Retirement Targets

[Land Grant]

If you get rid of SS you are going to force people to either work until they die, or have tens of millions of older adults living in poverty during their golden years. What happens to the children of a parent that has died without aid to dependent children, what happens to handicapped individuals if there is no longer SSI, what happens to person that is injured on the job and is now disabled? Are we going to say, "tough luck" to them?

SS and Medicare/Medicaid are being taken out of our checks already, so they are not added anything to the deficit that could not be fixed by just taking the cap off the program. Why should you stop paying into the system once you reach $160,000 a year? If you make that amount, you pay the exact figure that Patrick Mahomes pays into the program, and he makes 40 to 50 million a year. How is that far to anyone other than the 1%ers. You do not stop paying sales tax when you reach a given level or property tax, why do they stop collecting SS tax?

Take the lid of the top amount, you make 50 million, you pay SS tax on all of it, and then means test it. Sorry Pat, but you do not qualify for SS, I guess you are going to have to make it on the 500 million you made playing football.

I agree with taking the lid off. I disagree with means testing. You need to keep everyone in the same boat. SS must pay out be for every American: rich, middle, or poor. The psychology of that is meaningful.

 

[qwerty]

That makes sense. I do agree that cap is dumb.

Also, the IRS knows what you own in terms of taxable retirement accounts (since they know your RMD). Seems if you had RMDs north of a certain amount (80k maybe?), they could start to phase out your SS distribution…until you got nothing at perhaps a RMD of 120-150k?

So you want to penalize the prudent savers that don't spend their entire paycheck and put some away for later (retirement)? That should encourage retirement saving.

edit: and I fully realize not everyone is lucky enough to make more than the necessary spend. Some are forced to spend every dollar they earn. If something like above was implemented, you would see hard asset pricing go through the roof (land, houses, etc.) as the savers look for a place to park their excess income without just handing it over to the government. Which then exacerbates the problem of affordability for the less affluent.

 

[Land Grant]

Totally agree with what you are saying. But some people in the younger generation view SS as a Ponzi scheme run by the government. They are paying money into a program which is paying other people at the present time. They are led to believe the money will be there when they retire, but as we know, that's not a guarantee.

I'm in my mid 40's. I view SS not as an "investment" but rather as a tax. It's a tax to ensure people who are elderly, disabled, and children with a deceased parent can have some financial support. It's no different than any other tax program. I don't budget my retirement on any SS money as I view it as a necessity based tax program.

But if it was a true tax program, people wouldn't receive statements in the mail showing their estimated monthly allowance once they reach qualifying age. Hence why one could view the entire program as a government Ponzi scheme.

No, its not a tax. It is a shared commitment to the social good that works to the benefit of every American, including yourself. If you describe it as a tax, you're rhetorically greasing the wheels to destroy it.

And I don't know why people paint younger generation as always so aloof and cynical. I don't think that younger generations view SS as Ponzi scheme. That would suggest they don't believe in its goals and purpose. If anything, they believe in those MORE than older folks. What they've lost faith in is older generations (their grandparents; boomers) and the rich, who really seem to have an "I've got mine and you can go to h***" attitude.

I am much more likely to put my faith in the young than than their elders.

 

[BCClone]

It will always be there in some form. Either higher age needed or lower payout or both. I have never counted on anything from it so anything I get will be extra. Although, I have structured things to be mostly passive income, so I barely pay anything in anymore. So I take that money and stick it away into my own plan.

I’m an Xer.

 

[CycloneSpinning]

So you want to penalize the prudent savers that don't spend their entire paycheck and put some away for later (retirement)? That should encourage retirement saving.

edit: and I fully realize not everyone is lucky enough to make more than the necessary spend. Some are forced to spend every dollar they earn. If something like above was implemented, you would see hard asset pricing go through the roof (land, houses, etc.) as the savers look for a place to park their excess income without just handing it over to the government. Which then exacerbates the problem of affordability for the less affluent.

The wealthy businesspeople are always going to outsmart those in congress.

That said, I do understand what you’re saying…but at the same time, why does someone with $4 or $5 million in retirement savings need to get SS? I mean, I guess hopefully enough people are just dropping that back into charitable organizations, but it does seem a little silly for people who are relatively wealthy to be getting social security, doesn’t it?

I think about the town I grew up in, and almost everyone would benefit from social security. But then I look at the people who live around me now…and I’m like, you’re good to go. You and the world will be OK if you don’t get an extra $25k/year.

