While members of Congress play dodge ball with the “third rail” entitlement called Social Security, its time for us to face the music with a compromise.
Let’s acknowledge that the Social Security lock box is empty and the hole we are in is deeper every year unless we can find a solution.
“This year, the system will pay out more in benefits than it receives in payroll taxes, an important threshold it was not expected to cross until at least 2016, according to the Congressional Budget Office.” Source. NY Times.
“If you were born in 1960 or later, Your full retirement age is 67
Remember, the earliest a person can start receiving Social Security retirement benefits will remain age 62.
If you start receiving retirement benefits at age 62, you will get 70% of the monthly benefit because you will be getting benefits for an additional 60 months.
If you start receiving retirement benefits at age 65, you will get 86.7% of the monthly benefit because you will be getting benefits for an additional 24 months.”
What we are hearing are proposals to push out, incrementally, the age at which currently employed workers can retire with full benefits.
If we agree to push out retirement from age 67 to 68 or beyond I would suggest a corresponding push-out in the public sector that no employee can retire until age 65.
If public sector employees wish to retire earlier they should see a reduction in their benefit such as 80% at age 60.
Federal and state employees should not be able to take early retirement at age 50 or 55 and get a second job with full Social Security benefits after only 40 quarters or 10 years.
While this is not a perfect solution we need to eat the elephant one bite at a time.
Those are my thoughts. What suggestions can you offer?
In the past, surplus SS taxes were given to the government and spent. In recognition of this loan a treasury bond was issued and tucked away in the SS “lockbox.” In effect SS payors have been subsidizing the federal government. Therefore, as we tap the trust fund I think we need to have a tax on those who had not been paying SS because they benefited from this subsidy to the federal government. Therefore, I would like to see a tax on state and local pension distributions to be used to redeam the bonds in the the trust funds to free up the cash in order to pay future SS beneficiaries. That is the only fair thing I can think of.
Email response from a retired corporate manager.
“You are too generous! 50% at 60.”
This is such a no-brainer that I can hardly believe the American people are having a debate. RAISE THE CAP, DAMMIT! Geez…raise the cap and let’s move on.
But no, for some people it’s just damn impossible to consider revenue increases. Never, ever, ever! Not in times of plenty, not in times of want. A sure recipe for perpetuating the status quo.
anon. Which cap do you wish to raise? Public employees who retire at 55 and get a second job with a corresponding pension, aka Soc Sec.?
The taxable income cap, genius.
anon. Based on all of your left wing comments in the past I imagine you are promoting raising the current federal and state income taxes from the 85% cap on social security benefits to 115%.
You probably support ending the Bush tax cuts as well.
One thing hasn’t changed on the Juice. Is it abusive if we do our own profile of those who post comments? If so I plead guilty. You are an open book.
Anon, no way. Why should the wealthy pay more when congress keeps talking means test. It is an insurance program. Not a legal theft program.
And besides, what would raising the cap do? They would just spend the money on High Speed Rail or some such scam.
Tax state and local wokers on their retirment benefits. That is the only fair thing to do.
So-called conservatives – Larry’s predecessors – have been trying to demolish Social Security since it was first created by FDR 60-something years ago. They called it Communist, they said it wouldn’t work, that it was a Ponzi scheme, and for decades they’ve been screaming bloody murder that it’s gonna go broke.
Anon is right about raising the cap slightly. And there is a second magic bullet which’ll keep it in good shape for even longer – ease the pathway to citizenship for all the good immigrants who would love to be paying into our system and keeping it afloat while they do our toughest jobs.
But then, Obama created this Catfood Commission, knowing full well that the “bipartisan” gang he staffed it with would come up with a recipe for slashing benefits instead. Sometimes I wonder what sort of Manchurian Candidate we actually elected.
Wait a minute Vern, your liberal brethren have been complaining for years that a majority of ILLEGAL immigrants (and yes, many of them are good, some are not) already pay Social Security, so you can’t have it both ways.
I can have it both ways. Some of them do contribute, some don’t. When they’re legal they all will. See??
Vern. We elected? Speak for yourself please
Yes, Larry. A healthy majority of us. That’s “we.”
Larry,
You’re far too practical for this blog. Public sector employees actually paying their fair share – somewhere Richard Trumka and Nick Berardino are sharpening their swords.
Speaking of the right-wing myth that Social Security is broke, did you all see the Sharron Angle ad on that topic? Whatever your political leanings, I think you’ll agree it’s hilariously bad – her Washington DC advisers wouldn’t let her run it:
Vern. How can it be broken when retirees continue receiving their check every month?
Oh, the 50 million Generation X and the 70 million Generation Y workers who will not see their Social Security checks until they reach 85 as we continue to increase the retirement age for private sector employees. But it’s OK for public sector employees to pack it in at age 55 with up to 3% credit per year of employment.
Yup. Our pension system in America is surely fair and balanced.
I probably agree with you, to a degree, on that pension question.
Anon is right LIFT THE CAP.
You’ll never here any conservative media guys like Laur, Limbaugh, Beck OR the Leftys like Maddow, Olberman and Matthews, because they are all too cheap.
