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Thread: Fixing Social Security

  1. #1

    Fixing Social Security

    Wonder if anyone has any thoughts on this.

    Mine:

    1) Enact an "opt out" for seniors currently receiving benefits. There are any number of people currently receiving social security benefits who don't rely on them in any way, because they have sufficiently provided for their retirement themselves (whether through personal investments or otherwise). You can't just take away their benefits, since they paid into the system, but we should offer them a chance to choose not to receive their social security benefits and instead take a tax deduction for the amount of benefits they would have received. People who opted out could opt back in at any time.

    (Doing this would cut down on the amount of benefits currently paid out - perhaps significantly, perhaps not - and would extend the viability of social security as currently structured).

    2) Enact a different opt out for people aged 50-65: People could choose to forego their social security benefits ahead of time and in exchange have their social security tax payments made between the time of the election and their eligibility for benefits go directly into personal retirement accounts earmarked for them upon eligibility, to be invested as they direct (money market, mutual funds, stocks, etc.). However, yearly capital gains on the accounts would be taxed at 50%. This would be a one time opt-out option: upon enactment, and for subsequent wage earners when they turn 50. People who opt out could not opt back in.

    (I'd need to have some detailed economic study of the impact of this on the viability of social security, but my sense is that by eliminating a number of future obligations in exchange for a diminished revenue stream (capital gains v. what the social security tax revenues will have been) would also result in extending the viability of social security. It would also ensure that people who opt out received benefits in proportion to what they paid into the system over those years).

    3) For people under 50 who have already made an initial payment into the social security system, offer the opt out at 50; until 50, maintain the system as is.

    4) For people who have not made an initial payment into the social security system, only offer personal requirement accounts, which must be kept in all cash until the worker turns 30 and then may be invested at the worker's direction.

    (This would ensure that the social security program was fully converted to individual retirement accounts within a reasonable period of time, though it would retain the paternalism of forced savings)

    This is all off the top of my head, without a real economics background or an understanding of the true sources social security revenues or the precise amounts needed to keep the system solvent, so the details of this are probably far from viable.

    But I guess my thought is that fixing social security probably requires an array of measures, not just "leave it as is" or "everyone to personal retirement accounts", which is how the discussion is usually framed.

  2. #2
    It's not really complicated:

    You need to (1) increase the cap of what can be taxed, and (2) decrease the amount paid out.

    Right now, we pay SS taxes omn the first $100k or so of income. If you changed that to $150k or $200k, you'd have a ton more revenue for the system and very few people impacted. (I would actually only apply the cap increase to people making $500k a year or more, who wouldn't feel that at all, really, and it would protect people living in pricier markets like NY, SF and Chicago, where someone making $150k isn't rich.) Republicans don't like this, but, at a time when corporate pensions are increasingly unreliable, the system needs more money,.

    Now for the part Democrats don't like: You need to gradually decrease the payout from SS. Maybe 10% on people who retire 10 years from now, 15% on people who retire 15 years out, up to 20% 20 years out, basically. That gives people time to prepare for less SS income, but they'd still have it as a cushion against falling into poverty in old age.

    You take those two steps, and you've got a system on firm financial ground with only a small tax increase.

    That's the Nuu solution.

  3. #3
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    I think Medicaid is the much bigger problem..

    Are we ready to start mass denying benefits and allowing nature to take its course with oldies who didn't prepare properly?

  4. #4
    social security is and always has been actuarially out of balance (i.e. average person get more than they put in plus interest and inflation). So, it is like a pyramid scheme.

    So, Nuu would attempt to keep it going longer by taxing more (put more money in ... but not more money out ... because their is a limit on the monthly payout).

    Also, there are ideas to cap the payout amounts (various methods).

    Most logical choice is to raise the retirement age (more than it is scheduled to raise ... the current schedule is too slow and too late ... baby boomers will have already drained the system dry).

    ...

    Long term is a transition to a privatized plan (i.e. conservative 401K like options) ... however this would be like a 50-75 year transition ... and would do nothing to deal with the problem of the baby boom generation sucking the system dry. That has to be addressed with raising the age quicker or sooner than currently planned. And if it isn't done, taxes will end up being raised more (and/or means tested). The FICA tax use to be .5% ... now it is like 7.45% (which includes 1.45% for Medicare; which also is doubled for the self employed, those paid by 1099, etc.)

    Politicians don't even want to touch this issue ...

    send it to a commission ... is code word ... for periodic increases in the FICA tax ... and feeding the pyramid scheme ... remember, this is only one tax out of many ... where the percent will continue to rise ... The percent you taxing against is always 100%.

  5. #5
    Raising the FICA cap is akin to applying a bandaid to an axe wound.

    I can't agree with the notion of placing the burden of righting years of government mismanagement to higher wage earners who are already disproportionately taxed on their income.

    Though it is an unpopular and in some minds, a callous approach, I think CTM is onto something regarding Medicaid.

  6. #6
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    [QUOTE=CTM;2413379]I think Medicaid is the much bigger problem..

