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Social Security Expansion Act

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Just a question @cat0w - to you or anybody that cares to respond.

  1. Do you think that Social Security should be needs based?
  2. Do you think that a person's benefit should be based on their earnings and thus contributions, like it is now - Of which the benefit formula is already progressive in nature because of bend points in the formula.
  3. Should people have to pay into the system and NOT get any earnings benefit based on their earnings and contributions?  

 

It's Always Something . . . . Roseanna Roseannadanna
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@GailL1 

 

Similar questions came up at a SS forum at "Reddit". I'll pass on the thoughts I shared there. And I have some further insights to share (lucky AARP!)

1 - No, the Social Security OASDI programs were not created with the expectation of being needs-based. There's no need to change the "social contract' at this point and such would be unethical.

 

2 - Yes, Definitely. The OASDI benefit should be based on the number holder's payments.

3 - Not certain where this question leads. But certainly there are workers now who have paid into the system and won't get any benefits. These include those who, for whatever reason, may not meet the eligibility for benefits, such as having 40 quarters of work history (there were a couple such posters here in the past year). Or perhaps they have passed away before collecting any benefits and haven't left any eligible survivors. Of course, these situations are different from forcing someone to pay into the system without any prospect of being eligible for benefits.

 

 

I do have some new insights into such issues based on my recent move to Canada as a permanent resident. (background:  my entire working career was in the US and I am now collecting my US Social Security benefits; no Canadian benefits). Canada has three retirement programs that work mutually to assure that no one is "left behind". It sounds like some in the US are considering similar programs and, if so, they might look into those in Canada.

 

The three programs are briefly (some of my family members collect some or all of these programs and as I "keep the books" for them I have some familiarity)

 

1 - CPP - the Canada Pension Program. This is very similar to the US Social Security OASDI. Both employees and employers pay into this program, CPP is not supported by any other taxes. Like the US, benefits are based on the wages earned over the work history.

 

2 - OAS - Old Age Supplement. This program provides a supplemental benefit to eligible retirees. It is paid for by federal general tax revenues. The OAS dollar benefit diminishes as the annual income from other sources increases, eventually going to "0". So essentially there is a "needs test". Many retirees receive OAS. Nothing currently in the US is comparable to this program. Though it sounds like something like this is under consideration.

 

3 - GIS - Guaranteed Income Supplement. Again, paid for by federal general tax revenues. This benefit provides a "guaranteed income" and of course there are eligibility requirements. This assures that no seniors will be in dire poverty (at least that is the plan). Again, the benefit decreases as taxable income rises. I don't believe there is a test for assets, only for income, but I am not positive at the moment. Again, nothing in the US is comparable...other than SSI....Supplemental Security Income administered by the SSA and paid for out of general revenues. But it seems that GSI is much simpler to obtain than SSI.

 

Anyone contemplating changes to the US OASDI and related programs might take a look at their northern neighbor to see how things are here.

 

One big difference between the US and Canadian systems is that the pensions do not seem to have much in the way of "spousal" benefits other than a survivor's benefit from CPP. Again, I'm a bit hazy on this at the moment though I have dug into the particulars for the benefit of my in-laws.

 

---ffffffred

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@GailL1 I will provide my two cents and offer some thoughts/opinions regarding your questions. First, I will try to copy and paste a link from the SS website regarding "What is FICA". https://www.ssa.gov/thirdparty/materials/pdfs/educators/What-is-FICA-Infographic-EN-05-10297.pdf I believe the AARP has articles regarding FICA as well. At any rate, many others that write about SS benefits have indicated that the SS Program should drop the word, "Contribution" from the Federal Insurance Contribution Act (FICA). IMO, a better word is "Tax" which describes the Program clearly. Call it the Federal Insurance Tax Act (FITA). In my past career, working with pensions that used a social security integration formula as one of the formulas to develop the highest defined benefit monthly pension, many employees/pensioners believe their contributing to an account with the SSA similar to contributing to an IRA. As you know, that is not the case. Folks and employers pay a tax. I believe in the beginning (1930s), the Government had to convince folks that the SS program will be viable over the long term and used the word, "Contributions" rather than "Tax" to sell the concept. The SS Program is a Federal Program that was initially created to insure against poverty after one could no longer work due to old age (and death). It was amended to provide disability benefits starting in the 1950s. It provides benefits based on a percentage of career earnings and not career contributions. It uses 35 years of indexed earnings even though some folks, including myself, worked well beyond 35 years. Those additional taxes pay for others who are/were less fortunate. Others have stated that the SS Program is a welfare program funded by a dedicated tax. Based on the benefit provisions; namely, Old Age, Survivor, and Disability, I agree that the SS Program is more of a welfare program than a retirement program. Based on my pension background with a manufacturer of heavy products, many folks retired before attainment of age 62. Work was hard and conditions, at times, were harsh. So, many production workers (thousands) retired when their bodies had enough or certain operations were shutdown. They did not meet the eligibility requirements for SS benefits because they were younger than age 62 and not disabled. So, unlike many government pensions that may pay folks as early as age 55 or earlier with certain years of service, SS is not a retirement program for those folks that stopped working before attainment of age 62. Here are my answers to your questions. Yes, the SS program should be needs based especially for the highly compensated folks. For folks with $1 million or more of annual income, they do not need  SS benefits. The Feds should provide a substantial annual federal income tax deduction for those folks in lieu of receiving SS benefits. Perhaps a dollar for dollar deduction from FIT. I believe an earnings based formula is fair. SS benefits based on taxes paid (contributions) will provide lower amounts. The current indexed earnings approach provides about 30% to 40% more SS benefits. If one budgets their expenses based on their earnings through their working career, they should be able to budget through their non-working time. Of course, one needs to count on additional resources such as pensions, if any, defined contribution plans, or IRAs. Third, yes, many folks currently pay FICA taxes for more than 35 years and do not receive a corresponding SS benefit for those additional years. As I mentioned above, the highly compensated should be taxed the same as the non-highly compensated; and, if such highly compensated does not need the SS benefit, a federal tax deduction should be provided. I am not sure if Congress should be the determining group of folks that determine the income level (i.e., $400,000/yr, $500,000/yr, or more). There is too much political bias. Perhaps smaller sub-groups of Congresspeople should be designated as the groups to determine such income level. It should be dynamic as well and track annual executive type compensation which well exceeds annual inflation that workers may receive. The concept is to not penalize a worker who may receive a severance or lump sum payout. The federal income tax program already addresses that situation. Sorry for not getting back sooner as well as the length. I am trying to provide enough info for other readers.

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No one  I guess wants to touch this.

Nothing wrong with SS that a little, er, lot of understanding is needed. But that ain't happening anytime soon. Looking to government to solve problems, especially yours, probably is not a wise position. How many things does it touch and everything gets out of control. People can't be such short term thinkers, we want everything now.....instant on TV, er, cable? Don't expect re-education to work, because we are so ingrained with guaranteed expectations. Warren & Sanders would just print money till the well ran dry. Career (Ivory Tower) professor and the other a politician. Never really worked in the real world. 

1. no, but wouldn't be surprised if a supplemental payment shows up. Probably won't help much.

2. most don't understand that. They have no clue. 

3. no, it's then a tax, call it what it would be.

How do you break a 40-50 yr pact. 

 

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