Earlier today, I said I would propose my Social Security Plan. So here we go. But first I want to talk about the problems with the program. There are a number of reasons that Social Security is unaffordable. First, when the program first started there were many workers (42) supporting one retiree. No problem to fund the dollars for that one person. However, over time the number of retirees has grown significantly and the number of workers supporting each worker has decreased to the area of 3.3 workers supporting one retiree. The impact of the Baby Boom generation is where the program meets its largest challenge.
This large group of upcoming retirees are going to be supported by a significantly smaller group of workers. Regardless of the amount of money that is taken from each workers check, the numbers just do not work out. Over time the 3.3 workers supporting one retiree will decrease to 1 or less. Can the system be viable then?
Secondly, while Social Security was initially meant to be a supplementary retirement program, it has expanded far beyond its original intent. Over the years we have seen the benefits expanded to persons not originally intended to be covered such as dependent children, mentally challenged children and immigrants.
I know a lady who had a son born prematurely. The child, unfortunately, has learning as well as developmental problems. He receives Social Security even though he has never earned a dollar as an employee. Is that right?
Another friend of mine started receiving Social Security at age 62, because their son is under the age of 18, that child gets a monthly benefit. Does that make any sense. Oh, yes, my friend also gets his retirement plan and has continued to work. Wow, what a country!
The third reason the Social Security is failing it that it turned from a self-funded, self-administered program to one where the politicians could borrow the assets to fund other programs. Money was taken out and IOUs were given in return. The amount of money earned from these IOUs by the administration of Social Security has not kept up with the growing benefit outlay due to increasing participants. This causes the shortage which is estimated to bankrupt the program in less than ten years.
Lastly, government programs always expand over time as politicians try to prove to their constituents they are doing their job. Therefore, the initial cost estimates are always significantly low. This has been true for Medicare, Medicaid and the prescription drug plan "D" as well it will be for Obamacare.
So for these and many other reasons, Social Security is in trouble. I guess the question has to be asked, if we could not afford the program in the beginning as Greenspan indicated in his comments on Meet the Press, should we continue it? If the answer is yes, how do we modify it to make it viable? Do we drastically cut present or future benefits? Do we drastically increase the amount each worker pays into the system? Or is there a combination of things that we should do.
I do not think it is feasible, even in a dictatorship, to completely remove the benefits of Social Security from those who contributed.I do believe that it would cause such poverty and dislocation that no government could remain after taking such an action. So the only rationale way is to preserve the program as a much smaller version.
My suggestion in the case of Social Security as well as a number of other programs, we need to take a very hard and and uncompassionate look at everything involved with it. This will not be easy and it will take something missing in Washington, political guts. It will take tough decisions that will be politically very unpopular. If you think that the Ryan proposal is radical, you don't want to see mine.
I would return Social Security to the type of program it was originally imagined. A supplementary retirement program that is not expected to be your entire plan for your later years. It would limit benefits to the participant only and only to the amount that he/she had paid in based on a fair rate of return, say 5-7%. It would be a retirement program and NOTHING else. It would cut off millions who receive benefits that they had never paid for.
If you die early, your descendants do not lose what you had paid in. Children whose parents died before collecting, would receive the same stream of money due their parent until the age of 18 and then the remaining balance would be transferred to their individual Social Security account(s) to be used when they reach retirement age.
I would also allow participants to opt out for a portion of their benefit, say 50%. They would sign an agreement with the government that says in effect, "I waive 50% of my Social Security Benefits and have NO recourse against the government now or in the future should this action leave me with less benefits than had I stayed in the program. I agree to contract with a financial planner for the next X years to help me prepare to fund my retirement."
Their outside investments would have to be in guaranteed accounts say Certificates of Deposit, annuities or guaranteed interest accounts. No speculation would be allowed with these dollars.
I would require all workers to be part of the Social Security program for a very simple reason. Life. Things always change and as soon as we think that we have it all figured out, life comes up and bites us. Everyone needs some sort of safety net and this program would be your safety net.
Age of retirement for Social Security would be moved up from 67 to 75. No early Social Security would be allowed. If you want to retire earlier, save for it.
The percentage that each employee pays in and for which each employer matches would be maxed out at $250,000, adjusted for inflation.
All employees, including all Federal government employees, Congressmen/women, Congressional employees, Armed Forces, State employees and union members would be required to be part of the plan. If you earn money in the United States, its territories or protectorates, you would be part of the plan. Absolutely no exceptions would be allowed.
Those who have done well and feel they do not need Social Security benefit at retirement age can opt out. You are not required to take it. The same goes for Medicare and the Part D prescription drug program.
Yes, this is a slimmed down version of the program we know today. But the bloated behemoth we now have cannot make it and things must change and they must change dramatically.
I have used Social Security as an example, however, the other entitlements must also be treated with the same lack of deference. Things must change or we will be writing our country's economic demise.
The thing we must learn from the experience we have had with benefits, the government cannot provide them. They may have been well intentioned in the beginning, however, over time they grow until they become unmanageable and in the end cripple the country.
What other suggestions, comments or (I am sure there will be none) criticisms do you have. Please post them. Once I get a list of them, I plan to submit them to our Congressmen/women.
Thanks for your input.
This large group of upcoming retirees are going to be supported by a significantly smaller group of workers. Regardless of the amount of money that is taken from each workers check, the numbers just do not work out. Over time the 3.3 workers supporting one retiree will decrease to 1 or less. Can the system be viable then?
Secondly, while Social Security was initially meant to be a supplementary retirement program, it has expanded far beyond its original intent. Over the years we have seen the benefits expanded to persons not originally intended to be covered such as dependent children, mentally challenged children and immigrants.
