NationStates Jolt Archive

How Social Security is ripping you off!

Yes, that is right, you’ve been HOZED by social security. First of all, if you were born after 1960 you now have to work two additional years to get your full social security benefit. If you choose to retire ‘early’ (at 62) you get a 30% reduction in benefit instead of the traditional 20% reduction (http://www.ssa.gov/retirechartred.htm) Why? Because Social Security was so poorly planned as to not account for an increasing life expectancy. That’s what you get for not dieing soon enough.

Should you dare to have earned income while receiving social security here is what happens to you (http://www.retirementwatch.com/social.htm); If you are 62 years old and earn more than about $11,000 you will see a large reduction of your social security benefit. Take that you nasty ‘rich’ person!

Even if you don’t have a job but receive other income (such as a pension) you get the pleasure of paying taxes (http://www.annuitybrokerageservices.com/social_security.htm ) Almost every type of earnings, dividends, or interest is included as social security threshold income.
• If you are single with income between $25,000 and $34,000 up to 50% of your social security is taxable. Income in excess of $34,000 results in 85% of your social security income subject to tax.
• For couples with income between $32,000 and $44,000 up to 50% of social security income is taxable. Income over $44,000 results in 85% of your social security income subject to tax.
So you nasty ‘rich’ retired people earning over $25,000 – hand it over!

Ever wonder what a retirement income benefit like social security is worth? Let me show you:
For the sake of simplicity I’ll keep inflation out of the formula. Though your benefit will require inflation adjustments, your income (and therefore ‘contributions’ aka tax) will also likely grow at a rate comparable to inflation. By keeping both level the formula is vastly simplified and the answer reasonably accurate. If you want to factor inflation in be my guest, I’m including all the tools you need, but your result will not differ substantially for all the effort it will take. If you disagree, try it before you object!

A male born in Florida in 1985 who is earning $40,000/ year can expect a benefit in 37 years of $1007/month at age 62 retirement (http://www.ssa.gov/OACT/quickcalc/index.html) . A similar private benefit would cost a lump sum of $163,000 (http://www.immediateannuities.com/) .

That wage earner will have paid $510/month for all 37 years for this benefit (http://www.ssa.gov/pubs/10022.html) (15.3% tax) Using this calculator (http://www.arachnoid.com/lutusp/finance.html) you can determine that this is a return of negative 1.92% This person would have been better off putting the money in a coffee can!

There are many safe alternatives out there with guaranteed minimum rates. Here is a link (but not endorsement) to several which have a guaranteed minimum rate of 3% forever (http://www.annuityadvantage.com/ ) There are TONS of others out there.
In a worst case scenario of 3% for 37 years our same worker would accumulate $404,986.24 – more than TWICE the amount! That would translate into a monthly benefit of $2501 – or he could keep the principal and draw on the interest only for a minimum of $1012 (remember, 3% guaranteed minimum rate) Which is still greater than the current benefits offered and would result in almost a half-million dollar increase in net worth. (versus the great big 'goose egg' your estate currently gets if you die unmarried at age 61)

What this demonstrates is that the people who support the ‘status quo’ rather than modernizing the social security benefit really (intentionally or through ignorance) have much less interest in you than they have in supporting a behemoth of a bureaucracy that disguises wasteful government excess under the smokescreen of ‘helping’ you.

The SocSec program hasn't seen any real modernization, and is not in good shape. Returns are minimal, and the "trust fund" is nothing but a big IOU. I would support doing three things:

1. Raising the retirement age
2. Allowing people to invest outside of SS, but at the same time increase their taxes to the system so that those who prefer the traditional system would have enough money.
3. Increase the payroll cap on SS contribution

However, I would prefer to wait until the US budget is improved, and then use the budget surpluses (if possible) to pay for reform rather than more borrowing.

The SocSec program hasn't seen any real modernization, and is not in good shape. Returns are minimal, and the "trust fund" is nothing but a big IOU. I would support doing three things:

1. Raising the retirement age
2. Allowing people to invest outside of SS, but at the same time increase their taxes to the system so that those who prefer the traditional system would have enough money.
3. Increase the payroll cap on SS contribution

However, I would prefer to wait until the US budget is improved, and then use the budget surpluses (if possible) to pay for reform rather than more borrowing.
People already are allowed to invest outside of the program. The trouble is that the program itself is inefficient, stale, outdated and expensive. Increasing the amount people are forced to put in it would not make it any more adequate.

