Could you retire without Social Security?

55 posts / 0 new
Last post
investorzzo's picture
investorzzo
Status: Diamond Member (Offline)
Joined: Nov 7 2008
Posts: 1182
Could you retire without Social Security?

Last week's landmark tax deal sharply changes the financial outlook for Social Security. That has huge implications for your retirement. And most people don't have a clue what's coming.

http://finance.yahoo.com/focus-retirement/article/111640/could-you-retir...

Poet's picture
Poet
Status: Diamond Member (Offline)
Joined: Jan 21 2009
Posts: 1891
Social Security Will Be Gone

I think it was 2009 or this year when Social Security revenue inflows were less than Social Security payment outflows. It'll definitely be the case next year when all Social Security withholdings will be reduced to 2/3rds of what it was before.

My wife and I both have a few decades go to before we're eligible. Long before then, it'll have been eaten away by Fed money printing or frozen or reduced in one way or another.

This Ponzi-style confiscation of our earnings is outrageous, but there's little we can do about it. At least the amount that the two of us pay over our lifetimes will likely be far less than what our four parents will receive over their own retirement lives.

Poet

 

SagerXX's picture
SagerXX
Status: Diamond Member (Offline)
Joined: Feb 11 2009
Posts: 2219
Re: Could you retire without Social Security?

I'm operating on the assumption that either SS will be gone, or the purchasing power of whatever I get will be negligible.

doorwarrior's picture
doorwarrior
Status: Silver Member (Offline)
Joined: Oct 13 2009
Posts: 166
Re: Could you retire without Social Security?

Even if I do get my SS in 25 years I am sure the value will all be gone. None of my plans for the future include anything from the government.

hmm, I wonder if I could write off my SS and Medicare payments as a bad investment and deduct the losses from my taxes this year. Not Likely.

Stan Robertson's picture
Stan Robertson
Status: Platinum Member (Offline)
Joined: Oct 7 2008
Posts: 651
Re: Social Security Will Be Gone
Poet wrote:

I think it was 2009 or this year when Social Security revenue inflows were less than Social Security payment outflows. It'll definitely be the case next year when all Social Security withholdings will be reduced to 2/3rds of what it was before.

My wife and I both have a few decades go to before we're eligible. Long before then, it'll have been eaten away by Fed money printing or frozen or reduced in one way or another.

This Ponzi-style confiscation of our earnings is outrageous, but there's little we can do about it. At least the amount that the two of us pay over our lifetimes will likely be far less than what our four parents will receive over their own retirement lives.

Poet

I would be up a creek without my SS income, as would many other senior citizens. I have paid SS taxes from the first dollar I ever earned and I feel that what I receive is owed. It makes no sense to me to put SS on the chopping block. It is funded by a dedicated tax that has been adequate in all but a couple of recession years. Had the excess funds not been spent buying political elections, the system would be solvent for decades. But even if the IOUs are never paid, the system can remain solvent for many years by removing the caps on income subject to the tax. (Of course this would tax the rich at the same rate as ordinary working stiffs.) Even so, benefits will have to be trimmed in the future when too few people are paying in and too many drawing benefits.

When planning for retirement, I looked back  at how SS had perfomed as an investment. Almost any other investment of my tax money would have provided a better return, but I am not complaining because SS did serve as insurance for my family when my children were young.

It is pretty clear that the US can never repay its actual debts, let alone its promises, such as SS, in dollars of present worth. History says that if it honors its promises, it will be with currency worth much less than what is being used to pay SS taxes these days. I feel sorry for the youngsters who are paying for benefits that they will never receive. Our country is in such sad financial circumstance that, if I were young, I would not be counting on SS taking care of my old age.

ewilkerson's picture
ewilkerson
Status: Gold Member (Offline)
Joined: Jul 18 2010
Posts: 390
Re: Could you retire without Social Security?

