Would you forego Social Security if you could invest in own account instead?

[nereo]

Short of a dictatorship, do you really thing the people will vote in a "forced savings" program?

Um.  Isn't that what we have now?  I guess they call it a tax, if that is your distinction.

I see this quickly going down the "all taxation is theft" rabbit hole...

[BoonDogle]

Short of a dictatorship, do you really thing the people will vote in a "forced savings" program?

Um.  Isn't that what we have now?  I guess they call it a tax, if that is your distinction.

I see this quickly going down the "all taxation is theft" rabbit hole...

Not sure how you made that leap.  In the case of SS, we have no choice but to contribute to a govt funded retirement program, even if we don't need / want it.  There is a better way if people would remove their blinders and have a genuine discussion about a better way forward instead of jumping to conclusions.

[nereo]

Short of a dictatorship, do you really thing the people will vote in a "forced savings" program?

Um.  Isn't that what we have now?  I guess they call it a tax, if that is your distinction.

I see this quickly going down the "all taxation is theft" rabbit hole...

Not sure how you made that leap.  In the case of SS, we have no choice but to contribute to a govt funded retirement program, even if we don't need / want it.  There is a better way if people would remove their blinders and have a genuine discussion about a better way forward instead of jumping to conclusions.

oh... just the language being volleyed around... 'forced savings,' 'dictatorship' and the questions about whether the government has a right to take a portion of people's earnings.
I enjoy hearing other people's suggestions on how we could do things differently. I'm just pointing out that i) SS is and never has been an individual savings program and ii) we have a plethora of government supported individual saving vehicles which are underutilized.

[starguru]

Short of a dictatorship, do you really thing the people will vote in a "forced savings" program?

Um.  Isn't that what we have now?  I guess they call it a tax, if that is your distinction.

I see this quickly going down the "all taxation is theft" rabbit hole...

Not sure how you made that leap.  In the case of SS, we have no choice but to contribute to a govt funded retirement program, even if we don't need / want it.  There is a better way if people would remove their blinders and have a genuine discussion about a better way forward instead of jumping to conclusions.

oh... just the language being volleyed around... 'forced savings,' 'dictatorship' and the questions about whether the government has a right to take a portion of people's earnings.
I enjoy hearing other people's suggestions on how we could do things differently. I'm just pointing out that i) SS is and never has been an individual savings program and ii) we have a plethora of government supported individual saving vehicles which are underutilized.

The key distinction with "required/forced" saving vs a tax is that with the savings, the money never leaves possession of the individual. The government is not taking anything; it is requiring people to take an action for the good of society (and themselves). 

[nereo]

The key distinction with "required/forced" saving vs a tax is that with the savings, the money never leaves possession of the individual. The government is not taking anything; it is requiring people to take an action for the good of society (and themselves).

I'm not sure I can make that distinction.  If a government is mandating that I cannot use money from my paycheck until a distant and uncertain (e.g. death) time frame, it "smells" a lot like the SS tax, albeit with a different investment structure.  Can a person really 'possess' something if they aren't permitted access to it for decades? Currently the government takes money from my paycheck and promises me that I will have $x,xxx/mo when I turn 67.

[BoonDogle]

Short of a dictatorship, do you really thing the people will vote in a "forced savings" program?

Um.  Isn't that what we have now?  I guess they call it a tax, if that is your distinction.

I see this quickly going down the "all taxation is theft" rabbit hole...

Not sure how you made that leap.  In the case of SS, we have no choice but to contribute to a govt funded retirement program, even if we don't need / want it.  There is a better way if people would remove their blinders and have a genuine discussion about a better way forward instead of jumping to conclusions.

oh... just the language being volleyed around... 'forced savings,' 'dictatorship' and the questions about whether the government has a right to take a portion of people's earnings.
I enjoy hearing other people's suggestions on how we could do things differently. I'm just pointing out that i) SS is and never has been an individual savings program and ii) we have a plethora of government supported individual saving vehicles which are underutilized.

People are quick to dissect any alternative to SS by pointing out any and all flaws.  However, they don't give the same scrutiny to SS even though it has many flaws of its own.  I think we are looking for something better, not perfect.  However, tribalism takes hold and people think they have to support their side of the political aisle by renouncing anything the other side brings to the table, therefore good ideas are overlooked in favor of the current system.

I would support a forced savings vehicle with a smaller tax to subsidize lower income retirements.  I think that is a better approach, though not perfect.

[starguru]

The key distinction with "required/forced" saving vs a tax is that with the savings, the money never leaves possession of the individual. The government is not taking anything; it is requiring people to take an action for the good of society (and themselves).

I'm not sure I can make that distinction.  If a government is mandating that I cannot use money from my paycheck until a distant and uncertain (e.g. death) time frame, it "smells" a lot like the SS tax, albeit with a different investment structure.  Can a person really 'possess' something if they aren't permitted access to it for decades? Currently the government takes money from my paycheck and promises me that I will have $x,xxx/mo when I turn 67.

Do you consider your 401k yours or the governments? 

I see your point, but I think it is a stretch to interpret such a scheme as "the government taking" something.  There is the spectrum

Complete Freedom with asset -> Required Behavior with asset ->  Lost possession of asset.

Certainly your relationship with the relevant portion has changed, but possession has not.

[nereo]

The key distinction with "required/forced" saving vs a tax is that with the savings, the money never leaves possession of the individual. The government is not taking anything; it is requiring people to take an action for the good of society (and themselves).

I'm not sure I can make that distinction.  If a government is mandating that I cannot use money from my paycheck until a distant and uncertain (e.g. death) time frame, it "smells" a lot like the SS tax, albeit with a different investment structure.  Can a person really 'possess' something if they aren't permitted access to it for decades? Currently the government takes money from my paycheck and promises me that I will have $x,xxx/mo when I turn 67.

Do you consider your 401k yours or the governments? 

