Author Topic: Social Security will not be bankrupt  (Read 12841 times)

Reader

  • Bristles
  • ***
  • Posts: 312
Social Security will not be bankrupt
« on: June 07, 2018, 06:54:55 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

Brother Esau

  • Bristles
  • ***
  • Posts: 292
Re: Social Security will not be bankrupt
« Reply #1 on: June 07, 2018, 07:04:10 AM »
The book "Social Insecurity" gets into this and explains how SS isn't nearly as F'ed up as the media portrays it.

Much Fishing to Do

  • Bristles
  • ***
  • Posts: 361
Re: Social Security will not be bankrupt
« Reply #2 on: June 07, 2018, 07:50:38 AM »
It always surprises me how often projections use assumptions that hinge on unnecessarily inflexible 'rules' to lead to extreme circumstances.  (Common ones around here are things like with a 4% SWR you have a 5% chance of running out of money, its not like someone comes up to you one day and says the money is gone and you're surprised....slight adjustments can solve the issue).

So SS will be 20% underfunded.  If you move the "full" retirement age back a year for certain generations (you could still retire at the same age you want to after 62, it'll just pay a little less) & increase payroll taxes from 12.4% to 13.4% (has a lot less effect than annual raises & inflation), you've probably just fully funded it and I don't exactly seem those as extreme measures as these numbers have moved before, and we all know people are not only living longer but capable of working for longer.  If you just remove the payroll cap but don't increase the payout max you'd more than fully fund it, and given the loud call against income inequality lately I could see that happening as that will directly attack inequality, etc, etc. 

Or maybe none of that is done and SS benefits will be reduced by 20%.  I have hard time believing most people know what their benefits will be within 20% before they start receiving it anyway. 

And in the end we're probably just looking at little bits of all the above being done (e.g. look at things like the 0.9% additional medicare tax that was created to help that problem). 

Jrr85

  • Handlebar Stache
  • *****
  • Posts: 1204
Re: Social Security will not be bankrupt
« Reply #3 on: June 07, 2018, 07:58:03 AM »
It always surprises me how often projections use assumptions that hinge on unnecessarily inflexible 'rules' to lead to extreme circumstances.  (Common ones around here are things like with a 4% SWR you have a 5% chance of running out of money, its not like someone comes up to you one day and says the money is gone and you're surprised....slight adjustments can solve the issue).

So SS will be 20% underfunded.  If you move the "full" retirement age back a year for certain generations (you could still retire at the same age you want to after 62, it'll just pay a little less) & increase payroll taxes from 12.4% to 13.4% (has a lot less effect than annual raises & inflation), you've probably just fully funded it and I don't exactly seem those as extreme measures as these numbers have moved before, and we all know people are not only living longer but capable of working for longer.  If you just remove the payroll cap but don't increase the payout max you'd more than fully fund it, and given the loud call against income inequality lately I could see that happening as that will directly attack inequality, etc, etc. 

Or maybe none of that is done and SS benefits will be reduced by 20%.  I have hard time believing most people know what their benefits will be within 20% before they start receiving it anyway. 

And in the end we're probably just looking at little bits of all the above being done (e.g. look at things like the 0.9% additional medicare tax that was created to help that problem).

I think people beating the drum hard are just trying to slightly mitigate the intergenerational screwing.  We are reasonably certain that we're going to have reduced benefits (I have always seen ~75% being covered, not 80%, but the projection is far enough off for that to be noise).  Most likely, what's going to happen is that younger people are going to end up paying a lot more taxes to pay for boomers that could have and should have addressed this issue long ago. 

Even if we end up with a less inequitable solution, why not address it now so people have some certainty and benefits don't drop sharply, but instead just grow more slowly, so nobody has to deal with an income shock? 

We don't address it now because a lot of people are greedy ass holes, and a lot of people assume that when faced with paying 75-80% of scheduled benefits, it will be young people that get screwed and there won't be any real cut in social security payments, or at the least, any cuts will be minor and will be less than what would happen if they tried to adjust SS slowly.  And they're unfortunately probably right about what will happen.

FIRE@50

  • Bristles
  • ***
  • Posts: 313
  • Age: 41
  • Location: Maryland
Re: Social Security will not be bankrupt
« Reply #4 on: June 07, 2018, 07:59:51 AM »
Looks like the maximum amount of income subject to SS taxes this year is $128,400. I would like to see that number raised to infinity. That has always seemed like the logical solution to fill in future gaps but I never hear it mentioned when discussing shortfalls. I'm also not opposed to pushing back the full retirement age or whatever it is called.

Jrr85

  • Handlebar Stache
  • *****
  • Posts: 1204
Re: Social Security will not be bankrupt
« Reply #5 on: June 07, 2018, 08:14:59 AM »
Looks like the maximum amount of income subject to SS taxes this year is $128,400. I would like to see that number raised to infinity. That has always seemed like the logical solution to fill in future gaps but I never hear it mentioned when discussing shortfalls. I'm also not opposed to pushing back the full retirement age or whatever it is called.

Increasing the marginal tax rate by 14 percentage points seems like not a great solution to me.  For many people in high tax states, their marginal tax rate for federal state and local would probably exceed 66%.  That seems insane to me.  Just for federal you are looking at 37% income, plus ~15.2% SS and medicare, so that puts you at 52.2 (actually slightly less because of the deductibility of half of SS/Medicare taxes; still that seems unduly burdensome, especially when you consider state and local are taking a cut too, whether out of income or otherwise).   

Start with using chained CPI rather than wage growth, and then nobody gets an actual cut and everybody bears some of the burden. 

Or alternatively, change the benefits for boomers where there is a minimum floor, and subject to that floor, people get the lower of scheduled benefits or the benefits that would be projected to make sure they didn't get mroe than they put in, accounting for 2-3% growth on their contributions. 
« Last Edit: June 08, 2018, 08:57:47 AM by Jrr85 »

rantk81

  • Bristles
  • ***
  • Posts: 322
  • Age: 36
  • Location: Chicago
Re: Social Security will not be bankrupt
« Reply #6 on: June 07, 2018, 08:20:04 AM »
In my life time, congress has already passed one law that reduces my SS benefits (by raising the age when I'll be eligible to receive full benefits.)

Seems absolutely ridiculous that they would do it AGAIN.

ESPECIALLY considering the fact that ALL EXCEPT TWO of my working years have been years in which my FICA takes have been at the highest tax rates ever imposed.

[ 6.2% + 6.2% + 1.45% + 1.45% ] every single year

except for the small reprieve of

[ 4.2% + 6.2% + 1.45% + 1.45% ] in 2010 and 2011.




« Last Edit: June 07, 2018, 08:24:04 AM by rantk81 »

Jrr85

  • Handlebar Stache
  • *****
  • Posts: 1204
Re: Social Security will not be bankrupt
« Reply #7 on: June 07, 2018, 08:30:29 AM »
In my life time, congress has already passed one law that reduces my SS benefits (by raising the age when I'll be eligible to receive full benefits.)

Seems absolutely ridiculous that they would do it AGAIN.

ESPECIALLY considering the fact that ALL EXCEPT TWO of my working years have been years in which my FICA takes have been at the highest tax rates ever imposed.

[ 6.2% + 6.2% + 1.45% + 1.45% ] every single year

except for the small reprieve of

[ 4.2% + 6.2% + 1.45% + 1.45% ] in 2010 and 2011.

Those were just taxes though.  A lot of those taxes were used to pay retirees, and decent portion of them were used just to pay for general government spending.  The fact that you paid taxes isn't a great reason to make younger people pay higher taxes than you did.  Maybe it'd make sense to just compare the entire federal tax burden, but it certianly doesn't make sense to look at social security in isolation.

rantk81

  • Bristles
  • ***
  • Posts: 322
  • Age: 36
  • Location: Chicago
Re: Social Security will not be bankrupt
« Reply #8 on: June 07, 2018, 08:34:54 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.
« Last Edit: June 07, 2018, 08:38:39 AM by rantk81 »

fuzzy math

  • Pencil Stache
  • ****
  • Posts: 631
  • Location: PNW ---> Midwest (for now)
Re: Social Security will not be bankrupt
« Reply #9 on: June 07, 2018, 08:43:46 AM »
Looks like the maximum amount of income subject to SS taxes this year is $128,400. I would like to see that number raised to infinity. That has always seemed like the logical solution to fill in future gaps but I never hear it mentioned when discussing shortfalls. I'm also not opposed to pushing back the full retirement age or whatever it is called.

Increasing the marginal tax rate by 14 percentage points seems like not a great solution to me.  For many people in high tax states, their effective marginal tax rate for federal state and local would probably exceed 66%.  That seems insane to me.  Just for federal you are looking at 37% income, plus ~15.2% SS and medicare, so that puts you at 52.2 (actually slightly less because of the deductibility of half of SS/Medicare taxes; still that seems unduly burdensome, especially when you consider state and local are taking a cut too, whether out of income or otherwise).   

Start with using chained CPI rather than wage growth, and then nobody gets an actual cut and everybody bears some of the burden. 

Or alternatively, change the benefits for boomers where there is a minimum floor, and subject to that floor, people get the lower of scheduled benefits or the benefits that would be projected to make sure they didn't get mroe than they put in, accounting for 2-3% growth on their contributions.
Nobody is paying an effective federal tax rate of 37%.


