"Entitled Selfishness": Great article on the dismal future of Social Security

[mickeyfan2]

I worked w/ a gentleman, 70, who paid close to $300 a month to a former employer to maintain his medical insurance, top of the line.
They required him to claim Medicare first, then they would pick up the difference. It should have been the other way around, in my opinion.

Why should the company have to pay first? So he only pays less than $900/3 months for his insurance. Boy would I like ours to be that little. Ours is more than twice that amount.

 

[kinntj]

Since DH and I have both worked and paid into SS we would get ~$3K/month. That is $36K/year. Why should we not get that if we both worked and paid into it.? That is equivalent to almost $1 million dollars of investments. That $36K would go a long way to funding our retirement. It would more than pay for all of our medical insurances and bills. Should it be taken away from us because we chose not to lease Mercedes cars our whole life but just bought simple cars and put the rest away for our retirement. We would be getting penalized for doing the right thing. That is not the mentality the government needs to permiate!

Makes you wonder, doesn't it? Hmmm, wonder what the govt. is doing with all that money you could be investing yourself. If we had that money in our hands to invest we'd all have quite a few $$ and we wouldn't be here talking about SS would we?

 

[MrsPete]

I agree that it is NOT a welfare program as it is at this point, but it was originally intended to be that type of program

I said I don't believe it is being run as "intended", so of course there aren't going to be facts to support that, as it's never been run that way.

Have people EVER been disqualified from receiving SS benefits because of their income/savings? If not, and in the absence of any evidence more solid than "I think it was one time supposed to be used this way", I'm going to have to continue to believe that SS has always operated as a you-pay-in-when-you're-young, you-get-check-when-you're-old program.

Though I'm sure that SS has always been more important to the unprepared than the savers, financial need has never been a consideration --all evidence points in this direction. An objective observer simply could not accept the "it was supposed to be" theory.

It's equally evident that they'll have to make changes in the future. Possibilities:
1. Raise the SS tax on current workers
2. Reduce benefits for retirees
3. Raise the age at which people can collect
4. Raise the number of work quarters necessary to collect
5. Give benefits only to the most needy

 

[MrsPete]

Since DH and I have both worked and paid into SS we would get ~$3K/month. That is $36K/year. Why should we not get that if we both worked and paid into it.? That is equivalent to almost $1 million dollars of investments. That $36K would go a long way to funding our retirement. It would more than pay for all of our medical insurances and bills. Should it be taken away from us because we chose not to lease Mercedes cars our whole life but just bought simple cars and put the rest away for our retirement. We would be getting penalized for doing the right thing. That is not the mentality the government needs to permiate!

I'm figuring up how much Social Security tax I've paid in . . . I'm halfway through my teaching career, so I'm going to assume that my current salary is a median figure:

Over 30 years of teaching, I'll have paid in approximately 90K in Social Security taxes. I worked five years at another professional job before I began teaching, and I worked at various part-time jobs from age 18-22. I'll retire from teaching at age 57, and I'll probably work part-time for a while.

CONSERVATIVELY, I'll have paid in AT LEAST $100,000 in Social Security over my working career. If I'd have invested that myself over the years, it'd be a SIGNIFICANT amount of money. And it'd actually be mine. If I have the misfortune to die two years after beginning to collect Social Security, I'll lose big-time AND my heirs won't be able to access that money.

This is not chump change that the government's taking from us. They have to be accountable for it. They already have our federal and state taxes, and they are taking care of the needy through those very ample funds. Social Security must remain for those who paid it in.

 

[tedhowe]

Have people EVER been disqualified from receiving SS benefits because of their income/savings? If not, and in the absence of any evidence more solid than "I think it was one time supposed to be used this way", I'm going to have to continue to believe that SS has always operated as a you-pay-in-when-you're-young, you-get-check-when-you're-old program.

Though I'm sure that SS has always been more important to the unprepared than the savers, financial need has never been a consideration --all evidence points in this direction. An objective observer simply could not accept the "it was supposed to be" theory.

