AARPWA - great x account

[WebWiseWoman]

AARP-Washington State Members speak about their reliance on Social Security 

[GailL1]

I wanted to do some research on the Civil Service Retirement System because what she said about 19 years of service and then left before the pension took affect worried me.  I came up with some good links with both history, when a person was vested and what happens when they left federal employment before retiring.  I say no more -but this is why I take a lot of this with a grain of salt.

OPM.gov - CSRS Information 

OPM.gov - CSRS - Former Employees 

[Tonster521]

@GailL1, both of your replies are spot on. I also take that grain of salt especially when folks with a "gold plated" government pension complain about their benefits. It should be noted that if one worked 19 years pursuant to Social Security and terminated without eligibility for an immediate benefit, one does not have the option of electing their FICA tax contributions with interest. In the SS program you have to wait until you meet the eligibility requirements (i.e., age 62, disabled,etc.) for a SS Benefit. It appears that Sue (from the video) did not inform the folks what she did with her government benefits. Did she spend the money? Roll it to an IRA? Roll it to a SEP? Did she roll it over and subsequently elect a lump sum distribution after attainment of age 59.5? I am sure the present value of her deferred vested benefit was greater than any return of contributions with interest. At any rate, she did not elect the deferred vested benefit option which would have provided a monthly benefit in her later years.

As an independent contractor, she also had the option of contributing to an IRA, SEP, or even a Solo 401 K plan (available in the early 2000s). We do not know if Sue did any arrangement.

[GailL1]

@Tonster521 

All you say is true - as a federal employee, they do have several options.

I am not picking on the person in the video specifically because the condition we are really talking about here is WHY did one not prepare, at least somewhat?

The condition will never be righted when people do not realize all of the consequences.  Is it human nature to put off until tomorrow what you do NOT have to do today - then Tomorrow never arrives, then they find themselves with nothing but a Social Security benefit or nothing in some cases.

I just worked with a man that was self employed for all of his many years of working.  A 1099 employee - carpenter to be specific.  He paid is income taxes every year based on his reported earnings (1099)  during all those years but nobody ever figured out that he failed to pay his Self-employment taxes.  

Seems to me that when somebody reports 1099 wages that there should be a requirement that a Schedule C and the Schedule SE should be a requirement to process the tax return.  I do not know how it all happened but today at 62, he has NO Social Security earnings and it all goes back to not paying his SE taxes all those years.  He is left with nothing - at 65 he will be able to draw Supplemental Security Income with the rate currently at $ 967 a month less any in-kind payments made by somebody else.

AARP should do more in educating people about putting away money for their retirement - there are tons of ways to do it, no matter the amount.  And once it is in some retirement savings account, you do not remove it, come hell or high waters - you forget about it except remembering where it is and making sure it is growing.  It is not an emergency fund !  

[GailL1]

Screwed by the Federal Government because for those 19 years she worked for them, they did NOT pay into the Social Security system -  Imagine how much more her “earned” benefit would have been if she had paid into the system for those 19 years.  

IF she earned the Social Security benefit while working as a contractor, then she should have earned it while working for the Federal government.  The Federal government employees started paying into the system in the 1980’s - but still to THIS day some state and local government employees DO NOT pay into the system.  

Individual Retirement Accounts (IRA) came about in 1981 - the 1st one I opened was a CD for $ 500 but because our economy was in such poor shape with interest rates thu the roof, I was getting paid 21% APR on that (self) retirement savings account for a couple of years.  

That $ 500 has grown and grown as well as other monies I, as a self-employed person, put away, year after year, after years as well as paying both the employee and the employer matched as self employee folks have to do.

I do not just live off of what I get from Social Security but that is because of a plan - a plan that started with the FACT that someday I would not be able to work and provide for myself and anybody or anything that was dependent on me.  

Do I feel sympathy for this person and the millions of others like her - Sure I do - and I keep paying my due taxes to help support her in what she needs under programs  like SNAP or Rent subsidies.  In the past, I gave money directly to a relatives of mine who were in the same place, for years, until the day they died.

This financial problem of the Social Security Trust Fund isn’t the result of those who earned more, should pay more - where so many seem want to place the blame and look for their quick fix - they earned it if they paid into the system, they get paid in the same way as anybody else who is vested = same rules, same benefits,  with those in the higher earnings category already receiving less in benefits because of the benefits formula and the bend points in the formula.

But all I hear from beneficiaries is we should not pay more and they grip about the taxes they are having to pay on their benefits - which all go back into the Social Security Trust Fund.  

So guess what folks, this lady needs for you to pay your taxes on benefits so that she can hopefully keep her full Social Security benefit for a while longer.  

If people are sympathetic to people like this - why not just pay the few more dollars you might have to pay in taxes on your benefits to help the system?

  IF one pays into the system, they deserve a benefit from their contributions - right?

Of course, with the benefit formula as determined by the government.  If you want any benefit based on need rather than earnings (and contributions based on those earnings) then we should just make it another welfare program.  

TOO many people are in the same shape as this lady in the video - but that is not the fault of the Social Security Trust Fund system - the formula is just as it has always been with an added bend point for higher earners.  Can’t really blame it on economic conditions either, we all know prices rise and a dollar today does not equal a dollar 20 or more years down the road.  

There is no other place to put the blame for this condition than on the beneficiaries themselves and their preparation of their retirement time - whether thru a fault of their own or not - it is our preparation and Social Security was never designed to be ones total retirement as evidently many senior have designed their retirement to be - SAD, yes.  We were all aware that someday retirement was coming’ no big surprise there.