Social Security - Raise Age???

[Hoodie]

Social Security wasn't meant to be a retirement plan, and still isn't. It was meant to support those who had become no longer physically able to work and to support the widows and orphans of people who died in their working years. The taxes on it were sort of a forced savings account that would be paid out to the retiree of their benefactors. Over the years we have not only extended our life expectancy well beyond the original 65, but our health has gotten much better and our society has moved away from the largely physically demanding jobs to a more seditary economy. We've also added to the population who can draw social security adding in children and adults with disabilities, neither of which were part of the original plan, and neither of which pay into the system. When they were added, Social Security had a huge surplus because people were still dying before they could access their benefits. Since they added people who never paid in AND had more and more people accessing benefits, the account has dwindled.

Yes, the "retirement" age needs to be extended. In addition, there should be a health requirement. We currently have a 75 year old working at our office who is at the point where he is forced to take some of his retirement funds due to his age, even though he's still working full-time and perfectly capable of doing so. I know very few 65 year olds who are incapable of working. If a physical determines that you are healthy enough to continue working, then you are not eligible to recieve SS at this time. The disability aspect needs to be completely overhauled. No one wants to hear it, but we no longer have the choice.

As for why some people "max out" on the social security tax, it's because there is a limit to benefits received. Social Security payments are based on your annual income over a block of time, up to a certain limit. Those who make under that limit will have their full benefits calculated on what they make that whole time and what they put in. Those that make over that limit will only receive a certain amount, not matter how much they make. The idea is that those making over a certain amount should be able to fund thier own retirement plans, while those making under that amount will rely on SS. Or, in my opinion, the "the poor/middle class are too dumb to plan for their own retirement" approach. Since the "rich" are not eligible for full benefits, they do not pay fully into the account.

 

[Hoodie]

Myth #1: By the time I retire, Social Security will be broke.

If you believe this, you are not alone. More and more Americans have become convinced that the Social Security system won't be there when they need it. In an AARP survey released last year, only 35 percent of adults said they were very or somewhat confident about Social Security's future.

It's true that Social Security's finances need work, because over the long term there will not be enough money to fully cover promised benefits. But radical changes aren't needed. In 2010 a number of different proposals were put forward that, taken in combination, would put the program back on firm financial ground for the future, including changes such as raising the amount of wages subject to the payroll tax (now capped at $106,800) and benefit changes based on longer life expectancy

http://www.aarp.org/work/social-security/info-05-2011/social-security-fears.html

Even without any changes, Social Security can continue paying full benefits through 2037. After that, the revenue from payroll taxes will still cover about 75 percent of promised benefits

http://www.aarp.org/work/social-security/info-05-2011/social-security-fears.2.html

If it's broke by 2037, then it WILL be broke by the time I retire. It will be broke for everyone under the age of 40.

Per the CBO, the disability trust fund (SSDI) will be completely broke by 2018. This happened once before in 1994 and the solution was to transfer funds from SS to DI. I expect that will probably happen again, which will accelerate the general fund's bankruptcy.

Interesting that while AARP (which I have no respect for) is claiming that "going broke" is a myth, they also acknowledge that changes to payroll taxes and "benefit changes based on life expectancy" are needed to keep it solvent. If it was a myth, why would it need to be changed?

 

[dejr_8]

No...the reason SS is in trouble is because the government has been borrowing money from it and not paying it back

Perhaps some need to do some more research about the problem.

SS is going broke because there are more consumers (i.e. retirees) than producers (i.e. workers). There is - or shortly will be - a net payout of SS funds on a yearly basis. What the Federal Government has done with the surplus to date is not affecting the solvency of SS. There are IOUs there that the Feds will make up with using general tax funds (or additional borrowing).

As a PP stated, sometime around 2037 the "surplus" will be exhausted and SS will be run a deficit - that is there won't be sufficient funds to pay all the benefits.

The way to shift the equation is to make more workers and less retirees. This can be accomplished by raising the retirement age.

 

[NotUrsula]

It has already been raised, and while I think that we probably could eke out another year or two without getting too punitive, we are reaching the upper limits of what constitutes normal ability to keep working full-time for the majority of Americans.

What really needs to be raised, IMO, is the income limit for being required to contribute. Right now it is at about $107K, and that is ridiculous. I'm all right with leaving the formula where it is for the self-employed, but for wage earners it should factor out higher than that given the state of the fund, and it should be even higher in situations where that wage-earner claims as a dependent a non-working spouse who is not disabled. Also, the "work credits" contribution could probably use some tweaking as well; contributing for 10 years probably shouldn't be enough for collecting full benefits nowadays.

