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  #1211  
Old 10-10-2018, 12:07 PM
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A little. Best would be: "...work a couple of years longer to collect the same benefits that their parents could receive at a younger age."

Bruce
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  #1212  
Old 10-12-2018, 10:18 AM
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RETIREMENT AGE

https://www.forbes.com/sites/ebauer/.../#523096ca62be
Quote:
Yes, Blue-Collar Workers Could Be Harmed By A Higher Retirement Age. What Next?
Spoiler:
In my most recent article, I addressed the question of whether a hike in the Social Security Full Retirement Age is really a benefit cut in disguise, and observed that this can be true when the beginning and end points of retirement eligibility/maximum benefit level increase remain unchanged and only the age at which nominally-"full" benefits are available increases, but is not especially the case in countries where there is a single retirement age which increases, and certainly not in cases, such as Denmark, where that retirement age simply increases as needed to keep the average number of years in retirement unchanged as life expectancy increases.

But there's a wrinkle: neither the actual average retirement age nor life expectancy after retirement are the same for working-class/blue-collar workers and middle-class/white collar workers.

Here are some items to consider:

A Center for Retirement Research brief from this spring, "What Explains the Widening Gap in Retirement Ages by Education?" analyzes the data and finds that the gap in retirement age has been widening between high-school and college-educated workers, at least among men. In the years 1976 - 1979, high-school educated workers retired at an average age of 64.1; their college-educated counterparts retired at an average age of 64.6 -- only half a year difference. The gap began widening in the 1980s, as blue-collar workers began to retire earlier and white-collar workers later, and by the 2000s, was 3.2 years, with high-school-educated workers retiring at an average of 62.1 years of age from 2000 - 2009, compared to an average of 65.3 years for their college-educated counterparts; from 2010 - 2016, the gap narrowed slightly as retirement ages for both groups increased, to 62.8 and 65.7, respectively.


What accounts for this difference? The CRR brief doesn't address the initial drop in retirement ages, though one can guess that at least one driver is the impact of union-negotiated generous retirement benefits such as "30 and out." But these generous benefit packages are fading, and fewer and fewer of the high-school-educated workers reaching retirement have had careers at the sort of manufacturers providing them in the first place. Nonetheless, retirement ages for this group have not returned to their 1970s levels, even as college-educated workers have begun to delay their retirement, by more than a year on average. The CRR suggests that this is, in part, because the sorts of jobs this group holds are more physically taxing and less appealing to stay at with increasing age and because they are in poorer health than better-educated workers.

At the same time, in another brief, "How Is the Mortality Gap Affecting Social Security Progressivity?" researchers document the growing gap in longevity between the least educated Americans and the rest of us, a gap which has always existed but is increasing. The brief measures the gap based on "differences by education in expected years of life from ages 25 to 85" and finds that this gap widened from 3.4 to 5.9 years for white men and 1.7 to 4.2 for white women from 1990 to 2010. What's more, the same gap-widening also occurred among black men and women, from 1.2 to 3.7 and from 0.0 to 2.4, respectively, again from 1990 to 2010. The report then calculates that, while lower-income workers still receive a larger lifetime benefit as a percent of pay than higher-income workers, this measure of "progressivity" is less substantial than it once was, when taking into account life expectancy differences.

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All of which is to say that, depending on your point of view, raising the retirement age might be just fine for white-collar workers but maybe not quite so much for blue-collar workers.

One solution to the problem is the provision of benefit enhancements to Social Security, allowing "workers in arduous and hazardous jobs" (WAHJs) to collect benefits early without the sort of reductions that the rest of us would face, and various European countries have been doing this for years*, with special benefits not only for such groups as miners or seamen, but also (see this somewhat-dated OECD report) for such occupations as ballet dancers or other performing artists. One situation in France receives particular mention by the OECD: railroad workers were given the right to retire early without reduction back in the days after World War I at the time of steam trains; now those trains are electric rather than coal-burning but the right remains. And it's easy to find other examples, such as that of Greece where even hair stylists were given early retirement rights until a 2011 pension reform. Even in those countries with provisions for WAHJs, however, the trend has been away from early retirement and towards providing retraining or bridging benefits, for instance, providing a partial retirement benefit that's expected to be sufficient to maintain living standards alongside continuing to work on a part-time basis.

Which brings us to some questions the answers to which aren't entirely straightforward.

What, after all, is the purpose of whatever special provision might be made for blue-collar/hazardous-job workers?

Is it about "fairness" and enabling shortened-life-expectancy workers to enjoy a retirement similar in length to white-collar workers?

Is it a matter of those workers having made "their contribution to society" and deserving retirement at a younger age as a result?

