Tick Tock
Slate’s Will Saletan is no fan of President Bush. He’s not a Republican, a conservative, or even a neo-con. In fact, he’s a smart-ass secularist (which is probably why I usually enjoy reading him). With that in mind, let’s note that Saletan sees dire need to reform Social Security, like right now:
The problem is grimly detailed in “65+ in the United States,” a report released last week by the U.S. Census Bureau. Five years from now, the boomers will start hitting age 65. By 2030, we’ll have more than twice as many old people as we did three years ago. As a percentage of the population, this increase is enormous. In 1935, when Social Security was established, about 6 percent of Americans were 65 or older. Since then, the percentage has doubled. By 2030, it will have tripled. Not only are more people reaching 65
Here is my opinion on Medicare and Social Security.
As far was with-holdings go, SSN and Medicare are nothing more and nothing less than JUST ANOTHER TAX on our income. Including what your employer with-holds, oh no I
Aaron, good question. It’s not called Social InSecurity for nothing!
but, seriously, compound interest can be extraordinarily powerful. Powerful enough to complement Social Security? Shit, I don’t know.
Does that make any sense?
IIRC, Bush had a means testing element in his proposal.
The major problem with Bush’s proposal was that a large percentage of the country simply opposes any change and have been “convinced” that no changes need be made by people opposed to Bush.
Prediction: once a dem is in power again, you will see something very, very similar to Bush’s ideas advocated by the opponents.
In Australia, your employer is required (by law) to pay 9% of your gross income into a superannuation fund, which are basically managed funds which you can’t withdraw from until you reach age 60. Tax law also encourages voluntary contributions to your superannuation fund
There is also a means-tested old-age pension provided by the government, but that is largely because compulsory superannuation has only been around for the last 15 years or so. The rate of compulsory super contribution is gradually increasing and I think it is meant to reach around 15-18% eventually.
By the time today’s 20-year-olds reach retirement, most will probably be able to fully fund their own retirement. In the meantime, government benefits will be required because this scheme has only been around since 1992.
Which is basically mandates that every employer have a 401(k) style scheme, if I understand 401(k) properly.
Legally, employees can choose their super-fund, and can even manage the investments themselves if they choose (known as a self-managed super-fund), although most employees have their fund with a major provider.
I’ve heard others mention that
plan before. I think it was Mike Rosen.
“increasing the retirement age and means-testing SS payments.”
yep. That’s not a new idea. I agree that it’s a good one, but it’s not new.
Means Test: rewarding (again) under-achievers.
(Wanna guess how many loopholes that has for politically connected groups?)
I expect to get nothing out of the system, despite paying the maximum for at least the last 10 years.
Social Security is just a tax I pay so some bozo without the sense to save for retirement can retire anyway. I don’t like it, but that’s our government.
Since when are we entitled to retire? Since FDR, I guess. 99% of the humans that ever lived worked until they dropped dead. We’re simply going back to that.
Means testing is the obvious answer that will never be accepted and I am not sure it should be. My neighbor may choose to own a boat, have children, send those children to expensive private schools, etc.
Meanwhile we pay the same amount into this program and when we are retired he’s busted and gets more?
Tax programs need to reward good behavior or be neutral not punish good behavior.
Maybe SS payments should be treated as regular income and taxed accordingly. If you have no other income there will little or no effect. If you are doing wellin retirement paying taxes on your SS payout will not kill you.
Simple, for SS, you save in diversified funds.
For Medicare, you save in medical funds.
That way your return is closely related to what happens in the markets where the money will be spent in the future. Money is invested where the demand will be, so supply is increased in anticipation of the increased demand.
Everyone’s focusing on 5 years, not focusing on those who will take SS at 62.
The wage limit for social security is $94,200 in 2006. Employee & employer together pay 12.4%. http://www.ssa.gov/pubs/10003.html
There is a also medicare tax that should be kept away from SS discussions.
Raising the retirement age might work for white collar folks, but what about tradesmen? Should a plumber have to work in a crawl space when he’s 70+ years old? My wife is a chef, a very physical occupation. She’s on her feet for eight hours a day, hauls heavy pails of water around, unpacks supply trucks, etc. She’ll be lucky if she can continue to do that through her 50′s, let alone 60′s & 70′s.
If you means test SS it will be viewed by the public (rightly) as just another goevernment welfare program — but one where each voter knows in exact terms how much his benefit falls short of what he has contributed. Politicians representing well-off constituents will no longer have any reason to protect SS. Your means-tested SS pension will become subject to the same political pressures as medicaid & welfare.
I’m not defending the current system — I hate it. I will never get as much out of it as I put into it — I do think, though, that ‘fixing’ it will be more politically complicated than many backers of reform believe it will be.
Saletan and others have dealt with the issue of manual labour: cover it under disability. So you’re on disability from 50-70 and then retirement from 70 on.
there is the danger of the dutch disease, where too many people get disability (aka any 50 year old in an office can get it).
As to the specific example of your wife: stop being a chef. Own the restaurant, move to the front of the house, consult on menus, develop line of foods, run a catering company, etc. No one owes you a living but yourself.