    Are we ready to start mass denying benefits and allowing nature to take its course with oldies who didn't prepare properly?[/QUOTE]

    This is spot on. The real 'issue' is with Medicaid. Social Security is solvent until 2035 (last i knew) and if the federal government honors its Treasury notes it is solvent way after that.

    A solution is to allow more folks to immigrate into the US and they will make up for the slowing growth of our population.

  7. #7
    [QUOTE=JohnnyHector;2413460]Raising the FICA cap is akin to applying a bandaid to an axe wound.

    [B]I can't agree with the notion of placing the burden of righting years of government mismanagement to higher wage earners who are already disproportionately taxed on their income.[/B]

    Though it is an unpopular and in some minds, a callous approach, I think CTM is onto something regarding Medicaid.[/QUOTE]

    And is it right that someone making $90,000/year pays the same amount of social security tax as someone making $900,000/year??

    Nuu is right. Raising the cap will make a difference

  8. #8
    Fixing Social Security:

    1. For people over 30 keep the system as is, but cut spending and waste in many areas of the Federal government so as the use tax money to supplement the system. This will go to pay for the people who are in the current system.

    2. For people under 30 create a new system where S.S. money is placed in a private untouchable retirement account. This way the government cannot tap into the account whenever they run short on their bills.

    3. Make the system completely optional for people under 30. If people want to opt-out of the system, let them, but if they are old and impoverished they can't come crying to Uncle Sam for a hand out.
    Last edited by jefethegreat; 03-05-2008 at 01:49 PM.

  9. #9
    [QUOTE=CTM;2413379]I think Medicaid is the much bigger problem..

    Are we ready to start mass denying benefits and allowing nature to take its course with oldies who didn't prepare properly?[/QUOTE]

    I dont know are we?
    This is one of the arguments conservatives have against nationalized healthcare. they dont want the govt making decisions on medical issues and telling us if a procedure is "worth it" or not. For instance are you ready to deny the initiation of dialysis to those over 70? How about not allowing mechanical ventilation to those with terminal illnesses or over the age of 80. Are you ready to deny tube feeding to the demented? These are major questions that i dont think Americans want to face.

  10. #10
    [QUOTE=kennyo7;2413519]And is it right that someone making $90,000/year pays the same amount of social security tax as someone making $900,000/year??

    Nuu is right. Raising the cap will make a difference[/QUOTE]

    They both make the same amount of money back, if you raise the cap the rich will take more money out of the system.

  11. #11
    Besides raising the FICA cap we should also raise the age at which benefits begin to at least over 70.

  12. #12
    God forbid we let people keep the money stolen from them and put it into their own retirement account.

  13. #13
    [QUOTE=jefethegreat;2413544]They both make the same amount of money back, if you raise the cap the rich will take more money out of the system.[/QUOTE]

    Not really. The system will make more money off of the interest

  14. #14
    [QUOTE=WJGC;2413549]God forbid we let people keep the money stolen from them and put it into their own retirement account.[/QUOTE]

    People can do that now if they chose. SS was designed as a safetynet. Its not intended to be a sole source of income.

  15. #15
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    [QUOTE=kennyo7;2413519]And is it right that someone making $90,000/year pays the same amount of social security tax as someone making $900,000/year??

    Nuu is right. Raising the cap will make a difference[/QUOTE]

    So then I guess you think that benefits should correlate to what you put in, rather then lower income earners collected a much high percentage?

  16. #16
    [QUOTE=kennyo7;2413558][B]People can do that now if they chose.[/B] SS was designed as a safetynet. Its not intended to be a sole source of income.[/QUOTE]

    Where does it say I can opt out of Social Security?

  17. #17
    [QUOTE=jefethegreat;2413581]Where does it say I can opt out of Social Security?[/QUOTE]

    You can invest your money if you chose. But you still have to pay SS.
    Where does it say i dont have to pay taxes to support the war in Iraq? We dont pay taxes based on what we like or what is in our own personal interest.

  18. #18
    [QUOTE=CTM;2413580]So then I guess you think that benefits should correlate to what you put in, rather then lower income earners collected a much high percentage?[/QUOTE]

    Of course not.

  19. #19
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    [QUOTE=kennyo7;2413541]I dont know are we?
    This is one of the arguments conservatives have against nationalized healthcare. they dont want the govt making decisions on medical issues and telling us if a procedure is "worth it" or not. For instance are you ready to deny the initiation of dialysis to those over 70? How about not allowing mechanical ventilation to those with terminal illnesses or over the age of 80. Are you ready to deny tube feeding to the demented? These are major questions that i dont think Americans want to face.[/QUOTE]

    We're going to have to, I think. At some point the burden is just going to be too great for the the younger generations...

  20. #20
    [QUOTE=CTM;2413595]We're going to have to, I think. At some point the burden is just going to be too great for the the younger generations...[/QUOTE]

    And how are you going to convince the public...especially those getting up in age.

    I agree with you. We should deny benefits such as those i mentioned.

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