31-05-2003 12:52									#301
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quote: Originally posted by MichaeltheGreat The translation of that is "we're so constantly ****ing with them that we have no clue how bad they'll be next week." Another point is that showing the exact amounts would make it easier for people to see how badly they're being shafted. And that's never good policy.

Well they have a couple online calculators for that. I suppose everyone should know they're getting shafted by it anyway, should they not?

It only says that for an average income, the SS pension will be about 40 % of it. But what I'd like to know is, what percentage of your contribution base you get in pension for every year of contribution. Here it's 2 %.

	31-05-2003 13:13									#302
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quote: Originally posted by Kidicious Just use cost\benefit analysis.

I do that all the time. People pay me nicely for it, all documented and pretty and all. Although GP gave them nicer binders than I do.

quote: With your privatized system you have huge additional costs for many many years, and then you MAY, again MAY, have an extra 1 or 2% more return on a riskier investment.

(a) tell me on what basis you would consider market rate treasury securities (13 week to 30 year) "riskier" than an SS benefit which can be cancelled without recourse (other then voting them out) at any time by Congress.

(b) tell me the name of any reputable market analyst who shares your view of the "risk" of US treasury securities, or investment grade tax-exempt bonds, for that matter?

(c) the numbers are much higher than 1 or 2 percent. In the high inflation late 70's-early 80's, those treasuries were going for 5-9 percent per years highter than the SS internal loan rate, and when interest rates came down, you could more than double your money selling off stuff such as the 13 and change percent T-bonds. Worst case, the bills/bonds pay interest and are redeemable for full value at end of term, best case, interest movements may allow you to sell and repurchase and come out ahead with a larger principle base.

Additionally, you'd have full ownership, heritability and survivorship rights, none of which exist in SS. If you have a beneficiary die, a qualifying heir gets a trivial one off payment, (won't even pay for a decent headstone), then the amounts paid in by that spouse for a lifetime are extinguished. Women are the ones most shafted by this, since they live longer and earn less on average.

quote: At that rate it will take you forever to break even. It's just not worth it.

Under the present system, unless you can show me evidence (or even a plausible mechanism) that the payer to beneficiary ratio or actuarial lifespan of beneficiaries will revert to past levels, you will never break even. You will simply reduce payments out, increase taxes in until the payer to beneficiary level is stabilized by a stabilization in actuarial lifespan. Only a significant sustained increase in birthrate will alter that outcome, and then only if there are enough high enough paying jobs to support the average younger population.

quote: I know it's going to be tough with the current system, but there is no better alternative.

Until now, you've said there's no problem with the current system, and the rest of us are just right wing hysterics.

So how about my offer?

	31-05-2003 13:39									#303
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quote: Originally posted by MichaeltheGreat I do that all the time. People pay me nicely for it, all documented and pretty and all. Although GP gave them nicer binders than I do. .

I'm sure you're good at it. It's not hard. Why are we coming up with different conclusions?

quote: Originally posted by MichaeltheGreat (a) tell me on what basis you would consider market rate treasury securities (13 week to 30 year) "riskier" than an SS benefit which can be cancelled without recourse (other then voting them out) at any time by Congress.

If we cancel out the benefits it will no longer cost us anything so risk would not be an issue.

quote: Originally posted by MichaeltheGreat (c) the numbers are much higher than 1 or 2 percent. In the high inflation late 70's-early 80's, those treasuries were going for 5-9 percent per years highter than the SS internal loan rate, and when interest rates came down, you could more than double your money selling off stuff such as the 13 and change percent T-bonds. Worst case, the bills/bonds pay interest and are redeemable for full value at end of term, best case, interest movements may allow you to sell and repurchase and come out ahead with a larger principle base.

If you invest the same amount in the current system that you want to invest in the proposed system you can get the same return as govt securities. I was assuming that you wanted to get higher returns.

quote: Originally posted by MichaeltheGreat Additionally, you'd have full ownership, heritability and survivorship rights, none of which exist in SS. If you have a beneficiary die, a qualifying heir gets a trivial one off payment, (won't even pay for a decent headstone), then the amounts paid in by that spouse for a lifetime are extinguished. Women are the ones most shafted by this, since they live longer and earn less on average.

