SOCIAL SECURITY REPLACEMENT
The less money you make, the more that social security has to make up as your retirement income. From Life Insurance Selling:
|Income Level||Social Security||Other Sources|
MORE SOCIAL SECURITY: (FED Board of St. Louis 1996) Fewer
workers are providing benefits for more of the elderly and the info below
shows the problem worldwide. It is obviously due to the aging populace as
well as the lower birth rate.
Ratio of Working Age Population to the Retirement Age Population
We may look bad, but check out Japan.
In some countries, the working age population has risen while in others it has fallen. In 1960. 63% of the working age population in the U.S. and 69% of the population in France was working. In 1990, that had increased to 73% in the U.S. but had dropped to 61% in France. Part of France's problem was the socialistic society which made it financially worthwhile to retire early with lots of payments.
SOCIAL SECURITY: (1997) If you retire with full quarters of coverage but before the full retirement age, you are get less than if you had worked up to the full age as designated by social security (I went though all that to make you recognize that, while you can get Medicare at age 65, you may not get full benefits for social security since it uses retirement ages from 65 to 67). Anyway, benefits are based on your highest 35 earnings years, indexed for inflation and added together. If you work only 30 years, the five potentially highest years would be zero and therefore reduce your payments.
SOCIAL SECURITY INCREASE: (1997) Due to the efforts of Volcker and Greenspan, inflation has dropped. As such, SS payments in 1998 will increase just 2.1%
The average monthly benefits are
Retired Worker $765
Retired Couple 1,288
Widowed Mother with two children 1,522
Elderly widow(er) 731
Disabled worker 1,198
Supplemental Security Income- individual 494
Social Security Income- couple 741
Maximum annual earnings subject to SS tax 68,400, up from 65,400
SOCIAL SECURITY (1998): While the politicians congratulated themselves on balancing the budget (joke- the economy did it), they never did address the inherent problem with Social Security- which is still going to run out of money. From the Associated Press:
In 1996, social security paid benefits of $347.1 billion to almost 44 million retired and disabled workers or survivors. About 144 million workers-3.3 per each beneficiary- contributed taxes to pay for all that. Right now there is excess money flowing into the till and the trust fund increased by $70.9 billion to $567 billion. These extra funds will increase till about 2012, and then it hits the fan. From 2012 to 2019, social security will have to spend the interest earned on the accounts to pay off benefits to the estimated 70 million baby boomers expected to retire about then. By 2019, social security will have to start paying down from the principal. By 2029, the reserves will be gone. Only about 2 retirees will be paying payroll taxes for each recipient at that time.
So what will happen? Well, social security will always be available to the poor/low income. Those people making "too much" at retirement will pay higher tax on what they do get, or they won't get anything at all.
Social Security was originally designed to help the poor. That's what it will end up doing again.
SOCIAL SECURITY: (WSJ) 1998
Expected annual return on SS contributions for single males born 1960 and earning an average wage.
Total Population 0.7%
Blacks lose because of a statistically lower actuarial lifetime.
Expected returns for high income wage earners born in 1960, two children
Single earner 1.4%
Two earners -0.1%
In effect therefore, the poor are subsidizing the rich.
SOCIAL SECURITY: (1998) In 1935 when age 65 was the retirement age, the actuarial lifetime was just 61. But here is an unusual statistic- in 1950 there were about 16.5 workers to recipients; in 1997 about 3.3 and projected in 2025 to about 2.2. But about 38% of the working age population will be Black, Latino or Asian and they will be supporting a largely white elderly population. That's a precursor to a lot of social problems.
SOCIAL SECURITY: 1998 (Federal Reserve Bank of Richmond): Everyone knows that the Social Security surplus is a myth and that payments to beneficiaries will exceed revenues from their own taxes by 2012, and by 2029 the Social Security trust fund will be depleted.
Social Security receives contributions of taxes from workers and their employers and pays out benefits to retirees, their dependents, and those on disability. Excesses in receipt over expenditures are handed over to the U.S. Treasury to be used in financing other governmental activities. By applying an accounting fiction, the Social Security system treats these transfers as investments in government securities and adds them to an imaginary portfolio that also collects fictitious interest payments. From the perspective of the government's total budget, this practice implies that the Treasury issues fewer bonds to the public than it would given there was no surplus received from Social Security. Unlike Treasury Bonds issued to the public however, the IOU's from the Treasury to Social Security are not counted as government debt.
Social Security was created in 1935 as an inter-generational transfer program from workers to retirees. It is a pay a you go system. However, as such, there is a potential that the promised payments could become increasingly difficult to honor.
At the time of its inception, the Old Age Survivors Insurance (OASI) part of the program was fairly small. In 1940, its benefits equaled 0.03% of GDP. By 1950, it risen to only 0.33 %. But by 1996 it had risen to over 4% of GDP. In terms of taxable payrolls, benefits reached 10.7% in 1994 and represented roughly 90% of all federal outlays. Over time, the fraction of the labor force covered by Social Security has risen from 63.7 % in 1940 to 97.6 % in 1993.
