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

[dvcgirl]

I understand your point, but I still think you are being overly critical of a couple that saved a nice nest egg. $1 million may not be enough to cover your retirement expectations, but I'm betting there is a long line of people who would trade places with them in a flash.

I'm not being critical of them. You're just reading it that way. I'm just making the jump from one million dollars to $40,000 a year. Sure, $40,000 isn't anything to sneeze at, but since our median income in this country is 46K, and we spent more than we made last year as a nation, I'm thinking a lot of people will be slightly disappointed with that income in retirement. This is why I'm saying that means testing this couple out of SS wouldn't be fair.

We're talking about people here with no pensions, just what they saved +Social Security. And this is the big issue here, because pensions are disappearing and most of us will have only what we have saved and invested. There are millions and millions of people in their 30s and 40s just throwing a little money here and there at their 401Ks, with no thought at all about what they will need down the road. Most people don't do *any* retirement planning until they are in their 50s. Trust me, there are going to be lots and lots of really disappointed people out there when they find out that they really can't retire when they had planned (and we're already starting to hear about this...).

The fact that there is a long line of people who would trade places in a minute with the couple who have accumulated one million dollars only speaks to how serious and widespread the problem is.

 

[dvcgirl]

Absolutely. Therein lies the problem.

Money's Jan. 07 cover story "Are You On Track" showed that between 36 and 39% of folks ages 65-74 have mortgages and up to 36% carry credit card balances. And that data is only for the top 2/5 of income level.

I read the same thing . It is scary though isn't it? Wonder what the stats would be if they went all the way down the income scale, especially with respect to carrying CC debt. And the folks in that lower aged group....50s to early 60s....carrying much more debt, when they should really be ramping up savings. I'm telling you, people are so busy trying to have it all....and they're doing so at the expense of their future.

 

[disneysteve]

Sure, $40,000 isn't anything to sneeze at, but since our median income in this country is 46K, and we spent more than we made last year as a nation, I'm thinking a lot of people will be slightly disappointed with that income in retirement.

The fact that there is a long line of people who would trade places in a minute with the couple who have accumulated one million dollars only speaks to how serious and widespread the problem is.

I agree with you, but to be fair, a median income of 46K means that fully half of all households earn less than that. If you focus on that half of the population, they'd all be quite happy with a retirement income of 40K - 87% or higher of their pre-retirement income. And that's without SS added in. Even today, a million dollar nest egg would almost be like hitting the lottery for at least half the households in America. You and I are looking at this as members of the other half, on the top side of that median, so our point of view is different.

 

[tedhowe]

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This is the part that many of the posters on the DIS don't "get".. It's all about what one considers "comfortable" and makes them "happy".. Not everyone has a desire to travel all over the world; live in a big house; drive a fancy car; eat out every night of the week; go on shopping sprees; or whatever..

What you "need" to retire on - while living in a manner that makes you happy - is not a "one-size-fits-all" number and never will be.. Only the person who is actually doing it - or planning for it - can make that determination..

When I see some of the numbers "suggested" on these threads (or tossed about as a "given") I really have to chuckle.. I could live to be 150 with those numbers and STILL not run out of money..

But it is not the government's responsibility to make you "comfortable" in retirement. If you want to be "comfortable" to the style that you are accustomed (whatever that may be) then you need to plan for it and save earlier in your life.

Social Security is about making sure you are not living in poverty.

I'm reminded of a quote from Newt Gingrich back in '94 or '95 (when he was at his peak of influence).

"The pursuit of happiness...it's an active verb. Not happiness stamps, not a department of happiness, not therapy for happiness. Pursuit."

(in the internet age, it took me all of 30 seconds to find a quote I heard a dozen years ago)

Now, I don't particularly like Gingrich, though I much prefer him to the neo con wing of the Republican party, but this is the sort of fiscal conservatism that I CAN support. (For full disclosure, I've voted Democrat, Libertarian and independent in presidential elections, but never republican - mostly becase of my stances on social issues. I'd love to have a truly fiscally conservative -- or moderate -- Democrat to vote for in '08)

It is not the government's responsibilty to make sure you are comfortable. It is the government's responsibility to make sure your basic welfare is taken care of.

