Social security by the numbers

[BuzzH]

Today 40% of retirees have no defined benefit OR defined contribution income, and rely solely on social security to survive. Social security is the only thing keeping tens of millions of older Americans out of severe poverty.

It is significantly inadequate in that function though, as the age to attain needed benefits is far beyond how long people are actually capable of working. The average retirement age in the US is 62, whereas the highest SS payment is achieved by waiting to draw SS at age 70. People working physically demanding jobs overwhelmingly get stiffed because they often don’t have extra $ to set aside for retirement during their working years, and when they are forced out of work due to health, they are stuck settling for a greatly reduced benefit by pulling the benefit early.

It is also an enormously wasteful, inefficient, and convoluted program. SS is a regressive tax, so the poorest workers pay the most into the program proportionate to their income. The benefits, however, are highly progressive. Retired white collar workers collect much higher monthly checks because their incomes were higher during their working years, and they can also delay the age to start collecting on account of their better health. Illegal workers, which our country relies on heavily to make our economy work, are left out entirely.

We’re robbing the young and poor to enrich the old and financially stable.

I am all for phasing out the program as it exists today and replacing it with a program funded by progressive payroll tax, and pays out regressive benefits. The career roofer should pay little to nothing in, and be able to collect when their body gives out. The six-figure desk jockey should pay a lot in and collect nothing unless their defined contribution IRA falls through.

Or, just bring back required pension plans with oversight to assure they follow workers through their careers and that the money is being invested properly.

I know, that's the "idea" behind 401's but the trouble is, many lower income earners don't have the money to contribute and if they hit a snag or "need" a new boat, the money is too accessible. Not to mention that many haven't been given any kind of guidance or sound advice how it all works.

Loss of DBP's was a huge hit to the blue collar working class, but a great deal for Corporate America.

 

[Nick87]

Or, just bring back required pension plans with oversight to assure they follow workers through their careers and that the money is being invested properly.

I know, that's the "idea" behind 401's but the trouble is, many lower income earners don't have the money to contribute and if they hit a snag or "need" a new boat, the money is too accessible. Not to mention that many haven't been given any kind of guidance or sound advice how it all works.

Loss of DBP's was a huge hit to the blue collar working class, but a great deal for Corporate America.

I've thought about that a lot lately and as I'm getting a little older how lucky I am to have a pension. Company matching is great and all but only if you can put into it, Especially these days. I'd like to think if I had access to my retirement I'd never touch it. But who's to say. Life throws people curve balls sometimes and they get cornered. Also some people are absolutely terrible with money and woukd drain it regardless. I don't think many people are saving for retirement like they'd have you believe.i always thought I'd encourage my kids to go to school and not get into a trade like me. However looking around at zero school costs, a pension and Healthcare supplied after retirement. I'm starting to think I've got it a lot better than I thought I did years ago.

 

[BuzzH]

I've thought about that a lot lately and as I'm getting a little older how lucky I am to have a pension. Company matching is great and all but only if you can put into it, Especially these days. I'd like to think if I had access to my retirement I'd never touch it. But who's to say. Life throws people curve balls sometimes and they get cornered. Also some people are absolutely terrible with money and woukd drain it regardless. I don't think many people are saving for retirement like they'd have you believe.i always thought I'd encourage my kids to go to school and get into a trade like me. However looking around at zero school costs, a pension and Healthcare supplied after retirement. I'm starting to think I've got it a lot better than I thought I did years ago.

Same here and I look at my own family as the perfect example.

My grandfather had a RR pension, did not draw SS, and he lived very comfortably and retired in his late 50's, 58 IIRC. Lived to be 85.

My Dad has 2 pensions, from Union controlled pensions that are a majority of his retirement income, as well as union covered secondary health insurance for both him and my Mother. Without that, they would be in a pretty tough spot with just SS income.

I also agree with you that the average American blue collar worker is really getting the shit end of the stick with a 401 type program. Mainly because most simply can't afford to put much more than 2-3% company match into a 401. Further, many don't have the time or training, etc. to know HOW to invest within the 401 programs. I work with a bunch of people that simply don't have the experience, knowledge, or mentors to show them and explain the different investment options within a 401 type program. I was lucky that I have a very close friend that gave me advice, and good solid advice, in how to invest a long time ago. I owe him, and I'm thankful every time I look at my investments that he was willing to help me out.

