies that raided 401-k accounts?

The most I recall reading is failure to deposit, but I do not recall ever hearing about illegal withdrawals by plan sponsors. Pension funds, OTOH, were often raided by changing estimates and formulas and allowed the company to call it "overfunded" and then remove the excess amount.

Regards, JAFO
Print the post Back To Top
No. of Recommendations: 1
Hawkwin: "I fully expect to profit from SS - but then I am an upper middle class married white male with a working spouse. As long as we both live to our average life expectancy, we will do just fine.

If I was a single black man with adult children, I would not be too excited about the possibility of me or my heirs getting back at least what I put in."


I am not co certain why so fully expect to profit?

Two career couples can get whacked pretty easily.

You wife, even she had never worked, would have been entitled to a spousal benefit equal to one-half of your benefit (while you were alive). Given that you said she worked, she paid into the system, too, but will she be collecting more on her own account? If yes, then all that she paid in SS taxes is paying only for the incremental amount above what she would have collected in spousal benefits. And if she earned more, than it would work similarly in the other direction with respect to you as the lower earning spouse.

And once the higher earning spouse dies, the surviving spouses in entitled to a spousal benefit equal to the amount the deceased spouse was previously collecting. Thus, once the higher earning spouses dies, anything the surviving spouse paid into the SS system as taxes has zero marginal benefit to her (or him) because it does not affect the amount that the surviving spouse would collect.


And higher income earners do, too.

From some old notes:

A. 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 [2001], according to the Social Security Administration.

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

B. 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 (where x and y are indexed yearly).

Thus, the benefit formula has two sharp inflection points.

You may have run all the numbers, but if not, then I am not sure that you expectation to fully profit is as certain as you assert.

Regards, JAFO
Print the post Back To Top
No. of Recommendations: 1
And higher income earners do, too.

From some old notes:

A. 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 [2001], according to the Social Security Administration.




While it does look like high income earners are getting whacked, it certainly doesn't feel that way. The lowest earners probably need that 80% of their pre-retirement savings because they either didn't save anything for retirement or didn't have any excess funds to invest. While 27 percent of pre-retirement earnings look low for those at the maximum taxable wage base, it may represent a good portion of their post-retirement income needs. Personally, SS will cover most of my income needs with only small withdrawals from my retirement accounts. I'll be living far below my pre-retirement income.

PSU
Print the post Back To Top
No. of Recommendations: 0
I am not co certain why so fully expect to profit?<?i>

To quote myself:

As long as we both live to our average life expectancy, we will do just fine.

If either of us die early, then clearly that is not the case.

You may have run all the numbers,

I have; hence the qualifier in my previous comment.

But let's say I don't. Let's say that I end up being wrong - then my original point, that SS creates winners a losers is even more enforced - especially if more and more people end up with a negative rate of return from SS.


I don't even mind if no one profited at all from SS but to have a "security" system that creates a negative wealth effect often due to the early death of a spouse or a parent is a bad system. No one would voluntarily buy an insurance policy that worked that way.
Print the post Back To Top
No. of Recommendations: 1
Ah crapping non-edit and formating mess...

I am not co certain why so fully expect to profit?

To quote myself:

As long as we both live to our average life expectancy, we will do just fine.

If either of us die early, then clearly that is not the case.

You may have run all the numbers,

I have; hence the qualifier in my previous comment.

But let's say I don't. Let's say that I end up being wrong - then my original point, that SS creates winners a losers is even more enforced - especially if more and more people end up with a negative rate of return from SS.


I don't even mind if no one profited at all from SS but to have a "security" system that creates a negative wealth effect often due to the early death of a spouse or a parent is a bad system. No one would voluntarily buy an insurance policy that worked that way.
Print the post Back To Top
No. of Recommendations: 0
Do you have a few examples of companies that raided 401-k accounts?

The one that stands out in my memory was when there was an article on Pannekoeken Huis bankruptcy filing in the late 1990's, in Minnesota. It had a lot of write-up on how employees were getting hurt, because of the lost 401k balances and back wages some employees were owed.

I'm sure it had to do with how their 401k accounts were set up. Because I remember thinking at the time how strange it was, and that the same couldn't have occurred with my company's 401k.
Print the post Back To Top
No. of Recommendations: 1
PSUEngineer: "While it does look like high income earners are getting whacked, it certainly doesn't feel that way."

I suspect that varies from person to person and possibly even dramatically.

"The lowest earners probably need that 80% of their pre-retirement savings because they either didn't save anything for retirement or didn't have any excess funds to invest."

Agreed. And I write as I did to challenge Hawkin's belief that he "fully expect to profit from SS" not necessarily to suggest broad changes to the SS system.


"While 27 percent of pre-retirement earnings look low for those at the maximum taxable wage base, it may represent a good portion of their post-retirement income needs."

That really depends upon living expenses more than anything else. $118.5k is the maximum taxable wage base; 27% is almost 32k (and from other notes, $31,668 is the annual maximum amount for a newly retired, FRA, person.

"Personally, SS will cover most of my income needs with only small withdrawals from my retirement accounts. I'll be living far below my pre-retirement income."

70% below (IOW, on 30%) your pre-retirement income?

I am estimating more like 50%, and even then it will likely requiring moving to a lower real estate tax area (with lower land prices) and finding ways to address insurance costs.

