Social Security Discussion

[Kimura]

It's not a ponzi scheme, but if it helps keep your worldview intact, go with it.

It's not a Ponzi Scheme any more than Treasury bonds are a Ponzi Scheme.

A Ponzi Scheme is a scheme where unreasonably high returns are promised with no associated economic activity to support the promised return. It might be considered a Ponzi Scheme if the promised returns to SS recipients was 25% a year, but given that it's ticking along at 2%-3%, nobody reasonable can say its a Ponzi Scheme.

Liabilities of the US government are claims on future economic activity within the jurisdiction of the United States. A corporate bond is the same thing. A corporate bond is a claim on future activity of the corporation. Treasury bonds are liabilities of the US government. So are SS promises. One can argue that the promises of SS are too high and we will one day default by not paying the promised benefits (or not), but even if that's true, that doesn't make SS a Ponzi Scheme. Simply because we default on our liabilities doesn't make it a Ponzi Scheme. Large corporations default on their debt at the rate of about 1%-2% per year. Nobody knowledgeable would ever argue that every corporate default is a Ponzi Scheme.

People get confused because they think simply because it's a pay-as-you-go system, it inherently makes it a Ponzi Scheme. That's incorrect. All SS does is cut out the middle man in the bond market. SS acts exactly as a retirement fund that is invested 100% in government bonds. We could issue the bonds and drop them in the SS trusts, or we can just track the promises in the trusts as if we doing buying the bonds. The economics are the same.

I think SS is a poor system and should be changed, but it's not a Ponzi Scheme.

So you are saying the assets you are buying with your SS payments are a % of labor of your children and grandchildren? Dude that's some sick shit right there.

There really is no such thing as unfunded liabilities since the government can't run out of dollars so to speak. There really isn't a "funding" problem for SS, Medicaid, Medicare, etc.
This is especially the reality in the case of SS. As long as we can provide the real goods and services needed by people in their retirement, which I'm sure you agree we have the productive capacity to achieve, there isn't a a problem.

Anything which occurs in the future is technically an unfunded liability. I can say food, shelter, and clothing are unfunded liabilities. We'll all be able to produce what we need, unless neoliberals and right wing lunatics get their way and destroy our capacity to produce.

There isn't ANY liability for anything which the federal government purchases. Uncle Sam creates dollars when it spends and destroys dollars when it confiscates them in the form of taxes.

 

[Kimura]

It's not a Ponzi Scheme any more than Treasury bonds are a Ponzi Scheme.

A Ponzi Scheme is a scheme where unreasonably high returns are promised with no associated economic activity to support the promised return. It might be considered a Ponzi Scheme if the promised returns to SS recipients was 25% a year, but given that it's ticking along at 2%-3%, nobody reasonable can say its a Ponzi Scheme.

Liabilities of the US government are claims on future economic activity within the jurisdiction of the United States. A corporate bond is the same thing. A corporate bond is a claim on future activity of the corporation. Treasury bonds are liabilities of the US government. So are SS promises. One can argue that the promises of SS are too high and we will one day default by not paying the promised benefits (or not), but even if that's true, that doesn't make SS a Ponzi Scheme. Simply because we default on our liabilities doesn't make it a Ponzi Scheme. Large corporations default on their debt at the rate of about 1%-2% per year. Nobody knowledgeable would ever argue that every corporate default is a Ponzi Scheme.

People get confused because they think simply because it's a pay-as-you-go system, it inherently makes it a Ponzi Scheme. That's incorrect. All SS does is cut out the middle man in the bond market. SS acts exactly as a retirement fund that is invested 100% in government bonds. We could issue the bonds and drop them in the SS trusts, or we can just track the promises in the trusts as if we doing buying the bonds. The economics are the same.

I think SS is a poor system and should be changed, but it's not a Ponzi Scheme.

So you are saying the assets you are buying with your SS payments are a % of labor of your children and grandchildren? Dude that's some sick shit right there.

All debt are claims on someone's future labor regardless of the issuing entity. Much of equity is too.

On a side note, US public debt to should be referred to as national equity or national savings when we really think about it.

 

[Kimura]

No it's a Ponzi scheme.

It's not a ponzi scheme, but if it helps keep your worldview intact, go with it.

It's not a Ponzi Scheme any more than Treasury bonds are a Ponzi Scheme.

