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I draw SS but if was my only source of income, it wouldn't be enough to live on. In 1978 I sold life and health insurance for a couple of years to supplement my meager Army retirement pay. At that time IRAs were very popular. I sold hundreds of them and I bought one for myself. After 27 years I turned 65, started drawing SS and initiated a monthly income from the IRA. Employers started using 401k about the time of the IRA and everyone I know who had these retirement plans from the 70s and beyond are living a comfortable life. I feel that each worker should have a personal retirement savings plan so that SS could fade away. The US population doesn't need it anymore.
Why do you call it a tax break ?
They won't collect on anything above a certain income....so the extra they pay in is lost.
The marginal benefit return on SS contributions by higher earners is only 15% of average income (which happens to be almost exactly the combined employee/employer payroll tax rate). This means that in return for contributing 15% of your pretax income for 35 years, you will get back a taxable lifetime annuity of the same amount at age 65-66. Actuarially, this is a terrible "investment."
This reduced benefit for higher earners is what allows SS to give lower earners up to 90% of their earnings, thus making SS a de facto means-tested welfare program. Why should earnings over $110K be exempted from this tax? I guarantee you that no one in this category would voluntarily contribute to this scheme, even if it increased their SS benefits. Instead, they would much prefer to keep the regressive drop in their marginal tax rates that they now enjoy.
Yes, social security is an absolutely miserable investment. The only way it can be justified is that at least those who do not plan and save for their retirement years will receive something when they retire.
But what if there had been no social security program? What if the government instead had offered the IRAs, 401Ks, and other tax free savings vehicles as an incentive to save--had allowed employers to match 401K contributions and deduct those from their taxes? What if the push had been to ensure that the culture made it socially desirable and 'the right thing to do' to save for retirement? None of that would have cost the government a dime but would have been a huge incentive for people to save. And if you make the tax consequences for early withdrawal painful enough, that is a strong incentive to leave the funds intact for one's retirement.
The advantages of managing one's own funds is that they can be invested so that they at least draw interest or hopefully grow in value far and beyond what interest alone can do. And they are your funds. If you die before you can use them, they are passed on to whomever you designate should receive them instead of disappearing into the black hole that is government. Because you would not be paying taxes on that money at any point, you would have ability to save more. Right now we pay taxes on the amount that is taken for social security taxes before the social security taxes are taken.
So what about the irresponsible who don't save, you say? Well whose responsibility is it to make people responsible? The government? You? Me? Or the person who is making the choices?
This is where I part company with conservatives...if, for no other reason, they often don't seem to understand the history of how it got started.
Prior to the roaring 20's, most people worked in a family business or on a family farm. As they grew older, they didn't retire...they simply took on fewer and fewer tasks..but still contributed.
The industrial revolution marginalized the elderly as farm population and small business employment (relative to past percentages) shrunk. The elderly were not phased out...they were simply dropped.
The Real Deal The History and Future of Social Security - Sylvester J. Schieber John B. Shoven - Google Books
When the great depression hit, unemployment amongst the elderly was over 50% (from memory). So you can see....something was needed.
What wasn't needed was a permanent system.
However, the "progressives" of the time were aware of the social safety nets of Europe (and apparently not aware of the issues associated with them), and thought we needed something similar.
And thus FDR got his way (after threatening the SCOTUS).
While I think the elderly needed relief I am not so sure we needed this program long term.
Had we phased it out (in favor of something else where you got what you paid in) when things were good (the 50's), we might have been O.K.
The whatever that was needed did not have to be unconstitutional taxes and allocations from the federal government. Certainly the meager amounts routed to the senior citizens before the 50's could have been accomplished in many different ways than by creating a faceless entitlement program that the federal government was never intended to have authority to do.
I really don't care what could have been...the fact still remains that there was a problem that needed to be addressed. Those different ways obviously were not appealing and so-called conservatives were asleep at the wheel (just like on Obamacare). So now you have a stupid system and me asking what you would do different if you could change it.
The marginal benefit return on SS contributions by higher earners is only 15% of average income (which happens to be almost exactly the combined employee/employer payroll tax rate). This means that in return for contributing 15% of your pretax income for 35 years, you will get back a taxable lifetime annuity of the same amount at age 65-66. Actuarially, this is a terrible "investment."
This reduced benefit for higher earners is what allows SS to give lower earners up to 90% of their earnings, thus making SS a de facto means-tested welfare program. Why should earnings over $110K be exempted from this tax? I guarantee you that no one in this category would voluntarily contribute to this scheme, even if it increased their SS benefits. Instead, they would much prefer to keep the regressive drop in their marginal tax rates that they now enjoy.
Yes, social security is an absolutely miserable investment. The only way it can be justified is that at least those who do not plan and save for their retirement years will receive something when they retire.
But what if there had been no social security program? What if the government instead had offered the IRAs, 401Ks, and other tax free savings vehicles as an incentive to save--had allowed employers to match 401K contributions and deduct those from their taxes? What if the push had been to ensure that the culture made it socially desirable and 'the right thing to do' to save for retirement? None of that would have cost the government a dime but would have been a huge incentive for people to save. And if you make the tax consequences for early withdrawal painful enough, that is a strong incentive to leave the funds intact for one's retirement.