Regards, JAFO
Print the post Back To Top
No. of Recommendations: 2
Here ya go. Not my specific numbers (those are at home someplace) but numbers from a study performed by SSA.gov.

http://www.reuters.com/article/us-column-miller-socialsecuri...

--Younger workers will get less. Today's young people will see lower rates of return, because they will have paid the highest payroll tax rates of all the age groups compared in the SSA analysis.

--Couples do better. Marital status is a key factor affecting Social Security returns. In every age group, the best returns went to married couples where one spouse works. That is because Social Security's design includes valuable spousal features that pay benefits to nonworking spouses and surviving widows. Spouses are entitled to receive the greater of his/her own benefit or half of their spouse's benefit. And surviving widows can step up to 100 percent of a deceased spouse's benefit.

A single-earning couple with medium wages, born in 1943, will see a 4.59 rate of annual return, while a single female born the same year - also with medium wages - can expect a 2.49 percent return. (Spousal benefits are also available in cases where a lower-earning spouse had some earnings but so much less that their worker benefit is less than half.)

--Longevity matters. All pension and annuity systems are structured around mortality credits - that is, they use assets of those who die young to fund the benefits of those who live to a very advanced age. A projection by Favreault of Social Security data found that 82 percent of individuals who live to age 85 get back more in benefits than then pay in taxes; about 52 percent of those who die between 75 and 84 come out ahead. Meanwhile, just 21 percent of those who die between 62 and 69 get back more than they put in to the system.

------------

An interesting and humorous tangent about married couples with one working spouse. Johnny Carson was married four times. Because of the laws regarding divorced spouses and SS, Three of his wives, both his current and two previous, were eligible for half of his SS benefit, of course without any reduction for him. One missed out because she was married to him about 9 months less than the required 10 years.


https://www.mutualfundstore.com/investing-insight/re-marriag...
Print the post Back To Top
No. of Recommendations: 0
Hawkwin: "I don't even mind if no one profited at all from SS"

I doubt that. The ones who profit most from SS are the SAH spouses of high (or higher) wage earners.

If you are interested, run the math for a two couples, one where both parents work and make 55K and the other where one works for 110k and one stay homes and runs the household.

Regards, JAFO
Print the post Back To Top
No. of Recommendations: 0
70% below (IOW, on 30%) your pre-retirement income?

I have not done a retirement budget yet but quick crayon on napkin estimates would put me somewhere in the 25-30% range.

PSU
Print the post Back To Top
No. of Recommendations: 0
rharmelink:

<<<Do you have a few examples of companies that raided 401-k accounts?>>>

"The one that stands out in my memory was when there was an article on Pannekoeken Huis bankruptcy filing in the late 1990's, in Minnesota. It had a lot of write-up on how employees were getting hurt, because of the lost 401k balances and back wages some employees were owed."

Do you have any articles? When I looked, I found only a handful of articles, and mention of back wages, but nothing about raided 401-k accounts.

Regards, JAFO
Print the post Back To Top
No. of Recommendations: 1
don't forget you will pay taxes on the social security that you receive from day one if your income is over a certain level. which it a few years will included everyone. not adjusted for inflation.
Print the post Back To Top
No. of Recommendations: 1
Thank you for the link.

From it - "They found that every age group received a positive return. Among current workers and retirees, the rates of annual return varied by about two percentage points - from a high of 6.52 percent (for single-earning couples born in 1920) to 4.52 percent (for their counterparts born in 1985).

. . .

That is because Social Security's design includes valuable spousal features that pay benefits to nonworking spouses and surviving widows.

. . .

Lower-income workers come out ahead. Low-income workers enjoy higher rates of return by design, because Social Security's benefit formula is weighted toward lower-earning beneficiaries and their payroll tax contributions will be relatively lower."

"A projection by Favreault of Social Security data found that 82 percent of individuals who live to age 85 get back more in benefits than then pay in taxes; about 52 percent of those who die between 75 and 84 come out ahead. Meanwhile, just 21 percent of those who die between 62 and 69 get back more than they put in to the system."

So even if one lives to 85, there is still an 18% chance (slightly worse than 1 in 5) that one would get back less than the taxes paid.

And I suspect, that those making 85 and in the 18% would be dual career, high income persons.

It was not clear to me how the employer's portion of the taxes were counted in the analysis in article you linked. I am never (or rarely) willing to assume that those employer paid taxes would necessarily and automatically be paid to workers as earned income.

And if the winners under the current system are SAH spouses and lower income workers, to re-design the system to assure that everyone got back at least as much paid (as you seemed to argue earlier), without tilting the system even more, would mean "taking" from those who currently benefit most.

Regards, JAFO
Print the post Back To Top
No. of Recommendations: 0
PSUEngineer:

<<<70% below (IOW, on 30%) your pre-retirement income?>>>

"I have not done a retirement budget yet but quick crayon on napkin estimates would put me somewhere in the 25-30% range."

That is fantastic; more power to you. I do not see how to get mine that low while married to my spouse. (;>)

Regards, JAFO
Print the post Back To Top
No. of Recommendations: 1
I doubt that.

???

You doubt what, that I would not mind if no one profited? I thought I had made myself quite clear that I don't like the idea of people losing money via SS. Not once did I complain about a subpar rate of return.