A Ponzi Scheme is a scheme where unreasonably high returns are promised with no associated economic activity to support the promised return. It might be considered a Ponzi Scheme if the promised returns to SS recipients was 25% a year, but given that it's ticking along at 2%-3%, nobody reasonable can say its a Ponzi Scheme.

Liabilities of the US government are claims on future economic activity within the jurisdiction of the United States. A corporate bond is the same thing. A corporate bond is a claim on future activity of the corporation. Treasury bonds are liabilities of the US government. So are SS promises. One can argue that the promises of SS are too high and we will one day default by not paying the promised benefits (or not), but even if that's true, that doesn't make SS a Ponzi Scheme. Simply because we default on our liabilities doesn't make it a Ponzi Scheme. Large corporations default on their debt at the rate of about 1%-2% per year. Nobody knowledgeable would ever argue that every corporate default is a Ponzi Scheme.

People get confused because they think simply because it's a pay-as-you-go system, it inherently makes it a Ponzi Scheme. That's incorrect. All SS does is cut out the middle man in the bond market. SS acts exactly as a retirement fund that is invested 100% in government bonds. We could issue the bonds and drop them in the SS trusts, or we can just track the promises in the trusts as if we doing buying the bonds. The economics are the same.

I think SS is a poor system and should be changed, but it's not a Ponzi Scheme.

Technically, any default by the US government would have to be voluntary. Payments for SS come from the Treasury General Account.

I'd like to get a funding guarantee from Congress similar to Medicare Part B & D. The whole SS Trust Fund is anachronistic at this point. We just fund it out of the general revenue. I also think minimum payments should start at $2000 per month and include COLA adjustments.

My two cents...

 

[Foxfyre]

It's not a ponzi scheme, but if it helps keep your worldview intact, go with it.

It's not a Ponzi Scheme any more than Treasury bonds are a Ponzi Scheme.

A Ponzi Scheme is a scheme where unreasonably high returns are promised with no associated economic activity to support the promised return. It might be considered a Ponzi Scheme if the promised returns to SS recipients was 25% a year, but given that it's ticking along at 2%-3%, nobody reasonable can say its a Ponzi Scheme.

Liabilities of the US government are claims on future economic activity within the jurisdiction of the United States. A corporate bond is the same thing. A corporate bond is a claim on future activity of the corporation. Treasury bonds are liabilities of the US government. So are SS promises. One can argue that the promises of SS are too high and we will one day default by not paying the promised benefits (or not), but even if that's true, that doesn't make SS a Ponzi Scheme. Simply because we default on our liabilities doesn't make it a Ponzi Scheme. Large corporations default on their debt at the rate of about 1%-2% per year. Nobody knowledgeable would ever argue that every corporate default is a Ponzi Scheme.

People get confused because they think simply because it's a pay-as-you-go system, it inherently makes it a Ponzi Scheme. That's incorrect. All SS does is cut out the middle man in the bond market. SS acts exactly as a retirement fund that is invested 100% in government bonds. We could issue the bonds and drop them in the SS trusts, or we can just track the promises in the trusts as if we doing buying the bonds. The economics are the same.

I think SS is a poor system and should be changed, but it's not a Ponzi Scheme.

Technically, any default by the US government would have to be voluntary. Payments for SS come from the Treasury General Account.

I'd like to get a funding guarantee from Congress similar to Medicare Part B & D. The whole SS Trust Fund is anachronistic at this point. We just fund it out of the general revenue. I also think minimum payments should start at $2000 per month and include COLA adjustments.

My two cents...

Are you saying that you are one of those who thinks that a goose who lays perpetual golden eggs is possible? That printing money is no different from that tied to the value of productivity? That government really is Santa Claus with unlimited ability to dispense currency and there is no such thing as the figurative chickens coming home to roost? That there really are no negative consequences for government dispensing unlimited charity in perpetuity?

 

[RKMBrown]

It's not a Ponzi Scheme any more than Treasury bonds are a Ponzi Scheme.

A Ponzi Scheme is a scheme where unreasonably high returns are promised with no associated economic activity to support the promised return. It might be considered a Ponzi Scheme if the promised returns to SS recipients was 25% a year, but given that it's ticking along at 2%-3%, nobody reasonable can say its a Ponzi Scheme.