 

[CycloneSpinning]

I agree with taking the lid off. I disagree with means testing. You need to keep everyone in the same boat. SS must pay out be for every American: rich, middle, or poor. The psychology of that is meaningful.

I respectfully disagree (and do mean that). If it’s a boat, the boat feels like the Titanic. If we crash, the rich are finding the lifeboats and locking the poor in the basement. I don’t have all the answers though. It’s certainly complicated.

 

[CascadeClone]

SS and Medicare/Medicaid are immensely complicated topics that they could probably support their own thread for discussion of the various challenges, potential solutions, and different values people place on different parts of the program.

From a "retirement target" planning point of view... my suggestion:
if you are 60+ you can count on 25-25k annual from it, and if you are under 50, you should probably NOT count on anything from it. If you do get anything out of it at age 67, 72, 85, whatever, treat that like gravy. For those of us in your 50s... idk. Personally I am not counting on it.

 

[SEIOWA CLONE]

I agree with taking the lid off. I disagree with means testing. You need to keep everyone in the same boat. SS must pay out be for every American: rich, middle, or poor. The psychology of that is meaningful.

Then if you do not want to Means Test the program, put a cap on the amount they can receive each month. They just are not going to get anywhere back what they paid in, but they are wealthy and should not need the money.

 

[CycloneDaddy]

The wealthy businesspeople are always going to outsmart those in congress.

That said, I do understand what you’re saying…but at the same time, why does someone with $4 or $5 million in retirement savings need to get SS? I mean, I guess hopefully enough people are just dropping that back into charitable organizations, but it does seem a little silly for people who are relatively wealthy to be getting social security, doesn’t it?

I think about the town I grew up in, and almost everyone would benefit from social security. But then I look at the people who live around me now…and I’m like, you’re good to go. You and the world will be OK if you don’t get an extra $25k/year.

$4 million is only $160,000 (4%) per year and that is before taxes. So yeah if you take $50k away a year from me and my wife that is a negative impact on my retirement. You dont get to switch the rules after I have been paying into SS for over 30 years (Im still 20 years from SS age).

 

[Thp427]

Retirement: likely in 6 years at age 59 when my last kid graduates college and our mortgage is paid off, will have around $5 million saved at that point. (no pension) I expect another 2 million or so when my parents & inlaws die, but hopefully that is many years away still. Alternatively I may work another 8 years to age 61, just so I can say I put in a full 30 years as a surgeon at one hospital. Will see how I feel in 6 years.

 

[Thp427]

Then if you do not want to Means Test the program, put a cap on the amount they can receive each month. They just are not going to get anywhere back what they paid in, but they are wealthy and should not need the money.

Then paying in to SS absolutely is a tax.

 

[CycloneSpinning]

$4 million is only $160,000 (4%) per year and that is before taxes. So yeah if you take $50k away a year from me and my wife that is a negative impact on my retirement. You dont get to switch the rules after I have been paying into SS for over 30 years (Im still 20 years from SS age).

I want to dialogue about this, so forgive me if I strike the wrong chord. I just disagree that a benefit should be paid out when we reach that level…though I will admit I’m thinking in today’s dollars. 20 years from now, $160k doesn’t look exactly the same obviously.

But I get that your life looks a little less comfortable/luxurious at that point. It’s just that big picture I believe something like that is going to be necessary. I don’t know what the other options are. I can’t imagine an across the board cut (saying that the poor take the same cut as the wealthy). That would really ruin our country (and arguably be more immoral than just keeping the money we (more wealthy people) put in. Doing nothing also doesn’t seem to be an option…

 

[Cyhig]

No, its not a tax. It is a shared commitment to the social good that works to the benefit of every American, including yourself. If you describe it as a tax, you're rhetorically greasing the wheels to destroy it.

And I don't know why people paint younger generation as always so aloof and cynical. I don't think that younger generations view SS as Ponzi scheme. That would suggest they don't believe in its goals and purpose. If anything, they believe in those MORE than older folks. What they've lost faith in is older generations (their grandparents; boomers) and the rich, who really seem to have an "I've got mine and you can go to h***" attitude.

I am much more likely to put my faith in the young than than their elders.

Medicare/Medicaid is a shared commitment. I pay money my local fire/police departments. Thats’s a shared commitment. And I believe those are taxes.