In other words, my complaint is not about getting 2% when I could be getting 6%. It is about those who get -4% (or far less) vs getting at least 0%. If everyone and their families received at least breakeven and no one got anything different, that would be an improvement IMO. I realize that such would result in less income for many but at least this way, no family risks losing any wealth to SS.
Print the post Back To Top
No. of Recommendations: 0
Hawkwin:

<<<I doubt that.>>>

"???

You doubt what, that I would not mind if no one profited? I thought I had made myself quite clear that I don't like the idea of people losing money via SS. Not once did I complain about a subpar rate of return.

In other words, my complaint is not about getting 2% when I could be getting 6%. It is about those who get -4% (or far less) vs getting at least 0%. If everyone and their families received at least breakeven and no one got anything different, that would be an improvement IMO.
[JAFO - I agree that would be an improvement, but that is an impossible dream - to give more to some and without changing what anyone else received] "I realize that such would result in less income for many but at least this way, no family risks losing any wealth to SS."

I do not doubt that in the abstract that you would not mind if no one profited.

I doubt that in reality you would readily accept the lesser benefits to those would are currently benefitting the most from the system - non-working spouses and the low income - and in order to accomplish your stated goal without tilting the system even more against the high income.

Only you know your heart, and perhaps I am wrong. I know you only from what you post, and not IRL.

Regards, JAFO
Print the post Back To Top
No. of Recommendations: 0
It is vital to remember that what you pay to social security is a TAX. It's not insurance. It's not a pension program. It's a tax. There is no account with money in it set aside for your personal benefits. The money is gone and no longer yours. It belongs to the government.

People say that a lot, but it doesn't make any sense as a criticism. Social Security is a government run insurance program that's essentially identical to a private inflation adjusted annuity. Don't believe me? Let's look at how regular insurance works.

Let's say you buy an annuity, or homeowner's or any other type of insurance. After you pay the premium it is gone and no longer yours. There is no special account set aside for your personal insurance needs. It all goes into a giant pot of money, and except for the mandated reserves, it goes out and gets invested somewhere. The insurance company does not have an envelope labeled "ptheland" stuffed full of dollar bills that you paid them.

The only meaningful differences between how Social Security works is that SS is in fact paid for by taxes, and the government has broader flexibility to change benefits or increase or decrease taxes.
Print the post Back To Top
No. of Recommendations: 1
From it - "They found that every age group received a positive return. Among current workers and retirees, the rates of annual return varied by about two percentage points - from a high of 6.52 percent (for single-earning couples born in 1920) to 4.52 percent (for their counterparts born in 1985).

At the risk of being redundant, I will state once again that I specifically referred to those that die early.

Those that die early often DO NOT receive a positive rate of return. The article I quoted and bolded stated exactly that.

Here, I will quote myself again from my first reply:

All else being equal, SS should provide a guarantee return of premium to the estate or the benes. It is extremely unfortunate that some people pay into SS all their lives and their spouse or their kids lose out on all that lost wealth because of the early death of the contributor.

------------

would mean "taking" from those who currently benefit most.

Agreed, and I am generally OK with that. Such would certainly provide more security to those families that actually need it. If we are going to have a socialized system, then we shouldn't have one that punishes families due to the early death of a contributor.

I am perfectly OK with less or even no winners. I really don't care for a system that creates financial losers all because someone died too young.
Print the post Back To Top
No. of Recommendations: 0
Do you have any articles? When I looked, I found only a handful of articles, and mention of back wages, but nothing about raided 401-k accounts.

I think it was a follow-up to this article (I'm not a subscriber, so I can't see the whole article):

https://www.highbeam.com/doc/1G1-62605886.html

However, I did see this much:

Employees of the nine Twin Cities Pannekoeken Huis restaurants that closed late last year are having trouble getting information about their 401(k) retirement plans because of the parent company's bankruptcy liquidation.

U.S. Rep. Bruce Vento, D-Minn., is looking into the matter after a constituent complained that Massachusetts Mutual said it would not allow transfer of the individual's account until a full accounting of contributions is received from Sytjes Pannekoeken Huis Restaurants Inc.

Vento said Massachusetts Mutual received lump-sum 401(k) contributions from the company but does not know how the contributions should be allocated among employees. Vento said there also is a question whether all the money was contributed as required.

But Rob Kugler, the Pannekoeken attorney with Robins Kaplan Miller & Ciresi, said he feels confident that the company was current on its contributions to Massachusetts Mutual.


I'm itching my memory, but as I recall, it ended up that they hadn't made the contributions to the 401k accounts for a number of months, and whether the lump-sum contribution from the bankruptcy proceedings was sufficient?
Print the post Back To Top
No. of Recommendations: 1
Social Security isn't insurance. It doesn't function like insurance. It's not even close. It is a welfare benefit for the elderly and disabled funded by a tax on earned income.

Nonsense - social security is insurance - and a very viable insurance. Thus far, the social security trust fund received $2.7 Trillion (with a T) more than it has paid out.

True. But solvency today does not imply solvency tomorrow. My recollection of the numbers is that this surplus will start going down in the next decade. And it will be gone in 3 decades (give or take a couple of years).

Well, solvency today to the tune of a $2.7 Trillion surplus implies, very strongly I submit, solvency tomorrow. And most important it is inappropriate to call social security a welfare benefit.


