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

[kinntj]

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.

That's true. It is late for them and there's not much they can do except work minimal hours during their retirement so they can get SS. It's the generation after, that has to know this is coming and prepare for it. It's going to be tough going and those who live below their means and save, save, save will be the only ones who will be ahead. Hard to do in a credit/entitled society. Sigh.

 

[MrsPete]

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

I think your ideas are largely workable and represent the opposite of Social Security's current head-in-the-sand concept. Something has to change, and I think your last statement: "Changes will need to be phased in over time" is important. I wouldn't be too upset if I didn't get back EVERYTHING I've paid in -- I just don't want to get screwed over entirely, though I think that's a distinct possibility.

I think 160 quarters may be a little high -- that'd mean people'd be required to work a full 40 years to collect. For people who want to stay home with a couple children, or people who are genuinely disabled, that might be asking a great deal. I'd vote for paying benefits on a sliding scale: You worked 40 quarters over your lifetime? You get 25% of the maximum benefit. You worked 80 quarters? 50% the maximum benefit . . .

Right now though, a person only has to work 40 quarters (or 10 years) over the course of his or her lifetime to draw a FULL benefit. That's not difficult at all.

I also think Survivor benefits are something that needs some attention. I understand that "back in the day", the social expectation was that a wife would be at home for her husband and children, and one of the results was that a never-worked wife could draw her husband's Social Security benefits after his death. Today our world has changed. While I don't mean to knock the importance of taking good care of one's family, running a household no longer requires the intensive labor that it did in the past; plus women have real opportunities in the work force that didn't previously exist. I think it's perfectly reasonable to say that any person who wants to draw a Social Security age-benefit should put in the work time PERSONALLY and not draw upon a spouse's benefit.

 

[C.Ann]

If you are paying for a service, health insurance, then don't push it onto the gov't/taxpayer.

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

But there's the rub.. You are not ALLOWED to - by the health insurers.. You are required to enroll in Medicare..

 

[MrsPete]

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

Yes, but you have the sense to see the need in that, and you have the money to pay the accounts /financial planners to help you see all your options. I'm sure you'd agree that everyone doesn't have the same foresight.

 

[ducklite]

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.

That's why I said "for the mst part."

My FIL's pension plan was changed by IBM iether right before or right after he retired. They still get by fine, but I know that they have to be more careful than they were expecting to in their retirement. They do have a nice nest-egg of their own saved funds that's enough to squeak by on, but for those without that who were entirely relying on the pension and SS, things aren't as rosey as they expected them to be.

On the other hand DH and I know a couple in their mid-40's. (I think I've already mentioned them on this thread) They haven't got a dime saved between them, and rent. The way thier car loans are structured, they'll be lucky if the cars are paid for before they go to the junkyard (six year loans on used cars with high interest rates--can you say upside-down the entire term?) They've taken three cruises in seven years, and have another planned. Did I mention the wide-screen?

Anyhow, they keep talking about this wonderful pension he'll be getting when he retires, and social security. They just won't wake up and realize that it's most likely that not that both benefits will either not exist, or will be drastically reduced by the time they retire.

Then they'll be screaming because they have to work full-time in their 80's, if anyone will even hire them!

Anne

 

[dvcgirl]

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.

lol...it's a rosy picture isn't it? The sad thing is, that I just happen to agree with you. My DH and I were just having a very similar conversation on this topic recently.

We followed the cycle exactly as you did. I do think we'll see more and more retirees, moving back in with the adult kids, or pooling money from two households to buy a bigger place for everyone...that kind of thing.

I definitely see the housing market taking a hit from all of this. Like you said, not right away, but as the boomers start to spend down their money....say, ten years in. The first wave of boomers, now into their early 70s are going to need to sell and move in with the family, or sell and downsize....but a lot of others will be trying to do the same thing. Reverse mortgages will also become commonplace.

 

[ducklite]

That's true. It is late for them and there's not much they can do except work minimal hours during their retirement so they can get SS. It's the generation after, that has to know this is coming and prepare for it. It's going to be tough going and those who live below their means and save, save, save will be the only ones who will be ahead. Hard to do in a credit/entitled society. Sigh.

I couldn't agree more. Tath's why I think that we need to face reality and start restructuring/phasing out SS as we currently know it NOW to give a wake-up call to those in their 30's and 40's.

Anne

 

[ducklite]

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

Actually my son was carrying his health insurance COBRA for about a year. It cost $478 a month. So $300 a month for two people is a good deal.

Anne

 

[spima3]

Well, after reading many of the posts, I did some actual research into the SS Act of 1935.

Yes, it was enacted as a retirement supplement due to the large number of elderly living in poverty through the Great Depression. It also allowed for various health and "welfare" programs. So in reality it was both a retirement program and welfare.

