Social Security

[rich_t]

It's a hot 3rd rail topic during practically every election cycle.

IMO it does need to be phased out of existence at some point.  It is currently unsustainable and was never intended to be a complete retirement plan as many today use it.

Far too many short sighted gullible people have allowed themselves to be convinced that they don't need to save for their retirement; that SS would be there for them to live on after retirement.  In addition far too many people are on SSDI that are actually capable of performing work to support themselves.  The system is rife with abuse and out right fraud (as are most entitlement programs).

So the question is, what to do with it?  How to eliminate it or at least significantly reform it?

My idea is (and I admit that I may not have thought it out as fully as it needs to be):

Folks currently 50 and older:  No change in your SS benefits or payroll deductions.

Folks 40-50: 30% reduction in benefit pay out (based on current pay out schedule).  50% reduction of what you pay into the system.

Folks 30-40: 60% reduction in benefit pay out (based on current pay out schedule).  80% reduction of what you pay into the system.

Folks under 30:  No benefit to be paid.  No payroll deduction.

Thoughts?

[thundley4]

Means testing?

*ducks and runs*

[Maxiest]

As much as I agree it needs to be phased out and I like your plan.  I don't think we live in an America that will ever allow it.

[rich_t]

As much as I agree it needs to be phased out and I like your plan.  I don't think we live in an America that will ever allow it.

I fear you are right.

The plebs have already discovered that they can vote themselves bread and circuses without limit and that the productive members of the body politic cannot stop them.

[Zeus]

Partial privatization on a voluntary basis.

stay with the existing program and realistically expect extension of the retirement age , discounted payout or both.

Go with voluntary partial privatization , say 2.5% of both employee & employer contributions Receive a discounted Soc Sec payout  at retirement based on contributions and are fully invested and own the privatization account. The private investment contributions directed to a choice from a cafeteria style of investment options.

[BigTex]

It's a hot 3rd rail topic during practically every election cycle.

IMO it does need to be phased out of existence at some point.  It is currently unsustainable and was never intended to be a complete retirement plan as many today use it.

Far too many short sighted gullible people have allowed themselves to be convinced that they don't need to save for their retirement; that SS would be there for them to live on after retirement.  In addition far too many people are on SSDI that are actually capable of performing work to support themselves.  The system is rife with abuse and out right fraud (as are most entitlement programs).

So the question is, what to do with it?  How to eliminate it or at least significantly reform it?

My idea is (and I admit that I may not have thought it out as fully as it needs to be):

Folks currently 50 and older:  No change in your SS benefits or payroll deductions.

Folks 40-50: 30% reduction in benefit pay out (based on current pay out schedule).  50% reduction of what you pay into the system.

Folks 30-40: 60% reduction in benefit pay out (based on current pay out schedule).  80% reduction of what you pay into the system.

Folks under 30:  No benefit to be paid.  No payroll deduction.

Thoughts?

Thats a nice plan but it would be a huge tax payer burden to phase it out

[thundley4]

Thats a nice plan but it would be a huge tax payer burden to phase it out

Someone is going to pay for it one way or another.

[BigTex]

Someone is going to pay for it one way or another.

But with already 16 trillion in debt you would be asking tax payers to tack on another 5 trillion or so just to phase out SS. People 30 and under are getting the major screw job in that phase out plan. Sure they dont have payroll deductions but their income tax will be footing the extra bill their entire lives with zero benefits for it.

[thundley4]

But with already 16 trillion in debt you would be asking tax payers to tack on another 5 trillion or so just to phase out SS. People 30 and under are getting the major screw job in that phase out plan. Sure they dont have payroll deductions but their income tax will be footing the extra bill their entire lives with zero benefits for it.

Regardless of whether it is phased out or not, someone that doesn't get any benefits from it is going to pay for those that do.

[Lacarnut]

LBJ started transferring the funds put into the SS system from the Trust Fund to the General Fund to pay for the V.N. war and the Great Society programs. This horrible decision gave the politicians a green light to rape and pillage the money that was deposit in there.

There are so many trillions in unfunded liabilities that there are no good plans to restore SS. Allowing younger workers an option to opt out sounds like a great idea but in reality the Fund will go bust sooner because of less revenues. Raising the age and increasing the rates is probably what the politicians will do. In 2014, Medicare premiums will more than double to $247 per month under Odumbocare. I look for the same thing to happen with other Federal Taxes  

Let's go back to what SS was intended for in the first place :
Only those who put in SS payments and their spouse are entitled to benefits
Illegals and kids are not
Allow disability benefits only after 3 Dr's have given the okay. Benefits would be cut from what they are today. Plus, they would have to take an examination at their expense to remain on the rolls. A 5% tax on all disability payments would be imposed. Let's make it harder for the explosion of people going on disability.
 