Is it a question of accommodation for workers who can no longer work at their usual occupation, even if not disabled, strictly speaking, and/or a provision to spare them the need to prove disability? And, in that case, is it "unfair" or unrealistic to expect workers to retrain for other jobs, perhaps supplemented by a partial benefit to make up for reduced work hours or lower wages?

In principle, an "arduous or hazardous" occupation ought to already pay better than an occupation requiring the same education and skill level but with less physical labor required. Should some of those extra wages simply be directed towards funding earlier retirement, so that these workers genuinely "earn" their benefits?

I'm not going to prescribe an answer here, but will invite reader comments, as usual, at JaneTheActuary.com.

(*Note: the EU report contains the standard EU country abbreviations; here's a glossary explaining these.)


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  #1213  
Old 10-14-2018, 03:05 PM
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ah, my "favorite" retirement writer/thinker. Up there with Dean Baker.

https://www.forbes.com/sites/teresag.../#562f13ab3951

Quote:
Why Not Just Expand Social Security?


If we expanded Social Security to provide adequate retirement for the vast majority of American workers payroll taxes would rise to nearly over 25% percent of pay– up from 12.4%.

Spoiler:




The New School - Retirement Equity LabSCHWARTZ CENTER FOR ECONOMIC POLICY ANALYSIS

Indeed, Social Security needs shoring up to help solve the looming retirement crises. If we do nothing, the number of poor or near-poor people over the age of 62 will increase by 25% between 2018 and 2045, from 17.5 million to 21.8 million. And, in the next 12 years, 40% of middle-class older workers will be poor and near poor elders.

Why not just expand Social Security to solve the retirement crises? If we expanded Social Security to provide adequate retirement for the vast majority of American workers payroll taxes would rise to nearly over 25% percent of pay– up from 12.4%.


What Other Nations Do

Rarely do nations secure pensions for all workers with a just a PAYGO system. Nations that achieve widespread retirement security do so with both advanced–funded and Social Security-type pensions. France and Spain are rare cases that started out with just a PAYGO system. Their high replacement rates for the average worker -- 55% for France without taxes and transfers (70% with taxes and transfers) and 82% for Spain -- are paid for with corresponding high payroll taxes -- 37% and 28%.

To keep those tax rates from getting any larger and to scale them down, France and Spain are each developing an advanced-funded system composed of mandated hybrids between defined benefit and 401(k) type plans.

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In contrast, the U.S. Social Security system taxes workers and employers 12.4% (6.2% each) which in turn pays for low benefits -- a 35% replacement rate for the average worker. If the U.S. wanted to reach a target replacement rate of 70% -- and that is what most of us need -- the payroll tax would double. (The table at the end of the article, which matches selected nations' payroll tax with their pension benefits, indicates the U.S. rate is 15% because that includes the OECD estimation of Supplementary Security Income. which is funded by general revenues).

The U.S. Needs Social Security and Pensions for All

All workers need a restoration of Social Security promised benefits – Rep. John Larson (Connecticut, D.) and others are sponsoring (Social Security 2100 Act). The bill solves the math problem that without more revenue -- an immediate increase in the Social Security payroll tax from 12.4% to 15.4%, or an elimination of the taxable earnings limit -- Social Security benefits for the median retired household will be cut by a quarter and replacement rates will fall by one-fifth in 2034. All workers and their spouses and children need Social Security’s insurance against disability, early death, and inflation -- this social insurance is the base of any retirement plan. But, though Social Security replaces about 80% of pre-retirement income for the low-wage lifelong earners and their families, it only replaces 38% of pre-retirement income for middle-class workers and less than 20% of pre-retirement income for the top 10%.

It should be obvious by now that despite our aspirations to balance our retirement income by getting funds from a number of sources, the U.S. system is no three-legged stool – only the highest income retirees get a third of their retirement income from Social Security, a third from pensions, and a third from assets. The bottom 40% of Americans over age 65 receive over 90% of their retirement income from the PAYGO Social Security system. Those in the top-half of the income distribution get a smaller share of retirement income from Social Security – an average monthly benefit of about $1,500 – and need more to maintain their standard of living. But nearly half of Americans are not covered by a workplace plan.

Everyone needs an option to the crumbling 401(k) and IRA system and more than anything now proposed in Congress. Workers need Social Security and pensions, so that investment earnings, and not just tax revenue from younger workers, pay their pensions when the times comes to retire.

Because a blend of PAYGO and advanced-funded plans is more efficient, meaning administrative costs and risks are smaller, a large government plan can manage economic and demographic shocks better than a pure PAYGO system or a totally capitalized system. Nobel prize winner Peter Diamond and Nicholas Barr make this point. Households can fund their retirement more cheaply with a combination of regulated add-on pension accounts and Social Security. An improved U.S. retirement system would mandate contributions, professionally-manage investments, and pay out annuities. Even those with access to retirement plans have little saved and face contribution and investment risk and concerns about how the money will last a lifetime. Tony James and I have a plan to supplement Social Security called the Guaranteed Retirement Accounts (GRA). GRAs work in concert with Social Security.