Social Security has played a major role in reducing the number of people over 65 who lived below the poverty line. In 1959, 35.2% of the elderly were characterized as poor. By 1994, the figure had dropped to 11.7%. The increase in Social Security benefits is largely responsible for this decline. Expressed in 1995 dollars, the average monthly benefit in 1950 was $269.30, in 1968 was $381.38, in 1995 it was $719.80. Also the number beneficiaries has risen substantially from 222,488 in 1940 to 37.5 million in 1995. In terms of the percentages of the population over 65, only 7% receive benefits in 1940 whereas 91.3% receive benefits in 1995. Social Security, provides over 90% of income for half the seniors below the poverty line and 50% of income for two-thirds of all beneficiaries.
The original Social Security act provided benefits only to those that contributed, but in 1939 benefits were extended to spouses and surviving widows. There have been other changes over the years, but perhaps most importantly was the 1950 Act that brought an additional 10 million new workers into the system.
Initially there was a 2% tax rate, equally divided between employer employee and levied on income up to $3,000. The first benefits were not paid until 1940. Further, no benefits were to be paid in any month that a retiree earned more than fifteen dollars, and to put that number into perspective, the average annual wage in 1937 was $797. It must be very clear to note that the major feature of the system was that Social Security was at least in part envisioned as insurance against destitution.
Over its history, Social Security has probably never been sound primarily due to Congress providing benefits more generous than originally intended and by effectively refusing to raise tax rates as fast as a 1939 Act indicated. The article noted that perhaps the most severe problem for the system was created by the 1972 Act which included automatic price adjustments. Such an adjustment ended up over compensating workers. Due to these problems, another act was initiated in 1997 that supposedly would provide a soundness to the program well into the next century. Wrong.
In 1953, the maximum benefit was 30.5% of the average wage; in 1981 it was greater than 50%; in 1995 it was equal to 60.5%.
Additionally, in 1945 there were 42 workers per retiree. In 1995, that number had diminish to 3.3 and it is projected that by 2030, there will be only two workers per retiree. Along with this problem, the life expectancy of individual has increased dramatically thereby requiring payments not only for the retiree, but potentially for the survivor, normally the woman, who was living a much longer number of years. A 65 year old woman today has a 19.4 remaining actuarial lifetime.
In the report by the 1994-1996 advisory council, Social Security indicated that taxes would have to be raised immediately by 2.13 % to attain a 75 year balance.
SOCIAL SECURITY: (1998) If you reach age 65 this or next year but elect not to take social security benefits, you get a 5.5 % "delayed retirement credit" for each full year that you do not receive benefits up to the age of 70. That means that if you do not start collecting social security till age 70, the monthly benefits will be 27.5%t higher than if you started taking them at age 65.
SOCIAL SECURITY: (1998) If you reach age 65 this or next year but elect not to take social security benefits, you get a 5.5 % "delayed retirement credit" for each full year that you do not receive benefits up to the age of 70. That means that if you do not start collecting social security till age 70, the monthly benefits will be 27.5%t higher than if you started taking them at age 65.
SOCIAL SECURITY: In 1997, the system paid out $369.9 billion benefits- about 90 percent of the taxes received of $409.1 billion. The difference, $39.2 billion, plus $43.6 billion of interest credited to the fund, accounted for the $82.8 billion increase in the trust fund balance during the year. However, the trust fund offsets deficits in all the other functions of the federal government in all commonly reported discussions of the federal budget deficit. In other words, "creative accounting".
SOCIAL SECURITY: Per 1997 statistics-
About 147 million people worked in jobs covered by Social Security and 44 million received Social Security benefits. There are currently 3.3 U.S. workers per recipient. By about 2030, the ration will be 2:1. There are about 30 million Americans over age 65 now. By 2030, it will be about 60 million.
Social Security paid out $369 billion but took in $457 billion. Interest income was $44 billion
The Trust fund reserves amounted to $656 billion
Administrative expenses totaled $3.4 billion or about 0.9% of benefit payments.
One third of all unmarried women depend on Social Security for 90% of their income. Only 20% of women age 65+ received any type of pension in 1990 and that amount equaled only $409/month. The 1990 median income for widows 65+ was $9,366 for white women and $5,938 for black women. Forty percent of all widowed and divorced women age 65+ had incomes below $7,500.
The average benefit paid to women was $644 monthly while men averaged $838.
SOCIAL SECURITY: in 1997 only 46 % of American said that they would count upon social security as a source of retirement income. That's down from 88 % in 1974. 42% of these now count on self directed retirement accounts vs. only 6 % in 1980.
SOCIAL SECURITY: (1999) In 1935 there were 40 workers that supported every worker- in 1997 it's about 2.8 workers per beneficiary.. Taxes were first collected in 1937. Monthly payments started in 1940 and 222,000 received $35 million. The average benefit for a retiree was $13.13 per month- it's about $734.53 month now.
