Democrats Introduce Plan to Fix Social Security
“Democrats Introduce Plan To Fix Social Security, the way we fixed the cat,”
Commenter and Social Security Expert Dale Coberly assesses the latest plan coming out of Washington DC “Congress has a new plan to fix Social Security. How it would change benefits,” CNBC in the House. Dale was one of the creators of the Northwest Plan which was submitted to Congressman DeFazio who sent Dale Coberly’s Northwest Plan to the Social Security Administration – Karen P. Glenn, Deputy Chief Actuary, Office of the Chief Actuary In an email Social Security Deputy Chief Actuary confirmed this would work.
Today, Dale Coberly written explanation at Angry Bear explains why many of the points or changes proposed in the House plan may be bad ideas as depicted in the CNBC article. (edited 10/29/2021 to better establish author ownership).
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The Democrats have been so successful lately demonstrating how to turn a winning position into a losing one, they thought they’d try it out with Social Security.
Leave Social Security Alone has been a winning position for Democrats since 1936, despite their occasional efforts in the past to join the latest Republican stampede to fix Social Security by cutting benefits.Now they may have found a way to boot their advantage and lose by winning. The following is taken from an article in CNBC Life Changes ( Congress has a new plan to fix Social Security. How it would change benefits ).
My comments follow each paragraph in indented type.
[THEM] House Democrats are reintroducing a Social Security reform bill popular with their party. This time, it features some changes aimed at attracting more support from Republicans.
[ME] note: “attracting more support from Republicans.” That should tell you something is up that won’t turn out good for Social Security or the people who depend on it. [that’s you, even if you don’t know it yet.]
The bill, known as the Social Security 2100 Act, is being brought forward by Rep. John Larson, D-Conn., chairman of the House Ways and Means subcommittee on Social Security.
Rep. Alexandria Ocasio-Cortez, D-N.Y., and House Ways and Means Committee Chairman Richard Neal, D-Mass., appeared with Larson on Tuesday to announce the reintroduction of the bill.
All good people as far as I know. Maybe not as smart as Roosevelt, but they mean well.
Neal urged lawmakers to offset the concentration of wealth, which has become more prevalent in the U.S., by embracing this Social Security proposal and extending the expanded child tax credit.
“We have this rare moment to accomplish seismic achievements, and this is the time to do it,” he said.
Beware of seismic achievements; this has been the Republican “Don’t miss this once in a lifetime opportunity” sales pitch for their last eight attempts to kill Social Security by saving it. or (when the wind changed) to save Social Security by killing it:
“it’s socialism,” “you’ll never get a penny back,” “It’s going broke,” “it is broke, flat bust,” “it’s going broke (again),” “The stock market will make everyone rich,” “Greedy old people are stealing from the young,” etc.
The new version of the bill, called Social Security 2100: A Sacred Trust, follows the Social Security Administration’s latest estimates that the trust funds that support the program will be depleted in just 13 years. At that time, in 2034, only 78% of promised benefits will be payable.
The bill proposes extending that date to 2038 to give Congress more time to come up with a long-term solution to the program’s solvency issues.
I think what this means is that Larson’s bill will not solve the program’s “solvency issues” but just push them back four years. In any case the Trust Fund was never intended to “support the program.” Social Security is “supported” by the payroll tax. The temporarily largeTrust Fund was created to enable the boomers to pay for their own retirement, just all previous generations have done, but because of the unusual size of the boomer generation could not be done by the normal pay as you go financing. There is no mention in this article that 100% of promised benefits could be paid for by raising the payoll tax 2% each for the worker and the employer. Even though polls have shown that workers would rather raise the tax than “change”Social Security. There is no solvency issue if we just pay for what we need, just as our parents and grandparents did.
The measure would also incorporate proposals made by President Joe Biden during his presidential campaign.
“We have a person on Pennsylvania Avenue who knows and understands that Social Security is a sacred trust,” Larson said of Biden.
This new bill combines Biden’s proposals with House Ways and Means initiatives to expand and enhance Social Security benefits, he said.
Biden seems to be another good man. But he would not be the first Democratic President who advocated doing something that would hurt Social Security and the people who depend on it.
“It’s got a lot that’s attractive, and nothing that I think should cause Democrats problems in an election year,” said Nancy Altman, president of Social Security Works, an advocacy group that promotes expanding benefits.
Unless making “the rich” and powerful mad at you would cause problems.
