If you're years from receiving Social Security benefits like myself, then like me you're probably assuming Social Security won't be around when you retire. So, short of privatization or getting rid of Social Security completely, here are my recommendations for fixing it once and for all, and without causing any short-term shortfalls in collections: 1) Means testing -- SS benefits should be phased out gradually the less you rely on it for retirement. I think it's ridiculous that there are people who have SS benefits guaranteed to them and yet it represents a small fraction of their overal retirement earnings. I know this sounds way too progressive, but the only way to reduce the overall burden of SS is to relegate it to purely a benefit for those who truly need it. This could be applied immediately and with a gradual phase-out to people already receiving benefits. 2) Allocate a portion of the SS windfall for centralized managed investments -- Having most of the SS revenues merely pass through to recipients is bad enough, but to have the rest invested in US treasuries that are barely beating inflation is downright criminal. Rather than private accounts, which have a risk of being wasted away through poor individual investment decisions, a portion of the $100 billion annual surplus (as well as the roughly $2 trillion already held in the trust fund) should be syphoned into a fund managed by professionals tasked with growing it at least at 6-10% annually. Every other state retirement funds does it with tremendous success, and it would allow for the money to be channeled into alternative investments. It could also become a sovereign fund that could be an international activist investor. 3) Increase the retirement age -- Granted everyone wants to retire by the age of 60, but SS was created when the average life expectancy was 67. Today it's 77. At least bump up the minimum age to 65 if not higher. This should be gradually increased for people nearing retirement age and in full effect for those younger than 50. Obviously I haven't done the math, but I would think this would go a long way in addressing this 800Lb gorilla (well, actually, I suppose Medicare is the true 800Lb gorilla, so maybe SS is the 500Lb one sitting next to it). Any opinions on what I laid out here, and any other ideas you can add?
reply to 1) I don't think you can cut some people out based on merit without the entire system becoming fallible to being gamed and swindled. Some people get it and some don't, but everyone pays in... reply to 2) Centralized managed investments of huge governmental monies lead to cronies defrauding the government and much more swindle. Case in point: Jeb Bush and his investment friends and the Florida state employees funds. Buying stock at 30 and selling at pennies on the dollar? Somebody should have gone to jail but the worst that was done is the head guy resigned, and Jeb is now working at Lehman Brothers or some shit. He should be shot in the back of the head. reply to 3) Tough choice, and unfortunately, a good one. I think it will be done, although with the dipshits in Washington, you never really know. --- Social security is definitely a pickle. I personally think it is and will stay solvent for quite a while, but only because I know a social security lawyer who explains things well, and his main point is the social security crisis is all just politics and talking points. I don't know whether it is or not, but he makes a good argument. Then again, he's a really good lawyer, too. Anyhoo, thanks for the thought provoking post.
as you said the real 800lb gorilla is the medicare budget. if i'm not mistaken there are several studies out there that show it would be rather easy to fix the ss issue with a 1-2% increase in the tax rate. i think they said it would make ss solvent for another 30-40 yrs or so. you'll get your ss checks unless they go to means testing and you're wealthy. one of uncle ben's first speaches after becoming fed chair was on the whole boomer retirement issue and how paying their medical bills would result in something like a 15% reduction in the standard of living of the country. the medical bills are going to be big.
A must read for anyone truly interested in this topic is the recently published book "Where does the money go". To fix SS, taxes would either have to be raised 16% or spending cut 13%. To fix Medicare, taxes would have to be raised 132% or spending cut 50%. That puts the reality of the problems in to stark contrast. Also, we all love to rail against spending but pork only accounts for $1.6 billion in its worst year out of a $400 Billion budget. The items that essential make up the budget are SS. Medicare, Defense, and interest payments on the national debt. If we don't find a way to grow the economy we become a very different country, period. Politicians can talk all they want about cutting spending, and certainly it needs to be cut, but unless they are talking about defense spending, SS, or Medicare, it is all a bunch of BS. If they talk about taxing our ability to grow the economy and any impediment to growth they are dooming the country to very hard times. In addition to trading I am a business owner and an employer. While I haven't liked what Bush has done in his Presidency I have been incentivized to make money by his tax cuts as have a lot of other entrepreneurs judging by the tax receipts for most of his Presidency. Guess what I plan to do when my corporate taxes go up, my payroll taxes go up, and my income and dividend taxes go up? I will quit working so hard, infact worse than that I will pull back. What is the point of killing myself to make that extra $ when all I will get to keep is 30-40c on the $ made when all is said and done. A real world example for you, I have been doing DD for the last year on making a $1.8M investment in a health/senior care related master franchise that would employ 35 people in its 1st year, with a projection of adding at least 15-20 employees a year for the subsequent 2 years, and at annual salaries ranging from $32.5-85K , not minimum wage crap. Given what is going on politically I am going to wait and see how things play out. If Obama gets in and starts carrying out his tax policy I will put the idea on hold indefinitely and will instead focus more on offshore ideas. Think I am the only one?
Actually, the real 800 pound gorilla is the insanity of all the people that went bullshit crazy when Bush tried to privatize social security... they could not produce any evidence that privatization had not worked everywhere else... and their only argument seemed to be that people would not be able to manage their own investments!! In other words, they really do think they are the elite and they really do think they can run things for people better than people can for themselves!! What, all us individuals could not find good investment advise like "BUY AN INDEX"?