Found It.
It is broken. The politicians broke it by doing exactly what you pointed out. And they have no intention of paying it back. They will just continue to rob from it and ask it's intended future recipients to delay their retirement or accept less benefits
We could eventually end the need for the social security program, by folding it into unemployment compensation, simply for being unemployed on an at-will basis in our at-will employment States.
"Just impose a 12.6% tax on everyone earning over $106k. That's a great idea and nobody would ever have a problem with it!"
Here is my proposal:
Allow workers to opt into a partially privatized system, where of their 7.65% FICA expenditures, 5% goes into a private TSP-style account; and the Employers match follow the same. the remaining 2.65% (or, when you count the match, 5.3%) will go straight into SS, but it will be revenue for which SS will never see a liability. the cost for opting out
welllll, let's do a quick example:
Joe graduates High School and goes to work, making 25,000 a year. Not anyone's idea of incredible pay, but there you are. Joe gets' a 2% raise every year to account for his increasing talent, experience, etc. The 10% of his income goes into a mix of funds that matches the S&P 500 Combined Annualized Growth average since 1982: 7.98% (after you account for inflation). If Joe retires nice and early at 62; his retirement fund will be worth $1,030,110, and if placed into an annuity / conservative account that generates a 5% annual return, his monthly benefit will be $4,292. That would be slightly less than his last monthly paycheck of $4,979; but still quite livable. If Joe works until he's 65, his monthly benefit will climb above his monthly income to $5,473; and if he decides (as most of us probably will) to delay retirement to 68, he's looking at a monthly retirement check of $6,966.
And remember, Joe isn't exactly one of society's higher paid workers.
But he also had the advantage of time. Let's say instead Joe went to two years of college, and got an associates before entering the workforce to earn that 25,000; and let's say that instead of 2%, Joe turns out not to learn new skills that well, and his annual raise above inflation is actually 0.5%. We're stacking the deck a little against ole Joe, but he still seems to come out okay; his monthly benefit at age 62 is $3,050; at age 65 it's $3,875; and at age 68 it's $4,915. It's worth noting that under this model, the most Joe ever made was $31,672 in a given year; and that his monthly retirement benefits at age 65 represents a $1,200 monthly pay increase over his monthly income. Even if Joe retires early at 62 he will have more in income off of his account than he would from working; and the longer he chooses to keep working, the greater, obviously, his return is.
AND ALL THIS WITHOUT COSTING OLE JOE A SINGLE RED CENT. since the money was cash he was losing to taxes in the first place, his take-home pay wasn't reduced one iota; but because we partially privatized social security, Low Income Worker Joe can retire a millionaire.
OR, if he didn't want the 'risk' of the marketplace, he could have chosen to stay with regular social (in)security. average monthly payout: about $1,100 dollars. or, roughly 1/3rd of what Joe made in our worse case scenario at age 65.
BUT WAIT!!! WHAT IF THE MARKET TANKS!!!
Markets recover. If the market tanks right as Joe was planning on retiring, he can work for an extra year while it rights itself, or simply choose to draw less from the account in order to leave more in there to ride the upswing. OR, if Joe makes the worst decision possible, at the worst time possible and withdraws all of his money while the market is at the low point on the trough (say, a 40% drop, similar to what we just saw), to purchase a 5% annuity... then his monthly income in our worse-case scenario at age 65 will still be more than twice what he could have expected from Social Security.
I am particularly interested in liberal critiques of this plan. Conservative ones (it leaves Social Security, which is unConstitutional, still in place, so on and so forth) I already know, but tend to discount them as beyond the politically palatable. It strikes me that this offers a little something for both sides of the economic aisle: for you Keynesians, the existence of a retirement fund growing tax-free will spur people to consume more and save less; for you Austrians, the existence of a steady flow of capital into the market irrespective of what it is doing will smooth out the business cycle, and create a massive interest group against easy money (people like few things less than watching their nest eggs dwindle thanks to inflation).
More complicated than it needs to be. Just remove the cap on income taxed. People that stop paying because they've topped out are likely taking advantage of other tax advantaged retirement programs.Thanks for reading through and respondingtwo issues arise with this plan:
1. It doesn't raise sufficient funds, especially when you take into account likely behavioral changes
2. This would make Social (in)Security even worse in it's effects - namely, it would expand the degree to which it locks Americans' retirement funding into a terrible program with atrocious ROI which fails to adequately take care of our seniors, particular or low-income ones.
If we have to change Social Security anyway, let's at least try to make it better for the people using it.
SS is NOT unconstitutional, you can tell by the fact that the SCOTUS has not declared it to be unconstitutional.
I'm aware that it was considered a tax and therefore constitutional by that court. Some disagree with that decision, and I was acknowledging them.
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If "Social Security" is how we "provide some measure of protection against poverty in old age", then this isn't a fundamental change in what Social Security Is, but rather a change in how cash flow is handled within the program and the benefit formula.This isn't a fix to social security. It's a fundamental change to what social security is. If we want to discuss that, let's do it in honest terms.
Social security fix
Remove the salary cap on imcome subject to the social security tax
Make all income, earned and unearned, subject to the social security tax
If that doesn't do it.then raise the tax rate
Social security benefits need to be raised not cut
The retirement age should be 65. Not many people who actually do physical work can continue in their trade much after that. Not many 70 year old concrete finishers, iron workers or other labor intensive workers out there.
[emoji38] while I'd love to see it, it probably won't happen soon - wise policy is terrible politics. One of the many reasons the Founders feared mob rule.I think Republicans should run on “fixing” social security.
[emoji38] while I'd love to see it, it won't happen soon - wise policy is terrible politics. One of the many reasons the Founders feared mob rule.
