How would you fix Social Security?
The two obvious choices are to trim benefits and/or increase taxes, but there are still tough decisions to make.
This post comes from Lynn Mucken at MSN Money.
As deficit-cutting fever -- or at least brave talk about it by politicians -- rolls across the nation, one of the top targets of conservatives is Social Security.
Given all the political windage, you might be surprised to learn there is a $2.6 trillion surplus in the SS trust fund. However, with a huge increase in beneficiaries looming as the 1946-to-'64-born baby boomer generation passes through, coupled with a proportional decrease in the working population, the fund is expected to run dry in 2037 and then operate at a deficit for decades longer. Post continues after video.
In his speech this week on the budget deficit, President Obama did not give specifics for addressing that problem, but said "… both parties should work together now to strengthen Social Security for future generations. But we must do it without putting at risk current retirees, the most vulnerable, or people with disabilities; without slashing benefits for future generations; and without subjecting Americans' guaranteed retirement income to the whims of the stock market."
Just how are Congress and the White House going to do that? We want to hear your suggestions.
Using information from Boston College's Center for Retirement Research, The Wall Street Journal has laid out 11 changes that could help keep Social Security solvent over the next 75 years. Six of them would change the benefit structure, five would alter the revenue stream. You can riff off them, or give us ideas of your own.
First, some numbers provided by the WSJ and the Social Security Administration:
- 2.9/2.1: Workers for each SS beneficiary today and in 2035.
- 40.7/76.3: Number of Americans, in millions, over 65 today and in 2035.
- $1,011/$1,312: Today's average monthly benefit for women and men.
- 34 million/$703 billion: Number of Americans receiving SS, and the payout in 2010.
- 52/72: Percentage of retired couples and singles who receive more than 50% of their income from SS.
- 20/41: Percentage who receive more than 90% of their income from SS.
OK, here are Boston College's ideas, and the percentage of the 75-year shortfall each would cover. Feel free to mix and match.
- Cut benefits today by 13% (100%) -- This means the average couple's SS income would drop from $2,323 a month to $2,021. That $302 pays a lot of utility and grocery bills (or greens fees and slot machine play). This is quick and clean, and probably politically fatal for anyone who votes for it. The SS recipients might find it more palatable if the military, federal workers and even members of Congress took the same hit.
- Raise the full retirement age quickly, then in line with longevity (30%): Americans are living longer, and longer in good health. The SS age for full retirement is gradually increasing from the current 66 for those born between 1943 and 1954 to 67 for people born in 1960 or later. A bipartisan committee of retired senators recommended increasing that age to 68 and then to 69 by about 2075. The age for early retirement also would rise from 62 to 64 during the same period.
- Freeze the purchasing power of benefits (100%): SS benefit increases are designed to replace a portion of our earnings, thus helping maintain our standard of living. According to the Boston College figures, if such a freeze had been implemented 30 years ago, today's SS benefits would be 18% smaller.
- Freeze the purchasing power of benefits on a sliding scale (65%): The same as above, but the bottom 30% of the income bracket would continue to replace earnings, and there would be a sliding scale above that. This appears to be means testing by another name.
- Change the cost-of-living adjustment (25%): Writing on USA Today's Planning to Retire blog, Emily Brandon said that reducing the cost-of-living adjustment by 1 percentage point every year would eliminate 78% of the deficit (40% for half a percentage point). The annual COLA is based on the Consumer Price Index for urban wage earners, and includes food and energy prices.
- Cut benefits in 2037 by 22% (100%): According to Boston College: "The average worker who claims at 65 would get 28% of earnings -- about $11,700 in terms of current wages -- before reductions for Medicare premiums and income taxes. And if we shelter existing beneficiaries, new beneficiaries would get much less." This appears to be a way to punish the current child-producing generation for not having enough kids, but few politicians look 26 years into the future, and this might not cost them their job. And, of course, the "Me Generation" boomers might go for it.
- Increase the payroll tax today (100%): Both employer and employee would put in 7.2% instead of 6.2% on earnings up to $106,800 (sorry, that employee drop to 4.2% negotiated in Congress in December is good only for 2011). If your household is at the median of $67,000, you would pay $670 more a year, or about $13 a week. That just might sell.