There is virtually no way to dig ourselves out of this mess besides defaulting on our debt and starting over.  We have been so reckless and greedy without wanting to pay for anything.  It is pathetic!!  Just add Peak Oil in there and the US will have no choice but to default.  The credit markets will drive rates so high we will not be able to pay them.  I guess the Fed will be stuck with a bunch of bad Treasury Notes.  Heck.  The Fed is acting like such a Zombie that they may just keep on buying US debt.Embarassed

dshields's picture
dshields
Status: Platinum Member (Offline)
Joined: Oct 24 2009
Posts: 599
Re: Could you retire without Social Security?

in 15 years or so i do not believe that SS will be a meaningful part of my retirement.  i have been socking away money in a 401k for many years thinking that would be very helpful.  however, that is not doing much of anything either and probably will not do much of anything.  the entire retirement thing looks pretty bleak at this point.  i probably have to work until i drop dead.

Poet's picture
Poet
Status: Diamond Member (Offline)
Joined: Jan 21 2009
Posts: 1891
Re: Social Security Will Be Gone
Stan Robertson wrote:

I would be up a creek without my SS income, as would many other senior citizens. I have paid SS taxes from the first dollar I ever earned and I feel that what I receive is owed. It makes no sense to me to put SS on the chopping block. It is funded by a dedicated tax that has been adequate in all but a couple of recession years. Had the excess funds not been spent buying political elections, the system would be solvent for decades. But even if the IOUs are never paid, the system can remain solvent for many years by removing the caps on income subject to the tax. (Of course this would tax the rich at the same rate as ordinary working stiffs.) Even so, benefits will have to be trimmed in the future when too few people are paying in and too many drawing benefits.

I hear ya, Stan. However, I have to respectfully disagree about receiving what is "owed". There is an inherent inequality present in terms of how this money is taken from us.

Ida May Fuller was the first Social Security benefits recipient. Over about 3 years, she paid a grand total of $24.75 into the system. Her first check, dated January 31, 1940, was for $22.54. By the time of her death in 1975, Fuller had collected $22,888.92 from Social Security monthly benefits.

While no one these days will ever come close to Ida May Fuller's jackpot winnings, if you ever calculate how much you ever paid into Social Security versus how much you have (so far) received and will receive throughout the course of your retirement (as well as potential spousal benefits), you will see that Social Security requires more current workers to pay for the benefits past workers, and it also requires some people to die without ever collecting a penny (which is just plain evil). Inherently, this model - like the debt model - requires exponential growth in worker population and in wages.

Again, I hear ya, Stan. I understand you would be up a creek without Social Security payments. I just disagree about what's earned and what's owed. Aside from the amount you put in, with adjustments for bond interest, the rest wasn't earned or owed. Millions of people get nothing back or some some back because they died early.

Even if I were to die right now and my wife children to receive Social Security survivor benefits, I wouldn't say that what they received was "earned" beyond what I put in. The rest is coercive redistribution of hard-earned wages. I'd have far gotten bigger bang for the buck by investing for retirement over my working lifetime and purchasing life insurance (which I am doing despite having 12.4% of my wages or 1.5 months of work per year - half paid by my employer to me before it goes away to the SSA, half paid by my employer straight to SSA - going to Social Security).

Poet

SteveW's picture
SteveW
Status: Gold Member (Offline)
Joined: Jan 21 2010
Posts: 490
Re: Social Security Will Be Gone
Poet wrote:

Even if I were to die right now and my wife children to receive Social Security survivor benefits, I wouldn't say that what they received was "earned" beyond what I put in. The rest is coercive redistribution of hard-earned wages.

In Canada our plan is called social insurance which indicates this insurance aspect of the plan. Being more socialist we generally are more in favour of coercive redistribution of hard-earned wages. In fact I understand that if there was no cap on SS then it would be fully funded by the redistribution of wealth from the millionaires and billionaires who control your government.

 

Stan Robertson's picture
Stan Robertson
Status: Platinum Member (Offline)
Joined: Oct 7 2008
Posts: 651
Re: Social Security Will Be Gone
Poet wrote:

I hear ya, Stan. However, I have to respectfully disagree about receiving what is "owed". There is an inherent inequality present in terms of how this money is taken from us.

