Author Topic: Social Security Running Dry?  (Read 13698 times)

Sid888

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Social Security Running Dry?
« on: February 11, 2015, 06:01:30 AM »
MSN Money is reporting that the Social Security Disability Insurance trust fund will be flat broke in 2016.  I'd be interested in (a) what policy you think federal lawmakers should take, if any, to address this problem, and (b) what benefit would you personally receive if the federal lawmakers adopted the policy that you suggested?

Story: http://www.msn.com/en-us/money/retirement/us-budget-aims-to-save-social-security-disability-benefits/ar-AA99R61

"Social Security trustees and other financial experts have been warning for years that lawmakers and the administration must act to prop up the hemorrhaging trust fund, as trustee Charles Blahous noted recently in The Fiscal Times. SSDI supplements the income of physically disabled workers and automatically enrolls them in Medicare after two years. The plan is funded by federal payroll taxes.

With more and more Americans turning to the program--and increasing evidence of billions dollars in fraud--the latest trustees’ report projects that the fund’s reserves will be depleted in late 2016. By law, Social Security can only pay benefits if there is a positive balance in the appropriate funds."

Gin1984

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Re: Social Security Running Dry?
« Reply #1 on: February 11, 2015, 06:13:42 AM »
You missed the next paragraph: Absent those reserves, Blahous said, the only funds the government can use to cover disability claims is the incoming tax revenue. Unfortunately, there would only be enough to cover 81 percent of scheduled disability benefits.

Sid888

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Re: Social Security Running Dry?
« Reply #2 on: February 11, 2015, 06:21:57 AM »
You missed the next paragraph: Absent those reserves, Blahous said, the only funds the government can use to cover disability claims is the incoming tax revenue. Unfortunately, there would only be enough to cover 81 percent of scheduled disability benefits.

So is your policy suggestion an across the board cut to SSDI benefits equal to incoming tax revenue?

Gin1984

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Re: Social Security Running Dry?
« Reply #3 on: February 11, 2015, 06:30:22 AM »
You missed the next paragraph: Absent those reserves, Blahous said, the only funds the government can use to cover disability claims is the incoming tax revenue. Unfortunately, there would only be enough to cover 81 percent of scheduled disability benefits.

So is your policy suggestion an across the board cut to SSDI benefits equal to incoming tax revenue?
No, however my point is that it is not as dire as you implied.

Sid888

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Re: Social Security Running Dry?
« Reply #4 on: February 11, 2015, 06:37:44 AM »
You missed the next paragraph: Absent those reserves, Blahous said, the only funds the government can use to cover disability claims is the incoming tax revenue. Unfortunately, there would only be enough to cover 81 percent of scheduled disability benefits.

So is your policy suggestion an across the board cut to SSDI benefits equal to incoming tax revenue?
No, however my point is that it is not as dire as you implied.

A 19% cut in 2016 - and maybe more down the road - for someone with a severe disability (or their family) may disagree.
« Last Edit: February 11, 2015, 09:03:17 AM by Sid888 »

Liberty Stache

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Re: Social Security Running Dry?
« Reply #5 on: February 11, 2015, 06:43:27 AM »
Add yet another (albeit small) reason to reach FI ASAP. Less safety nets = more self-reliance in my book.
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fodder69

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Re: Social Security Running Dry?
« Reply #6 on: February 11, 2015, 07:02:05 AM »
Typically, SSDI funds were routinely transfered from the 'regular" SS trust to cover any deficit. But the new Republic majority in congress changed a rule requiring a majority vote for these in order to manufacture yet another "crisis" to try to get support for changing SS to something more to their liking, which would generally involve privatizing it or just flat out ending it.

Because everyone "knows" that 99% of those "disabled" people are just lazy moochers.

OutBy40

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Re: Social Security Running Dry?
« Reply #7 on: February 11, 2015, 07:22:49 AM »
Add yet another (albeit small) reason to reach FI ASAP. Less safety nets = more self-reliance in my book.

Yes, this. 

Quote from: fodder69
Because everyone "knows" that 99% of those "disabled" people are just lazy moochers.

And, unfortunately, this too a lot of the time.
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MooseOutFront

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Re: Social Security Running Dry?
« Reply #8 on: February 11, 2015, 07:32:29 AM »
It's things like this that made me scrap my plan to FIRE with both of us going on SSDI even though we live on a little less now than what the benefit would be.

(not serious.  this was never the plan.  though the benefit we qualify for would be more than plenty to maintain current standard of living.  So would 19% less.)
« Last Edit: February 11, 2015, 07:34:24 AM by MooseOutFront »

Sid888

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Re: Social Security Running Dry?
« Reply #9 on: February 11, 2015, 07:33:39 AM »
Add yet another (albeit small) reason to reach FI ASAP. Less safety nets = more self-reliance in my book.

So is your policy to not pay those who should be self reliant, i.e. means test?

Bateaux

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Re: Social Security Running Dry?
« Reply #10 on: February 11, 2015, 07:58:19 AM »
Anybody who is over 50 and bases their retirement on SS is a fool.  Plan as if it doesn't exist and if it come all the better. 
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Sid888

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Re: Social Security Running Dry?
« Reply #11 on: February 11, 2015, 08:08:35 AM »
It's things like this that made me scrap my plan to FIRE with both of us going on SSDI even though we live on a little less now than what the benefit would be.

(not serious.  this was never the plan.  though the benefit we qualify for would be more than plenty to maintain current standard of living.  So would 19% less.)