« Last Edit: June 07, 2018, 08:45:28 AM by fuzzy math »

Jrr85

  • Handlebar Stache
  • *****
  • Posts: 1204
Re: Social Security will not be bankrupt
« Reply #10 on: June 07, 2018, 08:58:34 AM »
Looks like the maximum amount of income subject to SS taxes this year is $128,400. I would like to see that number raised to infinity. That has always seemed like the logical solution to fill in future gaps but I never hear it mentioned when discussing shortfalls. I'm also not opposed to pushing back the full retirement age or whatever it is called.

Increasing the marginal tax rate by 14 percentage points seems like not a great solution to me.  For many people in high tax states, their effective marginal tax rate for federal state and local would probably exceed 66%.  That seems insane to me.  Just for federal you are looking at 37% income, plus ~15.2% SS and medicare, so that puts you at 52.2 (actually slightly less because of the deductibility of half of SS/Medicare taxes; still that seems unduly burdensome, especially when you consider state and local are taking a cut too, whether out of income or otherwise).   

Start with using chained CPI rather than wage growth, and then nobody gets an actual cut and everybody bears some of the burden. 

Or alternatively, change the benefits for boomers where there is a minimum floor, and subject to that floor, people get the lower of scheduled benefits or the benefits that would be projected to make sure they didn't get mroe than they put in, accounting for 2-3% growth on their contributions.
Nobody is paying an effective federal tax rate of 37%.
  Brain fart.  "Effective marginal tax rate" is just the marginal tax rate.  Not sure why I put "effective" in there. 

Could you explain your last paragraph? I am struggling to follow what you're saying. I promise to have the rest of my coffee drank before I read your next response. I'm curious bc I know you're fairly conservative and it's always interesting to hear a different perspective on huge issues.

Sent from my H1623 using Tapatalk

Part of the challenge with reforming Social Security is that people like to pretend it's something other than a welfare program that transfers money from workers to retirees and the disabled.  What I suggested was halfway tongue in cheek it's so politically impossible, but basically the tenets are:

(1) We want to have a federal welfare program that ensures the elderly can at least manage a meager existence without living in the streets.  So we guarantee that everybody gets some minimum SS benefit, no matter how little they put in, that is somewhere around poverty level.
(2) It's understandable that people feel like the "put in" to social security, and so should get some back.  This argument is basically, I had to pay the older generation, now the younger generation has to pay me, even if I am richer than them.  Understandable sentiment, but a counter to that is ok, you get to take from the younger generation, but you don't get to take more than you put in.  If you put in an average of say $10k per year, we're going to treat that as if it was invested at a 2-3% (or whatever the average treasury rate was, to reflect that you are getting a guaranteed return), and that is going to generate a "lump sum" that would have been available to you if your ss contributions had been invested rather than spent.  That lump sum is then used to calculate what annuity you could buy, and that would be your actual benefits received, so you don't take out more than you put in. 
(3) For some higher earners, the annuity calculation will actually provide a higher monthly payment than the scheduled benefits under current law.  For those people, they get the scheduled benefits, not what they could have gotten if their contributions had been invested in "guaranteed" investments.  That's just part of the whole social security is welfare, and high earners don't do as well under welfare, just like the current social security program. 

If you followed those three tenets, nobody would get a worse deal than they "deserve".  They are either getting more than they put in under scenario one, or they are getting what they put in under scenario two, and under scenario three, while they are getting less than they put in, they are getting what was "promised" to them, which was always a bad deal and just a function of having progressive tax rates. 

Make sense?  As I said, a complete political non-starter.  But I am not sure how it could be more fair.
« Last Edit: June 07, 2018, 09:31:59 AM by Jrr85 »

rantk81

  • Bristles
  • ***
  • Posts: 322
  • Age: 36
  • Location: Chicago
Re: Social Security will not be bankrupt
« Reply #11 on: June 07, 2018, 08:59:57 AM »
What I think would be profoundly interesting would be, is if someone could put together a calculator/estimator that:

- Takes into account someone's age, SS taxes (including past paid taxes, and current taxes being paid)
- Their marital status
- What the cost on the "open market" would be for a similar disability insurance policy would be
- What the cost of a similarly featured whole life annuity (with dependent survivor benefits) would be

etc. etc. etc.

Basically, what does it cost, on the private market, to buy a similar array of "financial security" products (mix of annuities, life insurance, disability insurance, etc) that is comparable to what Social Security offers -- and how the cost of that compares to the amount of taxes we are all paying for Social Security.

I genuinely have no idea what the results would be of those types of calculations, but i would be VERY interested to find out!



Edit:  And just to throw in a little bit of opinion about it:  I'm not convinced that forcing some folks to "buy" some types of insurance they don't want or need, at potentially higher than market rates, is the best way to fund a welfare program in order to provide similar financial products to others at a lower cost to them.  If you want to do that, fine... but there's a better way.
« Last Edit: June 07, 2018, 09:13:23 AM by rantk81 »

OurTown

  • Pencil Stache
  • ****
  • Posts: 958
  • Age: 49
  • Location: Tennessee
Re: Social Security will not be bankrupt
« Reply #12 on: June 07, 2018, 11:28:20 AM »
I think it will be there, although I have not included it in my calculations for FIRE.  So it will either be a bonus once we are eligible, or we will have the option of reducing our withdrawal rate if necessary and/or appropriate.

Rosy

  • Handlebar Stache
  • *****
  • Posts: 1818
  • Location: Florida
Re: Social Security will not be bankrupt
« Reply #13 on: June 07, 2018, 11:41:32 AM »
It always surprises me how often projections use assumptions that hinge on unnecessarily inflexible 'rules' to lead to extreme circumstances.  (Common ones around here are things like with a 4% SWR you have a 5% chance of running out of money, its not like someone comes up to you one day and says the money is gone and you're surprised....slight adjustments can solve the issue).

So SS will be 20% underfunded.  If you move the "full" retirement age back a year for certain generations (you could still retire at the same age you want to after 62, it'll just pay a little less) & increase payroll taxes from 12.4% to 13.4% (has a lot less effect than annual raises & inflation), you've probably just fully funded it and I don't exactly seem those as extreme measures as these numbers have moved before, and we all know people are not only living longer but capable of working for longer.  If you just remove the payroll cap but don't increase the payout max you'd more than fully fund it, and given the loud call against income inequality lately I could see that happening as that will directly attack inequality, etc, etc. 


Or maybe none of that is done and SS benefits will be reduced by 20%.  I have hard time believing most people know what their benefits will be within 20% before they start receiving it anyway. 

And in the end we're probably just looking at little bits of all the above being done (e.g. look at things like the 0.9% additional medicare tax that was created to help that problem).

Now there - you see - you fixed it! Thanks - brilliant! Next...
It really is that simple to fix, but unless the baby boomers finally wake up and push for some changes it may not happen. I can understand why the Millennials seem to think Social Security would go bust. They've been inoculated with those myths from day one.

The thing that was glaringly missing from the article was a link to proposed legislation/bill that is already written up but hasn't made it to the floor yet. Beyond that, this is the most informative article I've seen on SS in a long time.
Thanks for posting it, OP.

I paid in 100% not 79% of what the government asked forced me to pay for my entire working life. If they want to do away with the program so badly - fine, just give me back what I already paid in, with interest and I'll walk off into the sunset.

Quote
Or maybe none of that is done and SS benefits will be reduced by 20%.  I have hard time believing most people know what their benefits will be within 20% before they start receiving it anyway. 
Sad, but oh so true for most of the baby boomers I know. Shoot, mine turned out to be twice what I thought it would be. For some it is a rough awakening to poverty in retirement because you know, we were promised that SS is a sure, reliable thing - no mention of "entitlement" and grrr "welfare" program.
I saw it as a nice, guaranteed supplement, not as my only retirement plan, but you bet I do feel "entitled".
Ironically, I find that it is the people who are well off already who are financially savvy, like on MMM, who look into SS long before collection time.

SNARK - If the rich insist that this is in truth a welfare program then I suggest we have a lottery once a month where they give up their SS "entitlement" and some lucky poor sod gets to reap their benefits instead.

I resent the idea that receiving SS makes me a welfare recipient when I am the one who paid in. That's perverse!

I am not on board with raising the age of eligibility again - who the hell is going to employ 65-year construction workers or receptionists? How many will be healthy enough to continue working?
Just because we live longer, does not mean there is employment available or possible - age discrimination is real and in some cases defensible.

I really hate to see all the things they are doing today to throttle the program now. Like years without COL - hello, you don't think rent and food prices went up? Stagnation of benefits screws us over by arbitrary changing the rules - after the politicians robbed the program blind by using it's excess to fund other programs.

In answer to jrr85
Quote
Maybe it'd make sense to just compare the entire federal tax burden, but it certianly doesn't make sense to look at social security in isolation.
All they had to do is leave the social security program alone - untouched. Had it remained in isolation it would be paying us at least 21% more in 2034 instead of a projected 21% less.
Forgive me if this was taken slightly out of context, but I thought it supported a point I wanted to make.

This intergenerational squabbling should have politicians in alt because it is completely disguising the fact that if the program had not been robbed it would do well for all future generations for a long time to come.
 
