Want to read Slashdot from your mobile device? Point it at m.slashdot.org and keep reading!

 


Forgot your password?
Close
typodupeerror
United States

Journal pudge's Journal: Social Security "Promises" 11

Journal by pudge

There is still a lot of misconception out there about Social Security. It's complicated, so this is not surprising. But one thing that is very important to understand is the idea of whether a cut in the rate of benefit growth constitutes a reduction in benefits.

What is being proposed is indexing benefit increases to inflation, instead of to wages. Likely, this would mean benefits would increase (in actual dollars) more slowly, and would stay the same in real dollars (as that is the definition of inflation).

Democrats say, well, if nothing changes in the law, I will get $x in the year 20$yy, when I retire. Under this change, I will get less, so it is a cut.

Republicans say, well, but you will actually have the same amount of money in real dollars, and more in actual dollars: to call that a cut is nonsense.

Both sides have a point, but the Democrats are on the losing end here. Nothing in the law says that you will get $x in 20$yy. On the contrary, it stays away from such language, and covers only people who actually do retire under the law as it currently exists. It does not say you will get $x in 20$yy, it says someone retiring in 2005 will get $z.

When you see on your Social Security Statement that you will get $x in 20$yy, it is not a promise. It is not implied or expressed as such. It is an estimate, extrapolated from current law. There is bold language on your estimates page that says:

Your estimated benefits are based on current law. Congress has made changes to the law in the past and can do so at any time. The law governing benefit amounts may change because, by 2042*, the payroll taxes collected will be enough to pay only about 73 percent of scheduled benefits.

So what is most accurate is that under this rate change proposal, the current benefit estimates will be reduced, and that benefits themselves will remain constant.

* For those following along most closely, the document also notes that the 2042 number is based on the SSA's intermediate assumptions, while the Democrats like to tout the most optimistic assumptions, which keep the Trust Fund solvent indefinitely, but also assume unreasonably low population growth, high mortality rate, etc. In any event, it is clear that this, too, is merely an estimate. Indeed, if the intermediate assumptions hold, and we do nothing as the Democrats appear to wish, then we would have likely have actual benefit cuts in 2042 -- forced by lack of funds -- instead of merely having rate cuts sooner.

This discussion was created by pudge (3605) for no Foes, but now has been archived. No new comments can be posted.

Social Security "Promises" More

Social Security "Promises"

Comments Filter:
  • I'm still trying to figure out why we still bother with Social Security. If someone doesn't save money for retirement, that's their problem, not the governments. The federal government's job is to provide basic things like national defense and regulate foreign trade, not be its citizens' baby sitter.
    • I'm still trying to figure out why we still bother with Social Security. If someone doesn't save money for retirement, that's their problem, not the governments. The federal government's job is to provide basic things like national defense and regulate foreign trade, not be its citizens' baby sitter.

      But if we have too many poor old people, that kills the economy and reduces our security.

    • It depends on your point of view, example, here in the UK I pay approx 250 GBP a month in National Insurance Contibutions. This is to cover both my share of the nations state pensions and social security benifits. Now I pay this month in month out, have done for the past 18 months and will do for the next 40 years, mainly without compaint, it keeps people spending money, which in the end pays my wages, and thus the 250GBP. I do expect to get some of this back, hopefully when I retire, not before, but not al

      • Now, my point, yes people should save, yes people will be "poor" if they don't, but they should be able to eat, heat and keep dry. This is I believe a basic privilage which thouse in the G7/8 should be able to affort all of their citizens, at what is in reality a not great cost to any one individual.

        Not a great cost? We're talking thousands per year here. I don't think this is a basic right or privilege. I'd prefer it went away entirely, to be replaced by some sort of welfare system -- given only to th
        • Not a great cost? We're talking thousands per year here.

          So very true. As an example, in the area I live in (admittedly high-cost), a simple studio apartment, minimal utilities and minimal food would be around US$1300 monthly. According to my most recent SSA statement, I'd get around US$845 (estimated in today's dollars) if I retired at 62 years old. Maybe, if I got lucky, I'd be able to find reduced-cost housing. I might be able to reduce my energy usage to a fridge and a heater. Of course, I'd get a
  • Isn't there already a lot of disagreement about how to determine the rate of inflation? The bottom line is we want the benefit payments of tomorrow to purchase the the same basic goods and servcies retired folk use as they do today. If the inflation calculation weighted the cost of things like electronics (declining) too much and the cost of things like housing and medicine (increasing) too little, future retirees would be more poor than those of today.

    It seems like those who want to stick with wage indexi
    • Isn't there already a lot of disagreement about how to determine the rate of inflation?

      Well yes, but this is a detail that can be worked out.

      The bottom line is we want the benefit payments of tomorrow to purchase the the same basic goods and servcies retired folk use as they do today. If the inflation calculation weighted the cost of things like electronics (declining) too much and the cost of things like housing and medicine (increasing) too little, future retirees would be more poor than those of toda
  • Since they can legislate the number all over the place, there is no guarantee that you will even get what you put into the system. It is entirely likely that people in the 18 to 30 year old range will put into social security for their entire lives and not see one red cent.

    Don't rely on it. Expect it to be completely depleted and expect that your tax rate will be extremely high in order for it to deal with the crunch. Expect that you will just be a drone to the gigantic population of social security rec
    • Since they can legislate the number all over the place, there is no guarantee that you will even get what you put into the system.

      No such guarantee *has ever existed.* It was not even designed for this purpose.

      It is entirely likely that people in the 18 to 30 year old range will put into social security for their entire lives and not see one red cent.

      Which is all part of the point of private accounts, which I am not keen on. I'd rather lower its future liabilities through increased retirement age, m
      • I don't like private accounts because there is nothing to say that the money that you receive won't be legislated away either. My reading of it, which could be off, is that there is a max rate of increase that you are set to receive and the excess goes back into the Social Security pool. I could be wrong, but even if I am not, leaving the money in the social security system is more likely leaving it open to be legislated away.

        I haven't felt that there would be anything in SS for me when I get older since
        • I would add that we should stop borrowing against it to the mix and stop adding riders like prescription drug benefits to it.

          Absolutely. While the Republicans are correct about the forecasts -- though not necessarily accurate in the characterizations of it (e.g., "bankrupt") -- they act like this problem is outside of their control. It is created, in the short and medium term, by taking money out of the Trust Fund. "It hurts when I do this." "So stop doing that!"

          We also differ, I think, in the idea

Slashdot Top Deals

Man is the best computer we can put aboard a spacecraft ... and the only one that can be mass produced with unskilled labor. -- Wernher von Braun

Close