Can you provide a little more detail of how you ended up on SSDI?  What's your policy suggestion?  What happens if the cuts expand beyond 19%

Sid888

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Re: Social Security Running Dry?
« Reply #12 on: February 11, 2015, 08:09:35 AM »
Anybody who is over 50 and bases their retirement on SS is a fool.  Plan as if it doesn't exist and if it come all the better. 

Why do you hold this belief?  What's your policy for changing SS so you can plan on it?

sabertooth3

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Re: Social Security Running Dry?
« Reply #13 on: February 11, 2015, 08:21:21 AM »
If Congress just got rid of the income cap for SocSec, the problem would be solved with 99% of workers not feeling anything different.

iamlindoro

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Re: Social Security Running Dry?
« Reply #14 on: February 11, 2015, 08:25:14 AM »
If Congress just got rid of the income cap for SocSec, the problem would be solved with 99% of workers not feeling anything different.

Yep, this is more or less what I'd suggest even though I know it has zero chance of happening with the current Congress.

For myself, I'd be perfectly happy with a refund of all SS monies paid by myself and my employer into a qualified retirement account.  However, it's not socially responsible to hope for something like this-- I'm not going to rely on SS in any way, but a great many people do.
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PathtoFIRE

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Re: Social Security Running Dry?
« Reply #15 on: February 11, 2015, 08:38:32 AM »
I personally would like to see either a negative income tax or guaranteed basic income program to replace Social Security. However, I acknowledge that the greatest hurdle/downside to these programs is that unlike SSDI, they don't have a veneer of "paying into the system" that SSDI does, and that veneer, no matter how misleading, is a large part of the reason that this particular social welfare program is so difficult to eliminate or modify out of existence.

Absent that, I do agree that an elimination on the income cap would be relatively painless for the economy, but then again I don't believe in the idea of a "job creator" class. I personally would experience a significant increase in taxes under such a program, although I would argue removal of the cap should be accompanied by a permanent reduction in the rate, maybe to the 4.2% we saw for a short time a few years ago. Maybe better yet, a complete removal of the employer portion of the tax while leaving the employee rate the same, which should allow for wage increases, most dramatically at lower salary/hourly levels.

Tabaxus

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Re: Social Security Running Dry?
« Reply #16 on: February 11, 2015, 08:41:21 AM »
If Congress just got rid of the income cap for SocSec, the problem would be solved with 99% of workers not feeling anything different.

Yep, this is more or less what I'd suggest even though I know it has zero chance of happening with the current Congress.

For myself, I'd be perfectly happy with a refund of all SS monies paid by myself and my employer into a qualified retirement account.  However, it's not socially responsible to hope for something like this-- I'm not going to rely on SS in any way, but a great many people do.

That statement should be true for basically anyone under 50 if just focusing on personal well-being (rather than the well-being of the system).

Anyone under 50 who really believes they're going to get significant SS is fooling themselves.  The math just doesn't work.  I'd much rather plan for $0 and be pleasantly surprised in my dotage.

johnny847

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Re: Social Security Running Dry?
« Reply #17 on: February 11, 2015, 08:47:52 AM »
I'm not going to rely on SS in any way, but a great many people do.

Same here. Whenever I see posts about SS might fail by 2045 or what have you, I shrug it off. I'm 23. It's within the realm of possibility that SS will go bankrupt by the time that I reach the age that I'd become SS eligible (and I'm assuming that they'll keep raising the age requirement). I certainly don't count on SS in my plans, especially considering I want to hit FI far before I'm eligible for SS payouts.

If Congress just got rid of the income cap for SocSec, the problem would be solved with 99% of workers not feeling anything different.
I think that's a short term solution though. The true problem with SS is that today's working force is paying for today's old people. Whenever you have a generational mismatch, like the baby boomers heading into retirement now, this system isn't sustainable.
I think if we're ever going to solve this problem, we need to weather the storm that is the baby boomers heading into retirement (perhaps by getting rid of the income cap for SS), build up a buffer of funds somehow (this part I don't know how we're going to accomplish), and then switch the system over such that you only get back the dollars you put into the system.

Sid888

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Re: Social Security Running Dry?
« Reply #18 on: February 11, 2015, 08:50:37 AM »
If Congress just got rid of the income cap for SocSec, the problem would be solved with 99% of workers not feeling anything different.

Yep, this is more or less what I'd suggest even though I know it has zero chance of happening with the current Congress.

For myself, I'd be perfectly happy with a refund of all SS monies paid by myself and my employer into a qualified retirement account.  However, it's not socially responsible to hope for something like this-- I'm not going to rely on SS in any way, but a great many people do.
That statement should be true for basically anyone under 50 if just focusing on personal well-being (rather than the well-being of the system).

Anyone under 50 who really believes they're going to get significant SS is fooling themselves.  The math just doesn't work.  I'd much rather plan for $0 and be pleasantly surprised in my dotage.

Why doesn't the "math" work?  What would make the "math" work?
« Last Edit: February 11, 2015, 08:54:36 AM by Sid888 »

Gin1984

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Re: Social Security Running Dry?
« Reply #19 on: February 11, 2015, 08:53:21 AM »
I'm not going to rely on SS in any way, but a great many people do.

Same here. Whenever I see posts about SS might fail by 2045 or what have you, I shrug it off. I'm 23. It's within the realm of possibility that SS will go bankrupt by the time that I reach the age that I'd become SS eligible (and I'm assuming that they'll keep raising the age requirement). I certainly don't count on SS in my plans, especially considering I want to hit FI far before I'm eligible for SS payouts.