-=Ajax=-
Print the post Back To Top
No. of Recommendations: 3
As it is, I am unable to reconcile the complaints that "people don't get back what they put in", and yet apparently the system is disgorging so much money that "it is going broke." Either people (in aggregate) are getting more out than they put in, or the system isn't going broke. Which is it?

It's quite simple, really. Because the money is never 'invested', there is never a 'return on investment', so people get around a 1% annual return, because they technically get more back than they put it, but it's still WAY lower than they could have obtained if the money hadn't been TAKEN from them. A 50/50 stock/bond index, or even a 30/30/40 stock/bond/cash investment would do FAR better than SS. But SS is just a transfer system, or a Ponzi scheme, depending on one's definitions.

But given the recent spike in SSDI abuse, it's also actually going broke. It's also interesting that black men do worst, and actually have a NEGATIVE return from SS because of mortality.

The Social Security system has worked pretty well for 80 years, far longer than most insurance companies have been in business, and unlike more than 1,000 of them which are no longer in business - it is still paying benefits to millions of seniors across the country.

Your reasoning is akin to falling off a building and saying how wonderful things are as you're passing the 10th floor.
Print the post Back To Top
No. of Recommendations: 0
Only you know your heart, and perhaps I am wrong. I know you only from what you post, and not IRL.

Then perhaps get better acquainted with my posts. Clearly you have ignored every single one in this thread.

Here is one from roughly 10 years ago (took me a bit of work to find one closely related): [and yes I know that the referenced Heritage study is disputed but this goes more to my posting history and position than it does any specific study.]

11/8/2006
http://boards.fool.com/it-is-not-a-lie-your-own-article-prov...

snip:

What the article does state is that because blacks die at a much higher rate, that their kids get survivor benefits where as they otherwise would get nothing.

It must be great be a fatherless black child in America to know that you only had to lose a parent to "tremendously" benefit from social security!

-------------

Again two years later:
10/15/2008
http://boards.fool.com/my-opinion-has-not-changed-either-put...

snip:

The system needs some ownership. Many poor can't afford to save more money than what they are FORCED to put into SS. Give them ownership of that money so when they die, any remaining balance is given to their family - help break the cycle of generational poverty by giving people ownership of their retirement income.

-----------

My opinion of SS is multi-faceted but I have long held that if we are going to have a socialized safety net, then it should not have such a large gaping hole as it pertains to the early demise of contributors.
Print the post Back To Top
No. of Recommendations: 1
Hawkwin: "At the risk of being redundant, I will state once again that I specifically referred to those that die early.

Those that die early often DO NOT receive a positive rate of return. The article I quoted and bolded stated exactly that."


I am ok, but we are back where we started, and as I noted then, not all benefits are lost.

I am also concerned because this feels like a "nose under the the tent stategy" to abolish or significantly revise or abolish SS.

From the article you cited, and also quoted previously in this thread.

"A projection by Favreault of Social Security data found that 82 percent of individuals who live to age 85 get back more in benefits than then pay in taxes; about 52 percent of those who die between 75 and 84 come out ahead. Meanwhile, just 21 percent of those who die between 62 and 69 get back more than they put in to the system.

Those that die young are not the only ones who collect less than the amount paid in taxes - - - 79% who die b/w 62 (generally speaking, the earliest collection age)- 69 receive less, 48% of those between 75-84 receive less [Note - curious that age 70-74 bracket was omitted], and even 18% of those who live to age 85 receive less.

I have no idea what your suggested change would mean for those who would receive less.

Given your stated position about receiving less that paid (i.e., lack of a guaranteed return of premium), why would I assume that you would not turn the same argument in favor of people who live longer and still receive less than the amount paid in taxes (however the "amount paid in taxes" as calculated by the author of the article, which as I noted previously, was not disclosed).

The ultimate insistence upon a guaranteed return of premium will almost inalterably change SS in significant ways, and likely force it into a "defined contribution" plan and not a "defined benefit" plan, just the way that 401-ks have largely replaced old-school pensions, which were typically defined benefit plans. And I believe that you are too smart not to understand this, too.

Regards, JAFO
Print the post Back To Top
No. of Recommendations: 0
rharmelink:

<<<Do you have any articles? When I looked, I found only a handful of articles, and mention of back wages, but nothing about raided 401-k accounts.>>>

"I think it was a follow-up to this article (I'm not a subscriber, so I can't see the whole article):

https://www.highbeam.com/doc/1G1-62605886.html"


Thank you.

"However, I did see this much:

Employees of the nine Twin Cities Pannekoeken Huis restaurants that closed late last year are having trouble getting information about their 401(k) retirement plans because of the parent company's bankruptcy liquidation.

U.S. Rep. Bruce Vento, D-Minn., is looking into the matter after a constituent complained that Massachusetts Mutual said it would not allow transfer of the individual's account until a full accounting of contributions is received from Sytjes Pannekoeken Huis Restaurants Inc.

Vento said Massachusetts Mutual received lump-sum 401(k) contributions from the company but does not know how the contributions should be allocated among employees. Vento said there also is a question whether all the money was contributed as required.

But Rob Kugler, the Pannekoeken attorney with Robins Kaplan Miller & Ciresi, said he feels confident that the company was current on its contributions to Massachusetts Mutual."