It's equally evident that they'll have to make changes in the future. Possibilities:
1. Raise the SS tax on current workers
2. Reduce benefits for retirees
3. Raise the age at which people can collect
4. Raise the number of work quarters necessary to collect
5. Give benefits only to the most needy

At the beginning of SS, it wasn't just people who contributed that received benefits - it was anyone who was old enough and was no longer working. That first generation of people who received benefits, by and large, got FAR FAR more back than they ever paid in, many of them getting SS benefits every month until they died even though they never put in a dime.

Also, keep in mind that a good portion (small on a percentage basis, but still large in absolute dollars) goes to the Disability component of Social Security that is paid today even if you didn't meet the retirement contribution requirements.

Based on those two elements, I think an argument CAN be made that there is a welfare component to the program.

As to future possibilities, I think that the fairest approach would be a combination of 3 and 4 from your list above.

The only realistic solution overall is to raise the retirement age, in my opinion.

Ted

 

[dvcgirl]

My problem is for all those who lived to excess their entire lives and then never bothered to save anything because they would have SS in their futures. That is the problem w/ welfare programs, it creates passivity.

lori

Well, whether they are living excessive lives or they just don't have enough to save, the fact of the matter is that most Americans (over 60%) have done absolute no planning with respect to income needs in retirement. Those who have begun planning are typically older workers, in their mid 50s. And yet, with this in mind, a full 66% of Americans are at least "somewhat confident" that they'll have enough money to "live comfortably through retirement". There is just a huge disconnect with reality here. People are living in Fantasyland if they think that they'll live a "comfortable" retirement based on the hard facts.

For further proof....just look at the numbers. The numbers for all workers, all ages, are just awful, so lets just look at the 55 and over group. The folks who are less than 10 years from retirement. These are the people who should be the best prepared.

All of this data is from the 2006 Retirement Confidence Survey which is put out yearly by the Employee Benefit Research Institute. It includes all money saved for retirement, but does not include home equity or pensions (which are disappearing and/or being frozen left and right).

Okay, so 43% of people aged 55 and up have saved less than $25,000 for retirement. Let that sink in a moment. 8% have saved between 25 and 50K. 12% have saved between 50 and 100K. And so, a full 63% have saved less than $100,000 for retirement. 11% has between 100 and 250K. Only 26% has saved over 250K.

Keep in mind that if you live until age 90 you'd need 210K alone by age 65 just to supplment medicare in its current form....not taking into the factor the inevitable cuts that are coming there. This is going to be a huge factor in keeping people 65 and up at work. They won't be able to retire because they won't be able to afford the supplemental insurance coverage. And so 75% of Americans 55 and up haven't even saved enough to cover *that* one aspect of retirement, let alone the rest of it. And yet you have 66% of Americans believing that they'll have a comfortable retirement and yet only 25% of those closest to being retiring are even remotely in a position to actually experiencing that.

 

[dcfromva]

Originally Posted by MrsPete: And if you insist that it's a welfare program, then explain this: Why is it listed separately on our paycheck stubs as a separate program, one which is treated differently at tax time? Why is it that even teenagers who earn measley salaries are required to pay Social Security? Why is it that even the lowest-earning wage earners -- those who get back all of their federal and state taxes -- can't get back a penny of their Social Security? If it's a welfare program, why isn't it treated as our normal taxes? Answer: Because it's not a welfare program.

MrsPete,
I agree with you on this. If SS were a welfare program, then why would the government list SS as one of the 3 parts to its own retirement system?

About 20 years ago, the government had a different retirement system which exempted worked from paying into SS. This is because the federal retirement system had been created prior to SS and workers had already been contributing (a higher percentage of pay) into the federal retirement system. SS was created to mirror the federal retirement system that was already in place.
I think it was in the late 80's, congress came up with this new retirement system (which I don't believe congress participates in, BTW) for government workers called FERS. Older employees who were under the old system were allowed to stay in the old retirement or switch to the new. This is how OPM describes the new plan:

From the Office of Personnel Management:

Federal Employees Retirement System (FERS)
Overview
FERS is a retirement plan that provides benefits from three different sources: a Basic Benefit Plan, Social Security, and the Thrift Savings Plan. Two of the three parts of FERS (Social Security and the Thrift Savings Plan) are portable should you leave the Federal Government before retirement. FERS gives you more control over the retirement benefits you receive.

