Author Topic: Social Security will not be bankrupt  (Read 11372 times)

Davids

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Re: Social Security will not be bankrupt
« Reply #50 on: June 08, 2018, 07:07:58 PM »
I am 36. I do not account for social security in any calculation. If it is there for me then great it is an added bonus.

seattlecyclone

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Re: Social Security will not be bankrupt
« Reply #51 on: June 08, 2018, 07:08:09 PM »
It's not about making sure they get the fruit of the tax rates they were wiling to impose on themselves.  But it is eminently fair to say if you were only willing to pay 15.2% flat tax on your income to fund older people's retirements, it's not reasonable for you to demand that the generation after you be required to pay a 20% flat tax, especially when you will have more disposable income than mnay of the workers paying that 20% flat tax.

Right, which is why I think it's best to get rid of this idea that the only acceptable way to fund social security is through a flat tax on current workers' wage income. Let's consider using revenue from the progressive income tax (that we use to pay for everything else) to pay for this as well. That would in many cases mean taxing well-off boomer retirees' IRA withdrawals to fund social security.

DreamFIRE

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Re: Social Security will not be bankrupt
« Reply #52 on: June 08, 2018, 08:58:31 PM »
It's not about making sure they get the fruit of the tax rates they were wiling to impose on themselves.  But it is eminently fair to say if you were only willing to pay 15.2% flat tax on your income to fund older people's retirements, it's not reasonable for you to demand that the generation after you be required to pay a 20% flat tax, especially when you will have more disposable income than mnay of the workers paying that 20% flat tax.

Right, which is why I think it's best to get rid of this idea that the only acceptable way to fund social security is through a flat tax on current workers' wage income. Let's consider using revenue from the progressive income tax (that we use to pay for everything else) to pay for this as well. That would in many cases mean taxing well-off boomer retirees' IRA withdrawals to fund social security.

I wouldn't mind paying higher payroll taxes to help fund SS.  I'm already paying higher taxes to subsidize families and children.  I have less of an issue paying higher taxes to help our vulnerable senior citizens who are effectively receiving cuts to their SS benefits as noted here:

https://forum.mrmoneymustache.com/welcome-to-the-forum/social-security-will-not-be-bankrupt/msg2031636/#msg2031636

For those over 10 years from SS age of 62, the full retirement age should be raised similarly to how it was raised for those who are nearing retirement now.  Eliminate the cap on SS taxed earnings, add a bit of a FICA tax on capital gains for high earners.  Stop providing spousal benefits to spouses who never worked 40 quarters while the spouse who was qualified for benefits is still alive.  Means testing based on total retirement income.  This shares some of the pain without hurting seniors in need.

zolotiyeruki

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Re: Social Security will not be bankrupt
« Reply #53 on: June 08, 2018, 11:47:33 PM »
For higher wage earners and savvy mustachians,  SS is a colossally bad deal when compared to simply investing the money in an index fund. So how about this idea: allow people to partially opt out of SS. Their SS taxes go down by, say, 50%, but they forfeit 66% of the benefit they would accrue. This (in the long term) helps SS stay solvent, by reducing future expenditures more than it reduces contributions. Those who have opted out benefit as well, by having the opportunity to invest more in a higher-yield portfolio.

pecunia

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Re: Social Security will not be bankrupt
« Reply #54 on: June 09, 2018, 08:21:05 AM »
You know I've read mst of the posts and you guys are all making one big mistake.

You think the government is going to handle Social Security in an honest way.  You can increase the upper limit, raise ages or increase payroll taxes.

Come on guys.  How have they been paying for those foreign wars? 

They borrow the money and they print more.  Certainly, in the long run it leads to the money being worth less, but the immediate issue is solved.

Politicians of today are not like those of the 1930s when Social Security was conceived.  These guys work for the big corporate masters who look no further than 3 months into the future.  These same guys control the sources of news so it's likely that as Social Security goes deeper and deeper into a hole, that we won't even hear about it.  Besides, some of today's politicians subscribe to the ideas of crazy authors like Ayn Rand so they don't even believe in the idea of Social Security.

So borrow more money and print more.

The checks for the old folks will effectively be reduced and they will complain.  Politicians will point out that the checks have actually gone up and leave out the fact that the dollars are worth a lot less.  They will smile at the old people and say, "I'll do what I can to help."  In a few years the old people will be in a nursing home or dead and no more complaints will be heard.

BTDretire

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Re: Social Security will not be bankrupt
« Reply #55 on: June 09, 2018, 08:38:15 AM »
Quote
The fact that you paid taxes isn't a great reason to make younger people pay higher taxes than you did.

I agree 100%, if you agree that this line of reasoning should have applied to the prior generation too.

If my math is correct, folks claiming full SS benefits today are 66 years old.  Assuming they were born in about 1952, and began working at age 18 in about 1970.  Those people paid less than the current 6.2% rate all the way up until 1990.

  That may be true, on the other hand, those pre 1990 contributions have had 28 to 46 years to compound if you started paying when you were 20 years old.

BTDretire

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Re: Social Security will not be bankrupt
« Reply #56 on: June 09, 2018, 08:47:21 AM »
It's not about making sure they get the fruit of the tax rates they were wiling to impose on themselves.  But it is eminently fair to say if you were only willing to pay 15.2% flat tax on your income to fund older people's retirements, it's not reasonable for you to demand that the generation after you be required to pay a 20% flat tax, especially when you will have more disposable income than mnay of the workers paying that 20% flat tax.

Right, which is why I think it's best to get rid of this idea that the only acceptable way to fund social security is through a flat tax on current workers' wage income. Let's consider using revenue from the progressive income tax (that we use to pay for everything else) to pay for this as well. That would in many cases mean taxing well-off boomer retirees' IRA withdrawals to fund social security.

 Can we consider "well-off boomers" as those who had high incomes rather than high savings? :-)
I'm a "well-off boomer" but only averaged an inflation adjusted $71k over the last 36 years.
 Don't take my savings just because I decided to live below my income, while the family that made $120k
and spent it all, would not have to pay.