We are going to kick this can down the road until it becomes a crises and we have no good options left, and then we are going to blame the very politicians whom we would have punished for trying to address the problem sooner for having not fixed it.
Here is my proposal:
Allow workers to opt into a partially privatized system, ...
Social Security doesn't need to be privatized - it needs to be paid for.
That starts with getting rid of the cap on taxable earnings and ends with getting rid of the cap on taxable earnings.
Or Republicans could run on their true agenda, Democrats could run on theirs, and give the voters an honest choice.
By the way, Obama even (foolishly) offered cuts to social security and Republicans didn’t take it.
Social security fix
Remove the salary cap on imcome subject to the social security tax
Make.all income, earned and unearned, subject to the social security tax
If that doesn't do it.then raise the tax rate
Social security benefits need to be raised not cut
The retirement age should be 65. Not many people who actually do physical work can continue in their trade much after that. Not many 70 year old concrete finishers, iron workers or other labor intensive workers out there.
Democrats could run on theirs, and give the voters an honest choice
Which is why it's handed out to everyone regardless of means. Makes sense.
Most people know that a worker must have worked and paid into the Social Security system in order to collect Social Security retirement and disability benefits. People who are particularly aware of their retirement rights may even know that in order to collect Social Security retirement benefits they must have worked and received at least 40 “quarters” in order to qualify for such benefits. But when it comes to qualifying for Social Security Disability Insurance (SSDI) coverage, the work history requirements become much cloudier in the minds of most people.
Social security fix
Remove the salary cap on imcome subject to the social security tax
Make.all income, earned and unearned, subject to the social security tax
If that doesn't do it.then raise the tax rate
Social security benefits need to be raised not cut
The retirement age should be 65. Not many people who actually do physical work can continue in their trade much after that. Not many 70 year old concrete finishers, iron workers or other labor intensive workers out there.
While we're at it, let's treat all income the same for tax purposes. Why is it that money earned as salary is taxed at a higher rate that money earned by letting the money work for you?
Here is my proposal:
Allow workers to opt into a partially privatized system, where of their 7.65% FICA tax, 5% goes into a private TSP-style account; and the Employers match follow the same. the remaining 2.65% (or, when you count the match, 5.3%) will go straight into SS, but it will be revenue for which SS will never see a liability. the cost for opting out is that part of your pay continues to go to pay for others, but the upside is that you get a combined total of 10% of your annual income going into a retirement account that belongs to you, and grows tax-free. Social Securities' revenues will instantly drop, but nowhere near as severely as their liabilities. To ensure solvency in the adjustment period (and to make it politically palatable); lift the cap. We can lift the cap on only the worker (and not the employer) if we want to encourage job-creation; or lift it on both if we need the revenue to ensure solvency, or if that's the only way to get the thing passed; here is room for compromise wiggling. Higher paid workers will see more of their money leave in the form of taxes, but those making less than $604,000 will get back even more in the form of ownership of personalized accounts (assuming the employer cap isn't lifted, and that's not figuring for the added benefit of those accounts growing tax-free), and so they will be willing to make the trade. Perhaps another compromise point would be to raise the cap to $604K. Poorer workers can either spend their lifetime building far more wealth than they ever would have seen under Social Security if they are younger, or keep the guaranteed program benefits if they are older.
the American people and the Government are left better off.
how much better off?
let's do a quick example:
Joe graduates High School and goes to work, making 25K a year. Not anyone's idea of incredible pay, but there you are. Joe gets' a 2% raise every year to account for his increasing talent, experience, etc. The 10% of his income goes into a mix of funds that matches the S&P 500 Combined Annualized Growth average since 1982: 7.98% (after you account for inflation). If Joe retires nice and early at 62; his retirement fund will be worth $1,030,110, and if placed into an annuity / conservative account that generates a 5% annual return, his monthly benefit will be $4,292. That would be slightly less than his last monthly paycheck of $4,979; but still quite livable. If Joe works until he's 65, his monthly benefit will climb above his monthly income to $5,473; and if he decides (as most probably will) to delay retirement to 68, he's looking at a monthly retirement check of $6,966.
And remember, Joe isn't exactly one of society's higher paid workers.
But he also had the advantage of time. Let's say instead Joe got an associates before entering the workforce to earn that 25K; and let's say that instead of 2%, Joe turns out not to learn new skills that well, and his annual raise above inflation is actually 0.5%. We're stacking the deck a little against ole Joe, but he still seems to come out okay; his monthly benefit at age 62 is $3,050; at age 65 it's $3,875; and at age 68 it's $4,915. It's worth noting that under this model, the most Joe ever made was $31,672 in a given year; and that his monthly retirement benefits at age 65 represents a $1,200 monthly pay increase over his monthly income. Even if Joe retires early at 62 he will have more in income off of his account than he would from working; and the longer he chooses to keep working, the greater, obviously, his return is.
OR, if he didn't want the 'risk' of the marketplace, he could have chosen to stay with regular social (in)security. average monthly payout: about $1,100 dollars. or, roughly 1/3rd of what Joe made in our worse case scenario at age 65.
BUT WAIT!!! WHAT IF THE MARKET TANKS!!!
Markets recover. If the market tanks right as Joe was planning on retiring, he can work for an extra year while it rights itself, or simply choose to draw less from the account in order to leave more in there to ride the upswing. OR, if Joe makes the worst decision possible, at the worst time possible and withdraws all of his money while the market is at the low point on the trough (say, a 40% drop, similar to what we just saw), to purchase a 5% annuity... then his monthly income in our worse-case scenario at age 65 will still be more than twice what he could have expected from Social Security.
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