The Media and Social Security

[quijote]

katherine2:

I have it on good authority Vern that among you and me, only one of us is a widow. No one is stealing from me. It is a social insurance program that works quite well.

I must say that SS has really helped many elderly folks. My grandfather immigrated from Mexico when he was 50 and work until his late 60’s doing odd jobs. He died at 100 and, thanks to SS was able to maintain his standard of living (which was not very expensive to begin with). Then again, he had my five aunts and countless cousins to take care of him so he never had to go into a nursing home.

I think that Vern is not trying to say that SS is “entirely” wrong, but that, given a choice, younger workers might choose the PSA. All we want is the choice between SS and PSA.

Cheers

 

[vern_humphrey]

quijote:

Wait, if Personal Savings Accounts work like an annutiy, wouldn’t the surviving non-working-spouse “inherit” the working-spouse’s annuity? If not, why the heck no? the money in the PSA is suppoused to be the workers. If yes, whew!

Also, does anyone have any idea how much it will cost to transition to PSA? (provided that benefits are kept to those who are 55+ and that those who are younger would still get some SS benefits)

Cheers

I’ll be happy to port my model into Excel and send you a copy.

We can guarentee every American AT LEAST his Social Security entitlement, and transition to PRAs simply by not stealing the Social Security surplus.

If we are stupid and don’t start before the surplus is gone, we can make the transition with a slight increase in Social Security taxes.

 

[quijote]

vern humphrey:

We can guarentee every American AT LEAST his Social Security entitlement, and transition to PRAs simply by **not stealing **the Social Security surplus.

Ah, how many of our current problems would not be there if Congress and the WhiteHouse (whether Rep or Dem) would treat their budgets like everyday Americans do.

I’ll PM you my e-mail later to get your excell sheet. Thanks.

Cheers

 

[vern_humphrey]

quijote:

Ah, how many of our current problems would not be there if Congress and the WhiteHouse (whether Rep or Dem) would treat their budgets like everyday Americans do.

I’ll PM you my e-mail later to get your excell sheet. Thanks.

Cheers

The irony is the government thinks it is wiser than you are when it comes to your money. And yet the government cannot do what they expect you to do – reduce expenditures so you can added taxes.

 

[Meg2]

vern humphrey:

No one says it will IN THE SHORT TERM. But as I’ve pointed out, by the 33rd year most retirees will be self-funded.

Will we be able to divert 4% of combined Social Security taxes paid by us and our employer? (4% of 12.4%)? Even taking 4% of my total Social Security taxes, that doesn’t come close to $1000 a year. Wouldn’t you have to make $202,000 a year to reach the $1000/yr cap? (($202,000 x 12.4%) x 4%)

Even if I can put in $1000 a year:

1. Again, the system will be phased in; I won’t be able to invest $1000 a year right away.
2. I will be at retirement age before the 33rd year of the plan. If I want to retire at 65 years, and if the PSA plan is implemented in 2009.

The plan is that those whose 55th birthday is on January 1, 2005 or later can invest in it (someone born in 1950). This person born in 1950 will only have 6 years in the plan before they turn 65. So, only those born in 1977 or later will be able to invest for 33 years?
vern humphrey:

The idea is it’s YOUR money, and YOU – not the government should control it.

I agree in principal. But that means the government can’t use it to fund the program, that it has to be funded some other way. But you’ve argued the program will pay for itself in an individual’s 33rd year of the plan.

Tangent question…in your calculations, how many years do you expect someone to work full-time? My Social Security earnings were for only part-time earnings for 6 years (in High School and college). And what if someone gets laid off for 3-4 months for a number of years during an economic slump? I’d be curious how this would affect the final numbers. Especially in the early years, because it is better to save earlier rather than later.
vern humphrey:

The experience of nations that have similar programs (for example, Great Britain and Chile) is 11%.

11% would be fantastic. Do you have some links to this info? I’ve tried to google for it, but I’m coming up with too many hits.
vern humphrey:

The money from Social Security is NOT yours at all …You can’t borrow from your Social Security Account while working …

True and true. My issue is they keep saying “you control it” but there’s only so much you control. You do control where it is invested. The money remains in the account and the government cannot take it out. But you cannot take it out before retirement. You can’t take out funds reserved to keep you above the poverty level. And those funds that are reserved do not go to your heirs upon your death.

I’m not expecting that PSAs will be like a 401K or some other type of investment. I just want it to be made clear to the public that PSAs indeed will not be like 401Ks or other investments.
vern humphrey:

Please explain that – it will be paid to you on the same basis as your Social Security entitlement. If you have more than you need, there is no obligation that you spend it – you can give it to your children and grandchildren, or invest it.

If I understand it correctly, if my traditional benefits cannot keep me above the poverty line during my retirement, a portion in my PSA will be placed in an annunity, reserved to ensure that my total benefits will keep me above the poverty line. So, if the government pays me $12,490 (because I’m married) for 20 years (don’t know how many years are planned for), they’ll have to provide $249,800, between traditional savings and my annuity (no adjustments made).

My last SSA statement claims that I’ll get roughly $1000/month. If the system isn’t changed, I’ll probably only receive 75% of this. So, to make up for this over 20 years, I’ll need $60,000 from my PSA. Say I had $75,000 in my PSA. $60,000 would have to be reserved and put into an annuity. I could take out only $15,000 (Yes, this is similar to the current Social Security). I just want people to understand that it is possible only a portion of the PSA savings at retirement will truly be under their control. (Of course, this is ignoring your example of $688,000 earned in the PSA.)