I see your point, but I think it is a stretch to interpret such a scheme as "the government taking" something.  There is the spectrum

Complete Freedom with asset -> Required Behavior with asset ->  Lost possession of asset.

Certainly your relationship with the relevant portion has changed, but possession has not.

Fair enough.  Given our paltry national savings rates I'm not against some sort of "forced savings" requirement. My point is more that politicians in particular seem to undergo extreme linguistic gymnastics to claim that taking money away from your paycheck is not taxation.  Fees, penalties, failure to get a refund/credit/deduction, etc.
Ultimately does it matter? I believe we need some sort of a social insurance program, and we would be greatly better off if more people took responsibility for their own retirement.  With the latter we can reduce the cost and scope of the former, but it's a chicken-and-egg problem. 

[Northwestie]

I don't see much difference in leveraging a "tax" or penalty for non-savers vs. just taxing everyone for SS and using that to pay retirees.   The former guarantees that folks get something on the back end.  Given the lack of savings in this country I don't see how the penalty will do anything more that punish folks who are least likely to save - for whatever reason.

[Jrr85]

Social Security is currently a 12.4% tax.  Why not have a mandated 10% savings rate and a 2.4% tax to help those in need so no bad things happen in those streets.  The money can not be withdrawn until full Retirement Age.

Saving 10% for 40 years would provide a relatively reasonable retirement after 40 years.  When the person dies if any money is left over  50% is taxed and the rest goes to heirs.

This plan would slowly have to transition from our current plan over the next 40 years.

Why not a mandated savings?  Because this is the US and we don't do things like that.  10% over 40 years for a minimum wage worker isn't much.  AND, during that 40 years there is no disability coverage or benefits for surviving children.

Why do you believe the government should have to right to take any savings left over?  That would surly encourage people to either spend their money or hide it.  We don't do that in a free country.

I'm not sure if my sarcasm meter is broken, but in case it's not, you're saying we don't force 10% of people's savings because this is america, but will take 15% of somebody's savings to give it to elderly people, including wealthy elderly people (and on average relatively well off people)?

where are we getting 15%? SS is 6.2% from the employee and 6.2% from the employer (12.4% total).

I am shorthanding FICA taxes.  I think it's 15.3 percent after adding all the employers and employees contribution.  That does lump SS and Medicare in together, so it changes the discussion a little bit about how much is enough to save. 

[Jrr85]

I don't see much difference in leveraging a "tax" or penalty for non-savers vs. just taxing everyone for SS and using that to pay retirees.   The former guarantees that folks get something on the back end.  Given the lack of savings in this country I don't see how the penalty will do anything more that punish folks who are least likely to save - for whatever reason.

There's a huge difference.  If we had a forced savings program, ss recipients wouldn't be looking at a 24% cut to their "promised" benefit in 10-15 years.  There would be money they are entitled to by law.  Obviously it's extremely unlikely that when the political process plays out that there will be a 24% cut, but that just means we are going to have to raise SS taxes by approximately 30% (or cut other gov't spending by the same amount, or borrow the equivalent amount (which just pushes off cuts or taxes to the future)).  However we deal with the shortfall, it's going to be painful and the pain could have been avoided or lessened had voters acted like adults at any time over the past three and a half decades.

[GetItRight]

I would opt out of the social security tax in a heartbeat, never to receive a penny of it and not sweat the massive amount stolen from me already under that tax program.

Social Security, and all other specific scope tax programs, should be opt in or at the very least opt out. Then where relevant these programs would compete with private companies (insurance) and individuals simply saving and investing as they see fit. I'm fairly certain the government programs would go bankrupt and fail when competing with free market options, but unfortunately that's not how government works.

I would gladly also opt out of government unemployment and other taxes earmarked for specific purposes. I'm perfectly capable of saving for my own goals or purchasing insurance when it makes sense for my circumstances.

[Northwestie]

I don't see much difference in leveraging a "tax" or penalty for non-savers vs. just taxing everyone for SS and using that to pay retirees.   The former guarantees that folks get something on the back end.  Given the lack of savings in this country I don't see how the penalty will do anything more that punish folks who are least likely to save - for whatever reason.

There's a huge difference.  If we had a forced savings program, ss recipients wouldn't be looking at a 24% cut to their "promised" benefit in 10-15 years.  There would be money they are entitled to by law.  Obviously it's extremely unlikely that when the political process plays out that there will be a 24% cut, but that just means we are going to have to raise SS taxes by approximately 30% (or cut other gov't spending by the same amount, or borrow the equivalent amount (which just pushes off cuts or taxes to the future)).  However we deal with the shortfall, it's going to be painful and the pain could have been avoided or lessened had voters acted like adults at any time over the past three and a half decades.

..........and it's not practical nor would it gain the intended results, merely punish folks who for whatever reason, don't or can't save.  They're humans and surprisingly flawed.   The potential cuts can be easily handled several ways, including my favorite - substantially increase the upper threshold income limit for paying SS tax.

[starguru]

I don't see much difference in leveraging a "tax" or penalty for non-savers vs. just taxing everyone for SS and using that to pay retirees.   The former guarantees that folks get something on the back end.  Given the lack of savings in this country I don't see how the penalty will do anything more that punish folks who are least likely to save - for whatever reason.

There's a huge difference.  If we had a forced savings program, ss recipients wouldn't be looking at a 24% cut to their "promised" benefit in 10-15 years.  There would be money they are entitled to by law.  Obviously it's extremely unlikely that when the political process plays out that there will be a 24% cut, but that just means we are going to have to raise SS taxes by approximately 30% (or cut other gov't spending by the same amount, or borrow the equivalent amount (which just pushes off cuts or taxes to the future)).  However we deal with the shortfall, it's going to be painful and the pain could have been avoided or lessened had voters acted like adults at any time over the past three and a half decades.