I’m paying money into a program that is currently helping some people (mainly elderly) make ends meet. A program that may or not be around in 25-30 years when I am eligible to receive funds.

So I am assuming it won’t be around. That’s planning conservatively. Rather than get upset that money o am contributing to a fund won’t be recouped, I view it the same as any other tax designed to help people

Edit: and I actually said the program more closely resembles a Ponzi scheme. But I’ll instead view SS as a tax as I am assuming I won’t get anything back in return. I’m just helping current elderly/disabled people to make ends meet. You know… like a tax

Edit 2: businesses must contribute half towards the employees’ SS (6.2%). Businesses classify these costs as payroll taxes. Yes, even in the business world SS is a tax

 

[Cyhig]

Ok, then you explain it to me. Where did the money go?

People are living longer. Let’s take an example.. an individual averaged $50k per year in salary for 40 years. Total earnings is $2M. The total amount deposited to their SSN is 248,000 (2,000,000 * 12.4%). That person then takes out 2,000 per month. At that rate, it would take 10.33 years to fully recoup their money. But once it’s fully recouped, they don’t stop collecting. If they live another 10 years, the program lost $248,000.

 

[BCClone]

$4 million is only $160,000 (4%) per year and that is before taxes. So yeah if you take $50k away a year from me and my wife that is a negative impact on my retirement. You dont get to switch the rules after I have been paying into SS for over 30 years (Im still 20 years from SS age).

If you did a Roth there would be no taxes.

 

[CyclonePigskin]

Taxation of Social Security benefits only began in 1983 and increased in 1994 with the additional tax revenues dedicated to a Medicare trust fund.

 

[clonechemist]

I want to dialogue about this, so forgive me if I strike the wrong chord. I just disagree that a benefit should be paid out when we reach that level…though I will admit I’m thinking in today’s dollars. 20 years from now, $160k doesn’t look exactly the same obviously.

But I get that your life looks a little less comfortable/luxurious at that point. It’s just that big picture I believe something like that is going to be necessary. I don’t know what the other options are. I can’t imagine an across the board cut (saying that the poor take the same cut as the wealthy). That would really ruin our country (and arguably be more immoral than just keeping the money we (more wealthy people) put in. Doing nothing also doesn’t seem to be an option…

You may not realize this, but high earners already pay in more to social security than they get back.

That's because the social security benefit formula replaces a much higher percentage of income for the first X dollars made of average annual income. As average annual income goes up, the SS benefit pays a lower and lower percentage back, even though all that income is taxed at the same rate (12.4%, half paid by employer, half by employee).

More explanation here: https://www.fool.com/investing/2020/11/18/how-much-of-your-pre-retirement-income-will-social/

 

[abcguyks]

People are living longer. Let’s take an example.. an individual averaged $50k per year in salary for 40 years. Total earnings is $2M. The total amount deposited to their SSN is 248,000 (2,000,000 * 12.4%). That person then takes out 2,000 per month. At that rate, it would take 10.33 years to fully recoup their money. But once it’s fully recouped, they don’t stop collecting. If they live another 10 years, the program lost $248,000.

You’ve assumed no interest earned on the contributions. Factor in interest and the analysis looks a lot different.

 

[qwerty]

People are living longer. Let’s take an example.. an individual averaged $50k per year in salary for 40 years. Total earnings is $2M. The total amount deposited to their SSN is 248,000 (2,000,000 * 12.4%). That person then takes out 2,000 per month. At that rate, it would take 10.33 years to fully recoup their money. But once it’s fully recouped, they don’t stop collecting. If they live another 10 years, the program lost $248,000.

So, the government hid his money under a rock and didn't get any returns from sale of instruments backed by those funds? They have his money for over 50 years (40 working and another 10+ in retirement). I know the government is ultra conservative, but they do get SOME return on assets.

 

[KnappShack]

People are living longer. Let’s take an example.. an individual averaged $50k per year in salary for 40 years. Total earnings is $2M. The total amount deposited to their SSN is 248,000 (2,000,000 * 12.4%). That person then takes out 2,000 per month. At that rate, it would take 10.33 years to fully recoup their money. But once it’s fully recouped, they don’t stop collecting. If they live another 10 years, the program lost $248,000.

I'm not sure this is true. We've seen a decline in life expectancy.


According to data published by the CDC’s National Center for Health Statistics (NCHS), life expectancy at birth in the U.S. dropped to 76.1 years in 2021—the lowest it has been since 1996—from 77 years in 2020