Piece about Social Security benefits

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(continuing)

The result was a capitalization of the Chilean economy (which the US doesn’t need), an amazing and extended economic boom, and better retirement.

After a few years, they had to drop the domestic investment requirement because they had funded the place so well that it just wast necessary.

Transitioning is painful, sure, but in their case (and ours), not as painful as the consequences of the existing system.

As for individual scammers, yes, that happens in any system. We could pretend that the government doesn’t have to pay with other funds from those who embezzle, but . . . .

I am not suggesting that such a fund have a purely self-directed 401(k) option. That should be separate, or after a certain level of consolidation for that investor is achieved.

doc hawk
 
There’s another option: find a way to pay for wars other than raiding the funds which were intended for other things.
 
I agree. It is easy to figure out life expectancies over a 30-40 yr period. It is not easy to determine the ever-changing criteria of collecting SS disability.
 
DENNYINMI said:
Social security is a system we’ve paid into for decades for many of us and we still are.
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Yes but here’s the kicker: you only get benefits based on the best 35 yrs, inflation adjusted. Your 36th year payroll tax goes to someone else
 
It’s not just those extra years, either.

The “base” tier of SS is calculated by your average earnings (subject to the cap) of the 35 highest paying (adjusting for inflation) years. I forget the percentage, but it may be 30% on those.

Then, to cover the the lower earners, there is a “bonus” tier in which you get an additional multiplier.

That tier is paid for by reducing the benefits above a certain average earnings for the higher-income earners.

When benefits are reduced for having another pension, it is only the bonus amount in the low-income tier that is reduced.

hawk
 
Here’s how you can figure your benefits. (A spreadsheet and your earnings history would be helpful.)


Your benefits must be reported on your 1040. How much is taxable depends on other income, including interest income and even “tax-free” municipal bonds. See 1040 form. Thus the benefits are already “means-tested” to an extent by the tax code. But I’m sure the politicians will go a step further and reduce your benefits before you report them if you’re making a lot of other income.
 
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I have a spreadsheet that came to within a dollar/month for my wife, and something like $20/month for me.

I’ll try to see if I can figure it out in the morning and post it :roll_eyes:

It also let me calculate that my return on anything I pay in is 1%/year–starting 15 years from now . . .
 
Ummm, thanks, while I still have my misgivings, you’re definitely got my concerns addressed (though I was already leaning in favor of retirement accounts because of encouraging savings) to an extent (except maybe for the fears of fraud), since you got SS under control, what would be your ideas for Medicare (and Medicaid if you open to discussing it)?
 
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That’s a completely different can of worms 🙂 😱

I would handle health care reform completely differently than what was done. Constitutional questions aside (and I suspect that the current challenge is fatal), it needs nothing more than the laws of supply and demand to be repealed to work.

The Hawkins medical plan would define a basic policy, and perhaps two alternates, and what they cover. Any variations would be not by separate policies, but riders from plan A, B, or C.

Pre-existing conditions would be required to be covered not by the unworkable “get sick, and then sign up”, but rather that acquiring one would be one of the things that is insured against.

To be clear, this would increase costs from traditional plans that adjust rates based on health.

So, if you’re insured and acquire a bum knee with $250k in present value future medical costs (and these numbers are actuarially [statistically] knowable), that means that rather than $10k in this year’s costs, it is treated as a $250k incident.

If you want to change from Blue Cross to Sierra next year, Blue Cross writes Sierra a $250k check.

If you weren’t insured and want coverage, either you pay the $250k buy-in, or the condition isn’t covered.

(this sounds harsh, but under the current system, the rational thing to do is for a 22 year old to go without coverage, and pick it up the next year if this happens).

The present system has both that problem, and the mandate that there can be no more than a 3:1 price difference by age–but the cost of insuring varies more than that!