Here is one thing that never made sense to me during the social security debates over the last couple of years:
If I understand, part of the motivation for the change was that individuals could invest their “social security” money in mutual funds, getting a much better return than the social security trust gives.
My question: Why does the social security trust not invest in index funds itself, thus getting that same “better return”? Why was making the accounts private an important part of it?
I freely admit my lack of knowledge about social security here, so perhaps I’m just misunderstanding.
Quinn: That would be an eminently sensible idea, if in fact there were any actual funds in the Social Security trust fund. Despite widespread public misconceptions, the SS “trust fund” is literally a bunch of file cabinets in a Federal office in Fairfax, Virginia. These file cabinets are filled with government IOUs. The money collected from SS taxes is treated like every other source of funding to the Federal government, i.e., spent like our government was a drunken sailor on leave in Bangkok.
The push for private accounts is to permit the reality of retirement savings to match the perception – you’d actually have your own money which the government couldn’t spend long before you hit retirement age. The Democrats, however, are determined to fight to keep the system as it is without changes. One can only wonder what they’ll say in 2041, when the SS “trust fund” runs out (after amassing $5 trillion in new debt as the IOUs are redeemed) and SS benefits are subject to a mandatory 27% reduction the following year. (That’s how the system will currently work). Future cuts will follow. All I can say is, I’m not counting on ever receiving a nickel of SS benefits. And sometime in the 2020s, Social Security will be “reformed” with a vengeance, by people who already know that this Ponzi scheme will never give them anything back. Think “with a sledgehammer.”
I suspect some of our children will be leading the revolt against SS. Knowing they will get nothing from it, they will never agree to pay forty, fifty or sixty percent of their wages in Federal taxes alone, just so old folks will get to enjoy their retirement and get all the expensive medications they want. They will never submit to having the needs of their young, growing families placed second – behind the state. They will object, they will resist, and ultimately they will revolt. And they will win that revolution too, because they will have both the physical numbers (2 young:1 old) and economic justice on their side. To avoid age warfare over SS in the future would require immediate (or sooner) reforms. I dont see that happening.
I remember reading that the gov’t wasn’t allowed (under current laws?) to invest SS funds (even if they weren’t spent as soon as it was collected).
I’m not sure that is correct info, I read it in a newspaper, so obviously it wasn’t necessarily fact-checked.
Does anyone have citiable info regarding the gov’ts ability to invest funds (maybe something to do with undue influence in the markets?)
To all the folks pointing out that blue-collar workers may have trouble increasing their retirement age, what is to stop the free market dealing with that?
Since blue-collar jobs ‘use up’ more of a worker’s health, they will wind up getting higher wages than otherwise and hence be able to save for retirement.
What is so insanely stupid about “reforming” Social Security is that it is way too late to do much of anything other than serious cuts in spending. Either the age of eligibility is raised significantly or benefits are cut across the board or benefits are means tested or probably all of the above. Tax increases have already been done many times.
I remember back 25 years ago when Sen. Alan Simpson was telling it straight about the mess we were in and the troubles ahead. AARP and their water bearers in Congress went after him with a vengeance. Imagine how much less drastic the changes would have needed to be if they were made 25 years earlier? 30 years? 40? And still nothing has been done. When half of the country won’t even concede that the sky is blue and the grass is green how the heck do we even begin to have a serious discussion about fixing the looming disaster?
I wonder if some of the commenters would take a moment to consider the POLITICAL implications of reforming Social Security.
The plain fact of the matter is that political action never occurs until AFTER a crisis.
We didn’t invade Afghanistan until AFTER 3,000 people were dead – even though it probably would have prevented it. It was the FACT of 3,000 dead bodies laying in the road that created the political capital needed to conduct a war.
If you could have gone on television on September 9, and predicted that 3,000 people would be laying in the streets on September 11 unless we invade Afghanistan on September 10 – you would have been laughed off the set. On September 12, war in Afghanistan was an easily accepted concept.
My point here is that there are many sensible ways to “reform” Social Security, but none of them will happen until there is enough political capital amassed.
It’s simply too easy to do nothing and offend nobody for a politician to risk his office advocating cutting the benefits of the largest voting bloc in the nation (people over 50). Hey, a Congressman makes 160 large a year. That ain’t chump change.
And so, there must be a CRISIS before anything will be done, because it is the very nature of the CRISIS that will produce the political cover necessary for politicians to do “what the voters want.”
We simply cannot reform Social Security UNTIL THE MONEY RUNS OUT. Once the money runs out, there will be a hue and cry to reform it. Right now, there is no hue and cry, because the money is there.
Without hue and cry, politicians simply DO NOT ACT, because the very action they might take will offend a large population of the people who get them into office.
So, in short, Social Security reform might be necessary; would probably be a good thing, but I argue it won’t happen until AFTER it’s too late to do anything else.
Private accounts. If they perform badly, it’s because there is nothing worth buying, so if you lose money it’s no big deal. There’s nothing you would want to spend it on anyway.