Like Biden’s plan, the Social Security 2100 Act would set a higher minimum benefit for low-income workers. Benefits would be set at 125% above the poverty line and tied to current wage levels.
There’s also a benefit boost for both new and existing beneficiaries amounting to about 2% of the average benefit.
Annual cost-of-living adjustments would be tied to the Consumer Price Index for the Elderly, or CPI-E. The argument is that this experimental index may better reflect the costs seniors face. Biden also included this change in his Social Security proposals.
These may all be good things to do. But if they are to be done, the workers must pay for them. Not mentioned is that the proposal means paying benefits to people who never paid the payroll tax. We have programs to help people who did not work, or did not work long enough in occupations that paid into the Social Security system.
Notably, the Social Security 2100 Act proposed in 2019 had more than 200 co-sponsors, though all were Democrats. On Tuesday, lawmakers indicated that the new version of the bill has already drawn a similar level of support.
I am not sure what’s notable about this. If 200 people say a stupid thing, it’s still a stupid thing.
“To have that social safety net isn’t just good for us individually for peace of mind, it helps us feel like we are part of a society that respects our elders and values our vulnerable.” Rep. Alexandria Ocasio-Cortez Democratic Congresswoman from New York
Ocasio-Cortez spoke about how Social Security benefits helped her family when her father died unexpectedly of cancer.
“Social Security checks helped my family through,” she said. “It’s why my brother and I were able to go to college.
It’s why I felt confident while I was at college that my mom would be able to have something to eat,” she added. “To have that social safety net isn’t just good for us individually for peace of mind, it helps us feel like we are part of a society that respects our elders and values our vulnerable.”
Absolutely. But this is true of Social Security, not true of the Larson plan.
The plan also integrates a couple of elements that might help draw support from across the aisle.
The new version would repeal rules that reduce Social Security benefits for public workers and their spouses, widows or widowers who also have pension income. These are known as the Windfall Elimination Provision and Government Pension Offset.
This issue came up at a recent House hearing on Social Security and has bipartisan support.
The elimination of one proposal — a higher payroll tax rate — may also help draw more support. The Social Security 2100 Act had previously called for gradually increasing contributions to the program from workers and employers to 7.4%, up from the current rate of 6.2%, over roughly 20 years.
The Windfall elimination program was intended to prevent relatively high paid workers who had a government pension from working a few years in Social Security covered employment in order to collect the enhanced benefits designed for people with very low lifetime earnings. It does not surprise me the relatively well-off “bipartisan” people would support having an opportunity to poach on a program designed for the very poor.
And they offer “as a good thing” getting rid of the gradual payroll tax increase, the only provision having d chance of actually solving the “insolvency problem.” Of course people, even poor people, are going to be against a tax increase . . . until they understand it is the only way to pay for their future needs. Without selling Social Security to the rich to do with as they want.
However, the legislation does call for increasing Social Security taxes paid by higher-wage earners. In 2021, those taxes are capped at $142,800 in wages, and in 2022 that will rise to $147,000. This proposal reapplies taxes on wages at $400,000 and up, which is also in line with what Biden has proposed.
This is the killer. Roosevelt very carefully designed Social Security to be not “the dole” . . . ”so no damn politician can take it away from them. The Larsons and Altmans think that as long as they don’t call it welfare they can make the rich pay for it. The rich will just say, “okay.” The rich will only say “okay” if they see this as the opportunity to replace Social Security with welfare that they have always wanted.
Because they know how to get rid of welfare.
At the same time, the bill would also raise the thresholds above which income including Social Security is taxed. The plan calls for changing that to $35,000 for individuals and $50,000 for couples, up from $25,000 and $32,000, respectively.
The tax on benefits is a normal tax on retirement income. What is not normal, is that SS income is not taxed on people whose total income is below a certain threshold. Raising the threshold might be a good idea, but the payroll tax will then need to be increased to pay for needed benefits. This is a tax cut for the relatively well off, paid for by a tax on the less well off.
The bill would also prevent the reduction of benefits for certain beneficiaries if the National Average Wage Index declines due to unforeseen circumstances, such as events impacting the economy.
