Mention “cut” and Social Security in the same sentence and fear and ignorance show themselves instantly. Politicians know this and use it effectively.
Americans have no clue how SS works, how the funding or benefit calculation works, that the taxes they pay are unrelated to their benefit or that the program is skewed to provide a greater benefit to lower in income citizens. Take a look at two of the many comments to the Tweet below. That Tweet in itself displays an ignorance – more likely intentional misleading.
Had the government simply invested the money they took from me for Social Security (starting when I started working as a teenager decades ago) and put it into an S&P 500 index fund instead of their government mismanaged “trust fund”, I’d have a few million by now and could easily withdraw 4% per year and live well.
And technically, since it’s a tax, it’s not your money.
That —might— work for one person, butt…
If they did that for every person, it would over saturate the market. There is no place to invest that much money.
State and municipal pension funds withhold 20% +/- of workers wages and invest in “the market” or a balanced portfolio and can provide adequate pensions , more or less.
But government workers are only about 15% of the workforce.
Certainly not millions.
Nobody mismanaged the money. It’s been invested in interest-paying treasury bonds and the interest goes into the trust. Not technically, but actually it is a tax and the taxes you paid have nothing to do with the benefit you end up receiving from SS.
Federal retirement (including military, I think) are different than state and local in that they do not invest in the private market.
“The CSRDF is similar to the Social Security trust funds in that, by law, 100% of its assets are invested in special-issue U.S. Treasury bonds or other bonds backed by the full faith and credit of the U.S. government.”
But, like most state/local retirement, federal systems are grossly underfunded. The math, and the logic are very hard to follow, and it changes as demographics change…
“the unfunded liability of the CSRDF has already peaked, will steadily decline, and is projected to be eliminated by FY2085.”
And, in the meantime, there will always be enough in the fund to cover federal pension checks. So they say.
My wife calls it “ifcome”.
Actually, something can be done.
Instead of Social Security sending out the current statement, with promises of unfunded benefits coupled with a disclaimer, they should send out a statement that shows the portion of benefits that would be funded by current tax rates, and demonstrating that Congress has promised benefits in excess of the taxes that they have approved.
Similarly, the statement should show taxpayers what their contributions, and those of their employer, plus a modest assumed rate of return, justify in terms of benefits, compared to the promise made by Congress. That will show most Americans that they did not properly fund their own benefit, and that if their benefit was limited to the amount that they have funded (their individual account), just how much of a cut would be required.
Only when individuals have to confront what they have funded, and what remains to be funded… Only when individuals have to confront that their contributions are insufficient to fund the benefit that Congress has promised …
If we continue to do what we have always done, why would we expect a different result?
We should add a 3-legged retirement stool to the statement and make clear that SS will only provide 1/3 of a comfortable retirement, not 100%. And if one will receive no pension, then a person has personal responsibility to save twice the amount. Help educate people to see the big picture of their retirement and the big part we play in the success/failure of our own retirement.
Good for you, maybe. Good for me. But the 3-legged stool doesn’t apply to a lot of people. Maybe most people.
According to Andrew Biggs, past director of SS, the lowest quintile of earners likely shouldn’t even try to save for retirement. Its counterproductive.
Personal responsibility applies to all people. Maybe they choose to not exercise personal responsible, but it still applicable to them. The point is your retirement is mainly dependent on yourself. Yes the “village elders” (government) may help set up some help, but should not be 100% for the vast majority of people. I laugh when I hear that we should eliminate the SALT cap – that only helps the more fortunate, not the lowest income folks. The idea of fair in American is not equal treatment unless we want a socialistic country instead one based on capitalism.
Its complicated. Enlightened self interest. One of the reasons for the first pensions was superannuation. Get rid of (gently) the older, less productive worker to make room for more productive workers. It applies to a corporation or to the society in general.
Its not socialism. Think of it like paying a farmer to leave a field idle to control crop prices. Nobody is seriously asking for equal. Just less unequal.
A lot of people not only retire with no saving, they retire with remaining debt. And they are not bad people, or lazy, or stupid. Or irresponsible.
Sometimes the village elders do make a mistake. Nobody agrees on everything. We do the best we can.
“Similarly, the statement should show taxpayers what their contributions, and those of their employer, plus a modest assumed rate of return, justify in terms of benefits…”
Interesting idea, Mr. Quinn. Its probably been done, as example, for different income levels. Have you seen anything like this?
With such widespread ignorance about social security it is easy to stir the pot like the guy with the tweet above. The responses demonstrate that in spades. Nothing can be done about, the people without a clue show no inclination to learn anything.
Stir the pot like Mr Quinn does with his statement “the program is skewed to provide a greater benefit to lower in income citizens.”? I know he is talking about a a higher percentage is used in calculating the lower income person’s benefit. But Americans stink at math. Fractions and percentage were something they remembered for a test in grade school and soon forgot. Just as we humans ignore anything to the right of a decimal point – gas prices for instance or $1.9 trillion. I like to roundup to ensure I have enough before spending, while other round down and worry about paying off the credit card later.
“On the other hand…”
The greater benefit is only temporal. Higher monthly payments relative to pre-retirement income, but lifetime comparisons of taxes paid minus benefits received show the system is barely progressive if at all,* arguably regressive depending on which study you believe.
“Results show that the Social Security program is modestly progressive on a lifetime basis, about halfway between a pure DC program and a program paying a flat-dollar benefit. In this way, the current program can be described as balancing its twin goals of income adequacy and individual equity.”
*Mostly due to lower life expectancies for lower income.
Not a chance in the world that entitlement design is regressive. Maybe in actual operation – given the higher mortality that occurs among lower income Americans. That is, mortality rates may succeed in overcoming progressive entitlement design