DreamFIRE

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Re: Social Security will not be bankrupt
« Reply #58 on: June 09, 2018, 08:57:29 AM »
You know I've read mst of the posts and you guys are all making one big mistake.

You think the government is going to handle Social Security in an honest way.  You can increase the upper limit, raise ages or increase payroll taxes.

Or ALL of those and a few other things that I mentioned a few posts back.  There's no reason it has to be just "one" thing to address the issue.  I think "opting out" is a non-starter, though.

Quote
Politicians will point out that the checks have actually gone up and leave out the fact that the dollars are worth a lot less.

And taxed a lot more due to the reasons I mentioned earlier regarding the formula for determining the amount of benefits that are taxable which exposes a greater percentage of SS income to taxation every year.

Quote
They will smile at the old people and say, "I'll do what I can to help."  In a few years the old people will be in a nursing home or dead and no more complaints will be heard.

Bu there's always more old people coming along.  And younger people should be looking out for them and speaking up also, as if we are lucky, we will all be old some day.  Think about your future old self, friends, relatives, etc.

DreamFIRE

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Re: Social Security will not be bankrupt
« Reply #59 on: June 09, 2018, 09:03:51 AM »
Can we consider "well-off boomers" as those who had high incomes rather than high savings? :-)
I'm a "well-off boomer" but only averaged an inflation adjusted $71k over the last 36 years.
 Don't take my savings just because I decided to live below my income, while the family that made $120k
and spent it all, would not have to pay.

^This.  I make the same argument, and this is why in my "means testing" comment earlier, I stated that it would be based on retirement "income", not "assets".  So if someone was raking in over $50K/yr in pension and taxable income in addition to SS benefits, they would see a significant reduction in SS benefits, but not the guy who saved $1M living off a lower amount of taxable income.  I don't think savers should be punished vs. those who spent their money like drunken sailors, and I think it would be a terrible idea to discourage saving, so means testing based on higher retirement income and pensions makes a lot more sense.

DreamFIRE

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Re: Social Security will not be bankrupt
« Reply #60 on: June 09, 2018, 09:19:40 AM »
https://nypost.com/2018/06/07/this-is-how-to-truly-save-social-security-and-medicare/

TL;DR  = put the burden entirely on seniors, screw seniors.  Raise the retirement age, slash benefits.

The old republican Medicare voucher program - no thanks.

pecunia

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Re: Social Security will not be bankrupt
« Reply #61 on: June 09, 2018, 10:25:17 AM »
Is there a way to turn this around and make it positive?

Could there be some sort of reward for having today's people in their sixties and seventies keep working?  Despite the opinions of many making these posts that people this age are a doddering bunch of drooling old codgers, it isn't true.  Seems like all of the solutions offered are "stick" solutions.  Are there any "carrot" solutions?

I'm not sure what it would be, but you folks have obviously given this a lot of thought.  Keeping people productive benefits us all.  There could even be some mental health benefits for those who would continue working.  The country is slowly falling apart.  People with a lifetime of skills could put it back together.  Why waste a vast resource of skilled (& unskilled) labor?  Even something like a rotation of three months on, three months off,  three months on could be a big winner.

Rosy

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Re: Social Security will not be bankrupt
« Reply #62 on: June 09, 2018, 10:55:21 AM »
It's not about making sure they get the fruit of the tax rates they were wiling to impose on themselves.  But it is eminently fair to say if you were only willing to pay 15.2% flat tax on your income to fund older people's retirements, it's not reasonable for you to demand that the generation after you be required to pay a 20% flat tax, especially when you will have more disposable income than mnay of the workers paying that 20% flat tax.

Right, which is why I think it's best to get rid of this idea that the only acceptable way to fund social security is through a flat tax on current workers' wage income. Let's consider using revenue from the progressive income tax (that we use to pay for everything else) to pay for this as well. That would in many cases mean taxing well-off boomer retirees' IRA withdrawals to fund social security.

 Can we consider "well-off boomers" as those who had high incomes rather than high savings? :-)
I'm a "well-off boomer" but only averaged an inflation adjusted $71k over the last 36 years.
 Don't take my savings just because I decided to live below my income, while the family that made $120k
and spent it all, would not have to pay.


Unintended consequences for frugal mustachians - good catch.

seattlecyclone

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Re: Social Security will not be bankrupt
« Reply #63 on: June 09, 2018, 11:23:53 AM »
It's not about making sure they get the fruit of the tax rates they were wiling to impose on themselves.  But it is eminently fair to say if you were only willing to pay 15.2% flat tax on your income to fund older people's retirements, it's not reasonable for you to demand that the generation after you be required to pay a 20% flat tax, especially when you will have more disposable income than mnay of the workers paying that 20% flat tax.

Right, which is why I think it's best to get rid of this idea that the only acceptable way to fund social security is through a flat tax on current workers' wage income. Let's consider using revenue from the progressive income tax (that we use to pay for everything else) to pay for this as well. That would in many cases mean taxing well-off boomer retirees' IRA withdrawals to fund social security.

 Can we consider "well-off boomers" as those who had high incomes rather than high savings? :-)
I'm a "well-off boomer" but only averaged an inflation adjusted $71k over the last 36 years.
 Don't take my savings just because I decided to live below my income, while the family that made $120k
and spent it all, would not have to pay.

I'm not proposing a wealth tax. I just think it's perfectly reasonable for income taxes we already charge to help pay for those on social security. I'm also saying that to the extent we need to cut spending to balance the budget, social security probably shouldn't be the default choice for what to cut first.

That may be true, on the other hand, those pre 1990 contributions have had 28 to 46 years to compound if you started paying when you were 20 years old.

There has been no compounding. The payroll taxes you paid have not been sitting in an account with your name on it earning interest ever since you paid them. Every penny of tax you paid has been spent already.

Roadrunner53

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Re: Social Security will not be bankrupt
« Reply #64 on: June 09, 2018, 11:35:23 AM »
Is there a way to turn this around and make it positive?

Could there be some sort of reward for having today's people in their sixties and seventies keep working?  Despite the opinions of many making these posts that people this age are a doddering bunch of drooling old codgers, it isn't true.  Seems like all of the solutions offered are "stick" solutions.  Are there any "carrot" solutions?

