Current round of Social Security discussion

[MountainHawk]

Originally Posted by Gary Wright

Fix it with cost of living adjustments - based on your SSNRD.

Start adjusting benefits for people 10 years or more from retirement with some amount less than inflation - maybe 1% less per year, maybe more than that.

They have time to plan, no current beneficiaries can complain, and you don't have a mandatory increase in SSNRD, so people can't really play that card to politicians.

Figure 30 years from now, the overall increase in average benefits would be something greater in magnitude than 30% less than it would be with no change, and future beneficiaries have time to plan. If 30% doesn't do it, then adjust the difference between general inflation and the increase in benefits to keep things solvent.

People complain a little, but nobody has the view of "I was going to get something, and now I have a greater chance of getting nothing" (bird in the hand is worth two in the bush, right?).

I much prefer the approach of:

If you retire on or before date X, you get your promised SS retirement benefit. If you retire after that, you get $0. It is an unaffordable luxury program that society cannot continue to finance forever. It can be replaced with means tested welfare programs for the elderly out of general funds.

I would make date X whatever it needs to be to stop the tax collection on date X, and have the trust fund be expected to be $0 at the end.

[bdschobel]

What about taxes paid before date X? You would get nothing with respect to those? Seems kinda harsh!

Bruce

[Gary Wright]

Originally Posted by MountainHawk

I much prefer the approach of:

If you retire on or before date X, you get your promised SS retirement benefit. If you retire after that, you get $0. It is an unaffordable luxury program that society cannot continue to finance forever. It can be replaced with means tested welfare programs for the elderly out of general funds.

I would make date X whatever it needs to be to stop the tax collection on date X, and have the trust fund be expected to be $0 at the end.

That's fine, technically, but you can't avoid the political aspect of telling people you're going to give some of them a chance (other than death) to receive $0 on something they're very aware that they paid a lot of tax dollars toward. You have to wind down the benefits for people by indexing them out.

Also, I forgot to make the comment earlier - inflation has been very low for the last 10 years. I don't think it's going to stay that way for long. There will be opportunity to take advantage of a spread.

[Gary Wright]

Originally Posted by bdschobel

What about taxes paid before date X? You would get nothing with respect to those? Seems kinda harsh!

Bruce

Exactly - you immediately have every single call to legislators stating exactly that.

That's why it's my opinion that the change needs to be legislated now to occur over time. People don't quantify things that occur over time well - it's an easier sell to them.

Even if it's 2% less per year in increased benefits for someone who is 10% away from retirement, their benefit is still getting larger nominally - you could play with the legislative details to not allow it to decrease unless there is deflation.

Gotta be a con man. Straight up "actuarially, this is what works - right now - on a current benefits basis and on a current and future benefits basis", I think, is going to get us in trouble.

[bdschobel]

My favorite proposal is raising the retirement age, as you must know. It's effective, understandable, and a demographic solution to a demographic problem. Other changes are needed, however, to get the job done, and a diet COLA would be on my list.

Bruce

[WellThen]

Why are all these government retirement plans around the world in trouble? Was someone using false assumptions?

[MountainHawk]

Originally Posted by bdschobel

What about taxes paid before date X? You would get nothing with respect to those? Seems kinda harsh!

Bruce

I'm 33. I'm getting $0 anyway. I'm more than willing to make it official now than burden my kids and their kids with huge debt stringing along an ill-concieved program. All raising the retirement age does is delay the issue again, unless you set the retirement age as something like (expected life expectancy at age X - 5) meaning it automatically keeps rising.

However, I fail to see why we should be taxing kids out of college 15% of income to pay for the retirement of someone who had the opportunity to save for that retirement for 40 years. It's a grossly inefficient use of national resources to be guaranteeing people with $100K+ incomes for the last 20 years of their life a state pension. Means tested welfare is fine.

[bdschobel]

Originally Posted by WellThen

Why are all these government retirement plans around the world in trouble? Was someone using false assumptions?

There is not one answer for all plans.

Bruce

[MountainHawk]

Originally Posted by WellThen

Why are all these government retirement plans around the world in trouble? Was someone using false assumptions?

Many were put into place when only the husband worked (so only the husband earned credits towards a pension) and when people were having kids above the replacement rate. Now, the western world is well below replacement birth rate in most countrywide, and both parents are working.

Double the number of pensions + living longer on those pensions + fewer young people to support those pension = Triple Whammy of Doom for the state pension racket.

[bdschobel]

Originally Posted by MountainHawk

I'm 33. I'm getting $0 anyway.

This is too pessimistic. Even after the accumulated government bonds in the trust funds are exhausted, anticipated to be around 2037, Social Security's tax income will cover about three-fourths of its benefit obligations. So you shouldn't expect to get zero. Where would all those taxes go if not to you and others your age?

Bruce