Ever wonder where all that money goes that you pay into Social security? The main part called Old-Age, Survivors, and Disability Insurance (OASDI)? Of course, it goes to pay Grandpa's monthly government check, that's where it goes right now.
Well the present rate is 12.4%. Yes, 12.4%, not 6.2%. Don't give me any crap that the employer pays half. It's ALL part of your wages, all part of the cost of employing you. Besides, self employed pay both parts up front anyway. Enough of that rant, I'm getting off track.
Let's just take a VERY VERY MINIMAL case. Let's say you work for MINIMUM WAGE ($5.15/hour).
That's about $10,700 per year.
Let's say for some reason it stays at $5.15 /hour forever. Maybe the Republicans have wiped out the Dems. It's just an example.
Thats 50 years (age 18 to age 68)at $10,700
NOW, take that money and invest it in the stock market. The AVERAGE return over the long term has been about 8% to 10%.
Let's use a figure I found of 8.44% over the past 50 years.
You'll be investing $1326.80 anually (12.4% of $10,700).
Due to the effect of compounded annual growth rate.....
on your retirement you will have a net worth of.....
$926,731.47.
Give or take, you've got a MILLION bucks...
not counting dividends paid!!!! and this was a VERY minimal example PLUS you've helped fuel the economy by loaning your money to the private sector.
How do you make it? Who pays for the recipients' SS during the transition? Right now my SS pmt goes into the funds being spent currently. That's why there's no appreciation - it's not invested, but spent.
The true cost of SS is that it goes into the General Treasury and is not ear-marked for SS. Congress decides how much to give to SS. This change came about in the 1960s as part of LBJ's "Great Society". At that time, the Baby Boomers greatly outnumbered the elderly and the SS trust fund was too big not to tamper with.
The system would have worked without these changes. Figuring out how to get back there is a problem since the Baby Boomers are getting older, an immigration has helped the population swell but not necesarily paying into SS (illegals often share a SSN).
social security was a break even proposition. That was the year ssa taxes were increased to 12.4 % and the self employed contributions were increased to match that percentage. After that we began to have a growing surplus. Congress has borrowed that money every years since, and issues interest bearing bonds to the SSA trust fund. This borrowed money does not show up on the Feds books, making the deficit appear smaller. That is just one of the goverments unfunded liability's. Paying this money back without raising taxes is impossible hence the problem. If addressed soon SSA could be fixed (not with private accounts). Medicare and medicade is another matter and I don't see a solution, public or private, without revamping our entire health care system. Honest accounting, with a moderate view puts our unfunded liabilty's at 54 trillion $s and this years deficit at 8 trillion dollars. Bob
Is funding the current spate of retirees and also funding those that have paid into the system and are nearing retirement. In order to make any type of transition, the government would have to meet all of the payout for a retiree, this would turn out to be enormously expensive and would have to be met with some type of tax.
The SS program is headed for a wall as the large baby boom generation begin to retire and will begin drawing from the system. I would expect to draw on the system since I am somewhere near the early middle of the baby boom generation. But the last of the baby boomers will find that the trough is empty. The program has ran a surplus for many years (when politicians were not dicking with it) because there were more people paying into it than were taking payments from it, that dynamic is about to change in a big way.
What can be done to save SS, or at least transistion to a "forced" investment plan as some envision. Probaly the best route would be for retirees that are wealthy enough to forgo the money that they have paid into the system opt out if being paid. The opt out would have to be coupled with the government taking the saved money and seeding investment accounts that younger people paying into the system will begin very slowly allocating their payments toward. The only way out of the mess that we are headed for, in my opinion, is for someone to sacrifice. One of the luckiest things from the government's point of view, is to have a person pay into the system for years then die either before reaching retirement age (and it is even more beneficial to the government if the person have no minor children) of soon after. This last observation is probaly why raising the age for full retirement to 67 or 68 would be beneficial, it would bring mortality in to play as a bigger factor in payouts.
Social security is a ponzi scheme !! If it was run by anyone other than the government they would be arrested. Most people have no clue how SS works. Most of the young guys that work for me still think they are going to get a check at 65 but i tell them to look it up, if born after 1960 you dont get to collect until 67. Worse yet the system is bankrupt long before we get there.
I also love the idea that some have floated that you should means test before handing out the money when you retire. I guess tax the rich never goes away for you dems. Why should someone who takes the time to make sure that they're secure and has paid into the system have their benefit stolen? because they succeeded? Why not just show up and take their home, business, money and property and redistribute it to the poor after they die, hell why wait for them to die better to get it from them while they still have time to go out and earn more to take away.
I thought that in america we reward success and hard work. Not in todays just do it and if it feels good go with it world.I guess you should just piss your money away then wait for a government solution for your problems. I want to opt out ASAP and privitization is an idea worth exploring. If your young enough you should require your elected officials to examine this. Not enough are willing to go near the third rail they're going to wait for the system to fail.