Ted

 

[C.Ann]

I read the same thing . It is scary though isn't it? Wonder what the stats would be if they went all the way down the income scale, especially with respect to carrying CC debt. And the folks in that lower aged group....50s to early 60s....carrying much more debt, when they should really be ramping up savings. I'm telling you, people are so busy trying to have it all....and they're doing so at the expense of their future.

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This is the REAL problem.. If people could find a way to be happy without feeling like they have to "have it all", they wouldn't have to worry about their retirement for the next 20 or 30 years.. They would have what they need because they wouldn't be spending every dime of it (and the "borrowed' dimes) now.. Can't save what you don't have..

 

[tedhowe]

What many of us are upset about is being penalized for saving in our earning years rather than being spendthrifts with fancy cars, wide screen plasma tv's, and every available cable pay channel when we haven't got a dime set aside for our retirement. The federal government keeps saying that people haven't saved enough for retirement, yet they want to penalize those who do. What's wrong with this picture?

More and more the thought of setting up a trust to shelter my assets from the government is sounding like a good plan.

Anne

Anne,

I totally understand the sentiment, but from my perspective, Social Security is really about a "safety net".

I'd rather I could invest my money myself and have a bigger retirement nestegg, but being an idealist, I DO feel a responsibility to help provide for those that NEED social security while I am working.

That's why as I go through the thought process in this thread I'm all for means testing. I don't see it as being penalized -- rather I see it as a blessing to be fortunate enough (should I be in another 30 years) to not NEED social security.

Ted

 

[dvcgirl]

I agree with you, but to be fair, a median income of 46K means that fully half of all households earn less than that. If you focus on that half of the population, they'd all be quite happy with a retirement income of 40K - 87% or higher of their pre-retirement income. And that's without SS added in. Even today, a million dollar nest egg would almost be like hitting the lottery for at least half the households in America. You and I are looking at this as members of the other half, on the top side of that median, so our point of view is different.

Valid point....and yes, I'll admit, most of the people families/couples I know make much more than 46K. I know a lot of people who earn income in the 40s, but they are usually half of a couple. I know a few younger teachers down here who make less than 35K, and trust me, they struggle.

But let's just say this, how many of the folks in that bottom half, making less than 46K a year will end up anywhere near a one million dollar nest egg? How many would end up with even 500K? Look at the 401K/IRA balances....it's not likely.

 

[C.Ann]

But it is not the government's responsibility to make you "comfortable" in retirement.
Ted

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I haven't "asked" the government to make me comfortable in my retirement.. It just so happens that because I'm older than many of the posters here, it "will" be there for me.. I'm entitled to it on my DH's record as his widow, it's up to the government to decide if I get it.. If I do, I do.. If I don't, I don't..

I'm not sure I understand what you mean.. If you're talking about people in general needing to save more, I agree 100% - although I would never presume to tell them how "much" they need, because I don't know what they expect (or want) their lifestyle to be when they retire..

But the one thing I can tell you is that all you have to do is read the posts on the DIS day after day and believe me, there is PLENTY of money spent and plenty of CC debt racked up "just because people can".. Those are the people who need to worry the most..

 

[ducklite]

The 4% rule assumes that you will make 4% plus inflation each year. So your 1 million grows with inflation and the 4% draw also grows with inflation. So in 20 years you would still have the equivalent of $40K of buying power when compared to today.

Although depending on the vagarities of economy, neither 4% interest rates nor 4% inflation can be assured, and inflation can rise unchecked while interest rates remain stagnant or even decrease. Either way I think we can both agree that $1M isn't going to comfortably fund a retirement for 20+ years.

Anne

 

[mickeyfan2]

Although depending on the vagarities of economy, neither 4% interest rates nor 4% inflation can be assured, and inflation can rise unchecked while interest rates remain stagnant or even decrease. Either way I think we can both agree that $1M isn't going to comfortably fund a retirement for 20+ years.

Anne

ITA. But that is the basic theory behind the 4% rule.

 

[snowwite]

But it is not the government's responsibility to make you "comfortable" in retirement. If you want to be "comfortable" to the style that you are accustomed (whatever that may be) then you need to plan for it and save earlier in your life.