If Congress just got rid of the income cap for SocSec, the problem would be solved with 99% of workers not feeling anything different.
I think that's a short term solution though. The true problem with SS is that today's working force is paying for today's old people. Whenever you have a generational mismatch, like the baby boomers heading into retirement now, this system isn't sustainable.
I think if we're ever going to solve this problem, we need to weather the storm that is the baby boomers heading into retirement (perhaps by getting rid of the income cap for SS), build up a buffer of funds somehow (this part I don't know how we're going to accomplish), and then switch the system over such that you only get back the dollars you put into the system.
We had a buffer, it was borrowed from.  Also SS was designed to keep people from starving on the streets and given the poverty level for older women in this country, I don't think I'd want to make it so you can only get back what you paid in.  Which btw makes very little sense when you take into account inflation.

Sid888

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Re: Social Security Running Dry?
« Reply #20 on: February 11, 2015, 08:56:54 AM »
I think if we're ever going to solve this problem, we need to weather the storm that is the baby boomers heading into retirement (perhaps by getting rid of the income cap for SS), build up a buffer of funds somehow (this part I don't know how we're going to accomplish), and then switch the system over such that you only get back the dollars you put into the system.

Why should the boomers get significantly more than the next generations?  Wouldn't that collapse political support for the entire system amongst the losing generations?
« Last Edit: February 11, 2015, 08:58:46 AM by Sid888 »

Fastfwd

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Re: Social Security Running Dry?
« Reply #21 on: February 11, 2015, 09:05:56 AM »
Anybody who is over 50 and bases their retirement on SS is a fool.  Plan as if it doesn't exist and if it come all the better. 

Why do you hold this belief?  What's your policy for changing SS so you can plan on it?

Obviously his opinion matters more. Have you seen that font size?  :)

I think SS is part of retirement but should never relied upon 100%; you plan with it but also plan for possible modifications to it. I for one am planning for a world where a lot of people keep working long after 65 and homeless/soup kitchens become a more important part of society.

johnny847

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Re: Social Security Running Dry?
« Reply #22 on: February 11, 2015, 09:07:24 AM »
I'm not going to rely on SS in any way, but a great many people do.

Same here. Whenever I see posts about SS might fail by 2045 or what have you, I shrug it off. I'm 23. It's within the realm of possibility that SS will go bankrupt by the time that I reach the age that I'd become SS eligible (and I'm assuming that they'll keep raising the age requirement). I certainly don't count on SS in my plans, especially considering I want to hit FI far before I'm eligible for SS payouts.

If Congress just got rid of the income cap for SocSec, the problem would be solved with 99% of workers not feeling anything different.
I think that's a short term solution though. The true problem with SS is that today's working force is paying for today's old people. Whenever you have a generational mismatch, like the baby boomers heading into retirement now, this system isn't sustainable.
I think if we're ever going to solve this problem, we need to weather the storm that is the baby boomers heading into retirement (perhaps by getting rid of the income cap for SS), build up a buffer of funds somehow (this part I don't know how we're going to accomplish), and then switch the system over such that you only get back the dollars you put into the system.
We had a buffer, it was borrowed from.  Also SS was designed to keep people from starving on the streets and given the poverty level for older women in this country, I don't think I'd want to make it so you can only get back what you paid in.  Which btw makes very little sense when you take into account inflation.
I meant get back what you paid in, after inflation adjustments.

If we want SS as a wealth distribution system, then it's simply not sustainable if everybody is paying the same rate (well ok the ultra rich end up paying a lower effective rate, but that just makes the problem worse, not better) but we face generational issues like we do now.
Our income taxes are used, to an extent, as a wealth distribution system. But this is sustainable because on average, the rich pay a higher effective rate than the poor.

Why should the boomers get significantly more than the next generations?  Wouldn't that collapse political support for the entire system amongst the losing generations?
They shouldn't. If you want to keep the payroll tax rate the same for everybody, then I'm saying that we can only sustain this if people get back what you put in. If we're somehow going to switch the system from today's workforce paying today's old people to everybody getting paid what you put in, then we need to build up a buffer to do that. The boomer's wouldn't be getting any more than they are now.
Admittedly politically this is never going to happen. The buffer has to come from somewhere, and that's most likely today's workforce.

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Re: Social Security Running Dry?
« Reply #23 on: February 11, 2015, 09:13:58 AM »
I meant get back what you paid in, after inflation adjustments.

The social safety net is a social contract and it's based a lot of having the next generation pay for the one that came before. Only now the next generation does not have people in enough numbers to support the previous and also the safety net must take care of elderly that were previously living at home with kids and grandkids.

Previous generation having more numbers and to a big extent more money influence also means that they control politics to a greater extent and will orient laws to their benefits.

I never expect to get back what I paid for in unemployment or SS. This is just the way it is. In an alternate life where I can't find another job after an early stop to my career unemployment and SS would have benefitted me. I paid the insurance but did not need to claim.

2lazy2retire

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Re: Social Security Running Dry?
« Reply #24 on: February 11, 2015, 09:25:04 AM »
Can we make a Category for political ranting so I can completely avoid it. There was a day on this site when a topic like this would give some useful info and stats on social security ( or any other topic for that matter). More and more it now turns into some left/right bashing which is totally pointless, it like fucking Fox News or  Marketwatch, everyone here needs a dose of reality and stop whining.
MMM posted an article some time back ( maybe someone can find it ) talks about the fact that as we are sitting here reading this blog suggests we are better off than 99% or the worlds population ( or something like that ) - so STFU.