For a personal perspective, my insurance policy (that we were promised we could keep) was cancelled because the ACA made most HSA computable policies non-compliant. I pay almost 4 times as much now for less coverage. That is, I pay three times a much to subsidize other policies as I pay for actual insurance.

The goal here is to commoditize the policies so that they are interchangeable, and that insurers will compete on service, handling, and evaluating policies.

The government could either issue subsidies for lower income, or put in bids for (for example) lots of 10,000 class A policies.

The second part of my program deals with the haze of medical costs.

All providers who will be reimbursed must submit their prices for procedures into a database. Prices won’t be controlled, but reimbursement will be limited to those within a standard deviation (or 1.5. or 2.0) above the median–and this includes the patient contribution. If you think you’re so good that you should get $500 instead of $200, fine, but it’s not covered by insurance.

The key here is to keep market incentives working.

(Yeah, I’m an economist who has put some time into this . . .)

hawk
 
It’s a colossally stupid way to run a pension fund to invest it entirely in risk-free Treasuries. No risk means low yield. Furthermore, in any other context, running a pension fund in the same manner as Social Security would be considered self-dealing, and the people in charge would go to jail for investment fraud.
 
Conservative bonds are usually seen in almost any port-folio, including those which include high risk long term stocks. Having a very conservative brokerage account had the advantage of lowering taxable income during the year I opened it. Regarding social security, it is something I’ve paid into (reluctantly or not) for 40 years and I have no shame in my game in stating I expect to collect from it. Any partisan talk of doing away with it or changing it for those of my age will loose my vote. I belong to a large voting block and I am not alone. Have a wonderful morning.
 
I was watching Bloomberg yesterday and someone mentioned that now was a good time for pension plans to “derisk” their portfolios as the market now seems to be responding to the Fed clearing its balance sheet. I assume it’s letting its QE purchases expire, much to the chagrin of those foreign countries holding longer-term Treasuries.
 
pnewton said:
Or do not engage in a war, if there is not enough support to pay for it.
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War bonds at 5% were issued to Americans to help pay for WWII. A 10% surtax was imposed to help pay for the Vietnam War. And Kuwait paid for the Gulf War. AFAIK Iraq and Afghanistan were unfunded; in fact there were tax cuts on top of them.
 
Yes, but not 100% of the portfolio. If you don’t include some risk, you don’t get the yield you need. Based on current projections, Social Security won’t be able to make full payments beyond 2034; if we don’t take action to fix this, there will be an abrupt reduction in benefits for anyone still alive in 2035, including those who are already receiving benefits today.
 
mythbuster1 said:
If you don’t include some risk, you don’t get the yield you need. Based on current projections, Social Security won’t be able to make full payments beyond 2034; if we don’t take action to fix this, there will be an abrupt reduction in benefits for anyone still alive in 2035, including those who are already receiving benefits today.
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I can’t fault your math or logic. I understand however that it was already decided that the Fed holds these SS funds. ($3 trillion?) As least they aren’t charging interest on them. 🙂
 
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It’s actually worse than that. The Civil Service Retirement and Disability Fund, which pays Federal employee pensions, is managed the same way as Social Security.
 
Probably the best thing most private companies did was discontinue pensions altogether. If employees didn’t like it, where were they going to go?

Sorry that this sounds cruel but I was trying to make the point of unsustainabilty of these ad infinitum plans made by short term managers, private and government. Lots of states have also been downgraded because of these obligations.
 
ProVobis said:
As least they aren’t charging interest on them
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Huh?

Yes, the government pays interest on the special class of bonds held by social security.

Not much, true, just like as other long term treasuries.
 
mythbuster1 said:
Yes, but not 100% of the portfolio. If you don’t include some risk, you don’t get the yield you need.
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As was already stated, all portfolio’s hold some conservative investment. A good manager encourages “less” risk as your age increases. Fast approaching winter here…if you know what I mean. 😉 Nevertheless, I intend to proudly collect SS when the time comes.
 
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