Ida May Fuller was the first Social Security benefits recipient. Over about 3 years, she paid a grand total of $24.75 into the system. Her first check, dated January 31, 1940, was for $22.54. By the time of her death in 1975, Fuller had collected $22,888.92 from Social Security monthly benefits.

While no one these days will ever come close to Ida May Fuller's jackpot winnings, if you ever calculate how much you ever paid into Social Security versus how much you have (so far) received and will receive throughout the course of your retirement (as well as potential spousal benefits), you will see that Social Security requires more current workers to pay for the benefits past workers, and it also requires some people to die without ever collecting a penny (which is just plain evil). Inherently, this model - like the debt model - requires exponential growth in worker population and in wages.

Again, I hear ya, Stan. I understand you would be up a creek without Social Security payments. I just disagree about what's earned and what's owed. Aside from the amount you put in, with adjustments for bond interest, the rest wasn't earned or owed. Millions of people get nothing back or some some back because they died early.

Even if I were to die right now and my wife children to receive Social Security survivor benefits, I wouldn't say that what they received was "earned" beyond what I put in. The rest is coercive redistribution of hard-earned wages. I'd have far gotten bigger bang for the buck by investing for retirement over my working lifetime and purchasing life insurance (which I am doing despite having 12.4% of my wages or 1.5 months of work per year - half paid by my employer to me before it goes away to the SSA, half paid by my employer straight to SSA - going to Social Security).

Poet

I fully acknowledge the inequities in the SS system. We all know folks who paid in only a little and drew benefites for decades. That was part of the vote buying that went on when the tax inputs were in excess. We also know that raising the retirement age to 69 will mean that many people who worked hard and paid all of their lives will die without receiving benefits. That is one way to compound an existing evil. Nevertheless, SS was a social contract of sorts. If I could have opted out and taken my 12.4% contributions and invested them elsewhere, I would have. Almost any investment strategy would have provided a better return than I will ever receive. You may disagree about what I am owed, but the fact is that I satisfied my end of the contract for near 60 years.  If I live a few more years it is pretty clear that I will get the last of my payments in cheapened dollars, but it is the younger people who will be cheated the worst.

I disagree that SS requires exponential growth. It has been operated as though exponential growth would continue forever, but it is, in principle, possible to have stable systems in which growth in spending does not exceed the rate of population increase. All that is necessary is that the number of people paying in be capable of supporting those receiving benefits. It is unlikely that we will ever have such a rich economy that a system with only two or three payers per recipient can succeed, but that is where we are headed.

osb272646's picture
osb272646
Status: Silver Member (Offline)
Joined: Mar 14 2010
Posts: 120
Re: Could you retire without Social Security?

Doorwarrior - You are spot on.   The Social Security mess didn't just happen yesterday.   Since 1973 the demise of Social Security has been obvious to anyone who paid attention to demographic trends.  At least three times over the past 40 years there have been Blue Ribbon Presidential Commissions that recommended cutting benefits, delaying retirement age, or putting in means testing.  In EVERY case, the recommendations of these Commissions became toilet paper for the West Wing privies.  That was Carter, Clinton and Obama.  The other presidents since 1973 just ignored the issue.

In the late 90's Greenspan advised Congress to address Social Security, or at least to fess up to the citizens about Social Security's precarious condition so people could plan accordingly.  Of course, Congress did nothing. 

My point here is that anybody entering the workforce since 1973 could have seen this coming and planned accordingly. 

 

Ken C's picture
Ken C
Status: Platinum Member (Offline)
Joined: Feb 13 2009
Posts: 753
Re: Could you retire without Social Security?
osb272646 wrote:

Doorwarrior - You are spot on.   The Social Security mess didn't just happen yesterday.   Since 1973 the demise of Social Security has been obvious to anyone who paid attention to demographic trends.  At least three times over the past 40 years there have been Blue Ribbon Presidential Commissions that recommended cutting benefits, delaying retirement age, or putting in means testing.  In EVERY case, the recommendations of these Commissions became toilet paper for the West Wing privies.  That was Carter, Clinton and Obama.  The other presidents since 1973 just ignored the issue.

In the late 90's Greenspan advised Congress to address Social Security, or at least to fess up to the citizens about Social Security's precarious condition so people could plan accordingly.  Of course, Congress did nothing. 