Wow, nobody has disagreed so far? Never thought it'd be so easy. I suppose all it takes is a handfull of facts to hush the critics.

I have always hated social security. I like to think of it as the government stealing my money. Personally, I am smart enough to manage my own g.d. money and the government shouldn't be treating me like a child and holding my hand so I don't screw myself over when I'm old. Guess what if you don't save money that's your OWN FAULT. I'd have a hell of a lot more money when I hit 65 if I just took the money the government steals from me and put it in a saving account. There should be an opt out option for social security :\

OH NOES! :eek:

The main reason I have no problem w/SS reform is because the system is so dated and inadequate that opposing reform would have no beneficial consequences, and would hurt people in the long run.

Tell that to the Democrats.

All talk with denouncement but not one counter proposal.

No wonder people are getting mad with them.

All talk with denouncement but not one counter proposal

Well, I border on moderate Republican/Democrat, and know what you mean. They (or we?) will never win as long as they are considered the party of opposition, not ideas. Clinton was so successful because he was able to work together with the Republicans rather than just taking a contrarian stand for partisan politics.

Social Security is not meant to be a main source of retirement income, nor has it ever been so. It is meant to provide a base( i.e. social security ), to keep senior citizens out of poverty, and keep them from being homeless/starving etc. The government expects people to invest outside it, and not depend on the government.

Well, I border on moderate Republican/Democrat, and know what you mean. They (or we?) will never win as long as they are considered the party of opposition, not ideas. Clinton was so successful because he was able to work together with the Republicans rather than just taking a contrarian stand for partisan politics.

So very true. Alwell, I guess SS Reform is really D.O.A. thanks to dems. And Bush was so willing to compromise.

Besides, if you are thinking about LIVING off Social Security, you're kinda in trouble anyway.

SS was supposed to be a supplement to a private account of money--it was never supposed to be the way to live richly in old age.

When people absolutely NEED SS, then of course, they are in such a destitute condition that they need whatever they can get.

Khvostof got me first!

It's something we (or at least those of us awake) learned in high school government class.

FDR supported a kind of partial privatization. In 1935 he said, "It is proposed that the Federal Government assume one-half of the old-age pension plan, which ought ultimately to be supplanted by self-supporting annuity plans -- Voluntary contributory annuities by which individual initiative can increase the annual amounts received in old age." Thus, it can be argued that the SS system he proposed would be a moderate half/half system, and not a total government nor total private system. This would enhance the quality of retirement life, help maintain the SS system, and ensure its fiscal stability.

Social Security is not meant to be a main source of retirement income, nor has it ever been so. It is meant to provide a base( i.e. social security ), to keep senior citizens out of poverty, and keep them from being homeless/starving etc. The government expects people to invest outside it, and not depend on the government.
And now it is too grossy bloated and inefficient to even achieve those modest goals. To add insult to injury, they reduce benefits and tax people's SSI benefits even if they are of modest means. I say scrap it and turn it into a mandatory savings plan.

Besides, if you are thinking about LIVING off Social Security, you're kinda in trouble anyway.

SS was supposed to be a supplement to a private account of money--it was never supposed to be the way to live richly in old age.

When people absolutely NEED SS, then of course, they are in such a destitute condition that they need whatever they can get.

FIRST off.. this is an idea play out by Democrats who seem to belive you should'nt live off SS but that minimum wage needs to be made a LIVING wage.. odd >.>

Secondly If SS is suppose to be the suppliment you claim, then taking Bush's plans into account would be to no ones detrement.. yes it will cost money, but then the government isn't exactly saving money if it does nothing.. it will cost them more in the long run. There is the possibility that SOME people wont know what their doing, take the OPTION of private accounts anyway and squander the 35% of their savings that they put into SS. But as you stated, they will still get SOMETHING and SS isn't meant to be lived off of, only a suppliment.

Thridly the idea that we wait for budget surplusses again to pay for SS is a joke, SS loeses its finacial stability by 2021.. which is a demographic problem.. your just proposing for the government to spend even MORE tax payers money on this system instead of correcting the problem itself.

I'm a bt in shock, where are all of our libby/socialist/communist pals? Did I scare themoff with all that fact? Too much math?

(I could sympathize with the second - putting it together gave ME a headache, frankly)

B0zzy, you won't get any intelligent responses if you act like an ass.

Moving on.

