Is Social Security Really in Trouble? (NT)

[JohnH]

James Kwak just keeps making me think. Maybe this isn't exactly a tax preparation topic, but it's still interesting. I probably would't even post it during regular tax season.

And just to be clear, this is intended to address the economics of Social Security rather then the politics, although admittedly it's difficult to keep them separate in this type of discussion.

http://baselinescenario.com/2011/09/27/should-social-security-be-progressive/#entry

He's inviting a response, so I'm thinking the TMI brain trust might have a thing or two to say about his article. We've already had a couple of very interesting discussions on the subject in some other threads.

[kpangelinan]

All I know is it's a Ponzi Scheme, legally that is. Is that an oxymoron....a legal Ponzi Scheme.

In all seriousness, I would tend to agree with the author of the article stance, that the program needs to be separated so that all facets of the program (mainly death, disability) isn't based on redistribution......because the math doesn't work out unless you have a large pool of working class citizens paying for the currently retired (ahem: can you say babyboomers?).

It is certainly spiraling towards bankruptcy and insolvency and is unsustainable as is.

[taxmom34]

it would probably be a sin for anyone to suggest or even pass law for the richer to pay more into the social security system

[Earl]

I have never understood why a single person pays the same as a married person with children.

Payments to single person stop when he dies. Married person payments continue after death and can be to spouse, former spouse, children as well.

Seems like single person is helping to subsidize payments for married persons.

[kpangelinan]

I have never understood why a single person pays the same as a married person with children.

Payments to single person stop when he dies. Married person payments continue after death and can be to spouse, former spouse, children as well.

Seems like single person is helping to subsidize payments for married persons.

That's kinda what the article was implying.....redistribution doesn't work for instances like this or for disability, death, or survivorship......it's a continual spiral towards being unfunded.....or as they say every election cycle, unsustainable!

[JohnH]

I've been thinking about Earl's comment, but I'm not sure I agree. I think the actuaries already have this factored into the system.

For most working couples, when one spouse dies it is true that the remaining spouse gets the higher of the two benefits. However, they also forfeit the benefit they were receiving, so there's a genuine loss of benefits between the two. Not unlike the situation when a couple chooses a joint life benefit vs a single life benefit. Maybe the system is skewed when there is only one working spouse in the household paying into the system, but how many situations like that exist today?

If you think all this can't be calculated accurately by actuaries, then consider the fact that a married man and a single man of the same age and health will pay the same for life insurance coverage.

[Earl]

Think also about when worker has multiple children. Should he become disabled
or die the children also receive benefit based on his contributions.

Single person receives nothing after he dies and only one benefit while living.

Therefore, the married person and family will receive considerably more in benefits
than single person based on same contribution amount.

[BHoffman]

I believe that almost all defined benefit pensions eventually devour the host. It's only a matter of when. GM is basically a pension plan administration company with this little car business on the side.

Unfortunately, our federal gov't is going the same route - with this little constitution (provide national defense, equal enforcement of the law, etc.) thing on the side.

Changing SS from a defined benefit plan to a defined contribution plan would address a lot of the "unfairness" described above, but the transition cost would be immense.

This defined benefit vs. defined contribution pension plan is a defining (yuk yuk) issue in the upcoming Phoenix mayoral race. I found this article to be interesting:

http://www.azcentral.com/arizonarepublic/opinions/articles/2011/09/22/20110922robb23-gullett-stanton-dustup.html