Tag Archives: Social Security

WTF?

Man choosing to live like a baby remains eligible for Social Security Disability payments.  He runs a website and builds furniture, but is not capable of working.  Maybe being really weird is a disability?

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70? Try ‘Not At Any Age’

The Miami Herald reports today on consideration among Economists and members of Congress of raising the minimum age for Social Security benefits to 70.

No one who’s slated to receive benefits in the next decade or two is likely to be affected, but there’s a gentle, growing and unusually bipartisan push to raise the retirement age for full Social Security benefits for people born in the 1960s and after.

The suggestions are being taken seriously after decades when they were politically impossible because officials – and, increasingly, their constituents – are confronting the inescapable challenge of the nation’s enormous debt.

Social Security was created in 1935 with a retirement age of 65, but since then life expectancy at that age has increased by about six years, according to the National Center for Health Statistics.

Today the full Social Security benefit retirement age is 66 for people born from 1943 to 1954. It then increases by two months for each birth year (66 years and two months for those born in 1955, 66 and four months for those born in 1956 and so forth), until those born in 1960 or later get full benefits at age 67.

Raising the age eventually to 70 could prove to be politically acceptable because it wouldn’t have an immediate social impact, but it would demonstrate that politicians are resolute enough to mend one of the government’s most popular social programs and to tackle the national debt.

To borrow a phrase from The One:  Let me be clear.  I was born in 1970.  I guarantee I will not get Social Security.  Ever.  By the time I hit 65, there will be means testing, and Social Security will be open about the fact that it is simply a wealth redistribution scheme from people who work to people who don’t, with a new twist that people who don’t work who don’t need Social Security (and all of my financial planning is done with the assumption that Social Security will not be available) also pay for those who do.  I’ll be 69 in 2039, the year they admit they won’t have enough money.

Last week the CBO issued a report suggesting that some adjustments must be made to Social Security’s financing. It projected that under the current rules, the system won’t be able to pay scheduled benefits starting in 2039.

However, the CBO also found that raising the full retirement age to 68 starting with workers born after 1966, or to 70 for workers born after 1978, and raising it gradually before that wouldn’t significantly improve the system’s financial outlook.

The CBO said that raising the age to 68 would reduce Social Security spending by only 3 percent, or 0.2 percent of the GDP, in 2040. A retirement age of 70 would save 6 percent, or 0.4 percent of the GDP.

The lawmakers stress that raising the full-retirement age should be only one of a series of Social Security changes.

Their views represent a subtle but important shift. Traditionally, Social Security was considered “the third rail” of politics – touch it and you die – because people cherished their benefits so much.

That changed only once, in 1983, when a bipartisan Social Security commission’s recommendations led to increases in payroll taxes and a gradual rise in the retirement age, putting the system on a path to solvency for decades.

In the years since, however, proposals for more changes have gone nowhere, but the debt threat is forcing another look.

No one in Congress has the courage to stand up and say what is true, that Social Security needs a complete overhaul (or, if I had my way, needs to be eliminated).  We can not continue to make promises like this, and we can’t afford to keep the ones already made.  So plan like I am, assume Social Security will be gone when you retire.


A Question Everyone Should be Allowed to Answer

This is a repost from my old blog from February, 2006.

Which of the following choices would you prefer:

$75,000 cash at age 35 and an additional $9,500 of income every year for the rest of your working years (assuming your salary doesn’t change), or
$1,386 per month starting at age 62 for the rest of your life, or
$2,015 per month starting at age 67 for the rest of your life, or
$2,500 per month starting at age 70.

For me, its a no brainer. I bet most people would take the cash now. Unfortunately, the government won’t let you decide. They have decided you may pick only from the last 3 choices.

This example is based on the remarkably helpful letter I got this year from the government.


Setting Yourself Up for Disappointment

Projections are that Social Security payments will not rise for the next two years, as the calculations for COLA are coming out negative.

Millions of older people face shrinking Social Security checks next year, the first time in a generation that payments would not rise. The trustees who oversee Social Security are projecting there won’t be a cost of living adjustment (COLA) for the next two years. That hasn’t happened since automatic increases were adopted in 1975.

By law, Social Security benefits cannot go down. Nevertheless, monthly payments would drop for millions of people in the Medicare prescription drug program because the premiums, which often are deducted from Social Security payments, are scheduled to go up slightly.

What surprised me a little were the huge numbers of people in the programs.  I guess I knew, but seeing the numbers is a little shocking.

About 50 million retired and disabled Americans receive Social Security benefits. The average monthly benefit for retirees is $1,153 this year. All beneficiaries received a 5.8 percent increase in January, the largest since 1982.

More than 32 million people are in the Medicare prescription drug program. Average monthly premiums are set to go from $28 this year to $30 next year, though they vary by plan. About 6 million people in the program have premiums deducted from their monthly Social Security payments, according to the Social Security Administration.

Millions of people with Medicare Part B coverage for doctors’ visits also have their premiums deducted from Social Security payments. Part B premiums are expected to rise as well. But under the law, the increase cannot be larger than the increase in Social Security benefits for most recipients.

There is no such hold-harmless provision for drug premiums.

Oh, and rules notwithstanding, they would like more money.

Kennelly’s group wants Congress to increase Social Security benefits next year, even though the formula doesn’t call for it. She would like to see either a 1 percent increase in monthly payments or a one-time payment of $150.

The cost of a one-time payment, a little less than $8 billion, could be covered by increasing the amount of income subjected to Social Security taxes, Kennelly said. Workers only pay Social Security taxes on the first $106,800 of income, a limit that rises each year with the average national wage.

But the limit only increases if monthly benefits increase.

And the money quote, and the theme of the post:

Consumer prices are down from 2008 levels, giving Social Security recipients more purchasing power, even if their benefits stay the same, said Andrew G. Biggs, a resident scholar at the American Enterprise Institute, a Washington think tank.

“Seniors may perceive that they are being hurt because there is no COLA, but they are in fact not getting hurt,” Biggs said. “Congress has to be able to tell people they are not getting everything they want.”

I don’t understand how so many people have missed the lessons of the past (and not to distant past, either).  If you are relying on the government to take care of you, expect to be disappointed.  How did we get to this place where so many people rely on the government?  What happened to the idea that it was embarrassing to have to take a handout?

Yeah, I know Social Security isn’t exactly a handout, that we’ve ‘paid in’ to a system and are due our money back.  But really, who expects that to be true any longer?  Now Social Security is simply a redistribution scheme that’s running out of money.  If you are under the age of 40, you better be planning on something else when you retire.

But maybe that’s not a bad thing.   Maybe we’d be better off with a little less entitlement to other people’s money; maybe we’d learn to rely on ourselves instead of our government to take care of us.


The Case To Abolish Social Security

I’ve said for some time Social Security should be abolished, or at a minimum be voluntary.  Mark Brandly at Mises makes his case to abolish it.

Making the system sustainable will require higher taxes or benefits reductions. These reductions could be achieved by either reducing the benefits per recipient or reducing the number of beneficiaries — say, by raising the minimum age requirements. The solution is to give workers a negative rate of return on the money that is taken from them. It would also help if some workers collected no benefits at all. Workers who are taxed and then die before collecting any benefits are a boon to the system. Maybe the federal government should rethink its war on tobacco.

This system is a massive income-redistribution scheme, taking one-eighth of most workers’ incomes. The total tax burden is hidden from the workers. The tax revenues have been used to cover the deficits in the rest of the government’s budgets, and the only way to make the system sustainable is to give the participants a negative rate of return on their money.

Read up.


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