Which is what I first wrote, failure to deposit, as opposed to a raid/withdrawal of funds previously deposited in the 401-k.

JAFO previously: <<<The most I recall reading is failure to deposit, but I do not recall ever hearing about illegal withdrawals by plan sponsors. Pension funds, OTOH, were often raided by changing estimates and formulas and allowed the company to call it "overfunded" and then remove the excess amount.>>>

I am not suggesting that, if true, the employees did not take it in the shorts, or that it is (or was) right. This, however, is an issue that Congress can address with legislation mandating how timely deposits must be made by the employer - e.g., within x days after the end of the pay period or when checks/deposit receipts were issued by the employer, or at least monthly. And I have no idea what the code required in the 190s or requires now in this regard.

Regards, JAFO
Print the post Back To Top
No. of Recommendations: 1
Your reasoning is akin to falling off a building and saying how wonderful things are as you're passing the 10th floor.

I just don't understand the panic-inducing metaphors people use to describe Social Security. I understand the metaphors, but I don't understand the panic.

The last time they raised payroll taxes back in 1990 (IIRC), they estimated SS would be able to pay promised benefits until 2040. Today, that number is looking more like 2036. That means a financial prediction for 50 years in the future might be off by four whole years! Time to freak out!

And that means, gulp, payroll might have to be raised, or benefits modified or some combination, four years sooner than people thought back in 1990! I mean, we only have about ten years before something needs to be changed. This is exactly like falling off a building. Definitely time to freak out! Time to turn the whole thing over to Wall Street, because they did such a great job with the housing thing.
Print the post Back To Top
No. of Recommendations: 3
And that means, gulp, payroll might have to be raised, or benefits modified or some combination, four years sooner than people thought back in 1990!

What a surprise - when it turns out that a social program costs more and delivers less than what was projected, the answer is... take more and give back less!

The SS take is already over 12% of income. That is an insane amount, but by all means, let's make it more insane, because that'll make it better, at least until you want to raise the tax some more.
Print the post Back To Top
No. of Recommendations: 4
AjaxofTelamon:

<<<Social Security isn't insurance. It doesn't function like insurance. It's not even close. It is a welfare benefit for the elderly and disabled funded by a tax on earned income.>>>

"Nonsense - social security is insurance - and a very viable insurance. Thus far, the social security trust fund received $2.7 Trillion (with a T) more than it has paid out.

And most important it is inappropriate to call social security a welfare benefit."


I disagree, and concur with peter (IIRC).

Social security is a welfare benefit. And it is a tax.

The USSC has been very clear, since 1960 and Flemming v. Nestor (Flemming V. Nestor 363 U.S. 603 (1960)) that SS is not an "accrued [vested] property right". "We think that the District Court erred in holding that . . . deprived appellee of an 'accrued property right.'"

"The program is financed through a payroll tax levied on employees in covered employment, and on their employers."

and Helvering v. Davis, 301 U.S. 619 (1937) held SS Constitutional long before then.

It is a tax and it is a welfare benefit because it is transfer from those currently working to those currently collecting.

Regards, JAFO
Print the post Back To Top
No. of Recommendations: 1
That is an insane amount, but by all means, let's make it more insane, because that'll make it better, at least until you want to raise the tax some more.

Raising the limit on what income is taxed would not raise the tax for anyone below that limit.
Print the post Back To Top
No. of Recommendations: 0
I am ok, but we are back where we started, and as I noted then, not all benefits are lost.

ya and you are picking a nit.

If an adult single male age 60 dies and has no minor children but perhaps a couple of adult children, all that contributed wealth is lost. And yes, I know about the $255 lump sum death benefit.

I am also concerned because this feels like a "nose under the the tent stategy" to abolish or significantly revise or abolish SS.

Take your slippery slope fallacy someplace else.

Those that die young are not the only ones who collect less than the amount paid in taxes

So now you are supporting my position that SS has a negative rate of return for many people? Welcome aboard!

I have no idea what your suggested change would mean for those who would receive less.

Nor I but I would love to see it studied. Specifically as it pertains to early death and those with immediate family members. My assumption is that it would not be a huge number and I would think it would be easy for SSA to determine what that number is annual since they would have to know which people have died and are no longer eligible for full retirement benefits.

The ultimate insistence upon a guaranteed return of premium will almost inalterably change SS in significant ways, and likely force it into a "defined contribution" plan and not a "defined benefit" plan

Right now it is a mix of both defined contribution and defined benefit with neither of the benefits commonly associated with either.
Print the post Back To Top
No. of Recommendations: 0
Hawkwin:

<<<Only you know your heart, and perhaps I am wrong. I know you only from what you post, and not IRL.>>>

"Then perhaps get better acquainted with my posts. Clearly you have ignored every single one in this thread."

I read a lot of your posts, and while I do not always (or perhaps even often) agree with you, I generally respect you and the positions you stake out.

"Here is one from roughly 10 years ago (took me a bit of work to find one closely related): [and yes I know that the referenced Heritage study is disputed but this goes more to my posting history and position than it does any specific study.]

11/8/2006
http://boards.fool.com/it-is-not-a-lie-your-own-article-prov......

snip:

What the article does state is that because blacks die at a much higher rate, that their kids get survivor benefits where as they otherwise would get nothing.