Liabilities of the US government are claims on future economic activity within the jurisdiction of the United States. A corporate bond is the same thing. A corporate bond is a claim on future activity of the corporation. Treasury bonds are liabilities of the US government. So are SS promises. One can argue that the promises of SS are too high and we will one day default by not paying the promised benefits (or not), but even if that's true, that doesn't make SS a Ponzi Scheme. Simply because we default on our liabilities doesn't make it a Ponzi Scheme. Large corporations default on their debt at the rate of about 1%-2% per year. Nobody knowledgeable would ever argue that every corporate default is a Ponzi Scheme.

People get confused because they think simply because it's a pay-as-you-go system, it inherently makes it a Ponzi Scheme. That's incorrect. All SS does is cut out the middle man in the bond market. SS acts exactly as a retirement fund that is invested 100% in government bonds. We could issue the bonds and drop them in the SS trusts, or we can just track the promises in the trusts as if we doing buying the bonds. The economics are the same.

I think SS is a poor system and should be changed, but it's not a Ponzi Scheme.

So you are saying the assets you are buying with your SS payments are a % of labor of your children and grandchildren? Dude that's some sick shit right there.

There really is no such thing as unfunded liabilities since the government can't run out of dollars so to speak. There really isn't a "funding" problem for SS, Medicaid, Medicare, etc.
This is especially the reality in the case of SS. As long as we can provide the real goods and services needed by people in their retirement, which I'm sure you agree we have the productive capacity to achieve, there isn't a a problem.

Anything which occurs in the future is technically an unfunded liability. I can say food, shelter, and clothing are unfunded liabilities. We'll all be able to produce what we need, unless neoliberals and right wing lunatics get their way and destroy our capacity to produce.

There isn't ANY liability for anything which the federal government purchases. Uncle Sam creates dollars when it spends and destroys dollars when it confiscates them in the form of taxes.

Nice dance but you did not address the question.

Yes or no, the assets you are buying with your SS payments are a % of labor of your children and grandchildren?

 

[oldfart]

I may jump into the food fight later, but you ask a couple of good questions that deserve a straight answer, so I'll try to answer them without commentary.

Please explain then, why we have to pay more than 2% of our salary, which was the starting cost of this program? Let me see the transparent financial statements that said 2% is all we will have to pay. Contrast that with the current percent of income that we have to pay, 12.4%.

At it's inception Social Security would run a huge surplus with most works paying in and few beneficiaries drawing pensions. The actuaries and economists told Congress that this posed real problems. Workers and employers would need a period to adjust to the FICA withholdings to avert hardship and avoid triggering a fall in consumption which would lead to recession. So the rate began at 2% with scheduled increases as the number of beneficiaries grew. It was anticipated from the start that increases in lifespan might require changing benefits and FICA rates to keep the system actuarially sound. There was, in other words, a suspicion that decades later Americans might not die in sufficient numbers "on time" and that it was preferable to alter the FICA rates rather than to increase the death rate; referred to by a waggish historian of Social Security as the "Death OR Taxes debate"!

So in summary, from the beginning FICA rates were "phased-in" and expected to increase over time, at least because of increases I longevity.

While at it please explain why people who put less in get more out as a % of their income:

Very few people understand how the Social Security benefit formulae work. Basically it works like this.

1. Each year each participant is credited with their covered earnings (FICA wages reported box 3 Form W-2 plus 92.35% of net earnings from self-employment reported on Schedule SE) up to that year's wage base (the maximum earnings subject to FICA/SECA). A side record is kept for eligibility purposes of how many quarters of coverage this amount has earned, forty being needed for retirement benefits in most cases. This earnings record is sent annually to each participant and can be viewed by logging into the Social Security website.

2. Each year's earnings are weighted in order to compute average monthly earnings. This part of the computation and all subsequent computations are done by the estimator on the SSA website without displaying or explaining the computation. The weighting is a retrospective inflation adjustment and the weighting factors are recomputed each year for all prior years. The most current two years always have a factor of 1.0000 and the other years' factors get larger according to a standard reverse discount formula. This year's retirees can expect factors of three or four or more for their earliest years. This has the effect of evening out what appear to be pretty large differences between early years and recent years.

3. The average monthly earnings is defined as the average weighted annual earnings for the 35 highest years, divided by 12.

