Difficult Choices for Social Security

[car0040]

I am surprised at some of the options on the table to ensure the longevity of the social security system.

Raising the cap, increased payroll tax rates, broadening the definitions of income and changing the benefit calculation makes sense, as the younger generation is still in the workforce and can make financial adjustments to ensure their own financial security.

The progressive approach is totally unfair..I am getting so sick of being punished for being successful.  We were told when we were young to work hard, save, go to college, aim for higher goals, and then, what happens?  You are not eligible for your full social security, because some of what you put in for your own retirement, is now going to go to others who have lower incomes..  Don't punish success!  Those of us that were successful paid more into to the system, and then to be told we get less because others didn't make is unfair! 

So is reducing the COLA, that hurts everyone.

Tina

[ms8175]

This along with the article ,the future of social security, why is nothing ever addressed about people that receive benefits that never paid into it?  Taking care of young children or the disabled, I agree they should be taken care of but not out of a fund that is for retirement that people paid into for that reason. It needs to come from somewhere else. It has been handed wrong for years payments shouldn’t be coming from current taxes, who had managed investing to make more. Payments into should be managed by each individual tax payer for their own future. It isn’t fair to put the burden on the future recipients. My main thing is quit using ss funds for those that never paid into it and a minimum amount needs to be paid in by a person before getting benefits and they shouldn’t get more than their paid in. 

[Tonster521]

@ms8175 First, all SS benefits whether Old Age (including retirement,spousal & children); Survivor(including widows, widowers, children); or Disability Income (including the disabled, spousal &children) have paid FICA taxes either directly (worker) or indirectly (spouse and/or children of worker). The percentage (6.2%) that a worker (and their employers) contribute includes all three (3) benefit coverage. It is easy to assume that if you did not die or become disabled, all the  FICA taxes that you paid are used for Old Age (retirement) benefits. However, a portion of your 6.2% FICA  tax is used for Survivor benefits(approx. 1.0%); Disability Income (approx. 1.2%); and approx. 4.0% for Old Age (retirement). So, if one becomes eligible for a SS benefit, FICA taxes have been paid by either yourself, your spouse, your ex-spouse, or your parent(s). I am providing a link to SS Monthly Statistics for February 2022 https://www.ssa.gov/policy/docs/quickfacts/stat_snapshot/ Take a look at Table 2 for a breakdown of the type of SS benefits and their amounts. The SS program currently pays about $100 Billion per month or over $1 Trillion per year. Spouses of retired workers receive about $1.8 Billion ($1,791,000,000) per month. I suspect many of the spouses were homemakers, one of the toughest jobs on Earth, and were not connected to a formal payroll system. I like to call it a "six figure" job with all the figures at zero ($0.00). If married, SS Spousal benefits are paid in addition to retired worker benefits. In February 2022, there were 2,135,000 spouses of retired workers. With regard to Survivor Benefits, there were 3,530,000 Nondisabled widow(er)s and 222,000 Disabled widow(er)s who received about $5.5 Billion ($5,503,000,000) and $181 Million ($181,000,000), respectively. Many have not directly paid FICA taxes; however, their spouses paid FICA taxes. Children of deceased workers exceed 2 million and receive about $1.9 Billion ($1,965,000,000). To suggest not paying any of the above benefits (Spousal and Survivor including children) would be a tragedy to millions of folks/children. Shifting benefits to the Federal government would require an increase in federal income taxes which many do not want to pay. So, the SS program is a complex problem that needs more revenue from either the right pocket (SS program) or the left pocket (Federal government) or a combination of both. 

[john258]

One has to understand SS and why it was set up in  the first place. It is not an indv. savings or retirement account. It is a program that we all pay into for a base retirement income that in the long run saves all money as taxes would be higher in many areas cover services that people would need if SS did not supply them. The main idea is that working people supply the funds for the SS benefits paid out to the older people now. That is what was needed in the founding years of the program. Problems arise when the number of working people decrease and the number of older people using benefits increase. That is what is happening now.

