Why Social Security is a Success, in Four Charts

[MULTIZ321]

Why Social Security is a Success, in Four Charts - by Elizabeth Stoker Bruenig/ Social Security/ New Republic/ newrepublic.com

"Eighty years ago today, President Franklin Delano Roosevelt signed into law the Social Security Act, a piece of legislation that has bequeathed modern America with the bundle of benefits we know as social security. Including benefits for elderly, disabled, bereaved and otherwise vulnerable people, Social Security is one of the most useful and therefore hated programs the United States offers its needy citizens. Republican presidential candidates have been debating whether to slice, shut down, or preserve Social Security, and it will likely swell into an evermore contentious issue as the 2016 presidential election draws near.

But for today, let's celebrate social security in four graphs drawn from census data that demonstrate just how essential this set of benefits has been in keeping millions of Americans out of poverty..."


Richard

 

[bogey21]

No question that Social Security has been a plus for society. However, changes needs to be made to make sure it is around for those who need it in the future. I have been collecting benefits for over 15 years now. If my mental math is correct, I have collected over $300,000 and paid income tax on only a small part of it. It has been nice, but in truth I could have gotten along without it. Based on my experience I advocate means testing it. I don't know where to draw the line but believe it needs to be drawn.

George

 

[Makai Guy]

Time to remind everyone of Posting Rule #5:

Avoid posting about politics, religion, or contentious social issues
Unless directly related to timesharing, such discussions are prohibited in these forums, including TUG Lounge. We've been down that road before, it was ugly, and we are not going there again.​

Social Security can easily fall into multiple categories -- both politics and contentious social issues. So tread lightly.

 

[Blues]

Based on my experience I advocate means testing it. I don't know where to draw the line but believe it needs to be drawn.

As someone who's getting very close to retirement age, I disagree. We've paid into SS, we should get the benefits we paid for. It's already means tested -- If you look at the calculations for retirement bennies, you'll discover that the lowest income recipients replace 90% of their AIME (average indexed monthly earnings), while at the highest income levels, we get 15%. That's a pretty steep curve.

The main problem is that we're living much longer than folks did in the 1940's. Raise the retirement age -- that makes the most sense. And perhaps, along with that, raise or remove the income cap on contributions. But don't take away benefits for which we've been paying for all our lives.

Bob

 

[theo]

An objective, historical observation with no "political" statement or intent....

No question that Social Security has been a plus for society. However, changes needs to be made to make sure it is around for those who need it in the future. I have been collecting benefits for over 15 years now. If my mental math is correct, I have collected over $300,000 and paid income tax on only a small part of it. It has been nice, but in truth I could have gotten along without it. Based on my experience I advocate means testing it. I don't know where to draw the line but believe it needs to be drawn.

George

A noble viewpoint George, but a segment of our society has (...erroneously and with no actual basis in historical fact or truth) somehow come to regard Social Security as some form or version of a "retirement program". Certainly, no such application of Social Security was ever envisioned or intended by the Franklin Roosevelt administration; Social Security was originally designed and intended only as a mechanism to help keep people out of abject poverty and starvation in post-1929 Depression era U.S.A.

 

[MichaelColey]

I'm probably about 80 years to late for my opinion to matter, but here are my problems with Social Security:

1) The existence of it has made the overwhelming majority of people not take saving for retirement seriously, or at the very least has delayed such concerns until it's far too late. I would argue that on that basis alone, it has created more poverty than it has eliminated.

2) I shudder to think of how much I've paid in over the years, and have very little expectation that I'll ever see a penny of it.

3) The money we "put in" isn't set aside and invested on our behalf, or even designated as ours. It goes out as other people's "benefits". Like a ponzi scheme, the government is counting on the pool of contributors to always be bigger than the pool of recipients. While there is a trust fund, when you compare the amount in the trust fund to the unfunded obligations, it's quite troubling.

Rather than having 12.4% of my income go into Social Security (being self employed, I'm responsible for both halves), I would much rather be able to choose how to have that invested. Not having a choice means that those of us who want to invest in our own future have to pay twice.