I assume this means that in the event of a recession and a loss of payroll tax income to Social Security, benefits will not be reduced. This is the normal function of the Trust Fund [when the baby boom is not a factor]. Should a recession be deep enough or long enough to exhaust the Trust Fund, the answer would be to raise the payroll tax enough on those still working…to tide everyone through, and then to reduce the tax when good times return. The temporary tax increase would not need to be large . . . less than about five dollars a week for a very deep and long recession. An amount the still working would be glad to pay knowing a time might come when they could be retired or disabled facing a cut in benefits.
It would also require the SSA to mail paper statements to all workers ages 25 and up, unless they request electronic delivery.
This is a good idea. The paper statements were cut “to save money”…an insignificant amount of money . . . but really to keep ordinary people from seeing how much their future benefits are likely to be . . . something that seems to always make them less willing to see “changes” in Social Security.
Other changes in the bill include extending benefits for students up through age 25, increasing certain widows’ and widowers’ benefits, boosting beneficiaries’ benefits after 15 years, eliminating a five-month waiting period to receive disability benefits, and creating caregiver credits so that the retirement benefits of those who take time out of the workforce are not reduced.
Eliminating the waiting period for DI benefits is a good idea, but the “other changes” are just welfare for people who did not pay into Social Security. There are welfare programs to help those people. The whole point of Social Security is that it is NOT welfare. “We paid for it ourselves.”
It remains to be seen how much attention this bill will get amid Congress’ busy legislative agenda and whether it will be embraced by Republican lawmakers.
However, advocates such as Social Security Works are optimistic.
“We’re all hoping that after they finish, however they finish the reconciliation and the debt limit and all these other things, that they will bring up Social Security,” Altman said.
The National Committee to Preserve Social Security and Medicare was also among the groups to support the proposal.
“There is good news for everyone in this bill, which is only fitting, since Social Security touches almost every American’s life,” said Max Richtman, the organization’s president and CEO.
“It is time for the full House to pass Rep. Larson’s bill and send it on to the Senate,” he said.
And here is the tragedy. The people who have saved Social Security in the past from “bipartisan” efforts to destroy it, have been seduced into selling it out for a promise of higher benefits paid for by the rich, “The Rich” couldn’t have come up with a better plan if they thought of it themselves
Dale Coberly
A brilliant and distressing analysis. This is so disheartening, a Democratic effort to undo a critically important New Deal accomplishment.
Thank you so much.
I am not an “expert” in Social Security. That’s too big a subject for me. I may be an expert in what it would cost to keep Social Security solvent for the forseeable future: raise the payroll tax about two percent. This can still be done one tenth of one percent at a time. Or about a dollar per week per year.
Peter DeFazio does not endorse this plan. He did send it to the Deputy Chief Actuary, who doesn’t endorse it either, but she does say it would work.
The rest here is mainly “opinion.” I do think my opinion is better than that of some “non partisan experts.” But if your opinion is that privatizing Social Security, or turning it into welfare, or abolishing it altogether is better than just paying for it… well, that’s your opinion.
Coberly:
That SS said it would work is the biggest and only endorsement you would need. And who else knows more about Social Security?
Run
yes, you could call it an endorsement, but i think it would get her in trouble, or me in trouble if i said it. SSA is not supposed to”endorse” plans, merely to evaluate them in terms of their effect on “solvency.”
I wouldn’t want to be asked question about how to game SS rules to maximize your “take.” Mostly because I don’t know the rules. I do think I know enough about SS and the facts of life to spot sloppy or self-serving thinking about SS “solvency” and importance to workers, but after looking at a lot of “thinking” about SS over the years, I don’t think anybody gives a damn about either.
The politicians are just playing a game. The people just don’t know enough to know when they are being lied to. And then they only half remember the lies and come up with their own gerrymandered “ideas.”
this is a matter of semantics. if endorse means “we think this is a good idea” then, no, they can’t say that. but if endorse means “this would produce solvency for the 75 year actuarial window, and as far as we can see beyond that” then, yes, they said that.
“semantics” is often used to mean “it doesn’t matter, it’s just words.” but it does matter. words are what shape people’s opinions, and if they are using the same word to mean different things, disagreement is inevitable.
ltr
i don’t think they intend to undo SS. however, what is distressing when you read the history of all the plans to fix Social Security is that none of them employed any real thought at all about their effects on the worker. They are only interested in what’s in it for them. Up until now the plans to fix SS have obviously been bad for workers, so the workers opposed and stopped them.
This time, the plan looks on the surface like it will help workers, so, without any real thought, the workers will support it. With any luck, the Republicans will oppose it “because it’s a tax increase” on the rich.