By 1997 there were 43.971 MILLION beneficiaries receiving $341,971 BILLION in Social Security payments while an additional 6.153 million received $27.037 billion in supplementary security income.
Over the years $4.1 trillion has been paid in social security benefits.
A 1997 retiree's income was about 23% due to social security ($7,130 annually); 24% from savings, 21% from pensions; 28% from savings and 4% from other benefits.
SOCIAL SECURITY: (1999) How
much to the different income levels depend on Social Security. From the National
Commission on Retirement Policy
|Low Income||Middle Income||High Income|
In 1900 only about 4% of Americans were over 65; in 1996- 13%. Estimated 2040- 25%
SOCIAL SECURITY: (Associated Press 1999) It does an exceptional job of helping people - particularly women- who retire with little in assets, though that was not the (true) intent when it started in the 30's. Anyway, it "cuts in half the gap in poverty rates between elderly women and elderly men." Women pay 38% of all social security payroll taxes yet receive 53% of benefits- primarily because they live longer and the fact that the benefits are not sex adjusted. They can also get it (as can men) even though they have never worked but as long as their spouse was covered under SS. If they have not worked, the benefits are not as significant. Blacks and Hispanics draw more upon social security than whites simply because of less income overall. Elderly persons were poor if they had income of less than $7,698 in 1997- $9,712 for couples. Overall, "without income from social security, 47.6% of elderly Americans- 15.3 million people- would have been poor in 1997. Social security benefits cut that poverty rate by 75% to 11.9% or 3.8 million elderly."
SOCIAL SECURITY 2000 Social Security could be in for a lot more problems than you made have heard about if for no other reason that the actuarial lifetimes are increasing. That means that SS will need to pay out money longer. How much longer? A study indicated, "Projected life expectancy at birth in 2070 should be raised to the level currently projected for the high-cost assumptions, 3.7 years above the current intermediate projection." Here is the summary of The 1999 Technical Panel of Assumptions and Methods Report to the Social Security Advisory
Social Security Systems around the world
SSA Issues Final Rules Relating to "Substantial Gainful Activity" The Social Security Administration issued final rules to automatically adjust each year, based on any increases in the national average wage index, the average monthly earnings guideline it uses to determine whether work done by persons with impairments other than blindness is substantial gainful activity. Proposed rules were issued August 11, 2000. The effective date of the new rules is January 29, 2001.
2000 Annual Statistical Supplement on SSI and Social Security (2001) The Supplement has 400+ pages of the most comprehensive data available on the Social Security and SSI programs. The data cover many aspects of these programs -- from beneficiary counts and amounts of benefits to the status of the trust funds. The statistical tables also contain data on Medicare, Medicaid, veterans' benefits, and other related income-security programs. At the beginning of the Supplement are historical program summaries of the major programs and summaries of current legislative developments.
Social Security is now 66 years old. (2001) Social Security was designed in an era when the average life expectancy was 65, and when families of 3 or 4 children were more rule than the exception. In those early years there were 30-40 workers paying Social Security taxes for every 1 retiree receiving benefits. Today, there are 3 workers for every retiree soon there will be just 2. Due to declining ratios of workers to seniors, the Social Security payroll tax, which was once just 2%, has now passed 12%
Social Security and back taxes: (WSJ 2001) About 232,000 people of the nearly 45 million who receive Social Security benefits owe federal taxes from earlier years, the IRS says. If those people don't resolve these debts, 15% of their Social Security benefits may be applied to their back taxes next year under a new phase of a "federal payment levy program." The levy will continue until the tax bill is paid off or the person arranges payment.
SS Disability: (2002) Social Security Reports Three-Year Backlog on Disability Cases: Disabled Americans who apply for Social Security benefits often must wait two to three years to start receiving benefits because of a backlog of pending applications. About 10 million disabled Americans receive Social Security benefits. The Social Security Administration receives more than 2 million applications for disability benefits each year.
The Impact of Income on Mortality: Evidence from the Social Security Notch (2002) There is widespread and longstanding agreement that life expectancy and income are positively correlated. However, it has proven much more difficult to establish a causal relationship since income and health are jointly determined. In this report, researchers use a major change in the Social Security law to examine the impact of income on mortality in an elderly population.
Social Security study: (PRU 2003) - Nearly half of American workers have doubts about whether Social Security will be there for them by the time they reach retirement age. Younger workers and those with less than $50,000 household income, who are years away from being able to collect Social Security benefits at eventual retirement and perhaps less prepared financially, are particularly worried about the future of Social Security.
- More than 7 in 10 American workers would support the creation of either a mandatory or optional Social Security personal account that will give them the opportunity to take control of and invest a portion of the Social Security taxes they are currently paying. Not surprisingly, younger workers, who are most concerned about the solvency of Social Security, showed the strongest support for this proposal.