I don't think there are any easy answers.

 

[x3 skier]

The current solution by both Congress and the Administration to a real Social Security funding vs disbursement problem is to kick the can down the road. While I'll be long gone by the time reality sets in, I'd gladly sacrifice now for the benefit of my kids and grandkids.

Cheers

 

[Sugarcubesea]

I thought I had read somewhere that a proposal was suggested that each new year increase the age of a recipient to receive SS so that is self expires…

For Example a person born in 2015, would not be eligible for SS till they reached 70 and so on…

 

[Passepartout]

There would not be a problem with the longevity of the SS retirement program even now, even with people living longer and less people working and paying in compared with those collecting benefits, had the Congress kept their fingers off the SS Trust. They saw a pile of public money- backed by Treasury bills, and simply spent the money.

Just thought I'd get my $.02 in before the thread closes.

See my signature.

Jim

 

[Blues]

A noble viewpoint George, but a segment of our society has (...erroneously and with no actual basis in historical fact or truth) somehow come to regard Social Security as some form or version of a "retirement program".

Ahem. http://www.ssa.gov/retire/index.html

It is a retirement program, and has been promoted as such for many decades. As Michael Coley points out, if we had been allowed to invest our FICA contributions into an independent retirement program, we'd all be much better off. But FWIW, our government has decided to run this particular retirement program.

Bob

 

[geekette]

There are simple tweaks to preserve it including lifting cap on wage ceiling for contributions and continuing to raise FRA gradually. Not in favor of increasing the payroll tax but is yet another small tweak available.

I am against means testing for the simple reason that those deemed not needing it still paid in. Further, it is becoming more and more likely for retirees to not have a pension, that 3rd leg of the stool. I am not in favor of punishing those that begin saving young because they know there is no pension for them (in effect, needing to save double, once for "personal savings" and the other to create self-pension). Plus, who decides the level of "sufficient means"? 40k or whatever in midAmerica vs coast is not the same yet many Fed rules just put forth A Number with no cost of living indexing.

 

[geekette]

Also, it is an entitlement program, unpopular as those words may be, because on the basis of having contributed to it, one is entitled to it.

 

[theo]

Personal perception vs. historical fact...

Ahem. http://www.ssa.gov/retire/index.html

It is a retirement program, and has been promoted as such for many decades. As Michael Coley points out, if we had been allowed to invest our FICA contributions into an independent retirement program, we'd all be much better off. But FWIW, our government has decided to run this particular retirement program.

Contractor-prepared web site language notwithstanding, I can't and won't argue with history. The indisputable historical fact of long-standing record is simply that the FDR administration created the SS program in the post-1929 Depression era in order to protect U.S. citizens from poverty and starvation. No more, no less. Period, amen.
I respectfully submit that the perceptual morphing of SS over later, subsequent decades of national prosperity is a separate matter and entirely different conversation.

That being said, it is (IMHO) unfortunate that the SSA site actively adopts the phrase "retirement benefits" but, with all due respect, I believe that the context in which the phrase is used there is clearly one of age-eligible supplementation (as distinguished from SS somehow constituting a stand-alone "retirement program" all by itself). Nonetheless, selective perception can and does somehow become its' own reality to some folks, regardless of crystal clear facts and the indisputable historical record.

In any case, I agree that those who paid into SS during their working years should be able to extract some benefit for their contributions in their (self-funded) retirement. Whether "means testing" is a fair and appropriate method for determining extent of benefits access is a matter of personal opinion. Opinions aside, we'd certainly all at least agree that Uncle Sam not having raided and badly mismanaging SS in the first place would have averted much of the imminent financial mess-to-be for everyone.

 

[pedro47]

Social Security is, have been and will be a very good program for so many peoples in the USA.

 

["Roger"]

Ahem. http://www.ssa.gov/retire/index.html

As Michael Coley points out, if we had been allowed to invest our FICA contributions into an independent retirement program, we'd all be much better off.
Bob

Not true.

I have an uncle who took his retirement as a lump sum because "he would be better off" investing it himself. Lost it all.

