Social Security Thoughts

[snafu]

Well stated disneysteve. Added to the life expectancy rising, SS continues as an underfunded liability as administration after administration collects contributions and spends that income in whatever category they prefer, like the Madoff theory of 'investment.' It would make sense to change both retirement and SS access age incrementally. All the research confirms men in particular live longer when they continue to work past 62 y/o.

[Gailete]

My husband was in his 30's when we met and I was in my 40's earning over $30K/year as a nurse. We had talked about retirement before we got married and he felt that he would never see any benefits from it. I didn't expect to draw from it for another 20 years, although as my knees got worse and worse, I thought that I might have to drop out of the workforce, so I bought a house I could afford, saving as much as possible, etc. Three weeks after we got married I got sick and had my first trip to the ER. No telling what the problem was. Three week later I left work in the middle of the day and never return. I got SSD after awhile (denied the first time) and accepted the second.

Now my husband who never thought he would see a penny of his SS payment, is living with the benefit of my checks. There are about 1/4 of what I would probably be making now if I could still work although I turned 62 in October and could have retired if I had wanted to. My husband is never going to be able to work to 62 at this point so he may be seeing some SSD on his own also.

Those that go off of work due to a disabling disease, unless they had been working a really high paying job out of the gate, don't usually end up with a large SS check. I was 30 when I started nursing school, so my nursing career lasted 14 years (the only years that I had any kind of 'high' income) One of which I was out on worker's comp after a bad back injury (transferring a gentleman to the toilet and he stroked mid transfer I had two choices, drop him or kill my back till help came) -- which from that point on effected which jobs I could take and then when my knees got bad I knew I was really running into trouble as a nurse. I preferred the clinical side of nursing so much more than management and paperwork. But choices were being taken away from me left and right in those days. If I had been able to work the last 15 years or so, my SS check I estimate would be $1500 more than what I am getting now. As it is now, we shuffle along with it and other money that we can pull in. I think (hope desperately) that SS will continue to be here long term.

I do think that all folks need to be contributing to a retirement plan of some kind no matter what job they have. That plan can't be touched until the person retires or dies. No 'I'm going to borrow it to remodel my living room' kind of things. This is why even though technically 'retired', I still try to contribute to my retirement plan as much as possible each year, at least for the next 8 years I guess. Those retirees should do the same if possible. I can't imagine even if I had decent retirement money, unless filthy rich, to not be setting money aside as those last days and years of retirement could be some of the most expensive ones. Better to have more money at the end, than use it all at the beginning of retirement.

Besides contributing to a retirement plan, people owe it to themselves to earn as much as they can so they can boost their retirement plans. My sister after she got married never did any work but home day care (for not enough money in my opinion). She has had many things wrong with her medically including cancer x 2 and finally couldn't handle those kids anymore and applied for SSD. She got a check for $300/month from them. I was 4 years younger than her, but had made a whole lot more than she had. Within a year or two of her going on SS I had to as well. My initial check was in the $1100/month region. A big difference especially if someone like she also had a husband making minimum wage and his benefits were in the toilet. Many people don't have the understanding or math skills to figure out how to help themselves. Just like being a 2 pack/day smoker, and how that is just literally making any possibility of a healthy savings account impossible.

[GrimJack]

The easiest way to fix the SS system is to remove or raise the limit on the income limit for contributions. I know that certain conservatives want to privatize SS but as far as I can tell there has never been a successful privatization of a government program.

I was hoping to hold off on collecting SS until I was 70 but I am a seasonal employee so I needed the income but what I do is offset the SS income from my paycheck to my retirement (TSP) - I think I am w/h about 30-40% to retirement now when I work. I started collecting at age 66 so I get full benefit.