For those that don’t understand, Contributors pay aprox 6.8% into the fund, while employers pay the other 6% or so. BUT, only up to income of $106,000. annually. If that cap was raised to say $200K SSI would be fully funded THROUGH 2075 with a large surplus. Large enough to raise the payments.
If it was raised to $500,000. We would’nt be having this conversation.
Look up CAP LIFT on google or your trusty search engine.
THIS IS THE ANSWER. THIS IS THE THIRD RAIL EVEN OBAMA WON’T TOUCH. IT TAKES WALL STREET BANKERS TO BE ELECTED.
I’m pretty sure Keith and Rachel are foursquare behind that idea actually. In fact, Rachel has talked about it.
To clarify, many local governments, including the County of Orange, do not participate in Social Security. Some do, but some don’t. So, a SS solution that applies the same solution to all public sector employees will find that application uneven and rife with unanticipated consequences. While many public sector retirees are reeling from finding out that their employers failed to finance their retirement promises to their employees, those who look to Social Security to finance their golden years are in a quite similar situation – the unfunded liability is huge. All that said, Larry Gilbert deserves kudo’s for putting this topic on the table, although he comments about the pension system in America when the reality is there is no pension system, there are a bunch of independent and uncoordinated pension plans and strategies out there each with their own enrollment, retirement and pay out criteria, not to mention financing strategy.
Fool me once.
Thank you for acknowledging this major issue, one that our elected officials in DC must face somewhere down the road before we go completely over the cliff.
I truly emphathize with those who are just entering the private sector workforce who pay into a system that we know is on very shaky ground.
Fool, you are anything but,
Larry does indeed deserve an “atta boy for this”
Having said that, every PERS employee is perfectly aware of what they face. They just like most people deny it to themself and hope it gets better. Further, there is little danger of your newly retired teacher, cop or fireman running out of money. Very Little.
It’s the ones seven to ten years in that should be fretting!
Further, PERS offers private investment, something SSI never did. A smart ex Assemblyman saw this and played the Tejon Ranch thing for a cool two million, this is a guy who’s last job was in a Lebec Pizza joint! CALPERS was manipulated by wallstreet. the public sector employees who got burned, did so because of fund managers.
BIG DIFFERENCE between that and the crisis facing the average American worker.
For my “friend” anon who wants to raise our taxes on social Security let me offer the following from my good friend Google:
“Ask the Advisor – Tax on Social Security Benefits Is Double Taxation!
Q: I’m very concerned about paying tax on my Social Security benefits. My husband and I pay 85%. Will this law ever be repealed? Talk about double taxation!
A: Despite multiple tax cuts in recent years, Social Security recipients got no relief from the taxation of Social Security benefits. To the contrary, every year the benefits of more retirees are subjected to the tax, because the federal government does not adjust the income levels annually as is routinely done with income tax brackets.
In addition to not adjusting the income levels, the federal government also doesn’t allow Social Security recipients to figure their incomes like regular taxpayers. The IRS requires that retirees first use a special formula to determine “provisional” income — one that includes supposedly “tax free” money, such as tax-free municipal bonds or proceeds from ROTH retirement accounts, that’s not counted for other tax purposes.
The tax does not affect individuals with incomes less than $25,000, or couples filing jointly with incomes of less than $32,000. But up to 50% of Social Security benefits are taxable for individuals with incomes of $25,000 to $34,000, or couples with incomes of $32,000 to $44,000. Up to 85% of the Social Security benefits are taxable of individuals with incomes of more than $34,000 and couples with incomes of more than $44,000.
When the 50% tax on Social Security was first signed into law by President Reagan, and the 85% tax later signed into law by President Clinton, it was sold to the public on the basis that it only affected “high income” seniors. Today, these income levels are no longer “high income.” In fact, they are lower than the national median income, which was $46,326 in 2005.
If income levels had been adjusted annually, from the time this tax was established, far fewer seniors today would be affected as illustrated in the following chart:
Maximum Percentage of Social Security Benefits Subject To Tax Filing Status “Provisional” Income Income If Had Been Adjusted For Inflation*
50% single $25,000 $50,216
50% couple/joint $32,000 $64,276
85% single $34,000 $65,120
85% couple/joint $44,000 $85,036
*adjusted using Cost-of-Living Adjustment data
Those affected justifiably feel this is a form of double taxation. But it will get even worse in 2007. Consider this. Currently the 85% level of taxation is earmarked for Medicare. Nevertheless, starting in 2007, in addition to tax on their Social Security benefits, seniors with incomes exceeding $80,000 will also be required to pay much higher Medicare Part B premiums under “Means Testing.” These same individuals also quite likely paid more Medicare taxes than other workers over their careers. (Unlike Social Security, which has a maximum wage upon which workers pay Social Security taxes, Medicare taxes are collected on 100% of an individual’s salary.)
TSCL is opposed to Means Testing of Medicare, because it may only be a matter of time before Congress tries to expand it. In his fiscal year 2007 budget proposal, for example, President Bush proposed dropping the annual adjustment of income levels for Means Testing. If Congress were to adopt such an approach, more seniors would be affected every year (just like the taxation of Social Security benefits). TSCL supports the repeal of both the Means Testing of Medicare Part B premiums and legislation that would repeal the taxation of Social Security benefits.”
