The Ruse of the SS COLA Scheme.

[ConstitutionCowboy]

This report by Devin Carroll got me to thinking about the COLA and how much of a ruse it is. The COLA is all well and good TO A POINT! What is also needed is a payment at the end of each year to recover the loss of purchasing power that has already occurred as the current monthly benefit lags behind inflation. That loss has been dramatically demonstrated this year! The COLA is calculated in arrears and surely diminishes the purchasing power of Social Security payments from year to year. The old saw that goes, "A day late and a dollar short" certainly describes the Social Security COLA scheme.



Write your representatives and senators! Demand action, fairness, and put real security in this supposed "safety net" we pay for in our future and us retirees have paid for in the past.



Woody 

[AZRedhawk44]

Ida May Fuller received Social Security check #1.

She paid in $22.

She took out over $25,000.

You're deluded if you think you are owed anything by SS.  It is not a savings program, it is not a retirement program.  The only definition that fits it is pyramid scheme.

You are robbing your children, grandchildren and subsequent scions every day you support it, into eternity.

[Devonai]

I am 45 and I'm not expecting zilch by the time I'm 67.  Of course, that's why I'll be a government lackey until 62, although one might argue that my 401k and TSP are also built on a house of cards.

[dogmush]

Strictly speaking, they're robbing me.  Someone else will rob their grandchildren.

[ConstitutionCowboy]

Ida May Fuller received Social Security check #1.

She paid in $22.

She took out over $25,000.

You're deluded if you think you are owed anything by SS.  It is not a savings program, it is not a retirement program.  The only definition that fits it is pyramid scheme.

You are robbing your children, grandchildren and subsequent scions every day you support it, into eternity.

I never asked the government to support me in my retirement. I was forced to pay the government for it and the government owes it to me. Is it my fault the government took what everyone pays into the program and doesn't "save" it or "invest" it for us? "Us" meaning you, me, and all our children, grandchildren, etc., etc., etc.? It's not even a pyramid scheme. The government just takes it and puts an I.O.U. in the "box", and pays it out like it is paying off a loan. It's a bookkeeping scheme. There is no money in the box - only I.O.U.s and promises.

That said, I agree it needs to be phased out. Set a date, and anyone born on or after that date receives no SS and pays nothing into it. Let attrition run its course. Pay those who have paid into the system out of the general fund. Within a generation, it'll be over.

Woody

[Pb]

Some people put in more to SS than they take out.

It varies by the person.

[Northwoods]

Some people put in more to SS than they take out.

It varies by the person.

The higher the income the more true that is.  Also the younger you are the more true that is.  For my grandparents (born in the 19-teens) is was great “investment” in terms of what they paid in vs what they got out.  For my parents (both born 1946, made decent money but not huge money) is not horrible.  They’ll get out an effective return probably comparable to decent bond funds.  For me (born 1977, probably making less after inflation adjustment than my dad) it’s literally a net negative rate of return.  I’d be better off stuffing my FICA taxes as cash in a mattress, earning 0.000% interest on it, and would come out ahead vs SS unless I live to around 110.

People my age who make a lot less than me probably still see a slight net positive ROI but only IF they live past their actuarial life span.  Not to super-centenarian level, but at least into their 80’s.

I would gladly forego all benefits I’ve “earned” to date in exchange for being exempt from all SS taxes (including employer share, so long as I got that as cash compensation I could then invest).  Even if I needed to retire on disability at 55, investing that 12.4% SS tax money for the next 10 years, then letting it ride for another 10 (at which point I’d be 65) would yield a $79k income stream from 65-85.  I doubt I’ll live past 85 anyway, but I could cut that back to $70k and be good to past 95.  If I stick with SS best I can hope for is $35-40k annually. 

[MechAg94]

I am watching something else right now.  What does COLA stand for?

[MillCreek]

Cost of living adjustment.

[HankB]

Ida May Fuller received Social Security check #1.

She paid in $22.

She took out over $25,000.

You're deluded if you think you are owed anything by SS.  It is not a savings program, it is not a retirement program.  The only definition that fits it is pyramid scheme.

You are robbing your children, grandchildren and subsequent scions every day you support it, into eternity.