Social Security is about making sure you are not living in poverty.

I'm reminded of a quote from Newt Gingrich back in '94 or '95 (when he was at his peak of influence).

"The pursuit of happiness...it's an active verb. Not happiness stamps, not a department of happiness, not therapy for happiness. Pursuit."

(in the internet age, it took me all of 30 seconds to find a quote I heard a dozen years ago)

Now, I don't particularly like Gingrich, though I much prefer him to the neo con wing of the Republican party, but this is the sort of fiscal conservatism that I CAN support. (For full disclosure, I've voted Democrat, Libertarian and independent in presidential elections, but never republican - mostly becase of my stances on social issues. I'd love to have a truly fiscally conservative -- or moderate -- Democrat to vote for in '08)

It is not the government's responsibilty to make sure you are comfortable. It is the government's responsibility to make sure your basic welfare is taken care of.

Ted

Oh right, lke Newt Gingrich or any polititcian doesnt have a HUGE pension/retirement coming to them!? It makes me mad when I think of the perks they get. Bottom line I feel like the government had no right to collect social securityt from me if they have no intention of paying me when it is my turn. I feel like I get screwed by being working middle class.

 

[ducklite]

This isn't necessarily true. There are lots of current retirees who don't have anywhere near $1 million in savings and they are doing just fine between SS and whatever they have saved. You have to remember that the current batch of seniors have predominantly known a much simpler lifestyle, and continue to live that simpler lifestyle in retirement. My mom is 76. Her savings are barely a quarter of a million and she doesn't spend all of the income that portfolio generates. My father died 14 years ago. The house was paid for. They had no other debts. Other than buying a new car and traveling occasionally, she really has no significant expenses. And, she moved to a senior apartment building in June which lowered her living expenses even farther. Once her house sells, she'll have over 100K added to her savings but really doesn't need it at all to cover her living costs. $15,000/year or so keeps her very comfortable and lets her do everything she wants to do.

But you've also got to consider that the majority of people without $1M in the bank at retirement are also not going to own a home. I"m not talking about todays retirees, I'm talking about the ones who plan on retiring in the next 10-30 years. They have been living the mine-mine-mine lifestyle, renting, not saving, and will then be complaining because the government isn't giving them enough in retirement to live the lifestyle they're accustomed to living.

Anne

 

[MrsPete]

My husband's aunt has about a million dollars set aside, her husband still works part time for the full health insurance coverage. The health insurance, as many have stated here becomes a big issue, but they could certainly live comfortably on what they have set aside. I don't think SS was ever meant for people who could well afford to provide for themselves as they age.

Nope Social Security was intended for ALL American workers. It isn't a welfare program. All -- well, okay, most -- American workers pay into it, there's no reason they shouldn't all draw out of it.

If we don't pay it to everyone, then it's a success tax -- people who work hard and are successful are being taxed to provide for those who didn't do as well.

 

[MrsPete]

ITA

This results in rewarding bad behavior. If I was told I could make X from SS or X from my investments and get no SS why would I want to save X. I will live on the same amount and have more stuff that the money could buy. This would just cause more not to save.

And I totally agree as well. We need to encourage people to save, not discourage it by saying that you'll never get your Social Security if you amass any amount of money during your working years.

 

[C.Ann]

Bottom line I feel like the government had no right to collect social securityt from me if they have no intention of paying me when it is my turn. I feel like I get screwed by being working middle class.

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Considering you were never given the opportunity to "opt out", it's basically theft..

 

[ducklite]

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This is the part that many of the posters on the DIS don't "get".. It's all about what one considers "comfortable" and makes them "happy".. Not everyone has a desire to travel all over the world; live in a big house; drive a fancy car; eat out every night of the week; go on shopping sprees; or whatever..

What you "need" to retire on - while living in a manner that makes you happy - is not a "one-size-fits-all" number and never will be.. Only the person who is actually doing it - or planning for it - can make that determination..

When I see some of the numbers "suggested" on these threads (or tossed about as a "given") I really have to chuckle.. I could live to be 150 with those numbers and STILL not run out of money..