4 The baseline benefit amount which determines how much a beneficiary will receive at retirement at various ages, disability, and survivor benefits is called the "Primary Insurance Amount" or PIA. It is based on a formula which is the sum of three tier computations. There are two inflection points that divide the three tiers. These inflection points are increased each year by the same formula used to weight years earnings for inflation. For 2014 the first inflection point is $816 per month and the second inflection point is $4,917. The beneficiary will receive 90% of the average indexed monthly earnings up to $816, plus 32% of the average indexed monthly earnings from $817 to $4,917, and 15% of the average indexed monthly earnings over $4,917.

It's obvious that beneficiaries with very low average indexed monthly earnings receive a much higher portion of their earnings in their eventual benefits. This explains the graph RKM Brown posted.

This kind of actuarial computation is what makes accounting look exciting by comparison.

 

[oldfart]

Are you saying that you are one of those who thinks that a goose who lays perpetual golden eggs is possible? That printing money is no different from that tied to the value of productivity? That government really is Santa Claus with unlimited ability to dispense currency and there is no such thing as the figurative chickens coming home to roost? That there really are no negative consequences for government dispensing unlimited charity in perpetuity?

Somewhere under all of your politically loaded verbiage, there is probably a coherent question, but I for one do not see a good reason to dig it out. Lose the attitude if you expect people who understand governmental accounting to give you a straight answer. You are embarrassing yourself.

 

[oldfart]

Nice dance but you did not address the question.

Yes or no, the assets you are buying with your SS payments are a % of labor of your children and grandchildren?

No. There is no statutory requirement that the taxpayers of the future who pay taxes bear any familial relationship to you. There is also no statutory requirement that the members of the armed forces who die in future conflicts to protect you be related to you. Stop making ridiculously absurd arguments. You also are embarrassing yourself.

 

[RKMBrown]

Nice dance but you did not address the question.

Yes or no, the assets you are buying with your SS payments are a % of labor of your children and grandchildren?

No. There is no statutory requirement that the taxpayers of the future who pay taxes bear any familial relationship to you. There is also no statutory requirement that the members of the armed forces who die in future conflicts to protect you be related to you. Stop making ridiculously absurd arguments. You also are embarrassing yourself.

My bad...

Yes or no, the assets you are buying with your SS payments are a % of labor of our children and grandchildren?

 

[RKMBrown]

I may jump into the food fight later, but you ask a couple of good questions that deserve a straight answer, so I'll try to answer them without commentary.

Please explain then, why we have to pay more than 2% of our salary, which was the starting cost of this program? Let me see the transparent financial statements that said 2% is all we will have to pay. Contrast that with the current percent of income that we have to pay, 12.4%.

At it's inception Social Security would run a huge surplus with most works paying in and few beneficiaries drawing pensions. The actuaries and economists told Congress that this posed real problems. Workers and employers would need a period to adjust to the FICA withholdings to avert hardship and avoid triggering a fall in consumption which would lead to recession. So the rate began at 2% with scheduled increases as the number of beneficiaries grew. It was anticipated from the start that increases in lifespan might require changing benefits and FICA rates to keep the system actuarially sound. There was, in other words, a suspicion that decades later Americans might not die in sufficient numbers "on time" and that it was preferable to alter the FICA rates rather than to increase the death rate; referred to by a waggish historian of Social Security as the "Death OR Taxes debate"!

So in summary, from the beginning FICA rates were "phased-in" and expected to increase over time, at least because of increases I longevity.

While at it please explain why people who put less in get more out as a % of their income:

Very few people understand how the Social Security benefit formulae work. Basically it works like this.

1. Each year each participant is credited with their covered earnings (FICA wages reported box 3 Form W-2 plus 92.35% of net earnings from self-employment reported on Schedule SE) up to that year's wage base (the maximum earnings subject to FICA/SECA). A side record is kept for eligibility purposes of how many quarters of coverage this amount has earned, forty being needed for retirement benefits in most cases. This earnings record is sent annually to each participant and can be viewed by logging into the Social Security website.

2. Each year's earnings are weighted in order to compute average monthly earnings. This part of the computation and all subsequent computations are done by the estimator on the SSA website without displaying or explaining the computation. The weighting is a retrospective inflation adjustment and the weighting factors are recomputed each year for all prior years. The most current two years always have a factor of 1.0000 and the other years' factors get larger according to a standard reverse discount formula. This year's retirees can expect factors of three or four or more for their earliest years. This has the effect of evening out what appear to be pretty large differences between early years and recent years.

3. The average monthly earnings is defined as the average weighted annual earnings for the 35 highest years, divided by 12.