Make no mistake the 401 deal is a much better deal for corporate America than the working class, also a much better deal for those that make 6 figures than for those that don't (for obvious reasons).

The American working class was sold a bill of goods by dissolving DBP's, and many are about to find out.

 

[Nick87]

Same here and I look at my own family as the perfect example.

My grandfather had a RR pension, did not draw SS, and he lived very comfortably and retired in his late 50's, 58 IIRC. Lived to be 85.

My Dad has 2 pensions, from Union controlled pensions that are a majority of his retirement income, as well as union covered secondary health insurance for both him and my Mother. Without that, they would be in a pretty tough spot with just SS income.

I also agree with you that the average American blue collar worker is really getting the shit end of the stick with a 401 type program. Mainly because most simply can't afford to put much more than 2-3% company match into a 401. Further, many don't have the time or training, etc. to know HOW to invest within the 401 programs. I work with a bunch of people that simply don't have the experience, knowledge, or mentors to show them and explain the different investment options within a 401 type program. I was lucky that I have a very close friend that gave me advice, and good solid advice, in how to invest a long time ago. I owe him, and I'm thankful every time I look at my investments that he was willing to help me out.

Make no mistake the 401 deal is a much better deal for corporate America than the working class, also a much better deal for those that make 6 figures than for those that don't (for obvious reasons).

The American working class was sold a bill of goods by dissolving DBP's, and many are about to find out.

I think there's actually quite a few trade unions now that have gone away with DBP for the newer members, so I'm not real sure if my kids will even have that option in 15 to 20 years for that matter. I know we have had to raise our minimum retirement age from 55 to 60 recently. Regardless of years of service. That's all specific to one local though.

 

[406dn]

Today 40% of retirees have no defined benefit OR defined contribution income, and rely solely on social security to survive. Social security is the only thing keeping tens of millions of older Americans out of severe poverty.

It is significantly inadequate in that function though, as the age to attain needed benefits is far beyond how long people are actually capable of working. The average retirement age in the US is 62, whereas the highest SS payment is achieved by waiting to draw SS at age 70. People working physically demanding jobs overwhelmingly get stiffed because they often don’t have extra $ to set aside for retirement during their working years, and when they are forced out of work due to health, they are stuck settling for a greatly reduced benefit by pulling the benefit early.

It is also an enormously wasteful, inefficient, and convoluted program. SS is a regressive tax, so the poorest workers pay the most into the program proportionate to their income. The benefits, however, are highly progressive. Retired white collar workers collect much higher monthly checks because their incomes were higher during their working years, and they can also delay the age to start collecting on account of their better health. Illegal workers, which our country relies on heavily to make our economy work, are left out entirely.

We’re robbing the young and poor to enrich the old and financially stable.

I am all for phasing out the program as it exists today and replacing it with a program funded by progressive payroll tax, and pays out regressive benefits. The career roofer should pay little to nothing in, and be able to collect when their body gives out. The six-figure desk jockey should pay a lot in and collect nothing unless their defined contribution IRA falls through.

While I might like your idea, it will won't fly, in the public forum, imo.

Not mentioned in your post is that there is an adjustment in the benefits, to pay a higher percentage of earnings, to lower earners, and a lower percentage to high earners. I like that feature. If they ever went to a means testing, to receive SS, it would be the beginning of the end for the program. Paying into a program for 40 years, then being told, you are too well off, to receive the benefit, would create a huge backlash.

I do want to see the ability to draw at 62 maintained, for the reasons you cite. However, there has to be an age adjusted payout, to have a hope of maintaining the solvency of the program. If there was not an age adjusted benefit, everyone would begin drawing at 62. I think a better fix is to lift the earning cap, for those drawing at 62. That way a person could shift to a part time, less physically demanding job, and preserve higher earnings for more of their life.

We do need to shore up Social Security and Medicare. It would be a stain on our society, to let many seniors end their lives in poverty.

 

[Pucky Freak]

We need a functional safety net and a functional retirement savings system. Traditional pensions are gone forever, but there are other ways to make them work. Australia recently moved to a nationalized retirement savings system that locks away workers’ future benefits, and many US States are following suit. SS was not a retirement savings program at the outset, but in practice it has sort of morphed into that. In it ever returned to a safety net only, we’d need to phase those changes in slowly and gradually to allow workers to plan around it.