After having seen how uninformed people are on this issue I thought it might be good to open a thread on the subject.

One popular minsconception I have heard is that Kerry doesn't have a plan for social security. That's really not the truth. So let's clear a few things up.

1) AARP has stated that Social Security is solvent through the year 2042. This means that if benefits stay the same and the projected numbers for retiring persons is correct, we can have a fully funded social security through 2042.

2) Privitizing Social Security may be a plan, but it's certainly not an easy "fix." What you hear is Bush talking about how great his plan is and that it will give younger Americans control over their own retirements. Sounds great.....but it doesn't explain how that transition will be paid for. Some estitmates have said it will cost 2 TRILLION dollars to make that switch. To me it's not a plan unless you are able to state where you are getting the money to do this. To date the president's people have done an excellent job of passing on this question.

3) The issue of privitizing is far from a well formulated plan. Right now we have a system whereby people pay in throughout their life and then get money back when they reach the appropriate age. The reason this is a decent plan is because it DOESN'T give people an option. You or I may be capable of managing money throughout our lives, but it's nice to know that for people that don't have the inclination or desire or whatever, there is a foolproof way for them to survive when they are older.

It almost doesn't matter if there is a "plan" for social security because if the nation's economy is in a slump any privitization of it will suffer, and with a national deficit such as we have today no funds are available to suppliment the current shortfall that social security will experience as the baby boomers start tapping into it (where there are more people pulling from it that feeding into it.

The "social security plan" needs to be a higher level plan of growth in industry and technology and education so that as many Americans as can be are employeed and earning a decent wages so that the social security funds extracted from their wages are enough to keep the system alive.

Otherwise, its all moot. If the national economy isn't in a controlled state of steady growth, if people are loosing jobs faster than people can obtain them, and if the education system is NOT feeding skilled workers into the job force for when jobs DO become available, then social security is screwed regardless of any privitization effort.

Anyone else have roll-over IRAs that have LOST money every quarter for the last four years to the point where they are equal to or less in value than they were when you rolled them over? Or worse, if your answer is "what the f is an IRA", bend over an kiss our asses goodbye. They will be collecting our homes when we get "old" because we won't be able to pay the property taxes on them, and throwing all of us in convelesant hosptials. (Unless your response to that is "what home?" of course).

Apologies for poor spelling.

and then what? am i to understand you don't care about 2043, 2044....?
pretty shortsighted.



it is not the goverment's job to make sure john doe is taken care of. it is john doe's job to make sure john doe is taken care of. if you decide to spend all your money and not save, you should bear the burden of your choices. likewise, if you decide to save, you should be rewarded for prudence. i resent the fact that i am forced to contribute to a program that any fairly intelligent person would have no need for in the first place.



this is one of the most ridiculous statements i've ever heard. you CANNOT make a person worse off by the addition of more choices.

for arguements sake, lets say that you have two options regarding social security and your future. you can either A.) contribute to the program as it is today, receive the same benefits, etc. B.) not contribute and put the money where you please. regardless of what you choose, you are made at least no worse off by the addition of option B.

you really believe that you should have NO option as to what you do with the money you have worked hard enough to earn?

and if the nation's economy is in a boom any privatization of it will reap the benefits



yep. this is actually an arguement FOR privatization. it's interesting you put this immediately after your first statement.



employers are forced to match each employees social security contributions. as the burden gets larger and larger for each individual to keep social security solvent, each employee is forced to contribute an increasingly disproportional amount to the program. as each employee is forced to contribute more and more, so must the employers. this constitutes a huge drag on employment, innovation, and economic dynamism. when the costs of labor and employees increases, businesses naturally hire less and less. this almost completely precludes what you described from happening.

social security, just like every government program, is a zero-sum game that encourages stagnation and fights economic growth with every fiber of its being.

Obviously I care what happens after 2042. I was simply stating that there's no need to fall into the trap of panic that both sides like to illicit for their own personal gains. Surely something will need to be done about social security but it's not as if we are looking at a collapse tomorrow or even next year.

