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I get frustrated sometimes. Okay pretty often, even oftener these days.
The root cause of much of my frustration is reading the nonsense posted on social media and readily passed along as 100% fact and apparently driving a great deal of public opinion. Today’s political climate is making things much worse.
Social Security is a favorite target.
What people claim, for example – Congress stole the trust money, actuaries didn’t consider some people die before collecting, the trust earns no interest – is appalling, but readily believed by so many. When I try and explain the facts, some people just won’t accept them and call me not very nice names.
My current favorite is people claiming Social Security is a scam – a Ponzi scheme – and by personally investing the payroll taxes they paid, they could do far better financially in retirement.
I bet Rick could construction such a scenario with a spreadsheet. The fact is the math could work given the right circumstances, but more likely would not work given real life and human nature.
The overriding risk is that Social Security is not just a individual pension. It is
Many people are eligible for benefits never having paid a penny in taxes, including individuals disabled from birth. And, of course, there is no relationship between the FICA taxes and SS benefits. Two separate laws in fact.
To make all this self-funding work as planned certain conditions are necessary it seems to me.
I’ll stick with Social Security and most Americans would be wise to do the same.
Now all we need is Congress to do its job and assure unlimited sustainability for the program – which is not that hard, but getting harder the longer we delay.
“I bet Rick could construction such a scenario with a spreadsheet.” Hmmm, I thought I already had? So did Dan.
Only 40 years ago, my senator came back home holding up a copy of the Social Security Amendments Act of 1983 claiming that they had saved Social Security for all time.
However, so long as Congress can buy votes by promising favored constituents more benefits while sending the tax bill to the not so favored, or to people too young to vote and/or generations yet unborn, and so long as Congress keeps running $~2 Trillion in annual deficits (while SS and Medicare trust funds are invested in government debt instruments), SS & Medicare will continue to be viewed by many as quasi-Ponzi schemes.
Most recent example was President Biden’s sign off on the “Social Security Fairness Act” where elimination of the Government Pension Offset will increase Social Security benefits paid to certain government workers who already receive taxpayer funded pensions while sending the bill to American taxpayers, most of whom have no pension plan.
I agree. It seems that most of the people arguing for investment are the ones looking back, so as usual, hindsight is 20/20. It would probably only work if 1) you got extremely lucky with your choice of investments, or 2) it was a mandatory investment into mutual fund type of investment. Do you choose the stock or bond option? What combination/percentage of each? These options were very new when I started working a long time ago.
Based on the list above, sounds like a form of insurance to me. Fine by me.
Exactly
I agree; so far SS works for a stream of retirement income, even for people whose lives were not a straight line toward retirement. I would add one more thing to the list, which is for women to remain employed outside of the home and for both people to do IRA contributions as soon as they can. Payroll contributions to a Roth can be powerful. I was a SAHM due to husband’s job, and divorce left me without recent work experience, and low income.
That’s a good point.
Change is hard, and especially hard as we gain more years of experience doing things one way. Social Security is likely a victim of almost 90 years of bureaucracy and an update would be welcomed by many. Taking care of the most needy should be the target without making more people needy.
Last update was 1983. It is fairly lazy for Congress to just increase the age of full retirement and call it good. As the generations change, the FICO tax can vary, and should. Physical laborers have a difficult time making it to 65, and if they are the main earner, this leaves the wives at risk.
It’s the victim of political inaction not bureaucracy. For the massive system it is it runs quite well. The basic structure is sound.
If changes to funding were made regularly to reflect actuarial changes – just like a pension plan – there would be no problem. That simply means the taxes need to reflect the estimated liabilities and any benefit changes need to be reflected immediately.
If that were done on a regular basis it would be barely noticed, but now years of accumulated neglect must be dealt with at a time of fiscal turmoil.
Exactly. Social Security is insurance, not an investment vehicle. It’s right there in the full name: Old Age, Survivors and Disability Insurance Program.
I don’t run into these ill-informed social media posters, but the only social media sites I look at are HumbleDollar, Bogleheads and Fodors, plus a few travel blogs. You might find going on a social media diet good for your blood pressure…
We could add that Social Security was meant to be a “safety net” that would protect older folks from poverty when they were no longer able to work and earn wages.
But even if you are promised a SS benefit, it is still incumbent on all workers to save for the future. Perhaps many people don’t realize that relying solely on SS in retirement will mean a very basic, no-frills lifestyle. Maybe they feel they deserve more, and that disappointment leads to all manner of conspiracy theories.
My final SS statement had 52 years of earnings. AND, I worked those years in two retirement plans that had jobs attached to them. But my SS benefit is the highest amount of income of all of my 5 retirement accounts.
Go Social Security!
I wonder if the GOP sees SS as another profit based thing that should be privatized.
That would be impossible since Social Security earns no profits.
She is referring to privatization as a way to increase profits for the companies handling the money. Similar to what the GOP wants with Medicare, which is why Medicare Advantage plans are being sold so vigorously. The salesmen make commissions, and the private insurers do their best to control costs by limiting as much coverage as possible. Most independent analysis says stay away from Medicare Advantage
The concern for me is that Social media has wide influence especially among younger people. The spread of misinformation is dangerous and IMO can lead to bad personal and policy decisions.
It is alarming to hear how many young adults use social media as their only source of information. My local paper had an article today on how young adults are relying on financial influencers on social media for information and guidance, when those influencers are compensated by particular financial outlets.
If you’re going to social media and expecting to find people looking for the truth for facts, you’ll be severely disappointed.
On SM get rich quick schemes are more popular than here’s how you budget to get rich slow. That’s all you really need to know.
Your last line is what interests me more, why can’t Congress get this done? Perhaps DOGE is our hope, they seem to be operating like a giant spotlight and maybe that’s what we need to break the stasis.
Do you think it’s ironic that the hate SS crowd will also contain a significant number of Medicare for all people?
Doge is a scam. You have filthy rich people cutting programs for the poor,so this will benefit the filthy rich, so they can get a tax cut and keep the deficit from ballooning. I always wonder why billionaires want more money? It must be ego, “he or she who dies with the most toys wins” in their minds.
DOGE is not the hope, nor the proper vehicle nor relevant to the issues with SS.
The Trustees have explained the issues for all to see in very clear terms.
Congress does not tell Americans the truth and Americans don’t demand action in part because they don’t want to face the truth – program liabilities are underfunded.
Take a look at some of my blog SS posts including quotes from Trustee Reports.
https://quinnscommentary.net/category/social-security/
The need to act and the potential solutions are not secrets. These issues are over 25 years old. The question isn’t what to do. It’s when will the political calculus change such that action becomes possible.
Don’t hold your breath. When it comes to the budget Congress has completed appropriations before the start of the fiscal year only 4 times in the past 40 years. The last time Congress completed all bills on time was 20 years ago, in 1996.
SS is not just about personal individual retirement. My father was disabled and SS helped me through college. My child is disabled and will never be able to work.
You are correct and that is my point. I had a nephew disabled from birth collecting SS.