SS tax has been reduced from 7.65% to 4.2% for 2011. It helps the employed and not the retired. I have more to say, but I will save it for facebook.
Social Security
- Thread starter Dunkopf
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Oh yeah, I got a couple of things to say but not on here, but on FB LOL!
Oh yeah, I got a couple of things to say but not on here, but on FB LOL!
It's my understanding that SS is paid out of a specific fund. That fund currently has 2.3 trillion dollars in it. The SS withholding was doubled in the 70's I believe. The purpose was to compensate for the baby boomers who are starting to retire right now. If contributions would have stayed at 6.4% for employee and 6.4% for employer the fund would have paid for SS for 29 years based on projected birth rates. After 29 years benefits will still be paid at 80%. Right now there is more paid out than taken in each year. That is the purpose of the surplus fund. When the babyboomers start tipping over, things will equal out some.
I dont depend on Wikipedia for facts, but this seems like a reasonable look at the question. Remember, in the example in this exerpt the 2020 date is just a date picked out for the example, talking about one specific dollar put in the system. It does not have anything to do with when the Trust Fund will run out or become insolvent.
http://en.wikipedia.org/wiki/Social_Security_Trust_Fund
The following two scenarios help illustrate the concept. Depending on which scenario is right, Social Security is either an accounting fiction or represents real economic savings.
Scenario 1 (Trust Fund is an accounting fiction):
1984: $1 payroll tax collected in 1984
1984: $1 lent by Social Security to the federal government
1984: Federal government increases spending on government programs by $1
2020: Federal government raises taxes by $1 plus interest to repay the loan to Social Security
2020: $1 plus interest transferred from Federal Government to Social Security.
Scenario 2 (Trust Fund represents real economic savings):
1984: $1 payroll tax collected in 1984
1984: $1 lent by Social Security to the federal government
1984: Federal government increases spending on government programs by $0
2020: Federal government raises taxes by $0 to repay the loan to Social Security. Any tax increases that occur in 2020 would have happened anyway without Social Security.
2020: $1 plus interest transferred from Federal Government to Social Security.
Then you get his from the Social Security website.
http://www.ssa.gov/oact/progdata/fundFAQ.html#n7
As stated above, money flowing into the trust funds is invested in U. S. Government securities. Because the government spends this borrowed cash, some people see the current increase in the trust fund assets as an accumulation of securities that the government will be unable to make good on in the future. Without legislation to restore long-range solvency of the trust funds, redemption of long-term securities prior to maturity would be necessary.
Far from being "worthless IOUs," the investments held by the trust funds are backed by the full faith and credit of the U. S. Government. The government has always repaid Social Security, with interest. The special-issue securities are, therefore, just as safe as U.S. Savings Bonds or other financial instruments of the Federal government.
The collateral backing these securities is the full faith and credit of the U. S. Government. That depends on the governments Constitutional power to collect taxes, fees, and tariffs. Others obviously have different opinions, but I do not see that the SS Trust Fund has resulted in a net of zero in government collections and spending. I see it that the SS Trust Fund has delayed raises in other taxes, fees, and tariffs depending upon the amount of surplus each year. It has not affected spending at all. It has delayed us paying for that spending in other ways. When outgo exceeds income, the difference will have to be made up from taxes, fees, or tariffs.
I dont agree with the analogy that the special-issue securities are as safe as savings bonds. If you buy a Savings Bond from the government, that is a two party transaction. You loan the money to someone else and get it back with interest. If you buy a savings bond from yourself and spend that bond money now, then you owe yourself the amount of the bond with interest when the bond comes due. If you put money aside each month to cover the principle and interest, then you had a net increase in savings. If you do not put money aside to pay that personal savings bond off when it becomes due, you do not have a net increase in savings.
Im not saying that Social Security is worthless or that someone will not get any money from Social Security in the future. Im not saying it is going to go broke. I think taxes, fees, and tariffs will cover the shortfall, the benefits will be cut sometime in the future, or probably a combination. I do think that the idea that surplus money invested in this trust fund is increasing the value of this trust fund is false.
Since it has been reduced to 4.4% that means the money will not accumulate at the same rate and will therefore run out faster. They will continue paying at the same percentages, it just won't last as long. Personally I don't expect it to return to the 6.4% rate. Once you give the public a cut, it's there to stay. Especially in this financial climate. I know it's supposed to be one year. The Bush tax cuts were supposed to expire in 2010. Even though it's costing us a trillion dollars over 10 years when everyone is so concerned about the deficit. They still got extended for 2 years. From a personal stand point I'm glad they did. From a perspective of what is good for the country, it's a bad thing. You will notice that the deficit hawks on the TV and radio were ok with it though.
