Educate yourself: SEVEN MYTHS ABOUT SOCIAL SECURITY

[jswordy]

Motley Fool, a respected investor's guide column:

http://www.fool.com/news/commentary/2005/commentary05020304.htm

[Bozita]

1. IMHO, that's homepage material

Thanks.

[Ivote]

2. Please Read My Post about SS

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=104x3052364

[AllegroRondo]

3. Myth 6: Private accounts will fix the problems

Allowing private accounts does not solve Social Security's problems. It is more of an ideological goal than an economic solution. In fact, diverting money to private accounts leaves less money to pay current and near retirees, which the government would have to come up with elsewhere, probably by more borrowing. If the president and Congress had kept discretionary, non-defense spending in check over the past few years, perhaps this would be more palatable. But given our current deficits and skyrocketing Medicare spending (the real retirement crisis), I'm curious how the country can afford a plan that, by itself, doesn't solve the long-term problem.

------
This is the biggest thing we have to keep the public informed about. Private accounts will not fix any of the problems that * seems so worried about.

[papau]

4. The FOOL is wrong about "Social Security is fine" being a myth

Myth 5: Social Security is fine
Since the growth of retirees will outpace the growth of workers, Social Security is not hunky-dory. Something needs to be done, sooner rather than later. There is no painless solution: Taxes will have to be raised, benefits cut, or a mixture of the two. Which you prefer probably depends on your income, other retirement resources, and belief in the purpose of Social Security. If you see it as a safety net to prevent widows, orphans, and the elderly from living in poverty, you might argue that taxes should be raised and/or benefits cut for wealthier Americans. If, on the other hand, you see it as a way for individual Americans to supplement their retirement income irrespective of other resources, you might be inclined toward broader benefit cuts -- and perhaps the possibility for individuals to do better through private accounts.


Does the FOOL think the projections (that say the System is fine forever as long as GDP growth exceeds the 1.6% assumption that produces the 2042 date) are done without taking into account the growth of retirees relative to the growth of workers.

What an ass. I guess he is trying to show how he is unbiased. :-) What he does show is that he needs a bit more education.

sigh...

:-)

[aint_no_life_nowhere]

5. "Since the growth of retirees will outpace the growth of workers"

That's something I don't quite understand. They say that years ago there were 16 individuals paying in to S.S. for every person receiving benefits. They also say that just a few years from now, only two will be paying in for every benefit recipient. That's an incredible change - a 400% increase in recipients compared to those paying in. I understand that there are factors such as the baby boom and also that people are living longer. But 400%??? Isn't there however the factor of women entering the work force in great numbers in recent years that could offset the effects of the baby boom and greater longevity? And could the fact that more people are now unemployed than the government admits to (so-called discouraged workers and the homeless unemployed) be a factor? Or that wages are simply not increasing at the low end of the employment marketplace be a factor? No journalist seems to be addressing the finer details of these statistics being thrown at us.

[papau]

7. The amazing part is that it was all predicted in 1934 by the actuaries

that set up the plan.

In 1934, when Franklin Roosevelt formed the Committee on Economic Security to design what was in effect the first federal safety net, the committee hired three actuaries to stargaze into the future. The actuaries predicted that the proportion of Americans over 65 -- then only 5.4 percent -- would rise to 12.65 percent in 1990, meaning that retiree costs would soar. They were just a tad high; the actual figure would be 12.49 percent.

Nothing has changed. There is no problem. Two workers per retiree does not kill the system - indeed, it does not even strain it that much.

I am an actuary. Talk to an actuary. The Bush folks talk to any and all math/statistical types except the actuaries.

[Igel]

10. So how do those 2 support the third?

Since the money will have to come either from then-current FICA taxes or general tax revenues.

[htuttle]

11. Well, doing a little math

If each of those two workers is paying 6.2 percent into social security, and the average pay of the two them is $50,000 per year (may be a little optimistic nowdays), that's $6,200 ($3,100 x 2) per year going to Social Security. Since their employers are also kicking in 6.2 percent of their average 50K pay, that's another $6,200 per year, making $12,400 annually, which is about what you get now.

This leaves really no money for administration, however. Maybe by then, a massive AI program (and accompanying voice/phone menu system) will have replaced the entire Social Security Administration bureaucracy...

Or, we could raise the top cutoff rate for FICA to $200,000 from about $80,000 where it is now, and keep a human staff in place.

[papau]

14. Admistration adds 1% to cost :-)

:-)

[papau]

13. The wonders of using the real projected benefits in the math - the

benefits are a bit pre-funded

That old excess payroll tax we are paying now provides an interest component to the income side of the calculation, plus the benefit is poverty level - SS is not designed to make you fat and happy in retirement

:-)

[Cronus Protagonist]

6. No problem. Make the rich pay more into Social Security

Simple solution. It works. Problem solved.


http://bushspeaks.com/home.asp?did=194


http://brainbuttons.com/home.asp?stashid=13
Buttons for brainy people - educate your local freepers today!

[papau]

8. Raising the wage cap in effect does make the rich pay more.

and is the best idea (I like no wage cap at all - let the very rich get million dollar monthly checks from Social Security by counting all income - I'll sit back with a huge smile as I think of all the payroll tax they paid in to get that check - and how all that money from the rich allow the payroll tax rate to be reduced - meaning I paid less!)

:-)

[sandnsea]

9. pretty good, except for

"Which you prefer probably depends on your income, other retirement resources, and belief in the purpose of Social Security. If you see it as a safety net to prevent widows, orphans, and the elderly from living in poverty, you might argue that taxes should be raised and/or benefits cut for wealthier Americans. If, on the other hand, you see it as a way for individual Americans to supplement their retirement income irrespective of other resources, you might be inclined toward broader benefit cuts -- and perhaps the possibility for individuals to do better through private accounts."

It isn't a matter of how one chooses to view it. It's a matter of what it is. It's an insurance program to protect your family from poverty if you die, are disabled, or grow too old to work. Period.

[nuxvomica]

12. Much better explanation of the "crisis" here

The link was originally posted by dweller on another thread. I have been e-mailing it to everyone I can think of.

from Social Security crisis? Not if wealthy pay their way
By Kevin Drum

...
So this was the implicit bargain in the reforms recommended by Greenspan and signed into law by Reagan: From 1983 to 2018, low- and middle-income earners would pay excess payroll taxes. This allowed income taxes to be kept low, and primarily benefited high earners.

Then, beginning in 2018, instead of raising payroll taxes to pay for baby-boomer retirement benefits, Social Security would begin selling its bonds back to the government.

To pay for those bonds, income taxes would be raised - high earners would begin paying higher income taxes.

In other words, the fact that income taxes will eventually need to be increased in order to cover Social Security benefits was part of the Greenspan/Reagan plan from the start.
...
more at Christian Science Monitor