When the original projections were made for SS benefits, the reasoning was that there were a large percentage of contributors who would die before collecting AND not have any minor survivors who could collect, and that that money would roll back in and cover the undercontributors. Back in 1935, when the birth rate was much higher and before modern antibiotics, transplants, and mass-scale blood transfusions, that made sense, but not now. Not only are healthy people living longer, but SICK people are living longer, and disability benefits are putting the most strain on the system because disabled recipients tend to collect for much longer than retirees. When disability coverage was added in 1956, the expectation for the lifespan of a totally disabled person was much shorter than it is now, before the 1984 relaxation of the benefits standard. (To be clear, I don't any have any issue with the concept of providing disability support to disabled Americans; I just don't think that the Social Security retirement fund was the place that it should have come from. That should have been separately funded so that it did not take money from the old-age pension fund.) http://www.nber.org/aginghealth/fall06/w12436.html

BTW, life expectancy for SS recipients has not actually risen that much since 1940, the year that regular benefits began to be paid out.
Average life expectancy in general has risen substantially, it is true, but that average includes children and does not take accident mortality rates into account. If you look at numbers for life expectancy changes only for those who have reached retirement age (65), the difference is much smaller; only about 5 years. http://www.ssa.gov/history/lifeexpect.html Once people get to be 65, accidents and death in military service drop way down the list of major cause of death, and that hasn't changed much since 1940. http://www.cdc.gov/injury/wisqars/LeadingCauses.html

 

[dejr_8]

What really needs to be raised, IMO, is the income limit for being required to contribute. Right now it is at about $107K, and that is ridiculous.

This would be a fundamental shift in SS policy. Currently, benefits are "linked" to the amount you paid in. If you raise the amount of income that can be taxed but don't increase the potential benefit that rule would no longer apply. In essence, SS would become another means to transfer wealth from one group to another.

Note: if you raise the amount that can be taxed while raising potential benefits I don't believe you will have solved any problems.

 

[golfgal]

It has already been raised, and while I think that we probably could eke out another year or two without getting too punitive, we are reaching the upper limits of what constitutes normal ability to keep working full-time for the majority of Americans.

What really needs to be raised, IMO, is the income limit for being required to contribute. Right now it is at about $107K, and that is ridiculous. I'm all right with leaving the formula where it is for the self-employed, but for wage earners it should factor out higher than that given the state of the fund, and it should be even higher in situations where that wage-earner claims as a dependent a non-working spouse who is not disabled. Also, the "work credits" contribution could probably use some tweaking as well; contributing for 10 years probably shouldn't be enough for collecting full benefits nowadays.

When the original projections were made for SS benefits, the reasoning was that there were a large percentage of contributors who would die before collecting AND not have any minor survivors who could collect, and that that money would roll back in and cover the undercontributors. Back in 1935, when the birth rate was much higher and before modern antibiotics, transplants, and mass-scale blood transfusions, that made sense, but not now. Not only are healthy people living longer, but SICK people are living longer, and disability benefits are putting the most strain on the system because disabled recipients tend to collect for much longer than retirees. When disability coverage was added in 1956, the expectation for the lifespan of a totally disabled person was much shorter than it is now, before the 1984 relaxation of the benefits standard. (To be clear, I don't any have any issue with the concept of providing disability support to disabled Americans; I just don't think that the Social Security retirement fund was the place that it should have come from. That should have been separately funded so that it did not take money from the old-age pension fund.) http://www.nber.org/aginghealth/fall06/w12436.html

But if you raise the limits on who has to contribute you have to pay out more in the end for those people too...

 

[moburg]

If it's broke by 2037, then it WILL be broke by the time I retire. It will be broke for everyone under the age of 40.

Per the CBO, the disability trust fund (SSDI) will be completely broke by 2018. This happened once before in 1994 and the solution was to transfer funds from SS to DI. I expect that will probably happen again, which will accelerate the general fund's bankruptcy.

Interesting that while AARP (which I have no respect for) is claiming that "going broke" is a myth, they also acknowledge that changes to payroll taxes and "benefit changes based on life expectancy" are needed to keep it solvent. If it was a myth, why would it need to be changed?

Didn't I read recently that SS paid out more than it took in THIS YEAR?? That date had been several years out in the future, but thanks to the roaring economy, the payroll taxes are down enough that it occurred this year.