It must be great be a fatherless black child in America to know that you only had to lose a parent to "tremendously" benefit from social security!"


-------------

And that post was made in a thread maligning the failure of GWB's effort to privatize SS.

I also posted in that thread (though not in response to you) -

"Years ago, this is what I wrote about SS reform:

"I am especially concerned about (1) the transition period, (2) whether participation would be mandatory or optional, (3) the employers contribution, and (4) the tension between all-private PSA and guaranty of government minimum standard."


"Again two years later:
10/15/2008
http://boards.fool.com/my-opinion-has-not-changed-either-put......

snip:

The system needs some ownership. Many poor can't afford to save more money than what they are FORCED to put into SS. Give them ownership of that money so when they die, any remaining balance is given to their family - help break the cycle of generational poverty by giving people ownership of their retirement income.

-----------

My opinion of SS is multi-faceted but I have long held that if we are going to have a socialized safety net, then it should not have such a large gaping hole as it pertains to the early demise of contributors. "


Several questions, then. And IIRC correctly, you are an insurance guy (or generally knowledgeable about products and pricing).

Are there any insurance products (as opposed to annuities) sold by insurance companies in the marketplace that guarantee a return of all premiums?

I wish I had that are some term policies I bought when I was younger.

With respect to annuities, as I understand it, if one elects a return of premiums, then other payouts are less for the same dollars invested? In other words, as I understand it, if standardizing two annuities for the same payout, the one that also included return of premium would cost more?

And then the nitty gritty questions.

Given that this is only discussing SS tax, I assume that the 1.45% currently paid for Medicare is not under discussion and not part of the return on premium concept you are discussing. Correct? Or not?

Are you counting the employer paid portion in calculating the return of premium? If yes, why? It is a cost of doing business to the employer but unless you have good reasons that I can understand, I am not willing to assume that employers would necessarily pay it to employees as wages. I am not aware of any data that suggests or supports the proposition that most employers pay more because they incur savings in the costs of production. In fact, the limited data I do see suggests that much more of the savings go to capital than labor (other than perhaps to the C-suite labor).

How will you price the survivor's benefits - spouse, ex-spouse and minor children that will be paid in determining whether a premium refund is due?

Will you continue to force such payments as tax collections? If not, how will you deal with the present consumption, save for future consumption, delayed gratification issues and Maslow's hierarchy of needs?

Regards, JAFO
Print the post Back To Top
No. of Recommendations: 2
The post formatting is really starting to bug me.

PSU
Print the post Back To Top
No. of Recommendations: 1
Hawkwin:

<<<I am also concerned because this feels like a "nose under the tent strategy" to abolish or significantly revise or abolish SS."

"Take your slippery slope fallacy someplace else."

"The Slippery Slope is a fallacy in which a person asserts that some event must inevitably follow from another without any argument for the inevitability of the event in question."
https://www.google.com/?gws_rd=ssl#q=slippery+slope

In this thread you previously wrote - "None of that has anything to do with whether or not someone gets back at least what they put in."

and

"The system needs some ownership. Many poor can't afford to save more money than what they are FORCED to put into SS. Give them ownership of that money so when they die, any remaining balance is given to their family - help break the cycle of generational poverty by giving people ownership of their retirement income."

It seems pretty clear to me that you firmly believe in a "refund of premium" concept with respect to SS taxes.

But while you defaulted a slippery slope reference above, you totally ignored my quote from the article you cited that shows there are plenty of other people (i.e., other than those who die young) who also fail to collect as much as the amount paid in taxes, which I have repeated below:

"A projection by Favreault of Social Security data found that 82 percent of individuals who live to age 85 get back more in benefits than then pay in taxes; about 52 percent of those who die between 75 and 84 come out ahead. Meanwhile, just 21 percent of those who die between 62 and 69 get back more than they put in to the system.

Those that die young are not the only ones who collect less than the amount paid in taxes - - - 79% who die b/w 62 (generally speaking, the earliest collection age)- 69 receive less, 48% of those between 75-84 receive less [Note - curious that age 70-74 bracket was omitted], and even 18% of those who live to age 85 receive less.

I took you at your word that you wanted to assure that everyone "gets back at least what they put in".

Why is it a slippery slope to assume that you mean what you wrote and would apply in generally?

Regards, JAFO
Print the post Back To Top
No. of Recommendations: 1
Apologies. I should have checked formatting before posting. Re-posted below:


Hawkwin:

<<<Only you know your heart, and perhaps I am wrong. I know you only from what you post, and not IRL.>>>

""Then perhaps get better acquainted with my posts. Clearly you have ignored every single one in this thread."

I read a lot of your posts, and while I do not always (or perhaps even often) agree with you, I generally respect you and the positions you stake out.

""Here is one from roughly 10 years ago (took me a bit of work to find one closely related): [and yes I know that the referenced Heritage study is disputed but this goes more to my posting history and position than it does any specific study.]

11/8/2006
http://boards.fool.com/it-is-not-a-lie-your-own-article-prov.........

snip:

What the article does state is that because blacks die at a much higher rate, that their kids get survivor benefits where as they otherwise would get nothing.

It must be great be a fatherless black child in America to know that you only had to lose a parent to "tremendously" benefit from social security!"