It seems to me as though the "lock box" idea is worth a try too. The government has dipped a bit too much into Social Security; had it not, the issue might not be quite so pressing as being 70 years on the horizon.

The government has dipped a bit too much into Social Security; had it not, the issue might not be quite so pressing as being 70 years on the horizon.


Actually, I think the Trust Fund is pretty much stuffed with IOU's. They've been borrowing for years and it is nearly exhausted.

Well, I border on moderate Republican/Democrat, and know what you mean. They (or we?) will never win as long as they are considered the party of opposition, not ideas. Clinton was so successful because he was able to work together with the Republicans rather than just taking a contrarian stand for partisan politics.

Cough! Cough! Choke! Gag! Sorry, I was drinking when you said that Clinton was "successful because he was able to work together with the Republicans". Cough! There I go again.:(

Actually, I think the Trust Fund is pretty much stuffed with IOU's. They've been borrowing for years and it is nearly exhausted.That's what I mean. I think if the government paid back everything it owes and then used Gore's little lock box, things would at least be better.

That's what I mean. I think if the government paid back everything it owes and then used Gore's little lock box, things would at least be better.

I'll be 62 in May and have been paying into SS since 1960 or so. In addition, I've been paying into a 401k since 1988. I sincerely believe that if I had been able to invest everything that my employers and I have paid into SS into a private fund similar to my 401k, I would be much better off when I retire.

If SS or a portion of SS is privatized, people should be given investment options that include stocks, bonds, and “guaranteed returns” similar to 401k options. Unlike a 401k people should not be allowed to draw any money out of the fund unless they are of retirement age or disabled. If someone dies before they collect the privatized SS, or before they have exhausted all the funds in their account, any amount remaining in the account should be turned over to their estate.

If I were young enough, and give, the option I have outlined above I would jump at it. As it is I will retire at 66 and my wife, who has not worked outside the home, and I will be OK. I will exhaust our 401k to pay off our mortgage. With SS, military retirement, and a very small stipend from a company paid retirement program we will retire with 62 to 70% of my current income and be debt free.

To all you “young pups” out there, my advice is SS or not, start some type of a retirement plan now and don’t touch the money under any circumstances until you are ready to retire. To many people “raid” their 401k when they change jobs and end up with nothing at retirement.

B0zzy, you won't get any intelligent responses if you act like an ass.

Moving on.

It seems to me as though the "lock box" idea is worth a try too. The government has dipped a bit too much into Social Security; had it not, the issue might not be quite so pressing as being 70 years on the horizon.
Oooh, an ass. Gee, I think I'll take my sensitivity training from your class for the thin-skinned. Do I get rocks and a glass house too? :)

The lock box idea is fundamentally flawed. What would you have them do with the cash? They can't just put greenbacks in storage. So what does that leave for them to do? The answer to that question illustrates the fallacy of a federal 'lockbox'. (hint - where do reveunes from the sale of treasuries go?)

The only way to create a true 'lockbox' which the feds cannot raid is to remove the funds from federal custody - privatize.

I'll be 62 in May

Dang! And I thought I was the old dude here @ 37.




As it is I will retire at 66 and my wife, who has not worked outside the home, and I will be OK. I will exhaust our 401k to pay off our mortgage.
Dude, check with a financial advisor before you do that. You are going to get REAMED for taxes if you do that and there is likely a better way. Your house won't keep you any dryer in the rain or cooler in the heat if it is F+C. Meanwhile you will have paid GOBS of tax for the money to pay it off. Money that could be used for better purposes (liquidity, income, growth) I beg you - consult with a competent advisor first. Hell, you can even post their advice here and I'll be glad to pick it apart if it is less than stellar. I cannot give you anonymous advice however, other than to seek an advisor.

Cool?

Meanwhile, yes - all you kids out there, get started NOW saving. I started at 27 and I wish I had started sooner. At first it is more for the habit than the money. It is easier to save more if you've always saved a little. It is too easy to put off 'till after I pay of the cards' or whatever. Don't fall for it. I still have a balance on my visa and probably always will. meanwhile I have enough in my 401k to pay it off fourty times over.
Also, your first ten years as an investor suck, because that is about how long it takes before your returns are greater than your contributions. THAT is when it gets interesting. The sooner you get the first ten years out of the way the better. Start NOW even if it is only $25 per paycheck going into your IRA. It is the habit that counts just as much as the savings.