Repeal the Social Security Earnings Penalty
Inside the Beltway, the world seemingly turned rosy last week. Establishment media outlets got all excited about the Labor Department’s report that the unemployment rate dropped to 10% in November and that the month’s 11,000 seasonally adjusted jobs lost was the lowest such figure in almost two years.
But a closer look at the not seasonally adjusted job gain/loss numbers during the past three months — that is, what has actually happened on the ground — reveals that the “good news” is more than a little illusory:
Comparing 2009’s monthly actuals to the average of 2003-2007, when the economy was doing well, you will see that after some improvement in October, the situation actually worsened in November:
- September 2009’s 389,000 jobs actually added were over a quarter million shy of the 643,000 average added in September 2003-2007.
- October 2009 showed significant improvement. The 708,000 jobs added that month were only 81,000 fewer than that month’s 2003-2007 average of 789,000.
- But in November, virtually all of October’s improvement disappeared. November’s 80,000-job pickup was, as in September, over a quarter million jobs short of the November 2003-2007 average of 331,000.
November’s seasonally adjusted job loss of 11,000 was artificially influenced by how truly awful November 2008’s job loss was in the wake of Obama’s presidential victory. Because the past year or so has been so bad and because the seasonal adjustment calculations weigh more recent years more heavily, wild gyrations in the reported seasonally adjusted numbers may continue for a while. People who really want to understand what’s going on in the employment market are going to have to pay much more attention to the not seasonally adjusted numbers for the foreseeable future.
Beyond all that, Americans continue to withdraw from the workforce. Since June 2008, at about the time when what I have been calling the POR (Pelosi-Obama-Reid) economy began, after five years of barely budging, what the government calls “the labor force participation rate” has dropped from a seasonally adjusted 66.1% to November’s 65.0%. That may not seem like much, but as a result over 2.5 million fewer people are working or looking for work than if that rate had held steady. (These people are, by the way, not considered in the primary unemployment rate calculation.)
Close, but no cigar. Repeal Social Security, period. The Libertarian party has had a plan for years to sell off federal assits held unconstituionally (like most of the southwestern states)to repay with interests what people have put into this ponzi scheme. It was a bad idea when it was created, and it remains a bad idea.
Okay; Repeal this law, but it won’t make any difference in the attitude of employers hiring older workers. When you get into your late fifties, employers mostly ignore you, no matter what your skill level. And if you’re a white man! Lotsa luck, pal. No laws protect you.
I may be showing my age, but I remember all the way back to 2004, when we were told that 4.5% unemployment meant that GWB was a miserable failure and the worst president ever. Such was the conventional wisdom at the time. Ah, nostalgia…
The earnings penalty for early retirement is real. However, if you check the SS site you’ll see that through a complex formula, when you reach FRA the SS earnings you had lost by working above the limit during early retirement will be rolled back into your FRA check when you reach 66 (or 67). See http://www.socialsecurity.gov/retire2/whileworking3.htm
Actually, that’s a Band-Aid on a Band-Aid. We need to wean ourselves off of Social Security, and we need to engender a culture of personal responsibility. Character, you know? So, retirees who CAN work could get together and publicly demonstrate that they are willing to give up an entitlement (or at least part of an entitlement) and contribute to the welfare of the country because they CAN, not because they have to. This financial cliff America is approaching is the time for the leadership generation (50-70 years old?) to step up and show voluntary selfdenial as a contribution to the culture. Otherwise, the younger generation will have no motivation to NOT vote for Socialism.
ps. I’m 52 and self-employed. My plans for my “twilight years” include a 401.k, but more importantly making sure I have skills that will be marketable when I’m 70. My wife and I have intentionally accepted a more minimal lifestyle that will be sustainable with a much lower income. Social Security? I for one will never apply.
From what I’ve seen, the current round of layoffs has been skewed towards removing 40-50 year old employees in their peak earning years. Those hit the hardest from what I’ve seen are families forced to deal with the loss of one or both incomes.