My point here is that anybody entering the workforce since 1973 could have seen this coming and planned accordingly. 

 

Hell when I got my first pay check at my first real job back in 1966 I didn't like the SS deduction. I took a long hard look at it then and decided that it was a bogus program. I could not not opt out then so why should I not get paid when it is due. If I could have taken that SS deduction and saved it and invested I could have had some real and tangible asset under my control not the gov.

Doug's picture
Doug
Status: Diamond Member (Offline)
Joined: Oct 1 2008
Posts: 3125
Re: Could you retire without Social Security?

KenC

Quote:

If I could have taken that SS deduction and saved it and invested I could have had some real and tangible asset under my control not the gov.

Yes, but would you?  I was in the Navy when you started your first real job.  Of course I didn't pay payroll taxes then, but there was a period of time after I got out that I was a working student and just entering the workforce.  I can pretty much guarantee I would not have saved or invested.  I was just scraping by.  I will note that without the GI Bill, I probably wouldn't have gone to college.

Doug

Ken C's picture
Ken C
Status: Platinum Member (Offline)
Joined: Feb 13 2009
Posts: 753
Re: Could you retire without Social Security?
Doug wrote:

KenC

Quote:

If I could have taken that SS deduction and saved it and invested I could have had some real and tangible asset under my control not the gov.

Yes, but would you?  I was in the Navy when you started your first real job.  Of course I didn't pay payroll taxes then, but there was a period of time after I got out that I was a working student and just entering the workforce.  I can pretty much guarantee I would not have saved or invested.  I was just scraping by.  I will note that without the GI Bill, I probably wouldn't have gone to college.

Doug

The difference is that it would have been my choice not someone else. I paid into the system for many years without the option to do something else with the money. This is essetially a contract forced on me.  So why is it that now the terms should get changed?

Just like I view the GI bill as part of the compensation for your contract to be in the Navy. You earned it you should have it.

 

dshields's picture
dshields
Status: Platinum Member (Offline)
Joined: Oct 24 2009
Posts: 599
Re: Could you retire without Social Security?
Ken C wrote:
Doug wrote:

KenC

Quote:

If I could have taken that SS deduction and saved it and invested I could have had some real and tangible asset under my control not the gov.

Yes, but would you?  I was in the Navy when you started your first real job.  Of course I didn't pay payroll taxes then, but there was a period of time after I got out that I was a working student and just entering the workforce.  I can pretty much guarantee I would not have saved or invested.  I was just scraping by.  I will note that without the GI Bill, I probably wouldn't have gone to college.

Doug

The difference is that it would have been my choice not someone else. I paid into the system for many years without the option to do something else with the money. This is essetially a contract forced on me.  So why is it that now the terms should get changed?

Just like I view the GI bill as part of the compensation for your contract to be in the Navy. You earned it you should have it.

 

If i had put all the money I have paid into SS in government backed financial instruments i would be a rich man right now.  I am going to do some calcs and try to approximate it.  Before I figure it out I am going to wager that I would be easily able to retire.

 

Stan Robertson's picture
Stan Robertson
Status: Platinum Member (Offline)
Joined: Oct 7 2008
Posts: 651
Re: Could you retire without Social Security?
dshields wrote:

If i had put all the money I have paid into SS in government backed financial instruments i would be a rich man right now.  I am going to do some calcs and try to approximate it.  Before I figure it out I am going to wager that I would be easily able to retire.

If you want to get a clear picture you will have to adjust nominal dollars for inflation. I did this some years ago when considering retirement and adjusted income levels to present values using CPI tables. Imagine my surprise to learn that my peak earnings year was 1959 when I was working as an oil field roughneck. Little did I know that I was wasting peak earnings years by leaving the oil patch for college.

darbikrash's picture
darbikrash
Status: Platinum Member (Offline)
Joined: Aug 25 2009
Posts: 573
Re: Could you retire without Social Security?