SS is not an indv. retirement account nor should it even be thought of as one. You need indv. retirement accounts in addition to SS. There are experts who understand all the parts of SS and can handle that job. No one in here fits that bill. 

[Tonster521]

@car0040 I am missing something in your posting. Why are you not eligible for your full social security? Are you starting your SS benefit early at age 62? All SS beneficiaries are covered by the same benefit formula that uses up to 35 years of earnings to develop the Average Index Monthly Earnings (AIME). You and your employers' contributions (FICA taxes) are not used in the SS benefit formula. For example, a person may work 45 years or more.  However, only 35 years are used  in the SS benefit formula. Do they receive a refund of 10 years of FICA taxes? The answer is No. Please note that the FICA taxes that you contributed are not similar to contributions to a defined contribution retirement plan (i.e., 401 K, IRA, 403 B, 457, etc.). I am providing a link to a page from the SS website that explains AIME. There are other concepts highlighted in blue on that page that you may click for more info on how to develop your SS benefit at Full Retirement Age (FRA) and how to accept either an actuarial reduced SS benefit for starting early or an actuarial increased SS benefit for delaying. https://www.ssa.gov/cgi-bin/awiFactors.cgi I used 2022 as an example. You can change it so it correlates to your age. So, in 1987 which was 35 years ago, the index factor is 3.0189439. If one earned $20,000 in 1987, SS would increase that amount to $60,378.88 ($20,000 X 3.0189439) for purposes of developing the AIME. Looking back 40 years to 1977, if one earned $12,000, the index factor is 5.6883216 and SS would increase $12,000 to $68,259.86. For retirement, every year is indexed up to age 60. The highest 35 years are used. Zeroes are used for folks with less than 35 years of earnings. I have not seen any proposals to change this complex SS benefit formula.

[john258]

Nice thoughts but here is what jumped started a lot of the improvements in the USA since WW2.

1. GI Bill- Paid for some of these things which allowed many to take part, and become successful. 2. Home ownership programs. 3. SS, 4, Medicare,  5 Small Business programs 6 Medical research programs 7. Interstate Highway system 8. Plus many more.

The progressive approach as you put it moved this country forwarded and allowed many people to be come successful. Before that you made it most time by birth. Look at what Teddy did when he started the breakup of family ownership which was leading to family control of everything in the country like we had and have in South America and other parts of the world. There was one family where every child born into it had a savings account established in a bank they owned so there would be one million $ in it when they turned 21.

We need more govt programs not less that ensue everyone can get ahead regardless of how much money their family has that is how you do not punish success.

On SS you lift the cap on earnings, tax investment income, and all income on everyone, and pay out on the approach we now have. Yes some will get more, and some less but all benefit in lower overall taxes, and calls for charity payments.

[GailL1]

Social Security is a progressive system - always has been as long as I remember.  The formula for retirement benefits adds in an extra bend point when figuring ones benefit if over a certain amount.  They do this because the maximum earnings cap correlates to the highest benefit which is paid.  

Raising the cap won't change this - there will just be an additional bend point, higher up in the formula.

The necessary fixes to the SS system is gonna take a whole lot more than raising the cap.  The worker to retiree ratio has long been going down therefore the payroll tax is probably gonna have to go up too - and not just for SS, Medicare (Part A) payroll taxes are also gonna have to go up - employee & employer.

The government has put off dealing with a problem; the great procrastinators -  and they knew the baby boomers were gonna make a big slurping sound out of both systems - they knew and chose to ignore it.  Now if they don't get it corrected SOON - there is a clause in the law of both (SS & Medicare) that will automatically cut benefits come about 2027 (Medicare) and 2034 (Social Security).

What gets me is that it isn't even being discussed - something always gets in the way.  OR it is an election year and they all run the other way.