The Basic Benefit and Social Security parts of FERS require you to make contributions each pay period. The cost of the Basic Benefit and Social Security are withheld from your pay as payroll deductions. The Government makes contributions too. Then, after you retire, you receive benefit checks each month for the rest of your life. This is what is called an annuity.

-DC

 

[mickeyfan2]

Makes you wonder, doesn't it? Hmmm, wonder what the govt. is doing with all that money you could be investing yourself. If we had that money in our hands to invest we'd all have quite a few $$ and we wouldn't be here talking about SS would we?

 

[dcfromva]

Another source of information is an employee's own retirement plan information. If there is a retirement handbook that a company publishes on the retirement benefits, SS listed is often listed as a retirement benefit. After all, the company is paying a match on the SS contributions, too.

-DC

 

[tedhowe]

Okay, so 43% of people aged 55 and up have saved less than $25,000 for retirement. Let that sink in a moment. 8% have saved between 25 and 50K. 12% have saved between 50 and 100K. And so, a full 63% have saved less than $100,000 for retirement. 11% has between 100 and 250K. Only 26% has saved over 250K.

Wow, that is staggering and it took a bit to sink in, for sure. I might have expected those sorts of numbers for people in their 20s or 30s - but 55 and up????

Helloooo.... america? I'd like to introduce you to reality - you seem to not be very acquanted with it. (And now that I typed that, how many different areas of life could that little sarcastic quote apply to? )

As a side note, this is my 100th post - nearly 7 years after my first post (and I had been reading for almost 2 years before I finally registered so I could make that first post)

9 years for 100 posts, and about 20 of them have come in the last 3 days between this and the "house as wealth" thread.

 

[ducklite]

Have people EVER been disqualified from receiving SS benefits because of their income/savings? If not, and in the absence of any evidence more solid than "I think it was one time supposed to be used this way", I'm going to have to continue to believe that SS has always operated as a you-pay-in-when-you're-young, you-get-check-when-you're-old program.

Though I'm sure that SS has always been more important to the unprepared than the savers, financial need has never been a consideration --all evidence points in this direction. An objective observer simply could not accept the "it was supposed to be" theory.

It's equally evident that they'll have to make changes in the future. Possibilities:
1. Raise the SS tax on current workers
2. Reduce benefits for retirees
3. Raise the age at which people can collect
4. Raise the number of work quarters necessary to collect
5. Give benefits only to the most needy

The #4 choice actually makes a lot of sense. It will keep those who come to the US in thier 50's as immigrants, work at Wal-Mart for 10 years, and then want to collect after paying in under $10K. If they live 20 years and get $800 a month, they'll end up receiving $192K. Something's wrong with that picture. It will benefit those who have worked their entire life, and penalize those who spent 30 years as a SAHM then went back to work in thier 50's because they "were bored." But if they were making do on one income before, they can do so again in retirement.

Another option would be to never pay out more than someone has paid in. Except for disabled people, as I've stated previously, I do think that people who are disabled to the point that they can not work need to be assured that they will not end up on the street eating out of garbage cans. That said, I don't believe that blindness, deafness, obesity, or a host of other conditions should qualify one for automatic benefits. But that's another thread.

Anyhow, if a limit was placed on benefits where once what you've paid in is gone, you're cut off, with an eventual phase out of the benefit (and the tax) entirely, it might be the way to go. No one would feel entirely ripped off--granted that money could have been invested and made into a small fortune over time--but I'd be happy just knowing that I'll get what I've paid into it back. Maybe make it a double what's been paid in benefit for those who have worked more than 160 quarters--which means they have pretty much worked most of thier entire life with small amounts of time off for childbirth or returning for further educations, etc.