[BigTex]

Regardless of whether it is phased out or not, someone that doesn't get any benefits from it is going to pay for those that do.

Well if the politicians wernt beholden to the high turnout of seniors, they might be able to spread the burden out instead of sticking the younger generation with the bill.

[thundley4]

Well if the politicians wernt beholden to the high turnout of seniors, they might be able to spread the burden out instead of sticking the younger generation with the bill.

Which is why it ain't going to happen.

[BigTex]

Which is why it ain't going to happen.

and of course my generation refuses to pay the whole bill and get no benefits which is why we wont phase it out either, its a spiraling catch 22 of debt that will eventually destroy us.

[Zeus]

and of course my generation refuses to pay the whole bill and get no benefits which is why we wont phase it out either, its a spiraling catch 22 of debt that will eventually destroy us.

Precisely why partial if not total privatization needs careful consideration. Stock mkt loses is a smoke screen by those against the Idea. Since the inception of the stock mkt Historically you can start anywhere on the time line and cover a forty yr period and there has never been a net lose. This even includes the period of the great depression. Couple that with portion of Soc Sec still available it's a win/win for everyone.

[Maxiest]

Precisely why partial if not total privatization needs careful consideration. Stock mkt loses is a smoke screen by those against the Idea. Since the inception of the stock mkt Historically you can start anywhere on the time line and cover a forty yr period and there has never been a net lose. This even includes the period of the great depression. Couple that with portion of Soc Sec still available it's a win/win for everyone.

And I believe there has only been 1 time that any ten year period and a net lose. 

[Zeus]

And I believe there has only been 1 time that any ten year period and a net lose. 

Couple that with say the equivalent of 10% of an employees gross pay invested for 40 yrs at an annualized ROI of say 5-6% (which is a very Conservative estimate of ROI) you have a very respectable nest egg. Roughly 3X what you could expect from Conventional Soc Sec. Also you own the account , so unlike soc sec when you die the acct dies also, you can leave the remainder to family or friends.

[Maxiest]

Couple that with say the equivalent of 10% of an employees gross pay invested for 40 yrs at an annualized ROI of say 5-6% (which is a very Conservative estimate of ROI) you have a very respectable nest egg. Roughly 3X what you could expect from Conventional Soc Sec. Also you own the account , so unlike soc sec when you die the acct dies also, you can leave the remainder to family or friends.

Yes using the Average Weekly Pay of NONSUPERVISORY EMPLOYEES in the most current BLS.  An investment of 10% would be about $3400 a year.  The ROI you assumed is low but I still used it.  I used a compound interest calculator and the nest egg would be $557,762.12.  I would say that is more than 7 or 8 people would see from their SS.

[RobJohnson]

Let's make it harder for the explosion of people going on disability

.

In my short term on earth those that have worked the hardest while paying into the system had to hire a lawyer and wait years for benefits. These guys were in bad shape. One had to cut out a hole around his knee cap, just to get his jeans to fit....when he finally won disability, the lawyer got a nice cut, within a year he was in Chicago having major surgery, then extended care and passed away after being home less then a month. He was 56

A few have to screw it up for everyone. He simply slipped through the cracks, a top notch guy, a good friend, now gone.

[BigTex]

Precisely why partial if not total privatization needs careful consideration. Stock mkt loses is a smoke screen by those against the Idea. Since the inception of the stock mkt Historically you can start anywhere on the time line and cover a forty yr period and there has never been a net lose. This even includes the period of the great depression. Couple that with portion of Soc Sec still available it's a win/win for everyone.

Privatization is clearly the better option but there is still the problem of the shortfall to pay current and near retirees on conventional social security.

[RobJohnson]

Yes using the Average Weekly Pay of NONSUPERVISORY EMPLOYEES in the most current BLS.  An investment of 10% would be about $3400 a year.  The ROI you assumed is low but I still used it.  I used a compound interest calculator and the nest egg would be $557,762.12.  I would say that is more than 7 or 8 people would see from their SS.

Would the nest egg be taxed??????

[Maxiest]

Would the nest egg be taxed??????

I would hope that if they privatized it they would also implement something similar to 401ks or Roths.  Which both have tax advantages.