You say, "it is not the goverment's job to make sure john doe is taken care of." To this I ask you what the hell you think the responisibility is of the government. You say I'm short sighted for looking at 2042 and then you turn around and say it's not the government's place to care for the ederly? That's pretty funny. The fact that you believe that only people who are not "fairly intelligent" would need the system speaks volumes about your character. It's pretty obvious you have a very limited exposure to the older generations of this country. If you'd spent any time with them at all you'd have an understanding what it is like to live on a fixed income where every penny counts. You also speak of SS as a "reward" for not properly preparing for retirement. If you've ever seen a SS check, you'd see it's not much of a reward.

Ideally nobody would live on SS, that was never the intention of the program. Sadly, many older Americans are forced to do so for many different reasons. Perhaps you don't have the forsight or life experiences yet to understand that with a long life comes many challenges that no amount of preparing can allow for. Long illnesses, sudden job loss late in life, stock market crashes, Enron type disasters have destroyed many American's retirement plans. It's too bad that your myopic view doesn't allow for life and all of its unpredictability.

Your final "point" about adding choices is just as superficial as your view of people's circumstances. Firstly, I am not saying that adding choice is a bad thing. People have plenty of choices right now. The money that you contribute to SS is a small amount. Many of us have enough left over at the end of a paycheck to put something away in any type of retirement plan you'd like. I have a 401K as well as other plans. You already have choices, Social Security works because no matter what happens to the market now or in the future it will be there (even if we have to make adjustments before 2042). It's not supposed to be the only income for your later years but the fact that it is foolproof gives some elderly people a small amount of money they can count on.

Let's say it's privitized and many young people today put money into an account that does well for 40 years. Then what happens when the bubble bursts again like it did a few years ago. Many millions of older people had catastrophic losses during that period, forcing some of them to go back to work. Of course it's best to diversify outside of your SS but at the end of the day it's a sure thing that has worked and we can continue to make work.

you also never even came close to addressing how you're going to pay for the $2 Trillion shortfall of Bush's transition.

fair enough. but that still doesn't address the long term shortcomings of a pay-as-you-go institution. don't make the mistake of assuming that social security is a program that is rock solid and immune from the temporary shocks you so willingly attribute to market based programs. i make no claim that short term stock market investments, bonds, etc are not sometimes rocky. emphasis on short term. long term, stock market returns go up. this is a fact. look at any 40+ year interval.

so, yes, SS is immune from short term market interruptions. but SS, as we are now seeing, is subject to shocks that the market is not. neither population nor work force composition has an immediate effect on the size, shape, returns, or nature of the market. it is, however, the main (more accurately, the lone) determinant of SS revenues. when there is a major demographic shift in population, work force, etc. social security's solvency will be challenged. wall street will not.

the question then becomes: which change, market ups and downs or physical population characteristics, can be recovered from more easily and completely? if you honestly think that population changes are more easily remedied than an anomolous market outcome...then, well, i guess we'll just disagree.



you're twisting and misconstruing the implications of a lot of what i say. i maintain now, and always will, however, that the individual is ultimately responsible for him/herself. the responsibility of the government is to provide goods or services that the market either cannot (national defense) or it is to inefficient to produce (roads). the other, and more important, role of goverment is to defend the claims of individuals to private property, and establish a clear set of common laws. it's not the goverments place to look after the elderly; government was never intended to fulfill a paternal role. the elderly should look after themselves. when i say that, i more or less mean that anyone should have the foresight to know that they will be less capable of providing for themselves when older. with that knowledge, start planning now.

why do you assassinate my character? you don't know me. i don't know you. i choose not to make this personal. i would enjoy this board more if you stuck only to the issues and refrained from ad hominem attacks. what does it say about your character that as soon as someone disagreed with you, you played the "asshole" card, instead of reinforcing your arguement?

incidentally, i'm not so sheltered as to have managed to avoid any contact with someone over 35 for my entire life. i have two sets of grandparents-one lives comfortably on their retirement. the other barely scrape by because they chose to spend their money recklessly and unwisely when they were younger. now they must accept responsibility and accountability for their decisions.



agreed



not the least of which is bad choices. if you know you will have to bear the full weight of indiscretions, you will naturally be less irresponsible. i don't see how engendering responsiblity is undesirable.



how did you infer this? nobody ever said life was easy. life is fraught with vicissitudes. anyone who thinks they are going to be exempt from challenges should think again. if anything, THIS attitude is myopic. plan ahead. it's that easy.