For the truly indigent, perhaps a different social program along the lines of workfare could be established, where they have to continue to work at least part time in order to receive bare bones benefits. Yes, it's punitive, but in all honesty, 20 years from now, anyone without a retirement nest egg accrued on thier own should not be rewarded, knowing what we all know now.

Changes will need to be phased in over time

Anne

 

[MrsPete]

At the beginning of SS, it wasn't just people who contributed that received benefits - it was anyone who was old enough and was no longer working. That first generation of people who received benefits, by and large, got FAR FAR more back than they ever paid in, many of them getting SS benefits every month until they died even though they never put in a dime.

Also, keep in mind that a good portion (small on a percentage basis, but still large in absolute dollars) goes to the Disability component of Social Security that is paid today even if you didn't meet the retirement contribution requirements.

Based on those two elements, I think an argument CAN be made that there is a welfare component to the program.

As to future possibilities, I think that the fairest approach would be a combination of 3 and 4 from your list above.

The only realistic solution overall is to raise the retirement age, in my opinion.

Ted

I understand that there was a "start up curve" when Social Security was just beginning, but I suspect that doesn't include anyone who's still in the system today; however, that's one of the big problems today: the system's always used every penny it has every month . . . so where's the money that was deducted from my last paycheck? The whole system is poorly designed, but that doesn't mean it's a welfare system. It's never been based upon need, only age.

Disability is a component of Social Security, as is the benefit paid to children whose parents have died young. I agree that the disability part is akin to welfare. The children's benefits, though, I don't think are welfare. Right now, I've already worked enough years to collect a full benefit when I'm of-age. If I were to die today, my children would collect a check until they're 18 (18?); that's perfectly fair because they'd be getting MY money, which I'd never see -- in fact, because they're already 9 and 12, they'd probably never get all my benefits -- they'd age out of the system first.

 

[mickeyfan2]

Say I retire with 1 million. I am turned down by SS because "I don't need it." I am told SS would pay us $36K/year but since our investment nest $40K/year we don't need SS. So we go out and blow our million on huge vacations and toys for us. We then are destitute and reapply to SS. So not "we need" help and we qualify for $36K in SS. So we lived high for a year or two and did every trip we could have wanted and now only have to give up $4K/year. I see no reason to be "wise" with our million.

 

[ducklite]

Okay, so 43% of people aged 55 and up have saved less than $25,000 for retirement. Let that sink in a moment. 8% have saved between 25 and 50K. 12% have saved between 50 and 100K. And so, a full 63% have saved less than $100,000 for retirement. 11% has between 100 and 250K. Only 26% has saved over 250K.

Keep in mind that if you live until age 90 you'd need 210K alone by age 65 just to supplment medicare in its current form....not taking into the factor the inevitable cuts that are coming there. This is going to be a huge factor in keeping people 65 and up at work. They won't be able to retire because they won't be able to afford the supplemental insurance coverage. And so 75% of Americans 55 and up haven't even saved enough to cover *that* one aspect of retirement, let alone the rest of it. And yet you have 66% of Americans believing that they'll have a comfortable retirement and yet only 25% of those closest to being retiring are even remotely in a position to actually experiencing that.

Those numbers are staggeringly frightening. What on earth do these people think is going to happen to them?

My community is right across the street from a community that's active adult, 55+. There is a Publix between us, and I'd say probably 40% of their workers are retirees. I'm quite sure that some of them work there because it's a great place to work and they want to have a bit of extra pocket change for "extras." But it saddens me to think that probably a full half of the retirees who work there do so out of neccessity. Of course I also then think that they could cut their housing cost in half by living in a much less expensive neighborhood, but still...

That said, I still feel that for the most part, they should have perhaps planned a bit more for thier future.