4 The baseline benefit amount which determines how much a beneficiary will receive at retirement at various ages, disability, and survivor benefits is called the "Primary Insurance Amount" or PIA. It is based on a formula which is the sum of three tier computations. There are two inflection points that divide the three tiers. These inflection points are increased each year by the same formula used to weight years earnings for inflation. For 2014 the first inflection point is $816 per month and the second inflection point is $4,917. The beneficiary will receive 90% of the average indexed monthly earnings up to $816, plus 32% of the average indexed monthly earnings from $817 to $4,917, and 15% of the average indexed monthly earnings over $4,917.

It's obvious that beneficiaries with very low average indexed monthly earnings receive a much higher portion of their earnings in their eventual benefits. This explains the graph RKM Brown posted.

This kind of actuarial computation is what makes accounting look exciting by comparison.

IOW they knew they were gonna be hurting "our" children and grandchildren with a socialist program in which future generations would benefit inversely proportional to the amount each successive generation was forced to put in. It was on purpose. Interesting.

As per the graph, yeah it's pretty obvious the program benefits are also inversely proportional to the amount you put in for each particular generation. IOW Younger generations that earn less benefit significantly more than later generations who earn more.

Yeah not a ponzi. Just some whacked out socialist redistribution scheme to screw over future generations, and just as importantly to punish high earners more than lower earners. In short, the opposite of an incentive system, a system designed to provide disincentives for future generations. Gee whiz I wonder why things appear to be getting worse each generation.

I was hoping you would tell me, oh no they had good intentions.

 

[oldfart]

Nice dance but you did not address the question.

Yes or no, the assets you are buying with your SS payments are a % of labor of your children and grandchildren?

No. There is no statutory requirement that the taxpayers of the future who pay taxes bear any familial relationship to you. There is also no statutory requirement that the members of the armed forces who die in future conflicts to protect you be related to you. Stop making ridiculously absurd arguments. You also are embarrassing yourself.

My bad...

Yes or no, the assets you are buying with your SS payments are a % of labor of our children and grandchildren?

I repeat myself. No. Please tell me that English is not your first language.

 

[oldfart]

I may jump into the food fight later, but you ask a couple of good questions that deserve a straight answer, so I'll try to answer them without commentary.

Please explain then, why we have to pay more than 2% of our salary, which was the starting cost of this program? Let me see the transparent financial statements that said 2% is all we will have to pay. Contrast that with the current percent of income that we have to pay, 12.4%.

At it's inception Social Security would run a huge surplus with most works paying in and few beneficiaries drawing pensions. The actuaries and economists told Congress that this posed real problems. Workers and employers would need a period to adjust to the FICA withholdings to avert hardship and avoid triggering a fall in consumption which would lead to recession. So the rate began at 2% with scheduled increases as the number of beneficiaries grew. It was anticipated from the start that increases in lifespan might require changing benefits and FICA rates to keep the system actuarially sound. There was, in other words, a suspicion that decades later Americans might not die in sufficient numbers "on time" and that it was preferable to alter the FICA rates rather than to increase the death rate; referred to by a waggish historian of Social Security as the "Death OR Taxes debate"!

So in summary, from the beginning FICA rates were "phased-in" and expected to increase over time, at least because of increases I longevity.

While at it please explain why people who put less in get more out as a % of their income:

Very few people understand how the Social Security benefit formulae work. Basically it works like this.

1. Each year each participant is credited with their covered earnings (FICA wages reported box 3 Form W-2 plus 92.35% of net earnings from self-employment reported on Schedule SE) up to that year's wage base (the maximum earnings subject to FICA/SECA). A side record is kept for eligibility purposes of how many quarters of coverage this amount has earned, forty being needed for retirement benefits in most cases. This earnings record is sent annually to each participant and can be viewed by logging into the Social Security website.

2. Each year's earnings are weighted in order to compute average monthly earnings. This part of the computation and all subsequent computations are done by the estimator on the SSA website without displaying or explaining the computation. The weighting is a retrospective inflation adjustment and the weighting factors are recomputed each year for all prior years. The most current two years always have a factor of 1.0000 and the other years' factors get larger according to a standard reverse discount formula. This year's retirees can expect factors of three or four or more for their earliest years. This has the effect of evening out what appear to be pretty large differences between early years and recent years.

3. The average monthly earnings is defined as the average weighted annual earnings for the 35 highest years, divided by 12.

