Jun
12
Even though I’ve already prepared for no social security benefit I definitely do NOT see it going belly up. Any required changes “WILL” be made because the baby boom generation is way too big of a voting segment. Here are three things I think either will or “should” be changed. I’m sure there will be some disagreements but here we go (it’s a little long):
1) One of the things I definitely expect to see soon is a change in the SS tax so that there is NO cap on income subject to the tax (currently 97.5K).
2) A .5% increase ($50 extra per $10K of annual earnings) in the tax itself to 6.7%. This, combined with #1 above, would add quite a bit to the fund. Ex: a person earning 197.5K would pay an extra $7,187.50. A hedge fund manager (wall Street exec, etc) making 100,097,500.00 would pay an additional 6,700,487.50 in SS tax. The tax could be reduced to .5% lower than the “current” level as the system gained its footing. That would mean a 5.7% SS tax. The .5% reduction (from 6.2 to 5.7) could then be added to the Medicare tax to fix it. The net effect would be no change in the total SS/Medicare tax (it would still be a total of 7.65%)
3) Unfortunately, I think most people (i.e. 70%+) would do even worse than the governments historically bad rate of return; therefore I’m against giving some of the money to individuals who, for the most part, can’t even manage what they have now. However, I do believe the money should be invested for higher returns in a diversified ETF portfolio something like this: 50% domestic/international stocks (ex’s: S&P, NASDAQ, IOO, ADRA), 20% commodities related (GLD, DBA, VAW, IGE,), 20% High Quality Bonds (Gov’t & Corporate), 10% Cash equivalents like CD ylding > 6%.
4) Protect SS funds from “other” uses.
5) Additionally, in the interest of saving the system, and because I believe social security should be more of a safety net for “if” you need it, I submit the following thought. I think SS benefits should be “eliminated” for people with retirement sources of income (cap gains, div’s, pensions, etc) “or” assets (minus primary house & active farmland) totaling greater than a set limit that adjusts for inflation. Purely as a starting point for debate: I would support a current income threshold limit of 2.5X the average income of the city you reside in “and/or” a 3M asset limit. For example: if your city’s avg income was 40K, and your total retired income exceeded 100K (or assets > 2M), you would not get any of the SS money that you would otherwise collect (your full benefit would simply be “reduced” between 1.5-2.5X that city’s avg income). Adjusting for salary increases, the avg income in my example would be around 100K in 30 yrs and therefore you total retired income would have to be more than 250K (or assets >5M) to lose the entire benefit. My money’s where my mouth is because I’m 30yrs from SS eligibility and I will have ZERO problem giving up my benefits when I’m spending >250K/yr and/or have assets >5M. BTW, the hedge fund mngr mentioned in #2 would get a nice fat $2100/month (6K/month in 30 yrs) “if” he somehow went bankrupt between making 100M and retirement so he “would” be able to take advantage of the “safety net” that he had paid into. Actually, the max benefit would have to be increase when the 97.5K cap was abolished. I could see the hedge fund guy getting the new max benefit of 10K/month (28K/month in 30 yrs) because he put more into it. The 10K/month amount would apply to anyone who had paid SS tax on an average income > 500K/yr every yr from age 21 (per current rules for the 2100 max payment). The 500K as of 07’ would be adjusted backward and fwd for inflation.
Unlike some, who think SS should be phased out, I still like the idea of SS (even if I never benefit from mine). I see it as an encouragement for people to take chances in their lives such as entrepreneurial risks. I think that knowing there is “something” to fall back on would provide at least a little bit of encouragement to try high risks/high reward endeavors. If, however, the business risk pays off and you create the next MSFT, APPL, GOOG, CAT, etc, etc. then there’s no reason to “access” that safety net.
Any opinions, thoughts, or new ideas that aren’t smartass in nature?
Comments
5 Responses to “My Social Security fix (If you’re willing to read it)?”
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I agree there needs to be a change. looks like you gave it a great deal of thought.
I am all for eliminating the CAP.
Yep. I read it. I didn’t take the time to really consider each and every point, but I think you’re on the right track.
To achieve solvency is definitely going to require a combination of more money going in and somewhat less going out.
Any scheme that purports to do otherwise, such as privatization, is the equivalent of counting on the lottery.
Sounds great to me! When are you planning to run for President? As a baby-boomer who is on the edge of retirement I have been worried for years that nothing will be there when I need it. Since my situation is a far cry from wealthy, I will have to depend on whatever small part of the years and years worth of dollars that I paid in to this fund is still available. Your solution (which I did read) sounds logical but as you already know would never be allowed into law due to the greediness of our current and future leaders. Thanks for the dream though!
One of the problems with your ideas on rate of return is that you forget that SS is not just a retirement saving program, but it also functions as disability insurance and life insurance all at the same time.
I don’t know the numbers, but I’d be willing to bet that one that is factored in the return rate is not as bad.
Additionally there is also the matter of the market variability. My Father saved money while working for the same company for 35 years. He was invested is a good mix of stocks, mutual funds (including index funds) and some cash accounts. After in 2000 the market went way down and he saw the value of his investments do way down.
If the safety net of social security goes away, there is no way to protect seniors (who may not be able to just go back to work) from the volatility of the markets.
well, it wont matter how much social security you get once you retire as long as the healthcare providers are allowed to get away with legalized extortion in this country.”pay us what ever we want to charge or you die” is their new motto not the hypocratic oath