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Proposed SS fix

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  • Avatar Tim 
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    alpha investing

    @maxpower,
    We have a tendency to discriminate due to age and sometimes folks over 40 experience a decrease in physical capacity. I use 40 because of Tom Brady!
    Can you name just one college degree that a 59 year old would realistically be considered? In our economy, out with the old, in with the new. Life expectancy doesn’t address the aging process. How will those over 65 earn a living?
    Tear the bandaid off. Great, now what?

    #188232 Reply
    ENT Doc ENT Doc 
    Participant
    Status: Physician
    Posts: 3452
    Joined: 01/14/2017

    @maxpower,
    We have a tendency to discriminate due to age and sometimes folks over 40 experience a decrease in physical capacity. I use 40 because of Tom Brady!
    Can you name just one college degree that a 59 year old would realistically be considered? In our economy, out with the old, in with the new. Life expectancy doesn’t address the aging process. How will those over 65 earn a living?
    Tear the bandaid off. Great, now what?

    Click to expand…

    You have evidence that age discrimination has gotten worse over the years?  I’ll give you that life expectancy doesn’t address the aging process, but again where is the evidence that people in the 1960’s lived robust and full lives until 65 and that this hasn’t changed or has worsened with better treatments?

    #188256 Reply
    Avatar Tim 
    Participant
    Status: Accountant
    Posts: 2843
    Joined: 09/18/2018

    @EntDoc,
    “You have evidence that age discrimination has gotten worse over the years? “ Fair question. No I don’t.
    Actually, I assume you mean surveys and data collected.
    -Older workers are being fired or offered buyouts, and younger ones are being hired. …
    -You are reassigned to unpleasant duties. …
    -You start hearing tacky comments about your age. …
    -You stop getting raises.
    Couldn’t find one dang survey that had those questions.
    Did you have data that young people were favored? Is it better or worse? Yes, even older applicants have hurdles with admissions committees. I can’t “prove it”.
    Let alone prove it has gotten worse.
    Actually, (and I cannot prove it) I think the quality of life is much better. Crap, fixing the knee and spine and chemo works wonders. Some of that killed you in the past. It’s a good life. Need to see cardiologist too.

    Finding a job at 55-65 is tough. Especially when your network FIRE’d 20 years ago.
    By the way, not many 65 guys date 20 yr old girls.
    No statistics, just an observation. I could be wrong.
    Do you really think age discrimination is better now?
    Packages work miracles.

    #188286 Reply
    Avatar ITEngineer 
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    Status: Other Professional
    Posts: 311
    Joined: 05/09/2017
    extend age to benefits—probably the right answer since lifespan has increased significantly since SS was introduced; greater means testing, etc

    Click to expand…

    When SS was introduced, life expectancy was 65. If we were setting up something from scratch similar today, it would be set to 79. I’m not arguing raising it to 79, but 67 (the current retirement age) is far from it.

    There is no means testing for SS. That should be introduced and should be an easy putt, but for some reason it’s not. Why should Warren Buffet, Bill Gates, your neighbor with $10M in assets collect full SS benefits? Is the program meant to be insurance or a pension? If insurance, means testing makes sense. We collect it like insurance but pay out like it’s a pension which is one of the reasons it’s not solvent anymore.

    FICA Taxes are highly regressive. If you make less than $132k, you have a flat, 12.4% tax on your earned income. I think it needs a vast overhaul in how benefits are collected. Personally, for people whom are low income, some sort of ‘forced savings plan’ IMO has a lot of merit. How you implement that, IDK……but someone making $40k/year pays $4960 in FICA taxes (before paying any income taxes). If $1000/year of that amount could be invested that would go a long way in making that person financially fit come retirement and less reliant on the state. In theory.

    Another solution is to increase the workforce (the tax base) through increased immigration (ducks as rocks get thrown……) Since it’s always been a ‘pay as you go’ system, this would allow you to maintain the status quo for a while longer.

    I am NOT a fan of any payroll tax increases though. It will just further squeeze the lower classes. Knowledge workers will be able to absorb the impact, but you’ll be rolling out more automated checkout lines, robotic vacuums, etc. As a business owner, anything that you don’t have to pay FICA taxes on will benefit.

    #188301 Reply
    Drop it into MD Drop it into MD 
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    Status: Physician
    Posts: 440
    Joined: 09/20/2018
    extend age to benefits—probably the right answer since lifespan has increased significantly since SS was introduced; greater means testing, etc 

    Click to expand…

    When SS was introduced, life expectancy was 65. If we were setting up something from scratch similar today, it would be set to 79. I’m not arguing raising it to 79, but 67 (the current retirement age) is far from it.