I'm not sure what it would be, but you folks have obviously given this a lot of thought.  Keeping people productive benefits us all.  There could even be some mental health benefits for those who would continue working.  The country is slowly falling apart.  People with a lifetime of skills could put it back together.  Why waste a vast resource of skilled (& unskilled) labor?  Even something like a rotation of three months on, three months off,  three months on could be a big winner.

Some of these ideas are good but I have worked with some nasty grouchy old people in my life that SHOULD have retired. They made everyone's life miserable. Some of them were just working because they had no clue what to do with themselves if they retired. The Hub worked with this Old electrician who would spend hours trying to piece together an electric line that should have been completely replaced with new stuff. If he had used new stuff the job would have taken 15 minutes compared to half a day. And in the end, it was an accident waiting to happen. I am not saying all old people are like this...but they do exist just as some young people are dregs. Sometimes, it is refreshing to get younger people in place with fresh ideas and enthusiasm. If we keep all the old people working till they are 80 it also is not freeing up jobs for young people.

I also don't think anyone who has paid into the SS system should be denied a SS check. If they are millionaires they have paid just like you and me. If they want to go to the horse races and gamble it all away, buy Cuban cigars or donate it to charity that is their right to do so. Maybe the government could offer a tax deduction for those who decline SS.

There has to be ways to fix SS. Why doesn't Congress hire some financial brains to do an intense study for say two years and put together some ideas. Congress certainly can't do the job and they all have their heads stuck in the sand so deep it would take tow trucks to pull them out.

powskier

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Re: Social Security will not be bankrupt
« Reply #65 on: June 09, 2018, 11:43:08 AM »
I just fixed Social Security!  Who do I send the bill to?  :)   See pic:




Subjecting all wages to payroll tax instead of only the wages below $128 k fixes 76%, looks like the place to start for me.
« Last Edit: June 09, 2018, 11:56:09 AM by powskier »

DreamFIRE

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Re: Social Security will not be bankrupt
« Reply #66 on: June 09, 2018, 12:03:36 PM »
Is there a way to turn this around and make it positive?

Could there be some sort of reward for having today's people in their sixties and seventies keep working? 

There already is, in a sense.  If you draw your SS at 62, you get reduced benefits.  If you wait until you're 70, you get a nice increase in benefits, which is rewarding for having worked longer and needing to draw SS benefits for fewer years than had you started at the standard age of 67.  However, on average, the total net cost to the SS system doesn't change (or a little if it takes you past the next bend point where your benefit grows more slowly).  If you are talking about making the reward even greater by waiting until 70, then that actually costs the SS system even more.  Rewards cost money, which brings us back to the other options.
« Last Edit: June 09, 2018, 12:05:12 PM by DreamFIRE »

austin944

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Re: Social Security will not be bankrupt
« Reply #67 on: June 09, 2018, 12:35:16 PM »
Just came across a morningstar article which explained that 79% of social security is funded by payroll taxes. so there will still a reduced amount of social security even if the social security trust funds are used up.

http://www.morningstar.com/articles/868505/social-security-isnt-going-away.html

There is no SS "trust fund"; that money has already been spent by the government (2.9 trillion dollars).  The so-called trust fund is nothing more than a bunch of IOUs issued by the government for funds which it does not currently possess.  It would either have to raise taxes or borrow that money in order to pay off the IOUs.

Social Security fits the definition of a Ponzi scheme:
http://thehill.com/opinion/campaign/391364-social-security-isnt-going-broke-its-already-broke



Undecided

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Re: Social Security will not be bankrupt
« Reply #68 on: June 09, 2018, 12:55:16 PM »
I just fixed Social Security!  Who do I send the bill to?  :)   See pic:




Subjecting all wages to payroll tax instead of only the wages below $128 k fixes 76%, looks like the place to start for me.

After the high priority Congress just placed on 2-3 percentage point reductions in the marginal tax rates for high earners, do you think a 15.3 percentage point increase is a remote likelihood?

DreamFIRE

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Re: Social Security will not be bankrupt
« Reply #69 on: June 09, 2018, 12:56:22 PM »
Just came across a morningstar article which explained that 79% of social security is funded by payroll taxes. so there will still a reduced amount of social security even if the social security trust funds are used up.

http://www.morningstar.com/articles/868505/social-security-isnt-going-away.html

There is no SS "trust fund"; that money has already been spent by the government (2.9 trillion dollars).  The so-called trust fund is nothing more than a bunch of IOUs issued by the government for funds which it does not currently possess.  It would either have to raise taxes or borrow that money in order to pay off the IOUs.

Social Security fits the definition of a Ponzi scheme:


That is absolutely false.  There most certainly is a SS trust fund, and it contains government securities which pay interest.  It is not expected to be depleted for many years:

https://en.wikipedia.org/wiki/Social_Security_Trust_Fund

SS is definitely not a Ponzi scheme, but is often parroted about by clueless people who have no understanding of what a Ponzi scheme is.

https://www.washingtonpost.com/blogs/ezra-klein/post/is-social-security-a-ponzi-scheme/2011/08/25/gIQA2t0dcL_blog.html?noredirect=on&utm_term=.496ab9622589

pecunia

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Re: Social Security will not be bankrupt
« Reply #70 on: June 09, 2018, 01:16:31 PM »
Roadrunner 53-1/2:
Quote
If we keep all the old people working till they are 80 it also is not freeing up jobs for young people.

I've made similar comments on this website and have been greeted with the response that it is not a "Zero Sum Game." 

Some jobs that should be filled are never filled.  Some jobs that should be posted are never posted.   There are many things that should be done that are not done.  Or so I've been told.  I believe it.

I've read the demographics in an earlier post that said two people would be paying for every single person on social security.  It seems that if there are older people who are able and willing to work, it may assist with this threatening demographic.

I don't know about 80 though, not all will get there.

DreamFIRE

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Re: Social Security will not be bankrupt
« Reply #71 on: June 09, 2018, 01:17:20 PM »
I just fixed Social Security!  Who do I send the bill to?  :)   See pic:




Subjecting all wages to payroll tax instead of only the wages below $128 k fixes 76%, looks like the place to start for me.