The problem with these kind of examples, is that they are retrospective in that it is easy to assume that anyone with two functioning brain cells will save a few bucks every week for retirement, and in so doing, also exhibit better than average (or even average) investment savvy and arrive at retirement age with a nice nest egg.

However simplistic this may seem retrospectively, the dirty little secret is that an alarmingly small number of people will actually do this, and an even smaller number will be able to resist diving into the kitty once it gets large enough to fund that special Hawaiian vacation. Further, the people that do have adequate discipline to do this for 30-40 years, are the last ones that need any type of government support in their retirement years. They’re going to get rich anyway.

No, the vast majority of Americans will never consistently save, and even fewer can resist the siren call of materialist consumerism when the pot grows large enough to do some damage.

Admittedly, these hapless souls will arrive at retirement destitute, but having done so of their own volition. So it serves them right, right? You reap what you sew, and all that Calvinistic crap.

Except that now WE have a problem, WE the people. With tens of millions of senior citizens eating cat food and living in cardboard boxes, no society is going to be able to take the “tough it out, it’s your fault” story line. It’ll be you and I bailing these miscreants out, again.

If you look at the percentage of people who would fail to fund there own retirement and become destitute as a direct result, and look at the cost to society to try and rectify this disaster after the fact, SS does not seem like such a bad idea at all.

ao's picture
ao
Status: Diamond Member (Offline)
Joined: Feb 4 2009
Posts: 2220
Re: Could you retire without Social Security?
darbikrash wrote:

 You reap what you sew, and all that Calvinistic crap.

As an aside, I fail to see the connection between reaping what you sew (sic) and "Calvinistic crap" (whatever that means).  The relationship between a karmic concept pre-dating but later integrated into Christianity to Calvinism is an apples and oranges relationship.   

darbikrash's picture
darbikrash
Status: Platinum Member (Offline)
Joined: Aug 25 2009
Posts: 573
Re: Could you retire without Social Security?

I must admit to not putting a great deal of time in that analogy, perhaps a better word would have been Objectivist, but I have grown tired of using this comparison however accurate it may be.

The point of my post (apparently lost) was not to debate theology, but to examine non ideological reasons for implementing SS insurance, and what the ramifications might be if not implemented, a perspective not often considered.

The choice of using a Calvinistic comparison was to illustrate a tongue in cheek criticism of one of the 5 points of Calvinism, which is stated as Total Depravity, loosely defined as the “the will is only free to choose evil” which I do consider to be crap, and was intended as a parody to the concept of persecuting senior citizens for failing to fund their own retirement.

osb272646's picture
osb272646
Status: Silver Member (Offline)
Joined: Mar 14 2010
Posts: 120
Re: Could you retire without Social Security?

Darbikrash;

I have a close friend who promulgates a similar view that SS is not such a bad idea after all, given that folks don't save much for their retirement on their own.

I believe that a large part of the reason for that is due to the existence of SS in the first place.  Another reason is the defined benefit pension plans, which, together with SS, caused an entire generation to forego saving and that generation got away with it.  Saving for one's retirement fell out of style.   Unfortunately, the importance of frugality was not passed on to the next generation, which was ill prepared for the ramifications of the defined contribution plans that came into existence starting in the 1980's.

SS was not conceived as a retirement funding plan.  The early benefit levels were at subsistence levels, but most elderly back then were living with extended families and the SS checks helped reduce the burden on those families.  Politicians quickly learned they could buy votes by raising the benefit levels.  They didn't worry their pretty little heads about the impact of those increases on the long term stability of the system.  Now, through inflation and benefit cuts, the SS benefits will move back toward subsistence levels, and the folks who expected the government to take care of them in their old age will be in for some rough sledding.

A quick look at the Boomer age wave coming through the system would have led any thinking person to the conclusion that SS was in trouble and probably not a good idea to put all one's eggs in that basket.   The plan is a completely unfunded transfer payment scheme. 

One does reap what one sows.  Unfortunately, as we're seeing, all the liberal programs that our society has implemented cannot erase that fact.   That's true whether for society as a whole or individuals.