Well FDR may have had good intentions, but like the old saying goes: "the road to h#*$ is paved w/ good intentions", and the mucked up mess we have today is living proof of that.

lori

 

[MrsPete]

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.

Do you think this "I planned well, but got screwed over" scenerio is common, or is it the exception to the rule? I know it happens, but I wonder how often it happens.

I'm thinking of a guy who worked with my husband who screwed himself over. He wasn't a high-paid fellow, but he had savings and a pension coming to him. His wife was the same. They both cashed out their pensions, retired early, and set out on a dream: they wanted to open a restaurant. They rented a place in a brand-new shopping center near a bustling business center -- the kind of place where you literally have a hard time getting in and out of a restaurant in a lunch hour. They had a great location, and their food was top-notch. The problem was that neither of them had a business background, and they didn't get anyone to help them --in six months, they went out of business and lost everything.

What's more common? Retirees being screwed over by the company, or retirees messing up their own situations? I don't know -- I'm just basing this on my own personal experience.

 

[MrsPete]

Well, after reading many of the posts, I did some actual research into the SS Act of 1935.

Yes, it was enacted as a retirement supplement due to the large number of elderly living in poverty through the Great Depression. It also allowed for various health and "welfare" programs. So in reality it was both a retirement program and welfare.

Well FDR may have had good intentions, but like the old saying goes: "the road to h#*$ is paved w/ good intentions", and the mucked up mess we have today is living proof of that.

lori

Yes, it was enacted BECAUSE so many elderly were living in poverty, but it was made available to EVERYONE -- the wealthy and the indigent.

I agree that it started with good intentions, but it's snowballed into . . . well, into this argument, and there's no good answer at this point -- someone's going to get hurt.

 

[dcfromva]

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

But there's the rub.. You are not ALLOWED to - by the health insurers.. You are required to enroll in Medicare..

I think it is federal law that if you are over 65 and not working, Medicare becomes your primary insurance.
From what I've seen, Medicare doesn't cover very much. You have to enroll in Medicare part B and pay that premium to get any reasonable benefit (which has a lot of gaps). Then, after that you can pay for your own ins to fully cover you... And there is also a new prescription benefit (which I believe is another premium retirees have to pay for).
It seems ironic to me that you pay thousands upon thousands of dollars your whole life for Medicare Ins--and the basic doesn't seem to cover very much at all.

-DC

 

[kinntj]

I also think Survivor benefits are something that needs some attention. I understand that "back in the day", the social expectation was that a wife would be at home for her husband and children, and one of the results was that a never-worked wife could draw her husband's Social Security benefits after his death. Today our world has changed. While I don't mean to knock the importance of taking good care of one's family, running a household no longer requires the intensive labor that it did in the past; plus women have real opportunities in the work force that didn't previously exist. I think it's perfectly reasonable to say that any person who wants to draw a Social Security age-benefit should put in the work time PERSONALLY and not draw upon a spouse's benefit.

You know I thought SS was based on a pool and then you draw from the spouse's money. My mom is collecting SS from being a SAHM her entire adult life. Her and my dad split after 25 years of marriage. She called the SS agent and wanted to know if they would take away from my dad's amount. They said no. I don't understand this. What, the money just appears magically out of nowhere. Are other people that paid in, not getting their part because of this? I'm so confused with how this works, but without it she would pretty much be on the street; which she's already close to it. She has no insurance at all.

 

[MrsPete]

lol...it's a rosy picture isn't it? The sad thing is, that I just happen to agree with you. My DH and I were just having a very similar conversation on this topic recently.

We followed the cycle exactly as you did. I do think we'll see more and more retirees, moving back in with the adult kids, or pooling money from two households to buy a bigger place for everyone...that kind of thing.

I definitely see the housing market taking a hit from all of this. Like you said, not right away, but as the boomers start to spend down their money....say, ten years in. The first wave of boomers, now into their early 70s are going to need to sell and move in with the family, or sell and downsize....but a lot of others will be trying to do the same thing. Reverse mortgages will also become commonplace.

I don't think we'll see a large number of people buying the large houses for their extended families -- I think people won't make those choices until the financial need is great, and then they won't have the resources to buy the big houses.

SOME famlies, of course, will see the inevitable need to take in grandma and grandpa, and they'll buy a house with a mother-in-law suite well ahead of time . . . but I think they'll be the exception rather than the rule.

I agree that reverse mortgages will become commonplace. Probably other creative methods of financing retirement will pop up too.

 

[ducklite]

I think your ideas are largely workable and represent the opposite of Social Security's current head-in-the-sand concept. Something has to change, and I think your last statement: "Changes will need to be phased in over time" is important. I wouldn't be too upset if I didn't get back EVERYTHING I've paid in -- I just don't want to get screwed over entirely, though I think that's a distinct possibility.

