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One of the monkey wrenches in this discussion is the viability of the social security system itself. Can you really count on this 8% these days? I would say not in my opinion. What are the chances they will rewrite the rules? Fairly good in my opinion.......

Sure the system will change - but not in ways that will shorten life or viability of social security. As with all change, some people will be unhappy. The most likely changes are going to be extending the working life period or delaying the age for benefits. Back in the 1930s when Social Security only a small minority of folks lived long enough to collect. In recent years France raised retirement age to 70. England is in the process of that same change.

In this country we have lots of government employees (military, police, teachers, etc.) who are expecting to work collect benefits and stop working well before a normal retirement age. Places like Illinois, Chicago and multiple cities in California are now facing choices between dramatic tax increases to pay for existing or dramatic benefit cuts. So far, with the possible exception of bankruptcy, there have not been efforts to alter existing benefits - only future benefits. Any changes in benefits leave some people unhappy - even if those people have not yet earned benefits.

The 8% return exist only for those who are age 62 and choose to delay payments. Even if Congress were to change the law, anybody over age 62 could call Social Security and start benefits next month should Congress be changing the 8% number. But I don't see that changing. The 8% return only happens because funds are being moved from one retiree to another. The problem that needs to be addressed is the imbalance between income and outgo. That can be addressed by:

Lower over all payments - unlikely since Congress wants to be re-elected.
Increase social security tax rate - some less unlikely than lowering over all payments. Also unlikely for the same reason
Increasing the retirement age - something that has been done here in the past and is being done in other countries
Extend the Social Security Tax without limit in income - If a populist movement takes hold, this seems likely to me. Such an extension would result in more funds for social security than are currently being paid by the bottom 150 million wage earners according to an article I read last week.
Increase means testing - another good candidate.
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