The next major fix is going to be means testing, imo. Because they've already jacked up the taxes about as far as they can go. The public just won't accept much more of that. And they've also been taxing away the benefits of higher income recipients. So they don't have many options left to kick the can down the road much further. So more than likely they're going to begin means testing and anyone who's 'rich' would begin seeing a drop in how much they get. And then you find out that when you thought you were middle class, they're counting you as rich. They'll say, 'hey, everyone that dies before retirement is already not getting back what they put in, so this isn't much different. Just another necessary step to keep the program alive. Not really a big change'. Or you can believe piezoes scenario. Which one of us is presenting alternate facts?
Actually, I agree with both of you. One reason so many seniors are furious is they were kind of misled into believing they had their own personal SS trust account. Then they were kind of snickered at and told, "no, you're way too dumb to handle your own money. You get what we tell you you get. " Now piezoe has a very good point as well. We just have to recognize that things like health care and a decent retirement are not normal consumer goods. We are not going to let people die on the sidewalk because they did not plan ahead well. So we are going to have to have something, call it what you like, but if we have everybody in it, it would be better because we might need your money at some point. And it's not just the lower class that will benefit. Plenty of middle managers who got laid off with no pension are quite happy to get that SS check.
The only group that makes out in regards to Social Security would be the lower middle class. Anyone middle class or above generally will take out less than they put into the system. Even the people who "make out" would have been better off placing the money in an investment account earning a 3% return. Any search of charts showing Social Security returns all demonstrate the system provides poor returns for everyone across the board... rich, middle class, or poor. For those middle class and better the returns are negative generally. The supposed "campaign against S.S." from Wall Street has something going it -- they are completely right. It is difficult to argue with hard, cold facts. The facts presented by the social security administration itself on their own website shows the returns for individuals are very poor (and in many cases negative). Every single person in the U.S. would be better off if their Social Security money was placed in a conservative investment account that earned 3% yearly towards retirement. Many other countries have privatized their social security retirement systems -- usually very successfully. More info: Social Security Privatization Around the World Individual Accounts in other countries: SSA Administration Reforming Social Security: Lessons from Thirty Countries So what is the U.S. going to do. The first thing I expect they will do will be to significantly raise the S.S. cap without increasing payout benefits. This basically just increases the taxes on the upper-middle class and better without any corresponding benefit. This is not the best solution for enhancing the system. The best thing to do would be to privatize the system, make it still mandatory. Use a portion of the existing Trust Fund to still pay current retirees. Rollover appropriate funds paid by currently employed people to individual accounts with conservative returns managed by Wall Street. Give people who are over 50 a choice to stay with S.S. or go with privatized accounts. Everyone under 50 would be privatized automatically.
Two important points I would like to make. One is that the viewpoint that the only group that makes out in regards to Social Security would be the lower middle class is true only if one considers only the material aspects, which will sadly be true of most of us. I will also add that even if the system is put back as it was intended to operate with no participants receiving a negative ROI, it will, if it serves its purpose well, always favor those at the lower end of the wage spectrum. This seems a necessary feature so long as S.S. is designed to serve a capitalist economy. Also please be very careful with regard to projected returns based on inadequate funding. Naturally these returns will not be satisfactory. Why it is logical to neglect, year after year, to put the system on sound actuarial grounds and then point out that the system is flawed is beyond my comprehension. Does one have the right to complain about something they have willfully neglected? I'm going to assume that when you say privatize S.S. you intend the conversion from defined benefit to defined contribution with out a shared risk pool to draw on, and with the addition of management fees imposed by for profit investment firms that would replace the present administrative cost of S.S. If that is what you intend, than I will have no choice but to very strongly disagree that what you propose is a good idea, unless you can successfully argue that the low wage worker can afford to largely self-fund their retirement with such a scheme. I hope you are thinking this through more carefully then it seems to me you have. If you are really serious about proposing such a thing than I think you owe it to yourself to read this book. (See chapter 4 in particular.)https://books.google.com/books?id=s376sg5wvLQC&pg=PA101&lpg=PA101&dq=privatizing+pensions+under+thatcher&source=bl&ots=GTBTMIgERD&sig=gRTFzhDRK7QOByFfl42RSCbi3UQ&hl=en&sa=X&ved=0ahUKEwikk7q_-rPTAhVjyVQKHesEDuUQ6AEIRzAF#v=onepage&q=privatizing pensions under thatcher&f=false
Thank you attempting a balanced look at the arguments. We must recognize that their is a serious conflict of interest behind the calls for privatizing social security. Yet we should not dismiss the idea out of hand. Although I have dismissed it myself, it is only after many many hours of study and consideration. We have good examples of privatization experiments to guide us. The British experiment begun under Thatcher would be one of them. Another example that should be looked is the Norwegian public pension plan. Let us make informed decisions and not allow ourselves to be swayed by those with serious conflicts, or those blinded by political ideology.