I can see that in the future due to AI and robotics - robots aren't exactly "entitled" nor do they pay SS taxes, but given the possibility of a universal income - SS may be replaced - as future realities change.
It may well make sense to scrap the program and start over, but then again if it can be tweaked to address the new and different challenges of the next generations ...


lifeanon269

  • Bristles
  • ***
  • Posts: 337
Re: Social Security will not be bankrupt
« Reply #14 on: June 07, 2018, 11:47:48 AM »
The problem with only looking at the benefits payout and then concluding that "all is fine" is that it's only look at part of the equation. That perspective is completely ignoring how much an individual needed to pay into the system in order to receive that payout. Unfortunately, the millennial generation is getting completely screwed over in this respect. What good is a social support system that requires its citizens to pay into it more than they'll ever get out of it.

This are some enlightening graphs and information that was posted the other day the sums up the situation quite well.

https://twitter.com/BMBernstein/status/1004389858591297536

Retirees today receive about $300k in net benefits minus taxes paid while milennials will end up paying over $400k more into the system than they'll ever get back. That's highway robbery of an entire generation.

Jrr85

  • Handlebar Stache
  • *****
  • Posts: 1204
Re: Social Security will not be bankrupt
« Reply #15 on: June 07, 2018, 12:39:54 PM »
It always surprises me how often projections use assumptions that hinge on unnecessarily inflexible 'rules' to lead to extreme circumstances.  (Common ones around here are things like with a 4% SWR you have a 5% chance of running out of money, its not like someone comes up to you one day and says the money is gone and you're surprised....slight adjustments can solve the issue).

So SS will be 20% underfunded.  If you move the "full" retirement age back a year for certain generations (you could still retire at the same age you want to after 62, it'll just pay a little less) & increase payroll taxes from 12.4% to 13.4% (has a lot less effect than annual raises & inflation), you've probably just fully funded it and I don't exactly seem those as extreme measures as these numbers have moved before, and we all know people are not only living longer but capable of working for longer.  If you just remove the payroll cap but don't increase the payout max you'd more than fully fund it, and given the loud call against income inequality lately I could see that happening as that will directly attack inequality, etc, etc. 


Or maybe none of that is done and SS benefits will be reduced by 20%.  I have hard time believing most people know what their benefits will be within 20% before they start receiving it anyway. 

And in the end we're probably just looking at little bits of all the above being done (e.g. look at things like the 0.9% additional medicare tax that was created to help that problem).

Now there - you see - you fixed it! Thanks - brilliant! Next...
It really is that simple to fix, but unless the baby boomers finally wake up and push for some changes it may not happen. I can understand why the Millennials seem to think Social Security would go bust. They've been inoculated with those myths from day one.

The thing that was glaringly missing from the article was a link to proposed legislation/bill that is already written up but hasn't made it to the floor yet. Beyond that, this is the most informative article I've seen on SS in a long time.
Thanks for posting it, OP.

I paid in 100% not 79% of what the government asked forced me to pay for my entire working life. If they want to do away with the program so badly - fine, just give me back what I already paid in, with interest and I'll walk off into the sunset.
Forgive my skepticism, but from your tone, I suspect if they paid you what you already got in plus interest, you'd be one of the ones wanting to riot in the streets.  That is assuming you are not one of the few baby boomers who will get what they paid in or less without having an untimely death.

Quote
Or maybe none of that is done and SS benefits will be reduced by 20%.  I have hard time believing most people know what their benefits will be within 20% before they start receiving it anyway. 
Sad, but oh so true for most of the baby boomers I know. Shoot, mine turned out to be twice what I thought it would be. For some it is a rough awakening to poverty in retirement because you know, we were promised that SS is a sure, reliable thing - no mention of "entitlement" and grrr "welfare" program.
I saw it as a nice, guaranteed supplement, not as my only retirement plan, but you bet I do feel "entitled".
Ironically, I find that it is the people who are well off already who are financially savvy, like on MMM, who look into SS long before collection time.

SNARK - If the rich insist that this is in truth a welfare program then I suggest we have a lottery once a month where they give up their SS "entitlement" and some lucky poor sod gets to reap their benefits instead.

I resent the idea that receiving SS makes me a welfare recipient when I am the one who paid in. That's perverse!
  That's just the way welfare programs are described.  When you receive benefits from a welfare program, you are a welfare recipient.  If you work and pay taxes, and then become unemployed and receive TANF, you are a welfare recipient, notwithstanding the fact that you used to pay taxes that supported that welfare.  SS is no different except that it's not means tested.  It's nothing to resent.  If it bothers you being a welfare recipient, I suspect there is a way to disclaim your SS benefits. 


I am not on board with raising the age of eligibility again - who the hell is going to employ 65-year construction workers or receptionists? How many will be healthy enough to continue working?
Just because we live longer, does not mean there is employment available or possible - age discrimination is real and in some cases defensible.

I really hate to see all the things they are doing today to throttle the program now. Like years without COL - hello, you don't think rent and food prices went up? Stagnation of benefits screws us over by arbitrary changing the rules - after the politicians robbed the program blind by using it's excess to fund other programs.

In answer to jrr85
Quote
Maybe it'd make sense to just compare the entire federal tax burden, but it certianly doesn't make sense to look at social security in isolation.
All they had to do is leave the social security program alone - untouched. Had it remained in isolation it would be paying us at least 21% more in 2034 instead of a projected 21% less.
    If by left alone, you mean if funds not immediately used to pay benefits had been invested in a reasonable investment other than US government debt, that would likely be true.  Of course boomers have had plenty of time to elect politicians to do that, but they haven't in part because they were keeping their taxes low and government spending high by pretending that money was going to SS rather than being spent on current government.


Forgive me if this was taken slightly out of context, but I thought it supported a point I wanted to make.

This intergenerational squabbling should have politicians in alt because it is completely disguising the fact that if the program had not been robbed it would do well for all future generations for a long time to come.
  The "intergenerational squablling is occurring because the one group that was better positioned than any other to fix social security was boomers.  The problem was fully identified in 1982.  Yes, the 1982 "fix" was a scam, and lots of boomers were probably actually deceived and not just willfully blind, but now they want to impose essentially the full costs of that failure on younger generations. 




I can see that in the future due to AI and robotics - robots aren't exactly "entitled" nor do they pay SS taxes, but given the possibility of a universal income - SS may be replaced - as future realities change.
It may well make sense to scrap the program and start over, but then again if it can be tweaked to address the new and different challenges of the next generations ...
« Last Edit: June 07, 2018, 12:47:32 PM by Jrr85 »

TheWifeHalf

  • Bristles
  • ***
  • Posts: 499
Re: Social Security will not be bankrupt
« Reply #16 on: June 07, 2018, 02:04:12 PM »
TheHusbandHalf will get Raiiroad Retirement, rather than SS.
I read that SS was based on Railroad Retirement, so does anyone know if it's all one pool of money, or is it a separate chunk?

He just got his SS statement in the mail today! They estimate his monthly payment would be about the same as his RR payment, but the RR will add in extra because he paid tier 1 and tier 2.

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.

Praxis

  • 5 O'Clock Shadow
  • *
  • Posts: 64
Re: Social Security will not be bankrupt
« Reply #17 on: June 07, 2018, 02:35:39 PM »
I was listening to an NPR economics podcast discussing this and it's very interesting.

Essentially, there's actually a few really easy magical ways to fix SS, but many of them make it less politically viable.

The overnight methods are:

* Remove or raise caps on social security taxes.  Right now, it doesn't tax over ~$100k.  If you remove caps, Warren Buffett and other billionaires/multimillionaires have to pay a much larger SS tax, and float it for everyone else.

* Reduce benefits.  Later retirement age or lower payouts.  Anything that saves 20% of payouts fixes it.

* Raise SS taxes so that the younger generations can cover the older right now.  This can go back down after more Boomers have passed away.


Of these, to me, the first seems simplest.  The second one harms current old people, the third one harms current young people, the first taxes the rich who can best afford it.  But - SS is politically viable because people feel like they get what they pay in to it.  So anything that takes away that "feeling" means politicians are more likely to attack it and the program becomes more vulnerable.

Jrr85

  • Handlebar Stache
  • *****
  • Posts: 1204
Re: Social Security will not be bankrupt
« Reply #18 on: June 07, 2018, 02:59:25 PM »
I was listening to an NPR economics podcast discussing this and it's very interesting.

Essentially, there's actually a few really easy magical ways to fix SS, but many of them make it less politically viable.

The overnight methods are:

* Remove or raise caps on social security taxes.  Right now, it doesn't tax over ~$100k.  If you remove caps, Warren Buffett and other billionaires/multimillionaires have to pay a much larger SS tax, and float it for everyone else.

* Reduce benefits.  Later retirement age or lower payouts.  Anything that saves 20% of payouts fixes it.

* Raise SS taxes so that the younger generations can cover the older right now.  This can go back down after more Boomers have passed away.


Of these, to me, the first seems simplest.  The second one harms current old people, the third one harms current young people, the first taxes the rich who can best afford it.  But - SS is politically viable because people feel like they get what they pay in to it.  So anything that takes away that "feeling" means politicians are more likely to attack it and the program becomes more vulnerable.

Well, billionaires like Warren Buffet wouldn't have to pay any more.  His earnings are supposedly already below the social security cap (although that would probably fail an audit if that's true).   

But if you want to impose the burden on the rich who can best afford it, it makes more sense to means test benefits than it does to lift the cap on taxes.  It is simpler to raise the tax, but you're doing the same thing either way, making the well off pay more for less.  Not giving a lot of benefits to people who are wealthy seems like a better approach than raising taxes on working people so that you can give more benefits to the wealthy. 

