Ash UK/US

I was wondering... if Bush's plan goes into action (investing part of your social security in a private account) what happens if people don't? What I mean is 30-40 years down the line when people who didn't bother to set aside part of their money and can no longer work... who is gonna pick up the tab to feed and house them?

My husband and I would be smart even to make provision but we all know some people wont.... personally I think Bush is way off on this one... it is a bad idea.

Ash

anotherlimey

I'm not sure exactly how they're going to implement it but my first thought is that it's a useless proposition unless it's the law to save the part they are giving to you. Otherwise a lot of poor families will just use up that part and have even less when retirement comes.

tony126

I had part of my company pension in 'the market'. When I retired it was very much in a losing streak but I fortunately not all of the pension was in it. I think it is one hell of a risk to save for 40 yrs and possibly end up with nothing but there are financial markets as well as the stock market. My wife chose to invest her 401 in the financial market against all the advice of her workmates and others so she has not lost a penny.

mdyoung

Even though it has turned out that way; the Social Security program was not suppose to be an individual's only retirement income. It was supposed to consist of Social Security benefits, private pensions and personal savings.

The main problem with the Social Security system is the less people are paying into the system for more people to get benefits.

The worker-to-beneficiary ratio has fallen from 16-to-1 in 1950 to 3.3-to-1 today. Within 40 years it will be 2-to-1.

As I see it the only way to correct the problem is to make people pay more into the system and/or pay out less in benefits. Everyone would be wise to save for retirement regardless of if personal accounts are or aren't adopted.

Manc

What happens when you reach 40 years of age and become disabled and can no longer work. but you only have $30,000 in the pot?

Bob

then smoke it before the depression hits, cos your *****ed

tony126

Really can't add to that.

mdyoung

The changes in regard to savings accounts seem to only be directed toward retirement benefits. Until I hear otherwise I assume the SSDI and survivor benefit programs will remain as they are now. The bulk of benefits are paid out from retirement accounts, so that's where you get the biggest bang for the buck when you make changes.

http://www.ssa.gov/policy/docs/quick...hot/index.html

fatbrit

One interesting question I have about social security is what is going to happen to the substantial funds put in by those who aren't really meant to be working here at all.

At the moment, if social security cannot link the social security payments to the holder, the money is diverted into the general fund.

It will be an interesting conundrum when the recent wave of undocumented immigrants come up to retirement age.

mdyoung

Social Security taxes paid by the employee, employer and self employed workers are either used to pay current benefits or invested in government securities. There is no box of money with your name on it. Your covered wages are posted to your Social Security earnings record and benefits are based on a formula using those wages. When wage reports (W-2s) can't be posted an individual's earnings record due to the SSN or name not matching the wages are put in a suspense file.

People and politians keep saying that Social Security is a contract, but the Supreme Court has already ruled that people are not guaranteed benefits. Benefits are whatever Congress wants them to be.

http://www.ssa.gov/history/nestor.html

This court case should be interesting to immigrants. This guy was deported and denied his Social Security benefits based on a law that was passed to make illegal something that the guy was no longer doing and was legal at the time he was doing it.

fatbrit

Er, yes -- but it ain't that simple. Sure it all goes in the same pot, but the dosh you put in the pot is attached to your name and social security number combination. Down the road, you may actually be able to collect on it for disability, death of spouse, retirement, Medicare eligibility, etc.

Now the average paperwork-deficient employee is going to pay into the pot with multiple name/number combinations over a long period. Is s/he not going to get anything out at the end or when disaster strikes? Social security has no record, but s/he does from his paycheck slips. Were it one or two folks, I would expect not. But we're talking big, big numbers here, big enough in fact to get lawyers salivating. I'm expecting there'll be trouble awaiting down the road...

mdyoung

OK once again I will repeat the Social Security taxes paid do not figure in the computation of benefits. FICA and SECA taxes are collected by the IRS and SSA keeps no record of the payroll taxes collected. In fact the taxing sections that were originally in the Social Security Act were removed and made part of Internal Revenue Code.

What SSA does maintain is your earnings record, which shows the Social Security covered earnings you have earned each year. Credits (quarters of covered) used to determine insured status and benefit computations are based on those earnings.

If fact the way the retirement benefit formula is set up a low income worker gets a bigger percentage return on what was paid into the system than a high income earner.

http://www.ssa.gov/OACT/ProgData/retirebenefit1.html

The problems starts around 2017 when the payroll taxes coming in start being less than the money going out and the government needs to start tapping into the securities they now buy with the surplus taxes and then the next date is 2041 when the securities are all tapped out and the taxes coming in are only enough to cover 74% of the benefits that needs to be paid.

http://www.ssa.gov/pressoffice/pr/trustee05-pr.htm

So the program is not going bankrupt in the true sense, but if you don't let people prepare for that cut in benefits now by doing something like the savings accounts to try to make up the difference, it's going be a big shock when you only receive 74% of what you thought you were going to receive.

I see no problem with savings accounts. Federal goverment employees have something like that called the Thirft Savings Plan where you take a percentage of your wages an invest into the funds offered.

http://www.tsp.gov

fatbrit

Er.. you're explaining what I already know, but as you keep quoting me I assume it is meant to be relevant to my only query in this topic.

I just asked whether anybody had worked out what to do with the spanner in the works of very many people paying in who aren't here legally and appear to be staying. Your link to the Supreme Court decision was interesting and relevant-- but it was made with a lot of dissention and 45 years ago! The rest of your answer was pure smoke.

Ash UK/US

Yes but what happens with the people who just don't bother? who picks up the tab to clothe, feed and house them?

If it is a freedom of choice thing how are they gonna keep track of all the companies and investments? What happens if the market crashes?

Bush said that it will not affect people who where born before 1953 so what about Joe Bloggs who was born in 1954, he has paid in to the system all his working life... what happens to all the back payments?

I think it is a bad idea... I am not saying that something doesn't need to be done... I think Bush might be better to and improve the health system first... soon enough it is gonna be health for the wealthy only... our insurance went up 80% this weekbut that another story Hmmm maybe thats in his plan kill em young and save the payout

Ash

mdyoung

As I see it Congress could get together tomorrow and pass a law that say as of April 1st all Social Security benefits are cut 50% and no one would have a legal leg to stand on to challange it. Now of course they aren't going to do it because it would be political suicide.

If I understand you correctly, you are asking what will be the inpact on the system of people being here illegally being made legal? I kind of feel that is part of the scheme to keep from having to make any tough decisions on raising payroll taxes and/or cutting benefits. As I said before you only have 3 people are curently paying into the system for every one person getting benefits. I feel the plan is to make all those people legal so they can stop working under the table and start paying into the system.