There aren't enough workers in the Social Security Ponzi scheme to support the retiree's. And that's only going to get worse, not better. And when all the IOU's in that supposed "lock-box" are finally paid back with more and more loans from China, or wherever, then SS will in fact be broke.

Face it, if this system were put into place in the private market, the people running it would be thrown in jail! Bernie Madoff anyone??

 

[FredinFL]

 

[moburg]

Perhaps some need to do some more research about the problem.

SS is going broke because there are more consumers (i.e. retirees) than producers (i.e. workers). There is - or shortly will be - a net payout of SS funds on a yearly basis. What the Federal Government has done with the surplus to date is not affecting the solvency of SS. There are IOUs there that the Feds will make up with using general tax funds (or additional borrowing).

As a PP stated, sometime around 2037 the "surplus" will be exhausted and SS will be run a deficit - that is there won't be sufficient funds to pay all the benefits.

The way to shift the equation is to make more workers and less retirees. This can be accomplished by raising the retirement age.

When Social Security was implemented, the retirement age was 65, but life expectancy for men was 58 and women 62. It was designed so that a large enough percentage of the population would die before collecting too much benefit.

We're just not keeping up our end of the bargain and dying before we retire or collect too much.

 

[TB'sWidow]

I think the original poster kind of summed it all up when they said...we reached our income limit to pay into SS.

I don't have access to the figure right now while I type this but that is a pretty good yearly income and it is only June. Unfortunately, most people are not that lucky and do not make that kind of income, never have, never will.

Social Security is in trouble not for any of the reasons mentioned. Living longer? Yup! Some are. Not that many though. Poor people...save to retire? How exactly does one do that when they are spending every cent they can scrape together to keep a roof over their heads and food on the table.

No...the reason SS is in trouble is because the government has been borrowing money from it and not paying it back and because folks like the poster for some reason, totally unexplainable to me, can stop paying into it after they have earned more money then most of the rest of the population could even dream of. How is that even logical. If a poor person has to pay 7% of their almost non-existent income to SS. Why is it alright for a rich person to not pay the same 7%.

Also another reason that SS is in trouble is not because some poor old person lived a few years longer then convenient for us but because people with literally millions of dollars put away or invested at the time of their retirement get to pick from the SS fund at the same or higher rate then a person that is just barely making ends meet. They don't need it they already have more than enough money to last their lives, yet, they can and do still collect it. What for..to buy sun bonnets for their race houses.

Before anyone goes off on me about those statements, let me make it clear. I have nothing against people with money, but I do have something against people who are able to, but unwilling to, either pay their EQUAL percentage into the fund or then take from it's dwindling pot for themselves when it is totally unnecessary. Since they can retire whenever they want because of their wealth they feel that the proper answer is to make the working poor work a little longer, perhaps serving them coffee at the club.

Totally agree with this. Mary

 

[HeWhoMustNotBeNamed]

FICA max is $106,800. I, too, hit the max already this year. Should I keep paying all year? If that was the way it was set up, I would, without complaint. However, you should also keep in mind that there is a cap on the amount of social security I will draw. So if the laws were to change and I paid in all year with no cap, I would then expect to have no cap on the amount I am able to draw at retirement. The door would swing both ways.

I had previously posted that I did not think raising the age was a good idea. It has nothing to do with my personal financial situation; I'm 55 and I can tell that I'm not as sharp at my job as I used to be. If I had to do a physical job, I'd be in a world of hurt. It would not matter if I had enough money in the bank; my body is only physically capable of doing so much.

The cap was put into place for that very reason and I would be very opposed to doing away with the cap and having to double the amount that I pay in yearly with no benefit to that. I would much prefer raising the age limit.

 

[eliza61]

Perhaps some need to do some more research about the problem.

SS is going broke because there are more consumers (i.e. retirees) than producers (i.e. workers). There is - or shortly will be - a net payout of SS funds on a yearly basis. What the Federal Government has done with the surplus to date is not affecting the solvency of SS. There are IOUs there that the Feds will make up with using general tax funds (or additional borrowing).

As a PP stated, sometime around 2037 the "surplus" will be exhausted and SS will be run a deficit - that is there won't be sufficient funds to pay all the benefits.

The way to shift the equation is to make more workers and less retirees. This can be accomplished by raising the retirement age.

Maybe, maybe not. One of the downsides to older workers not retiring is that there is no place for "newer" workers to go, hence no real gain in jobs. so forcing those working now to work longer with out adding additional new jobs may not help.