You are probably right about whether this historic separation of what the employee pays versus what the employer pays becomes permanent. I see it as fairly irrelevent from that viewpoint. All it does is bring the day closer that the power of the government to collect other taxes, fees, and tarriffs come into play.
I dont depend on Wikipedia for facts, but this seems like a reasonable look at the question. Remember, in the example in this exerpt the 2020 date is just a date picked out for the example, talking about one specific dollar put in the system. It does not have anything to do with when the Trust Fund will run out or become insolvent.
http://en.wikipedia.org/wiki/Social_Security_Trust_Fund
The following two scenarios help illustrate the concept. Depending on which scenario is right, Social Security is either an accounting fiction or represents real economic savings.
Scenario 1 (Trust Fund is an accounting fiction):
1984: $1 payroll tax collected in 1984
1984: $1 lent by Social Security to the federal government
1984: Federal government increases spending on government programs by $1
2020: Federal government raises taxes by $1 plus interest to repay the loan to Social Security
2020: $1 plus interest transferred from Federal Government to Social Security.
Scenario 2 (Trust Fund represents real economic savings):
1984: $1 payroll tax collected in 1984
1984: $1 lent by Social Security to the federal government
1984: Federal government increases spending on government programs by $0
2020: Federal government raises taxes by $0 to repay the loan to Social Security. Any tax increases that occur in 2020 would have happened anyway without Social Security.
2020: $1 plus interest transferred from Federal Government to Social Security.
Then you get his from the Social Security website.
http://www.ssa.gov/oact/progdata/fundFAQ.html#n7
As stated above, money flowing into the trust funds is invested in U. S. Government securities. Because the government spends this borrowed cash, some people see the current increase in the trust fund assets as an accumulation of securities that the government will be unable to make good on in the future. Without legislation to restore long-range solvency of the trust funds, redemption of long-term securities prior to maturity would be necessary.
Far from being "worthless IOUs," the investments held by the trust funds are backed by the full faith and credit of the U. S. Government. The government has always repaid Social Security, with interest. The special-issue securities are, therefore, just as safe as U.S. Savings Bonds or other financial instruments of the Federal government.
The collateral backing these securities is the full faith and credit of the U. S. Government. That depends on the governments Constitutional power to collect taxes, fees, and tariffs. Others obviously have different opinions, but I do not see that the SS Trust Fund has resulted in a net of zero in government collections and spending. I see it that the SS Trust Fund has delayed raises in other taxes, fees, and tariffs depending upon the amount of surplus each year. It has not affected spending at all. It has delayed us paying for that spending in other ways. When outgo exceeds income, the difference will have to be made up from taxes, fees, or tariffs.
I dont agree with the analogy that the special-issue securities are as safe as savings bonds. If you buy a Savings Bond from the government, that is a two party transaction. You loan the money to someone else and get it back with interest. If you buy a savings bond from yourself and spend that bond money now, then you owe yourself the amount of the bond with interest when the bond comes due. If you put money aside each month to cover the principle and interest, then you had a net increase in savings. If you do not put money aside to pay that personal savings bond off when it becomes due, you do not have a net increase in savings.
Im not saying that Social Security is worthless or that someone will not get any money from Social Security in the future. Im not saying it is going to go broke. I think taxes, fees, and tariffs will cover the shortfall, the benefits will be cut sometime in the future, or probably a combination. I do think that the idea that surplus money invested in this trust fund is increasing the value of this trust fund is false.
Since it has been reduced to 4.4% that means the money will not accumulate at the same rate and will therefore run out faster. They will continue paying at the same percentages, it just won't last as long. Personally I don't expect it to return to the 6.4% rate. Once you give the public a cut, it's there to stay. Especially in this financial climate. I know it's supposed to be one year. The Bush tax cuts were supposed to expire in 2010. Even though it's costing us a trillion dollars over 10 years when everyone is so concerned about the deficit. They still got extended for 2 years. From a personal stand point I'm glad they did. From a perspective of what is good for the country, it's a bad thing. You will notice that the deficit hawks on the TV and radio were ok with it though.
You are probably right about whether this historic separation of what the employee pays versus what the employer pays becomes permanent. I see it as fairly irrelevent from that viewpoint. All it does is bring the day closer that the power of the government to collect other taxes, fees, and tarriffs come into play.
I have WHAT in my yard? :
I work on the assumption that it will not be there for me when I get old. Then I hope it will be.
This is the assumption I used. I did not retire until I could retire without depending on Social Security. Not everyone can do that. Many people depend on Social Security for their retirement, including many of my family members.
I know it is a socialist idea, but I'd really like to see the system changed to where people like me that don't need it don't get it, regardless of whether they paid into the system or not. Morally and philosophically I have no huge problem with helping people that really need the help if I can. We have told people they can rely on this program for their retirement and I think we have a moral obligation to keep it available for those that have counted on it. You can get into the argument of how many people that now need it would have needed it if it had not been available. I think it is a case of face the situation as it is now and don't spend useless argument and energy over what might have been. Now what kind of national debate would this idea spark?