It is a popular exercise to look at the total return for of S.S. compared to total contributions for those dying at a specified age, usually their life expectancy. These kinds of comparisons are not particularly useful however because returns on social security are based on ones earning history and are only indirectly related to total contributions. The weighting factor for each years contribution is not constant. Early contributions have a higher weighting than later contributions. So not only your total contributions over 35 years matter, but how those contributions are distributed matters as well. A better basis for comparison would be to ask what net ROI after expenses would be required on an ordinary, tax deferred, investment account, assuming a particular 35-year earning history, contributed to at the S.S. rate, to yield a pension equivalent to the S.S. pension up to some specified age. For a single person with no dependents who dies before qualifying for a pension, their ROI is virtually zero. For that same person who lives to be a hundred their ROI is substantial even if they are a high wage earner. These comparisons are very dependent on age at death. The following is from a Reuters Oct. 2012 article, By Mark Miller | CHICAGO Is Social Security a good deal? Many Americans worry that they will put more money into the system via payroll taxes during their working years than they will ever get back in benefits - and their concerns help fuel the ongoing push by Republicans to transform Social Security into a privatized system of personal accounts. Mitt Romney has supported privatization in the past (see his book, "No Apology"), and running mate Paul Ryan argued for it as recently as last week's vice presidential debate: "Let younger Americans have a voluntary choice of making their money work faster for them within the Social Security system." Could workers make their money grow more quickly with personal accounts? The actuaries at the Social Security Administration (SSA) ran an analysis recently that simulated real (after inflation) annual rates of return on payroll tax contributions for beneficiaries who were born between 1920 and 2004. It showed that some workers might beat Social Security's returns in some years if they took risks in the stock market. But over a lifetime, Social Security's consistent, risk-free and inflation-adjusted returns would be very tough to beat. I say "simulated" because the amount of your Social Security benefit is not based on tax contributions, but on your lifetime wage history and longevity. Moreover, Social Security is not an investment vehicle dependent solely on market returns - it is more like a form of insurance, annuity or pension, since its promise is to pay a monthly benefit amount no matter how long you live. In that sense, there is a peace-of-mind value that is difficult to quantify. "Since you're guaranteed an inflation-adjusted income stream for life, you can think about your other sources of income and assets knowing that you'll always have Social Security," said Melissa Favreault, a senior fellow at the Urban Institute. THE SIMULATIONS The SSA ran simulations analyzing workers with low, medium and high wages, and broke out results by four different life situations: single men, single women, a one-earner couple, and a two-earner couple. Then they adjusted the results for other key factors, such as mortality rates and disability. In addition, mindful that reforms will be coming at some point, they ran variations from the current outlook showing the impact of lifting the ceiling on taxable wages, and another scenario showing scaled-back benefits. Overall, they found that the current Social Security program is a good deal. However, your mileage will vary by lifetime earning history, longevity and your year of birth. The payroll tax rate for Social Security's retirement and disability programs reached its current peak level - aside from the current payroll tax holiday - in 1990 (6.2 percent each for workers and employers). Since we do not know what will happen on the policy front, I focused on the SSA's numbers assuming no change in current law. They found that every age group received a positive return. Among current workers and retirees, the rates of annual return varied by about two percentage points - from a high of 6.52 percent (for single-earning couples born in 1920) to 4.52 percent (for their counterparts born in 1985). So if you wonder whether you will "come out ahead" on Social Security, here are some key differentiating factors to keep in mind: --Younger workers will get less. Today's young people will see lower rates of return, because they will have paid the highest payroll tax rates of all the age groups compared in the SSA analysis. --Couples do better. Marital status is a key factor affecting Social Security returns. In every age group, the best returns went to married couples where one spouse works. That is because Social Security's design includes valuable spousal features that pay benefits to nonworking spouses and surviving widows. Spouses are entitled to receive the greater of his/her own benefit or half of their spouse's benefit. And surviving widows can step up to 100 percent of a deceased spouse's benefit. A single-earning couple with medium wages, born in 1943, will see a 4.59 rate of annual return, while a single female born the same year - also with medium wages - can expect a 2.49 percent return. (Spousal benefits are also available in cases where a lower-earning spouse had some earnings but so much less that their worker benefit is less than half.) --Longevity matters. All pension and annuity systems are structured around mortality credits - that is, they use assets of those who die young to fund the benefits of those who live to a very advanced age. A projection by Favreault of Social Security data found that 82 percent of individuals who live to age 85 get back more in benefits than then pay in taxes; about 52 percent of those who die between 75 and 84 come out ahead. Meanwhile, just 21 percent of those who die between 62 and 69 get back more than they put in to the system. The odds here are especially good for women, since they have a higher likelihood of surviving to retirement age and longer lives after retirement. That gives them higher rates of Social Security return - a medium-earning single female born in 1943 can expect a 2.49 rate of return compared with 2.09 percent for her male counterpart. --Lower-income workers come out ahead. Low-income workers enjoy higher rates of return by design, because Social Security's benefit formula is weighted toward lower-earning beneficiaries and their payroll tax contributions will be relatively lower. A very low-income couple born in 1943 will receive a 6.79 percent annual return, compared with 3.92 percent for their high-earning counterparts. http://www.reuters.com/article/us-column-miller-socialsecurity-idUSBRE89H0YG20121018
I am not buying the assertions in this article. The Social Security Administration website shows that no one who is not of retirement age will be earning a 2.09% return, much less a 4.59% or 4.52% return. The returns are generally all below 1%. I would like to see the direct source of their information which they claim is "actuaries at the Social Security Administration (SSA) ran an analysis recently that simulated real (after inflation) annual rates of return on payroll tax contributions for beneficiaries who were born between 1920 and 2004." This article needs to go back to people born in 1943 in order to present a positive case for Social Security. Unfortunately anyone born in the 50s, 60s, 70s, 80s, 90s, etc. are screwed. And the article is pure bullshiat.
I stand corrected. You are quite correct. You brought protection that, as it turned out, you couldn't use. It is the same for example if you were to buy disability insurance, but never had the ill fortune to become disabled.