-------------"


And that post was made in a thread maligning the failure of GWB's effort to privatize SS.

I also posted in that thread (though not in response to you) -

"Years ago, this is what I wrote about SS reform:

"I am especially concerned about (1) the transition period, (2) whether participation would be mandatory or optional, (3) the employers contribution, and (4) the tension between all-private PSA and guaranty of government minimum standard."


""Again two years later:
10/15/2008
http://boards.fool.com/my-opinion-has-not-changed-either-put.........

snip:

The system needs some ownership. Many poor can't afford to save more money than what they are FORCED to put into SS. Give them ownership of that money so when they die, any remaining balance is given to their family - help break the cycle of generational poverty by giving people ownership of their retirement income.

-----------

My opinion of SS is multi-faceted but I have long held that if we are going to have a socialized safety net, then it should not have such a large gaping hole as it pertains to the early demise of contributors."


Several questions, then. And IIRC correctly, you are an insurance guy (or generally knowledgeable about products and pricing).

Are there any insurance products (as opposed to annuities) sold by insurance companies in the marketplace that guarantee a return of all premiums?

I wish I had that are some term policies I bought when I was younger.

With respect to annuities, as I understand it, if one elects a return of premiums, then other payouts are less for the same dollars invested? In other words, as I understand it, if standardizing two annuities for the same payout, the one that also included return of premium would cost more?

And then the nitty gritty questions.

Given that this is only discussing SS tax, I assume that the 1.45% currently paid for Medicare is not under discussion and not part of the return on premium concept you are discussing. Correct? Or not?

Are you counting the employer paid portion in calculating the return of premium? If yes, why? It is a cost of doing business to the employer but unless you have good reasons that I can understand, I am not willing to assume that employers would necessarily pay it to employees as wages. I am not aware of any data that suggests or supports the proposition that most employers pay more because they incur savings in the costs of production. In fact, the limited data I do see suggests that much more of the savings go to capital than labor (other than perhaps to the C-suite labor).

How will you price the survivor's benefits - spouse, ex-spouse and minor children that will be paid in determining whether a premium refund is due?

Will you continue to force such payments as tax collections? If not, how will you deal with the present consumption, save for future consumption, delayed gratification issues and Maslow's hierarchy of needs?

Regards, JAFO
Print the post Back To Top
No. of Recommendations: 2
The Social Security system has worked pretty well for 80 years, far longer than most insurance companies have been in business, and unlike more than 1,000 of them which are no longer in business

LOL. I hardly think what we have today can be compared to what was established 80 years ago.

"Pretty well" = It's cost has increased from 1% of every dollar earned to over 12%. Thank goodness every tax rate hasn't done "pretty well" since they were first established. Although they have piggybacked a few other programs unto the original one.

And to top that off, they piggybacked Medicare on to it. A measly .35% of every dollar earned to start, but it's blossomed into nearly 3%. Another great success. Bait and switch.

The only thing keeping it going is forced participation. How many people would sign up for it if it was voluntary?

And, BTW, any insurance company carrying negative reserves on expected payouts would be shut down by the government. I used to be in IT for a commercial insurance company, directly supporting the pricing and reserving activities of the actuaries. My system provided the raw data to them, and collected their projections and estimates generated from that data. We often produced reports on reserving levels for the state attorney general's office and other agencies.

I'd enjoy seeing the results of a blind review of the SS/M pricing and reserving levels, when the reviewers are told they are looking at the operating results of an existing insurance company.
Print the post Back To Top
No. of Recommendations: 1
Social security is a welfare benefit. And it is a tax...and it is a welfare benefit because it is transfer from those currently working to those currently collecting.

And a very regressive tax at that, because of the caps on earned income and exclusion of investment income.

But, yes, an income redistribution system.

IMO, better to dump FICA and fund SS/M from general revenues. The income tax rates could be increased significantly, to adjust for loss of FICA taxes. Merge SS into existing welfare programs and convert Medicare into a single payer health care system.

Maybe even scrap all welfare programs into a basic income system. We'll eventually have to go there anyway, considering how much will be able to be automated. What else do we do when much of the population no longer needs to be employed?
Print the post Back To Top
No. of Recommendations: 0
Given that this is only discussing SS tax, I assume that the 1.45% currently paid for Medicare is not under discussion and not part of the return on premium concept you are discussing. Correct? Or not?

Since I stopped working in 2006, I've probably benefited more from Medicare than I have Social Security.

I would have said Medicare tax was 2.9%. Doesn't matter that the employer pays half of it -- just in one pocket and out the other. And 2.9% is what you would pay if you were self-employed.
Print the post Back To Top
No. of Recommendations: 1
and it is a welfare benefit because it is transfer from those currently working to those currently collecting.

There are a bunch of people working who are drawing SS.

Secondly no one's SS contribution is presently going to SS. Present SS deductions are going to pay debt which includes debt held by the SS Trust.

Other than the fact your statement was totally wrong you were almost right.
Print the post Back To Top
No. of Recommendations: 1
I took you at your word that you wanted to assure that everyone "gets back at least what they put in".

Why is it a slippery slope to assume that you mean what you wrote and would apply in generally?


You stated camel nose under the tent in an attempt to abolish SS.

