everyone with income pays a 15% tax, called Social security

Discussion in 'Budget & Taxes' started by gorte, Apr 18, 2015.

  1. CourtJester

    CourtJester Well-Known Member

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    Age sensitive investments do not guard against major economic risks. They are designed to reduce short term volatility in portfolio value as investment time frame shortens in a " normal" market environment.
     
  2. maat

    maat Well-Known Member Past Donor

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    Under privatization you would be welcome to invest your life savings in governments bonds. Further more, I suspect the government would have in place some sort of protection. My mother has her egg in an annuity and suffered no set backs. Plans can have safety features. Our current Ponzi is not our only solution and it will fail.
     
  3. unrealist42

    unrealist42 New Member

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    It is quite obvious by your continued characterization of SS as a ponzi scheme that you have absolutely no conception at all about how insurance actually works.
    Insurers do not take money from policy holders and squirrel it away, they use it to pay out current claims and invest the surplus in very safe investments like real estate and government bonds. SS has accumulated a $2Trillion surplus that is safely invested in interest paying US government bonds.

    Chile privatized its Pension system in the 1980s. Contributors were given the choice of remaining in the old scheme or moving to the new scheme which is much like the current 401k system in the US. There was all sorts of promises of huge returns and investor protections, none of which bore out because years later when the first of those who vested in the private scheme went to collect their pensions they were worth only 5% of what those who stayed in the old plan were receiving. Not 5% more but 95% less. This precipitated mass protests, emergency government borrowing of 50% of GDP to make these pensioners whole and the end of libertarian free market idealist governing, which capitulated in a popular rebellion.

    Just imagine what would have happened to all those SS recipients in 2009, when the stock market lost 60% of its value. It is very lucky that those losses were the extra money to beef up SS payments but if it it was most peoples SS that would have been a political catastrophe like Chile.

    btw, when Bush became president in 2001 the Treasury Secretary and Chairman of the Fed told him that the current revenue with its surplus would be enough to fund the privatization of SS. Bush chose to cut taxes on the wealthy instead, and cut taxes some more and get us into two wars and run up the debt and deficit to the point where the privatization of SS became fiscally and financially infeasible for the foreseeable future. The Congress has come to depend on SS holdings in its insanely wrong budget calculations.
     
  4. CourtJester

    CourtJester Well-Known Member

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    What was her upfront cost of buying the annuity and how many years will it take for her to break even.
     
  5. OldManOnFire

    OldManOnFire Well-Known Member

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    If you actually believe the government is going to eliminate SS, or any other program of which Americans are 100% dependent, then you have quite a shallow view of US government. Can you define any government program in which Americans were 100% dependent, and in which Americans separately funded the program, in which government failed?

    Well...nothing is free. Whatever it costs to maintain both a public and private retirement system in place will be born by ALL taxpayers.

    Of course SS costs will climb just as it does with everything else in our lives. Perhaps today FICA is 12.3% and in five years it will be 12.7% and continue climbing as necessary to fund the program.

    Instead of creating a separate private SS program why not just allow the government to invest and store the existing FICA contributions? Why not charge the government 25% interest rate for any SS cash that they borrow?
     
  6. OldManOnFire

    OldManOnFire Well-Known Member

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    Assuming the current median wage, and ignoring inflation and interest income, the median wage is $35,000, if we assume a 90% net of $31,500, and we assume 5% of this net is saved each year, this is a whopping $1575 per year, and over 40 years this would be $63,000 available at retirement time. Obviously not enough to live on. Further, what if someone has accrued $45,000 in their savings and they have any emergency that might require $25,000...there goes their retirement funds.

    Like it or not, for everyone who earns less than some amount, let's guess $75K, and only if they can consistently save 5-10% of their income, it will not be possible to save enough for 15-30 years of retirement. Of course any wage earner can invest their cash to achieve a higher ROI, but associated with this is risk.

    IMO the reason we can't arbitrarily change or terminate SS is because the scope of the program is so complex there is no single solution...
     
  7. maat

    maat Well-Known Member Past Donor

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    The government does not take the surpluses and invest them. It borrows them and wastes the money on bridges to nowhere. It is no different that Madoff.

    The unintended consequence is that it forces the current benefits on the current paying generation and borrows from the next generation what it cannot squeeze out of the current payers. The end result is continuos higher taxes on the next generations. Now, it is to the point most do not or cannot save for themselves and share in the wealth. The system has been slowly converting Americans back into serfs. This is not rocket science. Attempt to see past your own nose and recognize the pattern.

    Just like all Ponzi schemes, it starts out great and collapses on the tail end. We are nearing the tail end. Private accounts eliminate the pilfering by government/Madoff/Ponzi and provides fair outcomes that are not forced on the next generation. And, the markets do have a successful history of performance. The fact that we have recessions and depressions is mainly due to improper government influences. Better to solve them than continue the clear path to serfdom.
     
  8. CourtJester

    CourtJester Well-Known Member

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    The system has been gradually moving all the wealth of America to the top. At some point this will become unsustainable and the inverted pyramid will collapse. It really is just a fundamental question of whether America exists for the majority or for the few.
     
  9. OldManOnFire

    OldManOnFire Well-Known Member

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    Never implied the government invests surpluses??

    Money borrowed from SS is used for all government purposes...not just bridges.

    People don't save as much as they should because of all other reasons other than 'converting Americans back into serfs'. There is no system against any American which prevents that American from saving.

    100% private retirement accounts are not a single solution to the current SS system...

    - - - Updated - - -

    Please explain how 'the system' is taking wealth from you and giving it to others??
     