- One-third of participants in employer-sponsored defined contribution plans believe Social Security alone will not be sufficient to support a comfortable retirement, and this is the single most significant reason they enrolled in these plans. Complimenting Social Security is a stronger motivation to join employer-sponsored plans than the plans' other benefits such as employer matching contribution, tax advantages, convenience of payroll deduction or portability. These findings hold true across participants of all age groups and household income levels.
Retiree: (Seigel 2003) the number of workers per retiree in the U.S. will plummet from 3.9 today to 2.2 in 2030, in Europe from 2.98 to 1.70, and in Japan from 2.85 to 1.46. Fifty years ago, by comparison, the U.S. had 7 and Japan 10 workers for every retiree.
Social Security (2003) 80% of social security recipients do not pay taxes on SS benefits.
I have said this for years: (2003) Federal Reserve Board Chairman Alan Greenspan, who warned that delays in reforming Social Security would make the later adjustments needed for baby-boomers' retirement both 'abrupt and painful.' In his testimony, Greenspan said that the aging population in the United States 'makes our Social Security and Medicare programs unsustainable in the long run, short of a major increase in immigration rates, a dramatic acceleration in productivity growth well beyond historical experience, a significant increase in the age of eligibility for benefits, or the use of general revenues to fund benefits.'
"Greenspan argued that even with increased productivity growth, the economy could not grow at a rate fast enough to enable the program to pay legislated benefits. Social Security contributions will fall short of promised benefits by 2017, according to the intermediate projections of Social Security's trustees.
Social Security: (NY Times 2003) • The projected point at which tax revenues will fall below expenses, forcing the system to dip into its trust fund to pay benefits, was moved to 2018 from 2017.
• The point at which the trust fund will be exhausted was put at 2042, instead of 2041 as cited in the report last year.
Oddly, the headline on the news release summarizing the report — "Social Security Not Sustainable for the Long Term" — seemed a tad pessimistic, given that a trustee report as recently as 1995 had put the date for the trust fund to be depleted at 2030. That's 12 years earlier than is now expected.
Sure, it's technically true that if nothing changes — if Social Security taxes are never increased no matter how much the economy grows, and if all economic and demographic projections are perfectly on target — then the system in 2042 will be able to pay only 73 percent of scheduled benefits. But that's a lot of ifs spread out over almost four decades.
The trustees' report actually peers 75 years into the future. To fill the gap created by the expiration of the trust fund in 2042 and to keep the system going until 2077 would require an additional $3.5 trillion, it says. That's $200 billion more than was estimated in the report last year.
That $3.5 trillion sounds like a lot of money, but it covers a 75-year period. To put it in perspective, Social Security taxes would have to rise today by 1.92 percentage points, half paid by workers and half by employers, to fill that gap. That would mean that both workers and employers would pay a rate of 7.16 percent; they now pay 6.2 percent. Of course, the longer we wait, the steeper the increase would have to be.
But there are alternatives. The government could enact a smaller tax increase, for example, but also raise the amount of a person's annual income that is subject to Social Security taxes. The ceiling is now $87,000; earn more than that and it's free of Social Security taxes. Raising the ceiling, however, would involve raising taxes on wealthier people
Through 2002, the fund contained nearly $1.4 trillion in bonds, which earned interest of 6.4 percent last year — or $80.4 billion.
Social Security fraud: (2003) At least $69 million is paid each year to people fleeing prosecution, imprisonment or terms of probation or parole. $223.7 million has been improperly paid since 1996 in Supplemental Security Income which is earmarked for the very poor. At least $39 million in Old Age Survivor and Disability Insurance benefits is being paid to fugitives. An estimated 17,300 fugitives were paid at least 108 million during a sample span of less than 4 years said Social Security in 2000.
Social Security: (2003) In recent years, almost 70% of retirees took Social Security before age 65, thus accepting a permanent reduction in their monthly benefits.
In 1956, women were allowed to take Social Security as early as age 62. Men were given the same opportunity in 1961. But applying for benefits at 62 meant accepting a hefty 20% cut in monthly benefits.
That 20% hit, however, didn't prove to be much of a deterrent. By 1970, 40.3% of men and 57.3% of women claiming Social Security were under age 65.
In 2001, 65.6% of men and 69.9% of women applying for Social Security were under age 65.
Over this 31-year stretch, the average life expectancy for 65-year-old men climbed 2.7 years, while the life expectancy for 65-year-old women rose 1.1 years. In other words, for the typical retiree, it now makes more sense than ever to delay benefits until at least age 65.
Minorities Well Served by Social Security (2003) A report released by the General Accounting Office (GAO) casts doubt on claims that minorities fare worse in the current Social Security system than they would under personal investment accounts. Proponents for change claim that the current system hurts minorities because they don’t live as long as whites and, therefore, receive benefits for a shorter period of time. But, according to the GAO study, when disability and survivor benefits are taken into account, minorities fare as well as whites based on a ratio of benefits earned to taxes paid. GAO found that 47 percent of African-Americans receiving survivor benefits are children, compared with 22 percent of whites.