It is very likely that people in the 40's and under that are paying into the system will see little if any of the money that they pay in. But that is about the extent that I follow your rant. Because of my age, I may see some payments, if I choose to take them.
I stated that for any transition to take place, some type of "fund" would have to be built. This can either be done by the government, with the likely outcome being higher taxation in some other form than SS taxes. Or it can be done by people that have the means to do so, opting out of their payouts from the system. You seemed to have gotten the meaning of the term "optout" in your last paragraph, but appeared to completely have missed the meaning earlier. Optout means that a person voluntarily gives up something. My post was not liberal pandering, instead it contained truisms that neither the people that want to "privatize" SS or those that view it as a never ending gravy train are willing to face - regardless of the route taken, some "extra" money will have to be found to make that decision work, even marginally.
I am one of the baby boom workers that are supporting retirees. I come from a relatively large family and all of my sibblings have good paying jobs, same as I. My parents got little to nothing out of the SS system, we supplied virtually 100% of their post retirement living expenses. So I and my sibblings get nothing from the system and have never gotten anything from it. I have done well enough to be in a category of people that could consider opting out of payments during the future. Would I consider it if that was required to change the system in a meaningful way or keep it healthy? Certainly!!! You should never make assumptions about a person's motives when you do not have an ass scent of an idea of what they are.
You all missed my point, which is... what a raw deal SS is AFTER RETIREMENT. Even assuming the govenment makes good on their promise to pay me, I'll get back FAR FAR FAR LESS than is reasonable. My example creates a wealth capable of sustaining $40,000 to $50,000 per year payments without even touching the principle, and thats a minimum wage payments throughout life. I will have paid into the system 7 or 8 times more than my example.
As far as refunding the existing system....
I've seen various examples using things as simple as SLIGHTLY reducing the formula for Cost of Living (inflation) increases in monthly payments that make a HUGE impact on the fund's solvency.
proposal looks great. First a person working for minimum wage will not save their money voluntarly so it will have to be deducted from their check.Employers will have an administrative fee and someone has to invest and manage the money at a fee, lets say those together are 4%, leaving 8.4 %. Next this person will need some kind of disability ins lets say that is 3%. He needs some life ins too 3%. Both of those things are part of the SS program. That leaves 2.4% which is Bush"s private savings plan. And since we are not starting from scratch even that 2.4% in not a workable plan. Bob
Your 4 percentage points amounts to a 32% fee. Not even a full service stock broker comes close to this expense rate.
NO Load funds would charge what amounts to maybe 0.05% to 0.1% of the 12.4%
Have you looked at the death benefit from SS ? It's a whopping $255.
Disability insurance can be had for a few dollars a month.
Voluntary - or involuntary, THAT wasn't my point. It was just a bare minimum EXAMPLE. To show you how SCREWED you are by letting the government be the sole proprietor of your retirement (and disability insurance).
the minimum wage. 3% or 33$'s a month is a few dollars. The life insurance would take the place of survivor benefits, not just burial expense. Regardless of what you say as an employer I would need 2% administration fee, and 1or2 % would be the likly cost of managing the investment. Beyond all that poor people always have a pressing need for any money they have. They can't save any fucking money. Bob
There is no need for life insurance except to replace the measely death benefit ($255). The person's account would still exist after his death (or do you plan on confiscating the money upon death?). It could continue to payout the survior's monthly benefit. It would be no different than many private pension plans work today.
OK, I'll accept that a 2% fee is reasonable (although 1/2% to 1% is doable). But that is NOT 2 percentage points. 2% of 12.4% = 0.248%. That is one thin QUARTER for every 12.5 DOLLARS invested, NOT 2 dollars for every 12.5 dollars. Did you flunk math? Nothing personal.
Plus I was not suggesting that the minimum wage example applies to anybody. Almost no one makes minimum wage their entire life.
the system. Again, to my point. In order to make the system solvent longterm or change it (privatize it), free money will have to come from somewhere. The govenment can pay in, or as one poster pointed out, payback, but this will mean that your taxes and mine are going much higher. So we have a catch-22 stalemate, generally in such a situation all manner of unintended events transpire to make the situation even worse.
The present COLA exceeds the true inflation rate. I'm just talking about a very modest adjustment that actually reduces it to where it should be.
As I pointed out again and again, someone will have to pay to make the system solvent or to allow a transition to investment accounts for each person paying into the system. You appear to favor having current retirees pay. Such is your right if that is how you feel that the system can either be kept solvent or transitioned to investment accounts. The only problem that I have is that I wish you would call your leaning what it is.
I'm not trying to have anything. I'm not "leaning" one way or the other. At this point I could care less how the transition takes place. I wasn't even the one that brought up how to transition into a different system. I was merely offering additional thoughts on how to do it AFTER it had been brought up. And YES part of that method might involve a small reduction in the RATE of INCREASE of benefits, IF it could be shown that they are growing faster than inflation.