    There is no means testing for SS. That should be introduced and should be an easy putt, but for some reason it’s not. Why should Warren Buffet, Bill Gates, your neighbor with $10M in assets collect full SS benefits? Is the program meant to be insurance or a pension? If insurance, means testing makes sense. We collect it like insurance but pay out like it’s a pension which is one of the reasons it’s not solvent anymore.

    FICA Taxes are highly regressive. If you make less than $132k, you have a flat, 12.4% tax on your earned income. I think it needs a vast overhaul in how benefits are collected. Personally, for people whom are low income, some sort of ‘forced savings plan’ IMO has a lot of merit. How you implement that, IDK……but someone making $40k/year pays $4960 in FICA taxes (before paying any income taxes). If $1000/year of that amount could be invested that would go a long way in making that person financially fit come retirement and less reliant on the state. In theory.

    Another solution is to increase the workforce (the tax base) through increased immigration (ducks as rocks get thrown……) Since it’s always been a ‘pay as you go’ system, this would allow you to maintain the status quo for a while longer.

    I am NOT a fan of any payroll tax increases though. It will just further squeeze the lower classes. Knowledge workers will be able to absorb the impact, but you’ll be rolling out more automated checkout lines, robotic vacuums, etc. As a business owner, anything that you don’t have to pay FICA taxes on will benefit.

    Click to expand…

    The way it is taxed is flat but the way it is paid out is not.

    Social Security & Early Retirement 2018: Know Your Bend Points!

    I completely agree that we could do a better job of investing the money ourselves but that is not what happens in reality.  The people who need SS the most are the people least likely to invest the savings.

    I could argue that Bill Gates deserves it more then most.  It is a very bad deal for him.

    #188310 Reply
    ENT Doc ENT Doc 
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    Status: Physician
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    you’ll be rolling out more automated checkout lines, robotic vacuums, etc.

    Click to expand…

    Yup.  This is what I want our politicians to explain to us on live TV for all to watch.  It’s a capital vs labor decision, increasingly so for lower-skilled jobs.  Raise labor costs and hello robo hamburger flippers and automated ordering systems.

    As for the mandated investment idea, that would destroy the ponzi scheme.  With loss of revenue SS enters a death spiral even faster.

    The trouble with looking at it as insurance is that people can opt to not have insurance if they think they can self-insure.  I’d never pay SS if I didn’t have to.  What it is is a wealth transfer mechanism to current, older Americans.  Not all taxes should be progressive.  Families below the median income in this country pay next to nothing in income tax yet enjoy all the benefits of governmental services.  Keeping SS as a fixed price at least makes us all accountable to have skin in the game.  Skin in the game = personal accountability.

    Regarding immigration, I have zero problems bringing in more, skilled labor through something like what Canada and Australia use.  But to increase the unskilled labor force in an economy that is moving away from that doesn’t make much sense.  And it also shouldn’t be done for the purpose of feeding government programs.  Europe is struggling with this right now.  Their large, fixed costs have created a situation where you need more people than they have projected to support them.  This forces them to make desperate decisions on attracting people to their country while instead they should be focusing on their ridiculously high, fixed costs.

    #188313 Reply
    Avatar ITEngineer 
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    Joined: 05/09/2017
    The way it is taxed is flat but the way it is paid out is not.

    Click to expand…

    This is my ‘collected like insurance but paid like a pension’ comment. Insurance isn’t paid out to everyone, only those whom need it. Pensions are paid to all whom participate. They require much input rates.

    #188315 Reply
    Avatar ITEngineer 
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    As for the mandated investment idea, that would destroy the ponzi scheme. With loss of revenue SS enters a death spiral even faster.

    Click to expand…

    You don’t have to destroy it. You could use the ‘means testing’ savings to start investment accounts for the lowest earners. It’s just math. Political suicide, I know, but in the end, just math. (or fund it with a carbon tax…..i.e. another source of revenue) or get some meaningful healthcare reform done and use savings to fund it……lots of options..all DOA.

    As for insurance, you can mandate it like we do for ACA. Everyone whom owns a car has to have car insurance.