As I have stated I think three times now, my opinion of SS is multifaceted. My desire to have no one harmed by SS does not equate to abolishing SS. Your "nose under the tent" is exactly what a slippery slope fallacy illustrates.

Here, let me try another way.

There are many things I would change about SS but none of the would necessarily lead to abolishing it and not all of them are interrelated.

Lets say I really didn't want to have fish for dinner. My #1 desire is not to eat fish tonight. If it was unlikely that I could avoid that scenario, I still might have other preferences. If I must eat fish, then I want to make sure it is cooked and not raw. Perhaps I prefer salmon and not smelt. Perhaps if I must eat fish, I want to be assured that everyone else in my household must also eat fish and that no one gets steak (hey, I can be selfish too). Maybe I really don't want corn with fish where as otherwise I would prefer corn. My dinner preference is multifaceted - but none of that means that I don't want to eat dinner. SS is dinner.

My opinion of SS is similar. I don't want it abolished but I do want it revised - but then it has to be revised and it has always been revised. Obama and Congress just revised it again last year when they took away file and suspend. Did you accuse them of trying to put the camel nose under the tent? It is not actuarially possible for it to last and not be revised.
Print the post Back To Top
No. of Recommendations: 0
"I am especially concerned about (1) the transition period, (2) whether participation would be mandatory or optional, (3) the employers contribution, and (4) the tension between all-private PSA and guaranty of government minimum standard."

Good. Me too. Being open to options is a good start.

Are there any insurance products (as opposed to annuities) sold by insurance companies in the marketplace that guarantee a return of all premiums?

Ya, quite a few. Lots of life insurance policy variations, some long term care policies. I am not active in that industry like I used to be so I can't speak to what else there is out there but I would think a quick internet seach would answer your question. I think even some term with ROP exist now.

With respect to annuities, as I understand it, if one elects a return of premiums, then other payouts are less for the same dollars invested? In other words, as I understand it, if standardizing two annuities for the same payout, the one that also included return of premium would cost more?

I would assume so but I honestly don't know. The only ones (fixed annuity in this case) I have ever sold have a Return of Premium. I would assume that there are some out there that don't have that as a benefit and that may pay a higher rate due to such but I have no first hand knowledge of those. I do know that Single Premium Immediate Annuities do indeed pay a lower rate in general if you have some sort of installment or cash refund.

Given that this is only discussing SS tax, I assume that the 1.45% currently paid for Medicare is not under discussion and not part of the return on premium concept you are discussing. Correct? Or not?

Correct, as well as the portion that goes to SS disability. I would separate the SSDI portion from SS in general. I have no major objection to how it functions and I think it is good and worthy true insurance in general.

Are you counting the employer paid portion in calculating the return of premium? If yes, why? It is a cost of doing business to the employer but unless you have good reasons that I can understand, I am not willing to assume that employers would necessarily pay it to employees as wages.

In reverse order, I also would not assume that it would go out in wages but I am counting the employer paid portion. To do otherwise would create an imbalance with those that are self employed and paying both taxes. Also, if we are going to legislate employer-provided healthcare benefits to ensure that employees receive basic minimum coverage, then I see no objection to legislating employer-provided SS contributions to ensure that employees receive a minimum guarantee of compensation for such.

The more I think about it... I would even be OK if it wasn't a full 100% ROP (look at me being flexible! ;) ) just as long as there was a sufficient guarantee that is much higher than $0. Even if we told people that if they die early that 85% of their total SS contributions were eligible for beneficiary distributions, that would be a significant improvement.

Is it really so unreasonable to have a program that guarantees a minimum amount of gurranteed money?

If this money is really being invested in Treasuries at a rate of roughly 3%, then how can we justify not providing a minimum guarantee?

How will you price the survivor's benefits - spouse, ex-spouse and minor children that will be paid in determining whether a premium refund is due?

I would leave that up to the actuaries that have the raw data. I am sure there are many possible solutions and I remain open to all of them currently.

Will you continue to force such payments as tax collections? If not, how will you deal with the present consumption, save for future consumption, delayed gratification issues and Maslow's hierarchy of needs?

Yes.
Print the post Back To Top
No. of Recommendations: 3
I have never experienced people feeling they should get all their auto or home owners insurance premiums back. Certainly most people do not get their life insurance or health insurance premiums back.

What is different about social security?


Exactly.
We are trying to wait until we're 70 to apply for SS. Friends and family turn very serious and admonish us with: "What if you die before then? You won't get anything?" True. And our response is, "So what?" That money will stay in the pot for someone else to use. My parents died when they were each 56, so their benefits were never used by them.

My in-laws, however, have received far more in benefits than they ever put in. I understand this scenario is becoming more rare.

Chili
Print the post Back To Top
No. of Recommendations: 6
That money will stay in the pot for someone else to use.

====================================

My friend and I thank you. Both our parents died when were were pretty young. Without SS to dependent children our mothers would have really struggled.

Jean
Print the post Back To Top
No. of Recommendations: 0
"Friends and family turn very serious and admonish us with: "What if you die before then? You won't get anything?""

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

I suspect the cost of living goes to zero when you die.

Howie52

However, I used to know a fellow who wanted a couple bags of chips, a
case of beer and a can opener placed in his coffin. Just in case
there the afterlife was a BYOB event.
Print the post Back To Top