again, look at any multiyear interval in stock market history. if an initial investment was made in 1950, a market downturn in 1990 will not decimate the wealth accumulated over the 40 years. perhaps 1990's income will be affected, but it will not wipe out life savings. it is virtually impossible to find any 40-year period in which the stock market has not paid a higher rate of return on your money than you get from social security. besides, nobody invests today with the intention of retiring next week.



the ease with which you flout law and contract is amazing. why would you sign a contract that enabled the other party to change the terms of that contract at will, while you could neither stop him nor make any changes of your own? yet that is exactly what happens when you pay money into social security. no matter what you were promised or at what age you were supposed to get it, the government can always pass a new law that changes all of that. you still have to pay into the system. you are also disregarding the fact that the constitution expressly forbids the government from amending private contracts.

and besides, i trust myself more than any politician or goverment figure. do you?

(i'm not avoiding the 2 trillion issue; i'll get to it later. gotta work.)

i love to play the asshole card, it's my best hand!

anyway, the reason I got a bit testy is because I felt that you are basically saying that only people who are reckless or idiots do not plan for their retirement. While I believe that there are people that are both, there are many retired people that put their money (and faith) in their company, the stock market, or other investments and have gotten burned. I have heard far too many stories of people having to go back to work because their life savings was wiped out for one reason or another. These are people who have planned in some fashion. Maybe they aren't as savvy as you or I (or just cynical) but many of them counted on their company's retirement plan or stock investments as their sole nest egg. For me, whether or not that was a smart move isn't the issue. The issue becomes whether or not we will have a large group of senior citizens who have next to nothing to retire with.

I think at some point you have to be a realist and figure that the reason people have no money when they retire isn't the issue, it's what to do about it. I think a plan whereby even the most ill prepared idiotic financial planner can have a subsistance living from our government. On some level these people have served their country well by being a citizen who paid taxes and paid into SS. We aren't talking about a program where someone makes tons of money, really it isn't a huge deal from my paycheck and it isn't a windfall for them. It seems to be a "the least we could do" from the government.

The reason that I don't think privitizing SS is a good idea is because if one thing is certain, it's that most Americans are not savvy with stocks and the like. I agree that long term investments do increase. Hell you'd be stupid not to invest for the long term. The problem I forsee is that when you have people that choose their own plans and it does well for 40 years but gets cut in half because they didn't follow the market correctly or something happens, then they're shit out of luck. I think SS has worked well and can continue to work well if we make adjustments over time.

One other issue that arises is that when we privitize SS we are basically giving a portion of that savings to privite companies in the form of profits. This isn't a big deal when things are going well but what happens when funds are mismanaged? Whose accountable when something is goofed? Is it the government who recommended Plan A or Company B or is it the individual firm? Social Security isn't sexy right now and doesn't offer the returns we'd all like for the time period it's invested but it is something that's gonna be there.

I have a bit more faith in the government than you it seems. I trust that they aren't going to do something stupid with the money I've put in so far or change benefits drastically if only because they'd fear the voter backlash.

Well said!

I was unaware that employers had to "match" SS contributions - they get corporate tax breaks for doing so, yes?

i thought the social security reserve was a
file cabinet filled with IOU's

A tax "break"? They don't pay taxes on the Social Security taxes they pay, if that's what you're getting at.

That is what I was asking, thank you for clarifying.

*ding*

From http://www.ssa.gov:


Its from their FAQ section, I hope it helps to answer many of your questions:

--------------------------
Q: I am retired and receiving a monthly check from Social Security. Are my monthly payments going to be cut?


A: No, there are no plans to cut benefits for current retirees. In fact, benefits will continue to be increased each year with inflation.



Q: I'll be retiring in the next five to 10 years. Can I expect my presently scheduled benefits to be paid to me at retirement?



A: Many reform plans, including those put forth by the President's Commission to Strengthen Social Security, preserve scheduled benefits, including cost- of-living increases, for near-retirees. Depending on the proposal, a "near-retiree" is defined as someone aged 50 to 55 and older.



Q: My parents are receiving Social Security payments. Should I be worried that their monthly checks will be cut and that I will have to make up the difference?