Bottom line: Why not just expand Social Security as our retirement system fails? If we expanded Social Security to provide replacement rates of 75-80% for most workers payroll taxes would rise to over 25% of pay and we would lose the potential efficiencies of advanced-funded retirement plans.

************************************************** ************************************************** ******************************

FOR TECHIES

The tax rate for Social Security (old age survivors and disability insurance OASDI) is 6.4 percent for both the employer and employee and is paid on earnings up to a cap, which will be $132,900 in 2019. Based on Social Security’s handy wage data in “Wage Statistics” -- it is a fascinating table -- did you know out of the 165 million wage earners only 205 earn over $50 million a year and report an average earnings of exactly $97,338,760.37? I estimate if we expanded Social Security to provide replacement rates of 75-80% for the 75% of American workers who earn between $10,000 per year and $140,000 per year, payroll taxes would rise to to 25% of pay– up from 12.4% and more if the retiree cohort is much bigger than the working cohort. I only examine the tax rate needed to raise the replacement rate from an average of 34% to 70% for the middle 75% of earners because I assume the bottom 21% of earners who earn an average $5000 a year need public assistance and the top 5 percent who earn over $135,000 will use personal assets for retirement.

Table: Internationally, High Payroll Tax Rates Yield High Replacement Rates (source: OECD Pensions at a Glance and Taxing Wages)

Country

(2015 – 2018)

Employer and Employee Social Security Tax Gross Replacement Rate of Retirement Income to Pre-retirement Income
France 37% 55%
Germany 34% 38%
Greece 33% 67%
Italy 31% 70%
Spain 28% 82%
Japan 26% 35%
Netherlands 22% 27%
United Kingdom 18% 22%
Canada 17% 37%
United States 15% 35%

I agree, it should be expanded. All government employees should be forced to be a part of it.

Yes, I know that's not what she meant.
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  #1214  
Old 10-14-2018, 03:15 PM
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Wow, anyone writing about Social Security should get their most basic facts right! The tax rate is 6.2 percent, not 6.4 percent. Nearly all government employees are covered by Social Security already (except for 5-6 million state and local government employees, for whom coverage raises constitutional concerns flowing from the Tenth Amendment).

Bruce
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  #1215  
Old 10-14-2018, 03:42 PM
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Originally Posted by bdschobel View Post
Wow, anyone writing about Social Security should get their most basic facts right! The tax rate is 6.2 percent, not 6.4 percent. Nearly all government employees are covered by Social Security already (except for 5-6 million state and local government employees, for whom coverage raises constitutional concerns flowing from the Tenth Amendment).

Bruce
5-6 million not covered doesn't sound like nearly all to me. Isn't that like 1/4 of the group in question?
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  #1216  
Old 10-14-2018, 03:49 PM
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Originally Posted by bdschobel View Post
Wow, anyone writing about Social Security should get their most basic facts right! The tax rate is 6.2 percent, not 6.4 percent. Nearly all government employees are covered by Social Security already (except for 5-6 million state and local government employees, for whom coverage raises constitutional concerns flowing from the Tenth Amendment).

Bruce
And those 6 million often whine that they don't get subsidized SS benefits. But the tax rate is really 12.4%. The self-employed know that, and the employers know that, too.

My theory is that pension equality would have the state and local govt workers contribute 12.4% to the local systems in addition to their regular contributions, covering the benefit payments for the past service liabilities (rising from the retirees who got much more than they paid for). But that is just a political non-starter that would produce equal treatment, since all others are paying the 12.4% for prior workers.
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  #1217  
Old 10-14-2018, 11:10 PM
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Quote:
Originally Posted by CuriousGeorge View Post
5-6 million not covered doesn't sound like nearly all to me. Isn't that like 1/4 of the group in question?
Exactly right.

Bruce
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  #1218  
Old 10-15-2018, 12:45 PM
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Quote:
Originally Posted by bdschobel View Post
Wow, anyone writing about Social Security should get their most basic facts right! The tax rate is 6.2 percent, not 6.4 percent.
To be fair, he got it right five times and he got it wrong once, so I'm willing to believe that he knows what the right number is. And the place where it's wrong might have been an editor's fault rather than the author.
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  #1219  
Old 10-16-2018, 05:37 PM
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oh look, she's got another one!

https://www.forbes.com/sites/teresag.../#6dfd53285da1

Quote:
Senate Republicans Set Sights On Cutting Social Security

Spoiler:

The higher deficits caused by the tax cuts of 2017 will fuel the chronic attack to cut the programs.