Social Security: (2003) The CBO has published another policy brief focused on the Social Security program entitled “The Future Growth of Social Security: It’s Not Just Society’s Aging.” The brief projects that spending for Social Security, adjusted for inflation, will rise from $483 billion in 2003 to $2.5 trillion in 2075. Approximately 55 percent of the higher spending is due to an expected increase in the number of beneficiaries, as the number of new claimants grows and as life expectancy rises. The rest of the spending increase is attributed to a projected increase in the real value of Social Security benefit checks.
The SSA published the latest “Fast Facts and Figures About Social Security,” which is a compendium of statistical information about the program and its beneficiaries, as well as the Supplemental Security Program (SSI). In 2001, 91% of married couples and individuals aged 65 or older received Social Security benefits. Social Security was the major source of income (providing at least 50% of total income) for 65% of aged beneficiaries, and it was the only source of income for 20%.
Social Security: (2003) “Today, more than 60 percent of all seniors depend on Social Security to supply more than half their income. Without Social Security, nearly half of all seniors today would be in poverty. Because of the program, only 10.2 percent of the elderly now live below the poverty line. “But it is important to understand that Social Security is far more than just a retirement program for older Americans, it is a family security program. Each month, nearly 46 million Americans get Social Security benefits: 32 million retirees, their spouses and children; 7 million surviving widows, widowers and children; 6.7 million people with disabilities and their spouses and children.
Social Security Benefit Calculations for Workers Attaining Age 62 in 2003
Primary Insurance Amount formula
90 percent of the first $606 of AIME $545.40 $545.40
32 percent of AIME over $606 and through $3,653 684.16 975.04
15 percent of AIME over $3,653 0.00 311.40 --------------------------------------------------------------------------------
Total 1,229.56 1,831.84
PIA 1,229.50 1,831.80
The basic Social Security benefit is called the primary insurance amount (PIA). Typically the PIA is a function of average indexed monthly earnings (AIME). The PIA is determined by applying a benefit formula to AIME. The formula changes annually. The formula used depends on the year of first eligibility (the year a person attains age 62 in retirement cases).
For workers becoming eligible in 2003, the PIA formula appears in the above table, together with its application to the AIME of the 2 retirement examples with average and maximum earnings. The PIA is the "total" shown in the table, rounded down to the next lower dime.
Benefit based on PIA and age
The amount of retirement benefits paid depends on the age a person elects to receive benefits. Benefits are reduced if its taken before the normal retirement age and increased benefits taken after the normal retirement age. The earliest possible age for receiving retirement benefits is age 62. For the average and maximum earnings cases, the benefits would be $942.00, and $1,404.00, respectively, provided the worker takes a benefit at exact age 62 in 2003. Due to a legal technicality, a more typical retirement age is age 62 and one month. At this later age, benefits are slightly higher-$947.00 and $1,412.00-for the average and maximum earnings cases, respectively.
Social Security: (2004) The non-partisan Social Security Board of Trustees in March released their latest report on the health of the system. It shows that if nothing is done to fix Social Security, it will go broke in 2018, a mere fourteen years from now. It also proves that the only alternatives to personal accounts are massive tax increases and benefit cuts
Social Security: The Board of Trustees of the Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds (aka the Social Security program) released their annual report on the program, which finds that the ‘Trust Funds’ are still projected to be exhausted by 2042. More importantly, the point at which tax revenue drops below expenses will occur in 2018. This is when Social Security stops running a surplus and begins to become a drain on the federal budget. The report also provides program information noting that At the end of 2003, 47 million people were receiving Social Security benefits: 33 million retired workers and their dependents, 7 million survivors of deceased workers, and 8 million disabled workers and their dependents. About 4 million beneficiaries are children. Total benefits paid in 2003 were $471 billion.
Social security: (2004) For people who claim social security before reaching full retirement age (65 and 4 months this year), benefits are reduced by $1 for every $2 of earnings in excess of the limit, which goes up each year. For 2004, the tipping point is $11,640. Someone who earned $20,000 from a job or self-employment, for example, would lose $4,180 in benefits -- half of the $8,360 that exceeds the 2004 earnings-limit test.
Retirement: 4 Workers with 40 or more quarters of covered employment qualify for Social Security retirement benefits, which are based on earnings received during the 35 years in which the worker had the highest earnings, up to certain limits. Those who retire at the full retirement age, which had been 65 but is now increasing gradually to 67, receive full benefits. Workers can begin collecting reduced retirement benefits at age 62. Current rules reduce benefits below the full amount by 6.67 percent per year for the first three years that retirees collect payments before the full retirement age, and then by 5 percent per year for each additional year of receipt before the full age. The system also rewards those who delay retirement with higher benefits. For those turning 62 in 2005, benefits increase by 8 percent for each year that beneficiaries delay claiming beyond the full retirement age, up to age 70.