- Raise the payroll tax earnings cap to cover 90% of earnings (40%): According to the Boston College figures, the SS payroll tax covers 83% of all earnings. To get that figure up to 90%, the individual earnings level subject to the tax would rise to $172,000. The well-to-do and companies, both powerful forces in politics, are likely to fight this.
- Use the estate tax (25%): The idea is to take the 35% tax on estates worth over $5 million and dedicate it for Social Security. Given the nation's overall budget deficit, this has a "smoke and mirrors" feel. Are you any richer if you switch your wallet from your left pocket to your right?
- Invest 40% of SS Trust Fund assets in stocks (35%): The $2.6 trillion in the trust fund is now invested in bonds sold to it by the government (yes, we borrow the money from ourselves). Those optimistic Boston College folks think the stock market would yield a 3.5% higher annual return. This seems unlikely to fly, as President George W. Bush learned when he tried to privatize Social Security in 2005.
- Increase the payroll tax in 2037 (100%): Boston College estimated the payroll tax would be 8.2% for both employee and employer, but that seems a trifle optimistic. Still, this might be adopted; the average age for members of Congress is 58, so all but a few would be long gone (from office, at least) when the political backlash hits.
More on MSN Money:
The answer is simple.....if one has not paid into the system, then one gets NOTHING out of the system.
2. Do away with the Jimmy Carter law that allows anyone over 65 to draw SSI whether they paid in or not. (this alone would save millions, I know many people who never paid a dime in and is getting 600+ each month)
3. No one while in the prison system would be allowed to drew a dime of SSI. We are already paying for their upkeep.
4. Must be citizen of the US and paid in to the SSI program.
5. Not sure if welfare is paid for from the SSI program or not. But as stated before and seen on TV where women stay home a have children from multiple partners and get paid more every time they have another. Limit it to only one child and the father must pay support and the mother must have a job of some sort in order to draw a dime.
5. Any benefits from state or federal government (welfare, food cards etc.) must be citizens. I have seen illegals in the grocery line with food cards and pull out 100 dollar bills to pay the difference. Also, go to a place that has a Western Union terminal and watch how many illegals will send money (tax free) to the family's out side of this country. It has been stated on the news that over 8 billions dollars are sent each year out of this country tax free and NO SSI paid...
I will stop for now
They give SS to illegal aliens
They give SS to handicapped people
They give SS to anyone the government wants to and then blame too many seniors for the demise of SS.
Seniors pay a yearly stipend for Medicare plus they pay for the amount over what Medicare allows docs and medical facilities.
Seniors die so there should be lots of money since our population has grown. But the problem is that the growing population is made up of non-working, dependents with lots of kids. FIX THAT!
No money for unwed mothers. That is the function of charities, not governments. Illegitimacy is a sin in my religion. Why do I have to contribute to it? Let the bleeding hearts give their money to unwed moms so they can keep spitting the little money-makers out.
Everyone in Washington should have to pay into SS . Once The people who make all the decisions in Washington have to pay & live like the rest of us , Things will change extremely fast .
How about this for a start. Investigate overseas direct deposit. Many americans died in places like Thailand only to have several generations of Thai's at the bank living off Uncle Sam, or should I say our hard earned money. Make Americans go to the Embassy every year to prove they are alive, and that they don't have a fake wife, than a daughter who is still collecting.
Thailand is just one of many countries that have been doing this for years. Back in the 70's 80's and probably now they change names to the american there with a cost of like $20.00, add them to the account, and the man has been dead for 20 years... first the young wife collects it, and if she has any kids go up to the bank every month....so on and so on...."This has to stop!!!!
At the present time income above about $108,000 is exempt from SSN taxes.
Social Security could be balanced simply by taxing ALL income with SSN payments.
The way to satisfy those rich folks this would affect:
Those folks would then be eligible for their corresponding larger share when they retire.
The numbers still work and everyone gets payments that they deserve.
Simple and fair for everyone!
Rediculous...thats OUR money, the program was originally put in place to supply retired americans with income. The federal government has robbed it time and again, now they want to cut it because they dont know how to ballance the effin budget and curb their own spending habits?????!!!!!!!! Keep your rotten hands off our money, take yourselves a paycut and get on with the job your being paid to do - rediculous rediculous.
Im amazed at how disapointed I am with our government and how they continually try and find ways of robbing the american public as opposed to turning their examining eye on themselves....Shame on washigton, shame on Obama, and shame on me...for staying in this back assward country for tooo long.
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