A couple of years ago, during one of the discussions about whether timeshares pay, one Tugger, for the sake of calculations, claimed that if you were not getting 20% return on your investments, you were not investing wisely. He had gotten that at the time he posted, but then lost it all.

Just because you do not get maximum return does not mean that you are investing poorly. Security (as in social security) can mean lower returns.

PS - Not only are there poor investments, if the money were in our hands, the number of swindlers with get rich schemes to take advantage of retirement money would be enormous.

 

[isisdave]

Like most of today's issues, it IS a complicated one ... I suppose we've fixed all the easy ones.

As a recently-retired 66-yo, I'd be worried about any kind of "means testing" that wasn't evaluated until I retired. The whole key to retirement planning is to start early and have a clear plan. It's also necessary to be able to know that the rules won't change a lot in the future. If my SS benefit will be lower because I am more successful at investing, it is a disincentive to invest well. If means testing doesn't consider a wide range ofincome needs at retirement (and who will make THOSE decisions?), then it'll be a time bomb for people with unusual expenses, like having to raise grandkids, or expensive medical problems.

The average benefit is about $1300, I read. While a couple can get by on $2600 a month in some parts of the country, it would certainly be hard in many others. And I don't know how a single person would do it on $1300 .. one-bedroom apartments are $1100 here. You'd have to have a roommate. My point is that SS is not an adequate retirement plan .. it's just the fail-safe part.

There are big dangers in allowing individual decisions for more than a relatively small part of the "investment." Some people will make stupid mistakes, others will just be unlucky, but more than a few will be victimized by con artists. As usual, it takes money to make money, and people with good business sense or the ability to pay for advice will do the best.

I'd support removing the contribution cap, and possibly collecting from other sources. Maybe part of the contribution for super-earners could go to an individual plan, or some sort of IRA-type-thing that was save from squandering.

 

[Carol C]

A noble viewpoint George, but a segment of our society has (...erroneously and with no actual basis in historical fact or truth) somehow come to regard Social Security as some form or version of a "retirement program". Certainly, no such application of Social Security was ever envisioned or intended by the Franklin Roosevelt administration; Social Security was originally designed and intended only as a mechanism to help keep people out of abject poverty and starvation in post-1929 Depression era U.S.A.

What about the post-2008 Great Recession which lingers on? Most baby boomers I know...including our household...lost major equity in real estate and took a huge hit in 401Ks and other savings devices...and still have not recovered. My cousin said they lost 3/4 of their investments that were stock market related (and they're not dummies...her husband now retired was a Westinghouse engineer his whole life.)

In summary I believe Social Security needs to stick around and even be expanded. If there's any "testing" to be done maybe folks with lifestyle diseases who smoke, do drugs, abuse alcohol and drink sugary drinks all the time should be in substance abuse programs. If you improve their health and hopefully stop their addictions to substances that can kill you then you can expect them to live long quality lives. If folks live long but stay healthy and care about their own bodies then social security as a system can stay healthy too.

 

[Passepartout]

In truth Carol, people collecting SS should thank the smokers, drinkers, drug abusers, motorcyclists without protective gear and others living risky lives. They have paid into the trust fund and will have reduced capability of collecting more than they paid in.

Here's to ya, folks, Party on!

Jim

 

[zinger1457]

1) The existence of it has made the overwhelming majority of people not take saving for retirement seriously, or at the very least has delayed such concerns until it's far too late. I would argue that on that basis alone, it has created more poverty than it has eliminated.

I see it differently, I see social security as a forced savings program for those that aren't responsible enough to do it on their own. I seriously doubt that those that don't take saving for retirement seriously would all of a sudden become model savers and investors if social security wasn't around.

 

[Passepartout]

I see it differently, I see social security as a forced savings program for those that aren't responsible enough to do it on their own. I seriously doubt that those that don't take saving for retirement seriously would all of a sudden become model savers and investors if social security wasn't around.

I think that those who live paycheck-to-paycheck would continue to do so. I hope that time never comes again- as it existed 80 years ago before Social Security. Debtor's prisons, potter's fields, generations deep inescapable bankruptcy.