I would want to keep a safety net for medical though. As a retiree, potential medical expenses are my biggest concern. That could wipe me out.
I work on the assumption that it will not be there for me when I get old. Then I hope it will be.
This is the assumption I used. I did not retire until I could retire without depending on Social Security. Not everyone can do that. Many people depend on Social Security for their retirement, including many of my family members.
I know it is a socialist idea, but I'd really like to see the system changed to where people like me that don't need it don't get it, regardless of whether they paid into the system or not. Morally and philosophically I have no huge problem with helping people that really need the help if I can. We have told people they can rely on this program for their retirement and I think we have a moral obligation to keep it available for those that have counted on it. You can get into the argument of how many people that now need it would have needed it if it had not been available. I think it is a case of face the situation as it is now and don't spend useless argument and energy over what might have been. Now what kind of national debate would this idea spark?
I would want to keep a safety net for medical though. As a retiree, potential medical expenses are my biggest concern. That could wipe me out.
Medical costs are the largest cause of bankruptcy as a single reason.
That is pitiful. I agree with you about who should be able to collect. There is no reason my sister and her husband who bring in very good money should collect later when they won't need it. I am on that border of people who earn enough that I could be put in that category and I would accept that. People who like to think they have no social obligations whatsoever to the other humans who share their country are kidding themselves. You either choose to help or you end up paying the cost later. Why is that so hard to fathom?
That is pitiful. I agree with you about who should be able to collect. There is no reason my sister and her husband who bring in very good money should collect later when they won't need it. I am on that border of people who earn enough that I could be put in that category and I would accept that. People who like to think they have no social obligations whatsoever to the other humans who share their country are kidding themselves. You either choose to help or you end up paying the cost later. Why is that so hard to fathom?
Quote:
This is the assumption I used. I did not retire until I could retire without depending on Social Security. Not everyone can do that. Many people depend on Social Security for their retirement, including many of my family members.
I know it is a socialist idea, but I'd really like to see the system changed to where people like me that don't need it don't get it, regardless of whether they paid into the system or not. Morally and philosophically I have no huge problem with helping people that really need the help if I can. We have told people they can rely on this program for their retirement and I think we have a moral obligation to keep it available for those that have counted on it. You can get into the argument of how many people that now need it would have needed it if it had not been available. I think it is a case of face the situation as it is now and don't spend useless argument and energy over what might have been. Now what kind of national debate would this idea spark?
I would want to keep a safety net for medical though. As a retiree, potential medical expenses are my biggest concern. That could wipe me out.
Social Security needs to be a means-tested program.
This is the assumption I used. I did not retire until I could retire without depending on Social Security. Not everyone can do that. Many people depend on Social Security for their retirement, including many of my family members.
I know it is a socialist idea, but I'd really like to see the system changed to where people like me that don't need it don't get it, regardless of whether they paid into the system or not. Morally and philosophically I have no huge problem with helping people that really need the help if I can. We have told people they can rely on this program for their retirement and I think we have a moral obligation to keep it available for those that have counted on it. You can get into the argument of how many people that now need it would have needed it if it had not been available. I think it is a case of face the situation as it is now and don't spend useless argument and energy over what might have been. Now what kind of national debate would this idea spark?
I would want to keep a safety net for medical though. As a retiree, potential medical expenses are my biggest concern. That could wipe me out.
Social Security needs to be a means-tested program.
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I think (or should say hope) it will be at some point. Setting that means point is going to be the political nightmare.
Social Security to provide security to people when they retire is something I fully support, especially if they have worked and paid into the system. By security I mean the security that they can retire with dignity, that they can heat their home in the winter and not have to eat dog food to survive. I don't mean it in the sense that they can vacation on the Riviera in season.
I can even see politically how this could happen. Simply set the date to switch over to a means tested program to some time in the future, say 20 years, and the only people affected are those that retire 20 years from now. Anybody that retires before that deadline gets to keep full benefits. This gives the politicians political cover since most voters will forget who voted for this 20 years ago. Tell the people currently retired that this will not only not affect their current benefits but will assure them over the long term. People that plan to retire in the next 20 years should not have a big problem with it for the same reasons, so you should have the votes of almost everyone over 45. Historically, younger people don't tend to vote as much, so you should have a majority of the people that actually vote covered. Don't tax you. Don't tax me. Tax that man behind the tree. I think it would have to be a gradual switch to a means test to prevent a huge bunch of people retiring in time to get grandfathered in. I see that as a huge psychological boundary for people on the cusp.
Another option is to raise eligibility ages, again with the transition postponed to provide political cover to the guilty. This seems most likely but is not my preferred method.