Unfortunately, employers have no legal obligation to families and there exist real disincentives to hiring employees with families, i.e. reliability (sick kids, dropping kids off at school etc.), healthcare costs and such.
Is this the right time to be creating employment incentives for retirees?
1. What do you mean by “most of the southwestern states?”
My idea is make all SS benefits fully taxable, but impose no penalty on the benefits themselves. This will be less of a shock to the system, while still reducing our net spending on SS. Then we can focus on eliminating it.
Don’t forget the penalty that occurs when you are required to withdraw money from your ira or 401k plan at 70.5 years. it is treated the same as w-2 earnings and you must pay payroll taxes on the withdrawal and taxed again on the amount you withdrawal that exceeds $37,680. you cannot beat the system. you either withdraw or the goverment penalizes you. those are old untaxed wages and the gov wants it’s money.
The reason this won’t work is because the vast majority of Americans have NO idea how SS works. They also don’t realize there are at least two Supreme Court decisions stating that there is no contract between an SS account holder and the government. Therefore, with one vote (a majority vote in one house of Congress) and a Presidential signature, everything millions of Americans have counted on for decades of their working life changes in that instant.
Good luck!
Furthermore, it changes automatically upon bankruptcy of the Trust Fund. Farce though it may be, there is a pile of Treasury Bills that the SSA holds that the Treasury must honor. However, once these bills are all redeemed, SS defaults and all benefits are pro-rated to a level that corresponds to the revenue generated by payroll taxes, because the SSA has no claim on the General Fund except the claim represented by those T-Bills. When the fund goes bankrupt, they will have no choice but to reduce benefits proportionally, or in a manner that Congress shall appoint by law, but under no circumstance can Social Security carry a negative balance in the Trust Fund, because the SSA has no power to borrow or print money.
Wouldn’t removing the earnings penalty for early retirement just encourage people to retire early and keep working?
Wouldn’t it be smarter to simply raise the eligibility age?
There is a coming swell of Boomer retirees like me; we would be beter off to encourage them to keep working longer, paying into the system, instead of withdrawing.
There isn’t really any reason why people absolutely must stop working at 65; when SS was set up in 1933, 65 year olds were really unfit for work; today, not so much.
myth buster,
This is what I meant by “most of the southwestern states.”
As per the link below, the Federal government directly owns almost 30% of the land in the United States. I doubt this is what the founders/framers had in mind.
http://strangemaps.wordpress.com/2008/06/17/291-federal-lands-in-the-us/
If you are a non union wage earner in your mid to late fifties then good luck on getting a job after you have been laid off. Over 37 years experience as Electronics Technician and Electrician in Industry Commercial and Industrial but there is nothing for me Vietnam Era Veteran with Good Conduct and Honorable Discharge after serving and will possibly not see a dime of what I have put into Social Security. I am disgusted with this current administration and those that want more from those that have already given but are now trying to just get by.
Raising the retirement age is a no brainer. We shouldn’t permit anyone under 70 to claim retirement benefits.
#4, I’m aware of the recovery formula, but I don’t think its existence has any impact on decisions as to whether or not to work while receiving benefits between ages 62 and FRA minus one year, and only a minimal impact on the final year before FRA.
myth buster,
“We” don’t have the right to “permit” or deny permission to someone as to when they want to retire. It really is that simple. Social Securty was designed to buy votes, it is a scam like everything else that came out of the “New Deal,” and needs to be dismantled.
Eliminating SS is no solution. It’s an OPTION when you want to retire. You can do it at 62 or at 70. Just because some workaholics don’t want to stop, it doesn’t means everyone else should. The people who can retire without SS is a minority, maybe a rich minority; but again, wage earners depend on SS to just survive in their “golden” years. Older people deserve respect, this country has a lot to learn.
16&17. You can retire before Social Security reaching retirement age; you just can’t claim Social Security benefits. Used to be people relied on their savings or else their children to provide for them in old age. That’s what we need to get back to.
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