..........and it's not practical nor would it gain the intended results, merely punish folks who for whatever reason, don't or can't save.  They're humans and surprisingly flawed.   The potential cuts can be easily handled several ways, including my favorite - substantially increase the upper threshold income limit for paying SS tax.

Why do you say it won't gain the intended results?  It works pretty well for Australia, and their system has obvious deficiencies, from what I read. 

If we require saving, we are not punishing anyone.  "Can't save" no longer computes; it has to happen, if saving is required.  There will be a lot of kicking and screaming up front, but the end result will be much better.

The problem with increasing the income threshold on which SS tax is payed is it's not politically viable.  Arguing for that solution is the same unproductive behavior of Dems and Reps screaming past each other across the isle. 

[Northwestie]

It's politically viable to put in a whole new system that punishes folks for not savings but somehow not politically viable to adjust an existing system to increase the applicable income threshold that has not been adjusted in decades?

I have the opposite opinion.

[starguru]

It's politically viable to put in a whole new system that punishes folks for not savings but somehow not politically viable to adjust an existing system to increase the applicable income threshold that has not been adjusted in decades?

I have the opposite opinion.

No-one has tried to argue for mandatory savings.  People have been arguing about various ways to fix SS forever, and failed.  You keep saying "punishes people" but that makes no sense.  If contributions are mandatory there is no punishment, everyone will contribute.  How is there any punishment?  And the SS income cap limit increases every year, with inflation. 

[nereo]

Why do you say it won't gain the intended results?  It works pretty well for Australia, and their system has obvious deficiencies, from what I read. 

If we require saving, we are not punishing anyone.  "Can't save" no longer computes; it has to happen, if saving is required.  There will be a lot of kicking and screaming up front, but the end result will be much better.

The problem with increasing the income threshold on which SS tax is payed is it's not politically viable.  Arguing for that solution is the same unproductive behavior of Dems and Reps screaming past each other across the isle.

Two points: 1) I disagree that creating a required or 'forced' savings plan would be less politically viable than increasing the income threshold on which SS tax is payed.  We've already increased the age at which "full retirement benefits" are given, and we've increased the upper income limit in fits and starts over the years.
2) I'm certain that many people will see forced savings as a form of punishment.  While I agree it would go a long way towards solving one problem, this would be government telling people a rigid formulaic approach is better for them than letting them manage their own financial affairs. Libertarians in particular should scream at such a proposition.

[starguru]

Why do you say it won't gain the intended results?  It works pretty well for Australia, and their system has obvious deficiencies, from what I read. 

If we require saving, we are not punishing anyone.  "Can't save" no longer computes; it has to happen, if saving is required.  There will be a lot of kicking and screaming up front, but the end result will be much better.

The problem with increasing the income threshold on which SS tax is payed is it's not politically viable.  Arguing for that solution is the same unproductive behavior of Dems and Reps screaming past each other across the isle.

Two points: 1) I disagree that creating a required or 'forced' savings plan would be less politically viable than increasing the income threshold on which SS tax is payed.  We've already increased the age at which "full retirement benefits" are given, and we've increased the upper income limit in fits and starts over the years.
2) I'm certain that many people will see forced savings as a form of punishment.  While I agree it would go a long way towards solving one problem, this would be government telling people a rigid formulaic approach is better for them than letting them manage their own financial affairs. Libertarians in particular should scream at such a proposition.

Wait, so you are saying its more politically viable to implement mandatory savings than increasing SS taxes?  Just want to be clear...

Whether or not it's seen as "punishment" I think a lot on the marketing.  I think everyone here would agree that it would be beneficial for both individuals and society.  I imagine marketing might go a long way to the perception problem.  Plus, if we could find a way to boost lower incomes, that would give people more $$ to save.  Imagine if the minimum wage went to something like $12/hr with a mandatory save of something like $1/hr (total pay of ~13/hr)...people get a raise AND they get to save. 

[nereo]

Wait, so you are saying its more politically viable to implement mandatory savings than increasing SS taxes?  Just want to be clear...

No, I am saying the exact opposite, in response to your claim that:

The problem with increasing the income threshold on which SS tax is payed is it's not politically viable.  Arguing for that solution is the same unproductive behavior of Dems and Reps screaming past each other across the isle. 

I think we CAN, politically, raise the income threshold on which the SS tax is payed, and that it would be much easier to do so than to impliment a mandatory ("forced") savings program in the US.

[starguru]

Thanks for clarifying.  I can't reach the same conclusions though.  Democrats have been crying for higher taxes for years (because, you know the only solution to every problem is more government spending), have got some under Obama, and still haven't fixed SS.  Republicans seem firmly entrenched on not agreeing to any more taxes (because, you know, all taxes and government spending are Satan's ass-drip), and I don't think Dems are going to get the majorities they need to override a veto. 

Meanwhile, the mandatory savings idea has never been debated in congress, nor has it been in the public discourse. 

No doubt, it's a new idea for many, but its precisely because of that that I think it's more viable.

[Northwestie]

Wait, so you are saying its more politically viable to implement mandatory savings than increasing SS taxes?  Just want to be clear...

No, I am saying the exact opposite, in response to your claim that:

The problem with increasing the income threshold on which SS tax is payed is it's not politically viable.  Arguing for that solution is the same unproductive behavior of Dems and Reps screaming past each other across the isle. 

I think we CAN, politically, raise the income threshold on which the SS tax is payed, and that it would be much easier to do so than to impliment a mandatory ("forced") savings program in the US.

Agreed

[RangerOne]

There is an upside of a mandatory forced savings though. One major downside of SS as a tax is we are funneling loads of money to the federal government which is effectively over-sizing their income. If you have any desire to shrink our bloated government the only way to do it is to take away their money.

There are of course downsides to having the private sector handle your investments as well, but at least in theory people could be given a choice of who they would like to trust with their money.