Anon. The ball is now in your court.
Let’s push out public sector pensions matching the private sector with the same penalty for early retirement. That’s a no brainer. Let’s share the pain together.
Yes folks we have a problem. Perhaps the old John Anderson solution of a gasoline tax dedicated in part to social sercuity funding could be a part of the solution. It would encourage more conservation and reduce imports.
But we cannot simply tax our way out either, some cuts such as not allowing double dipping on gevernment pensions and SS, an adjustment in the retirement age and other cost savings must also be a part of the solution.
Jim. You are correct. We cannot tax our way out of this dilemna.
As to youur suggestion of taking money from the gas tax I would strongly oppose that idea. In CA we already have billions of dollars of deferred maintenance of our roads and bridges.
Anderson’s suggestion was an additional tax to reduce consumption and dependance on imported oil. Then to use dedicate part of that money to fund social security obilgations
I wish all these supposed “reformers,” from George Bush to Alan Simpson to Larry Gilbert, would just admit that they don’t like social security, that it’s too “socialist” for them, and that they’d like to see it
destroyedprivatizedphased out. Then we could really get down to brass tacks.No Vern. We just want a level playing field.
Having been on both sides as the CEO and employee of our corporation I/we “contributed” for both Soc. Sec. obligations. Those earnings credited to myself for over a quarter century of employment were already taxed once.
As such this is not an entitlement.
Vern. Do you oppose allowing private sector employees to “opt out” and do their own 401K investing?
I suppose I should buckle down and read your post, Juice Brother. I’ve been reacting to the title and image. Social Security is not broke, and doesn’t need too major of a fix. OK. Won’t comment again till I read it.
Brother Vern. No softballs. Feel free to offer any suggestions you may have on this national issue so that the 100 million men and women currently employed, who are younger than you and I, will be able to obtain their “mandatory” investment into the Social Security Trust Fund which some label a Ponzi scheme.
OK, guys. We have ignored the obvious. Let’s give people the right to opt out for a private account alternative.
Social Security was orginally designed to be a safety net for those who had retired. The fund has no actual individual accounts, never has. Your payments that you receive once you begin to collect start from a minimun amount to a maximun amount based on your earnings. It was not ment to be lived on, individuals were expected to have done some additional planning.
It was a pay as you go program, the people currently working pay for those who are receiving checks. We have built in a surplus (IOU’s From the treasury) because we have been paying more into the system than benifits going out. This has allowed the deficit to appear to be lower than it actually was for many years. Now the trend is the other way and the treasury is supposed to cover the bonds, but as we all know the treasury does not have the money either.
Private accounts for retirement are great and orginally were expected to help cover retirement costs.
While I agree that Social Security was not eatablished to serve as your sole source of retirement year funds pushing out the age for full payments while negotiating age 55 defined benefit packages in the public sector is simply unacceptable.
If a public service employee does not wish to wait until age 65 to begin collecting his or her retirement checks than let’s reduce the benefit by 5 % per year. i.e. 75 % at age
60.
Perhaps we need to take a look at the privatization concept such as in effect in Chile
No thanks.
JIm, But today SS takes for more than they did in the past. 12.4%. It is time for private accounts. I really don’t know how we can call ourselves the land of the free without private accounts.
We have private accounts now, they’re called 401Ks, and are great if your employer contributes and doesn’t use the money to buy company stock.
As SS isn’t an insurance program it becomes very expensive to convert SS contributions to a private account. It was only possible in Chile because the Communists grossly devalued their currency and virtually wiped-out every one’s contributions.
The new system of private accounts isn’t as flexible as people seem to imply as inorder to actually provide a pension safeguards are needed to prevent people from investing with Bernie Madoff types or withdrawing a lump sum.
Of course privatization of SS is being pushed just so the Madoffs and Goldman Sachs can get their hands on that money.
Larry. The downside is when participants make bad choices and blow their money
Public service pensions and Social Security are related but vastly different things. One is an agreement between public service employees and the Government agency they work for, while Social Security is the corner stone of the safety net that the new Deal put in place in the 30’s to prevent starvation and homelessness for our elders.
The challanges to solving the problems these systems face in long term obligations are likely to be vastly different.
*Hmmm, lets see now. The SS Trust goes bust in 2037…no not really…2075,,,,and that
does not count the $2 Trillion missing Fed Bucks used for ear marks issues, defense and
a case of beer for the Flight Attendant that deployed the Exit Shoot that remains unaccounted
for…..by anyone!
Bunches and bunches of bull. At any rate, raise the retirement age to 90….make every
swinging monkey pay 6% of whatever they make…..each and every year. Allow no early
retirements. Convert each and every Pension and Retirement Program into the Social
Security Administration to run. Nobody gets to opt out for any reason! Either that, or you
can move to Romania! Your choice! In fact, moving to Romania might be pretty viable
on a Social Security check. At least for now!
Then we won’t have to talk about SSN every again!
rw