I think it also depends on where you live. My in-laws own their home in Upstate, NY. They have well and septic, so really for housing they only have electric, phone, cable, insurance, and taxes. My MIL gets a very small SS check. (she worked very little outside the home) FIL gets a pension as well as SS. They could survive on their savings without either, because they have low monthly housing expenses--around $6000 a year for their entire housing nut.

Frankly with my property taxes and insurance, I couldn't "survive" on less than $30K a year of non-taxable income. That would be just survival. No eating out, no new (used) car--ever.

Anne

 

[MrsPete]

Mrs Pete--
Did I read you right? You contribute to both your retirement system and Social Security? I am also a teacher, and we don't contribute to SS. That's why I said the govt could have my waitressing SS money-- I earned it a long time ago, and really never expected to get it back. If I had been contributing for all of my teaching years, that would be another story...

There is presently a windfall provision that Congress is getting ready to consider, which would lower the SS stipend of people who also get a pension or funds from other sources. I have no problem with that, but I stopped contributing to SS 10 years ago.

Yes, you got it right. I contribute the 7.5 (or is it a little higher now?) to Social Security every month AND I also pay 5.something into my state's teacher's pension plan. Something like 12-13% of my paycheck is going towards these two retirement plans, and I can't see any reason why I shouldn't get two checks when I'm of the appropriate age.

I don't know about other states, but ALL teachers in North Carolina pay into both Social Security and the state pension plan. I've been teaching for 15 years, and I expect to teach another 15 or so -- that's a sizeable amount of money that's being deducted from my checks. Money I've earned.

And don't forget that's IN ADDITION to the taxes that I pay.

 

[C.Ann]

I think it also depends on where you live. My in-laws own their home in Upstate, NY. They have well and septic, so really for housing they only have electric, phone, cable, insurance, and taxes. My MIL gets a very small SS check. (she worked very little outside the home) FIL gets a pension as well as SS. They could survive on their savings without either, because they have low monthly housing expenses--around $6000 a year for their entire housing nut.

Frankly with my property taxes and insurance, I couldn't "survive" on less than $30K a year of non-taxable income. That would be just survival. No eating out, no new (used) car--ever.

Anne

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

This is very true - and something people should consider while making their retirement plans..

 

[ducklite]

Absolutely. Therein lies the problem.

Money's Jan. 07 cover story "Are You On Track" showed that between 36 and 39% of folks ages 65-74 have mortgages and up to 36% carry credit card balances. And that data is only for the top 2/5 of income level.

I have neighbors who must be in thier late 60's. They are selling thier current home and UPSIZING to a much more expensive home which will carry a mortgage.

My goal is to have my mortgage paid off about the time that I'm 55, and put the monthly mortgage payment towards retirement savings for the last ten years or so of my working years to have an additional nest egg. (If I could do that it would pay my property taxes for 20 years, which I think will be my single largest expense in retirement.)

Anne

 

[tedhowe]

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I haven't "asked" the government to make me comfortable in my retirement.. It just so happens that because I'm older than many of the posters here, it "will" be there for me.. I'm entitled to it on my DH's record as his widow, it's up to the government to decide if I get it.. If I do, I do.. If I don't, I don't..

I'm not sure I understand what you mean.. If you're talking about people in general needing to save more, I agree 100% - although I would never presume to tell them how "much" they need, because I don't know what they expect (or want) their lifestyle to be when they retire..

But the one thing I can tell you is that all you have to do is read the posts on the DIS day after day and believe me, there is PLENTY of money spent and plenty of CC debt racked up "just because people can".. Those are the people who need to worry the most..

In general, people don't save enough. I hope (I think) that my wife and I are saving enough.

My point about "comfortable" is simply this: I don't believe it is the government's job to make sure retirees are "comfortable". This is precisely because it is a subjective measure.

The government's job is to make sure that basic needs are taken care of. I think that most people would not be "comfortable" on what social security provides.

How much someone "needs" is a fairly objective measure - their housing, food, and health care need to be provided for, primarily. How much the "want" to be "comfortable" is unique to each person - and not the government's job to have to provide.