Gin1984

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Re: Social Security Running Dry?
« Reply #25 on: February 11, 2015, 09:27:46 AM »
Can we make a Category for political ranting so I can completely avoid it. There was a day on this site when a topic like this would give some useful info and stats on social security ( or any other topic for that matter). More and more it now turns into some left/right bashing which is totally pointless, it like fucking Fox News or  Marketwatch, everyone here needs a dose of reality and stop whining.
MMM posted an article some time back ( maybe someone can find it ) talks about the fact that as we are sitting here reading this blog suggests we are better off than 99% or the worlds population ( or something like that ) - so STFU.
Hell I like politics but I am starting to agree with you.  There has been too much whining lately.

James

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Re: Social Security Running Dry?
« Reply #26 on: February 11, 2015, 09:29:49 AM »
SS won't go away, and it can't go "broke", it just runs out of the money it previously gave to the general fund and must meet all new expenditures with new revenue. The closer we get the more likely changes will be made to make the system "work" to some degree or another. Obviously it won't likely stay the same, but changes don't have to be draconian. I have no idea if the fix will mostly depend on increasing revenue or decreasing expenditures, or an even mix of both. And I don't much care since it is 30 years off for me and I won't need it since I'll FIRE before then without planning to use it. But when it does show up I look forwarding to using that money for extras, maybe sending a grandkid to college or something. :)
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James

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Re: Social Security Running Dry?
« Reply #27 on: February 11, 2015, 09:37:30 AM »
Can we make a Category for political ranting so I can completely avoid it. There was a day on this site when a topic like this would give some useful info and stats on social security ( or any other topic for that matter). More and more it now turns into some left/right bashing which is totally pointless, it like fucking Fox News or  Marketwatch, everyone here needs a dose of reality and stop whining.
MMM posted an article some time back ( maybe someone can find it ) talks about the fact that as we are sitting here reading this blog suggests we are better off than 99% or the worlds population ( or something like that ) - so STFU.

Complaining about political ranting while bashing fox news... got to love it lol ;)

Seriously though, you know from the title what posts are going to end up political. I go weeks where I just skip them, no reason to open the thread or enter the debate, you know these posts aren't going to change minds, it's just about debate for the fun of it I guess. People feel strongly, nobody is going to stop the debates, so either join or avoid, no reason to let it bother you.

We do have an off-topic, but there isn't any way to keep all politics there. Just is what it is, and MMM forum is pretty good by internet forum standards.
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2lazy2retire

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Re: Social Security Running Dry?
« Reply #28 on: February 11, 2015, 09:46:20 AM »
Can we make a Category for political ranting so I can completely avoid it. There was a day on this site when a topic like this would give some useful info and stats on social security ( or any other topic for that matter). More and more it now turns into some left/right bashing which is totally pointless, it like fucking Fox News or  Marketwatch, everyone here needs a dose of reality and stop whining.
MMM posted an article some time back ( maybe someone can find it ) talks about the fact that as we are sitting here reading this blog suggests we are better off than 99% or the worlds population ( or something like that ) - so STFU.

Complaining about political ranting while bashing fox news... got to love it lol ;)

Seriously though, you know from the title what posts are going to end up political. I go weeks where I just skip them, no reason to open the thread or enter the debate, you know these posts aren't going to change minds, it's just about debate for the fun of it I guess. People feel strongly, nobody is going to stop the debates, so either join or avoid, no reason to let it bother you.

We do have an off-topic, but there isn't any way to keep all politics there. Just is what it is, and MMM forum is pretty good by internet forum standards.

What?, I thought everyone hated Fox News

johnny847

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Re: Social Security Running Dry?
« Reply #29 on: February 11, 2015, 09:50:32 AM »
The social safety net is a social contract and it's based a lot of having the next generation pay for the one that came before. Only now the next generation does not have people in enough numbers to support the previous and also the safety net must take care of elderly that were previously living at home with kids and grandkids.
I know that's how it's based. But I'm saying that it's just not sustainable if everybody pays in at the same rate (7.65%, or twice that if you're including employer contributions - we're ignoring high earners that pay less than that for the moment) but you expect to be able to support generational differences in demographics.

Previous generation having more numbers and to a big extent more money influence also means that they control politics to a greater extent and will orient laws to their benefits.
I completely agree. I can't really think of any politically viable solution, unfortunately.

I never expect to get back what I paid for in unemployment or SS. This is just the way it is.
Neither do I.

GetItRight

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Re: Social Security Running Dry?
« Reply #30 on: February 11, 2015, 09:55:39 AM »
MSN Money is reporting that the Social Security Disability Insurance trust fund will be flat broke in 2016.  I'd be interested in (a) what policy you think federal lawmakers should take, if any, to address this problem, and (b) what benefit would you personally receive if the federal lawmakers adopted the policy that you suggested?

(a) Eliminate social security program and all associated taxes, government personnel, etc.


(b) This would eliminate a small amount of extortion from my life, directly giving back 6.2% of my earnings that previously would be stolen from me. This money would accelerate student loan repayment and investments to reach FI sooner.

My employer would also directly get to retain 6.2% of my earnings, which would be mutually beneficial as I would negotiate some portion (or all of it) added to my direct compensation. As money is fungible, all taxes on employers are taxes on employees (and customers). Direct payroll taxes on employers are essentially considered part of the employees compensation as it is the cost of hiring and retaining that person. My employer would also benefit from less accounting/payroll overhead, again benefiting me in an indirect way since there would be less waste and greater efficiency overall.

