If we had leaders who had common sense, who understood human nature rather than being duped by an ideology, we would be much better off.
Here is an example. Republicans who see the solution for Social Security as privatizing it.
Workers are not adequately saving now, workers are not taking full advantage of existing retirement plans, workers do not take time and effort to be financially literate and just because right wing philosophy thinks they will, doesn’t make it so.
This line of thinking is pure madness. While it should be logically true, it isn’t and never will be.
Finally, the Republican Study Committee (RSC) budget urged lawmakers to consider legislative options that allow employers and employees to reduce their payroll tax liability in order to use those savings to invest in private retirement options.
From the budget document (page 105):
According to an analysis from the Tax Foundation, “a worker who earned the average income and retired at the normal retirement age of 66 in 2016 could expect a Social Security retirement benefit of $19,646 a year.” However, a worker that saved ten percent of his or her income in a 401(k) retirement account made up of 60 percent stocks and 40 percent bonds would have “accumulated saving[s] total[ing] $719,670, which might provide an annuitized annual income of $57,319 a year, a far larger sum.”
The budget said such an effort is particularly critical for younger generations who largely believe Social Security benefits at levels enjoyed by current retirees will not be there for them in the future.
401kspecialist.com
Look at the calculation above. A worker saved 10% of earnings – good luck. How much is accumulated depends on the years you use and how long the 10% was saved.
Even more ludicrous is the assumption that $719,670 can provide annual income of $57,319. First, consider the 4% withdrawal rule so you don’t run out of money. That generates $28,786.8.
Purchasing an immediate annuity for a man age 66 – never mind age 62 – provides a guaranteed $4,515 per month $54,180 a year, but no inflation adjustment, no survivor benefits, no early retirement.
Are workers going to turn all their life savings into an annuity?
Social Security is far more than individual retirement income and far more than what a private investment account could provide.
The reality is that Americans need both Social Security and to save 10% of their income to assure adequate retirement income.
The other reality is that had Congress done it’s job managing Social Security, it would have remained solvent with room for added benefits through modest changes on a regular basis and yes, that includes some tax increases.
QUINNSCOMMENTARY 
I use a concierge doctor and he tells the story of having an issue with his car–dealer hooks it up to a computer for $150–diagnosis whatever–he hooks me up for an electrocardiogram and Medicare allows $100 or whatever it was back then. No Medicare patients for him unless you were with him before switching to concierge coverage. What % of a worker’s salary goes into Medicare part “A”? Is that % for 100% of wages or is like SS–up to $160,000 or so?
Will folks save for their own $ for retirement if they have to? Well, no! All I am saying is keep the current system where employer and employee pay the same % (I raised to 15%/—1/2 employer and 1/2 employee) but privatize it like the Galveston plan. At the end of his working days the Feds buy your grandson an annuity that pays out the market rate. I would like to see some way for that money (what’s left) to be inherited.
Didn’t Australia revamp its retirement system 20-25 years ago? Now, the left will crater any plan that does not grow government and give them power so I will never see this.
Again, I should trust the politicians and bureaucrats who screwed it up to fix it and administer it?
“I’m from the government and we are here to help you.” That’s after you buy my bridge in Arizona.
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SS has an annual COLA adjustment, spousal benefits, benefits for those who are disabled, and benefits for minor dependents of a worker who died. The amount of these benefits, compared with payroll taxes paid, is skewed in favor of lower earners. The quote referred to a worker who earned the AVERAGE income and then takes a ridiculous 8% annual distribution! This is a sales presentation by someone who is incompetent, disingenuous or both. First of all, fewer than half make the average; median income is lower but the midpoint. And what about those 50% of Americans who earn less than the median? Those at the bottom would be worse off than if they had social security instead. In my opinion, Social Security needs to be fixed by the dithering politicians, and everyone must also invest in a retirement plan. Period. When ideology meets human nature, human nature prevails!
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Absolutely right, spot on.
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Purchasing an immediate annuity for a man age 66 – never mind age 62 – provides a guaranteed $4,515 per month $54,180 a year,* but no inflation adjustment, no survivor benefits, no **early retirement.*
An annuity for what amount?
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For the $719,670
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The modest changes would add up to a significant amount over time and would be spent as soon as the revenue arrived leaving no cash balance for 2033 or 2034 or whenever. Looking at the 2023 Trustees Report for Social Security you see the estimated cost in 2032 (2264.1) with total revenue predicted to be 1885.7 (including 29.3 reported interest). A shortfall of of 407.7. All numbers in billions. To get to that revenue figure the payroll tax must be adjusted upward and not by peanuts. The cost of the program is a huge hit on employer costs and employee wages.
I am in favor of Social Security but I can’t see giving money today to be spent immediately on who knows what and gaining the illusion that will be there when it’s needed in 2033. I am just waiting to see what the solution will ultimately be in Washington.
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There are many combinations of changes that will all the trust to remain solvent for at least 75 years. Yes, they all raise taxes over time, and a few adjust future benefits, but not dramatically. For example, limit COLAS for those who retire with the maximum SS benefit at FRA. I have written about several combinations before.
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Of course left wing ideology feels the state should be in every aspect of our lives so the bureaucrats can make decisions that we ourselves are too foolish to make. The same folks who have messed up SS and Medicare (it is broke!) we should continue to entrust with our health care and retirement. Just tinker around the edges they tell us.
Oh, by the way, run $720,000 on the Schwab (sp?) calculator and you get:
$66,036 for a single life male age 66.
$58,872 male age 66 10-years certain.
$53,988 male 20-years certain
$52,908 for a husband/wife (joint) annuity.
Let’s say someone is netting $32,400 from SS today–it’s going to take a heap of inflation and many years to catch to the above figures.
How about the feds set up a Galveston like plan–they (feds) contribute 7.5%–the grand-kids contribute 7.5%–index it–and then purchase an annuity at retirement age that can be passed down to future generations.
Remember: “I’m from the government and I’m here to help you.”
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And you seriously think most Americans will have the discipline to save 10% their working lives, to invest it prudently, that nothing adverse will happen like early disability or the need to retire early nor early death or divorce or that there might not be a bear market the four years before retirement? This theory that Americans can do better on their own is a theory, but highly impractical. People don’t do what they should or can do. That’s a fact. As far a Medicare goes, Part A needs funding, there is always room for improvement reducing fraud, MA, but it is not broke. For the most part it works quite well. People have coverage, providers get paid, there is a free choice of health care and there is still room for the private sector involvement. So what’s broke especially relative to any alternative?
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