After the high priority Congress just placed on 2-3 percentage point reductions in the marginal tax rates for high earners, do you think a 15.3 percentage point increase is a remote likelihood?

These changes don't necessarily need done today or with the current republican congress, but the sooner the better.  We need to do this for our seniors and future seniors (that includes most of us if we are lucky), and I wouldn't mind paying an additional 4% of my income to a payroll tax to help prop up the system for long term sustainabilility.  If we can vote out republicans, we have a better shot in the future.

Also, this should be done along with other changes.  For those over 10 years from SS age of 62, the full retirement age should be raised similarly to how it was raised for those who are nearing retirement now.  For a 50 year old, increase FTA by 1 year, for a 45 year old, increase by 2 years, and so on, as needed to stabilize the system long term without hurting current seniors and those within a decade of retirement.  Eliminate the cap on SS taxed earnings, add a bit of a FICA tax on capital gains for high earners.  Stop providing spousal benefits to spouses who never worked 40 quarters while the spouse who was qualified for benefits is still alive.  Means testing based on non-SS income such as pension and taxable income totaling over $50K/yr.  This shares some of the pain without hurting seniors in need.  And of course, we need to stop taxing a greater percentage of the benefits each year, which is effectively a benefit cut.  The formula should be indexed to inflation using CPI-E as should the benefits themselves.

https://forum.mrmoneymustache.com/welcome-to-the-forum/social-security-will-not-be-bankrupt/msg2031636/#msg2031636

TheWifeHalf

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Re: Social Security will not be bankrupt
« Reply #72 on: June 09, 2018, 02:34:24 PM »
Keeping people productive benefits us all. 

When TheHusbandHalf retires, that opens up another job for a younger employee, and his job becomes open for a recent hire.
That has to be good for the employment rate that politicians are always talking about. 
Make it too expensive to retire, sorry young guy, it's not your turn yet.

The last time there was a hiring class, a person needed a college degree (any degree) to apply. Military experience qualified. I think now there is even a program there getting ex military folks applying. I think they just want to see that the applicant can stick with something - they spend a lot of money on the applicant during the year long training. There are a lot of college graduates who need jobs too.

So, keeping people does not benefit all. Where THH works, keeping old people productive only helps them, the employer.

BTDretire

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Re: Social Security will not be bankrupt
« Reply #73 on: June 09, 2018, 04:33:34 PM »
It's not about making sure they get the fruit of the tax rates they were wiling to impose on themselves.  But it is eminently fair to say if you were only willing to pay 15.2% flat tax on your income to fund older people's retirements, it's not reasonable for you to demand that the generation after you be required to pay a 20% flat tax, especially when you will have more disposable income than mnay of the workers paying that 20% flat tax.

Right, which is why I think it's best to get rid of this idea that the only acceptable way to fund social security is through a flat tax on current workers' wage income. Let's consider using revenue from the progressive income tax (that we use to pay for everything else) to pay for this as well. That would in many cases mean taxing well-off boomer retirees' IRA withdrawals to fund social security.

 Can we consider "well-off boomers" as those who had high incomes rather than high savings? :-)
I'm a "well-off boomer" but only averaged an inflation adjusted $71k over the last 36 years.
 Don't take my savings just because I decided to live below my income, while the family that made $120k
and spent it all, would not have to pay.

I'm not proposing a wealth tax. I just think it's perfectly reasonable for income taxes we already charge to help pay for those on social security. I'm also saying that to the extent we need to cut spending to balance the budget, social security probably shouldn't be the default choice for what to cut first.

That may be true, on the other hand, those pre 1990 contributions have had 28 to 46 years to compound if you started paying when you were 20 years old.

There has been no compounding. The payroll taxes you paid have not been sitting in an account with your name on it earning interest ever since you paid them. Every penny of tax you paid has been spent already.

 I'm well aware, Just a snide way to say, I started paying money into an account 48 years ago and it wasn't invested
they way I would have did it.
 On the other hand, it's nice to know I have a source of income that is about a secure as you can get.

Bateaux

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Re: Social Security will not be bankrupt
« Reply #74 on: June 09, 2018, 08:24:26 PM »
I'm 12 years away from eligibility.   I can't imagine Social Security being solvent by then.  If it is I'll be dancing in the streets.

Adam Zapple

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Re: Social Security will not be bankrupt
« Reply #75 on: June 10, 2018, 05:43:24 AM »
I completely agree with those who oppose raising the SS eligibility age.  Not everyone is a desk jockey.  There's a huge part of the population who work in physically demanding jobs.  They face several obstacles to ensuring a stable retirement...no access to company retirement plans, less access to retirement planning information (they don't sit in front of computers all day), forced early retirement due to injuries, lack of transferable skills in the case of job loss, etc. etc. etc.

For higher wage earners and savvy mustachians,  SS is a colossally bad deal when compared to simply investing the money in an index fund. So how about this idea: allow people to partially opt out of SS. Their SS taxes go down by, say, 50%, but they forfeit 66% of the benefit they would accrue. This (in the long term) helps SS stay solvent, by reducing future expenditures more than it reduces contributions. Those who have opted out benefit as well, by having the opportunity to invest more in a higher-yield portfolio.

On the surface, this is a decent idea.  I would love to have this option.  The problem is that the people who would most likely opt-out are those who will be needing the benefit the most in retirement age - the poor and everyone who is living above their means.




zolotiyeruki

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Re: Social Security will not be bankrupt
« Reply #76 on: June 10, 2018, 07:30:00 AM »
I completely agree with those who oppose raising the SS eligibility age.  Not everyone is a desk jockey.  There's a huge part of the population who work in physically demanding jobs.  They face several obstacles to ensuring a stable retirement...no access to company retirement plans, less access to retirement planning information (they don't sit in front of computers all day), forced early retirement due to injuries, lack of transferable skills in the case of job loss, etc. etc. etc.

For higher wage earners and savvy mustachians,  SS is a colossally bad deal when compared to simply investing the money in an index fund. So how about this idea: allow people to partially opt out of SS. Their SS taxes go down by, say, 50%, but they forfeit 66% of the benefit they would accrue. This (in the long term) helps SS stay solvent, by reducing future expenditures more than it reduces contributions. Those who have opted out benefit as well, by having the opportunity to invest more in a higher-yield portfolio.

