Now that we Amis have a nice tax cut, how to reduce spending to cover it?

[HershOstropoler]

Originally posted by MichaeltheGreat


The translation of that is "we're so constantly ****ing with them that we have no clue how bad they'll be next week."

Another point is that showing the exact amounts would make it easier for people to see how badly they're being shafted. And that's never good policy.

Well they have a couple online calculators for that. I suppose everyone should know they're getting shafted by it anyway, should they not?

It only says that for an average income, the SS pension will be about 40 % of it. But what I'd like to know is, what percentage of your contribution base you get in pension for every year of contribution. Here it's 2 %.

[MichaeltheGreat]

Originally posted by Kidicious
Just use cost\benefit analysis.

I do that all the time. People pay me nicely for it, all documented and pretty and all. Although GP gave them nicer binders than I do.

With your privatized system you have huge additional costs for many many years, and then you MAY, again MAY, have an extra 1 or 2% more return on a riskier investment.

(a) tell me on what basis you would consider market rate treasury securities (13 week to 30 year) "riskier" than an SS benefit which can be cancelled without recourse (other then voting them out) at any time by Congress.

(b) tell me the name of any reputable market analyst who shares your view of the "risk" of US treasury securities, or investment grade tax-exempt bonds, for that matter?

(c) the numbers are much higher than 1 or 2 percent. In the high inflation late 70's-early 80's, those treasuries were going for 5-9 percent per years highter than the SS internal loan rate, and when interest rates came down, you could more than double your money selling off stuff such as the 13 and change percent T-bonds. Worst case, the bills/bonds pay interest and are redeemable for full value at end of term, best case, interest movements may allow you to sell and repurchase and come out ahead with a larger principle base.

Additionally, you'd have full ownership, heritability and survivorship rights, none of which exist in SS. If you have a beneficiary die, a qualifying heir gets a trivial one off payment, (won't even pay for a decent headstone), then the amounts paid in by that spouse for a lifetime are extinguished. Women are the ones most shafted by this, since they live longer and earn less on average.

At that rate it will take you forever to break even. It's just not worth it.

Under the present system, unless you can show me evidence (or even a plausible mechanism) that the payer to beneficiary ratio or actuarial lifespan of beneficiaries will revert to past levels, you will never break even. You will simply reduce payments out, increase taxes in until the payer to beneficiary level is stabilized by a stabilization in actuarial lifespan. Only a significant sustained increase in birthrate will alter that outcome, and then only if there are enough high enough paying jobs to support the average younger population.

I know it's going to be tough with the current system, but there is no better alternative.

Until now, you've said there's no problem with the current system, and the rest of us are just right wing hysterics.

So how about my offer?

[Kidlicious]

Originally posted by MichaeltheGreat
I do that all the time. People pay me nicely for it, all documented and pretty and all. Although GP gave them nicer binders than I do. .

I'm sure you're good at it. It's not hard. Why are we coming up with different conclusions?

Originally posted by MichaeltheGreat
(a) tell me on what basis you would consider market rate treasury securities (13 week to 30 year) "riskier" than an SS benefit which can be cancelled without recourse (other then voting them out) at any time by Congress.

If we cancel out the benefits it will no longer cost us anything so risk would not be an issue.

Originally posted by MichaeltheGreat
(c) the numbers are much higher than 1 or 2 percent. In the high inflation late 70's-early 80's, those treasuries were going for 5-9 percent per years highter than the SS internal loan rate, and when interest rates came down, you could more than double your money selling off stuff such as the 13 and change percent T-bonds. Worst case, the bills/bonds pay interest and are redeemable for full value at end of term, best case, interest movements may allow you to sell and repurchase and come out ahead with a larger principle base.

If you invest the same amount in the current system that you want to invest in the proposed system you can get the same return as govt securities. I was assuming that you wanted to get higher returns.

Originally posted by MichaeltheGreat
Additionally, you'd have full ownership, heritability and survivorship rights, none of which exist in SS. If you have a beneficiary die, a qualifying heir gets a trivial one off payment, (won't even pay for a decent headstone), then the amounts paid in by that spouse for a lifetime are extinguished. Women are the ones most shafted by this, since they live longer and earn less on average.

And if I die before I contribute much into the system my wife gets less than she would from the old system.

Originally posted by MichaeltheGreat
Under the present system, unless you can show me evidence (or even a plausible mechanism) that the payer to beneficiary ratio or actuarial lifespan of beneficiaries will revert to past levels, you will never break even. You will simply reduce payments out, increase taxes in until the payer to beneficiary level is stabilized by a stabilization in actuarial lifespan. Only a significant sustained increase in birthrate will alter that outcome, and then only if there are enough high enough paying jobs to support the average younger population.