If you want to avoid force all together you could instead of making contributions to a retirement account mandatory simply make it initially automatic and make it slightly annoying to cancel. So any time someone gets a new job they get enrolled into a set of default 401k like plans commensurate with current social security contributions.Most lazy people will just end up remaining enrolled while still giving freedom of choice to roll the dice and take all your money.

[nereo]

Thanks for clarifying.  I can't reach the same conclusions though.  Democrats have been crying for higher taxes for years (because, you know the only solution to every problem is more government spending), have got some under Obama, and still haven't fixed SS.  Republicans seem firmly entrenched on not agreeing to any more taxes (because, you know, all taxes and government spending are Satan's ass-drip), and I don't think Dems are going to get the majorities they need to override a veto. 

Meanwhile, the mandatory savings idea has never been debated in congress, nor has it been in the public discourse. 

No doubt, it's a new idea for many, but its precisely because of that that I think it's more viable.

Wrapped up in this are so many tidbits... ( the democrats needing enough votes to overturn a presidential veto...)
One area I question is what legal grounds a forced savings law would have.  If we insist that it's not a tax it becomes a very murky area that the federal government could deny someone their compensation for an extended period of time, even if it were for their " own good."  For that reason I think it's a non starter.

[starguru]

Wait, so you are saying its more politically viable to implement mandatory savings than increasing SS taxes?  Just want to be clear...

No, I am saying the exact opposite, in response to your claim that:

The problem with increasing the income threshold on which SS tax is payed is it's not politically viable.  Arguing for that solution is the same unproductive behavior of Dems and Reps screaming past each other across the isle. 

I think we CAN, politically, raise the income threshold on which the SS tax is payed, and that it would be much easier to do so than to impliment a mandatory ("forced") savings program in the US.

Agreed

Im curious, regardless of what is more politically viable, what would be a better solution?  Raise taxes to cover the SS shortfall, or if somehow everyone saved some percent of their income to fund their retirements?  Which America would be better and why?

Im also curious, for those who support SS, would you support the notion that all the excess funds collected could not be spent on anything other than retirement?  Currently the government spends every dime of SS tax it collects, those taxes in excess of benefits paid are lent out to cover other government spending, in return for special treasury bonds that only apply to the SS fund.  Would you support stopping the practice and actually investing the excess?

[starguru]

Thanks for clarifying.  I can't reach the same conclusions though.  Democrats have been crying for higher taxes for years (because, you know the only solution to every problem is more government spending), have got some under Obama, and still haven't fixed SS.  Republicans seem firmly entrenched on not agreeing to any more taxes (because, you know, all taxes and government spending are Satan's ass-drip), and I don't think Dems are going to get the majorities they need to override a veto. 

Meanwhile, the mandatory savings idea has never been debated in congress, nor has it been in the public discourse. 

No doubt, it's a new idea for many, but its precisely because of that that I think it's more viable.

Wrapped up in this are so many tidbits... ( the democrats needing enough votes to overturn a presidential veto...)
One area I question is what legal grounds a forced savings law would have.  If we insist that it's not a tax it becomes a very murky area that the federal government could deny someone their compensation for an extended period of time, even if it were for their " own good."  For that reason I think it's a non starter.

I don't understand this at all. Any forced savings at worse would be as if the government levied a tax and spent the money.  And note, the government can do that now; they could raise the age at which 401k withdrawals could be taken without penalty to 100.  People would be forced to withdraw early and pay the penalty for early withdrawal.  The point is any government action can be oppressive or dishonest, requiring people to save for retirement is not special in any way.

[nereo]

Thanks for clarifying.  I can't reach the same conclusions though.  Democrats have been crying for higher taxes for years (because, you know the only solution to every problem is more government spending), have got some under Obama, and still haven't fixed SS.  Republicans seem firmly entrenched on not agreeing to any more taxes (because, you know, all taxes and government spending are Satan's ass-drip), and I don't think Dems are going to get the majorities they need to override a veto. 

Meanwhile, the mandatory savings idea has never been debated in congress, nor has it been in the public discourse. 

No doubt, it's a new idea for many, but its precisely because of that that I think it's more viable.

Wrapped up in this are so many tidbits... ( the democrats needing enough votes to overturn a presidential veto...)
One area I question is what legal grounds a forced savings law would have.  If we insist that it's not a tax it becomes a very murky area that the federal government could deny someone their compensation for an extended period of time, even if it were for their " own good."  For that reason I think it's a non starter.

I don't understand this at all. Any forced savings at worse would be as if the government levied a tax and spent the money.  And note, the government can do that now; they could raise the age at which 401k withdrawals could be taken without penalty to 100.  People would be forced to withdraw early and pay the penalty for early withdrawal.  The point is any government action can be oppressive or dishonest, requiring people to save for retirement is not special in any way.

The federal government has the explicit authority to raise taxes.  It can mandate the age of 401(k) withdraws precisely because a person's participation is voluntary.  It's far less clear to me that it has the authority to enact a forced savings law, precisely because it would not be a tax.  Perhaps someone better versed unconstitutional law could chirp in, but I'm finding it hard to see how it could be done.

[nereo]

Wait, so you are saying its more politically viable to implement mandatory savings than increasing SS taxes?  Just want to be clear...

No, I am saying the exact opposite, in response to your claim that:

The problem with increasing the income threshold on which SS tax is payed is it's not politically viable.  Arguing for that solution is the same unproductive behavior of Dems and Reps screaming past each other across the isle. 

I think we CAN, politically, raise the income threshold on which the SS tax is payed, and that it would be much easier to do so than to impliment a mandatory ("forced") savings program in the US.

Agreed

Im curious, regardless of what is more politically viable, what would be a better solution?  Raise taxes to cover the SS shortfall, or if somehow everyone saved some percent of their income to fund their retirements?  Which America would be better and why?

Im also curious, for those who support SS, would you support the notion that all the excess funds collected could not be spent on anything other than retirement?  Currently the government spends every dime of SS tax it collects, those taxes in excess of benefits paid are lent out to cover other government spending, in return for special treasury bonds that only apply to the SS fund.  Would you support stopping the practice and actually investing the excess?