Illustration of US House of Representatives shown here as a chess set.

Today Senate Leader Mitch McConnell said that Republican leaders will focus on cutting Social Security, Medicare, and Medicaid.

Pay attention to financial advice your financial adviser won't give you. Advisers do not emphasize that the government is a vital financial partner and partnership requires engagement. Government programs that ensure a baseline of income and health-care security insure our own household baseline security. It seems older people are getting the message; but younger not so much. Every adult eligible for Medicare and Social Security can vote, and they vote more. In the 2016 Presidential election turnout was 78% for people over age 75 and 58% for all Americans.

A key part of financial planning is understanding the roles the major government social insurance programs, Social Security, Medicare, and Medicaid will play in your later years. Consider this: they are worth almost a million dollars to a middle-income American. According to economist Eugene Steuerle and his colleagues at the Urban Institute, a single man who retires in the year 2020 after a full career earning a median wage (about $44,000) can expect to receive $536,000 in Social Security and Medicare benefits. In a couple where each spouse earned constant “average” wages over a career beginning at age 22 and retired on his or her 65th birthday would have over $1 million in health and retirement benefits. The expected benefits for couples turning 65 in 2050—age 30 today—are scheduled to rise under current law to almost $2 million.


These are stunning numbers. Our country made a commitment during the Depression to make sure that everyone and their families would be protected as they aged and if they became disabled. But national commitments don't renew themselves. Voting does.

The tax cuts in 2017 were a result of the Republican control of the federal government -- almost all Republicans voted for the tax cuts and almost all Democrats did not. The cuts added $1 trillion to the federal deficit and the nonpartisan Joint Committee on Taxation did not support Republican arguments that the $1.5 trillion tax cut would pay for itself with economic growth. Senator McConnell's announcement today makes clear political elites will use Social Security, Medicare and Medicaid as bargaining chips in budget negotiations and call for cuts in government spending. The higher deficits caused by the tax cuts of 2017 will fuel the chronic attack to cut the programs.

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White House economic adviser Larry Kudlow commented that “We have to be tougher on spending." Mitch McConnell just said rising federal deficits and debt is not the Republican’s fault but the deficit is caused by unwillingness to contain spending on Medicare, Medicaid and Social Security.

Here are key realities of Social Security that everyone should know:

Reality #1: Social Security is an essential form of insurance. It provides support for young families in the event of the death or disability of its breadwinners. It helps children with severe disabilities. It insures workers against old age, disability, or dying and leaving behind a survivor without adequate income. As a retirement benefit, Social Security is worth about $300,000 for the average household. Equally important, its benefits are guaranteed. In contrast, 401(k) returns are not guaranteed.

Reality #2: Social Security and Medicare benefit all workers, whether white-, pink-, or blue-collar. In 2012, 55 million Americans (out of a population of 313 million) cashed Social Security checks. These were members of all segments of society— rich and poor, left and right. Economist Moshe Milevsky makes this clear in his excellent book Your Money Milestones: A Guide to Making the 9 Most 102 Important Financial Decisions of Your Life. He writes that all households, rich and poor, have the government as an economic partner.

We all pay taxes, and we all receive benefits from it. Through our votes, we exercise some control over how that money is spent. So no matter what your political leanings are or what your tax bracket is, the government is part of your financial life and always will be. This is equally true for the corporate CEO, the small business owner, and the starving artist.

Reality #3: Social Security is on sound financial footing. In fact, it’s a lean and efficient success. In 2015, its administrative expenses (as a percentage of all Social Security spending) were less than .7%, compare that with the average 401(k), which has expenses three times as high – which can erode lifetime benefits considerably by 20-30%.

Any clear-sighted look at Social Security’s finances, free of politically motivated spin, shows that the program is in strong shape. It has a reserve fund to pay all benefits until 2034 without any change in current policy. And with some small policy changes—for instance, raising the payroll tax by 2.83 percentage points (shared between employer and employee) or eliminating the earnings cap—we could put the system in balance for the next 75 years. (The earning cap means that only wage income up to a certain ceiling is currently subject to Social Security taxes. In 2019, it will be $132,900, but that figure will rise in response to wage inflation.) We are easily poised to keep the system healthy well into the future.

The rising federal deficits will surely lead to political efforts next year to cut spending on Social Security, Medicare, and Medicaid if nothing changes. Vote.

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  #1220  
Old 10-16-2018, 08:36 PM
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Eliminating the maximum taxable amount (the "cap") -- even without paying additional benefits on the newly taxed earnings -- is insufficient to eliminate the long-range actuarial deficit. And why in the world does she cite data from 2012 when data from 2017 are readily available in the 2018 Trustees Report? Ugggh.

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