On the surface, this is a decent idea.  I would love to have this option.  The problem is that the people who would most likely opt-out are those who will be needing the benefit the most in retirement age - the poor and everyone who is living above their means.
That's a fair point.  So maybe instead of just giving them that money, it's invested into a 401k or IRA of their choice?

pecunia

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Re: Social Security will not be bankrupt
« Reply #77 on: June 10, 2018, 07:40:01 AM »
The Wife Half:

Quote
When TheHusbandHalf retires, that opens up another job for a younger employee, and his job becomes open for a recent hire.

I didn't quite understand your argument.  However, let me try to explain where I am coming from a little differently.

What happens to the money people make when they work?

Answer:  They spend it.

If people are retired and on a limited income, what is different?

Answer:  They spend less

If more people are working in an economy what happens?

Answer:  More money is spent.  With more money being spent, there is a demand for more people to provide the goods and services for which the money is spent.  The economy grows.  More jobs are created.

If you have a lot of older people on limited incomes, for the most part they will spend less money to maximize their existence.  they will not be purchasing more than the minimum it takes to survive.  There will be a need for less jobs.

Retired people are not contributing to our economy.  Those that are working are helping employers and their customers.  They are not an additional burden on our society.

So again, I repeat my comment.  Why not work out some positive way for people to work longer if they so desire?  It seems like there is both a societal and individual benefit for this to occur.

Quote
Make it too expensive to retire, sorry young guy, it's not your turn yet.

Sounds bad to a lot of the people posting here.  This is why they are living frugally and investing a major portion of their incomes.

zolotiyeruki

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Re: Social Security will not be bankrupt
« Reply #78 on: June 10, 2018, 08:01:56 AM »
I didn't quite understand your argument.  However, let me try to explain where I am coming from a little differently.

What happens to the money people make when they work?

Answer:  They spend some of it and some gets saved for retirement.

If people are retired and on a limited income, what is different?

Answer:  They sometimes spend less on some things and more on others, and much of that change is driven by age, not just employment status

If more people are working in an economy what happens?

Answer:  More money is spent.  With more money being spent, there is a demand for more people to provide the goods and services for which the money is spent.  The economy grows.  More jobs are created.

If you have a lot of older people on limited incomes, for the most part they will spend less money to maximize their existence.  they will not be purchasing more than the minimum it takes to survive.  There will be a need for less jobs. Actually, this is just wrong--the retiree removes one person from the workforce, but reduces their economic demand by less than 1 person's productivity

Retired people are not contributing to our economy but are living off their past contributions to the economy.  Those that are working are helping employers and their customers.  They are not an additional burden on our society.

So again, I repeat my comment.  Why not work out some positive way for people to work longer if they so desire?  It seems like there is both a societal and individual benefit for this to occur.
You're both...sorta right.  It's a bit more nuanced.  I've added some edits to the quote above to add some of the necessary nuance.  It's not quite as simple as you put it.  The person who decides not to retire increases the number of workers, which tends to suppress wages.

pecunia

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Re: Social Security will not be bankrupt
« Reply #79 on: June 10, 2018, 08:24:03 AM »
zoloruski or what:
Quote
Retired people are not contributing to our economy but are living off their past contributions to the economy

Good points - edits, but Social Security is pay as you go.  If these post 62 folks are still working, they are still paying into the pay as you go system.

Hopefully, they can live off past contributions to the economy, but data indicates people don't save a lot.  Persons on this website being the exception and not the rule.

DreamFIRE

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Re: Social Security will not be bankrupt
« Reply #80 on: June 10, 2018, 08:28:10 AM »

If people are retired and on a limited income, what is different?

Answer:  They spend less

Retired people are not contributing to our economy.

I disagree.  When I retire, I will more than double my spending vs. current spending.  I have it all documented in spreadsheets.  All that spending will be good for the economy.

maizeman

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Re: Social Security will not be bankrupt
« Reply #81 on: June 10, 2018, 08:31:23 AM »
In the last jobs report we had crossover such that there are now more job opening than people looking for work for the first time since at least 2000 (the ratio peaked in the recession at seven people looking for work per job).

It's actually a bit worse than it sounds because many of the job openings are in manufacturing and employers report they're not able to find any candidates with the necessary skills/abilities to hire, so for jobs requiring higher thresholds of training/ability it sounds like the ratio is already far below one.

I bring this up because the effect of a person retiring and leaving the labor force can vary based on the employment situation. Already discussed this in the case of specific professions with barriers to entry in the hourglass economy thread.

TL;DR version: if you retire when there are lots of equally skilled and qualified people who are either unemployed or constantly entering the job market in excess of regular job growth, retiring probably means one extra person gets a job. If you retire when there aren't enough people with the abilities, credentials, and interest to get jobs like yours, you may drive up wages for your co-workers,* but you're likely not going to give an extra person a job by retiring. As a whole it sounds like our economy more resembles the second case at the moment, although their certainly may be exceptions for individual fields.

(Darn it, even my TL;DRs end up long and complicated and require footnotes.)

*Depending on how inelastic demand is for the type of work you provide.

zolotiyeruki

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Re: Social Security will not be bankrupt
« Reply #82 on: June 10, 2018, 09:20:37 AM »
zoloruski or what:
Quote
Retired people are not contributing to our economy but are living off their past contributions to the economy

Good points - edits, but Social Security is pay as you go.  If these post 62 folks are still working, they are still paying into the pay as you go system.
I think we're talking about two different things on this point.  I was talking about the economy as a whole, you're talking about SS as a system.  Retirees stop contributing and start withdrawing from the system, true.  But the person that replaces them at that position also starts contributing to the system.

tomsang

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Re: Social Security will not be bankrupt
« Reply #83 on: June 10, 2018, 10:11:53 AM »
There are a lot of people that say that the reason Social Security is underfunded is because 1) government stole the money 2) the money was not invested 3) illegal immigrants are getting the benefits 4) lots of waste in the system 5) etc.