  10. Ndividual

    Ndividual Well-Known Member

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    A couple of examples of SS benefits
    1. A worker who began working in 1966 earning the minimum wage, then $1.25/hr, who only earned the Federal mandated minimum wage their entire working life and then retires in 2016 at age 67. That person would have earned a total of $425,757, with a total Social Security tax of $49,680.32 been provided the government, $24,537.83 from their paycheck and $25,142.48 from their employer under their SS number. Using the ssa.gov calculator that person would receive a monthly SS benefit of $1,102 each month for a total of $13,224 each year. Their SS benefits would begin to exceed their contributions after 3 years and 9 months, or before they reached age 71.

    2. Then take another worker who earned the maximum SS taxable income over their 50 year working life, also retiring at age 67 in 2016. That person would have earned a total of $2,732,300, with a total Social Security tax of $329,355.58 been provided the government, $162,508.79 from their paycheck and $166,846.79 from their employer under their SS number. Using the ssa.gov calculator that person would receive a monthly SS benefit of $2,916 each month for a total of $34,992 each year. Their SS benefits would begin to exceed their contributions after 9 years and 5 months, or before they reached age 78.

    According to the ssa.gov website, a man reaching age 65 today can expect to live, on average, until age 84.3, and a woman turning age 65 today can expect to live, on average, until age 86.6. Of course not everyone reaches age 65.

    The Social Security 'trust fund' or excess received into the program is invested in interest bearing government bonds, which is considered to be debt the government owes itself, and when those bonds need to be cashed in they then become a part of the public debt. By law, Social Security benefits must be reduced if the receipts are less than required to cover the payouts, meaning the SS tax will have to increase on those working if the payouts are to continue.

    Anyone read the governments pamphlet selling Social Security to American workers in 1936? "and finally, beginning in 1949, twelve years from now, you and your employer will each pay 3 cents on each dollar you earn, up to $3,000 a year. That is the most you will ever pay."

    And now we also have government provided 'affordable' healthcare to help more of us live long enough to collect Social Security.
     
  11. CourtJester

    CourtJester Well-Known Member

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    First, of course I didn't even begin to imply that the system is taking wealth from me. The system has been very good to me but then of course my income comes primarily from investment which benefits from preferential treatment of long term capital gains.

    Secondly. Didn't say the system involved " taking". Actual reading comprehension is a useful but acquired skill. What I said is the system is gradually moving all the wealth of America toward the top. This is a fact and is not debatable. The Interesting question is why this is happening. Several reasons come to mind

    1) preferential treatment of long term capital gains.
    2) tax cuts that primarily benefit the wealthy.
    3) globalization that reduces the value of labor and increases the value of capital
    4) automation which reduces the value of labor
    5) stepped up basis for inheritance which facilitates transfer of wealth between generations of the same families.
    6) increased limits on inheritance exemptions which help the above.
    7) special tax provisions such as those for hedge fund managers.

    And then of course we can discuss the decline of public education. None of the above is really assignable to a particular political party. The trend has continued through both Republican and Democratic rule. The question is should something be done to reduce the trend or even reverse it or do we just let it continue and see what happens to our Democracy.
     
  12. maat

    maat Well-Known Member Past Donor

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    When SS started it was truly a small old age insurance that only collected 2% tax. Today, it is 12.4%, which makes it difficult for most Americans to save. The longer it goes the higher the taxes. The higher the taxes the less disposable income to invest. See the pattern?
     
  13. Woolley

    Woolley Well-Known Member

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    The idea that black people were living off the earnings of white people started almost immediately after LBJ started his anti-poverty programs. These same folks never thought of the hill billies in the Appalachians or the crackers in Mississippi all of whom were dirt poor. Nope, all they could think of was a black person getting welfare. It continues to this day, I hear it constantly. This was all part of the Southern Strategy and it is dooming the modern GOP to be the white party.
     
  14. Deckel

    Deckel Well-Known Member Past Donor

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    And dooming the DNC to being the northeast and western party talking about hillbillies, crackers and viewing the south as being dirt poor.
     
  15. Woolley

    Woolley Well-Known Member

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    Well, the south is dominated by their rural areas and by their culture. The rural areas are not much different today than they were decades ago. The culture is still a story resembling Gone with the Wind but it is changing. If the right thinks the south is the best of America, they are welcome to it. As someone who has spent a lot of time in the south, I can tell you that while they have some very wonderful qualities, Southerners (white people) are truly some of the most ignorant, racist and stupid people I have ever met. I retain some hope for them though, there is always hope.
     
  16. Deckel

    Deckel Well-Known Member Past Donor

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    That is your own bias. Most of the south, rural or urban, is violet. The DNC has just surrendered it time and time again, refusing to spend time and money there because they cannot get money out of there.

    Your racism, however, is noted. Have a blessed day.
     
  17. Woolley

    Woolley Well-Known Member

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    Well, if my sin is that I call them as I see them then I should be embraced by all who claim that this is the single most important attribute, it is certainly something I hear quite often from the Rump supporters. The south is deeply racist, calling me a racist for stating a simple fact is quite hilarious. I do hope the South turns blue, it is not even close to being purple yet as your various state, local and national elections prove time and again. I find the south fascinating, it is a study in cultural preservation. The south has a story, it is a story steeped in racism, honor, pride and history but it is deeply racist. There is no other way to put it. I know there are good people in the south but unfortunately for them, they are outgunned by the folks who think the Civil War was about states rights, the confederate flag is something to be proud of and that any conservative actually gives a damn about them beyond getting their vote.
     
  18. Ndividual

    Ndividual Well-Known Member

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    Everyone who has a FICA deduction taken from their income is directly/indirectly funding Social Security and Medicare, with the assumption that if they retire or become disabled they will receive some benefit from those programs.
     

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