I believe you are conflating two separate issues.  One is the societal and individual good that would come from more people having large enough assets to fund their own retirement.  The other is having a safety net in place for when people need additional help.  While the former will reduce th need for the latter, they are not the same.

[starguru]

Thanks for clarifying.  I can't reach the same conclusions though.  Democrats have been crying for higher taxes for years (because, you know the only solution to every problem is more government spending), have got some under Obama, and still haven't fixed SS.  Republicans seem firmly entrenched on not agreeing to any more taxes (because, you know, all taxes and government spending are Satan's ass-drip), and I don't think Dems are going to get the majorities they need to override a veto. 

Meanwhile, the mandatory savings idea has never been debated in congress, nor has it been in the public discourse. 

No doubt, it's a new idea for many, but its precisely because of that that I think it's more viable.

Wrapped up in this are so many tidbits... ( the democrats needing enough votes to overturn a presidential veto...)
One area I question is what legal grounds a forced savings law would have.  If we insist that it's not a tax it becomes a very murky area that the federal government could deny someone their compensation for an extended period of time, even if it were for their " own good."  For that reason I think it's a non starter.

I don't understand this at all. Any forced savings at worse would be as if the government levied a tax and spent the money.  And note, the government can do that now; they could raise the age at which 401k withdrawals could be taken without penalty to 100.  People would be forced to withdraw early and pay the penalty for early withdrawal.  The point is any government action can be oppressive or dishonest, requiring people to save for retirement is not special in any way.

The federal government has the explicit authority to raise taxes.  It can mandate the age of 401(k) withdraws precisely because a person's participation is voluntary.  It's far less clear to me that it has the authority to enact a forced savings law, precisely because it would not be a tax.  Perhaps someone better versed unconstitutional law could chirp in, but I'm finding it hard to see how it could be done.

I see your point.  It could be implemented in such a way that it's optional, and if someone doesn't want to save, they have to pay a tax.  That's what the ACA does, and the Supreme Court has already ruled on that.  Or it could be a tax, the proceeds of which are directed into account for the individual, controlled by the individual. 

Reg

[starguru]

Wait, so you are saying its more politically viable to implement mandatory savings than increasing SS taxes?  Just want to be clear...

No, I am saying the exact opposite, in response to your claim that:

The problem with increasing the income threshold on which SS tax is payed is it's not politically viable.  Arguing for that solution is the same unproductive behavior of Dems and Reps screaming past each other across the isle. 

I think we CAN, politically, raise the income threshold on which the SS tax is payed, and that it would be much easier to do so than to impliment a mandatory ("forced") savings program in the US.

Agreed

Im curious, regardless of what is more politically viable, what would be a better solution?  Raise taxes to cover the SS shortfall, or if somehow everyone saved some percent of their income to fund their retirements?  Which America would be better and why?

Im also curious, for those who support SS, would you support the notion that all the excess funds collected could not be spent on anything other than retirement?  Currently the government spends every dime of SS tax it collects, those taxes in excess of benefits paid are lent out to cover other government spending, in return for special treasury bonds that only apply to the SS fund.  Would you support stopping the practice and actually investing the excess?

I believe you are conflating two separate issues.  One is the societal and individual good that would come from more people having large enough assets to fund their own retirement.  The other is having a safety net in place for when people need additional help.  While the former will reduce th need for the latter, they are not the same.

To be clear, I'm not personally for dismantling SS.  I agree we need safety net as a last line of defense in case of disaster.  But I'm not for expanding it either.  The safety net exists now; instead of it becoming the retirement plan for everyone, I think we would all be better served by saving and investing in simple low cost index funds. 

The question I pose to you, though, is which do you think would have a better result?  Expanding SS or requiring people to save?

[Jrr85]

It's politically viable to put in a whole new system that punishes folks for not savings but somehow not politically viable to adjust an existing system to increase the applicable income threshold that has not been adjusted in decades?

I have the opposite opinion.

It's politically viable to convert the current system from a system where people's money is just taken and given to other people, to a system where people's money is just taken and some is given to other people while some is actually under their ownership, albeit subject to strict limitations that prevent it from being drawn on to pay for anything other than retirement or disability. 

[nereo]

It's politically viable to put in a whole new system that punishes folks for not savings but somehow not politically viable to adjust an existing system to increase the applicable income threshold that has not been adjusted in decades?

I have the opposite opinion.

It's politically viable to convert the current system from a system where people's money is just taken and given to other people, to a system where people's money is just taken and some is given to other people while some is actually under their ownership, albeit subject to strict limitations that prevent it from being drawn on to pay for anything other than retirement or disability.

How would that be different from the system we already have with the two social security trust funds?
https://www.ssa.gov/news/press/factsheets/WhatAreTheTrust.htm

[starguru]

It's politically viable to put in a whole new system that punishes folks for not savings but somehow not politically viable to adjust an existing system to increase the applicable income threshold that has not been adjusted in decades?

I have the opposite opinion.

It's politically viable to convert the current system from a system where people's money is just taken and given to other people, to a system where people's money is just taken and some is given to other people while some is actually under their ownership, albeit subject to strict limitations that prevent it from being drawn on to pay for anything other than retirement or disability.

How would that be different from the system we already have with the two social security trust funds?
https://www.ssa.gov/news/press/factsheets/WhatAreTheTrust.htm

Current system: Individual's $$ is taxed and distributed to OTHERS (i.e. distributed to those who are currently retired or disabled).
Alternate: Individual's $$ is kept in an account for THEMSELVES (i.e. they save the $$ for themselves).

[nereo]

It's politically viable to put in a whole new system that punishes folks for not savings but somehow not politically viable to adjust an existing system to increase the applicable income threshold that has not been adjusted in decades?

I have the opposite opinion.

