Will Social Security be sustainable in the future?

[JOEBIALEK]

According to the Social Security Act, "the purpose of Social Security is to provide insured persons with payments by way of a retirement benefit, survivors benefit, sickness benefit, and to substitute for compensation under the Workmen's Compensation Ordinance, a system of insurance against injury or death caused by accident arising out of and in the course of employment." In order to finance social security, a Social Security Fund was established, financed by contributions made by the workers and their employers. All benefits, administrative expenses, and capital expenditures are paid out from the Fund.

But according to government figures, "while Social Security takes in more than it spends right now, the situation reverses when the baby boom generation (those born between 1946 and 1964) begins to retire in 2010. Unless the system is overhauled, Social Security by 2013 will be spending more than it collects in taxes and will be broke by 2032."

I will be 69 years old in 2032. I will have paid a very large percentage of my income into a government plan and will have nothing to show for it. Accordingly, Social Security payroll deductions should end for anyone born in 1965 or later and be shifted to a 401(K) plan so they will reap the rewards of their investment when they retire. Those born in 1964 and before should continue some Social Security payroll deduction along with some government subsidy to cover the difference.

With all this talk of tax refunds fueled by a government surplus coupled with the enormous corporate tax breaks given out by our government, I am sure we could find enough money to subsidize a transition plan to save our retirement money.

 

[selfAdjoint]

Start voting. Lots of opinion says that in spite of the scare predictions, social security will never go broke, because the seniors are always the most faithful voters and the most focussed on their own interests, rather than on the smoke and mirrors that delude younger voters. Those motivated voters will never let their meal ticket become worthless.

 

[Njorl]

The latest take on social security is that wages are rising fast enough so that while earner to retiree ratios will decline, earnings to payout ratios will increase. Don't know if it is true or not. It is feasible, but who knows for sure.

Njorl

 

[russ_watters]

...smoke and mirrors.

The insolvency of SS is not smoke and mirrors. The system is already coming apart. http://www.socialsecurityreform.org/history/index.cfm

edit: should have read the link before I posted it. Its even worse than I thought: SS never has been stable. Since its inception, the rate had to be continually increased to keep it solvent. It started at 2%! I didn't even know it was that bad.

Lots of opinion says that in spite of the scare predictions, social security will never go broke, because the seniors are always the most faithful voters and the most focussed on their own interests

Translation: 'give me my SS and screw the next generation.' Seniors know that if they had put the money they put into SS into an S&P index fund instead, they'd get something like 10x the return they're actually getting. But they don't care - the money is already gone. I'm young and have paid very little into SS. I'm planning on not getting any, but you know what - I won't need it. I'm saving on my own. It still pisses me off though, that I have to pay into it. 15% is a massive percentage of income to lose.

I really, really hate that I am being punished for being responsible while others get rewarded for being irresponsible. More than that, SS is an anchor on the American economy.

 

[member 5645]

Here Here Russ!

 

[Njorl]

15% is a massive percentage of income to lose.

You're not losing anywhere near this much.

Only 7.5% comes out of your paycheck. The other 7.5% comes from the employer. If you think that your employer would pay you that 7.5%, you got another thing comin'. In fact, you probably wouldn't get all of the 7.5% that comes out of your end. If SS disappeared, all businesses would have to readjust prices and wages to remain competitive. While this increased competitiveness would indirectly benefit you by raising the general standard of living, the effect would be small and diluted. In addition, federal income taxes would need to be raised significantly, since it would no longer be possible to borrow from the SS trust fund.

So, in essence, the 15% that goes to SS would be divided between:

1. Increased federal taxes
2. Increased competitiveness in the marketplace
3. Increased profits for your employer
4. Money in your pocket

I would venture that those are listed in order of diminishing size. #4 would probably be about 2%, not 15%.

Njorl

 

[russ_watters]

You're not losing anywhere near this much.

Only 7.5% comes out of your paycheck. The other 7.5% comes from the employer.

As a matter of fact, I get paid as a sub-contractor. That makes me self-employed and I pay 15%.

So, in essence, the 15% that goes to SS would be divided between:

Well, you know me, Njorl - getting rid of SS would be just the beginning.

 

[Robert Zaleski]

The latest take on social security is that wages are rising fast enough so that while earner to retiree ratios will decline, earnings to payout ratios will increase. Don't know if it is true or not. It is feasible, but who knows for sure.

Njorl

If an employer is paying higher wages to his/her employees, wouldn't that mean the employer would have to raise his/her cost for goods and services to stay competitive. Wouldn't this be a wash.

 

[member 5645]

You're not losing anywhere near this much.

Only 7.5% comes out of your paycheck. The other 7.5% comes from the employer.

I'm self employed, so I pay it all. How ironic, entrepeneurship (the backbone of our capitalist economy) is hit harder than just falling in line with some other existing business.

Thing is, if the country were running on Galveston county's plan (search for my thread) then we'd either have plenty of money for SS, or we'd be in the same situation (whatever your opinion of it) with LESS money taken out.

 

[selfAdjoint]

The Galveston plan, as has been posted before, would not work as it does if it covered the whole country. What insurance company would be able to set up payouts for everybody? I agree we could set up a federal agency, along the lines of Fanny May, to do it but it would be a 400 pound gorilla in the investment markets.

 

[member 5645]

The Galveston plan, as has been posted before, would not work as it does if it covered the whole country. What insurance company would be able to set up payouts for everybody? I agree we could set up a federal agency, along the lines of Fanny May, to do it but it would be a 400 pound gorilla in the investment markets.

The simple answer, to make everyone happy, is to simply go back to the original SS plan. By which I mean reallow counties and states to create their own SS plans if they wish to opt out.
Even a federally promised savings bonds would pay out higher than SS does! And they are as a sure a thing as our country's economy is (as good, if not better, than the current SS system)

 

[Njorl]

If an employer is paying higher wages to his/her employees, wouldn't that mean the employer would have to raise his/her cost for goods and services to stay competitive. Wouldn't this be a wash.

Not necessarily, because productivity is also increasing.

Njorl

 

[member 5645]

Not necessarily, because productivity is also increasing.

Njorl

That's quite an assumption.

 

[Njorl]

That's quite an assumption.

Productivity has been increasing at roughly 3% a year for a while now. Over a 40 year career, that is a tripling of productivity. As one worker retires, he is replaced by someone who will make 3 times the contribution to GDP. That is the one-line version. I'm sure the real-world version is much more complicated, and much less rosy, but, it does show how we might possibly be able to bear the apparently unmanageable burden social security will become.

Had we only had a baby boom or a dramatic increase in lifespan I'm sure productivity increase could easily handle the job easily. Both at once - I am wouldn't like to guess. I'd have to do the numbers myself, and that would probably be a lifetime endeavor. Still, as long as there is no economic disaster like the great depession or the Arab oil embargo, social security would at worst have to be be scaled back a little, and have its onset age pushed back.

My advice about social security is always, make sure you don't need it, and it will be a pleasant surprise if you get it.

Njorl

 

[Nereid]

To all those who have strong feelings on this topic - do go learn some basic economics (and demography). As Njorl has pointed out - several times - (and selfAdjoint at least once) there's far more involved than simply taking wages (or payments to contractors) and investing it in somewhere (else).

 

[Greg Bernhardt]

My advice about social security is always, make sure you don't need it, and it will be a pleasant surprise if you get it.

Absolutely, as sad as it is to lose money, if you're planing to rely on SS after retirement then you deserve to get bit in the behind. Invest in 401k, IRA and stock. And save!