None of these are accurate.  The reason Social Security is underfunded is that the actuarial life of our population keeps increasing and benefits increased.  Those running Social Security had a hazy picture of what the lifespan would actually be and what the politicians would do to benefits.  They figured this out and cranked up the withholding almost yearly for over 50 years.  Then in 1990, the rate has been stuck at 6.2% even though our actuarial lives and payments have increased over the years.

Social Security withholding since inception.
https://payroll.wsu.edu/taxes/taxes-hist-oasi/

Actuarial lifespan
https://www.infoplease.com/us/mortality/life-expectancy-age-1850-2011

Our politicians could easily correct this situation in many ways.  They could transfer $1 trillion from our general deficit to the Social Security trust fund.  We just transferred $1 trillion to corporations and the 1%, a trillion added to the Social Security Trust Fund would benefit all people.  Instead, the GOP is using the projected deficit as an excuse to reduce or eliminate entitlements for the poor and middle class. They are talking about increasing retirement age, decreasing benefits, and getting rid of it completely.

Once we true up the Social Security deficit we could make it a law that the withholding rates change with the actuarial lives and changes to the benefits.  Currently, people feel like they are paying into something that they are not going to get.  If we true it up with a transfer, then everyone knows that their payroll taxes are going to something that they will use.

Then we can focus on paying off our $22 trillion in national debt.  As an accountant, I can tell you giving a trillion or so to corporations and the 1% is not helping the national debt. 

DreamFIRE

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Re: Social Security will not be bankrupt
« Reply #84 on: June 10, 2018, 10:22:14 AM »
Good points - edits, but Social Security is pay as you go.  If these post 62 folks are still working, they are still paying into the pay as you go system.

I addressed this earlier, but while many people will settle for reduced benefits at 62, many may work until  67 or older  Sure, they continue to pay into SS through the payroll tax, but they also will receive larger benefits when they eventually retire and draw SS, and the system is designed so this balances out.  And if you "reward" them with even higher benefits for waiting than the current system provides, that actually makes the SS funding problem even worse, not that I don't think they deserve better benefits, hence my inflation based comments earlier.

TheWifeHalf

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Re: Social Security will not be bankrupt
« Reply #85 on: June 10, 2018, 01:36:34 PM »
The Wife Half:

Quote
When TheHusbandHalf retires, that opens up another job for a younger employee, and his job becomes open for a recent hire.

I didn't quite understand your argument. 

THH A   works in the control room and retires

B gets his job.  B is not a new hire, he worked and tested to get qualification to work in the control room. A's job opens up, B bids on it, and gets A's job

C, a new hire, gets B's job

In the next year, this is going to happen often.
A couple of people are taking their paycheck, and sending some home to their parents in another country.

TheWifeHalf

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Re: Social Security will not be bankrupt
« Reply #86 on: June 10, 2018, 01:46:46 PM »
The person who decides not to retire increases the number of workers, which tends to suppress wages.

Not where THH works. The contract specifies a certain number of hourly workers, period. Only when that number is reduced, is a new person hired. The wages are in the contract, each job is paid a specific hourly wage.
Since they are on 12 hour shifts they can only work an extra 4 hours/shift according to state law.

zolotiyeruki

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Re: Social Security will not be bankrupt
« Reply #87 on: June 10, 2018, 02:56:27 PM »
The person who decides not to retire increases the number of workers, which tends to suppress wages.

Not where THH works. The contract specifies a certain number of hourly workers, period. Only when that number is reduced, is a new person hired. The wages are in the contract, each job is paid a specific hourly wage.
Since they are on 12 hour shifts they can only work an extra 4 hours/shift according to state law.
That's true for THH's specific situation, but I'm talking about the economy in the aggregate.

pecunia

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Re: Social Security will not be bankrupt
« Reply #88 on: June 10, 2018, 07:16:38 PM »
Quote
I addressed this earlier, but while many people will settle for reduced benefits at 62, many may work until  67 or older  Sure, they continue to pay into SS through the payroll tax, but they also will receive larger benefits when they eventually retire and draw SS, and the system is designed so this balances out.

https://www.cnbc.com/2016/06/03/dont-make-this-gigantic-social-security-mistake-commentary.html

Break even is in the early eighties.  (If you live that long.)  This is an incentive for many, but could there be another positive incentive other than money for people in their sixties to keep working?  That upcoming ratio of two people working for every recipient sounds mighty nasty.

Quote
Instead, the GOP is using the projected deficit as an excuse to reduce or eliminate entitlements for the poor and middle class. They are talking about increasing retirement age, decreasing benefits, and getting rid of it completely.

Hmmmm - Maybe I shouldn't vote for those guys.  On the other hand, we never did get that oil benefit from the Iraq war.  It is overdue and the spoils of war could be used to offset the deficit in Social Security.  This would solve two problems for the GOP.  They would be solving the Social Security problem and it would help them not to lose the votes of older Americans.


zolotiyeruki

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Re: Social Security will not be bankrupt
« Reply #89 on: June 10, 2018, 07:43:01 PM »
Quote
Instead, the GOP is using the projected deficit as an excuse to reduce or eliminate entitlements for the poor and middle class. They are talking about increasing retirement age, decreasing benefits, and getting rid of it completely.

Hmmmm - Maybe I shouldn't vote for those guys.  On the other hand, we never did get that oil benefit from the Iraq war.  It is overdue and the spoils of war could be used to offset the deficit in Social Security.  This would solve two problems for the GOP.  They would be solving the Social Security problem and it would help them not to lose the votes of older Americans.
Um, the rich don't receive any entitlements, so of course you're cutting entitlements to the poor and middle class if you cut them at all.

DreamFIRE

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Re: Social Security will not be bankrupt
« Reply #90 on: June 10, 2018, 08:15:30 PM »
Quote
I addressed this earlier, but while many people will settle for reduced benefits at 62, many may work until  67 or older  Sure, they continue to pay into SS through the payroll tax, but they also will receive larger benefits when they eventually retire and draw SS, and the system is designed so this balances out.

Break even is in the early eighties.  (If you live that long.)  This is an incentive for many, but could there be another positive incentive other than money for people in their sixties to keep working?  That upcoming ratio of two people working for every recipient sounds mighty nasty.