Social Security and retirement: (2004) Americans 65 and older can expect to spend a large and growing share of their Social Security checks on Medicare premiums and expenses. a typical 65-year-old can expect to spend 37% of his or her Social Security income on Medicare premiums, co-payments and out-of-pocket expenses in 2006. That share is projected to grow to almost 40% in 2011 and nearly 50% by 2021.
Social Security: Approximately 47 million older men and women, children and disabled people will receive a 2.7 percent cost-of-living adjustment (COLA) in their Social Security benefits in January, 2005. The average monthly benefit for a retired worker will increase $25 to $955. "Unfortunately, the increase in their Medicare premium will consume nearly half of the raise. The premiums, which are deducted from Social Security checks, will rise 17.4 percent in 2005, an average of $11.60 per month. "This means the average retiree will see a net gain of $13.40 per month. But for millions of older Americans who receive less than the average benefit, the entire increase will be wiped out by the Medicare premium increase,"
Social Security: (2005) An extensive analysis of the proposed private accounts and life cycle accounts. Note specifically the returns over time. The issue to me is not the fact that returns may be lower in the future but the fact that Shiller notes that financial advisers might help people do better. Perhaps. But look at the losses of over $1 trillion in 2000- 2002. Could not have happened. That there were losses in 2000- O.K.. But after that, there had to be major adjustments that there were no valid positions to adding more funds to equities. In fact, it was just the opposite. Does the inverted yield curve ring a bell? Coincident, lagging and leading indicators? Productivity? Did anyone read the manufacturing report from eh Philadelphia FED? No way that equities were the preferred allocations. No way.
Social security was for the poor: (NY Times 2005) According to government figures, old-age poverty has dropped from about 50 percent in the 1930's to around 10 percent today. Most of the credit goes to Social Security.
A 65-year-old single man who retires this year after a career in which he earned an average of $36,500 a year, in 2005 dollars, will get $164,000 in retirement benefits over the rest of his life, on average, based on his expected life span of 81.1 years. That is about $8,000 less than he would receive if he invested his payroll taxes at a 2 percent rate of return, after inflation.
But a single woman with a similar earnings profile can expect to receive $206,000 - or $28,000 more than she would get by investing the contributions at the same 2 percent rate, merely because she is likely to live longer.
Because the poor and the less educated tend to have lower life expectancies, they sometimes end up getting a worse return on their payroll taxes. According to projections by Mr. Steuerle, Mr. Carasso and Lee Cohen of the Social Security Administration, a male high-school dropout who retired over the past decade will receive retirement benefits equivalent to his lifetime payroll taxes invested at a 2.7 percent annual rate of return, after accounting for inflation. But for a college graduate, the implicit rate of return on his payroll taxes is 3.2 percent, because he is expected to live seven years longer
Social Security and more. (2005) In 1950, there were seven American workers for every retiree 65 or older. Today there are 4.9, and in 2050 there will be just 2.6. In Japan, there were 10 workers per retiree in 1950; there are 3.1 today and will be 1.3 in 2050.
Jeremy Siegel says that one way to reduce the problem is to gradually increase the retirement age in the U.S. to 73 by 2050. That would cut the number of years the average American has in retirement by a third, from about 14.4 years today to 9.2 years.
Won't work- and the difference between theory and real world. Sure, I might be able to do it since most of my work is non physical. But for those folks- generally the lower income workers who have had to do physical toil all their lives- their bodies will be so run down that they are lucky to work past age 70 at best. And with, generally, limited education, they cannot will not be trained for new jobs at age 60 or 65 when they simply wear out.
Social Security Trust Funds: (2005) Currently the Social Security trust funds hold $1.7 trillion in special Treasury bonds. The question is whether this buildup of assets has been economically meaningful. Has it increased national saving and investment and thereby created additional future income? In some sense this may seem like an antiquated question since 2016 is the last year when annual cash surpluses are expected to contribute to fund balances. But, in fact, the question is still very relevant because any attempt to restore solvency will likely again produce large surpluses for several decades.
You'd have to be an idiot to believe that Social Security is doing O.K.
Retirement?: (USA Today) When Social Security was launched 70 years ago Sunday, it was meant to be a supplement for retirees, not a full pension. But today, 10.6 million people, or 22% of the 48 million who will receive Social Security benefits this year, live on that check alone,
25% of retired women, including 46% of unmarried Hispanic women, have no income beyond Social Security. AARP also says 33% of retired African-Americans live on Social Security alone.
Those numbers could grow as the baby boom generation enters retirement. Currently, 53% of people in the workforce have no pension, and 32% have no savings set aside for retirement. The number of traditional pension plans — the kind that guarantee a set amount of money for life and that have propped up many of the pre-boomer generation — has fallen to 29,651 in 2004 from 112,208 in 1985.