It's politically viable to convert the current system from a system where people's money is just taken and given to other people, to a system where people's money is just taken and some is given to other people while some is actually under their ownership, albeit subject to strict limitations that prevent it from being drawn on to pay for anything other than retirement or disability.

How would that be different from the system we already have with the two social security trust funds?
https://www.ssa.gov/news/press/factsheets/WhatAreTheTrust.htm

Current system: Individual's $$ is taxed and distributed to OTHERS (i.e. distributed to those who are currently retired or disabled).
Alternate: Individual's $$ is kept in an account for THEMSELVES (i.e. they save the $$ for themselves).

But that's not exactly true. Everyone who pays into the system gets some benefits paid back to them, with money collected for SS held in trusts with strict limitations that prevent it being used for anything other than retirement or disability.  That sounds very similar to what Jrr85 was describing (above).

What you describe seems different - money you pay doesn't go to anyone else, and (presumably) money other people pay never goes to you.

[starguru]

It's politically viable to put in a whole new system that punishes folks for not savings but somehow not politically viable to adjust an existing system to increase the applicable income threshold that has not been adjusted in decades?

I have the opposite opinion.

It's politically viable to convert the current system from a system where people's money is just taken and given to other people, to a system where people's money is just taken and some is given to other people while some is actually under their ownership, albeit subject to strict limitations that prevent it from being drawn on to pay for anything other than retirement or disability.

How would that be different from the system we already have with the two social security trust funds?
https://www.ssa.gov/news/press/factsheets/WhatAreTheTrust.htm

Current system: Individual's $$ is taxed and distributed to OTHERS (i.e. distributed to those who are currently retired or disabled).
Alternate: Individual's $$ is kept in an account for THEMSELVES (i.e. they save the $$ for themselves).

But that's not exactly true. Everyone who pays into the system gets some benefits paid back to them, with money collected for SS held in trusts with strict limitations that prevent it being used for anything other than retirement or disability.  That sounds very similar to what Jrr85 was describing (above).

What you describe seems different - money you pay doesn't go to anyone else, and (presumably) money other people pay never goes to you.

Strictly speaking, the $$ collected is not held in a trust.  That $$ is used to buy bonds, which are held in the trust, and is spent by the government immediately.  It is widely accepted that with SS current workers pay for current retirees.  An individuals $$ is not kept for their specific benefit; they have no ownership.  That's the difference.

[EnjoyIt]

I can't believe that people are actually arguing that people are better off giving money to the government and then get much less in return in the future is somehow better than saving the money for themselves.  Unfortunately SS is not a trust fund.  There is $0 in the social security trust.  That money is immediately spent on current retirees and other government spending.  SS is just an additional tax that comes with some formulas that allow government to give you money sometime in the future based on contributions.  Lets not kid ourselves SS is just another income tax.

My recommendation is a simple 10% forced savings and a 2.4% tax that goes into a fund for those who have not had the ability to save for themselves.  If you opt out of the savings plan then you are fined a 10% tax which goes into the same fund similar to how ACA works.  There should be no income cap on this.  The reason why I would tax the money at death is because the money is collected tax free and eventually taxes will need to be paid.   Therefor tax it and give the remainder to loved ones.

[nereo]

I can't believe that people are actually arguing that people are better off giving money to the government and then get much less in return in the future is somehow better than saving the money for themselves.  Unfortunately SS is not a trust fund.  There is $0 in the social security trust.  That money is immediately spent on current retirees and other government spending.  SS is just an additional tax that comes with some formulas that allow government to give you money sometime in the future based on contributions.  Lets not kid ourselves SS is just another income tax.

Well, you have some of your facts and figures wrong; the SS trust funds currently has about $2.8T in it, all held in non-marketable securities.  The trust fund has actually been increasing in recent years, but is projected to be depleted 2034 if rates aren't altered as the baby-boomers retire and less is collected than paid out.
You can make the argument that all money is fungible, or that the treasury can create or destroy money at will, but there are securities backed by the US government in the SS trust fund (i.e. it is not $0).

I agree it is another tax on income.  At its current structure, some people will get more than they pay into the program and others (particularly high-earners) will get less.   

[Jrr85]

It's politically viable to put in a whole new system that punishes folks for not savings but somehow not politically viable to adjust an existing system to increase the applicable income threshold that has not been adjusted in decades?

I have the opposite opinion.

It's politically viable to convert the current system from a system where people's money is just taken and given to other people, to a system where people's money is just taken and some is given to other people while some is actually under their ownership, albeit subject to strict limitations that prevent it from being drawn on to pay for anything other than retirement or disability.

How would that be different from the system we already have with the two social security trust funds?
https://www.ssa.gov/news/press/factsheets/WhatAreTheTrust.htm

What I am describing is what politicians want you to think we have and why they use phrases like "social security trust funds".  That makes it sound like there are actual funds held somewhere that will be used for future social security benefits.  But that's not at all what the social security trust fund is.  It's not a fund at all.  It's just an accounting of how much money from SS taxes has been spent on stuff other than social security along with how much money it could have earned if it had been invested in negotiable t-bills or the like.  Basically when the "fund" shows a balance of zero, SS payments are automatically cut to where they match SS revenue.  It's basically a political asset.  The trust "fund" having a balance doesn't reduce the amount of borrowing or taxing the U.S. must do to make social security payments.  It just deals with the political process for when payments will be made. 

In the system I am describing, there would be actual funds to be paid to people that could not be taken without just compensation. 

 

[Jrr85]

I can't believe that people are actually arguing that people are better off giving money to the government and then get much less in return in the future is somehow better than saving the money for themselves.  Unfortunately SS is not a trust fund.  There is $0 in the social security trust.  That money is immediately spent on current retirees and other government spending.  SS is just an additional tax that comes with some formulas that allow government to give you money sometime in the future based on contributions.  Lets not kid ourselves SS is just another income tax.