I know a lady who had a son born prematurely. The child, unfortunately, has learning as well as developmental problems. He receives Social Security even though he has never earned a dollar as an employee. Is that right?
Another friend of mine started receiving Social Security at age 62, because their son is under the age of 18, that child gets a monthly benefit. Does that make any sense. Oh, yes, my friend also gets his retirement plan and has continued to work. Wow, what a country!
The third reason the Social Security is failing it that it turned from a self-funded, self-administered program to one where the politicians could borrow the assets to fund other programs. Money was taken out and IOUs were given in return. The amount of money earned from these IOUs by the administration of Social Security has not kept up with the growing benefit outlay due to increasing participants. This causes the shortage which is estimated to bankrupt the program in less than ten years.
Lastly, government programs always expand over time as politicians try to prove to their constituents they are doing their job. Therefore, the initial cost estimates are always significantly low. This has been true for Medicare, Medicaid and the prescription drug plan "D" as well it will be for Obamacare.
So for these and many other reasons, Social Security is in trouble. I guess the question has to be asked, if we could not afford the program in the beginning as Greenspan indicated in his comments on Meet the Press, should we continue it? If the answer is yes, how do we modify it to make it viable? Do we drastically cut present or future benefits? Do we drastically increase the amount each worker pays into the system? Or is there a combination of things that we should do.
I do not think it is feasible, even in a dictatorship, to completely remove the benefits of Social Security from those who contributed.I do believe that it would cause such poverty and dislocation that no government could remain after taking such an action. So the only rationale way is to preserve the program as a much smaller version.
My suggestion in the case of Social Security as well as a number of other programs, we need to take a very hard and and uncompassionate look at everything involved with it. This will not be easy and it will take something missing in Washington, political guts. It will take tough decisions that will be politically very unpopular. If you think that the Ryan proposal is radical, you don't want to see mine.
I would return Social Security to the type of program it was originally imagined. A supplementary retirement program that is not expected to be your entire plan for your later years. It would limit benefits to the participant only and only to the amount that he/she had paid in based on a fair rate of return, say 5-7%. It would be a retirement program and NOTHING else. It would cut off millions who receive benefits that they had never paid for.
If you die early, your descendants do not lose what you had paid in. Children whose parents died before collecting, would receive the same stream of money due their parent until the age of 18 and then the remaining balance would be transferred to their individual Social Security account(s) to be used when they reach retirement age.
I would also allow participants to opt out for a portion of their benefit, say 50%. They would sign an agreement with the government that says in effect, "I waive 50% of my Social Security Benefits and have NO recourse against the government now or in the future should this action leave me with less benefits than had I stayed in the program. I agree to contract with a financial planner for the next X years to help me prepare to fund my retirement."
Their outside investments would have to be in guaranteed accounts say Certificates of Deposit, annuities or guaranteed interest accounts. No speculation would be allowed with these dollars.
I would require all workers to be part of the Social Security program for a very simple reason. Life. Things always change and as soon as we think that we have it all figured out, life comes up and bites us. Everyone needs some sort of safety net and this program would be your safety net.
Age of retirement for Social Security would be moved up from 67 to 75. No early Social Security would be allowed. If you want to retire earlier, save for it.
The percentage that each employee pays in and for which each employer matches would be maxed out at $250,000, adjusted for inflation.
All employees, including all Federal government employees, Congressmen/women, Congressional employees, Armed Forces, State employees and union members would be required to be part of the plan. If you earn money in the United States, its territories or protectorates, you would be part of the plan. Absolutely no exceptions would be allowed.
Those who have done well and feel they do not need Social Security benefit at retirement age can opt out. You are not required to take it. The same goes for Medicare and the Part D prescription drug program.
Yes, this is a slimmed down version of the program we know today. But the bloated behemoth we now have cannot make it and things must change and they must change dramatically.
I have used Social Security as an example, however, the other entitlements must also be treated with the same lack of deference. Things must change or we will be writing our country's economic demise.
The thing we must learn from the experience we have had with benefits, the government cannot provide them. They may have been well intentioned in the beginning, however, over time they grow until they become unmanageable and in the end cripple the country.
What other suggestions, comments or (I am sure there will be none) criticisms do you have. Please post them. Once I get a list of them, I plan to submit them to our Congressmen/women.
Thanks for your input.
According to the 2010 OASDI Trustees Report, we can make the combined OASDI trust funds solvent for the next 75 years by cutting benefits by 12%, or by raising payroll tax by 1.84%. Either of these would work, or we could do some combination of both. I like some of your ideas, too. If those costs saving were added, either, or both, of the above numbers could be reduced. In the final analysis, I don't think it would put an unbearable burden on anybody.
ReplyDeleteMedicare is more difficult to solve, financially and politically. Ezra Klein has been having a nice little exchange with Paul Ryan on health care costs…
http://www.washingtonpost.com/blogs/ezra-klein/post/responding-to-ryan/2011/05/19/AGZVStCH_blog.html?wprss=ezra-klein
I don't agree with everything Klein says, but he makes some good points. I think the focus should be on health care costs, and Medicare reform is only a piece of it. I want to see the private health insurance companies improve their "medical loss ratio" and stop using their oligopolistic pricing power to raise premiums every year at a rate multiple times the inflation rate. These are the two main reasons why per capita health care costs are double in the U.S. compared to other rich countries. Those countries also have better health care outcomes by most statistical measures. Anyway, that's my two cents.
The problem with changing any of these benefits is that we, the American people, have become addicted to them no different than a druggy is looking for his/her next fix. If we take the benefits away, there will be h--- to pay. No party can propose taking away, modifying, or changing without paying a price. Are the politicians ready or able to make the necessary moves for the benefit of the country? I doubt it.
ReplyDelete