    Don’t forget, SS doesn’t cover everyone. Most teachers don’t pay. Most Firefighters or Police don’t pay. They are given pensions instead. This is another rabbit hole (is your pension solvent….you should check……mine is only 68% funded) but they have been contributing to a pot that ‘in theory’ will fund them till death and at a much higher monthly benefit than SS.

    This would be fun to discuss in the back yard over grilling steaks and drinks.

    #188317 Reply
    Drop it into MD Drop it into MD 
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    Status: Physician
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    Joined: 09/20/2018
    The way it is taxed is flat but the way it is paid out is not. 

    Click to expand…

    This is my ‘collected like insurance but paid like a pension’ comment. Insurance isn’t paid out to everyone, only those whom need it. Pensions are paid to all whom participate. They require much input rates.

    Click to expand…

    Sorry I missed your point there.  But ENT Doc beat me to it.  If it was insurance I would opt out as well.

    Many of us could opt out and do much better.  However the problem is many people who would opt out would not save the money and they would be shooting themselves in the foot.

    #188320 Reply
    Zaphod Zaphod 
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    Status: Physician, Small Business Owner
    Posts: 6063
    Joined: 01/12/2016
    you’ll be rolling out more automated checkout lines, robotic vacuums, etc. 

    Click to expand…

    Yup.  This is what I want our politicians to explain to us on live TV for all to watch.  It’s a capital vs labor decision, increasingly so for lower-skilled jobs.  Raise labor costs and hello robo hamburger flippers and automated ordering systems.

    As for the mandated investment idea, that would destroy the ponzi scheme.  With loss of revenue SS enters a death spiral even faster.

    The trouble with looking at it as insurance is that people can opt to not have insurance if they think they can self-insure.  I’d never pay SS if I didn’t have to.  What it is is a wealth transfer mechanism to current, older Americans.  Not all taxes should be progressive.  Families below the median income in this country pay next to nothing in income tax yet enjoy all the benefits of governmental services.  Keeping SS as a fixed price at least makes us all accountable to have skin in the game.  Skin in the game = personal accountability.

    Regarding immigration, I have zero problems bringing in more, skilled labor through something like what Canada and Australia use.  But to increase the unskilled labor force in an economy that is moving away from that doesn’t make much sense.  And it also shouldn’t be done for the purpose of feeding government programs.  Europe is struggling with this right now.  Their large, fixed costs have created a situation where you need more people than they have projected to support them.  This forces them to make desperate decisions on attracting people to their country while instead they should be focusing on their ridiculously high, fixed costs.

    Click to expand…

    Corporations and people will automate anything they can regardless of pay/labor costs. Automation is cheaper than slavery even. This is a fallacious argument. Its not like the automation you see today popped up overnight, or the ones in the early 1900s came because those factory kids were so expensive.

    Whats the problem with unskilled work force if they are indeed filling a demand the domestic market is not? Framing it so binary doesnt make sense and ignores the economic realities of individual places. Agree we should work harder to basically steal the best and brightest from elsewhere, just makes sense. Europe struggles for a whole bunch of other issues all working together.

    #188324 Reply
    Liked by MaxPower
    Avatar Tim 
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    Status: Accountant
    Posts: 2843
    Joined: 09/18/2018

    @EntDoc,
    “ I’d never pay SS if I didn’t have to. What it is is a wealth transfer mechanism to current, older Americans.”

    Hmmm, that is one way to frame it. Kind of like paying a term life policy the you thought was an annuity.
    Pay 6.2 x 2 on your earnings every payday for 40 years.
    Then it’s not really an annuity, it’s term life. You paid by law for 40 years. Now your not worth it, you stopped paying. Sounds reasonable. Wealth transfer. Catchy ring to it. Thanks for legalizing fraud with defining “wealth transfer mechanism to current, older Americans.”

    What is the phrase for all the really really old ones? Like grandpa and grandma? Sounds like someone needs to find a way to “transfer” about 40 years of prior payments. I want a refund too!

    #188325 Reply
    ENT Doc ENT Doc 
    Participant
    Status: Physician
    Posts: 3452
    Joined: 01/14/2017
    you’ll be rolling out more automated checkout lines, robotic vacuums, etc. 

    Click to expand…

    Yup.  This is what I want our politicians to explain to us on live TV for all to watch.  It’s a capital vs labor decision, increasingly so for lower-skilled jobs.  Raise labor costs and hello robo hamburger flippers and automated ordering systems.

    As for the mandated investment idea, that would destroy the ponzi scheme.  With loss of revenue SS enters a death spiral even faster.