Just for clarification, the balancing out I was referring to is the aggregate of all SS recipients.  Any particular individual may never receive any or may live to 100 and collect more than the average for someone who has paid in the same amount.

Quote
Hmmmm - Maybe I shouldn't vote for those guys.  On the other hand, we never did get that oil benefit from the Iraq war.  It is overdue and the spoils of war could be used to offset the deficit in Social Security.  This would solve two problems for the GOP.  They would be solving the Social Security problem and it would help them not to lose the votes of older Americans.

I can't see the GOP stabilizing SS in anyway that doesn't cut benefits.  They aren't going to increase taxes.   They also still want to convert Medicare into a voucher program:

http://thehill.com/opinion/healthcare/376767-gops-voucher-system-for-medicare-would-lead-to-the-programs-demise

Acastus

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Re: Social Security will not be bankrupt
« Reply #91 on: June 11, 2018, 08:28:49 AM »
I think the largest hurdle in having a meaningful discussion about Social Security is the age old conceit that it is somehow a separate entity, distinct from the federal government. Income taxes and SS taxes have been linked for decades. When SS collected too much, the rest of the government spent the excess. Now that SS costs more, funds from income tax are needed to balance the ledger.

It would be more productive to decide how we will tax people as one topic, and decide what programs we want as a separate topic. Once we know what we want, then we just need to make the numbers match.

Americans clearly need a pension plan. We have taken on all the personal responsibility we can handle by switching company pensions to 401k's. We need something to rely on that Big Brother manages and takes the risk for if there is a shortfall. It would be great if this were a true pension fund, but I see 20 years of heartache, bankruptcy, and early death getting from the current pay-as-you-go system to a pension fund. Both systems would need to be funded during the 30 ish year startup, so I think we are stuck with the current system. We could fiddle with payouts somewhat, but since so many people rely on this as their primary source of money, adjustments have to be minor.

On the tax front, we need to sum up all taxes and make them work together for the system to be as fair as possible. Property taxes are regressive, so federal income taxes need to be progressive to compensate. We should have a VAT, since economists say this distorts the economy less. We also need to link regular income tax and payroll taxes into a combined number. Looking at only one of these creates huge misunderstandings of who is paying in. (hint:  almost every worker pays at least 10%, even after EITC). Stop counting retirees as workers in the stats. Last, the rich should pay more, probably 30% net at least. They have a lot more assets to protects, and the military and our financial structures do that for them.

Jrr85

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Re: Social Security will not be bankrupt
« Reply #92 on: June 11, 2018, 08:42:13 AM »
Can we consider "well-off boomers" as those who had high incomes rather than high savings? :-)
I'm a "well-off boomer" but only averaged an inflation adjusted $71k over the last 36 years.
 Don't take my savings just because I decided to live below my income, while the family that made $120k
and spent it all, would not have to pay.

^This.  I make the same argument, and this is why in my "means testing" comment earlier, I stated that it would be based on retirement "income", not "assets".  So if someone was raking in over $50K/yr in pension and taxable income in addition to SS benefits, they would see a significant reduction in SS benefits, but not the guy who saved $1M living off a lower amount of taxable income.  I don't think savers should be punished vs. those who spent their money like drunken sailors, and I think it would be a terrible idea to discourage saving, so means testing based on higher retirement income and pensions makes a lot more sense.

You can't treat a pension differently than $1M in savings.  If you want to means test based on who had the ability to save and not who actually did save (which is I think the right way to do it), you are going to have to have a minimum benefit that keeps everybody at something like poverty level, and then means test from there based on lifetime earnings. 

Even that is going to be horrifically unfair in some circumstances.  Someone who made $50k a year and never had kids should have a lot more assets saved than somebody who made $50k per year and raised four kids.  That probably wouldn't be too hard to account for although it would be administratively burdensome, but then what about a person who had one kid versus a person who had one special needs kid.  There are probably a ton of things that would need to be taken into account to avoid some horrific instances of unfairness, but I'm not sure what could be taken into account other than stuff easily pulled from existing tax documents. 

Jrr85

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Re: Social Security will not be bankrupt
« Reply #93 on: June 11, 2018, 08:48:00 AM »
There are a lot of people that say that the reason Social Security is underfunded is because 1) government stole the money 2) the money was not invested 3) illegal immigrants are getting the benefits 4) lots of waste in the system 5) etc.

None of these are accurate.  The reason Social Security is underfunded is that the actuarial life of our population keeps increasing and benefits increased.  Those running Social Security had a hazy picture of what the lifespan would actually be and what the politicians would do to benefits.  They figured this out and cranked up the withholding almost yearly for over 50 years.  Then in 1990, the rate has been stuck at 6.2% even though our actuarial lives and payments have increased over the years.

Social Security withholding since inception.
https://payroll.wsu.edu/taxes/taxes-hist-oasi/

Actuarial lifespan
https://www.infoplease.com/us/mortality/life-expectancy-age-1850-2011

Our politicians could easily correct this situation in many ways.  They could transfer $1 trillion from our general deficit to the Social Security trust fund.  We just transferred $1 trillion to corporations and the 1%, a trillion added to the Social Security Trust Fund would benefit all people.  Instead, the GOP is using the projected deficit as an excuse to reduce or eliminate entitlements for the poor and middle class. They are talking about increasing retirement age, decreasing benefits, and getting rid of it completely.

Once we true up the Social Security deficit we could make it a law that the withholding rates change with the actuarial lives and changes to the benefits.  Currently, people feel like they are paying into something that they are not going to get.  If we true it up with a transfer, then everyone knows that their payroll taxes are going to something that they will use.

Then we can focus on paying off our $22 trillion in national debt.  As an accountant, I can tell you giving a trillion or so to corporations and the 1% is not helping the national debt.