And if I die before I contribute much into the system my wife gets less than she would from the old system.

quote: Originally posted by MichaeltheGreat Under the present system, unless you can show me evidence (or even a plausible mechanism) that the payer to beneficiary ratio or actuarial lifespan of beneficiaries will revert to past levels, you will never break even. You will simply reduce payments out, increase taxes in until the payer to beneficiary level is stabilized by a stabilization in actuarial lifespan. Only a significant sustained increase in birthrate will alter that outcome, and then only if there are enough high enough paying jobs to support the average younger population.

If there is no investment of course we will break even. After the current system stops running a surplus the investments end. Only transfer payments are left.

quote: Originally posted by MichaeltheGreat Until now, you've said there's no problem with the current system, and the rest of us are just right wing hysterics. So how about my offer?

I said the current system won't colapse, and I don't know what your offer is.

	31-05-2003 13:40									#304
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why not make the SS retirement age higher? It's only fair, really.

	31-05-2003 13:44									#305
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quote: Originally posted by HershOstropoler Well they have a couple online calculators for that. I suppose everyone should know they're getting shafted by it anyway, should they not?

Tell that to the old folks.

The calculator sort of hides the fact that the employer makes dollar for dollar matching contributions, so the amounts paid in are double. Also, a portion (1.5% of wages up to the cap, duplicated dollar for dollar on employer side) is medicare tax, so that's a wholly separate issue.

quote: It only says that for an average income, the SS pension will be about 40 % of it. But what I'd like to know is, what percentage of your contribution base you get in pension for every year of contribution. Here it's 2 %.

The formula doesn't use that explicitly, so it depends on the pattern of earnings. For my age, the annual base amounts rose pretty sharply. For my parents, they were nearly static for a long time. My parents started drawing then they were 65 (standard back then) and with 7 years of COLA (such as it is), they now get around $2300 a month for both of them. My dad maxed out every year and worked after retirement, so he didn't get shafted too much. (in SS terms)

If you use the maximum contribution (earning more gets you nothing, and there's a benefit cap anyway) you get annual maximum contributions of:

Year Taxable amount
1978 $17.700
1979 $22,900
1980 $25,900
1981 $29,700
1982 $32,400
1983 $35,700
1984 $37,800
1985 $39,600
1986 $42,000
1987 $43,800
1988 $45,000
1989 $48,000
1990 $51,300
1991 $53,400
1992 $55,500
1993 $57,600
1994 $60,600
1995 $61,200
1996 $62,700
1997 $65,400
1998 $68,400
1999 $72,600
2000 $76,200
2001 $80,400
2002 $84,900
2003 $87.000
.
.
.

The other side of that is that the percentage rates withheld have changed. It used to be that the Medicare portion had the same cap as the FICA portion, but that's been off for years - the current Medicare cap is around $153,000 give or take a few. In the mid 80's, employer and employee each paid around 6.25% of the cap amounts above, of which 1.2 percent was Medicare. Now you pay 7.65% up to the FICA caps above (of which 1.5 is medicare), then from the FICA cap to the Medicare cap, you just pay the 1.5%. 6.15% goes to calculating your benefit. Double all those numbers to reflect the employer or self-employed matching taxes.

Based on those max numbers above, and assuming I max out in the remaining years until retirement, I would get: $1414 a month (present dollars) if I retired at age 62, $2036 a month if I retired at age 67, and $2535 a month if I retired at age 70. (with an actuarial lifespan of 78 years more or less). The "official" SSA calculators use some hair-up-the-ass COLA assumptions to project future dollar values - their unofficial numbers are almost double what the last 10-15 year COLA increases have been.

	31-05-2003 14:00									#306
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quote: Originally posted by Kidicious I'm sure you're good at it. It's not hard. Why are we coming up with different conclusions?

Because you're wrong.

quote: If you invest the same amount in the current system that you want to invest in the proposed system you can get the same return as govt securities. I was assuming that you wanted to get higher returns.

No you don't. Use a contribution level of your choice, and calculate the benefits. Then figure you have no principle value, just the income stream. Calculate the total value you'd get from 13 week treasuries invested in the same pattern (skipping the Medicare percentage, but including the employers matching contributions.

quote: And if I die before I contribute much into the system my wife gets less than she would from the old system.

Under the present system, depending on when you die, your wife gets very little off of your contributions. I assume you don't deal with RRTA and all the other arcane stuff, but survivors benefits can be as low as a one time $255 payment.

quote: If there is no investment of course we will break even. After the current system stops running a surplus the investments end. Only transfer payments are left.

You only break even if you semantically chop the payment stream into "investments" and "transfer payments" If you look at a total cash in -> total cash out, the return goes negative. Currently, the "surplus" will pay somewhere around 2-3 years of benefits. You're going to have to tax the hell out of payees in the next two-three decades to maintain the surplus at any level. Or cut benefits.

quote: I said the current system won't colapse, and I don't know what your offer is.

My offer is that I'll "sell" you my total SS rights based on a lifetime of earnings, for a payment of 40 cents on the dollar of what I pay in from this year forward. You can elect my retirement age for SS purposes, and I'll wire you my benefits every month. If you have faith in the soundness of the system, you should believe you'd make a killing.

	31-05-2003 14:02									#307
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quote: Originally posted by Azazel why not make the SS retirement age higher? It's only fair, really.

Sure, you could solve the whole solvency problem by making it, say, 87 instead of 67.

The problem is selling that politically to a bunch of 60 year olds who've paid in for 40 years and expect they're 2 years from earliest retirement.

	31-05-2003 14:04									#308
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MichaeltheGreat:

"Tell that to the old folks. "

What's it with the rolleyes and shaking heads?
Do those who are now around 60 still profit from the system?

"6.15% goes to calculating your benefit. Double all those numbers to reflect the employer or self-employed matching taxes."

Well laugh at us. here it's about 22 %, not 12.3 %.

"$2036 a month if I retired at age 67"

This is based on how many years of contributing? (or is that irrelevant over 35 years?)

	31-05-2003 14:14									#309
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It's an emotional issue - and if you've already paid in, and are getting whatever pittance they give you, you probably don't care about those young whippersnappers.

22%? Although if you had that privatized into a nice, safe, self-directed plan, you could probably do fairly well.

They take the highest 35 years out of however many you've worked. So 18-67 = 49 years, although I started working earlier. Due to the cap creep, it's generally your last 35 years that get counted, unless you have an unusual change in income.

So women who did the housewife thing until the kids grew up, etc., are really double-screwed by their generally lower wages and limited workforce time. When their husband kicks off, they're triple screwed. Even worse if he kicks off before either retire, she remarries, then hubby 2 dumps her for his 20 year old receptionist after anything less than ten years of marriage. There's more horseshit than on a used car lot.

	31-05-2003 14:18									#310
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Is the SS in the US starting to pay out to the elderly at 67? didn't know that. THey just made it the retirement age for men here. (62 for women )

	31-05-2003 14:26									#311
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You can opt to take it at age 62, but you take about a 30% hit in monthly payments.

	31-05-2003 14:28									#312
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quote: Originally posted by MichaeltheGreat Because you're wrong.

Actually I'm looking at it from a cost\benefit point of view for society as a whole, and you are looking at it as a cost\benefit point of view for individuals.

quote: Originally posted by MichaeltheGreat No you don't. Use a contribution level of your choice, and calculate the benefits. Then figure you have no principle value, just the income stream. Calculate the total value you'd get from 13 week treasuries invested in the same pattern (skipping the Medicare percentage, but including the employers matching contributions.

If it would make you feel better we could use the surlpus to buy govt securities with a higher yield, but that would be pointless. The fact that we use the surplus instead of raising taxes or borrowing means that the return is equal to borrowing costs.

quote: Originally posted by MichaeltheGreat Under the present system, depending on when you die, your wife gets very little off of your contributions. I assume you don't deal with RRTA and all the other arcane stuff, but survivors benefits can be as low as a one time $255 payment.

I have my yearly statement here. Without disclosing my personal information I will just say that you can get a substantial survivor benefit with a small contribution.

quote: Originally posted by MichaeltheGreat You only break even if you semantically chop the payment stream into "investments" and "transfer payments" If you look at a total cash in -> total cash out, the return goes negative. Currently, the "surplus" will pay somewhere around 2-3 years of benefits. You're going to have to tax the hell out of payees in the next two-three decades to maintain the surplus at any level. Or cut benefits.

How can you consider a transfer payment an investment. Return on investment is partly determined by duration. Transfer payments have no duration. Without duration you don't have investment.

Again. Look at it from a total cost to society to total benefit to society point of view.

	31-05-2003 14:30									#313
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quote: Originally posted by MichaeltheGreat 22%? Although if you had that privatized into a nice, safe, self-directed plan, you could probably do fairly well.

I started calculating that once. I didn't finish it, it made me cry. 200 € a month go into my self-directed plan. A multiple of that to the public pension scheme.

The only good thing, it's capped at ~47.000 €, not 87.000 $. Taking current reform plans and retiring at 65, that would leave me with maybe 20-25k as a pension (not adjusting for inflation and future real growth till 2036).

	31-05-2003 19:34									#314
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"So women who did the housewife thing until the kids grew up, etc., are really double-screwed by their generally lower wages and limited workforce time. When their husband kicks off, they're triple screwed. Even worse if he kicks off before either retire, she remarries, then hubby 2 dumps her for his 20 year old receptionist after anything less than ten years of marriage. There's more horseshit than on a used car lot."

And you can double that screwing if you're an African-American.

	31-05-2003 19:36									#315
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"Actually I'm looking at it from a cost\benefit point of view for society as a whole, and you are looking at it as a cost\benefit point of view for individuals."

Given that a society is made of a collection of individuals, I cannot see the reasoning of things that are non-beneficial for the individual are beneficial for society.

	31-05-2003 20:23									#316
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quote: Originally posted by JohnT "Actually I'm looking at it from a cost\benefit point of view for society as a whole, and you are looking at it as a cost\benefit point of view for individuals." Given that a society is made of a collection of individuals, I cannot see the reasoning of things that are non-beneficial for the individual are beneficial for society.

Individuals are not directly beneficial from being drafted, but the society needs an army. In the same way, when a portion of my social security charge is used for the benefit of poorer people, I am not happy, although I appreciate living in a society where poor people are not dying in the streets.

	31-05-2003 20:26									#317
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quote: Originally posted by JohnT "Actually I'm looking at it from a cost\benefit point of view for society as a whole, and you are looking at it as a cost\benefit point of view for individuals." Given that a society is made of a collection of individuals, I cannot see the reasoning of things that are non-beneficial for the individual are beneficial for society.

Sure, but you make an error when you don't count some peoples benefits. For example, there are immediate benefits with transfer payments. If we count transfer payments as an investment we make an error calculating the total benefits because the benefits to an investment are delayed. The delay in benefits is a significant factor here, because with the privatized system the benefits would not be realized for many decades.

	31-05-2003 20:26									#318
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[QUOTE]
Year Taxable amount
1978 $17.700
1979 $22,900
1980 $25,900
1981 $29,700
1982 $32,400
1983 $35,700
1984 $37,800
1985 $39,600
1986 $42,000
1987 $43,800
1988 $45,000
1989 $48,000
1990 $51,300
1991 $53,400
1992 $55,500
1993 $57,600
1994 $60,600
1995 $61,200
1996 $62,700
1997 $65,400
1998 $68,400
1999 $72,600
2000 $76,200
2001 $80,400
2002 $84,900
2003 $87.000
[/UNQUOTE]

Does this result from an indexation on inflation ?

	31-05-2003 21:13									#319
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Davout,

I'm pretty sure it is.

	31-05-2003 21:36									#320
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It shows the two periods :

- before 84 : two digits inflation
- from 84 on, abruptly around 5% and lower

Same profile in Europe. Never been explained convincingly AFAIK.

	31-05-2003 22:00									#321
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More like indexing nominal income growth.

	31-05-2003 22:07									#322
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quote: Originally posted by HershOstropoler More like indexing nominal income growth.

Wouldn't the increases be greater during the 90s then?

	31-05-2003 22:19									#323
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Here we go. This is from the handbook.

1301.2 How is the maximum wage amount increased each year?
For the years after 1981, the maximum wage amount is usually increased by Congress. If Congress does not increase the maximum amount, it is automatically increased in multiples of $300 if there is a cost-of-living increase in Social Security benefits. The increased amount is officially published in the Federal Register on or before November 1 of the year before it goes into effect.

	01-06-2003 00:34									#324
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And you can double that screwing if you're an African-American.

Quite true. This is a huge economic injustice that I wonder why the black community hasn't pushed in the Democratic Party.

Generally speaking, I support MtG's policy proscription. I would be for an elderly poverty reduction plan, though. Some may make bad mistakes with their investments, so you need to have a safety net of some sort.

Hershell: Only E200/mo? Did you calculate what you would need upon retirement and then figure out the necessary contribution? Or are you saving an arbitrary amount?

Last edited by DanS on 01-06-2003 at 00:42

	01-06-2003 04:33									#325
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"Did you calculate what you would need upon retirement and then figure out the necessary contribution? Or are you saving an arbitrary amount?"

Starting at age 25 and assuming a 7 % return, that leaves me with 500.000 € at age 65. Simple capital consumption over 15 years would be ~33.000 € / year. It is likely that I'll retire at 68, and increase my contribution to 300 or 400 € over time, so it should look a bit better. In addition, I'll have a house with no debt to live in, and an appartment with no debt to rent out. As planning out to 2036/2039 is ripe with uncertainties, that's as safe as it gets.

	01-06-2003 05:56									#326
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I guess that isn't so bad, considering that all of your medical is paid for. A 5% real rate @ E300 overall would be about 500k real by 68.

In the US, drugs aren't paid for upon retirement (partially paid for?). This adds a higher degree of uncertainty to the calculations, which makes me salt away a lot more. Also, 401(k)s and IRAs can be accessed for other activities, such as education and medical care, so it makes more sense to put money into these accounts.

In the end, I'm more arbitrary in my deposits.

	01-06-2003 12:37									#327
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"I guess that isn't so bad, considering that all of your medical is paid for."

Not all, but I have private health care insurance too.

"This adds a higher degree of uncertainty to the calculations, which makes me salt away a lot more."

How much more?

"Also, 401(k)s and IRAs can be accessed for other activities, such as education and medical care, so it makes more sense to put money into these accounts."

Well you have tax reasons to do that, too, or?

	02-06-2003 01:47									#328
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quote: Senator plugs child tax credit for low-income families WASHINGTON (AP) --Sen. Blanche Lincoln, Democrat from Arkansas, said Saturday she will introduce legislation next week to restore child tax credits to low-income families that were stripped out of President Bush's tax cuts at the last minute. Delivering her party's weekly radio address, Lincoln said low-income families were unfairly squeezed out of the $350 billion tax-cut package that Bush signed Wednesday, which will provide child tax credits for wealthier Americans. Republicans have touted the landmark tax package as much-needed relief for working families. Under the increased tax credit, which ranges from $600 to $1,000, most families this summer will receive a $400 check in the mail for each child. But a provision that would have extended that benefit to families with annual incomes between $10,500 and $26,000 was quietly scratched from the final bill by GOP negotiators "to make room for the dividend tax cut and other measures that only benefit the wealthiest taxpayers," Lincoln said. "That's simply unfair to low- and middle-income taxpayers, who work hard to provide for their families," she said. "After all, buying blue jeans for the kids or tires for the car is just as expensive for a family making $20,000 a year as it is for a family making $100,000." Lincoln said she will introduce legislation to restore the tax credit for lower-income families next week, with Sen. Olympia Snowe, R-Maine, as a co-sponsor. "This isn't about partisanship," Lincoln said. "It's about doing what's right for families who may need a little extra help. We should fix this problem immediately."

I'm glad someone decided to report this story. This phony-baloney stimulus is really a "cut taxes for the rich" ploy while lower income families see the elimination of their tax credits. Bush's plan eliminated tax credits for lower income families that would have affected some 12 million kids (according to local radio reports I'm hearing). No child left behind indeed.

	02-06-2003 01:53									#329
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You know, I just wish some people would actually look at the linked IRS chart.

Sava, people who don't pay Federal Income Tax deserve no Income Tax refund. Sorry, but that's just the way it is.

And the idea that the story isn't being reported... uh, do you even look at the news?

	02-06-2003 01:58									#330
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quote: Originally posted by JohnT You know, I just wish some people would actually look at the linked IRS chart. Sava, people who don't pay Federal Income Tax deserve no Income Tax refund. Sorry, but that's just the way it is. And the idea that the story isn't being reported... uh, do you even look at the news?

That would be nice JohnT, except for that fact you are wrong. Even when I was working part time in 1997, making minimum wage at Pizza Hut, I paid Federal Income taxes. The fact is, anyone working full-time at a minimum wage job falls under the 20k mark and PAYS INCOME TAXES.

You should really put aside your political bias for a second, look at the facts and realize that Bush's tax cut is really a gift to the rich and an expense to the poor. The middle classes get a little, but a $400 dollar check doesn't mean sh1t when most people's retirements are going down the tubes. Or if they are part of the 2.6 million that have lost jobs.