And that is a fine kettle of fish.
I think the response to “The bill would also prevent the reduction of benefits for certain beneficiaries if the National Average Wage Index declines due to unforeseen circumstances, such as events impacting the economy” misses the point. Your Social Security benefits are proportional to the average wage index (AWI) for the year you turn 60. The AWI normally goes up every year, but if it happened to go down in the year you turn 60, you would have a permanently lower benefit than someone a year older with exactly the same earnings history. So a simple fix would be, if the AWI drops, people who turn 60 that year would have their wages indexed using the previous year’s AWI, which would be similar to the policy of having a 0 COLA if the 3rd quarter CPI-W drops (which would otherwise give a negative COLA). This would cost very little money – I think the AWI only dropped once since 1951, about 1.5% in 2009, and only the people who turned 60 in the down year would be affected.
I expect that this bill will go nowhere.
Mike B
This is a little esoteric for me. I find it hard to believe the Larson bill contemplated such a thing. But the language “some beneficiaries” suggests you could be right.
Do you know of any discussiom of this “point”?
Mike B
It could go nowhere and still poison people’s understanding of Social Security. The R’s played this game pretty succesfully with “huge looming many-Trillion dollar unfunded deficit” “SS is broke” “SS is a huge unfair burden on the young” “you’ll get rich if we put your payroll tax in stocks” to argue for bills that went nowhere.
Question: If the AWI drops in the year you turn 60, the AWI of the previous year would likely still be lower than what the “normal” AWI for this year would have been,
So wouldn’t the fix of using the previous year’s AWI still leave this year’s (future) beneficiaries short of what might seem fair?
next question: why do they use age 60 as the index year if the beneficiary can’t retire until age 62 or 67?
Mike:
It is my understanding they drop the five lowest years. Here I am talking actual earnings and you are talking a calculation.
run
good point. something else i hadn’t thought about. but i think the “lost year” of AWI calculation would reduce “adjusted earnings” for every year, keeping the “best 35 years” the same years, but all of them lower than they might have been after being adjusted.
Coberly:
It does and does not matter. Dropping the 5 lowest may not have a huge impact. AWI could have a greater impact and probably would. Just conversing on the topic.
Run
that’s what i am “just” doing too. it’s a good thing.
I think Mike B is one of those people who may know more than I do about Social Security. I don’t know if that means he understands it can be “fixed” for the dollar per week per year tax increase that i try to get people to understand. nor do i know, and this is a separate question, if he would agree that the payroll tax raise is the best way to fix it.
I hope he does and would.
i wish we could have conversations like this all the time, but i get a little uneasy about giving people things they can use to take our eyes off the prize.
coberly
I did not suspect this to be a “Danger, Will Robinson!” moment. I am reading the comments too.. .
This is the killer. Roosevelt very carefully designed Social Security to be not “the dole” . . . ”so no damn politician can take it away from them. The Larsons and Altmans think that as long as they don’t call it welfare they can make the rich pay for it. The rich will just say, “okay.” The rich will only say “okay” if they see this as the opportunity to replace Social Security with welfare that they have always wanted.
Because they know how to get rid of welfare.
Dan Coberly
[ Simple and sad as that. ]
ltr
thank you. it is rare that i hear from someone who can see “the point” amongst all the distractions that are immaterial or irrelevant.
In answer to Dale’s questions above, wages are indexed to the AWI in the year you turn 60 because that is the latest year for which the AWI is available before anyone can receive old-age benefits. For example, people born in early 1960 can receive Social Security in early 2022. But the AWI for 2020 was just released earlier this month (at the same time as the COLA). So that is the latest year that will be available when people born in 1960 start receiving benefits, and is the year they turned 60.
I just looked at the bill and the fix is essentially what I indicated (except it says to use the highest earlier AWI, which handles the case for which there are drops for multiple years).
I agree that this is not totally “fair” either, but it is an improvement. Adjusting by AWI is definitely a good thing, because AWI tends to go up faster than inflation. And it doesn’t seem to vary a lot. As I wrote, it rarely goes down (it didn’t in 2020). I think one reason is that during downturns, people are laid off, but AWI is calculated for people who are working, and wages are hard to cut.