Rosy

  • Handlebar Stache
  • *****
  • Posts: 1818
  • Location: Florida
Re: Social Security will not be bankrupt
« Reply #19 on: June 07, 2018, 03:19:43 PM »
1.
Quote
I paid in 100% not 79% of what the government asked forced me to pay for my entire working life. If they want to do away with the program so badly - fine, just give me back what I already paid in, with interest and I'll walk off into the sunset.

Quote
Forgive my skepticism, but from your tone, I suspect if they paid you what you already got in plus interest, you'd be one of the ones wanting to riot in the streets.  That is assuming you are not one of the few baby boomers who will get what they paid in or less without having an untimely death.

Naw - no rioting in the streets for this old lady. The pen is mightier than the sword:)
But now I wonder - how long do I have to live to get what I paid in? There must be a nice graph somewhere.

2.
Quote
I resent the idea that receiving SS makes me a welfare recipient when I am the one who paid in. That's perverse!
 
Quote
That's just the way welfare programs are described.  When you receive benefits from a welfare program, you are a welfare recipient.  If you work and pay taxes, and then become unemployed and receive TANF, you are a welfare recipient, notwithstanding the fact that you used to pay taxes that supported that welfare.  SS is no different except that it's not means tested.  It's nothing to resent. If it bothers you being a welfare recipient, I suspect there is a way to disclaim your SS benefits.

Got it.

3.
Quote
In answer to jrr85
Quote
Maybe it'd make sense to just compare the entire federal tax burden, but it certianly doesn't make sense to look at social security in isolation.
All they had to do is leave the social security program alone - untouched. Had it remained in isolation it would be paying us at least 21% more in 2034 instead of a projected 21% less.


Quote
If by left alone, you mean if funds not immediately used to pay benefits had been invested in a reasonable investment other than US government debt, that would likely be true.  Of course boomers have had plenty of time to elect politicians to do that, but they haven't in part because they were keeping their taxes low and government spending high by pretending that money was going to SS rather than being spent on current government.

Yes, that is what I meant.
Besides, the boomers were not the only generation that had the opportunity to fix things along the way.


4. This intergenerational squabbling should have politicians in alt because it is completely disguising the fact that if the program had not been robbed it would do well for all future generations for a long time to come.[/quote] 
Quote
The "intergenerational squablling is occurring because the one group that was better positioned than any other to fix social security was boomers.  The problem was fully identified in 1982.  Yes, the 1982 "fix" was a scam, and lots of boomers were probably actually deceived and not just willfully blind, but now they want to impose essentially the full costs of that failure on younger generations. 

I remember the SS "fix" in 1983 and I was neither deceived nor willfully blind, we had some hot debates about that subject. This link to an article by the Brookings Institute doesn't really reflect the "scam" aspect and I agree with you that it was a scam.
 https://www.brookings.edu/opinions/the-crisis-last-time-social-security-reform/

I like this one from THE HILL a bit better http://thehill.com/blogs/congress-blog/economy-budget/227610-sociel-security-deal-of-1983-was-a-punt
EXCERPT
Quote
The 1983 reform of Social Security largely shifted the burden of Social Security from one generation to the next with the consequences falling heavily on late-boomers and those that followed. The Republicans and Democrats came together in a bipartisan effort to kick-the-can.

I will say this, there were few boomers involved, (they would have been in their 30s) this was primarily hashed out by the "greatest generation". Nevertheless, SS remains a sacred cow and it was negligent and cowardly of our generation not to tackle it ever again.
Strange how nothing happens with SS until it becomes a problem, they were actually about to run short on payouts for the first time in the history of the program.

Anecdote: I mentioned the 2034 date and it's significance to a few lady friends (between 45 and 67 yrs old) - they had no clue.

If history prevails then the can will be kicked down the road by the politicians again. They'll take a few measures to keep the program afloat as long as the boomers are still able to vote and haven't met the untimely death you spoke about:).
I don't like to play the blame game - it solves nothing.

Are we going to wait until 2034 to take action? We have plenty of smart people young and old that can work on resolutions together. There are plenty of debates and solutions floating about including those from NPR that Praxis alluded to. 
 
« Last Edit: June 07, 2018, 03:23:49 PM by Rosy »

Rosy

  • Handlebar Stache
  • *****
  • Posts: 1818
  • Location: Florida
Re: Social Security will not be bankrupt
« Reply #20 on: June 07, 2018, 03:25:38 PM »
TheHusbandHalf will get Raiiroad Retirement, rather than SS.
I read that SS was based on Railroad Retirement, so does anyone know if it's all one pool of money, or is it a separate chunk?

He just got his SS statement in the mail today! They estimate his monthly payment would be about the same as his RR payment, but the RR will add in extra because he paid tier 1 and tier 2.

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?

mathlete

  • Pencil Stache
  • ****
  • Posts: 795
Re: Social Security will not be bankrupt
« Reply #21 on: June 07, 2018, 03:28:42 PM »
I'm well aware of this, but it's not much solace to the youth among us. We're looking at later retirement ages, a removed cap on income, or reduced benefits. There's virtually no way around it. This will be addressed sometime within the 30+ years before my eligibility.

And they're not going to cut benefits for the massive voting block that is already retired or close to it.

I appreciate the link though. There is a lot of misinformation about SS and it's good to have people trying to clear it up.

Jrr85

  • Handlebar Stache
  • *****
  • Posts: 1204
Re: Social Security will not be bankrupt
« Reply #22 on: June 07, 2018, 03:57:09 PM »
1.
Quote
I paid in 100% not 79% of what the government asked forced me to pay for my entire working life. If they want to do away with the program so badly - fine, just give me back what I already paid in, with interest and I'll walk off into the sunset.

Quote
Forgive my skepticism, but from your tone, I suspect if they paid you what you already got in plus interest, you'd be one of the ones wanting to riot in the streets.  That is assuming you are not one of the few baby boomers who will get what they paid in or less without having an untimely death.

Naw - no rioting in the streets for this old lady. The pen is mightier than the sword:)
But now I wonder - how long do I have to live to get what I paid in? There must be a nice graph somewhere.

2.
Quote
I resent the idea that receiving SS makes me a welfare recipient when I am the one who paid in. That's perverse!
 
Quote
That's just the way welfare programs are described.  When you receive benefits from a welfare program, you are a welfare recipient.  If you work and pay taxes, and then become unemployed and receive TANF, you are a welfare recipient, notwithstanding the fact that you used to pay taxes that supported that welfare.  SS is no different except that it's not means tested.  It's nothing to resent. If it bothers you being a welfare recipient, I suspect there is a way to disclaim your SS benefits.

Got it.

3.
Quote
In answer to jrr85
Quote
Maybe it'd make sense to just compare the entire federal tax burden, but it certianly doesn't make sense to look at social security in isolation.
All they had to do is leave the social security program alone - untouched. Had it remained in isolation it would be paying us at least 21% more in 2034 instead of a projected 21% less.


Quote
If by left alone, you mean if funds not immediately used to pay benefits had been invested in a reasonable investment other than US government debt, that would likely be true.  Of course boomers have had plenty of time to elect politicians to do that, but they haven't in part because they were keeping their taxes low and government spending high by pretending that money was going to SS rather than being spent on current government.

Yes, that is what I meant.
Besides, the boomers were not the only generation that had the opportunity to fix things along the way.


4. This intergenerational squabbling should have politicians in alt because it is completely disguising the fact that if the program had not been robbed it would do well for all future generations for a long time to come.
 
Quote
The "intergenerational squablling is occurring because the one group that was better positioned than any other to fix social security was boomers.  The problem was fully identified in 1982.  Yes, the 1982 "fix" was a scam, and lots of boomers were probably actually deceived and not just willfully blind, but now they want to impose essentially the full costs of that failure on younger generations. 

I remember the SS "fix" in 1983 and I was neither deceived nor willfully blind, we had some hot debates about that subject. This link to an article by the Brookings Institute doesn't really reflect the "scam" aspect and I agree with you that it was a scam.
 https://www.brookings.edu/opinions/the-crisis-last-time-social-security-reform/

I like this one from THE HILL a bit better http://thehill.com/blogs/congress-blog/economy-budget/227610-sociel-security-deal-of-1983-was-a-punt
EXCERPT
Quote
The 1983 reform of Social Security largely shifted the burden of Social Security from one generation to the next with the consequences falling heavily on late-boomers and those that followed. The Republicans and Democrats came together in a bipartisan effort to kick-the-can.

I will say this, there were few boomers involved, (they would have been in their 30s) this was primarily hashed out by the "greatest generation". Nevertheless, SS remains a sacred cow and it was negligent and cowardly of our generation not to tackle it ever again.
Strange how nothing happens with SS until it becomes a problem, they were actually about to run short on payouts for the first time in the history of the program.

Anecdote: I mentioned the 2034 date and it's significance to a few lady friends (between 45 and 67 yrs old) - they had no clue.

If history prevails then the can will be kicked down the road by the politicians again. They'll take a few measures to keep the program afloat as long as the boomers are still able to vote and haven't met the untimely death you spoke about:).
I don't like to play the blame game - it solves nothing.

Are we going to wait until 2034 to take action? We have plenty of smart people young and old that can work on resolutions together. There are plenty of debates and solutions floating about including those from NPR that Praxis alluded to.
[/quote]

Almost certainly.  Any politician that even acknowledges the reality of social security is the subject of attack ads accusing him of throwing the elderly off the cliff. 