A: No, there are no plans to reduce benefits for current retirees. In fact, benefits will continue to grow annually with inflation.



Q: I am receiving disability benefits from Social Security. Should I be worried that my monthly check will be cut?



A: Most plans, including those put forth by the President's Commission to Strengthen Social Security, do not reduce the benefits of currently disabled beneficiaries.



Q: I'm 35 years old. If nothing is done to improve Social Security, what can I expect to receive in retirement benefits from the program?



A: Unless changes are made, at age 73 your scheduled benefits could be reduced by 27 percent and could continue to be reduced every year thereafter from presently scheduled levels. See the Trustees Report



Q: I'm 25 years old. If nothing is done to change Social Security, what can I expect to receive in retirement benefits from the program?



A: Unless changes are made, when you reach age 63 in 2042, benefits for all retirees could be cut by 27 percent and could continue to be reduced every year thereafter. If you lived to be 100 years old in 2079 (which will be more common by then), your scheduled benefits could be reduced by 33 percent from today's scheduled levels. See the Trustees Report



Q: Should I count on Social Security for all my retirement income?



A: No. Social Security was never meant to be the sole source of income in retirement. It is often said that a comfortable retirement is based on a "three-legged stool" of Social Security, pensions and savings. American workers should be saving for their retirement on a personal basis and through employer-sponsored or other retirement plans.


Q: Does Social Security have dedicated assets invested for my retirement?



A: Social Security is largely a "pay-as-you-go" system with today's taxpayers paying for the benefits of today's retirees. Money not needed to pay today's benefits is invested in special-issue Treasury bonds.



Q: Is there really a Social Security trust fund?



A: Yes. Presently, Social Security collects more in taxes than it pays in benefits. The excess is borrowed by the U.S. Treasury, which in turn issues special-issue Treasury bonds to Social Security. These bonds totaled $1.5 trillion at the beginning of 2004, and Social Security receives more than $80 billion annually in interest from them. However, Social Security is still basically a "pay-as-you-go" system as the $1.5 trillion is a small percent of benefit obligations.


Q: I hear that Social Security has a big financial problem? Why?



A: Social Security's financing problems are long term and will not affect today's retirees and near-retirees, but they are very large and serious. People are living longer, the first baby boomers are five years from retirement, and the birth rate is low. The result is that the worker-to-beneficiary ratio has fallen from 16-to-1 in 1950 to 3.3-to-1 today. Within 40 years it will be 2-to-1. At this ratio there will not be enough workers to pay scheduled benefits at current tax rates.



Q: What will happen if Social Security is not changed?



A: If Social Security is not changed, payroll taxes will have to be increased, the benefits of today's younger workers will have to be cut, or massive transfers from general revenues will be required. Social Security's Chief Actuary states, "If benefits were reduced to meet the shortfall in revenue for the combined program, the reduction would need to be 27 percent starting with the exhaustion of the Trust Fund in 2042 and would rise to 32 percent for 2078. Alternatively, if additional revenue were provided beginning in 2042, revenue equivalent to a payroll tax rate increase of about 3.1 percentage points (from 12.4 percent under current law to about 15.5 percent) would be needed for the year. The additional revenue needed for 2043 would be equivalent to a payroll tax rate increase of about 4.5 percentage points for the year. Thereafter, the amount of additional revenue needed would gradually rise, reaching an amount equivalent to an increase in the payroll tax rate of about 5.9 percentage points for 2078 (or about 50 percent higher than today's rate). See the Trustees Report



Q: How big is the future problem?



A: Social Security is not sustainable over the long term at present benefit and tax rates without large infusions of additional revenue. There will be a massive and growing shortfall over the 75-year period.

Social Security's Chief Actuary projects that in present-value dollars the total net Social Security cash flow for years 2004 through 2078 is projected to be nearly -$5.2 trillion. When the trust fund balances of $1.5 trillion at the beginning of 2004 are added to this value, we get a financial shortfall (or unfunded obligation) for the 75-year period of $3.7 trillion. This unfunded obligation indicates that if an additional $3.7 trillion had been added to the trust fund at the beginning of 2004, the program would have had adequate financing to meet the projected cost of benefits scheduled in current law over the next 75 years. See the Trustees Report



Q: If Social Security's financial problem is so long term (negative cash flows not until 2018 and trust fund exhaustion in 2042), why do we need to fix it now?