Also, if all the money in my PSA has to be rolled into an annuity and I croak the next day, everything in the annuity is lost, to me and my beneficiaries anyways. (In page 22 of the interview with the Senior Administration Official, he/she says: “The annuity part would not come back, obviously, but the rest could be inherited.”)

Uffda. I think there’s smoke coming out of my ears. I am clearly NOT good with numbers. Thanks for helping me to understand this.

 

[Meg2]

quijote:

Wait, if Personal Savings Accounts work like an annutiy, wouldn’t the surviving non-working-spouse “inherit” the working-spouse’s annuity? If not, why the heck no? the money in the PSA is suppoused to be the workers. If yes, whew!

You’d think so, but in an interview factcheck.org did with a Senior Administration Official who spoke on condition of anonymity, no, anything in the annuity would not be inheritable.

quijote:

Also, does anyone have any idea how much it will cost to transition to PSA? (provided that benefits are kept to those who are 55+ and that those who are younger would still get some SS benefits)

That’s the question!! From a factcheck.org article:
“The administration projects it will borrow $754 billion (including interest) through 2015 to finance the initial phase-in of the accounts, and much more thereafter. The liberal Center on Budget and Policy Priorities – which opposes Bush’s proposal – projected that $4.5 trillion (with a “t”) would be required to finance the first 20 years of the accounts after they start to be phased in in 2009.”

And here’s another article.

 

[Meg2]

quijote:

Ah, how many of our current problems would not be there if Congress and the WhiteHouse (whether Rep or Dem) would treat their budgets like everyday Americans do.

Ah, yes. I have to balance my budget. The States have to balance their budgets. But the Federal government does not. Makes perfect sense.

 

[Meg2]

Meg2:

Will we be able to divert 4% of combined Social Security taxes paid by us and our employer? (4% of 12.4%)?

The models discussed on the President’s Commission to Strengthen Social Security website are:

Model 1: Workers would be given the opportunity to invest 2 percentage points of their taxable wages in a personal account.

Model 2: Workers who have not yet reached age 55 (as of January 1, 2002) would be given the opportunity, starting in 2004, to redirect 4 percentage points of their payroll taxes, up to an annual maximum of $1,000, to a personal account.

Model 3: Workers who are under age 55 at the beginning of 2002 would be given the opportunity to invest in voluntary personal accounts beginning in 2004. The deposit in personal accounts would be triggered by a voluntary contribution of an additional 1 percent of the participant’s wages, matched by a 2.5 percent contribution (up to an annual maximum of $1,000).

Under models 2 & 3, I could not reach the maximum, yet I make more than the average worker.

I wish it was spelled out what exactly a “low,” “medium,” or “high” earning is. By 2052, you would receive the following yearly Social Security benefits (based on low, med, high earnings) under the 3 models :

Model 1: $9,624, $16,476, $22,428
Model 2: $13,608, $20,016, $24,684
Model 3: $14,112, $23,796, $31,668

 

[StJeanneDArc]

Meg2:

That’s the question!! From a factcheck.org article:
“The administration projects it will borrow $754 billion (including interest) through 2015 to finance the initial phase-in of the accounts, and much more thereafter. The liberal Center on Budget and Policy Priorities – which opposes Bush’s proposal – projected that $4.5 trillion (with a “t”) would be required to finance the first 20 years of the accounts after they start to be phased in in 2009.”

The $4.5 trillion may be true, but you can’t compare that number to 0. All of SS is unfunded, the “lock box” is a myth, and is reliant on future taxpayer payments. I read in the WSJ a couple of months ago that the liability for the next 30 years is $20 trillion (I think)!

 

[Meg2]

StJeanneDArc:

The $4.5 trillion may be true, but you can’t compare that number to 0. All of SS is unfunded, the “lock box” is a myth, and is reliant on future taxpayer payments. I read in the WSJ a couple of months ago that the liability for the next 30 years is $20 trillion (I think)!

Ahh…and I am guilty of what bugs me the most about politics, not describing the complete picture. $4.5 trillion is a huge amount, but it needs to be compared with how much other Social Security options would cost (like, instead, raising taxes or decreasing benefits, which, may only be a temporary solution, requiring additonal money at some point in the future).

The document describing the three proposed models does attempt to show how the costs will be paid for over time. I don’t feel qualified to speculate if any of the models are a “good deal” in terms of cost effectiveness or whatever.

 

[vern_humphrey]

Meg2:

Ahh…and I am guilty of what bugs me the most about politics, not describing the complete picture. $4.5 trillion is a huge amount, but it needs to be compared with how much other Social Security options would cost (like, instead, raising taxes or decreasing benefits, which, may only be a temporary solution, requiring additonal money at some point in the future).

The document describing the three proposed models does attempt to show how the costs will be paid for over time. I don’t feel qualified to speculate if any of the models are a “good deal” in terms of cost effectiveness or whatever.

The problem is, we keep thinking the government owns the fruits of our labor before we own them.

What happens to us when the Government raises taxes? We tighten our belts. Is it unreasonable to expect the government to do the same – to ferret out waste and corruption, and spend LESS so the people can keep more of what they make?