Mike B
thanks. i think i must have been thinking about something else in 2009. took me a while to realize that cut might have been important to those it happened to.
when i asked SSA why they used the age 60 cut off I never got an answer, Just a repetion of the rule. I didn’t worry about it because my main focus has been trying to fend off the privatizers… and more recently the “stick it to the rich” believers.
the loss of a part year or full year or seven years of “interest” seemed to me to be unfair, but in the whole scheme of things better to defend SS “as-is” than get lost in the weeds of all the “little” issues that people want to talk about by way of “proving” SS is a bad deal. not meaning to disparage your information…. indeed, i am very grateful for it.
Coberly,
Glad that you are still in the game. SS is the superbowl. Is Dan Coberly related to you?
I do not have time to dig into the benefits calculation, but AWI is in contrast to earnings history as I understood the basis including Run’s lowest 5 years exclusion. Is this a difference between full SS retirement age and early SS retirement? Please leave me a link that explains the full monty if you have a good one although it will be a few months before I have time to take a deep dive into it.
In any case, much thanks.
Ron
getting my name wrong is one of those “little things” i don’t worry about.
(there is no “Dan Coberly” that I know of. and if you were just joking, that’s something else you can’t rely on me getting.
as far as i understand your question… “this” has nothing to do with early SS retirement. it’s not a lowest 5 year exclusion. it’s a “highest 35 year” inclusion.,,, whether you worked 20 years or 50. things may get a little tricky if you earned a million dollars one year and then took the rest of the days off.
i don’t think i could find a link that explains the whole thing. SSA website helps, but they get a little vague at times and are not helpful if you ask them what they mean. I think Mike B might know. I could try to tell you all I know, but as we have seen that may not be the full monty. and it might be hard for me to do. i think this is like fence building or house carpentry… you can’t learn it all at once, but if you do it a lot you begin to get a feel for it.
Dale,
Sure, thanks. I will dig around when I get time, but until I realized that AWI was just average wage income I was thrown a bit by references to ages younger than 65 or 66 and change. Of course that was AFTER the question had already been raised in my comment.
BTW, the Dan reference refers back to the comment by ltr @ October 28, 2021 at 8:47 pm
In any case, keep up the good work.
I’m very confused about the take here. You describe the plan as being pretty great, improving on the current social security system in a variety of ways… but then say that this plan somehow entails destroying social security? What?
Quite Likely,
I hardly know what to say. My point is that the Larson plan sounds good to those who only look at what people say about what they (you) are going to get out of it. But it is a very bad plan if you look at all the likely consequences.
In short, Larson looks like he is going to get more money for retirees….even those who never contributed to SS… and best of all make the evil Rich
But he doesn’t say. and probably hasn’t thought, that the evil Rich are not going to pass this plan unless it is the chance that they have been looking for.to destroy Social Security by turning it into welfare, which they know they can cut to death without the massive objection that “cutting “we paid for it ourselves” Social Security always provokes.
In other words, all those “improvements in a variety of ways” are bait, poisoned bait.
I’ll try to answer any questions you have about this.
i just got a phone call that they’re voiding my social security number for suspicious activity; will that affect what i have coming to me?
rjs
its a scam call. do not talk to them. if you already knew of this because you get ten of them a day, i apologize for not realizing you were joking.
yeah, Dale, i get ten or more scam calls a day, many originating from obvious call centers, most likely in India, but still showing local phone numbers on caller ID….when i’m bored i’ll sometimes lead them on, playing the dumb mark they’re looking to hit on, but usually i’ll just hang up….
sorry for expressing my frustration on your thread, but when one of those calls came from “social security”, that was my first impulse…
oh, lord, don’t be sorry for saying something funny i didn’t quite get. i need the practice.
i have scammed a few scammers for fun. but that gets to be a waste of time too.
please feel free to say anything you want on “my” threads.
I see that some questions have been addressed to me, some of which Dale answered. First, I am not an expert on Social Security, but I think I know how benefits are calculated for a single person with none of the complicating factors like windfall offset. I also have followed Dale’s and Bruce Webb’s posts here over the years on the program financing. As far as that goes, I am fine with Dale’s program for Social Security. I am totally against any cuts.