About 30 or 35 years ago, Fortune magazine ran a monthly column called "Keeping Up" by a Daniel Seligman. In one issue, he examined the return on investment of Social Security. IIRC he made the assumption that someone retiring that year at 65 had been making the maximum contribution since they turned 21. (I'm going by memory here, so I may get a detail or two wrong.) He totaled up both the employee and employer contributions, and assumed a real rate of return of 3% compounded over 40+ years to come up with a number. At that time, the resultant lump sum was enough to buy a lifetime annuity paying 75% more than the computed Social Security benefit. Annuities, interest rates, and benefits have changed since that article was printed, but things may not be quite as clear cut as some people think. For people paying higher SS taxes over time, it's more of a "wealth transfer" program than a pyramid scheme.

And . . . why is it that SS is running out of money which may mean a future benefit cut, but nobody talks about WELFARE running out of money?

[ConstitutionCowboy]

...

And . . . why is it that SS is running out of money which may mean a future benefit cut, but nobody talks about WELFARE running out of money?

Welfare buys votes from those willing to sell themselves into political servitude.

Woody

[AZRedhawk44]

And . . . why is it that SS is running out of money which may mean a future benefit cut, but nobody talks about WELFARE running out of money?

Because welfare has never been the recipient's faux "investment."  It's wealth transfer, plain and simple.

And don't call it charity either.  It's impossible for anything funded by tax dollars to be charitable.  Charity doesn't operate at the barrel of a gun.

[Nick1911]

Yea, SS is a total sham, always has been.

Realpolitik though: You're forced to pay into it if you have a legitimate job.  Even if you work for yourself, cash under the table - you're committing a crime if you don't pay SS on that income.  Full stop, you're part of it, you have no choice.

Therefore, no eligible person should feel bad for taking whatever benefits they can out of the system.  I would say that we should all work to change that system, but again the practical reality is that this system is so entrenched, with so many stakeholders, that any sort of phase out is politically unrealistic.  It isn't going to happen short of a full on "tear it all down, shoot a bunch of people, raise new flags" revolution.

[HeroHog]

I've been paying into "the system" since the late 60s. In my later working years, I paid in a lot. Take that for what little it is worth. "Life is What Happens To You While You’re Busy Making Other Plans."

[cordex]

Therefore, no eligible person should feel bad for taking whatever benefits they can out of the system.

Would “whatever benefits they can” include petitioning legislators for increased payouts, COLA or otherwise?

I could argue both ways.

As you note, we are compelled to give the money, which makes our lives and saving for our retirement more difficult. This might argue in favor of the government being required to maintain a level of support given that we were denied the ability to save for ourselves to the same extent.

On the other hand, knowing it is a scam and knowing that the people who will be impacted by profligacy today will be future generations - either through decreased SS payouts as COLA are unable to be made in the future to deal with increasing inflation or delaying entry into SS longer and longer, through the dissolution of the program entirely, or most likely constantly increasing the tax burden to support whatever generations are depending on SS as it fails, couldn’t it be argued that pushing for increased benefits now is accelerating the collapse and worsening the outcome?

[ConstitutionCowboy]

Would “whatever benefits they can” include petitioning legislators for increased payouts, COLA or otherwise?

I could argue both ways.

As you note, we are compelled to give the money, which makes our lives and saving for our retirement more difficult. This might argue in favor of the government being required to maintain a level of support given that we were denied the ability to save for ourselves to the same extent.

On the other hand, knowing it is a scam and knowing that the people who will be impacted by profligacy today will be future generations - either through decreased SS payouts as COLA are unable to be made in the future to deal with increasing inflation or delaying entry into SS longer and longer, through the dissolution of the program entirely, or most likely constantly increasing the tax burden to support whatever generations are depending on SS as it fails, couldn’t it be argued that pushing for increased benefits now is accelerating the collapse and worsening the outcome?

I'm not pushing for increased benefits. I simply want the same promised equity out of the system that I paid for. What inflation has done is show how much we are being shafted by the disingenuous COLA scheme. SS is not any from of charity. It is bought and paid for. If welfare can be maintained without any recipient paying into the system, SS can certainly be maintained as well.

It is always being stated how SS system will go broke within "X" number of years. This tells me that there is still "money" in the system that can be used to maintain the equity destroyed by inflation. So what if the "money" in the system runs out. Pay it out from the general funds - the same source being used to make welfare payments. And, like i said, set a date to stop collecting from people born on or after that date and eliminate the eligibility for people born on or after that date to collect from the system.