The average Social Security payout is $955 a month, $11,460 annually.
SOCIAL SECURITY’S 2006 FINANCIAL OUTLOOK: The 2006 Report in Perspective
Social Security’s 75-year deficit is slightly higher from that reported a year ago: 2.02 percent versus 1.92 percent of taxable payroll. The increase is due to two factors: 1) moving the projection period forward to include a year with a large deficit, and 2) reducing the assumed long-term interest rate from 3.0 to 2.9 percent, which increases the present value of projected deficits later in the valuation period.
Today Social Security is running a cash flow surplus of about $70 billion. These surpluses, which were the result of reforms enacted in 1983, will last until 2017. Adding interest on trust fund assets to tax receipts produces enough revenues to cover benefit payments until 2027. From 2027 on, annual income will fall short of annual benefit payments, so the government will be required to draw down trust fund assets to meet benefit commitments. The trust funds will be exhausted in 2040 (see Figure 2). The exhaustion date is one year earlier than reported last year
Social Security: (2006) The Social Security reform options examined would cut benefits, more so for the young—Because various Social Security reform alternatives would phase in benefit reductions, the cuts for younger cohorts of workers would be larger than the cuts that middle-age or older workers would experience. For example, the benefit cuts for the 1962 cohort would range from a $300 decrease in annual benefits for beneficiaries with the smallest benefits to about $3,000 for those with the highest benefits. These annual reductions would grow steadily across age cohorts, reaching $2,200 to $10,370 for the 1997 birth cohort and from $3,790 to $18,360 for the 2022 birth cohort.
Social Security Programs Throughout the World: Europe, 2006
Social Security Administration (SSA): The SSA has published the latest issue of its biennial report “Income of the Aged, 2004,” which presents a wide range of data involving the receipt and shares of income from Social Security, pensions, assets, earnings, and public assistance among those aged 65 and over. It indicates that nearly 9 out of 10 aged units receive Social Security benefits, followed by asset income, which is received by more than half of the aged. The report also shows that two-fifths receive retirement benefits other than Social Security, and nearly one-quarter have earnings. Public assistance and veterans’ benefits are each received by only 4%. It highlights the critical role of Social Security, which is the major source of income (providing at least 50% of total income) for 54% of aged beneficiary couples and 74% of aged nonmarried beneficiaries, and was the only source of income for 11% of aged beneficiary couples and 29% of aged nonmarried beneficiaries.
Social Security: The Trustees of the Social Security system have just issued the 2007 report. The report includes projections for the system over the next 75 years, prepared by Social Security’s Office of the Actuary. The bottom line is that the long-run outlook has remained virtually unchanged for the last thirteen years — the system has a 75-year deficit equal to about 2 percent of taxable payrolls and the trust fund faces exhaustion in the early 2040s, after which the system will be able to pay only 75 percent of promised benefits. The clear message of the persistent deficits is that the financing shortfall should be eliminated so that people can be assured they receive the income they need in retirement.
The 2007 Trustees report reconfirms what has been evident for two decades — namely, Social Security is facing a long–term financing shortfall. Changes in the underlying assumptions will not eliminate the problem. This problem can be solved only by putting more money into the system or by cutting benefits. There is no silver bullet.
I knew the wait was bad, but not this bad- (2007) Social Security Backlog Means Waits for Disability The number of people seeking help from the Social Security Administration (SSA) because they are too disabled to work has created a record backlog of appeals that is rapidly continuing to grow . More than 745,000 applicants are waiting an average 17 months for their disability case to be heard, both record numbers. The SSA says this backlog has doubled in only the last six years, and estimates it could reach 1 million cases by 2010. An increasing overall population and the aging of baby boomers have contributed to the buildup, as older workers are more likely to become injured or sick on the job. At the same time, the agency is at its lowest staff level in over 30 years, having lost more than 2,300 workers since 2005. To receive disability, a state agency of the SSA must first review the claim in a process taking an average of three to four months. Approximately 65 percent of the 2.5 million people filing disability claims each year are denied at first, until appeals are heard by federal administrative law judges. 62 percent of appeals are ultimately approved, but average waits for hearings range from an additional nine months (Harrisburg, PA.) to 31 months (Atlanta, GA). “This is a completely unacceptable way to treat workers who have given so much to their jobs they are physically unable to continue,” said Edward F. Coyle, Executive Director of the Alliance. Currently, 15.3 million people are collecting disability benefits, an increase of 24% over the past five years
Social Security If you were born in or after 1943, for example, postponing your benefits past your full retirement age would increase them by 8% a year. Wait to start your checks until age 70, and you've given yourself a 32% raise, says Dorothy Clark, a spokeswoman for the Social Security Administration in Baltimore. So, for example, if you were entitled to $1,000 a month in benefits at age 66, you would get $1,320 a month by waiting until age 70. (A chart at www.ssa.gov/retire2/delayret.htm shows how this works. Click link above)
The Social Security Administration's Web site has a quick calculator to help you determine your individual benefit amount at www.ssa.gov/OACT/quickcalc.