The really sad thing is that it is so predictable.  We are not going to do anything, and the people that are going to get screwed the hardest are not the well off retirees (who conceivably will not have any benefit cut), but the young worker worth substantially less and with substantially less disposable income that has to pay higher taxes so that relatively rich retirees get the benefits they promised themselves younger workers would pay them. 

seattlecyclone

  • Magnum Stache
  • ******
  • Posts: 4491
  • Age: 34
  • Location: Seattle, WA
Re: Social Security will not be bankrupt
« Reply #23 on: June 07, 2018, 04:27:41 PM »
The easiest fix, in my opinion, is to simply break down the artificial wall that has been put up between social security's budget and the rest of the government.

For years the payroll tax was more than was needed to pay social security recipients. This money was then spent on other government programs. There's a "trust fund" set up to track this amount. Under current law, regular tax revenue is required to supplement payroll tax revenue to pay out full benefits, but only until the "trust fund" goes down to zero.

There will be a year when the "trust fund" is almost exhausted, and the regular budget includes a bunch of money to repay it. Then the next year the "trust fund" will be gone, and we'll magically have a huge budget surplus. Well, not so magic. It's really just the consequence of legislators in the 1980s scheduling a completely arbitrary date to cut off retiree benefits by 20% fifty years later.

There's no reason why there needs to be this artificial wall between social security and the rest of the government, where surplus revenue from the social security side can flow into other government programs but not the other way around. Just end this charade.

Rosy

  • Handlebar Stache
  • *****
  • Posts: 1818
  • Location: Florida
Re: Social Security will not be bankrupt
« Reply #24 on: June 07, 2018, 05:08:58 PM »
The easiest fix, in my opinion, is to simply break down the artificial wall that has been put up between social security's budget and the rest of the government.

For years the payroll tax was more than was needed to pay social security recipients. This money was then spent on other government programs. There's a "trust fund" set up to track this amount. Under current law, regular tax revenue is required to supplement payroll tax revenue to pay out full benefits, but only until the "trust fund" goes down to zero.

There will be a year when the "trust fund" is almost exhausted, and the regular budget includes a bunch of money to repay it. Then the next year the "trust fund" will be gone, and we'll magically have a huge budget surplus. Well, not so magic. It's really just the consequence of legislators in the 1980s scheduling a completely arbitrary date to cut off retiree benefits by 20% fifty years later.

There's no reason why there needs to be this artificial wall between social security and the rest of the government, where surplus revenue from the social security side can flow into other government programs but not the other way around. Just end this charade.

Best explanation yet:)

TheWifeHalf

  • Bristles
  • ***
  • Posts: 499
Re: Social Security will not be bankrupt
« Reply #25 on: June 07, 2018, 06:07:58 PM »
TheHusbandHalf will get Raiiroad Retirement, rather than SS.
I read that SS was based on Railroad Retirement, so does anyone know if it's all one pool of money, or is it a separate chunk?

He just got his SS statement in the mail today! They estimate his monthly payment would be about the same as his RR payment, but the RR will add in extra because he paid tier 1 and tier 2.

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!
The new thing around here are 'roundabouts' I will never drive where there is one. In fact, I don't drive anywhere except the grocery store, and that's with THH.

It sounds like strategies that could make it advantageous to have an SS record have been done away with anyways. I'll just wait for half of THH.

DreamFIRE

  • Handlebar Stache
  • *****
  • Posts: 1307
Re: Social Security will not be bankrupt
« Reply #26 on: June 07, 2018, 07:28:50 PM »
Social Security after-tax "net" benefits are already being "cut" and have been for years, but most people aren't aware of how this is being done.

Social Security benefits are indexed to CPI, but seniors living costs tend to increase at a higher rate than the general public's expenses, so their SS benefits really should be indexed to Consumer Price Index for the Elderly, or CPI-E.   As it is, each year acts as a little bit more of a cut to their SS benefits and hurts seniors as their benefit increases do not match their living cost increases.

Also, SS formula for determining how much of your SS benefits are taxed is NOT indexed to inflation, so that threshold has not increased since it was first introduced in 1983.  For a single person, if your income combined with half your SS benefits exceeds $25,000, you have to pay income tax on up to 50% of your SS benefits.  If it exceeds $34,000, you have to pay income tax on up to 85% of your SS benefits.  $25K in 1983 is worth a lot more than $25K in 2018.  Since your retirement distributions and SS benefits will be adjusted with inflation, but NOT the $25,000/$34,000 thresholds, a greater percentage of your SS benefits will become taxable as each year passes (for married filing jointly, the thresholds are $32,000/$44,000.)  It's a built-in tax increase, reducing "net" SS benefits, hurting seniors further.  The greater your combined income and SS/2, the more you will be affected by this up to a max of 85% of your benefits being taxed!  It's absurd, and those thresholds should be increased to reflect inflation since 1983.

https://www.fool.com/retirement/general/2016/05/08/this-33-year-old-social-security-rule-is-wreaking.aspx
http://www.foxnews.com/story/2007/03/25/double-whammy-taxation-social-security-benefits.html
https://www.ssa.gov/policy/docs/issuepapers/ip2015-02.html
« Last Edit: June 07, 2018, 08:24:57 PM by DreamFIRE »

SwordGuy

  • Magnum Stache
  • ******
  • Posts: 4367
  • Location: Fayetteville, NC
    • Flipping Fayetteville
Re: Social Security will not be bankrupt
« Reply #27 on: June 07, 2018, 07:30:43 PM »
I resent the idea that receiving SS makes me a welfare recipient when I am the one who paid in. That's perverse!

Resent away all you want.

It won't change the fact that if you are a low income earner, you will be receiving benefits you didn't pay for.  You will be receiving benefits middle and high income earners paid for and are giving to you.

The amount of that subsidy might surprise you.   

I suggest you research "Social Security Bend Points" to learn the obscenely high level of subsidy.

And if you are a low income earner, say "Thank You!" to middle and high income earners.

I didn't mind paying out that subsidy.   But l do mind being treated like I wasn't pulling my weight in this system.  I was.  And I was pulling other people's weight, too.

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?   

DreamFIRE

  • Handlebar Stache
  • *****
  • Posts: 1307
Re: Social Security will not be bankrupt
« Reply #28 on: June 07, 2018, 08:49:15 PM »
I just fixed Social Security!  Who do I send the bill to?  :)   See pic:



It wasn't an option, but I would also slowly increase the retirement age for people now in their 40's or younger but not for those within 10 years of of being able to draw SS.  Another thing that wasn't an option was to put a small FICA tax on long term capital gains for high earners.
« Last Edit: June 07, 2018, 08:56:20 PM by DreamFIRE »

Undecided

  • Handlebar Stache
  • *****
  • Posts: 1075
Re: Social Security will not be bankrupt
« Reply #29 on: June 07, 2018, 09:16:39 PM »
The easiest fix, in my opinion, is to simply break down the artificial wall that has been put up between social security's budget and the rest of the government.

For years the payroll tax was more than was needed to pay social security recipients. This money was then spent on other government programs. There's a "trust fund" set up to track this amount. Under current law, regular tax revenue is required to supplement payroll tax revenue to pay out full benefits, but only until the "trust fund" goes down to zero.

There will be a year when the "trust fund" is almost exhausted, and the regular budget includes a bunch of money to repay it. Then the next year the "trust fund" will be gone, and we'll magically have a huge budget surplus. Well, not so magic. It's really just the consequence of legislators in the 1980s scheduling a completely arbitrary date to cut off retiree benefits by 20% fifty years later.

There's no reason why there needs to be this artificial wall between social security and the rest of the government, where surplus revenue from the social security side can flow into other government programs but not the other way around. Just end this charade.

While I think I understand the sense in which you mean “easiest,” given the apparent appetite for cutting other federal income taxes, I’m not sure what your suggestion actually means. Raise other taxes? Run bigger deficits? Either or both as dictated by the combination of social security and everything else?

Undecided

  • Handlebar Stache
  • *****
  • Posts: 1075
Re: Social Security will not be bankrupt
« Reply #30 on: June 07, 2018, 09:17:28 PM »
Looks like the maximum amount of income subject to SS taxes this year is $128,400. I would like to see that number raised to infinity. That has always seemed like the logical solution to fill in future gaps but I never hear it mentioned when discussing shortfalls. I'm also not opposed to pushing back the full retirement age or whatever it is called.

I think people should need 80 quarters, not 40, to qualify for benefits.

DreamFIRE

  • Handlebar Stache
  • *****
  • Posts: 1307
Re: Social Security will not be bankrupt
« Reply #31 on: June 07, 2018, 09:26:49 PM »
Looks like the maximum amount of income subject to SS taxes this year is $128,400. I would like to see that number raised to infinity. That has always seemed like the logical solution to fill in future gaps but I never hear it mentioned when discussing shortfalls. I'm also not opposed to pushing back the full retirement age or whatever it is called.

I think people should need 80 quarters, not 40, to qualify for benefits.

How about cutting spousal benefits for those who have 0 quarters?  Craziness!

Telecaster

  • Handlebar Stache
  • *****
  • Posts: 1344
  • Location: Seattle, WA
Re: Social Security will not be bankrupt
« Reply #32 on: June 07, 2018, 09:46:47 PM »

 The "intergenerational squablling is occurring because the one group that was better positioned than any other to fix social security was boomers.  The problem was fully identified in 1982.  Yes, the 1982 "fix" was a scam, and lots of boomers were probably actually deceived and not just willfully blind, but now they want to impose essentially the full costs of that failure on younger generations. 

I disagree.  Congress recognized there would be a demographic hump when the Boomers began to retire (which are are now seeing), and raised payroll taxes--the majority of which were on the Boomers themselves-- far beyond what was required to fund Social Security.  This lead to enormous surpluses, which were stored in the form of U.S. bonds.  The bonds pay interest, which in turn helps fund the SS program.  This surplus and spending down the bonds would be enough for SS to fully fund benefits for the next 50 years, which would bring us past the demographic hump of Boomer retirement. 

The alternative would have been to continuously increase SS taxes over time.  That would have been better for the Boomers, but worse for everybody else.  Back in 1982 Congress had no way of knowing what the demographics would look like in 2005 or 2018 so in a rare act of bi-partisan courage did the right thing, raised taxes, and fixed the problem for the next 50 years.

The screw job happened in 2001 and again in 2005.  In 2001, the federal government was running surpluses as far as the eye could see.    Instead of using the surpluses to help fix the SS problem, Congress voted for tax cuts, which mostly benefited the wealthy.  In 2005, Congress passed Medicare Part D, which probably was a good thing overall, however Congress did not provide funding.  Every dime of the expansion was borrowed, which placed more stress on the Medicare system which was already in bad shape. 




Jrr85

  • Handlebar Stache
  • *****
  • Posts: 1204
Re: Social Security will not be bankrupt
« Reply #33 on: June 08, 2018, 08:04:20 AM »

 The "intergenerational squablling is occurring because the one group that was better positioned than any other to fix social security was boomers.  The problem was fully identified in 1982.  Yes, the 1982 "fix" was a scam, and lots of boomers were probably actually deceived and not just willfully blind, but now they want to impose essentially the full costs of that failure on younger generations. 

I disagree.  Congress recognized there would be a demographic hump when the Boomers began to retire (which are are now seeing), and raised payroll taxes--the majority of which were on the Boomers themselves-- far beyond what was required to fund Social Security.  This lead to enormous surpluses, which were stored in the form of U.S. bonds.  The bonds pay interest, which in turn helps fund the SS program.  This surplus and spending down the bonds would be enough for SS to fully fund benefits for the next 50 years, which would bring us past the demographic hump of Boomer retirement. 
  (Ignoring the fact that the "fix" obviously didn't isn't going to get us past the bulge in the Boomer retirements), In other words, instead of attempting to do something with the surplus that would provide resources other than new taxes on future workers (or increased borrowing) to pay for social security in the future, they spent the surplus and called the number tracking the surplus a "trust fund" even though there were no assets there that would provide something other than tax dollars or borrowing to pay future social security benefits.  How is that not a scam again?


The alternative would have been to continuously increase SS taxes over time.  That would have been better for the Boomers, but worse for everybody else.  Back in 1982 Congress had no way of knowing what the demographics would look like in 2005 or 2018 so in a rare act of bi-partisan courage did the right thing, raised taxes, and fixed the problem for the next 50 years.
  That would have been better for everybody.  All the "fix" did was increase government revenue, which was of course followed by spending.  Had it not been for the scam fix, politicians would have had to openly raise taxes to fund more government spending, not escalate government spending, or had balooning deficits.  The first likely wouldn't have happened, as people wouldn't have agreed to raise taxes to increase spending on something other than social security.  Most likely we would have had a combination of two and three.
 We would have had higher deficits and resulting debt, but it would have been less spending than otherwise.  That would leave us now with less spending (and the associated entrenched special interests) to deal with and would also give us more room to raise taxes without causing a lot of deadweight loss.  That'd be a much better position than the one we're currently in, where we already have a >15% flat tax on wage income plus ordinary income taxes and also a ridiculous amount of spending.   

The screw job happened in 2001 and again in 2005.  In 2001, the federal government was running surpluses as far as the eye could see.    Instead of using the surpluses to help fix the SS problem, Congress voted for tax cuts, which mostly benefited the wealthy.  In 2005, Congress passed Medicare Part D, which probably was a good thing overall, however Congress did not provide funding.  Every dime of the expansion was borrowed, which placed more stress on the Medicare system which was already in bad shape.
  You can argue about whether the Bush tax cuts were a good idea nd whether Obama should have extended most of them, but it wasn't a screwing to not deal with SS then (also, you conveniently forget that Bush actually did try to fix SS, although even then it was too late to deal with most of the screwing, and got raked over the coals).  The cake was already baked at that point and somebody was going to get screwed.  It would have been better to set up a realistic path for SS in 2001 instead of 2034, but at that point they had already spent almost two decades worth of surplus that should have been invested into productive assets. 

Milizard

  • Pencil Stache
  • ****
  • Posts: 582
  • Location: West Michigan
Re: Social Security will not be bankrupt
« Reply #34 on: June 08, 2018, 08:43:34 AM »
What I would do to fix the shortfall for SS and Medicare, is add a smaller tax on all income (including investment income) over the cap.  This would help with the income inequality problem, and if you're making > $128k in investment income, I'm guessing a small tax on the excess would be affordable to you.  Also, the vast majority of this demographic just got a nice federal income tax cut recently.

FIRE@50

  • Bristles
  • ***
  • Posts: 313
  • Age: 41
  • Location: Maryland
Re: Social Security will not be bankrupt
« Reply #35 on: June 08, 2018, 08:52:27 AM »
Looks like the maximum amount of income subject to SS taxes this year is $128,400. I would like to see that number raised to infinity. That has always seemed like the logical solution to fill in future gaps but I never hear it mentioned when discussing shortfalls. I'm also not opposed to pushing back the full retirement age or whatever it is called.

Increasing the marginal tax rate by 14 percentage points seems like not a great solution to me.  For many people in high tax states, their effective marginal tax rate for federal state and local would probably exceed 66%.  That seems insane to me.  Just for federal you are looking at 37% income, plus ~15.2% SS and medicare, so that puts you at 52.2 (actually slightly less because of the deductibility of half of SS/Medicare taxes; still that seems unduly burdensome, especially when you consider state and local are taking a cut too, whether out of income or otherwise).   

Start with using chained CPI rather than wage growth, and then nobody gets an actual cut and everybody bears some of the burden. 

Or alternatively, change the benefits for boomers where there is a minimum floor, and subject to that floor, people get the lower of scheduled benefits or the benefits that would be projected to make sure they didn't get mroe than they put in, accounting for 2-3% growth on their contributions.

I support lowering income tax rates to one flat rate. I think you and I could find a good middle ground on overall taxes.

Jrr85

  • Handlebar Stache
  • *****
  • Posts: 1204
Re: Social Security will not be bankrupt
« Reply #36 on: June 08, 2018, 08:56:53 AM »
I just fixed Social Security!  Who do I send the bill to?  :)   See pic:



It wasn't an option, but I would also slowly increase the retirement age for people now in their 40's or younger but not for those within 10 years of of being able to draw SS.  Another thing that wasn't an option was to put a small FICA tax on long term capital gains for high earners.

That graphic is a little misleading.  "Increasing payroll tax by 4%" is going to be ready be many people to mean "increase payroll tax by four percent" and not "increase payroll tax by four percentage points", which is of course either increasing the payroll tax by ~twenty-six percent if they mean four percentage points total split in some way between employer and employee or ~fifty two percent if they mean four percentage points on both sides of the payroll.  Based on it closing 149% of the gap, I assume that actually means apply an additional 4 percentage points to both employer and employee sides, as just four percentage points would barely close the gap or not quite close the gap depednign on which projections you are looking at (and assuming no dynamic impacts). 

dogboyslim

  • Bristles
  • ***
  • Posts: 360
Re: Social Security will not be bankrupt
« Reply #37 on: June 08, 2018, 09:36:36 AM »
* Remove or raise caps on social security taxes.  Right now, it doesn't tax over ~$100k.  If you remove caps, Warren Buffett and other billionaires/multimillionaires have to pay a much larger SS tax, and float it for everyone else.

* Reduce benefits.  Later retirement age or lower payouts.  Anything that saves 20% of payouts fixes it.

* Raise SS taxes so that the younger generations can cover the older right now.  This can go back down after more Boomers have passed away.


Of these, to me, the first seems simplest.  The second one harms current old people, the third one harms current young people, the first taxes the rich who can best afford it.  But - SS is politically viable because people feel like they get what they pay in to it.  So anything that takes away that "feeling" means politicians are more likely to attack it and the program becomes more vulnerable.

Billionaires don't pay SS tax because it is only paid on wages.  Billionaires make their money on capital gains/interest/dividends.  Make these eligible for SS taxes and your statement is true.  How many on this board want to pay 12.4% of their gains/dividends into SS?  It would certainly fix the problem though.



Rosy

  • Handlebar Stache
  • *****
  • Posts: 1818
  • Location: Florida
Re: Social Security will not be bankrupt
« Reply #38 on: June 08, 2018, 09:42:37 AM »
I resent the idea that receiving SS makes me a welfare recipient when I am the one who paid in. That's perverse!

Resent away all you want.

It won't change the fact that if you are a low income earner, you will be receiving benefits you didn't pay for.  You will be receiving benefits middle and high income earners paid for and are giving to you.

The amount of that subsidy might surprise you.   

I suggest you research "Social Security Bend Points" to learn the obscenely high level of subsidy.

And if you are a low income earner, say "Thank You!" to middle and high income earners.

I didn't mind paying out that subsidy.   But l do mind being treated like I wasn't pulling my weight in this system.  I was.  And I was pulling other people's weight, too.

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?

Sword Guy - FWIW I'm not even collecting on my own SS since I am a widow - so in essence, like Jrr85 suggested I do - I did give up my own SS.
I don't think I'll have to say thank you to anyone and that is exactly how I prefer it to be.

You said that you do mind being treated as if you were not pulling your weight in this system, well so do I:)  Pulling in $90K in the 80s isn't exactly low income welfare territory and while I was not high income, I hovered between 65K and $100K for most of my working life.
Illness forced me to semi-retire in my early 60s and there were some chunks of time when I lived overseas, but all in all, I'm certain I pulled my own weight and perhaps a bit more.
I chose to begin drawing SS a couple of months before I turned 66.


I found this on the social security bend points - https://financialducksinarow.com/1962/social-security-bend-points-explained/

Quote
Bend point numbers for 2018 from https://financialducksinarow.com/1962/social-security-bend-points-explained/

Current year’s AWI Series divided by 1977’s AWI figure, times the bend points for 1979 equals your current year bend points

So here is the math for 2018’s bend points:

$48,642.15 / $9779.44 = 4.9739

4.9739 * $180 = $895.31, which is rounded down to $895 – the first bend point

4.9739 * $1,085 = $5,396.70, rounded up to $5,397 – the second bend point

And that’s all there is to it. 


While I surfed I also found this article on USA Today about possible solutions for Social Security - interesting read. https://www.usatoday.com/story/money/personalfinance/retirement/2018/02/23/how-much-will-i-get-from-social-security-if-i-make-100000/110701996/

Quote
Here's the point. There are two main ways it could be fixed: tax increases or benefit reductions. And some of the benefit reductions being considered would alter the calculation formula, such as using 38 years of employment instead of 35 to calculate average earnings, or creating a fourth "bend point" in the calculation formula that would effectively reduce benefits for higher-income workers.

I think the solution of using 38 years instead of 35 years of employment could be volatile, depending on whether they are at the beginning or the end of your career.










dogboyslim

  • Bristles
  • ***
  • Posts: 360
Re: Social Security will not be bankrupt
« Reply #39 on: June 08, 2018, 09:55:28 AM »
I also want to chime in and say that raising the retirement age creates a disparate impact on minority males who have shorter life expectancies, and to those in lower socioeconomic classes whose employment depends upon physical ability.  For all the desk-workers that seem to dominate this board, myself included, raising the retirement age isn't a big deal, but if you are a physical laborer, there are only so many years that you can sling a shovel, crawl under sinks and carry heavy tools/equipment.  I find the current age to already be problematic for some in this category, so I will vote and lobby against this if it is ever proposed.  I don't have a problem with benefit reductions, but we should take raising the retirement age OFF the table for consideration as a means to this end.

mm1970

  • Walrus Stache
  • *******
  • Posts: 5873
Re: Social Security will not be bankrupt
« Reply #40 on: June 08, 2018, 10:07:14 AM »
I also want to chime in and say that raising the retirement age creates a disparate impact on minority males who have shorter life expectancies, and to those in lower socioeconomic classes whose employment depends upon physical ability.  For all the desk-workers that seem to dominate this board, myself included, raising the retirement age isn't a big deal, but if you are a physical laborer, there are only so many years that you can sling a shovel, crawl under sinks and carry heavy tools/equipment.  I find the current age to already be problematic for some in this category, so I will vote and lobby against this if it is ever proposed.  I don't have a problem with benefit reductions, but we should take raising the retirement age OFF the table for consideration as a means to this end.
Yes, this is the thing that gets me when everyone talks about raising retirement age.  Most of my immediate family worked in physical labor (my dad, brother, BILs, etc.)  For many of them, they are physically in pain by age 50 - shoulders, knees, back, etc.  A few of them were lucky enough to have a pension - but they also have a good work ethic and try to get another physical but maybe less physical job.  And it's difficult.

"Retire at 70" is for desk folks, not construction workers or manual laborers.  And even then, I work with a large number of engineers and scientists who are over 60 - honestly, the mental capacity, ability to multi-task and remember things - it starts degrading, and it varies by person.  I've seen my own ability to remember things and multi-task degrade - and that started in my early 40s.  Not every person who uses their brain will be able to work until 70 either.

TheContinentalOp

  • 5 O'Clock Shadow
  • *
  • Posts: 96
  • Location: Suburban Philadelphia
Re: Social Security will not be bankrupt
« Reply #41 on: June 08, 2018, 10:37:20 AM »
Quote
I also want to chime in and say that raising the retirement age creates a disparate impact on minority males who have shorter life expectancies

It would be more accurate that it creates a disparate impact on men who have shorter lives than women.  Minorities do better and worse than whites.

Amerinds < Blacks < Whites < Hispanics < Asians

Jrr85

  • Handlebar Stache
  • *****
  • Posts: 1204
Re: Social Security will not be bankrupt
« Reply #42 on: June 08, 2018, 11:36:36 AM »
The easiest fix, in my opinion, is to simply break down the artificial wall that has been put up between social security's budget and the rest of the government.

For years the payroll tax was more than was needed to pay social security recipients. This money was then spent on other government programs. There's a "trust fund" set up to track this amount. Under current law, regular tax revenue is required to supplement payroll tax revenue to pay out full benefits, but only until the "trust fund" goes down to zero.

There will be a year when the "trust fund" is almost exhausted, and the regular budget includes a bunch of money to repay it. Then the next year the "trust fund" will be gone, and we'll magically have a huge budget surplus. Well, not so magic. It's really just the consequence of legislators in the 1980s scheduling a completely arbitrary date to cut off retiree benefits by 20% fifty years later.

There's no reason why there needs to be this artificial wall between social security and the rest of the government, where surplus revenue from the social security side can flow into other government programs but not the other way around. Just end this charade.
  The actually is a good reason for why the "wall" is there.  While it's misleading (to say the least) to call the social security revenue spent on general government a "trust fund", it does maintain some sense of intergenerational equity.  If payments were really reduced to match inflow when the "trust fund" shows zero, then that would ensure that retirees basically get the benefits that can be paid with the taxes they were willing to pay. 

It was stupid to not invest the surplus in productive assets, but given that decision, the current law is actually a pretty good approach from a fairness perspective.  The problem is that the law will probably change (in large part because people have been acting as if the law will change, which means allowing it to stay the same will have a lot of elderly people experiencing financial hardship, which creates the political will to change the law). 

Rosy

  • Handlebar Stache
  • *****
  • Posts: 1818
  • Location: Florida
Re: Social Security will not be bankrupt
« Reply #43 on: June 08, 2018, 12:03:34 PM »
I also want to chime in and say that raising the retirement age creates a disparate impact on minority males who have shorter life expectancies, and to those in lower socioeconomic classes whose employment depends upon physical ability.  For all the desk-workers that seem to dominate this board, myself included, raising the retirement age isn't a big deal, but if you are a physical laborer, there are only so many years that you can sling a shovel, crawl under sinks and carry heavy tools/equipment.  I find the current age to already be problematic for some in this category, so I will vote and lobby against this if it is ever proposed.  I don't have a problem with benefit reductions, but we should take raising the retirement age OFF the table for consideration as a means to this end.
Yes, this is the thing that gets me when everyone talks about raising retirement age.  Most of my immediate family worked in physical labor (my dad, brother, BILs, etc.)  For many of them, they are physically in pain by age 50 - shoulders, knees, back, etc.  A few of them were lucky enough to have a pension - but they also have a good work ethic and try to get another physical but maybe less physical job.  And it's difficult.

"Retire at 70" is for desk folks, not construction workers or manual laborers. And even then, I work with a large number of engineers and scientists who are over 60 - honestly, the mental capacity, ability to multi-task and remember things - it starts degrading, and it varies by person.  I've seen my own ability to remember things and multi-task degrade - and that started in my early 40s.  Not every person who uses their brain will be able to work until 70 either.

Agreed - age 70 creates hardships. Besides, there is also this real thing called age discrimination and the shame/anxiety and depression related to being laid off in your sixties and not finding any work while waiting for SS to kick in.
That is hard for people who identify with their job.

Mr. R. had a colleague who retired at 70, but only because they "convinced" him to leave. He no longer had the mental capacity to do the job, but he was holding on because he needed the money. 


Paul der Krake

  • Magnum Stache
  • ******
  • Posts: 4342
  • Age: 10
  • Location: USA
Re: Social Security will not be bankrupt
« Reply #44 on: June 08, 2018, 12:26:57 PM »
The easiest fix, in my opinion, is to simply break down the artificial wall that has been put up between social security's budget and the rest of the government.

For years the payroll tax was more than was needed to pay social security recipients. This money was then spent on other government programs. There's a "trust fund" set up to track this amount. Under current law, regular tax revenue is required to supplement payroll tax revenue to pay out full benefits, but only until the "trust fund" goes down to zero.

There will be a year when the "trust fund" is almost exhausted, and the regular budget includes a bunch of money to repay it. Then the next year the "trust fund" will be gone, and we'll magically have a huge budget surplus. Well, not so magic. It's really just the consequence of legislators in the 1980s scheduling a completely arbitrary date to cut off retiree benefits by 20% fifty years later.