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Re: Social Security Running Dry?
« Reply #31 on: February 11, 2015, 09:57:59 AM »
SS won't go away, and it can't go "broke", it just runs out of the money it previously gave to the general fund and must meet all new expenditures with new revenue. The closer we get the more likely changes will be made to make the system "work" to some degree or another. Obviously it won't likely stay the same, but changes don't have to be draconian. I have no idea if the fix will mostly depend on increasing revenue or decreasing expenditures, or an even mix of both. And I don't much care since it is 30 years off for me and I won't need it since I'll FIRE before then without planning to use it. But when it does show up I look forwarding to using that money for extras, maybe sending a grandkid to college or something. :)

Yes, exactly.  Repeat after me.  There is no Social Security trust fund.  There is no Social Security trust fund.  There is no Social Security trust fund.  This is a marketing gimmick by politicians.  All money collected via the "Social Security Tax" goes into the general fund, the same as the gas tax, income tax, and all other revenue.  The only "shortage" is the tax dollars designated as "Social Security" don't cover the payouts.  This is essentially meaningless, and can be solved by myriad options, including raising other taxes, cutting spending in *any* other area, adjusting payout amount or schedules, or any combination of those.
"Compound interest is the most powerful force in the universe."  -- Einstein

Tabaxus

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Re: Social Security Running Dry?
« Reply #32 on: February 11, 2015, 10:04:04 AM »
MSN Money is reporting that the Social Security Disability Insurance trust fund will be flat broke in 2016.  I'd be interested in (a) what policy you think federal lawmakers should take, if any, to address this problem, and (b) what benefit would you personally receive if the federal lawmakers adopted the policy that you suggested?

(a) Eliminate social security program and all associated taxes, government personnel, etc.


(b) This would eliminate a small amount of extortion from my life, directly giving back 6.2% of my earnings that previously would be stolen from me. This money would accelerate student loan repayment and investments to reach FI sooner.

My employer would also directly get to retain 6.2% of my earnings, which would be mutually beneficial as I would negotiate some portion (or all of it) added to my direct compensation. As money is fungible, all taxes on employers are taxes on employees (and customers). Direct payroll taxes on employers are essentially considered part of the employees compensation as it is the cost of hiring and retaining that person. My employer would also benefit from less accounting/payroll overhead, again benefiting me in an indirect way since there would be less waste and greater efficiency overall.

There are not enough eyeroll emojis for the idea that taxes are theft and extortion. 

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Re: Social Security Running Dry?
« Reply #33 on: February 11, 2015, 10:24:10 AM »
MSN Money is reporting that the Social Security Disability Insurance trust fund will be flat broke in 2016.  I'd be interested in (a) what policy you think federal lawmakers should take, if any, to address this problem, and (b) what benefit would you personally receive if the federal lawmakers adopted the policy that you suggested?

(a) Eliminate social security program and all associated taxes, government personnel, etc.


(b) This would eliminate a small amount of extortion from my life, directly giving back 6.2% of my earnings that previously would be stolen from me. This money would accelerate student loan repayment and investments to reach FI sooner.

My employer would also directly get to retain 6.2% of my earnings, which would be mutually beneficial as I would negotiate some portion (or all of it) added to my direct compensation. As money is fungible, all taxes on employers are taxes on employees (and customers). Direct payroll taxes on employers are essentially considered part of the employees compensation as it is the cost of hiring and retaining that person. My employer would also benefit from less accounting/payroll overhead, again benefiting me in an indirect way since there would be less waste and greater efficiency overall.

While that might be true in your case that some of the employer contribution would be transferred to you, I highly doubt that folks working blue-collar jobs would ever see an extra dime, and they're arguably the folks that need SS the most.  Let's face it, SS is there for the Joe Paychecks who never plan ahead. 

It's nice to have for everyone else, but we view it as a retirement supplement, not the whole enchilada.  Myself, I'm 33 and fairly certain that SS will still be around when I retire.  The terms may not be the same, but I'll get something. 

jmusic

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Re: Social Security Running Dry?
« Reply #34 on: February 11, 2015, 10:29:19 AM »
I'm also in agreement with the folks saying that this entire topic is caused by FEAR-MONGERING POLITICIANS. 

At the risk of generalizing, the retiree population tend to vote more often and are perhaps easier to scare with threats of taking away their primary income source.  Makes for a good demographic to target for an election campaign.

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Re: Social Security Running Dry?
« Reply #35 on: February 11, 2015, 11:12:01 AM »
If Congress just got rid of the income cap for SocSec, the problem would be solved with 99% of workers not feeling anything different.

For a little while - however the general trend is for people to live longer and longer lives.  When Social Security was enacted in 1935, retirement age was defined as 65 years old and the life expectancy of the average American was just 61.7 years.  Think about that for a while any time you view Social Security as an entitlement: it was created only to apply to people who lived significantly longer than average.

One option could be creating a benchmark for retirement age that floats with life expectancy, same as the benefit itself is based on inflation.  For example, it was created to pay out 3.3 years after the average age of death.  Today it pays out an average of 12 years before death.  If you float the retirement age to be based on X years before average death, that too would go a long way towards keeping it solvent for the long run.

Raise the contribution cap, raise the overall tax rate a little, phase out payments for people who already have high income in retirement, and peg the benefit to start X years before the average age of death.  It's actually a very easy program to fix because it already collects enough to pay out about 80% of the benefits, and this is in the so-called "broken" state of affairs!

Eric

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Re: Social Security Running Dry?
« Reply #36 on: February 11, 2015, 11:27:11 AM »
If Congress just got rid of the income cap for SocSec, the problem would be solved with 99% of workers not feeling anything different.