The advantages of managing one's own funds is that they can be invested so that they at least draw interest or hopefully grow in value far and beyond what interest alone can do. And they are your funds. If you die before you can use them, they are passed on to whomever you designate should receive them instead of disappearing into the black hole that is government. Because you would not be paying taxes on that money at any point, you would have ability to save more. Right now we pay taxes on the amount that is taken for social security taxes before the social security taxes are taken.
So what about the irresponsible who don't save, you say? Well whose responsibility is it to make people responsible? The government? You? Me? Or the person who is making the choices?
This is where I part company with conservatives...if, for no other reason, they often don't seem to understand the history of how it got started.
Prior to the roaring 20's, most people worked in a family business or on a family farm. As they grew older, they didn't retire...they simply took on fewer and fewer tasks..but still contributed.
The industrial revolution marginalized the elderly as farm population and small business employment (relative to past percentages) shrunk. The elderly were not phased out...they were simply dropped.
The Real Deal The History and Future of Social Security - Sylvester J. Schieber John B. Shoven - Google Books
When the great depression hit, unemployment amongst the elderly was over 50% (from memory). So you can see....something was needed.
What wasn't needed was a permanent system.
However, the "progressives" of the time were aware of the social safety nets of Europe (and apparently not aware of the issues associated with them), and thought we needed something similar.
And thus FDR got his way (after threatening the SCOTUS).
While I think the elderly needed relief I am not so sure we needed this program long term.
Had we phased it out (in favor of something else where you got what you paid in) when things were good (the 50's), we might have been O.K.
The whatever that was needed did not have to be unconstitutional taxes and allocations from the federal government. Certainly the meager amounts routed to the senior citizens before the 50's could have been accomplished in many different ways than by creating a faceless entitlement program that the federal government was never intended to have authority to do.
I really don't care what could have been...the fact still remains that there was a problem that needed to be addressed. Those different ways obviously were not appealing and so-called conservatives were asleep at the wheel (just like on Obamacare). So now you have a stupid system and me asking what you would do different if you could change it.
Whatever problem anybody has with conservatives or what appears to be your opinion that it was THEIR responsibility instead of whomever was in power at the time is irrelevant and non sequitur to the comment you are responding to here. My post directly addressed your OP. Not sure what your post is addressing.
I draw SS but if was my only source of income, it wouldn't be enough to live on. In 1978 I sold life and health insurance for a couple of years to supplement my meager Army retirement pay. At that time IRAs were very popular. I sold hundreds of them and I bought one for myself. After 27 years I turned 65, started drawing SS and initiated a monthly income from the IRA. Employers started using 401k about the time of the IRA and everyone I know who had these retirement plans from the 70s and beyond are living a comfortable life. I feel that each worker should have a personal retirement savings plan so that SS could fade away. The US population doesn't need it anymore.
One advantage of Social Security is that it acts as a pension
Not many employers offer a pension anymore. While you may lose your retirement savings, you can always count on Social Security being there
Retirees should have a retirement fund, Social Security and a paid off home
Good idea. And cut SS benefits for millionaire and billionaires. It's less than pennies to them.'Change it to something else' seemed the best option for,
End farm subsidies and use that saved money to fund Social Security.
I draw SS but if was my only source of income, it wouldn't be enough to live on. In 1978 I sold life and health insurance for a couple of years to supplement my meager Army retirement pay. At that time IRAs were very popular. I sold hundreds of them and I bought one for myself. After 27 years I turned 65, started drawing SS and initiated a monthly income from the IRA. Employers started using 401k about the time of the IRA and everyone I know who had these retirement plans from the 70s and beyond are living a comfortable life. I feel that each worker should have a personal retirement savings plan so that SS could fade away. The US population doesn't need it anymore.
One advantage of Social Security is that it acts as a pension
Not many employers offer a pension anymore. While you may lose your retirement savings, you can always count on Social Security being there
Retirees should have a retirement fund, Social Security and a paid off home
Social Security has worked well for 80 years, with a minor fix by Ronald Reagan and another needed fix due to baby boomers retiring. That said, you'll find a raft of problems that need elimination and or fixing.
One thing Republicans got right was the need to eliminate long term unemployment benefits. What they said about discouraging people to go out and look for work was never truer to me since I saw young relatives doing precisely that. So goes the benefits administered by Social Security disability. It has become a long term way to earn money dishonestly and that part of Social Security needs immediate fix or elimination.
Changing Social Security to a fund based or market based venture is not completely workable in my view, because there is no way to protect investors money in the event of a crash and sums that large would be way too hard to indemnify. 65% of all SS recipients get half of their money from SS, so its clear that any change would have to carefully weighed and vetted.
I'm not against starting an option to get into a market based solution or testing the waters of change, I'm just saying if it fails you have almost 65 million people angry and that can create havoc in a system such as ours. We have had market meltdowns in 1929, 2008 and we have had banking crisis in the 1987 savings and loan scandal and the Long Term Capital Mgmt bailout of 1998, along with the subprime mortgage scandal of 2007. So caution cannot be overstated.
The easiest way to solve the SS problem is to increase or eliminate the tax cap or to increase the Social Security tax by 1.0% which will solve the funding problem by 52%. I am against means testing because I feel if you paid into it you are clearly entitled to the fruits of your investment.
Now, this will not put to rest any Republican urges to institute their own fix. So I believe that we must try whatever they propose on a small scale that can be tested over a period of time to test and evaluate its efficacy. We have something that works but we need to believe that there might be something better. It would temper our politics and could actually broaden everyone's view of what's right for the country.