A: As the Trustees of Social Security, the Comptroller General of the United States and the Chairman of the Federal Reserve Board have said, the sooner we address the problem, the smaller and less abrupt the changes will be. The independent, bipartisan Social Security Advisory Board has said: "As time goes by, the size of the Social Security problem grows, and the choices available to fix it become more limited." Addressing the problem now will allow today's younger workers planning for their retirement to have a better assurance of the future of Social Security. See the Trustees Report

Q: What are the alternatives for modernization and reform?



A: The four basic alternatives that are being discussed -- singularly or in combination with each other -- are (1) increasing payroll taxes, (2) decreasing benefits, (3) using general revenues or (4) prefunding future benefits through either personal savings accounts or direct investments of the trust funds.

The independent, bipartisan Social Security Advisory Board examined many options that addressed Social Security's long-range solvency problem. Its July 2001 report is available online in pdf format.


Q: Does President Bush have a specific plan to modernize and reform Social Security?



A: No, but the President has established six guiding principles for any reform of Social Security:

* Preserve Social Security benefits for retirees and near-retirees
* Use Social Security surplus for Social Security
* Keep Social Security payroll taxes level
* Do not have the government invest Social Security funds in the stock market
* Preserve Social Security's disability and survivors insurance programs
* Create individually controlled, voluntary personal retirement accounts to augment Social Security

The bipartisan Commission he appointed put forward three models based on these principles. These models are in the process of being discussed, as are other alternatives



Q: Will Social Security be replaced by a private sector retirement plan ("privatization")?



A: No. There are no credible plans to replace Social Security as the foundation for the retirement of American workers.



Q: What is a voluntary personal retirement account?



A: There are many possible ways to structure personal accounts. Several proposals recommend that a personal savings account plan for Social Security be modeled after the federal government's Thrift Savings Plan. This very popular plan for federal employees and members of Congress allows a choice of five highly diversified, low-cost mutual funds. In the Thrift Savings Plan, no direct investments in individual stocks are allowed.



Q: I understand that some reform plans require larger transfers from general revenues to fund personal Social Security savings accounts. Is that true?



A: Yes. Many of the plans put forth, including those by the Commission and by some members of Congress, require significant transfers from general revenues. Depending on the underlying assumptions, these transfers generally range from less than $1 trillion to more than $2 trillion, in today's present-value dollars. However, it is also true that if no changes are made, revenue transfers totaling $3.7 trillion, in today's present-value dollars, would be needed to pay currently scheduled benefits over the next 75 years.



Q: Would a "lock box" fix Social Security's problems in and of itself?



A: No. As Social Security's Chief Actuary has stated, "The implementation of a Social Security 'lock box' would not alter the U.S. Treasury commitment and thus would have no direct effect on the future solvency of Social Security. However, if the effect of a 'lock box' were to require that the non-Social Security Federal budget be in balance or surplus for the years in which Social Security makes investments, then the amount of borrowing from the public might be reduced. In this case the difficulty of generating General Revenue for the redemption of Trust Fund investments in the future would likely be diminished."


Q: Social Security's future challenges are caused by the aging of our population. Do other countries have similar problems?



A: Yes. Most countries in Europe, as well as Japan, have more serious challenges than the U.S. Even some developing countries are starting to face up to the aging of their populations.



Q: What are these other countries doing to face their challenges?

A: Many of these countries have begun to prefund their social security plans. More than 20 countries, including Britain, Australia and Sweden, have established versions of personal accounts.

Also, just to chime in:

I think it would have been a better idea to dump all of the money wasted fighting a useless war in Iraq into social security.


But that would have made WAY too much sense.

I just want to make sure I'm clear on this. So far, the money 'wasted' in Iraq should have:

Funded national healthcare
Funded Social Security
Paid for increased education

Am I missing anything?



On a side note, I think that maybe the answer is to make SS a need based program. Yes, I know you paid in your whole life, but you didn't pay in for you, you paid in for someone that is currently collecting. If only needy people before the age of 62 can get government assistance, why does everyone including Bill Gates qualify for government assistance after age 62?