Well, you have some of your facts and figures wrong; the SS trust funds currently has about $2.8T in it, all held in non-marketable securities.  The trust fund has actually been increasing in recent years, but is projected to be depleted 2034 if rates aren't altered as the baby-boomers retire and less is collected than paid out.
You can make the argument that all money is fungible, or that the treasury can create or destroy money at will, but there are securities backed by the US government in the SS trust fund (i.e. it is not $0).

I agree it is another tax on income.  At its current structure, some people will get more than they pay into the program and others (particularly high-earners) will get less.

This is technically right, but functionally wrong.  As I said in my previous post, the trust "fund" is an accounting measure.  It's very meaningful from a political stance as it dictates who has the burden to change the law in order to change SS payouts.  But economically, there is no fund in the trust "fund".   

[nereo]

I can't believe that people are actually arguing that people are better off giving money to the government and then get much less in return in the future is somehow better than saving the money for themselves.  Unfortunately SS is not a trust fund.  There is $0 in the social security trust.  That money is immediately spent on current retirees and other government spending.  SS is just an additional tax that comes with some formulas that allow government to give you money sometime in the future based on contributions.  Lets not kid ourselves SS is just another income tax.

Well, you have some of your facts and figures wrong; the SS trust funds currently has about $2.8T in it, all held in non-marketable securities.  The trust fund has actually been increasing in recent years, but is projected to be depleted 2034 if rates aren't altered as the baby-boomers retire and less is collected than paid out.
You can make the argument that all money is fungible, or that the treasury can create or destroy money at will, but there are securities backed by the US government in the SS trust fund (i.e. it is not $0).

I agree it is another tax on income.  At its current structure, some people will get more than they pay into the program and others (particularly high-earners) will get less.

This is technically right, but functionally wrong.  As I said in my previous post, the trust "fund" is an accounting measure.  It's very meaningful from a political stance as it dictates who has the burden to change the law in order to change SS payouts.  But economically, there is no fund in the trust "fund".   

As i indicated, you can (and seemingly are) make the case that those securities are valueless because the treasury can create wealth out of thin air.  The securities are no more or less real than any other dollar held by the central bank. 

I'm not sure how your solution would be a fix to this; what would it hold?  US-issued bonds?  Equities? How do we get away from this paradox?

[EnjoyIt]

I can't believe that people are actually arguing that people are better off giving money to the government and then get much less in return in the future is somehow better than saving the money for themselves.  Unfortunately SS is not a trust fund.  There is $0 in the social security trust.  That money is immediately spent on current retirees and other government spending.  SS is just an additional tax that comes with some formulas that allow government to give you money sometime in the future based on contributions.  Lets not kid ourselves SS is just another income tax.

Well, you have some of your facts and figures wrong; the SS trust funds currently has about $2.8T in it, all held in non-marketable securities.  The trust fund has actually been increasing in recent years, but is projected to be depleted 2034 if rates aren't altered as the baby-boomers retire and less is collected than paid out.
You can make the argument that all money is fungible, or that the treasury can create or destroy money at will, but there are securities backed by the US government in the SS trust fund (i.e. it is not $0).

I agree it is another tax on income.  At its current structure, some people will get more than they pay into the program and others (particularly high-earners) will get less.

This is technically right, but functionally wrong.  As I said in my previous post, the trust "fund" is an accounting measure.  It's very meaningful from a political stance as it dictates who has the burden to change the law in order to change SS payouts.  But economically, there is no fund in the trust "fund".   

As i indicated, you can (and seemingly are) make the case that those securities are valueless because the treasury can create wealth out of thin air.  The securities are no more or less real than any other dollar held by the central bank. 

I'm not sure how your solution would be a fix to this; what would it hold?  US-issued bonds?  Equities? How do we get away from this paradox?

money has value as it has a acceptable reimbursement for goods and services in our society.  The US dollar has value.
The securities that are held in the SS trust are nothing more than IOUs from the government.  The only way those securities can be converted back to cash is by collecting future taxes or to pull from the treasury from previously collected taxes.  To my understanding there is no actual money in the social security trust. 

[Jrr85]

I can't believe that people are actually arguing that people are better off giving money to the government and then get much less in return in the future is somehow better than saving the money for themselves.  Unfortunately SS is not a trust fund.  There is $0 in the social security trust.  That money is immediately spent on current retirees and other government spending.  SS is just an additional tax that comes with some formulas that allow government to give you money sometime in the future based on contributions.  Lets not kid ourselves SS is just another income tax.

Well, you have some of your facts and figures wrong; the SS trust funds currently has about $2.8T in it, all held in non-marketable securities.  The trust fund has actually been increasing in recent years, but is projected to be depleted 2034 if rates aren't altered as the baby-boomers retire and less is collected than paid out.
You can make the argument that all money is fungible, or that the treasury can create or destroy money at will, but there are securities backed by the US government in the SS trust fund (i.e. it is not $0).

I agree it is another tax on income.  At its current structure, some people will get more than they pay into the program and others (particularly high-earners) will get less.

This is technically right, but functionally wrong.  As I said in my previous post, the trust "fund" is an accounting measure.  It's very meaningful from a political stance as it dictates who has the burden to change the law in order to change SS payouts.  But economically, there is no fund in the trust "fund".   

As i indicated, you can (and seemingly are) make the case that those securities are valueless because the treasury can create wealth out of thin air.  The securities are no more or less real than any other dollar held by the central bank. 

I'm not sure how your solution would be a fix to this; what would it hold?  US-issued bonds?  Equities? How do we get away from this paradox?

I am not arguing the securities are valuless because the treasury can create wealth out of thin air (the treasury can't do that anyway, unless I guess you consider seniorage wealth); I am arguing that there is no difference whether the "fund" exists or not.  When scheduled SS outlays exceed revenue from SS taxes, in order to make the scheduled payments, the gov't will have to make that money from new taxes, money taken from other programs, or new borrowing (which is just future taxes or cuts in spending).  If the trust "fund" has a positive balance or the trust "fund" is at zero balance, it makes no difference to the U.S. gov't's ability to pay, except that as long as their is a positive balance, cuts won't be made without Congress having a say so.  Once the balance is zero, cuts are automatic unless Congress says something different. 