[Smallsteps]

The problem with the failed attempts or lack of any attempts to fix the system is many do not want to see the big picture. Most all on this site are not in the group that seem not to understand that
#1 it makes NO interest / seems like so many People think it is like an investment that the money is in "separate accounts" and growing like a 401k or IRA
#2 I would like for everyone to get a clear picture to understand how this system will fail. add up your working contributions and divide by your estimated payments. If the benefit ends when their money ran out like a 401k they would see the real need to do something to help fix system. So people can still receive something after many years of paying in.
I was generous in my calculations of my hypochondriac sisters working years and SS contributions...... then divided by her current check.
Using the math I did, the money she Paid in, ended in a little over 4.5 years. using the average age of people in family she will live another 20 some years.
Every time any suggestion to change program is even suggested, so many yell "it is my money I paid in" while true, SOME people need to realize that even with the steady pay in and many years adding up it is NOT like an investment that grows. If people would do the math especially those whom are in the lower income ballpark ....what they paid in then divide what the estimated payout will be many will find " their money" will not carry them as far as they thought. NOW figure in the most basic amount of interest the money picture improves.
I have had discussions and so many People do not want to do this exercise because it will paint a picture they do not want to see.

[corn18]

The easiest way to fix the SS system is to remove or raise the limit on the income limit for contributions. I know that certain conservatives want to privatize SS but as far as I can tell there has never been a successful privatization of a government program.

Would you then raise the payout that comes with the higher wage limit? As it stands now, my benefits are based on what I paid in. If I paid in the max for 30 years, I get the max payout. If you raise the max I pay in, I would expect a comenserate increase in my max benefits. If not, SS becomes yet another program where the rich subsidize the poor.

[txex86]

Would you then raise the payout that comes with the higher wage limit? As it stands now, my benefits are based on what I paid in. If I paid in the max for 30 years, I get the max payout. If you raise the max I pay in, I would expect a comenserate increase in my max benefits. If not, SS becomes yet another program where the rich subsidize the poor.

The way SS is now is that wages are capped at $128,400 that pay SS tax. What could be done is that incomes would be taxed without a cap, but the amount of benefit is capped at $128,400 for example, if we use this year's maximum. This would still provide a healthy monthly SS benefit for those higher wage earners while helping to keep SS solvent for all of us.

[Like2Plan]

Social Security already works like this to some extent. If you are ever interested in "how the sausage is made"--ie how SS comes up with your Primary Insurance Amount (PIA), you have to look at the bend points.

https://www.ssa.gov/oact/cola/piaformula.html

These bend points are adjusted every year for inflation.
This year, the bend points are as follows:
(a) 90 percent of the first $895 of his/her average indexed monthly earnings, plus
(b) 32 percent of his/her average indexed monthly earnings over $895 and through $5,397, plus
(c) 15 percent of his/her average indexed monthly earnings over $5,397.

You add these amounts and you get your PIA. You will note that over 5397, you only receive 15%.

If you are really ambitious you can calculate your average indexed monthly earnings. You have to have your high 35 years of earnings and the latest index numbers. Indexing factors for eligibility year 2018

The problem I found with doing my own calculations is every year all the index numbers (35 of them) have to be updated. And the bend points change for inflation, too. You would have to guess about inflation rates to predict what a future PIA would be.

[corn18]

If you really want to calculate your SS benefits, you can download the SSA's detailed calculator anypia. It is hard to use and decipher the output, but it is accurate and takes into account all current laws and bend points.

https://www.ssa.gov/oact/anypia/anypia.html

[corn18]

The way SS is now is that wages are capped at $128,400 that pay SS tax. What could be done is that incomes would be taxed without a cap, but the amount of benefit is capped at $128,400 for example, if we use this year's maximum. This would still provide a healthy monthly SS benefit for those higher wage earners while helping to keep SS solvent for all of us.

I would also expect the bend points to be adjusted so the uncapped wage for paying in taxes doesn't haircut the benefit via bend points. Like2Plan is right in that the bend points already provide a subsidy for the low wage earners/contributors. Removing the cap would amplify this many times over.

[Like2Plan]

If you really want to calculate your SS benefits, you can download the SSA's detailed calculator anypia. It is hard to use and decipher the output, but it is accurate and takes into account all current laws and bend points.

https://www.ssa.gov/oact/anypia/anypia.html

That looks like it would be easier to update. In the past I have just used an excel spreadsheet to get a rough idea of how the calculations were done.