For a little while - however the general trend is for people to live longer and longer lives.  When Social Security was enacted in 1935, retirement age was defined as 65 years old and the life expectancy of the average American was just 61.7 years.  Think about that for a while any time you view Social Security as an entitlement: it was created only to apply to people who lived significantly longer than average.


That's not really true.  Well, it's true, but it's not a very good measure.  The reason that life expectancy was so low then was because of high infant mortality.  If someone reached the age of majority, then their life expectancy was much higher than this.

You should read this:

http://www.ssa.gov/history/lifeexpect.html

Quote
So we can observe that for men, for example, almost 54% of the them could expect to live to age 65 if they survived to age 21, and men who attained age 65 could expect to collect Social Security benefits for almost 13 years (and the numbers are even higher for women).

Quote
the average life expectancy at age 65 (i.e., the number of years a person could be expected to receive unreduced Social Security retirement benefits) has increased a modest 5 years (on average) since 1940. So, for example, men attaining 65 in 1990 can expect to live for 15.3 years compared to 12.7 years for men attaining 65 back in 1940.

So while it has increased, it's not nearly as much as it would seem
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lakemom

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Re: Social Security Running Dry?
« Reply #37 on: February 11, 2015, 11:29:50 AM »
I'm 51 and expect to receive my SS once I reach the age to do so.  Will we be fine without it? Of course, will we be better with it.....of course.  However, I've been hearing the same stuff my entire adult life and here we are 30+ years later and its still "going to run out soon".  Right!  My solution is multi-tiered...like others have said, remove the cap, then means test recipients (if your assets are over a certain amount the ss benefit reduces until its no longer received at all) and finally, get more Americans working again so that more people are again paying into the system  Don't ask me how to do all this as its all "in theory".  BUT I'm pretty sure that the OP and the article referenced was referring to SSDI which is disability payments NOT retirement payments...maybe I'm wrong? 

jmusic

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Re: Social Security Running Dry?
« Reply #38 on: February 11, 2015, 11:44:05 AM »
Also, SS was NEVER set up to be a "retirement account" like we think of them today.  If anyone is in doubt, just look at Ida May Fuller, the very first SS recipient.

http://en.wikipedia.org/wiki/Ida_May_Fuller

After contributing a whopping $24.75 into the SS system over three years, she almost recouped 100% of her investment in her very first check of $22.54 (decent amount of money in 1940).  She lived to be 100 and collected almost $23K.  HOLY 92380% ROI!!!

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Re: Social Security Running Dry?
« Reply #39 on: February 11, 2015, 11:48:44 AM »
If Congress just got rid of the income cap for SocSec, the problem would be solved with 99% of workers not feeling anything different.

For a little while - however the general trend is for people to live longer and longer lives.  When Social Security was enacted in 1935, retirement age was defined as 65 years old and the life expectancy of the average American was just 61.7 years.  Think about that for a while any time you view Social Security as an entitlement: it was created only to apply to people who lived significantly longer than average.


That's not really true.  Well, it's true, but it's not a very good measure.  The reason that life expectancy was so low then was because of high infant mortality.  If someone reached the age of majority, then their life expectancy was much higher than this.

You should read this:

http://www.ssa.gov/history/lifeexpect.html

Quote
So we can observe that for men, for example, almost 54% of the them could expect to live to age 65 if they survived to age 21, and men who attained age 65 could expect to collect Social Security benefits for almost 13 years (and the numbers are even higher for women).

Quote
the average life expectancy at age 65 (i.e., the number of years a person could be expected to receive unreduced Social Security retirement benefits) has increased a modest 5 years (on average) since 1940. So, for example, men attaining 65 in 1990 can expect to live for 15.3 years compared to 12.7 years for men attaining 65 back in 1940.

So while it has increased, it's not nearly as much as it would seem

So it can still be indexed to age... for example, that time period of 50 years increased the average age 2.6 years - that means in the 25 years since your stat, we should increase it again by 1.3 years - leading to 16.6 years after age 65.  Therefore, SS payouts should ALSO be increased by 4 years to accommodate for that longer life span.  That would put a person at age 69 instead of 65 or 67.  Further, an easy formula could be adapted to increase every 5 years the age.  (Ie, adding 0.26 years to the age, so 69 years and 3 months, 69 and a half years, etc - since I'm 31, that would put me at 71 to receive benefits, roughly (ie, 20 years = 1 year added)).

In addition to age, one could also look at amount paid in and index for that - you paid in $XX so you get out a percentage compared to those who put in $XXX.

Finally, fixing the health care and basic living needs would go a long way to making the money stretch - food, shelter, clothing, medical care should be covered by other government entities and then a person wouldn't need as much.  That's a rant for another day though ;-)

Matthew

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Re: Social Security Running Dry?
« Reply #40 on: February 11, 2015, 11:51:23 AM »
http://www.forbes.com/sites/johntharvey/2014/08/14/social-security-cannot-go-bankrupt/

Man, I just learned a lot from this short article.  Thanks for prompting me to do some research, everyone.  Not to sound smug, but I'm going to start not caring again.

dude

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Re: Social Security Running Dry?
« Reply #41 on: February 11, 2015, 11:56:06 AM »
The SS old age security portion will continue to run a surplus through 2034, at which point the surplus will be exhausted and it will still provide 78% of benefits for a long time to come -- so why the hell wouldn't you at least plan on having that 78%?  It's as good a money in the bank, because SS ain't going away.