There's no reason why there needs to be this artificial wall between social security and the rest of the government, where surplus revenue from the social security side can flow into other government programs but not the other way around. Just end this charade.
I'd rather see the opposite - prevent surpluses from being spent elsewhere (easier said than done now that there are no surpluses).

The politics around pensions in other countries get bogged down because there is no clear separation between pension funds and general state funds. Having a clear separation has value because it forces the debate to focus on how pensions are funded, not what the overall government spending should be. It keeps the debate focused on what the formula should be, without getting sidetracked with other spending debates.

seattlecyclone

  • Magnum Stache
  • ******
  • Posts: 4491
  • Age: 34
  • Location: Seattle, WA
Re: Social Security will not be bankrupt
« Reply #45 on: June 08, 2018, 12:33:49 PM »
The easiest fix, in my opinion, is to simply break down the artificial wall that has been put up between social security's budget and the rest of the government.

For years the payroll tax was more than was needed to pay social security recipients. This money was then spent on other government programs. There's a "trust fund" set up to track this amount. Under current law, regular tax revenue is required to supplement payroll tax revenue to pay out full benefits, but only until the "trust fund" goes down to zero.

There will be a year when the "trust fund" is almost exhausted, and the regular budget includes a bunch of money to repay it. Then the next year the "trust fund" will be gone, and we'll magically have a huge budget surplus. Well, not so magic. It's really just the consequence of legislators in the 1980s scheduling a completely arbitrary date to cut off retiree benefits by 20% fifty years later.

There's no reason why there needs to be this artificial wall between social security and the rest of the government, where surplus revenue from the social security side can flow into other government programs but not the other way around. Just end this charade.

While I think I understand the sense in which you mean “easiest,” given the apparent appetite for cutting other federal income taxes, I’m not sure what your suggestion actually means. Raise other taxes? Run bigger deficits? Either or both as dictated by the combination of social security and everything else?

My suggestion is to have roughly the same amount of deficit and taxes the year after the "trust fund" runs out as we do the year before. Of all the things we could massively cut from one year to another to balance the budget, keeping senior citizens out of homelessness would be near the bottom of my list.

seattlecyclone

  • Magnum Stache
  • ******
  • Posts: 4491
  • Age: 34
  • Location: Seattle, WA
Re: Social Security will not be bankrupt
« Reply #46 on: June 08, 2018, 12:41:30 PM »
The easiest fix, in my opinion, is to simply break down the artificial wall that has been put up between social security's budget and the rest of the government.

For years the payroll tax was more than was needed to pay social security recipients. This money was then spent on other government programs. There's a "trust fund" set up to track this amount. Under current law, regular tax revenue is required to supplement payroll tax revenue to pay out full benefits, but only until the "trust fund" goes down to zero.

There will be a year when the "trust fund" is almost exhausted, and the regular budget includes a bunch of money to repay it. Then the next year the "trust fund" will be gone, and we'll magically have a huge budget surplus. Well, not so magic. It's really just the consequence of legislators in the 1980s scheduling a completely arbitrary date to cut off retiree benefits by 20% fifty years later.

There's no reason why there needs to be this artificial wall between social security and the rest of the government, where surplus revenue from the social security side can flow into other government programs but not the other way around. Just end this charade.
I'd rather see the opposite - prevent surpluses from being spent elsewhere (easier said than done now that there are no surpluses).

The politics around pensions in other countries get bogged down because there is no clear separation between pension funds and general state funds. Having a clear separation has value because it forces the debate to focus on how pensions are funded, not what the overall government spending should be. It keeps the debate focused on what the formula should be, without getting sidetracked with other spending debates.

Many US states and local governments do have this clear separation for their employee pensions. It never seems to work in the retirees' favor. It's pretty common for these to be underfunded and if they eventually go bankrupt the benefits can be cut. You never hear about the opposite happening: an overfunded pension paying out more than promised.

The US social security system was built on this charade that workers are "paying into" some account that would save up money for their eventual retirement. That has never been the case. Current workers have always paid for current retirees. If the worker to retiree ratio goes down, the whole system collapses. This has nothing to do with making sure retirees get the fruit of the tax rates they were willing to impose on themselves as workers. It's all about that worker to retiree ratio.

Undecided

  • Handlebar Stache
  • *****
  • Posts: 1075
Re: Social Security will not be bankrupt
« Reply #47 on: June 08, 2018, 02:29:54 PM »
What I would do to fix the shortfall for SS and Medicare, is add a smaller tax on all income (including investment income) over the cap.  This would help with the income inequality problem, and if you're making > $128k in investment income, I'm guessing a small tax on the excess would be affordable to you.  Also, the vast majority of this demographic just got a nice federal income tax cut recently.

There is already a Medicare surtax (.9% on wage and self-employment income above $200k single/$250k MFJ) and the net-investment income tax (3.8% on investment income for people with incomes above those same thresholds). When people casually suggest raising (other peoples'?) taxes, I always wonder if they know what the current taxes are.

Jrr85

  • Handlebar Stache
  • *****
  • Posts: 1204
Re: Social Security will not be bankrupt
« Reply #48 on: June 08, 2018, 02:31:31 PM »
The easiest fix, in my opinion, is to simply break down the artificial wall that has been put up between social security's budget and the rest of the government.

For years the payroll tax was more than was needed to pay social security recipients. This money was then spent on other government programs. There's a "trust fund" set up to track this amount. Under current law, regular tax revenue is required to supplement payroll tax revenue to pay out full benefits, but only until the "trust fund" goes down to zero.

There will be a year when the "trust fund" is almost exhausted, and the regular budget includes a bunch of money to repay it. Then the next year the "trust fund" will be gone, and we'll magically have a huge budget surplus. Well, not so magic. It's really just the consequence of legislators in the 1980s scheduling a completely arbitrary date to cut off retiree benefits by 20% fifty years later.

There's no reason why there needs to be this artificial wall between social security and the rest of the government, where surplus revenue from the social security side can flow into other government programs but not the other way around. Just end this charade.

While I think I understand the sense in which you mean “easiest,” given the apparent appetite for cutting other federal income taxes, I’m not sure what your suggestion actually means. Raise other taxes? Run bigger deficits? Either or both as dictated by the combination of social security and everything else?

My suggestion is to have roughly the same amount of deficit and taxes the year after the "trust fund" runs out as we do the year before. Of all the things we could massively cut from one year to another to balance the budget, keeping senior citizens out of homelessness would be near the bottom of my list.

That might would be ok depending on how projections shake out.  It'd be unfair to workers, but probably not as unfair as what will actually happen.  The problem is that when the "trust fund" shows zero, I believe it's projected to continue to get worse for a while before it levels out. 

And even then, I'm not sure the deficits we're likely to be running at that time will be sustainable anyway, so that might not even be an option. 




Jrr85

  • Handlebar Stache
  • *****
  • Posts: 1204
Re: Social Security will not be bankrupt
« Reply #49 on: June 08, 2018, 02:39:08 PM »
The easiest fix, in my opinion, is to simply break down the artificial wall that has been put up between social security's budget and the rest of the government.

For years the payroll tax was more than was needed to pay social security recipients. This money was then spent on other government programs. There's a "trust fund" set up to track this amount. Under current law, regular tax revenue is required to supplement payroll tax revenue to pay out full benefits, but only until the "trust fund" goes down to zero.

There will be a year when the "trust fund" is almost exhausted, and the regular budget includes a bunch of money to repay it. Then the next year the "trust fund" will be gone, and we'll magically have a huge budget surplus. Well, not so magic. It's really just the consequence of legislators in the 1980s scheduling a completely arbitrary date to cut off retiree benefits by 20% fifty years later.

There's no reason why there needs to be this artificial wall between social security and the rest of the government, where surplus revenue from the social security side can flow into other government programs but not the other way around. Just end this charade.
I'd rather see the opposite - prevent surpluses from being spent elsewhere (easier said than done now that there are no surpluses).

The politics around pensions in other countries get bogged down because there is no clear separation between pension funds and general state funds. Having a clear separation has value because it forces the debate to focus on how pensions are funded, not what the overall government spending should be. It keeps the debate focused on what the formula should be, without getting sidetracked with other spending debates.

Many US states and local governments do have this clear separation for their employee pensions. It never seems to work in the retirees' favor. It's pretty common for these to be underfunded and if they eventually go bankrupt the benefits can be cut. You never hear about the opposite happening: an overfunded pension paying out more than promised.

The US social security system was built on this charade that workers are "paying into" some account that would save up money for their eventual retirement. That has never been the case. Current workers have always paid for current retirees. If the worker to retiree ratio goes down, the whole system collapses. This has nothing to do with making sure retirees get the fruit of the tax rates they were willing to impose on themselves as workers. It's all about that worker to retiree ratio.

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.  It's also worth noting that much of that 15.2% went to pay for government services that they received at the time, so it's still a horrendous deal for younger workers.  Boomers got to pay a 15.3% flat tax on wage income, but much of that went to paying for general services.  If younger workers only have to pay 15.3%, all of that 15.3% will go to retired boomers, and then younger workers still have to pay for general government.  That's still pretty unfair.  But it would be obscenely unfair to make younger workers pay a 20% flat tax on income (all of which goes to generally much more affluent retirees), and then also make them pay for general government.