And there is this: Section 4 of the Fourteenth Amendment states, "The the validity of the public debt of the United States authorized by law, ... shall not be questioned." SS is an authorized by law public debt. I don't question that debt. As a consequence of the law,the government owes me; especially that which it forced me to pay for. I simply demand the equity I paid for, year after year. That said, the system needs to be removed by law in an equitable manner as I stated above.

If you would like to slam the door on SS, repeal the Sixteenth Amendment.

Woody

[cordex]

You are justifiably concerned about seeing value out of a system you were required to pay into.  I get that.  But because of how the system works, you are also demanding that future generations pay for your social security (at whatever "equity" you consider appropriate) without themselves seeing the benefit of the same system.  That is to say, you want to steadily increase the dollar value of the benefit you are receiving - understandable given that the cost of living is increasing for all of us - with the full understanding that others will be continuing to pay for your social security without themselves being able to cash in on it.

I know you said that some future generation in theory wouldn't be forced to pay into it, but you also said that once you've drained social security dry you want to stick all active taxpayers with the remainder of the debt, meaning that those people who don't get the benefit of SS will still get to pay for it.

I totally understand the selfish desire to get while the getting is good, but I hope you recognize that selfishness for what it is.

[Northwoods]

Here’s what I’d propose. 

Everyone 65+ keeps their bennies as is.  Must also keep paying FICA taxes in full on eligible earnings, including any increases imposed (note - very few would pay taxes anyway since it’s a payroll tax and passive income isn’t a payroll).
Everyone 55-64 keeps the bennies they’ve earned to date but no longer gets any increase based on higher earnings or years worked.  Not subject to any future FICA tax increases, but also won’t benefit from any future reduction in SS rate.
Everyone 45-54 keeps benefits as earned to date but with a cap at 50% of of the max benefit of those in the 55-64 cohort.  Max 12.4% SS tax rate, second in line to benefit from any reductions.
Everyone 44 and younger loses all rights to SS benefits.  Their earning will remain subject to FICA taxes, including any increases, until age 45 at which point it reverts to a max of 12.4%.  First in line for any reductions in SS rate.

As retired people drawing SS die off and the need for paying them goes down so do SS taxes.  The people under 45 at the time of passage get the cuts first, with cuts first reducing any intermediate increases on the youngest payers.

Within 10 years overall SS payouts should start dropping.  After 20 years the majority of those in the 65+ group will have died, and probably +-1/3 of the 55-64 cohort (now 75-84).  By this time taxes required to sustain payouts should be able to start dropping significantly.  After 30 years essentially all of the oldest cohort are gone and likely 70+% of the next cohort as well, plus probably 1/4-1/3 of the youngest cohort to be eligible for anything.  SS taxes should be able to drop a lot more, and be approaching nuisance levels by this time.  After 40 years the amount being paid out will have dropped so low that SS taxes should be gone entirely.

Sucks for young people to keep paying into a system for a couple decades they’ll never benefit from, but they’re doing that anyway.  This would just admit to reality, and at least give line of site to eventually getting some breaks before they hit retirement age.  Those currently under 25 would get the most long term benefits.  Those 25-44 will be the most screwed.  But lines would have to be drawn somewhere, and there will always be losers and winners for any change that is made.  And making millennials take it in the shorts doesn’t bother me as much as it probably should.

[MillCreek]

I went back and looked, and my wife and I paid just over $ 17,000 in withheld Social Security taxes last year.

[dogmush]

Or.....stop pretending we should give old people young people's money.....

[ConstitutionCowboy]

You are justifiably concerned about seeing value out of a system you were required to pay into.  I get that.  But because of how the system works, you are also demanding that future generations pay for your social security (at whatever "equity" you consider appropriate) without themselves seeing the benefit of the same system.  That is to say, you want to steadily increase the dollar value of the benefit you are receiving - understandable given that the cost of living is increasing for all of us - with the full understanding that others will be continuing to pay for your social security without themselves being able to cash in on it.

I know you said that some future generation in theory wouldn't be forced to pay into it, but you also said that once you've drained social security dry you want to stick all active taxpayers with the remainder of the debt, meaning that those people who don't get the benefit of SS will still get to pay for it.

