I don't actually believe we are doomed but there were some scary headlines related to Social Security this week and that it may run into serious funding issues a little sooner than previously expected. A succinct description that I read elsewhere said that paying the disability benefit will have to start coming from the general fund in 2016, earlier than expected, which creates a strain on the entire program earlier than expected.
There were of course also comments from Tim Geithner noting that in "2033, incoming revenues and trust fund resources will be insufficient to maintain payment of full benefits."
A recent post of mine on this subject that was re-run on Seeking Alpha drew 75-80 comments with some making the case that social security is fine and there were similar comments left here on the original post as well. Joseph Weisenthal from Business Insider appears to be one who believes all is well if I am reading this post correctly.
There was a heated discussion in the Seeking Alpha comments as to whether or not Social Security is or is not a welfare program, one very interesting comment noted that Social Security was created to improve the government's cash flow. I believe there is a kind of conspiracy theory floating around that social security is fine but that the government is trying to condition us into accepting reduced benefits as a means of ripping us off.
It is not so clear that Social Security is a welfare program now but the obvious path seems like that is what it will become. Benefits will not disappear but as a recurring theme, there will be means testing that will probably come down further into the middle class than many people think. Means testing won't stop at people who merely meet President Obama's definition of wealthy.
A couple of paragraphs up you will see mention of a heated discussion and a conspiracy theory. These sorts of things tend to be fueled by emotion. An emotional response is unlikely to be anyone's best resource for addressing how changes in Social Security will effect them.
Political activism on this issue might be the good fight but will not solve any personal issues if Social Security as we know it today cannot be saved. People so motivated to take up this fight can probably be of more help once they have first addressed their own problems. For anyone new, the context of solve their own problems means live below your means, save more and figure a way to create a "post retirement" income by monetizing a hobby (or something similar).
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5 comments:
SS is getting lots of coverage, probably a good thing.
My reading of history is that SS was created to improve job mobility of young people, by freeing them of the responsibility of caring for their aging parents. We have forgotten that there was a time when old people basically controlled the country's wealth to ensure they (the old people) were provided for in their old age. Hence my previous comments that SS is a net benefit to society and the economy, and would be continued. If we end SS, we'll revert to the 1920's model where old people MAKE their children care for them via financial arrangements - the young will suffer, not the old. You kids want to grow up in my house, eat my food, go to schools I pay for, attend college, keep some of your salary, inherit my money - well, here's the deal. You care for me until I die.
Rich
Those who accept the validity of Occam's Razor can be reasonably confident that SS is more likely to be around for the foreseeable future than not.
They'll also know that, as a paygo system with its own tax and trust fund, that SS cannot become welfare both by definition and as a matter of law.
Of course laws can be changed but, in the case of SS it's unlikely (it's not known as the third rail of politics for nothing), and outside of that it really doesn't matter if folks ignore all the speculation while simply taking Roger's last bit of advice to heart: Learn to live below your means and it doesn't matter what SS does or what levels of support it provides 50 years from now.
"My other piece of advice, Copperfield, said Mr. Micawber, you know. Annual income twenty pounds, annual expenditure nineteen nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery. The blossom is blighted, the leaf is withered, the god of day goes down upon the dreary scene, and, in short, you are for ever floored. As I am!" - Charles Dickens
SS can easily be fixed. Increasing the retirement age is the easiest followed by increasing the contribution amount via the mulitplier or other and lastly, there is means testing.
Anyone who has ever done long range navigation knows that the earlier a course correction is made, the smaller the correction required. Of course if we wait until 2033, the course correction will need to be large and painful. Are any of you asking your congressman to get involved?
Personally i would not enjoy seeing the retirement age increase, i'd rather like to see pay taxed for ss all the way up, and then means testing.
To me, means testing isn't practical. How will it be implemented in a real world setting? Will it be based on your earnings history? That doesn't work as many who made a lot saved nothing as RW's Dickens points out (love that passage!). Will it be based on last year's income tax return? Cumbersome and ripe for system dodging. Based on your network worth...send your brokerage statements to the government for review?!?! I don't see how this can work.
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