Social Security to provide security to people when they retire is something I fully support, especially if they have worked and paid into the system. By security I mean the security that they can retire with dignity, that they can heat their home in the winter and not have to eat dog food to survive. I don't mean it in the sense that they can vacation on the Riviera in season.
I can even see politically how this could happen. Simply set the date to switch over to a means tested program to some time in the future, say 20 years, and the only people affected are those that retire 20 years from now. Anybody that retires before that deadline gets to keep full benefits. This gives the politicians political cover since most voters will forget who voted for this 20 years ago. Tell the people currently retired that this will not only not affect their current benefits but will assure them over the long term. People that plan to retire in the next 20 years should not have a big problem with it for the same reasons, so you should have the votes of almost everyone over 45. Historically, younger people don't tend to vote as much, so you should have a majority of the people that actually vote covered. Don't tax you. Don't tax me. Tax that man behind the tree. I think it would have to be a gradual switch to a means test to prevent a huge bunch of people retiring in time to get grandfathered in. I see that as a huge psychological boundary for people on the cusp.
Another option is to raise eligibility ages, again with the transition postponed to provide political cover to the guilty. This seems most likely but is not my preferred method.
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I heard the other day on NPR that the average lifespan in the us was now 84 (maybe 87, i don't fully remember). It is also gong DOWN now not up with the epidemic of Diabetes. SS was never meant to be retire and live well for 30 years. SO continuing to raise the retirement age seems reasonable.
I vaguely remember a story on SS that said it was only supposed to help in the last 10 years of life.
That said I am VERY against total privatization of SS.
I worked for a big corporation for 10 years. They had a matching program with the 401k. They matched the first $5.00 100%, then everything after that 50% up to 7% of your income.
The amount of employees who took advantage of this program was VERY small. They all said the same thing "I can't afford $5.00" They generally had decent cars and went out to lunch several times a week, but wouldn't even spend the $5 that would be matched 100%.
This was blue collar work, but the company did have some nice perks including the ability to be able to buy stock at a discount. Again very few did that either.
That experience made me really believe that if SS was privatized a large swath of people would just be out in the cold, and that I think was the whole reason SS was put into effect.
I truly believe if we dont have SS in the future there will be a huge population of homeless/beggers.
The experience proved to me that as a whole much of the general population would rather go out to lunch then put $5 in their 401k's. I am sure many will say I am wrong, but that is my personal experience.
I did take advantage of this perk as well as the buying stock for a discount. I had 5% of my income in the matching 401k. The stock discount I found to be a great perk. I later used the money I got from selling the stock, here on the farm for my fencing etc. The 401k money is still there, waiting for me to retire.
Ridgerunner I greatly enjoy reading your posts! I also enjoyed your posts on the raising cost of gas thread.
I vaguely remember a story on SS that said it was only supposed to help in the last 10 years of life.
That said I am VERY against total privatization of SS.
I worked for a big corporation for 10 years. They had a matching program with the 401k. They matched the first $5.00 100%, then everything after that 50% up to 7% of your income.
The amount of employees who took advantage of this program was VERY small. They all said the same thing "I can't afford $5.00" They generally had decent cars and went out to lunch several times a week, but wouldn't even spend the $5 that would be matched 100%.
This was blue collar work, but the company did have some nice perks including the ability to be able to buy stock at a discount. Again very few did that either.
That experience made me really believe that if SS was privatized a large swath of people would just be out in the cold, and that I think was the whole reason SS was put into effect.
I truly believe if we dont have SS in the future there will be a huge population of homeless/beggers.
The experience proved to me that as a whole much of the general population would rather go out to lunch then put $5 in their 401k's. I am sure many will say I am wrong, but that is my personal experience.
I did take advantage of this perk as well as the buying stock for a discount. I had 5% of my income in the matching 401k. The stock discount I found to be a great perk. I later used the money I got from selling the stock, here on the farm for my fencing etc. The 401k money is still there, waiting for me to retire.
Ridgerunner I greatly enjoy reading your posts! I also enjoyed your posts on the raising cost of gas thread.
At the very least, people who are still working (like John McCain) should not be collecting Social Security. Or people with large investment incomes. If you are bringing in $100,000 a year in investment income, you probably don't need Social Security benefits.
I am thinking I rather buy and invest in land. I don't trust the stock market, and not enough companies offer the 401(k) with any type of match to count on that. This is the phasing out of the middle class!
My IRA has been sitting with no contribution for almost 2 years now. Don't know when I can make a cont. anyways... like it matters much, I'm lucky its sitting stable and not just losing losing losing....
My IRA has been sitting with no contribution for almost 2 years now. Don't know when I can make a cont. anyways... like it matters much, I'm lucky its sitting stable and not just losing losing losing....
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