4 The baseline benefit amount which determines how much a beneficiary will receive at retirement at various ages, disability, and survivor benefits is called the "Primary Insurance Amount" or PIA. It is based on a formula which is the sum of three tier computations. There are two inflection points that divide the three tiers. These inflection points are increased each year by the same formula used to weight years earnings for inflation. For 2014 the first inflection point is $816 per month and the second inflection point is $4,917. The beneficiary will receive 90% of the average indexed monthly earnings up to $816, plus 32% of the average indexed monthly earnings from $817 to $4,917, and 15% of the average indexed monthly earnings over $4,917.

It's obvious that beneficiaries with very low average indexed monthly earnings receive a much higher portion of their earnings in their eventual benefits. This explains the graph RKM Brown posted.

This kind of actuarial computation is what makes accounting look exciting by comparison.

IOW they knew they were gonna be hurting "our" children and grandchildren with a socialist program in which future generations would benefit inversely proportional to the amount each successive generation was forced to put in. It was on purpose. Interesting.

As per the graph, yeah it's pretty obvious the program benefits are also inversely proportional to the amount you put in for each particular generation. IOW Younger generations that earn less benefit significantly more than later generations who earn more.

Yeah not a ponzi. Just some whacked out socialist redistribution scheme to screw over future generations, and just as importantly to punish high earners more than lower earners. In short, the opposite of an incentive system, a system designed to provide disincentives for future generations. Gee whiz I wonder why things appear to be getting worse each generation.

I was hoping you would tell me, oh no they had good intentions.

You asked a question, I stripped away loaded political verbiage and attempted to give you a straight answer. I also posted that if you wanted straight answers, it would be a good idea to alter the attitude. Since you seem to neither be able to read English or process information, I will not make that mistake again. You, sir, are simply an ignorant idiot, and apparently proud of it.

 

[RKMBrown]

I may jump into the food fight later, but you ask a couple of good questions that deserve a straight answer, so I'll try to answer them without commentary.



At it's inception Social Security would run a huge surplus with most works paying in and few beneficiaries drawing pensions. The actuaries and economists told Congress that this posed real problems. Workers and employers would need a period to adjust to the FICA withholdings to avert hardship and avoid triggering a fall in consumption which would lead to recession. So the rate began at 2% with scheduled increases as the number of beneficiaries grew. It was anticipated from the start that increases in lifespan might require changing benefits and FICA rates to keep the system actuarially sound. There was, in other words, a suspicion that decades later Americans might not die in sufficient numbers "on time" and that it was preferable to alter the FICA rates rather than to increase the death rate; referred to by a waggish historian of Social Security as the "Death OR Taxes debate"!

So in summary, from the beginning FICA rates were "phased-in" and expected to increase over time, at least because of increases I longevity.



Very few people understand how the Social Security benefit formulae work. Basically it works like this.

1. Each year each participant is credited with their covered earnings (FICA wages reported box 3 Form W-2 plus 92.35% of net earnings from self-employment reported on Schedule SE) up to that year's wage base (the maximum earnings subject to FICA/SECA). A side record is kept for eligibility purposes of how many quarters of coverage this amount has earned, forty being needed for retirement benefits in most cases. This earnings record is sent annually to each participant and can be viewed by logging into the Social Security website.

2. Each year's earnings are weighted in order to compute average monthly earnings. This part of the computation and all subsequent computations are done by the estimator on the SSA website without displaying or explaining the computation. The weighting is a retrospective inflation adjustment and the weighting factors are recomputed each year for all prior years. The most current two years always have a factor of 1.0000 and the other years' factors get larger according to a standard reverse discount formula. This year's retirees can expect factors of three or four or more for their earliest years. This has the effect of evening out what appear to be pretty large differences between early years and recent years.

3. The average monthly earnings is defined as the average weighted annual earnings for the 35 highest years, divided by 12.

4 The baseline benefit amount which determines how much a beneficiary will receive at retirement at various ages, disability, and survivor benefits is called the "Primary Insurance Amount" or PIA. It is based on a formula which is the sum of three tier computations. There are two inflection points that divide the three tiers. These inflection points are increased each year by the same formula used to weight years earnings for inflation. For 2014 the first inflection point is $816 per month and the second inflection point is $4,917. The beneficiary will receive 90% of the average indexed monthly earnings up to $816, plus 32% of the average indexed monthly earnings from $817 to $4,917, and 15% of the average indexed monthly earnings over $4,917.