 

 

Poet's picture
Poet
Status: Diamond Member (Offline)
Joined: Jan 21 2009
Posts: 1891
Re: Could you retire without Social Security?
osb272646 wrote:

I have a close friend who promulgates a similar view that SS is not such a bad idea after all, given that folks don't save much for their retirement on their own.

I hear the savings rate in China is 30%. They're saving for retirement, for future medical needs, and for other things in life - there is no Social Security there.

I wonder if we Americans would all start saving 30% of our earnings and start being smarter consumers (buying used, being careful shoppers) - if we weren't being coddled by having money confiscated with every paycheck and being lied to think that it's for our future when it's really for those already retired.

Poet

darbikrash's picture
darbikrash
Status: Platinum Member (Offline)
Joined: Aug 25 2009
Posts: 573
Re: Could you retire without Social Security?
osb272646 wrote:

I believe that a large part of the reason for that is due to the existence of SS in the first place.  Another reason is the defined benefit pension plans, which, together with SS, caused an entire generation to forego saving and that generation got away with it. 

Some good points – and some comments.

I’m not at all sure the argument that the simple presence of SS motivates the whole of society to forego retirement savings, while invoking the ever popular “saviour state” argument that such means are really counter productive, makes much sense. It’s simply an issue of savings rate of personal income, of which the US is currently between 2%-5%, depending on whose numbers you believe.

Claiming we would be more inclined to save if we did not have SS seems like a circular argument to me, given the historical savings rates of Americans. No, it is an issue of personal discipline and human nature’s lack of planning and refusal to consider the inevitable – particularly where age is concerned.

You could also make effective arguments regarding the annual income cap on SS deductions at $106k, and on how this disproportionate distribution of contributions contributes significantly to any future under funding, but this tired (and much overused) debate is not the central point

SS was not conceived as a retirement funding plan. 

Not correct. FDR initiated the plan in 1935 explicitly as a retirement plan.

Link

 

Q4:  Is it true that Social Security was originally just a retirement program?

A:  Yes. Under the 1935 law, what we now think of as Social Security only paid retirement benefits to the primary worker. A 1939 change in the law added survivors benefits and benefits for the retiree's spouse and children. In 1956 disability benefits were added.

Keep in mind, however, that the Social Security Act itself was much broader than just the program which today we commonly describe as "Social Security." The original 1935 law contained the first national unemployment compensation program, aid to the states for various health and welfare programs, and the Aid to Dependent Children program. (Full text of the 1935 law.)

Approaching this in a liberal or conservative framework is not likely to do anything but either vilify or valoritize the social contract we have had for 75 years – depending on which side of the fence you start from. None of these arguments really does anything but attempt to advance a punitive sense that people act irresponsibly due primarily to government policies (some certainly do), and that they will magically act responsibly when government influence is removed (most will not), all the while leaving the unanticipated mess of a bailout on those of us who do act responsibly. The argument reduces to the reality that:

1.)  Significant numbers of people, the majority in fact, will never of their own volition save effectively for retirement. (Note US savings rates)

2.)  We can initiate programs to enforce this saving on an individual level (including company contributions as in the current system) and in the process absorb a rather distasteful reality that this ideological unpleasantness is better than the alternative.

3.)   Or, we can accept the alternative, which is that well over a 100 million people will reach their late 60’s destitute and unable to care for themselves, and therefore force the rest of us to foot the bill.

To me it’s not a liberal argument at all, it’s just good business, it’s cheaper to pay for it now than inherit it later.

osb272646's picture
osb272646
Status: Silver Member (Offline)
Joined: Mar 14 2010
Posts: 120
Re: Could you retire without Social Security?

Darbikrash wrote: "It's cheaper to pay for it now than to inherit it later."

I absolutely agree with your statement.  On an individual and a societal level.  Perhaps we're talking about two different social security systems.  The one we have now surely does not adhere to that tenet.  If it did, then we wouldn't have the problems with SS that we have now. 

With regard to the original purpose of SS, here's what the preamble to the bill of 1935 states (thanks for providing the link in your post):

"An act to provide for the general welfare by establishing a system of Federal old-age benefits, and by enabling the several States to make more adequate provision for aged persons, blind persons, dependent and crippled children, maternal and child welfare, public health, and the administration of their unemployment compensation laws; to establish a Social Security Board; to raise revenue; and for other purposes.