As far as calculating Social Security benefits in the simple case mentioned above, Dale is of course correct that there is no exclusion of the lowest 5 years, but rather it is the highest 35 years of indexed earnings that are used. The indexing is done by dividing your Social Security wages for each year by the national average wage index (AWI) for that year. Then, you take the highest 35 of these (padded with 0s if you don’t have 35 years of wages) and average them. Next, you multiply this by the AWI in the year you turn 60 and divide by 12 to get your average indexed monthly earnings (AIME). This determines your primary insurance amount (PIA), which is the amount you would get if you start taking Social Security at your Full Retirement Age if there were no COLAs. To get from your AIME to your PIA, there are two bend points, and you use the ones for the year you turn 60. I think most people have an AIME between the two bend points. If so, then the formula is PIA = 0.9(B1) + 0.32(AIME – B1), where B1 is the first bend point, $996 if you turn 60 this year. You get COLAs applied from the year you turn 62, and you have to adjust the amount if you don’t start Social Security at your FRA. Of course, you get less if you start earlier (5/9th of 1% per month less for the first 3 years, then 5/12th % per month if you go earlier than that), and you get more if you wait until after your FRA (8/12th % per month). That’s it. I hope I got all that right. [If your AIME is above the second bend point, B2, then I think PIA=0.9(B1)+0.32(B2-B1)+0.15(AIME-B2).]
Mike B
this is what i understood…except i have to look up the actual numbers every time i need to know them. what i did not expect was a wage index falling, and so i was not expecting anyone to feel a need to change the way that was handled. i am glad you pointed it out to me.
like i said…and i apologize for repeating myself. i do it in case anyone else is reading this who hasn’t read prior comments… i think there are lots of questionable provisions in SS rules, but i don’t think it’s a good idea to fight about the details. we need to keep our eyes on protecting SS as a meaningful insurance for working people. i have been sucked into arguing points that were immaterial and irrelevant with people who just hated SS and wanted to say bad things about it…and to stop others from thinking about the importantBig Fact.
you are obviously not one of those. thanks for helping us out
In case anyone is still reading these comments and trying to follow my calculations above, I forgot to mention that your Social Security wages are only wage-indexed until the year you turn 60. So if you follow the method above, divide your wages for any year after you turn 60 by the AWI for the year you turn 60 (rather than the year you earned the wages). Also, if you delay receiving benefits until after your FRA, you only get the extra 8/12 % per month delay until age 70. For completeness, I should have included the PIA formula for those with AIME under the first bend point, which is simply PIA = 0.9(AIME). (Recent values of the AWI, COLAs and bend points can be found at https://www.ssa.gov/OACT/COLA/autoAdj.html, where bend points are called “Dollar amounts in PIA formula.” Clicking on the column headings in blue gives values further back in time. You only need bend points for the year you turn 60, but need AWIs for all years you worked through age 60, and COLAs for every year from the year you turned 62.) That’s it from me.
Mike B.
thanks for coming in.
while you (anyone else who’s here) are calculating, look at the amounts you paid for you benefit. then calculate your benefits for the twenty years of life expectency you will be collecting them. don’t forget to add in the COLA’s using your best guess of nominal interest.
let me know what you expect to get compared to what you paid if you don’t mind. or just use a ratio if you don’t want to reveal your income history. i did some “theoretical” calculations over a range of income levels and would like to compare what you got to what i calculated. and if you don’t mind, use the amount you actually paid in 6.2% if you got a paycheck, and 12.4%if you worked for yourself, or think you rasonably would have been paid the employers share if he didn’t have to (by law, strong union, or your own rare-skills bargaining power. note that what you paid in includes about 1% for disability insurance, so the calculation won’t be particularly an accurate picture of your “return on investment” unless you actually collected on the disability insurance. none of these calculations ever are perfectly accurate when applied to a group of people in advance of actual events. but a rough idea is useful to have in mind.
i suggest using nominal rather than real interest, because any investment or saving has to first get to “inflation” before they get to “real.”
Dale,
I can get the taxes paid from my latest Social Security statement and then add in the current year. I also have already calculated the present value of my Social Security benefits if I live to my present life expectancy (a bit less than 20 years). The ratio is a little over 6 (this uses the 0.062 value). Converting to return on investment is more complicated, because you put money (taxes) in over your working life, but in different amounts in different years. Anyway, if I use an average of a little under half my working life (since I didn’t make that much in the earliest years), then I get a return of about 10% per year.
Mike
I just did a more detailed calculation (taking into account the amount of taxes in each year) and got a return of 8.9%.
Mike B
Not bad. Together, my wife and I are ~ Median Income and we will be comfortable. With our IRAs, we will be fine and probably draw little from them.