And yeah, the shift from the welfare rolls in this country to SS Disability is well-documented.  There is a massive amount of fraud in the system, and I for one would like to see it shut down.

seattlecyclone

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Re: Social Security Running Dry?
« Reply #42 on: February 11, 2015, 12:01:17 PM »
SS won't go away, and it can't go "broke", it just runs out of the money it previously gave to the general fund and must meet all new expenditures with new revenue. The closer we get the more likely changes will be made to make the system "work" to some degree or another. Obviously it won't likely stay the same, but changes don't have to be draconian. I have no idea if the fix will mostly depend on increasing revenue or decreasing expenditures, or an even mix of both. And I don't much care since it is 30 years off for me and I won't need it since I'll FIRE before then without planning to use it. But when it does show up I look forwarding to using that money for extras, maybe sending a grandkid to college or something. :)

Yes, exactly.  Repeat after me.  There is no Social Security trust fund.  There is no Social Security trust fund.  There is no Social Security trust fund.  This is a marketing gimmick by politicians.  All money collected via the "Social Security Tax" goes into the general fund, the same as the gas tax, income tax, and all other revenue.  The only "shortage" is the tax dollars designated as "Social Security" don't cover the payouts.  This is essentially meaningless, and can be solved by myriad options, including raising other taxes, cutting spending in *any* other area, adjusting payout amount or schedules, or any combination of those.

Exactly. We should start by getting rid of the charade that social security taxation and spending is somehow separate from other government taxation and spending. Money comes in, money goes out. The "trust fund" is smoke and mirrors. Get rid of it.

After that, I would add some form of means testing to the program. If you have a stash of your own, you should be expected to spend most of it before you get any government benefits. The benefits should be set to a high enough level to guarantee a reasonable standard of living, but not so high that people would try to spend their own stash at an accelerated rate so they can get on social security sooner.

I might even go so far with the means testing as to put a family obligation into it, similar to college financial aid but without the loans. When you apply for social security each year, you'll need to submit information about your kids' income and assets to show that they can't afford to support you on their own. Prior to social security there was a moral obligation to support ones' parents once they can't work anymore because nobody else will keep them fed and housed. Social security distributed this obligation to all workers, but maybe a hybrid approach would be better where you still have an obligation to your family but there's a safety net if you can't afford it.
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Re: Social Security Running Dry?
« Reply #43 on: February 11, 2015, 12:16:41 PM »
SS won't go away, and it can't go "broke", it just runs out of the money it previously gave to the general fund and must meet all new expenditures with new revenue. The closer we get the more likely changes will be made to make the system "work" to some degree or another. Obviously it won't likely stay the same, but changes don't have to be draconian. I have no idea if the fix will mostly depend on increasing revenue or decreasing expenditures, or an even mix of both. And I don't much care since it is 30 years off for me and I won't need it since I'll FIRE before then without planning to use it. But when it does show up I look forwarding to using that money for extras, maybe sending a grandkid to college or something. :)

Yes, exactly.  Repeat after me.  There is no Social Security trust fund.  There is no Social Security trust fund.  There is no Social Security trust fund.  This is a marketing gimmick by politicians.  All money collected via the "Social Security Tax" goes into the general fund, the same as the gas tax, income tax, and all other revenue.  The only "shortage" is the tax dollars designated as "Social Security" don't cover the payouts.  This is essentially meaningless, and can be solved by myriad options, including raising other taxes, cutting spending in *any* other area, adjusting payout amount or schedules, or any combination of those.

Exactly. We should start by getting rid of the charade that social security taxation and spending is somehow separate from other government taxation and spending. Money comes in, money goes out. The "trust fund" is smoke and mirrors. Get rid of it.

After that, I would add some form of means testing to the program. If you have a stash of your own, you should be expected to spend most of it before you get any government benefits. The benefits should be set to a high enough level to guarantee a reasonable standard of living, but not so high that people would try to spend their own stash at an accelerated rate so they can get on social security sooner.

I might even go so far with the means testing as to put a family obligation into it, similar to college financial aid but without the loans. When you apply for social security each year, you'll need to submit information about your kids' income and assets to show that they can't afford to support you on their own. Prior to social security there was a moral obligation to support ones' parents once they can't work anymore because nobody else will keep them fed and housed. Social security distributed this obligation to all workers, but maybe a hybrid approach would be better where you still have an obligation to your family but there's a safety net if you can't afford it.
Isn't the taxation of SS a form a means testing?

dude

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Re: Social Security Running Dry?
« Reply #44 on: February 11, 2015, 12:20:15 PM »
SS won't go away, and it can't go "broke", it just runs out of the money it previously gave to the general fund and must meet all new expenditures with new revenue. The closer we get the more likely changes will be made to make the system "work" to some degree or another. Obviously it won't likely stay the same, but changes don't have to be draconian. I have no idea if the fix will mostly depend on increasing revenue or decreasing expenditures, or an even mix of both. And I don't much care since it is 30 years off for me and I won't need it since I'll FIRE before then without planning to use it. But when it does show up I look forwarding to using that money for extras, maybe sending a grandkid to college or something. :)

Yes, exactly.  Repeat after me.  There is no Social Security trust fund.  There is no Social Security trust fund.  There is no Social Security trust fund.  This is a marketing gimmick by politicians.  All money collected via the "Social Security Tax" goes into the general fund, the same as the gas tax, income tax, and all other revenue.  The only "shortage" is the tax dollars designated as "Social Security" don't cover the payouts.  This is essentially meaningless, and can be solved by myriad options, including raising other taxes, cutting spending in *any* other area, adjusting payout amount or schedules, or any combination of those.