Ignoring the tripe about "giving" a trillion dollars to corporations (there is plenty of cronyism you can point to; reducing general tax rates, the burden of which are not born by legal fictions anyway, is not giving things away), changing the withholding to reflect increased life expectancies doesn't solve anything unless you invest those increased payments into productive assets.  anything else is just repeating the scam of the "fix" from the early eighties, where you increase people's taxes but do nothing to ensure that there are assets available to pay SS when they are old enough to receive benefits.   

robartsd

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Re: Social Security will not be bankrupt
« Reply #94 on: June 11, 2018, 09:25:02 AM »
I paid into SS for 9 1/2 years (114 months). To get SS, one has to have 10 years worth of employment. Oh well, guess I helped out somebody.

I grew up thinking there would be no SS too. My kids are thinking the same.

Have you looked into the possibility of somehow making up the missing 6 months?
We thought of it, but we had a car accident 10 years ago, I had a traumatic brain injury, so I can't do it. Though my progress amazed all my doctors, there are some lasting, permanent 'disabilities.' (I hate to even call them that) For instance, I got a permanent excusal from jury duty. See, I remember all the driving rules, like I know how a 4 way stop works. I'll stop, but then when it's my turn to go, I'll forget where I'm going!
Wow, that must be difficult to live with. The way the law is written now, you can earn a single qualifying credit over the course of one year ($1320 is the amount needed to qualify one quarter in 2018). If you could figure out a self-employment scheme that makes about $150/month and run it for two tax years you'd qualify for SS on your record.

robartsd

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Re: Social Security will not be bankrupt
« Reply #95 on: June 11, 2018, 09:26:59 AM »
Before I retired, I calculated how much my social security check would go up if I worked an extra 10 years.   Almost nothing.  Ten additional years of my life working and I would have made less than $200 a month more.  That's because the overwhelming bulk of the money I contributed would be given away to low income earners.   Not worth my time.

Anyone want to chime in with the bend point numbers?
I recently calculated that I have filled the first bend point as of sometime last year. As I already have 40 quarters, from here on out SS is likely a (slight) net loss to me even before considering the potential for a reduction of benefits. Fortunately I don't expect to fill the second bend point.


Jrr85

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Re: Social Security will not be bankrupt
« Reply #96 on: June 11, 2018, 09:36:32 AM »
Just came across a morningstar article which explained that 79% of social security is funded by payroll taxes. so there will still a reduced amount of social security even if the social security trust funds are used up.

http://www.morningstar.com/articles/868505/social-security-isnt-going-away.html

There is no SS "trust fund"; that money has already been spent by the government (2.9 trillion dollars).  The so-called trust fund is nothing more than a bunch of IOUs issued by the government for funds which it does not currently possess.  It would either have to raise taxes or borrow that money in order to pay off the IOUs.

Social Security fits the definition of a Ponzi scheme:


That is absolutely false.  There most certainly is a SS trust fund, and it contains government securities which pay interest.  It is not expected to be depleted for many years:

https://en.wikipedia.org/wiki/Social_Security_Trust_Fund
  There is something called a trust fund, which is just a tracking of how much revenue of SS taxes has been spent on non-social security spending, and that number is increased for "interest".  There is no trust fund with assets that make it easier for the government to pay benefits in the future when outlays exceed ss tax revenue.  If you really believed that SS was a separate entity from the U.S. government and benefits will actually be cut when scheduled benefits exceed ss tax revenue, then yes, the trust fund does contain real assets of the SS trust.  But I don't think anybody expects the SS trust fund to really stand on its own and for it to pay out ~75% of scheduled benefits when the trust fund shows zero. 


SS is definitely not a Ponzi scheme, but is often parroted about by clueless people who have no understanding of what a Ponzi scheme is.

https://www.washingtonpost.com/blogs/ezra-klein/post/is-social-security-a-ponzi-scheme/2011/08/25/gIQA2t0dcL_blog.html?noredirect=on&utm_term=.496ab9622589

Social security is not a ponzi scheme.  It is like a ponzi scheme in some ways.  As the article notes, it is a transfer scheme from generally younger workers to retirees who previously paid in, just like a ponzi scheme transfers money from current "investors" to people who previously paid in.  And like a ponzi scheme, many people think their payments into social security are invested (granted the information as to the truth is much more readily available than with a ponzi scheme, but there is still a lot of intentional misinformation out there; hell, calling it an "insurance" to begin with is misleading).

It is sort of like and sort of not like a ponzi scheme in that it has to have a growing population to work, but it doesn't need exponential growth in a short period of time like most ponzi schemes.

Most importantly, it is not like a ponzi scheme in that there are people with guns who can make sure potential new "investors" pay in.  This makes it much more likely that benefits will be paid going forward.  Probably a good thing for welfare programs in general, but I can certainly understand why some people think that makes social security worse than a ponzi scheme, since so much of SS is a transfer from younger poorer workers to older, richer retirees. 
« Last Edit: June 11, 2018, 08:05:52 PM by Jrr85 »

Paul der Krake

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Re: Social Security will not be bankrupt
« Reply #97 on: June 11, 2018, 10:02:38 AM »
Ponzi schemes are based on deception. How Social Security operates is entirely transparent.

Not a Ponzi scheme, end of story.

austin944

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Re: Social Security will not be bankrupt
« Reply #98 on: June 11, 2018, 12:31:44 PM »
Ponzi schemes are based on deception. How Social Security operates is entirely transparent.

The proponents of Social Security almost never mention the fact that the program is currently $2.9 trillion in the hole.  The original article of this thread made no mention of this important fact.  It linked to a SSA web page that never mentioned the bookkeeping trick used to hide this massive debt.  Are these not deceptive practices?

Paul der Krake

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Re: Social Security will not be bankrupt
« Reply #99 on: June 11, 2018, 12:40:41 PM »
Ponzi schemes are based on deception. How Social Security operates is entirely transparent.

The proponents of Social Security almost never mention the fact that the program is currently $2.9 trillion in the hole.  The original article of this thread made no mention of this important fact.  It linked to a SSA web page that never mentioned the bookkeeping trick used to hide this massive debt.  Are these not deceptive practices?

The Social Security Administration regularly communicates on the state of the funds it oversees. Here is the link to their latest press release:
https://www.ssa.gov/news/press/releases/2018/#6-2018-1

What more do you want? A postcard personally addressed to you with a link to a youtube video explaining how US treasuries are real money?