I think 160 quarters may be a little high -- that'd mean people'd be required to work a full 40 years to collect. For people who want to stay home with a couple children, or people who are genuinely disabled, that might be asking a great deal. I'd vote for paying benefits on a sliding scale: You worked 40 quarters over your lifetime? You get 25% of the maximum benefit. You worked 80 quarters? 50% the maximum benefit . . .

And I wouldn't have a problem with that. I think I was saying that unless you had worked 40 years, you wouldn't get 200% what you paid in before you capped out. Maybe for those who worked 30 years could get 150%, 20 years they could get 125% what they had pain in, 10 years would only get what they had paid before the benefit would expire. Does that make sense?

Right now though, a person only has to work 40 quarters (or 10 years) over the course of his or her lifetime to draw a FULL benefit. That's not difficult at all.

Exactly, and I think it penalizes those who worked thier butts off thier entire life and only receive marginally higher benefits than some on and off welfare momma, recent immigrant, or someone who chose to be a SAHM for most of thier adult life. (And it is a choice.)

I also think Survivor benefits are something that needs some attention. I understand that "back in the day", the social expectation was that a wife would be at home for her husband and children, and one of the results was that a never-worked wife could draw her husband's Social Security benefits after his death. Today our world has changed. While I don't mean to knock the importance of taking good care of one's family, running a household no longer requires the intensive labor that it did in the past; plus women have real opportunities in the work force that didn't previously exist. I think it's perfectly reasonable to say that any person who wants to draw a Social Security age-benefit should put in the work time PERSONALLY and not draw upon a spouse's benefit.

Agreed. I also think that is what life insurance is for. Term life is affordable for pretty much everyone these days. Dh and I pay about $600 a year for almost $1M in coverage on our primary policies, we both have free policies from our jobs that give additional benefits. Neither of us will be rich, but we will be able to keep our current standard of living and provide for our futures. I don't know how anyone can afford to NOT have it. And I agree, if the primary breadwinner dies un or under-insured, then the other spouse will need to go back to work to make up the difference, even if it means daycare. Is it fair? IMHO yes, because the opportunity was certainly there to provide for the family through life insurance to begin with.

Anne

 

[spima3]

Actually my son was carrying his health insurance COBRA for about a year. It cost $478 a month. So $300 a month for two people is a good deal.Anne

Well COBRA is meant to be only a temporary continuation of coverage at group rates and is generally funded entirely by the consumer. One would assume your son would become re-employed at some date and resume coverage at a lesser rate.
For someone who is already retired, living on SS, supplemented w/ part time employment, in an area w/ high numbers of low income, I still contend that $300 is a heck of a lot. Add that payment to the $900 the former company is paying, and the insurance company is getting one heck of a deal!

lori

 

[MrsPete]

You know I thought SS was based on a pool and then you draw from the spouse's money. My mom is collecting SS from being a SAHM her entire adult life. Her and my dad split after 25 years of marriage. She called the SS agent and wanted to know if they would take away from my dad's amount. They said no. I don't understand this. What, the money just appears magically out of nowhere. Are other people that paid in, not getting their part because of this? I'm so confused with how this works, but without it she would pretty much be on the street; which she's already close to it. She has no insurance at all.

No current retiree is losing benefits because of this situation, but FUTURE retirees will hurt because of it.

I don't mean to insult your mom at all, but this is the type of situation I think should be stopped. She didn't pay in, so she shouldn't be able to draw out. And I think we need to educate people about this EARLY in their work careers so that they'll know they need to prepare themselves for retirement.

 

[ducklite]

Yes, but you have the sense to see the need in that, and you have the money to pay the accounts /financial planners to help you see all your options. I'm sure you'd agree that everyone doesn't have the same foresight.

True, although those with nothing to shelter don't need to worry about it, because under the current system, the government will take care of them.

Anne

 

[kinntj]

I do think we'll see more and more retirees, moving back in with the adult kids, or pooling money from two households to buy a bigger place for everyone...that kind of thing.

Our neighbor down the street did this. They added onto their house. Now, their house is the biggest in the neighborhood. Four car garage, they added housing on top of both garages and added onto the back with a 3 season deck/room. They have alot of people living there, it seems crowded at times, but I believe they needed that extra room for their sanity. I think the daughter has 4 kids and then the grandparents.

 

[MrsPete]

And I wouldn't have a problem with that. I think I was saying that unless you had worked 40 years, you wouldn't get 200% what you paid in before you capped out. Maybe for those who worked 30 years could get 150%, 20 years they could get 125% what they had pain in, 10 years would only get what they had paid before the benefit would expire. Does that make sense?



Exactly, and I think it penalizes those who worked thier butts off thier entire life and only receive marginally higher benefits than some on and off welfare momma, recent immigrant, or someone who chose to be a SAHM for most of thier adult life. (And it is a choice.)

I don't know what numbers would be fair, but I think this is a good start towards a more fair system -- those who paid in more, get more. Who could argue with that?