You are really into this with Dale Coberly, thanks.
Bill
No problem, Bill,
I think I’ll be OK, too, but the big unknown is medical expenses. It’s relatively easy to figure out how much income and savings you’ll have in retirement, and how much you need for housing and food and clothes, etc. But it’s much more difficult to predict medical expenses. So I think I’m OK, but I’m not sure.
Mike
Mike:
I hope you did the “ye old traditional Medicare + Supplemental + Part D.” You are safe with that rather than Medicare Advantage. There is going to be a lot of surprised people with the latter as they age.
unless we can reform Medicare into something like what they have in the civilized world. my own idiosyncratic thoughts on this later.
Mike B
yes, thank you very much. your answers agree with mine (ball park). want a job?
no pay unfortunately, but you are doing at least part of this better than i do, and i am losing the ability to do it at all.
as for how well we are doing. i don’t think any of us knows that. i do think SS and Medicare are our best hopes of doing at least well enough [they leave us plenty of room to try to do better with private savings/investments]. but Congress can mess that up. It’s funny that the best argument the people who hate SS have is that Congress (the government) can mess it up…while they are using the Congress to mess it up.
and..because i have just been beat up by the people i am trying to save…the paragraph above is what i mean by calling SS “insurance.” the people, those people,… think insurance has to look exactly like fire insurance… so they call me a liar.
Coberly,
Great job with Mike B. on this thread. If you are going to be a “liar” anyway, then why not just say that Social Security is actually life insurance while what folk call life insurance is actually death insurance. Also, depending upon savings for retirement is betting that one will die young.
My mom’s parents and three siblings each died before they turned 50 years old, but my mom made it to 76 years. My wife has literally bailed out one of her younger sisters and figuratively bailed out her other younger sister’s mortgage using her retirement savings. My mom’s unexpected longevity was attributed to her having married a good man. If that works the same way for my wife, then she is going to have money trouble eventually in retirement. So, it is a good thing that I pay all of the necessary bills. No one knows how long that they will live. That is what makes social security great insurance to have just in case of the misfortune of a long life.
ron
don’t encourage me. i will just go back into the lions’ den and get eaten alive by ducks.
my family history is a lot like yours. thing is, i have to live a whole lot longer than anyone thinks possible because i am going to have to bail out my kids for the rest of their lives. I guess that’s what they mean (not the kids, the SS haters) mean by us old people robbing from the young.
Coberly,
Well best of luck in any case. Working mostly outside tomorrow as it will be dry, unlike this drizzly cold day here.
Ron
I have already had more good luck in this life than i can account for by any good deeds i might have done. All the bad luck has been minor and mostly self-inflicted. Still leaves the problem of making ends meet.
I don’t call getting beat up by people who don’t know anything bad luck. I’s just a problem to solve, or fail to solve.
My kids not so much. They have had genuine bad luck.
Genuine bad luck is why we need Social Security (and fathers). I have been reading Laursen’s history of The People’s Pension, and the lies Republicans (mostly) have told over the years make me literally sick. Like looking at the face of the devil, according to some reports.
I do plan to use traditional Medicare, part D and a supplement (leaning toward United Healthcare, although that requires me to join AARP, which I would rather not do). I am still employed until the end of the year (and just recently turned 65), so I haven’t had to do everything yet.
I’ll pass on the non-paying job, although I’m not sure what I’ll do all day come January.
Mike
Mike
It’s so hard to find good workers nowadays.
It seems to me there were a few slips of the pen and the calculator above. None of them material, The “errors” all get washed out by the unavoidable error in the projections..even the 7 year “unpaid interest” in the way adjusted earnings are calculated doesn’t matter. The payout..your benefits…are in the final analysis not as dependent on your earnings plus interest as they are on the ability of SS to pay an “adequate” benefit given current income (payroll tax plus Trust Fund reserves.) The AWI adjustment DOES peg your particular payout to what you paid in compared to the adjusted AWI, but the “effective” interst you earn is determined by the final “bend point” calculation, and that, i think, is based ultimately on “other” calculations.
i don’t want to get into this, because i don’t know the answer and I don’t think it matters. A better (best) way to see if SS is “worth it” to you is to look at the Trustees projected benefits and ask if you, and the country, can do without them…allowing for the high probability that other “savings plans” might let you down.
So look at the details as much as you want to, but try to keep the big picture in mind.