As far as how to fix it, well, just making them negotiable would sort of fix it if you just want there to be real assets in the fund.  Then securities held by the social security trust would have value on the open market and it wouldn't simply be an accounting mechanism.  But that's still a pretty horrible solution, as it's still not doing anything to provide a way to pay benefits beyond taxing current workers more. 

Ideally, the trust would have been responsible for investing in assets other than federal government debt. 

This is all pretty much moot now as there aren't any surpluses to invest.  But in another 10-12 years when the trust "fund" is exhausted, we're facing a "payments are about to be cut 24% overnight" crisis, it's going to be pretty sad to look back at all the opportunities we had to do a program that made sense. 

[Paul der Krake]

Are you people seriously arguing about whether IOUs from the Federal government are money or not?

Newsflash: when you deposit money in the bank, it doesn't stay there either! It's called fractional reserve banking and it's kind of a big deal.

[rantk81]

I just logged into ssa.gov to see how much has been "contributed" to the "program" by myself and my employers over the years.  I would already be FI if I could add that amount to my 'stash.

[Jrr85]

Are you people seriously arguing about whether IOUs from the Federal government are money or not?

Newsflash: when you deposit money in the bank, it doesn't stay there either! It's called fractional reserve banking and it's kind of a big deal.

Yeah that's not what anybody is arguing about I don't think.

[ender]

I can't believe that people are actually arguing that people are better off giving money to the government and then get much less in return in the future is somehow better than saving the money for themselves.  Unfortunately SS is not a trust fund.  There is $0 in the social security trust.  That money is immediately spent on current retirees and other government spending.  SS is just an additional tax that comes with some formulas that allow government to give you money sometime in the future based on contributions.  Lets not kid ourselves SS is just another income tax.

The biggest problem is that while it's easy to say people should save money, it's easy to incentivize it, most people are financial idiots. So for most people, just like how following Dave Ramsey is suboptimal but still way better for them, it's still better to have a fairly horrible return than nothing at all.

How many of us know people who have raided their 401k for various reasons? Who cashed out a pension? Who made six figures their entire lives and are still 60 and broke? Even as libertarian leaning as I am, it's still quite naive for me to try to believe that people overwhelmingly are going to "take care of themselves" when it comes to retirement.

[starguru]

I can't believe that people are actually arguing that people are better off giving money to the government and then get much less in return in the future is somehow better than saving the money for themselves.  Unfortunately SS is not a trust fund.  There is $0 in the social security trust.  That money is immediately spent on current retirees and other government spending.  SS is just an additional tax that comes with some formulas that allow government to give you money sometime in the future based on contributions.  Lets not kid ourselves SS is just another income tax.

The biggest problem is that while it's easy to say people should save money, it's easy to incentivize it, most people are financial idiots. So for most people, just like how following Dave Ramsey is suboptimal but still way better for them, it's still better to have a fairly horrible return than nothing at all.

How many of us know people who have raided their 401k for various reasons? Who cashed out a pension? Who made six figures their entire lives and are still 60 and broke? Even as libertarian leaning as I am, it's still quite naive for me to try to believe that people overwhelmingly are going to "take care of themselves" when it comes to retirement.

We can make it easier by giving everyone access to low cost TSP funds, the same as Federal employees, and auto enrolling them at some reasonable allocation based on age, and not allowing early withdrawals.

There is no doubt we need to be better about financial education in this country.  We need to make as many as possible aware of the true cost of wasting money on frivolous things. 

No solution is going to be perfect, but that doesn't mean we shouldn't try to do the best thing for people, and try to encourage personal responsibility.   

[EnjoyIt]

I can't believe that people are actually arguing that people are better off giving money to the government and then get much less in return in the future is somehow better than saving the money for themselves.  Unfortunately SS is not a trust fund.  There is $0 in the social security trust.  That money is immediately spent on current retirees and other government spending.  SS is just an additional tax that comes with some formulas that allow government to give you money sometime in the future based on contributions.  Lets not kid ourselves SS is just another income tax.

The biggest problem is that while it's easy to say people should save money, it's easy to incentivize it, most people are financial idiots. So for most people, just like how following Dave Ramsey is suboptimal but still way better for them, it's still better to have a fairly horrible return than nothing at all.

How many of us know people who have raided their 401k for various reasons? Who cashed out a pension? Who made six figures their entire lives and are still 60 and broke? Even as libertarian leaning as I am, it's still quite naive for me to try to believe that people overwhelmingly are going to "take care of themselves" when it comes to retirement.

You are absolutely correct which is why people have an option.  Either take the 10% and put it in their investing account that they can not touch until FRA, or pay 10% in taxes to help add cash to the fund for people who don't have enough.  either way people are forced to save 10%.  And we do it just like the ACA taxes people without health insurance.

[minimalistgamer]

Considering that it is very unlikely that there will be any social security by the time I retire, I would like the option to opt out of this service.

[Bucksandreds]

Considering that it is very unlikely that there will be any social security by the time I retire, I would like the option to opt out of this service.

Absolutely and utterly non informed/ non rational opinion.

[ender]

We can make it easier by giving everyone access to low cost TSP funds, the same as Federal employees, and auto enrolling them at some reasonable allocation based on age, and not allowing early withdrawals.

There is no doubt we need to be better about financial education in this country.  We need to make as many as possible aware of the true cost of wasting money on frivolous things. 

No solution is going to be perfect, but that doesn't mean we shouldn't try to do the best thing for people, and try to encourage personal responsibility.

Do Federal employees actively participate and save money in their TSPs? High fees are not the reason people do not save for retirement.