 

[PigsDad]

What about the post-2008 Great Recession which lingers on? Most baby boomers I know...including our household...lost major equity in real estate and took a huge hit in 401Ks and other savings devices...and still have not recovered. My cousin said they lost 3/4 of their investments that were stock market related (and they're not dummies...her husband now retired was a Westinghouse engineer his whole life.)

I'm sorry to hear about your cousin's loss, but they either did something really stupid (like panic selling at the bottom) or were in some very risky investments. Any basic stock portfolio (index-based or whole-market based) has fully recovered from the 2008 crash, plus a healthy growth. In fact, we have been in one of the best bull markets in history for almost 7 years now.

If anyone has a 401k that hasn't recovered in this fantastic market, they need to fire their advisor! And if it was self-managed, they have no one to blame but themselves. Sorry to be blunt, but I am so tired of hearing how someone's portfolio hasn't recovered from the "Great Recession" -- the numbers and facts only point to mis-management if that is the case.

Kurt

 

[am1]

If people could choose to opt out of paying in then who would choose to pay in? Most likely low income earners who would see a very good return on their investment would opt out. Some would not save at all.

I would raise the retirement age as well. Maybe a few increases now based on age but most of the raise would be for those who have not entered the work force yet.

What is the minimum one needs to pay into the system in dollars and years to get the best return on their payments? If it matters say they live to 85.

 

[dioxide45]

When SS was created, they certainly had no idea that we would have the war and then the baby boom after that. One of the big problems with the system is that the number of beneficiaries are overly weighted in a certain age demographic. That is what is putting weight on the system today and in the foreseeable future.

Another problem was with how it was setup. Those in the beginning received benefits without paying anything in to the system. That is what one person called a ponzie scheme. It simply isn't sustainable.

I don't have all the solutions. I do wish they would give us the ability to determine where to put our money and how to invest it and know that it is actually there sitting in an account, whether all cash or in stocks. Not sitting in a drawer full of T-Bills.

 

[PigsDad]

There are simple tweaks to preserve it including lifting cap on wage ceiling for contributions and continuing to raise FRA gradually. Not in favor of increasing the payroll tax but is yet another small tweak available.

Your statement is spot on. I think the best solution is to frankly do all three tweaks. The problem is that the longer we wait, the more painful these "tweaks" will be; but unfortunately with the political realities the way they are, pushing off the hard decisions by the politicians is rewarded at the polling stations. Very few will vote for a candidate who will push for the best choices for the long term, vs. someone who promises good times in the short term.

Let's face it -- SS is not "fair". It is a social program and therefore inherently "unfair". It is a safety net that will (and should, IMO) benefit those that need it the most more vs. those that need it the least. As a higher-than-average wage earner, I know I could do better with 12.4% of my income compared to what I will receive from SS, but I am ok with that. I have been fortunate in many ways and knowing SS is there to help out those less fortunate is perfectly fine with me.

Kurt

 

[Elan]

Your statement is spot on. I think the best solution is to frankly do all three tweaks. The problem is that the longer we wait, the more painful these "tweaks" will be; but unfortunately with the political realities the way they are, pushing off the hard decisions by the politicians is rewarded at the polling stations. Very few will vote for a candidate who will push for the best choices for the long term, vs. someone who promises good times in the short term.

Let's face it -- SS is not "fair". It is a social program and therefore inherently "unfair". It is a safety net that will (and should, IMO) benefit those that need it the most more vs. those that need it the least. As a higher-than-average wage earner, I know I could do better with 12.4% of my income compared to what I will receive from SS, but I am ok with that. I have been fortunate in many ways and knowing SS is there to help out those less fortunate is perfectly fine with me.

Kurt

Nice post. I agree with everything you've stated.

I also believe it's possible to implement meaningful means testing with little to no impact on most of us here. However, IMO, the biggest gains can be made by raising the contribution cap.

The reality is that no responsible society is going to allow hundreds of thousands of elderly to live on the streets and go hungry. We'll pay one way or another. In that regard, SS was and is a very effective program.

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