    The trouble with looking at it as insurance is that people can opt to not have insurance if they think they can self-insure.  I’d never pay SS if I didn’t have to.  What it is is a wealth transfer mechanism to current, older Americans.  Not all taxes should be progressive.  Families below the median income in this country pay next to nothing in income tax yet enjoy all the benefits of governmental services.  Keeping SS as a fixed price at least makes us all accountable to have skin in the game.  Skin in the game = personal accountability.

    Regarding immigration, I have zero problems bringing in more, skilled labor through something like what Canada and Australia use.  But to increase the unskilled labor force in an economy that is moving away from that doesn’t make much sense.  And it also shouldn’t be done for the purpose of feeding government programs.  Europe is struggling with this right now.  Their large, fixed costs have created a situation where you need more people than they have projected to support them.  This forces them to make desperate decisions on attracting people to their country while instead they should be focusing on their ridiculously high, fixed costs.

    Click to expand…

    Corporations and people will automate anything they can regardless of pay/labor costs. Automation is cheaper than slavery even. This is a fallacious argument. Its not like the automation you see today popped up overnight, or the ones in the early 1900s came because those factory kids were so expensive.

    Whats the problem with unskilled work force if they are indeed filling a demand the domestic market is not? Framing it so binary doesnt make sense and ignores the economic realities of individual places. Agree we should work harder to basically steal the best and brightest from elsewhere, just makes sense. Europe struggles for a whole bunch of other issues all working together.

    Click to expand…

    I don’t agree with your first assertion.  If I’m a business why on earth would I pay more for automation if the costs are more than labor costs (regardless of labor costs, as you say)?  While technology needs to become available for that automation to even be an option it still needs to be economically sensible.  If things worked as you suggested McDonalds would fire every single worker and simply replace them immediately with self-service screens and robotic burger flippers.  That technology exists right now.  Over time, those advances become cheaper and beat out labor costs.  This is why the best option for labor in the long run is to not be a laborer and to compete in the marketplace.

    Regarding unskilled workers, my point is that they aren’t going to drive the innovation of tomorrow.  More of them will be obsolete through automation.  So then you have unskilled workers on government benefit programs.  Not exactly fiscally responsible.  Now if you’re talking about visa programs (that are actually enforced) no problem.  I’m also not suggesting no unskilled labor.  Indeed there is a demand not being filled.  But as to which to favor it makes little sense with the way our economy is shifting and with the fiscal mess we’re in to favor unskilled over skilled labor.

    #188330 Reply
    Liked by MaxPower
    Zaphod Zaphod 
    Participant
    Status: Physician, Small Business Owner
    Posts: 6063
    Joined: 01/12/2016
    Splash Refinancing Bonus

    you’ll be rolling out more automated checkout lines, robotic vacuums, etc.

    Click to expand…

    Yup.  This is what I want our politicians to explain to us on live TV for all to watch.  It’s a capital vs labor decision, increasingly so for lower-skilled jobs.  Raise labor costs and hello robo hamburger flippers and automated ordering systems.

    As for the mandated investment idea, that would destroy the ponzi scheme.  With loss of revenue SS enters a death spiral even faster.

    The trouble with looking at it as insurance is that people can opt to not have insurance if they think they can self-insure.  I’d never pay SS if I didn’t have to.  What it is is a wealth transfer mechanism to current, older Americans.  Not all taxes should be progressive.  Families below the median income in this country pay next to nothing in income tax yet enjoy all the benefits of governmental services.  Keeping SS as a fixed price at least makes us all accountable to have skin in the game.  Skin in the game = personal accountability.

    Regarding immigration, I have zero problems bringing in more, skilled labor through something like what Canada and Australia use.  But to increase the unskilled labor force in an economy that is moving away from that doesn’t make much sense.  And it also shouldn’t be done for the purpose of feeding government programs.  Europe is struggling with this right now.  Their large, fixed costs have created a situation where you need more people than they have projected to support them.  This forces them to make desperate decisions on attracting people to their country while instead they should be focusing on their ridiculously high, fixed costs.

    Click to expand…

    Corporations and people will automate anything they can regardless of pay/labor costs. Automation is cheaper than slavery even. This is a fallacious argument. Its not like the automation you see today popped up overnight, or the ones in the early 1900s came because those factory kids were so expensive.