If there is no investment of course we will break even. After the current system stops running a surplus the investments end. Only transfer payments are left.

Originally posted by MichaeltheGreat
Until now, you've said there's no problem with the current system, and the rest of us are just right wing hysterics.

So how about my offer?

I said the current system won't colapse, and I don't know what your offer is.

[Az]

why not make the SS retirement age higher? It's only fair, really.

[MichaeltheGreat]

Originally posted by HershOstropoler


Well they have a couple online calculators for that. I suppose everyone should know they're getting shafted by it anyway, should they not?

Tell that to the old folks.

The calculator sort of hides the fact that the employer makes dollar for dollar matching contributions, so the amounts paid in are double. Also, a portion (1.5% of wages up to the cap, duplicated dollar for dollar on employer side) is medicare tax, so that's a wholly separate issue.

It only says that for an average income, the SS pension will be about 40 % of it. But what I'd like to know is, what percentage of your contribution base you get in pension for every year of contribution. Here it's 2 %.

The formula doesn't use that explicitly, so it depends on the pattern of earnings. For my age, the annual base amounts rose pretty sharply. For my parents, they were nearly static for a long time. My parents started drawing then they were 65 (standard back then) and with 7 years of COLA (such as it is), they now get around $2300 a month for both of them. My dad maxed out every year and worked after retirement, so he didn't get shafted too much. (in SS terms)

If you use the maximum contribution (earning more gets you nothing, and there's a benefit cap anyway) you get annual maximum contributions of:

Year Taxable amount
1978 $17.700
1979 $22,900
1980 $25,900
1981 $29,700
1982 $32,400
1983 $35,700
1984 $37,800
1985 $39,600
1986 $42,000
1987 $43,800
1988 $45,000
1989 $48,000
1990 $51,300
1991 $53,400
1992 $55,500
1993 $57,600
1994 $60,600
1995 $61,200
1996 $62,700
1997 $65,400
1998 $68,400
1999 $72,600
2000 $76,200
2001 $80,400
2002 $84,900
2003 $87.000
.
.
.

The other side of that is that the percentage rates withheld have changed. It used to be that the Medicare portion had the same cap as the FICA portion, but that's been off for years - the current Medicare cap is around $153,000 give or take a few. In the mid 80's, employer and employee each paid around 6.25% of the cap amounts above, of which 1.2 percent was Medicare. Now you pay 7.65% up to the FICA caps above (of which 1.5 is medicare), then from the FICA cap to the Medicare cap, you just pay the 1.5%. 6.15% goes to calculating your benefit. Double all those numbers to reflect the employer or self-employed matching taxes.

Based on those max numbers above, and assuming I max out in the remaining years until retirement, I would get: $1414 a month (present dollars) if I retired at age 62, $2036 a month if I retired at age 67, and $2535 a month if I retired at age 70. (with an actuarial lifespan of 78 years more or less). The "official" SSA calculators use some hair-up-the-ass COLA assumptions to project future dollar values - their unofficial numbers are almost double what the last 10-15 year COLA increases have been.

[MichaeltheGreat]

Originally posted by Kidicious
I'm sure you're good at it. It's not hard. Why are we coming up with different conclusions?

Because you're wrong.

If you invest the same amount in the current system that you want to invest in the proposed system you can get the same return as govt securities. I was assuming that you wanted to get higher returns.

No you don't. Use a contribution level of your choice, and calculate the benefits. Then figure you have no principle value, just the income stream. Calculate the total value you'd get from 13 week treasuries invested in the same pattern (skipping the Medicare percentage, but including the employers matching contributions.

And if I die before I contribute much into the system my wife gets less than she would from the old system.

Under the present system, depending on when you die, your wife gets very little off of your contributions. I assume you don't deal with RRTA and all the other arcane stuff, but survivors benefits can be as low as a one time $255 payment.

If there is no investment of course we will break even. After the current system stops running a surplus the investments end. Only transfer payments are left.

You only break even if you semantically chop the payment stream into "investments" and "transfer payments" If you look at a total cash in -> total cash out, the return goes negative. Currently, the "surplus" will pay somewhere around 2-3 years of benefits. You're going to have to tax the hell out of payees in the next two-three decades to maintain the surplus at any level. Or cut benefits.

I said the current system won't colapse, and I don't know what your offer is.

My offer is that I'll "sell" you my total SS rights based on a lifetime of earnings, for a payment of 40 cents on the dollar of what I pay in from this year forward. You can elect my retirement age for SS purposes, and I'll wire you my benefits every month. If you have faith in the soundness of the system, you should believe you'd make a killing.