Doesn't say any thing about retirement.  As a retirement compensation plan, the payouts were totally inadequate until the '60's when politicians started raising benefits without finding ways to pay for them, in order to garner the Senior vote.

I only threw in the liberal comments as a reaction to your original comments about "Calvinist Crap" and your disdain for the concept of "What you sow, so will you reap"'.  I'm not a religeous person, but I do believe in individual accountability, hard work and the concept that "you get what you pay for."   Your comments introduced liberalism vs conservatism to this thread.  For you to object to my subsequent references to liberalism seems to me to be rather disingeneous on your part.

darbikrash's picture
darbikrash
Status: Platinum Member (Offline)
Joined: Aug 25 2009
Posts: 573
Re: Could you retire without Social Security?

Well I agree, if the measure is to a pension fund, or some type of compensation in a similar vein that for example returns 75% (or more) of the retiree’s historical salary – then no, this system does not and never did attempt to provide this level of compensation.

But is was called at the time, and is called now a retirement plan. The determination of what the level of income will be is the source of much debate. According to my SS statement, I will receive $2447/month, or about $30k a year if I retire at age 66. Call it what you like.

And I agree again with you in the commentary of working hard and getting what you pay for, no disagreement here. I’m a little surprised to see how my Calvinistic comment lead to a discussion about liberalism vs. conservatism, but I do not object to your liberalism reference. However, I did (and still do) find it useful to point out that these ideological definitions do nothing to solve the problem. So where does all this word smithing leave us?

Piketty and Saez Income series

Table AO on page 65 lists the average wage income of 0-90% of Americans excluding capital gains income, and in an adjacent column, you can see the same information with capital gains income. The difference between the two data sets is about $1200 of annual income that 90% of Americans receive from capital gains (investment), once we wash out wage income. The thinking is of course there is no wage income in retirement, so if we eliminate SS, the average Joe is left with only this income, and any 401 K income if he has a 401k plan. (The $1200 does not consider 401k revenue, which is non taxable if withdrawn in retirement and does not show up in the data)

About 50% of working Americans have a 401k plan. Of those, the average balance is around $60,000, and 50% of the particpants have less than $2000. Using a 6% interest income, the 90th percentile American would see something like $3,670/yr in retirement income if there was no SS.

This paints a clear, data based picture that the 90% of the families in the US are looking a retirement substantially below the poverty level (the 2010 US poverty level is defined at $22,500 annual for a family of four) if we do not consider SS income. Note also the Piketty and Saez data shows a sustained decline in wage and capital gains income over long periods of time. So it's getting worse. (Updated to 2008)

So given the data on savings, and the massive disconnect on any income not attributable to wage income, does it seem very sensible to cut off SS?

If so, what then, precisely, would be your suggestion?

dshields's picture
dshields
Status: Platinum Member (Offline)
Joined: Oct 24 2009
Posts: 599
Re: Could you retire without Social Security?
Stan Robertson wrote:
dshields wrote:

If i had put all the money I have paid into SS in government backed financial instruments i would be a rich man right now.  I am going to do some calcs and try to approximate it.  Before I figure it out I am going to wager that I would be easily able to retire.

If you want to get a clear picture you will have to adjust nominal dollars for inflation. I did this some years ago when considering retirement and adjusted income levels to present values using CPI tables. Imagine my surprise to learn that my peak earnings year was 1959 when I was working as an oil field roughneck. Little did I know that I was wasting peak earnings years by leaving the oil patch for college.

i have made some effort to collect the data required to do the analysis i discussed in a previous post on this thread.  it turns out this is a difficult thing to figure out in a couple of hours.  but, with inflation and stock/bond market fluctuations and some guess work about what i would have done given various situations in the past, it looks like i would have about double the retirement income as i will get from social security if i had placed all the money i have paid (not the employer part) in reasonable investment opportunities.  about double.  i tried to be somewhat conservative in the analysis.  i would be very happy to take double.  it might be a lot more based on what decisions i might have made over the years.  so, for me, SS is a HUGE rip off and i am getting a poop sandwich with a pickle as the result.