[zeitgeist]

Yes using the Average Weekly Pay of NONSUPERVISORY EMPLOYEES in the most current BLS.  An investment of 10% would be about $3400 a year.  The ROI you assumed is low but I still used it.  I used a compound interest calculator and the nest egg would be $557,762.12.  I would say that is more than 7 or 8 people would see from their SS.

If you want to play try this site which has a pretty simple calculator for determining future value.

I used these values:  monthly take out $ 3400.  Years to retirement 40

http://www.decisionaide.com/MPCalculators/RetirementPlanning/RetirementPlanning.asp#results

you may find the results interesting.

I would also point out that DIY internet retirement planning results may not be indicative of future returns.  $hit happens as they say which may fall outside the preprogramed results. Markets can and do go both down and up without regard to ones retirement date.  

[Zeus]

If you want to play try this site which has a pretty simple calculator for determining future value.

I used these values:  monthly take out $ 3400.  Years to retirement 40

http://www.decisionaide.com/MPCalculators/RetirementPlanning/RetirementPlanning.asp#results

you may find the results interesting.

I would also point out that DIY internet retirement planning results may not be indicative of future returns.  $hit happens as they say which may fall outside the preprogramed results. Markets can and do go both down and up without regard to ones retirement date.  

The S&P 500 has averaged an 11 percent annual rate of return since its 1957 inception. This rate of return includes several peaks and valleys that coincide with the economic cycle of growth, recession and recovery.

The S&P 500 surged throughout the late-1990s' technology boom. The index posted 38, 23, 33, 29 and 21 percent returns between 1995 and 1999. When the technology bubble collapsed into recession, the S&P 500 lost 9, 12 and 22 percent of its value between 2000 and 2002. The S&P 500 suffered a 37 percent loss in 2008 -- during the housing crisis.

Read more: The Historical Rate of Return for the Stock Market | eHow.com http://www.ehow.com/about_7421877_historical-rate-return-stock-market.html#ixzz28fSSeBlz

The Securities and Exchange Commission (SEC) recommends diversification to manage stock market risks while also allowing for long-term growth. A diversified portfolio may include both stocks and bonds. In recession, the bonds generate interest income to stabilize the portfolio. When the economy recovers, you can then expect your stocks to turn in strong gains.

Read more: The Historical Rate of Return for the Stock Market | eHow.com http://www.ehow.com/about_7421877_historical-rate-return-stock-market.html#ixzz28fSt8c4F

Historical Stock Market Returns

Historical S&P 500 Index Stock Market Returns
Year   Return   
1973   -14.7%
1974   -26.5%
1975   37.2%
1976   23.8%
1977   -7.2%
1978   6.6%
1979   18.4%
1980   32.4%
1981   -4.9%
1982   21.4%
1983   22.5
1984   6.3%
1985   32.2%
1986   18.5%
1987   5.2%
1988   16.8%
1989   31.5%
1990   -3.2%
1991   30.5%
1992   7.7%
1993   10.0%
1994   1.3%
1995   37.4%
1996   23.1%
1997   33.4%
1998   28.6%
1999   21.0%
2000   -9.1%
2001   -11.90%
2002   -22.1%
2003   28.7%
2004   10.9%
2005   4.9%
2006   15.9%
2007   5.5%
2008   -37.0%
2009   26.5%
2010   15.1%

[zeitgeist]

My only point is that it is those big negative "averages" that will slay ya if you are just gettin out of the market to retire.

I enjoy discussing financial options but would never recommend making decisions based solely on information gleened from the internet.  To me retirement planning invoves more than just putting money in a mutual fund 401k.   

Thirty or more years ago I took a great continuing education financial planning seminar at a local high school.  I have been very happy with the results of that decision. 

 

[Zeus]

My only point is that it is those big negative "averages" that will slay ya if you are just gettin out of the market to retire.

I enjoy discussing financial options but would never recommend making decisions based solely on information gleened from the internet.  To me retirement planning invoves more than just putting money in a mutual fund 401k.   

Thirty or more years ago I took a great continuing education financial planning seminar at a local high school.  I have been very happy with the results of that decision. 

 

If you been in for the long haul odds are your investments will have appreciated . Now one could quibble over the difference of of a 5% appreciation v. a 10% appreciation when one chooses to get out but the bottom line is it's still a gain.

The role one plays in an investment strategy, be it an active or passive role, is up to the particular investor.  it's a fair assumption most would choose a passive role and leave it up to fund managers to direct the particulars of what stocks/bonds are in play.

Also unless an individuals income changes often in essence their investment would be dollar cost averaging to lower the total average cost per share of the investment, giving the investor a lower overall cost for the shares purchased over time balancing return and risk.