[MichaeltheGreat]

Originally posted by Azazel
why not make the SS retirement age higher? It's only fair, really.

Sure, you could solve the whole solvency problem by making it, say, 87 instead of 67.

The problem is selling that politically to a bunch of 60 year olds who've paid in for 40 years and expect they're 2 years from earliest retirement.

[HershOstropoler]

MichaeltheGreat:

"Tell that to the old folks. "

What's it with the rolleyes and shaking heads?
Do those who are now around 60 still profit from the system?

"6.15% goes to calculating your benefit. Double all those numbers to reflect the employer or self-employed matching taxes."

Well laugh at us. here it's about 22 %, not 12.3 %.

"$2036 a month if I retired at age 67"

This is based on how many years of contributing? (or is that irrelevant over 35 years?)

[MichaeltheGreat]

It's an emotional issue - and if you've already paid in, and are getting whatever pittance they give you, you probably don't care about those young whippersnappers.

22%? Although if you had that privatized into a nice, safe, self-directed plan, you could probably do fairly well.

They take the highest 35 years out of however many you've worked. So 18-67 = 49 years, although I started working earlier. Due to the cap creep, it's generally your last 35 years that get counted, unless you have an unusual change in income.

So women who did the housewife thing until the kids grew up, etc., are really double-screwed by their generally lower wages and limited workforce time. When their husband kicks off, they're triple screwed. Even worse if he kicks off before either retire, she remarries, then hubby 2 dumps her for his 20 year old receptionist after anything less than ten years of marriage. There's more horse**** than on a used car lot.

[Az]

Is the SS in the US starting to pay out to the elderly at 67? didn't know that. THey just made it the retirement age for men here. (62 for women )

[MichaeltheGreat]

You can opt to take it at age 62, but you take about a 30% hit in monthly payments.

[Kidlicious]

Originally posted by MichaeltheGreat
Because you're wrong.

Actually I'm looking at it from a cost\benefit point of view for society as a whole, and you are looking at it as a cost\benefit point of view for individuals.

Originally posted by MichaeltheGreat
No you don't. Use a contribution level of your choice, and calculate the benefits. Then figure you have no principle value, just the income stream. Calculate the total value you'd get from 13 week treasuries invested in the same pattern (skipping the Medicare percentage, but including the employers matching contributions.

If it would make you feel better we could use the surlpus to buy govt securities with a higher yield, but that would be pointless. The fact that we use the surplus instead of raising taxes or borrowing means that the return is equal to borrowing costs.

Originally posted by MichaeltheGreat
Under the present system, depending on when you die, your wife gets very little off of your contributions. I assume you don't deal with RRTA and all the other arcane stuff, but survivors benefits can be as low as a one time $255 payment.

I have my yearly statement here. Without disclosing my personal information I will just say that you can get a substantial survivor benefit with a small contribution.

Originally posted by MichaeltheGreat
You only break even if you semantically chop the payment stream into "investments" and "transfer payments" If you look at a total cash in -> total cash out, the return goes negative. Currently, the "surplus" will pay somewhere around 2-3 years of benefits. You're going to have to tax the hell out of payees in the next two-three decades to maintain the surplus at any level. Or cut benefits.

How can you consider a transfer payment an investment. Return on investment is partly determined by duration. Transfer payments have no duration. Without duration you don't have investment.

Again. Look at it from a total cost to society to total benefit to society point of view.

[HershOstropoler]

Originally posted by MichaeltheGreat
22%? Although if you had that privatized into a nice, safe, self-directed plan, you could probably do fairly well.

I started calculating that once. I didn't finish it, it made me cry. 200 € a month go into my self-directed plan. A multiple of that to the public pension scheme.

The only good thing, it's capped at ~47.000 €, not 87.000 $. Taking current reform plans and retiring at 65, that would leave me with maybe 20-25k as a pension (not adjusting for inflation and future real growth till 2036).

[JohnT]

"So women who did the housewife thing until the kids grew up, etc., are really double-screwed by their generally lower wages and limited workforce time. When their husband kicks off, they're triple screwed. Even worse if he kicks off before either retire, she remarries, then hubby 2 dumps her for his 20 year old receptionist after anything less than ten years of marriage. There's more horse**** than on a used car lot."

And you can double that screwing if you're an African-American.

[JohnT]

"Actually I'm looking at it from a cost\benefit point of view for society as a whole, and you are looking at it as a cost\benefit point of view for individuals."

Given that a society is made of a collection of individuals, I cannot see the reasoning of things that are non-beneficial for the individual are beneficial for society.