 

Stan Robertson's picture
Stan Robertson
Status: Platinum Member (Offline)
Joined: Oct 7 2008
Posts: 651
Re: Could you retire without Social Security?

I suspect that a majority of people who have held steady jobs for decades would reach your same conclusion. But I think that darbikrash was correct when he said that few americans would have the self discipline to adequately save and invest for their retirement. The decreasing real wages that I found was an unpleasant surprise to me. That is part of the reason that most families now require two wage earners where one sufficed 50 years ago. Economic globalization is driving this to an extreme. We are competing for jobs with people in other countries who are willing to work for much, much less than we need to live here.

dshields's picture
dshields
Status: Platinum Member (Offline)
Joined: Oct 24 2009
Posts: 599
Re: Could you retire without Social Security?
Stan Robertson wrote:

I suspect that a majority of people who have held steady jobs for decades would reach your same conclusion. But I think that darbikrash was correct when he said that few americans would have the self discipline to adequately save and invest for their retirement. The decreasing real wages that I found was an unpleasant surprise to me. That is part of the reason that most families now require two wage earners where one sufficed 50 years ago. Economic globalization is driving this to an extreme. We are competing for jobs with people in other countries who are willing to work for much, much less than we need to live here.

You speak the truth and every time I think about it makes me get a little crazy.  I have looked at a wall of data about it and so has practically everyone on this site.  The only option I see was to slap a big fat tax on imports.  Then everything costs more for everyone and we keep a few million manufacturing jobs but it ends up two people have to work anyway because of the import tax - it would have to be a BIG tax.  Shirts then cost 25 dollars instead of 15 so everyone has to work their rears off just like now.

I read a post on here a while back where a guy postulated that we could equal or beat cheap foreign goods by building sophisticated factories here.  Not a lot of people would work at them but the people that did would have decent paying jobs.  He said, and he may be right, that companies don't want to bother with all the cap x and effort required to build cool new manufacturing facilities here - why should they when they can get what they want with no cap x and little effort from third world hell holes.  If that is true then it is a sad story.

 

RosemarieI's picture
RosemarieI
Status: Member (Offline)
Joined: Mar 16 2011
Posts: 1
Social Security

Additional U.S. Citizens are deciding not to wait until the official retirement age to gather Social Security benefits. Some baby boomers have been forced to use Social Security benefits early because of losing jobs and spending savings during the recession, while others are compelled to collect Social Security benefits before the program goes bankrupt. Social Security isn't going away, in accordance with most  financial experts, who recommend that individuals hold out at least until the official retirement age to maximize benefits.

Poet's picture
Poet
Status: Diamond Member (Offline)
Joined: Jan 21 2009
Posts: 1891
Americans Can Save

Some say Americans wouldn't save on their own.

Again, may I remind you that the Chinese savings rate is 30%. They know they have no Social Security or Medicare and the one-child policy means they can't rely on having children take care of them.

The savings rate was about that high in Japan until their economic Lost Decade, recession, and retired elderly began drawing down the national average to be more in line with the American rate (low single digits).

Americans can be frugal and be good savers. Many still are. Government promises hurts that.

Poet

Brainless's picture
Brainless
Status: Silver Member (Offline)
Joined: Dec 9 2008
Posts: 150
There are no savings without risks

Putting money in the bank. Taxes, Inflation, bankruptcy

Putting money in realestate. Property taxes, Insurance, maintenance, lower than needed roi.

Silver and gold. Taxes, acceptance as payment for goods, extreme cases confiscation, treatment as a commodity instead of money.

Investments: Taxes, regulations, performance of company

etc...

If you add the confiscations (SS) to the amount that people save you would arrive at a much higher savings rate, maybe even the highest in the world.

Carl Veritas's picture
Carl Veritas
Status: Gold Member (Offline)
Joined: Oct 23 2008
Posts: 294
Congressional Raiders

Congress has been ripping us off by raiding the trust fund so   I have no faith in them handling the money.     Do you?

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Login or Register to post comments