Exactly. We should start by getting rid of the charade that social security taxation and spending is somehow separate from other government taxation and spending. Money comes in, money goes out. The "trust fund" is smoke and mirrors. Get rid of it.

After that, I would add some form of means testing to the program. If you have a stash of your own, you should be expected to spend most of it before you get any government benefits. The benefits should be set to a high enough level to guarantee a reasonable standard of living, but not so high that people would try to spend their own stash at an accelerated rate so they can get on social security sooner.

I might even go so far with the means testing as to put a family obligation into it, similar to college financial aid but without the loans. When you apply for social security each year, you'll need to submit information about your kids' income and assets to show that they can't afford to support you on their own. Prior to social security there was a moral obligation to support ones' parents once they can't work anymore because nobody else will keep them fed and housed. Social security distributed this obligation to all workers, but maybe a hybrid approach would be better where you still have an obligation to your family but there's a safety net if you can't afford it.

Disagree strongly on this -- SS's viability hinges on buy-in from everyone putting in, otherwise, it's a straight-up wealth re-distribution scheme and it will die on the vine.  SS is already skewed to replace more of lower income earners' salaries than higher income people, so perhaps tinkering with that a bit is palatable, but cutting out entire segments of the population because they may have been smart enough to learn valuable skills, find well-paying jobs, and make the sacrifice needed to save and invest while their neighbors pissed everything away is not going to enamor those people to the system, myself included, at which point they will work to abolish it altogether.  THIS is most likely the REAL reason the Right keeps throwing means-testing out there -- they know it will kill the system, which has been their longstanding goal.

DoubleDown

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Re: Social Security Running Dry?
« Reply #45 on: February 11, 2015, 12:21:10 PM »
This news has me completely re-thinking my plan of cutting off my arms and legs in order to retire early on disability benefits.
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GetItRight

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Re: Social Security Running Dry?
« Reply #46 on: February 11, 2015, 12:31:14 PM »
There are not enough eyeroll emojis for the idea that taxes are theft and extortion.

Theft: the taking of another person's property without that person's permission or consent with the intent to deprive the rightful owner of it.

Extortion: the practice of obtaining something, especially money, through force or threats.

If you don't believe taxation is theft then don't give the government any money and see how long it takes before the extortion begins. If you personally want to give the government money then go ahead and do so on your own terms, but do not impose your will with the threat (and use) of violence upon those who do not wish to give anything to government. The only "tool" the government has to enforce laws is violence, as that is the logical conclusion of all attempts to enforce the law. You'd could get whatever it is you want from government for far cheaper through an individual or private organization, unless of course what you really want is to control other people who are in no way associated with you.


While that might be true in your case that some of the employer contribution would be transferred to you, I highly doubt that folks working blue-collar jobs would ever see an extra dime, and they're arguably the folks that need SS the most.  Let's face it, SS is there for the Joe Paychecks who never plan ahead. 

It's nice to have for everyone else, but we view it as a retirement supplement, not the whole enchilada.  Myself, I'm 33 and fairly certain that SS will still be around when I retire.  The terms may not be the same, but I'll get something.

It is true in my case simply because if my employer did not spend on me what they were willing to pay me previously, I would go elsewhere. Changing jobs tends to give a good pay increase anyway, 6.2% less tax would ensure I see more of that pay bump. What someone else would do, regardless of the pay or nature of their work, or how much (if at all) they choose to plan ahead with is none of my business and does not justify the threat of violence required for the government to collect money they did not earn.

Tabaxus

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Re: Social Security Running Dry?
« Reply #47 on: February 11, 2015, 12:36:45 PM »
The SS old age security portion will continue to run a surplus through 2034, at which point the surplus will be exhausted and it will still provide 78% of benefits for a long time to come -- so why the hell wouldn't you at least plan on having that 78%?  It's as good a money in the bank, because SS ain't going away.

And yeah, the shift from the welfare rolls in this country to SS Disability is well-documented.  There is a massive amount of fraud in the system, and I for one would like to see it shut down.

Means testing it/taxing it away/etc.  There will eventually be more significant means testing on social security than there is today; it's probably the most palatable way to shore the system up.  Obviously this is tax speculation, but if I could put a bet on this somehow in the market, I would. 

Ok, GetItRight, enjoy reading your Ayn Rand and going to your anarchist meetings.  I'll continue eyerolling.

seattlecyclone

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Re: Social Security Running Dry?
« Reply #48 on: February 11, 2015, 12:38:21 PM »
Isn't the taxation of SS a form a means testing?

Only in a very indirect way. At the maximum, a dollar in social security benefits only counts as 85¢ of income for tax calculation purposes, and then you might be taxed on 39.6% of this 85¢ if you're in the highest tax bracket. So the wealthiest retirees might have to pay 33.66% of their social security income back as taxes, but their social security benefits are likely higher than average because they probably earned more than average during their careers, so they're really not getting any less than anyone else.
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LibrarIan

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Re: Social Security Running Dry?
« Reply #49 on: February 11, 2015, 12:52:52 PM »
Here is a video interview between David Pakman (of The David Pakman Show) and Nancy Altman (a former adviser on SS reform and the author of Social Security Works!: Why Social Security Isn’t Going Broke and How Expanding It Will Help Us All). I'm not sure if it's completely relevant since it's topic is SS overall and not SSDI, but it is definitely worth a listen. Does not make it sound dire at all.

https://www.youtube.com/watch?v=AMEmurmhj18&list=PLVrg5xLmCvhGnWYrv837CKWDbbQG050w4