Aseahawkfan wrote:I did some research as well. You are right, Riverdog. It won't be insolvent, but will need to drop to 76 percent of benefits. This is from the social security administration itself.
Their recommended remedy is to increase the tax rate to 14.4 percent or reduce benefits 13 percent to fund for the next 75 years. 7.2 percent employee and 7.2 percent for employer.
They better get on this or we'll have 70 year olds robbing people. That will be terrible.
I would raise the age to 70, eliminate early retirement, and raise the tax hopefully by less if we do that, but we'll see what path they choose.
I guess they are investing the social security funds in treasuries, which have been horrible for years. It may be better for social security if interest rates stay at 4 percent or higher. I wonder what interest rate they would need to improve social security solvency. The low interest rates have made treasury support from bonds negative. It does indeed seem true that the government has been using social security to fund the government at a net negative for social security. It is the old aphorism of robbing Peter to pay Paul. Terrible mismanagement of social security. If treasuries are going to be used to help fund social security, the interest rate would have to set equal to or above inflation to match the negative impact of inflation on fixed income.
I know many wealthy people, especially fund managers, want social security invested in the markets. They're salivating over the fees they could collect from managing social security and the amount of liquidity it would push into the markets to drive up stock prices. If they ever allow fund managers to invest social security, my goodness you better be invested in stocks or you are going to miss out on the massive infusion of liquidity.
Thanks for your acknowledgement.
I agree with eliminating early retirement and raising the minimum retirement age, but I'm not sure I'd go all the way to 70, at least not all at once. Phase it in. The problem is that people have been planning their retirements under the assumption that they can start collecting benefits at age 67, and we don't want to be moving the goal posts with 2 minutes left in the 4th quarter.
I had a similar thing happen to me when I was planning my retirement. Our original plan was for my wife to retire and draw full benefits and I would defer mine but draw on hers at 50% of her benefit. The strategy was called file and defer. Mine would be the higher of the two benefits, so we would maximize it by delaying my taking it until age 70. They changed that provision and we missed the cutoff date by 10 months. But shortly after that, my wife was able to get on disability at age 62, so she actually got a higher monthly benefit had she waited until her FRA (full retirement age/amount).
The other thing I would do is extend the maximum benefit deferment from the current 70 out to age 72. I read a book once that challenged its readers to think of SS not as an accountant would, ie figure out how much total money you can get out of the system and choose that option, rather think of it as insurance to guard against a retiree's worst fear: Running out of money before they die. In other words, I'd rather receive a higher monthly benefit later in life and get less total money than I would have a lower monthly income when I'm in my late 80's-90's. That's what I did, deferred my benefit until age 70. I'm now getting 132% of my FRA. The Social Security fund benefits as they'd be paying out less and the beneficiary has the peace of mind of the higher benefit later in life, so it's a win-win. It would also cause people to either keep working or save more money towards their retirements so they could cover the gap between 67 and 72.
There are also some rules regarding how divorcees can draw on their ex-spouses account that I would re-visit. It made sense years ago when men had a much higher paycheck and better employment opportunities than their female counterparts, but that paradigm has changed. In 1963, the gender wage disparity for women was $.58 vs $1.00 for the man. Today, that number is $.83 to $1.00 while earning opportunities are now basically equal between genders. Women aren't nearly as dependent on a man for income as they used to be when that part of SS was put in.
I would also remove the cap, currently at $176k/year, on earnings subject to SS tax.
George W. Bush once proposed that individuals be allowed to invest their portion of the SS trust in the private sector, and the Democrats went ballistic. It demonstrated how SS is considered the 3rd rail of politics: Touch it and you're dead.