I totally understand the selfish desire to get while the getting is good, but I hope you recognize that selfishness for what it is.

Yes, I am justifiably concerned about receiving the value from the system I was forced to pay for/into. That system also supported recipients that retired before me with the payments I made into the system. I'm hardly the first to reap a value from the system  supported by people who have paid and are paying into the system.

I never said anything about increasing the dollar value of the benefit I'm receiving. All I want from the system is to receive the worth I'm entitled to. It requires more dollars but those dollars have been weakened by inflation. Ergo, it will require more dollars but absolutely no increase in value.

If you have a concern about others not receiving a value from a system they will, in essence, be paying for, keep the system, but make it fair.
 
I don't expect to "make a profit" from Social Security. I do expect to be paid whatever amount it takes to keep me level, and not have to diminish my lifestyle because I am being insufficiently compensated for with an insufficient flow dollars that have lost value.
Right now, there is a "surplus" in the SS system, expected to carry through 10 or more years. That means there is more than enough in the system to keep everyone in the system up to their paid-for level of security.
 
You say I am selfish for desiring what I paid for. I demand it. Are you expecting altruism here? There is no selfishness involved. I don't demand more than what I paid for. I don't demand it solely for my self. I demand it for everyone in the system - to include you for when you start to collect if you are not already collecting.

Woody

[cordex]

Woody,
I comprehend the idea of inflation, though I would note that social security recipients aren’t the only ones who deal with that. I have not received a cost of living adjustment from my company, for what it is worth.

One cannot keep the system and “make it fair”. It is an unfair system.

Ultimately it requires that someone take a haircut. Lots of someones, really. You don’t want it to be you, and fair enough, but I don’t think anyone wants it to be them. You are simply kicking that can down the road. Maybe future generations will be better equipped than your generation to deal with that (though at this point that seems unlikely).

I’m glad that there is a “surplus” for you to take advantage of. That will not be there when I retire.

Yes, you want what you paid for - however you define that, but that necessarily comes at the cost of future generations not getting what they paid for.  If you are talking about running out the “surplus” for yourself to keep your spending power up, then you most decidedly aren’t worried about others getting what they paid for. You feel entitled to get what you feel you deserve whatever the cost to future generations.

[dogmush]

Yes, I am justifiably concerned about receiving the value from the system I was forced to pay for/into. That system also supported recipients that retired before me with the payments I made into the system. I'm hardly the first to reap a value from the system  supported by people who have paid and are paying into the system.

I never said anything about increasing the dollar value of the benefit I'm receiving. All I want from the system is to receive the worth I'm entitled to. It requires more dollars but those dollars have been weakened by inflation. Ergo, it will require more dollars but absolutely no increase in value.

You (and I) got robbed at gunpoint so the could give our money to other people. It sucks and was unfair.  What I am unclear about is why you think that the fact you got robbed entitles (your word) to use the force of government to rob the people behind you.

Your money is gone.  It was spent. You got jacked.  Why does that entitle you to my money?

[JTHunter]

I am 45 and I'm not expecting zilch by the time I'm 67.  Of course, that's why I'll be a government lackey until 62, although one might argue that my 401k and TSP are also built on a house of cards.

By the time you reach 67, the government will have "moved the goal posts" yet again.  By 2044, your FRA may be up to 70 - IF there is even anything left.

[Northwoods]

Or.....stop pretending we should give old people young people's money.....

There’s only 2 ways SS goes away.  A slow ramp down like I posted.  Or a violent revolution that ends the USA.

With all due respect to Woody, as I understand his points (don’t agree, but I understand) there too many people that not only depend on SS to survive, but planned their retirement around such payments.  And the majority of those people don’t grok the generational theft aspect.  Even my parents, both phd scientists with plenty of money to live on in retirement even without SS, would howl were it taken away suddenly.  Because they paid in, and are “entitled” to get the benefits now.

I’m assuming that violent revolution is a distant second choice here (it may be inevitable regardless of the SS issue, but let’s pretend it won’t happen for the moment).  So how would you propose we get rid of SS?  Must be something with at least a snowballs chance in hell of actually being implemented.  Because a “rip the bandage off fast” isn’t going to happen.  You wouldn’t just rip out a few hairs if you did that.  You’d rip off all the flesh down to the bone.  No politician will do that, not even Ron Paul.