 

[mefordis]

I can't imagine anyone making over $106k being in favor of raising the cap.

 

[RitaE]

Not only is there a large percentage of workers who are physically unable to work into their late 60's - there is also a large percentage of employers who are unwilling to continue to employ older workers.

A 60-some year old employee who makes twice what the equivalent college grad would require AND is a drain on the employer funded health plan is a prime candidate for the next round of "rightsizing."

Somewhere around 70% of all Social Security applicants today have not yet reached the full benefit retirement age.

I see many people who plan to work well into their retirement years. Unfortunately, it isn't all that easy for them to find a place to work at.

 

[dejr_8]

Maybe, maybe not. One of the downsides to older workers not retiring is that there is no place for "newer" workers to go, hence no real gain in jobs. so forcing those working now to work longer with out adding additional new jobs may not help.

If those older people are working then they aren't collecting SS and they are still paying into the system. That is a plus for SS on two fronts.

The issue you raise is unemployment (or under-employment) for younger workers. Different issue with no impact on SS.

 

[NotUrsula]

This would be a fundamental shift in SS policy. Currently, benefits are "linked" to the amount you paid in. If you raise the amount of income that can be taxed but don't increase the potential benefit that rule would no longer apply. In essence, SS would become another means to transfer wealth from one group to another.

Note: if you raise the amount that can be taxed while raising potential benefits I don't believe you will have solved any problems.

Yes, you would have to raise it, but presumably by the time the majority of those folks retire the baby boomer bulge that is putting such strain on the system will have passed. The thing is, the birth rate IS rising now (caveats for the current economic slump); it hit rock bottom in the late 1980's. If you implement measures to increase the size of the fund during the period of greatest strain they can always be repealed once the strain decreases.

Also, when you strike this particular bargain there is a hedge in it that bets that a certain percentage of those folks who are paying more will die before they collect that extra benefit.

Even without that, if we raise the number of "work credits" then we'll also realize some savings, and help to force younger people into the workforce for longer.

We could also raise the quota for H1B visas -- after all, those folks usually pay substantial taxes and tend to have more children than native-born Americans in the same professions.

 

[dejr_8]

Yes, you would have to raise it, but presumably by the time the majority of those folks retire the baby boomer bulge that is putting such strain on the system will have passed. The thing is, the birth rate IS rising now (caveats for the current economic slump); it hit rock bottom in the late 1980's. If you implement measures to increase the size of the fund during the period of greatest strain they can always be repealed once the strain decreases.

Also, when you strike this particular bargain there is a hedge in it that bets that a certain percentage of those folks who are paying more will die before they collect that extra benefit.

Even without that, if we raise the number of "work credits" then we'll also realize some savings, and help to force younger people into the workforce for longer.

We could also raise the quota for H1B visas -- after all, those folks usually pay substantial taxes and tend to have more children than native-born Americans in the same professions.

I think you have hit upon what should be the new SS Motto - Save your Retirement - Make More Babies

 

[tvguy]

Social Security wasn't meant to be a retirement plan, and still isn't. It was meant to support those who had become no longer physically able to work and to support the widows and orphans of people who died in their working years. .

Actually, you hit the nail on the head with what is wrong with social security. Social security was never ever intended to provide any benefits to the those who could no longer work, or widows, or orphans. (And I say that as someone whose father died when I was 9, and received benefits for 12 years) But congress added those benefits later, without increasing the amount of money being withheld.
Social Security was meant to be a supplement to people's retirement savings. But people starting saying "I'll get Social Security, I don't need to save for retirement".

 

[tvguy]

When Social Security was implemented, the retirement age was 65, but life expectancy for men was 58 and women 62. It was designed so that a large enough percentage of the population would die before collecting too much benefit.

We're just not keeping up our end of the bargain and dying before we retire or collect too much.

Not sure this is still the case, but when I was studying Socialized Medicine in the Soviet Union back in 1976, cigarettes were not taxed, and the government actually subsidized them. The reason was, they hoped it would reduce the life expectancy of citizens so they didn't spend as much time retired drawing a pension and running up hospital bills.

 

[HeWhoMustNotBeNamed]

Funny fact from Wikipedia article on Social Security:

The first monthly payment was issued on January 31, 1940 to Ida May Fuller of Ludlow, Vermont. In 1937, 1938 and 1939 she paid a total of $24.75 into the Social Security System. Her first check was for $22.54. After her second check, Fuller already had received more than she contributed over the three-year period. She lived to be 100 and collected a total of $22,888.92.[26]