    Whats the problem with unskilled work force if they are indeed filling a demand the domestic market is not? Framing it so binary doesnt make sense and ignores the economic realities of individual places. Agree we should work harder to basically steal the best and brightest from elsewhere, just makes sense. Europe struggles for a whole bunch of other issues all working together.

    Click to expand…

    I don’t agree with your first assertion.  If I’m a business why on earth would I pay more for automation if the costs are more than labor costs (regardless of labor costs, as you say)?  While technology needs to become available for that automation to even be an option it still needs to be economically sensible.  If things worked as you suggested McDonalds would fire every single worker and simply replace them immediately with self-service screens and robotic burger flippers.  That technology exists right now.  Over time, those advances become cheaper and beat out labor costs.  This is why the best option for labor in the long run is to not be a laborer and to compete in the marketplace.

    Regarding unskilled workers, my point is that they aren’t going to drive the innovation of tomorrow.  More of them will be obsolete through automation.  So then you have unskilled workers on government benefit programs.  Not exactly fiscally responsible.  Now if you’re talking about visa programs (that are actually enforced) no problem.  I’m also not suggesting no unskilled labor.  Indeed there is a demand not being filled.  But as to which to favor it makes little sense with the way our economy is shifting and with the fiscal mess we’re in to favor unskilled over skilled labor.

    Click to expand…

    There is a lot of nuance to automation. It has to work well enough it doesnt drive people away and costs have to make sense. We arent there for burgers, etc…though lots of it is automated. My point is as soon as it gets there, you use it. Everyone would. Its not like you’d stop looking for ways to increase productivity or decrease costs just because its ok now, and only after a minimum wage hike is passed you start looking. Its being looked at constantly and will be utilized the second it makes sense.

    For immigration it would make sense to have a plan at all, doesnt seem like there is one whatsoever. Which is a travesty. We should embrace immigration and use it wisely (with a plan towards addressing tech, demand areas, etc…) as its really our secret weapon in staying economically at the forefront in the face of decreasing replacement rates. But yes, a plan makes sense.

    #188348 Reply
    Liked by ENT Doc
    Avatar Kamban 
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    Status: Physician
    Posts: 2416
    Joined: 08/01/2016

    You don’t have to destroy it. You could use the ‘means testing’ savings to start investment accounts for the lowest earners.

    Click to expand…

    This is my beef with politicians who will never give straight answers.

    As as solo physician I pay $12.4% of my first 130K ( and rising) each year towards SS. But when I am approaching retirement and want to collect SS, suddenly if is not solvent and let us means test it. Ah, Dr. Kamban you have been  too frugal in your life and saved more than enough and hence no soup ( or SS) for you.

    Why the heck did you not tell me that it was an insurance and lead me down the garden path of making it be assumed that it was more like a pension. Because if you did, people like me will ask what the hell they were getting in return for that 12.4 % they were giving up each year ( even the employed people pay that much as it is taken in to account for their total compensation).

    Let us have some honesty in this mess. Separate the two. Contribute total of 15%. Make everyone be aware that 5% of their contribution will go for catastrophic coverage like disability or truly destitute and that it is forced charity but the other 10% will go into a sovereign trust fund that will be invested and from the returns you will get a monthly payment, even if you are frugal or rich like Bill Gates. Make that clear for all contributors up front so that there is no double talk or these idiotic plans put up by one party or the other on how to save social security.

     

     

     

    #188355 Reply
    Avatar Tim 
    Participant
    Status: Accountant
    Posts: 2843
    Joined: 09/18/2018

    @kamban,
    “Let us have some honesty in this mess. “
    There is honest, both in the calculation and funding.
    https://www.fool.com/retirement/2018/05/26/heres-how-the-social-security-retirement-benefit-f.aspx

    Funding is defined and payments are defined. Actually, no major changes since 1934.

    The problem is the benefits are based upon prior earnings, The formula is very graduated, in that contributions are in no way considered. The return for lower wages far exceeds returns for higher wages. It is a graduated return for benefits.

    The funding is clear as well, current funding is the source by law. Change the cap or change the rate.

    There is zero requirement for unfunded benefits already earned. No assumptions about investment returns and shortfalls. Two separate disconnected streams, taxes collected and payments earned. Been that way for eighty some years. Raise revenues or lower expenditures to cover the unfunded balance.

    Trying to raise more revenue will have negative impacts.
    Trying to lower expenses will have negative impacts.
    Ironically, the younger generation has the most to lose.
    Pay more now and get less later. Honestly.

    #188364 Reply

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