Social Security-Is it bankrupt? What can we do to fix it?
Technically, if nothing is changed, income from Social Security taxes will be less than promised payments. But something can ALWAYS be changed. First off, if we were to do absolutely nothing, a reduction in benefits to 75% of current promises would make Social Security revenue neutral for the foreseeable future. That's not what comes to mind when they say "bankrupt" now, is it? If we just wanted to raise taxes to fix the problem, we'd need to have a 25% tax just for Medicare! Scary, right? Well, not when you realize that we're already paying about 15%. So it would be a 10% increase in taxes on all. Oh yeah, and that tax would likely be split between employers and employees, so you'd see 5% less in your paycheck. Not too fun, but not exactly "bankrupt", is it? OK, so we need to fix it. How? Raise taxes by 10%? OUCH! Cut benefits by 25%? Oh My! Some combination thereof? How could you cut benefits by 25% without starving some seniors?? They'll be out on the street! Scare tactics. How about delaying retirement age by 3 years to age 70? I don't know the exact numbers but 3 more years of payments and three fewer years of withdrawals would seem to me to be close to reducing current benefits by 25%, without reducing anyone's monthly payment, although people's payments clearly would be delayed by some amount. After all, we're in this problem because people are living longer and having much longer retirements than ever thought possible even just 20 years ago. If we do it now, we can phase in the increase in retirement age (it's already been raised, sort of, to 67 from 65) over time, so people close to retirement don't have to wait more than a few extra months, but youngsters in their 30's might see a 3 year increase, and 40's may see a two year increase and 50's a one year wait. This will give people plenty of time to save up extra money if they still want to retire at 67 or even 65, the former retirement age. If we wait, there's gonna be a lot of VERY unhappy seniors at some point. But it is still not "Bankrupt". That said, I don't trust politicians to do the right or sensible thing, and the REAL problem is the rest of the governments fiscal deficits, so I have an old 401(k) or two, I have SS qualification, I have savings, I have real estate (my house), I have life insurance and long term disability policies, I have some stocks, an IRA or two, and maybe a business venture or two, also  .
Food for thought. |
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| The United States current debt is $8,363,143,187,650.40
The most recent GDP figures are $ 12,370,000,000,000 (2005) If you were to compare those figures to a persons debt verses yearly income, that's not too shabby at all. |
| What can we do to fix it? For starters, they could stop wasting money having you RE-tested after the best doctors in the nation have declared you disabled, to see if you're disabled according to "SS's" standards.
My husband has been sent for xrays of his knees and his spine, for his lungs, (I think 3 times) and for blood work 3 times. Each time SS, pays for the tests and reimburses him for milage at about $26 a trip. Postage: one letter to tell you where and when to go, one to send back stating that you "will" go, one to send in the milage sheet and another sending you the reimbursement check. Those I know on SS receive between $800 - $900 a month after taxes and their costs for medicare are taken out. YES, they have to pay for Medicare. They also have to pay for Medicare supplement insurance if they want better coverage. The same is true with the new RX plan they are signing up for. Is it fair to make someone 70 continue to work? I say no, unless they want to. If they loose the job they have, who'll hire them? SS was started with the intent to get the elderly out of the work force to enable the young the possiblity of obtaining hard to get jobs after the depression. Like everything else, its been mismanaged and society pays for the mistakes made by government. No bankruptcy involved - it was the taking of something that wasn't theirs to take and using it on something else that caused the downfall. Whoops. JMOP  |
| Anyone care to comment further? |
| I've spent my adult life saving for retirement under the assumption that SS will be gone before I qualify for it in 2031. I thought the gov't was on the right track when they started talking about incorporating plans for people to do their own savings and investing. But the problem is that people are becoming more reliant on government programs rather than less. How many people do you know who actually pay off their home? Now, people just keep taking money out through home equity loans. Very few companies offer pensions anymore. People don't take advantage of IRAs and 401Ks the way they should. I think things are going to get much worse before any changes are made. |
Well after re reading your post, holy cow!  You guys can't retire til 67 years old??!!!
Here, there is no set age for people to *stop* working, but they *can* retire anytime after 55 and still recieve a pension. By retiring at 55 they lose a percentage of their pension (not sure, but I think it's 10%) Most people I know retire at 55 or 60. If they retire at 60 they lose nothing. (I think....) |
| I'm moving to Canada! |
| Can we get a discount w/Allied Moving Vans if enough of us move to Canada?
And can I still draw a pension in Canada if I am an American or do I have to take a citizenship test? If I have to learn French I am doomed - I speak Southern not English.  |
| Okay... being an actuary I can comment a little on the systems for anyone who's interested.
I know very little about the US social security system, but my understanding is that the reason why it's failing financially is that it is still a pay-as-you-go system. The current taxpayers are paying for the current retirees. The social security system has no future savings. If it were set up in a way that the current tax payers are paying into a fund that will accumulate and eventually equal the benefit they will take when they retire then it would be financially sound. Problem is, you can't just switch to that method because then the current retirees would have nothing. It would have to be a very gradual, costly switch. You can't possibly compare the GDP to the social security debt. The GDP (Gross Domestic Product) is the total value of goods and services produced by a country in one year. It is one of the many measures of economic success of a country. It has little to do with how much income the population earns, and has even less to do with how much money the government collects in taxes and it's very far from how much government income is allocated to social security. In Canada, your government retirement benefit depends on how many years you have worked in Canada and may or may not depend on other factors, like your average salary or ending salary. Last time I checked, the amount you can expect to receive from CPP and OAS was pretty pidly (less than $1,000 per month) so you should plan to have personal savings as well as hopefully have an employer pension plan. Also considering how poorly the US plan is doing I personally am not counting on government assistance when I retire. I know it's likely I can count on it, but it's better to be prepared just in case. Oh... and if you think a million dollars will buy you a decent life annuity, it's frightening, but you're wrong. A few years back when I learned the numbers in pensions class, it was terrifying.  |
| In the US, benefits received also depend upon the number of years worked and wages earned. It is true that current workers are paying for current retirees. The current problem is that there are fewer workers per retiree now than there were years ago.
The plans to allow people to take charge of their own retirement ignores the following: diverting social security taxes into private retirement funds would mean less funds available for current retirees who rely upon the SS benefits to survive. Not only that, but what would happen to those who used their payroll taxes for private retirement plans if they chose poorly and they didn't have enough in their accounts to cover their expenses? People are already allowed to save for their own retirement. They just don't do it as much or as well as they should. The government could and I would argue shoud do much more to encourage these types of savings and investment. But I will also say that a big problem facing retirees is when their company raids the pension plan, or when the stock market takes a dive. Most retirement funds are invested in the stock market, meaning that corporate excesses and mismanagement don't just hurt current stockholders but also affect the ability of retirees to maintain any decent standard of living. The government could give tax incentives to encourage more savings now, and tighten regulations about pension funds, including when one corporation takes over another one, as well as do a better job with regulating corporate finances. |
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