Anne

 

[dvcgirl]

Say I retire with 1 million. I am turned down by SS because "I don't need it." I am told SS would pay us $36K/year but since our investment nest $40K/year we don't need SS. So we go out and blow our million on huge vacations and toys for us. We then are destitute and reapply to SS. So not "we need" help and we qualify for $36K in SS. So we lived high for a year or two and did every trip we could have wanted and now only have to give up $4K/year. I see no reason to be "wise" with our million.

lol...good point. How would they accomplish any means testing though? I'm guessing that they'd go by income with current employees. However, as we all know too well, income isn't always a good indicator of how much one puts into savings/investments. This surely would be a wake-up call for the "slackers" out there though.

But what about current retirees? Would they also go by income, but this time it couldn't go on earned income because there isn't any to speak of for true retirees. They'd have to track investment income I suppose.

 

[MrsPete]

And yet, with this in mind, a full 66% of Americans are at least "somewhat confident" that they'll have enough money to "live comfortably through retirement". There is just a huge disconnect with reality here. People are living in Fantasyland if they think that they'll live a "comfortable" retirement based on the hard facts.

I think this is very scary. With the boomers -- my parents' generation, the 60-somethings -- reaching retirement age, the problems are going to become evident just because of their sheer numbers . . . and yet people in my generation (even if they recognize the problem) are going to be somewhat limited in what they can do to fix the problem.

Why? Because by the time my generation (the just-turning 40s) sees that their parents are in trouble, they themselves will already be 50-ish. It'll be too late to take advantage of the magic of compound interest. They're already going to be mired in large mortgages, etc. and their ability to save for their own retirement will be hampered. I predict a glut of big, expensive houses that'll be up for sale -- cheap.

Plus, I think we'll see many families in which grandma and grandpa are forced to move in with their adult children -- something we haven't seen in mass for decades. Since grandma and grandpa are going to bring limited financial resources into the family (and much of their income may go to medical expenses), the adult children's budgets will be even more strained.

With the adult children's budgets stretched, they're going to save less for their own children's educations . . . so my children's generation is going to get more student loans than ever before, and they're going to start out farther behind than previous generations . . . so the cycle continues.

The ball has already started rolling, and there's no good answer.

 

[dvcgirl]

Those numbers are staggeringly frightening. What on earth do these people think is going to happen to them?

My community is right across the street from a community that's active adult, 55+. There is a Publix between us, and I'd say probably 40% of their workers are retirees. I'm quite sure that some of them work there because it's a great place to work and they want to have a bit of extra pocket change for "extras." But it saddens me to think that probably a full half of the retirees who work there do so out of neccessity. Of course I also then think that they could cut their housing cost in half by living in a much less expensive neighborhood, but still...

That said, I still feel that for the most part, they should have perhaps planned a bit more for thier future.

Anne

While I agree that even some retirees could have planned better, well, the one thing that stinks for those in that 55 and up category is that the rules of the game changed on them....and for some, too late in the game to make adjustments. Many were promised pensions, but their funds either folded or their share was greatly decreased. Promised medical benefits in retirement were taken away or now require a hefty monthly premium. It has to be tough to get hit like that so far along in your working career, or worse still, in early retirement.

 

[kinntj]

Say I retire with 1 million. I am turned down by SS because "I don't need it." I am told SS would pay us $36K/year but since our investment nest $40K/year we don't need SS. So we go out and blow our million on huge vacations and toys for us. We then are destitute and reapply to SS. So not "we need" help and we qualify for $36K in SS. So we lived high for a year or two and did every trip we could have wanted and now only have to give up $4K/year. I see no reason to be "wise" with our million.

Well, yes they could say that the income you generate from interst on the money in your accounts could depreciate your SS checks.

You're still going to want to be wise with that million dollars, because you'll need excess money for medical expenses that SS won't cover. Medicare, what's that in the future?

 

[ducklite]

If it comes down to it, I fully plan on using trusts and other legal shelters to keep as much of my accumulated wealth as possible out of the hands of the government.

Anne

 

[spima3]

Why should the company have to pay first?

And my response is why shouldn't they? If you are paying for a service, health insurance, then don't push it onto the gov't/taxpayer.

And I think $300 a month is a lot for two people. When you consider this is only the employees contribution.


lori