SOcial Security and Medicare on line help- (2007) Mary Jane Yarrington, a senior policy analyst for the National Committee to Preserve Social Security and Medicare, a Washington advocacy group, who answers questions online at www.ncpssm.org/maryjane..
Interesting Social Security- (WSJ 2008) Social Security's "earnings test" dissuades some people who have reached 62 from filing for benefits. If you claim benefits before full retirement age -- and if you're still working -- Social Security deducts $1 in benefits for each $2 you earn above an annual limit. In 2008, the limit is $13,560. (The deductions are reduced in the year you reach full retirement age and end once you hit that mark.)
That said, it's still possible to get benefits, even though you're working. What's more -- and what many people don't realize -- is that, once you reach full retirement age, Social Security recalculates (read: increases) your benefit to give you credit for deductions tied to the earnings test.
Steve Potter, a retired public-affairs specialist for Social Security, shows how this can work -- and why January is important:
Let's say you turn 63 next month and expect to earn $33,560 in 2008. Also, Social Security tells you that, based on your earnings, your monthly benefits will total $1,000 at 63 -- or $1,250 at 66 (your full retirement age).
You decide to file at 63. Social Security first subtracts $13,560 (the earnings limit in 2008) from your expected income: $33,560 minus $13,560 equals $20,000. That figure is divided by two (again, $1 in benefits is deducted for each $2 above the limit.) The result -- $10,000 -- is the amount in 2008 that Social Security will withhold from your benefits.
The good news: Even though $10,000 is deducted from the $12,000 you were scheduled to receive in 2008, you still end up with $2,000 in your pocket -- money you wouldn't have seen if you hadn't filed for Social Security. (Ideally, continuing the math at ages 64 and 65 would yield $6,000 in all.)
And when you reach full retirement age, Social Security will increase your monthly benefit (to $1,208, in this case, from $1,000) to help compensate for the deductions.
The catch: Uncle Sam gets paid first. In our example, Social Security would withhold benefits from January through October ($1,000 times 10 equals $10,000) and send you $1,000 in both November and December.When Should Married Men Claim Social Security Benefits? (2008) Workers can claim Social Security benefits at any age between 62 and 70. For workers with average life expectancy, the expected present value (EPV) of benefits is much the same from 62 to Social Security’s Full Retirement Age (FRA). If a worker delays claiming, the shortened period of benefit receipt is offset by a higher monthly benefit.
The EPV of benefits for married couples is much more complicated due to
the special spousal and survivor benefits that Social Security
provides. While both are alive, each is entitled to the greater of his
or her own earned benefit or a benefit based on the spouse’s
earnings record, so long as the spouse has already claimed. Upon the
death of a spouse, survivors
are entitled to the greater of their own earned benefit or their spouse’s earned benefit, subject to certain minimums and reductions if claimed before the FRA.4
Because most married women have lower lifetime earnings and outlive their husbands, spousal and survivor benefits are almost invariably received by women. The benefit wives receive while their husband
is alive — whether their own earned benefit or a spousal benefit — is generally replaced by a survivor benefit upon their husband’s death. The EPV of the wife’s benefit received while her husband is alive is generally greatest if claimed at 62. The reason is that the increase in the monthly benefit from claiming later is generally too small to offset the reduction in her husband’s remaining life expectancy.
Social Security Administration (SSA 2008): The U.S. SSA has issued its latest "International Update," a monthly compilation of developments in foreign public and private pensions. This issue includes news from Cyprus, the UK, Canada, and New Zealand, and an OECD report on Pension Markets in Focus;
National Academy of Social Insurance (NASI 2008): NASI has published a report, Social Security: An Essential Asset and Insurance Protection for All, which details Social Security's role in safeguarding Americans families and retirees, with a particular focus on groups at high risk of having inadequate incomes ; older women, African American families, and the Latino community. It notes that the average monthly benefit for retirees was $1,045 in 2007, and that a 65-year old who wanted to buy a guaranteed income of that size; with payments that go up with the cost of living and continue for a widowed spouse; would need to pay an insurance company about $225,000. It also highlights that it is not just retirees who benefit from Social Security's protection, as 17% of benefits go to disabled workers and families, and another 14% goes to survivors.
Social Security (2008)
A third of people age 65 or over rely on Social Security for 90% or more of their incomes, the Social Security Administration says. For about one out of five people in that age group, or 22%, Social Security checks are the sole source of income.
The "replacement rate" -- how much of a worker's income is replaced by Social Security -- depends on how much you earn:
Being married is better than being single since two checks are, obviously, better than one. Spouses may receive a check based on their own work records or -- if they didn't work or earned less -- checks worth 50% of what their spouses get. That boosts the replacement rate considerably: