Social security

[VanFan]

I think we should be careful how much we generalize from them. It's awfully hard to know what the real "big picture" is.

All of this is well said. I especially agree with the bit above, since we all know "generalizations are always wrong".

 

[SLB_SA]

For instance, I was told many times while growing up that SS would only prevent the bare minimum in your retirement years - maybe enough for meals of rice and beans. So why do so many folks think that it would provide a comfortable income in retirement. Where did the message get so screwed up?

I felt a need to comment here. Your characterization of life on social security benefits is misleading for some people. Many people can lead a rich life primarily or solely on SS benefits, especially if they plan correctly or are lucky. Although I did have rice and beans today, I also live a rich life primarily on my SS benefits. The details of my story probably interest few here and I decided to delete them but I spend more on helping family and others than on myself.

 

[SLB_SA]

Maybe. But unless we know why folks are not prepared for their later years, then we as a society are doomed to see it constantly repeated. And if we understand why, then we as a society can do what is necessary to circumvent it.

When I see comments like this and I see data like Black families owned about 24 cents for every $1 of white family wealth, on average and Hispanic families owned about 24 cents for every $1 of white family wealth, on average link: Federal Reserve Bank of St. Louis it makes me wonder. Two of my grandchildren have a white mom (my daughter) and black dad (long gone); are they starting out with a handicap or do they just need to "prepare"? Are most black and Hispanic families simply "poorly prepared" and unable to succeed on a "level (economic) playing field"? What does the Fed data mean?

 

[SLB_SA]

Maybe, but understanding the reasons help break the cycle.

Do the reasons include race or is it simply not being prepared? Can you explain your comment in a bit of detail?

 

[SLB_SA]

As do I. Each month I give a lot of money for food and housing of folks in need. But I also hold as truth that if i give a man a fish he eats for a day, but if I teach him how to fish then he has food for a lifetime. I’d much rather see folks comfortably living on their own rather that being dependent on a handout.

I am going to steal a line from an investing newsletter to which I subscribe: from an unwitting mentor who’d tell you that very much contrary to the old adage, it’s sometimes better to “give a man a fish” than to teach him how to catch fish on his own, lest that man should keep fishing from your stream in perpetuity after the two of you are no longer sharing meals.

 

[mpruet]

I felt a need to comment here. Your characterization of life on social security benefits is misleading for some people. Many people can lead a rich life primarily or solely on SS benefits, especially if they plan correctly or are lucky. Although I did have rice and beans today, I also live a rich life primarily on my SS benefits. The details of my story probably interest few here and I decided to delete them but I spend more on helping family and others than on myself.

True, but I suspect a key component is being content on only spending on what is needed and not on what is just wanted.

 

[mpruet]

I am going to steal a line from an investing newsletter to which I subscribe: from an unwitting mentor who’d tell you that very much contrary to the old adage, it’s sometimes better to “give a man a fish” than to teach him how to catch fish on his own, lest that man should keep fishing from your stream in perpetuity after the two of you are no longer sharing meals.

OK - I’ll change the adage a bit. Feed a man an ear of corn and he eats today - teach him to grow his own corn and he eats a lifetime. ;-)

 

[mpruet]

Do the reasons include race or is it simply not being prepared? Can you explain your comment in a bit of detail?

If the message of the importance of being self-sufficient is not getting across, then why isn’t it? Race may have been a factor in the past, but during my working years I had too many colleagues and bosses who were minorities to buy into that now. I can sorta buy into lack of education, but I suspect that a lack of getting pride in one’s self-sufficiency has more to do with it. Don’t know for sure.

 

[mpruet]

If the message of the importance of being self-sufficient is not getting across, then why isn’t it? Race may have been a factor in the past, but during my working years I had too many colleagues and bosses who were minorities to buy into that now. I can sorta buy into lack of education, but I suspect that a lack of getting a sense of pride in one’s self-sufficiency has more to do with it. Don’t know for sure.

 

[mpruet]

When I see comments like this and I see data like Black families owned about 24 cents for every $1 of white family wealth, on average and Hispanic families owned about 24 cents for every $1 of white family wealth, on average link: Federal Reserve Bank of St. Louis it makes me wonder. Two of my grandchildren have a white mom (my daughter) and black dad (long gone); are they starting out with a handicap or do they just need to "prepare"? Are most black and Hispanic families simply "poorly prepared" and unable to succeed on a "level (economic) playing field"? What does the Fed data mean?

That’s a good question because during my working years the majority of my managers and colleagues were minorities.

 

[mpruet]

If companies and corporations hadn’t done away with pensions and cheap health care insuring they provided the quality of life they should have for their employees and the government had done a better job of insuring working people that didn’t work for those were able to use Social Security and Medicare at levels that insured basic needs then we wouldn’t be in this situation in my opinion. Instead profit only and cut and run businesses became powerful politically enough to buy and influence the system more so to their advantage slowly destroying the middle class and now continuing to push more into poverty with higher prices and lower benefits to further increase their power and wealth.

I personally think that pensions are a very risky plan. Often companies when belly-up and the pensions went with them. Also frequently a company with a pension would do a cash-out when the person retired and that person would have no experience in making a nest-egg grow enough to provide income. That frequently resulted in the nest-egg shrinking within a few years. It’s far better for the person to have a retirement account that he can monitor and become used to the investment world early on so that he can better manage his assets upon retirement.


Also - and this is rather important — most pensions and annuities do not give cost-of-living adjustments so in purchasing power, your income shrinks over time due to inflation.

 

[bullfrog !]

^^^with todays large corporations it would be much different than the many small ones of the past. Strict monitoring and employee union options like allowing or requiring union input before modifications to contracts or sales even would need to be required. Nowadays there is little employee input, monitoring or government requirements.

 

[RonDean]

...

So either we wallow in self-pity about how others are the reason that we have difficult times now that we’re aged, or we try to understand where things failed and we’re now in a rough position.

I "liked" this post in error and now feel responsible for replying rather than just continuing on.

Mpruet keeps talking about what we should have done or expected to happen. I doubt if even 1 out of 100 of us ended up where we planned in our youth. Nor does that matter when we are discussing possible system changes. I am not complaining about where I am right now. I've known for a long time that the system is rigged to favor some people over others. But, I worked hard, paid my taxes, and managed to stay healthy enough to appreciate being alive. And now I want what I was promised. What I deserve is an entirely different conversation.

I think where THIS conservation got its current impetuous were news items about some politicians wanting to change the rules - in my 4th quarter! If you want to change the rules, you do it before the game (life/career) starts. Then I'll be able to consider it somewhat reasonable. But to reduce benefits from people already or about to retire? A big fat NO on that.

As far as what we should have done differently or how we can now fix a broken system? Yah. I'll join that conversation. But, IMHO it just does not apply to this one. It's an entirely different subject. As is balancing the federal budget without having a serious consideration of ALL the ways that could be accomplished. That too is a different conversation.

 

[mpruet]

^^^with todays large corporations it would be much different than the many small ones of the past. Strict monitoring and employee union options like allowing or requiring union input before modifications to contracts or sales even would need to be required. Nowadays there is little employee input, monitoring or government requirements.

I’m not sure I would agree. I really think that 401Ks are far better for the employee than pensions ever were. The biggest problem with the 401K is that folks are not forced to put money into it. They are totally under the control of the individual and it takes a bit of looking ahead for an individual to realize just how important it is to regularly fund them. The one thing that I wish was that the traditional IRA had the same funding limits as the 401K.

Why do I like the 401K so much?

After the 2008 housing bubble burst, for several years I heard so many folks say “I lost everything with the 2008 bust.” Of course you don’t lose anything until you sell, so that implies that they panicked and sold. And generally that’s when the most is lost. My suspicion is that these folks had no experience with investing and a lot were newly retired and had received a lump-sum cash-out upon retirement. If they had been in a 401K for several years rather than a pension plan, they would have seen what typically happens with any recession and would not have panicked. They would have been much more cautious. And what ended up happening? — From 2009 to 2013 we had one of the strongest rises in value. Their nest egg would not have only come back, but would have been much larger than before. So my take is that having a 401K is not only safer than a pension plan, but also provides the needed experiences that a pension will not.

 

[mpruet]

I think where THIS conservation got its current impetuous were news items about some politicians wanting to change the rules - in my 4th quarter! If you want to change the rules, you do it before the game (life/career) starts. Then I'll be able to consider it somewhat reasonable. But to reduce benefits from people already or about to retire? A big fat NO on that.

Where do you propose the money come from when the fund dries up?

 

[SLB_SA]

Where do you propose the money come from when the fund dries up?

The fund receives FICA taxes on a regular basis and cannot "dry up." Additional FICA taxes can be obtained by removing the earned income FICA cap {around $160K in 2024) and possibly applying FICA taxes to Roth account distributions or taking other measures.

 

[mpruet]

The fund receives FICA taxes on a regular basis and cannot "dry up." Additional FICA taxes can be obtained by removing the earned income FICA cap {around $160K in 2024) and possibly applying FICA taxes to Roth account distributions or taking other measures.

No, but the surplus can dry up. And that means in a weaker economic year with higher unemployment, there will not be enough to make benefit payments. Or they could reduce the benefits indirectly. Already SS benefits are taxed if a person’s AGI is over a given amount. In 2022 taxes on the benefits accounted for $49B of that year’s funding. It wouldn’t be that hard to lower the taxation limit which in effect would cut effective benefits without actually lowering payments.

There would be a HUGE political stink if they changed the ROTH rules, especially since the money put into a ROTH is post-tax.

 

[bullfrog !]

Where is Robin Hood when you need him! Lol!!!

 

[SLB_SA]

There would be a HUGE political stink if they changed the ROTH rules, especially since the money put into a ROTH is post-tax.

The money contributed to a Roth account is post-tax money but the gains in the account are not. Income tax and FICA are different animals and applying FICA taxes to untaxed Roth distributions is different than applying income taxes to these same distributions; I can see this as a possibility.

 

[mpruet]

The money contributed to a Roth account is post-tax money but the gains in the account are not. Income tax and FICA are different animals and applying FICA taxes to untaxed Roth distributions is different than applying income taxes to these same distributions; I can see this as a possibility.

Maybe, but I doubt that any politician is going to touch ROTH. It’d be easier to collect FICA on capital gains, and I suspect that would actually raise more money. But even that would get really complicated. What about options, short sells, capital losses, etc…