It's obvious that beneficiaries with very low average indexed monthly earnings receive a much higher portion of their earnings in their eventual benefits. This explains the graph RKM Brown posted.

This kind of actuarial computation is what makes accounting look exciting by comparison.

IOW they knew they were gonna be hurting "our" children and grandchildren with a socialist program in which future generations would benefit inversely proportional to the amount each successive generation was forced to put in. It was on purpose. Interesting.

As per the graph, yeah it's pretty obvious the program benefits are also inversely proportional to the amount you put in for each particular generation. IOW Younger generations that earn less benefit significantly more than later generations who earn more.

Yeah not a ponzi. Just some whacked out socialist redistribution scheme to screw over future generations, and just as importantly to punish high earners more than lower earners. In short, the opposite of an incentive system, a system designed to provide disincentives for future generations. Gee whiz I wonder why things appear to be getting worse each generation.

I was hoping you would tell me, oh no they had good intentions.

You asked a question, I stripped away loaded political verbiage and attempted to give you a straight answer. I also posted that if you wanted straight answers, it would be a good idea to alter the attitude. Since you seem to neither be able to read English or process information, I will not make that mistake again. You, sir, are simply an ignorant idiot, and apparently proud of it.

What attitude? You are the one screaming not me. I'll take your screams and deflection as a yes, with an emphasis on you enjoy taking 12.4% of our children and grandchildren's wages. But rather than admit it you choose to scream ignorant idiot at anyone that points out the brutal facts.

 

[RKMBrown]

No. There is no statutory requirement that the taxpayers of the future who pay taxes bear any familial relationship to you. There is also no statutory requirement that the members of the armed forces who die in future conflicts to protect you be related to you. Stop making ridiculously absurd arguments. You also are embarrassing yourself.

My bad...

Yes or no, the assets you are buying with your SS payments are a % of labor of our children and grandchildren?

I repeat myself. No. Please tell me that English is not your first language.

You qualified your no by taking umbrage with my use of the term "your" as you assumed I was directly referring to "familial relationships." I changed my term from "your" to our to correct my question. This assuming your no, was on based on the familial issue you drew out. Then you freak out? What are you drinking? I had no idea anyone could be so stupid not to see their kids taxes at 12.4% for SS and understand that their labor is funding your SS. It's not rocket science. Why do you refuse to admit the truth?

 

[zeke]

My bad...

Yes or no, the assets you are buying with your SS payments are a % of labor of our children and grandchildren?

I repeat myself. No. Please tell me that English is not your first language.

You qualified your no by taking umbrage with my use of the term "your" as you assumed I was directly referring to "familial relationships." I changed my term from "your" to our to correct my question. This assuming your no, was on based on the familial issue you drew out. Then you freak out? What are you drinking? I had no idea anyone could be so stupid not to see their kids taxes at 12.4% for SS and understand that their labor is funding your SS. It's not rocket science. Why do you refuse to admit the truth?

So you are real worried that someones kids are paying 12.4% of THEIR earnings to help provide an income to those older retirees?

How much would it cost those same kids IF they were providing those retirees with housing, food and medical care? It Mom and Dad had to live with their kids because they (Mom and Dad) had no money or income, how much would that cost those kids?

Would it be more or less than 12.4%?

 

[RKMBrown]

I repeat myself. No. Please tell me that English is not your first language.

You qualified your no by taking umbrage with my use of the term "your" as you assumed I was directly referring to "familial relationships." I changed my term from "your" to our to correct my question. This assuming your no, was on based on the familial issue you drew out. Then you freak out? What are you drinking? I had no idea anyone could be so stupid not to see their kids taxes at 12.4% for SS and understand that their labor is funding your SS. It's not rocket science. Why do you refuse to admit the truth?

So you are real worried that someones kids are paying 12.4% of THEIR earnings to help provide an income to those older retirees?

How much would it cost those same kids IF they were providing those retirees with housing, food and medical care? It Mom and Dad had to live with their kids because they (Mom and Dad) had no money or income, how much would that cost those kids?

Would it be more or less than 12.4%?

Much more.

Is that what the 12.4% is for? To punt our responsibilities to the curb, to fork over checks to our parents so they don't have to ask for it, and instead can live by themselves?

It used to be in this country that grand parents lived with family in retirement, rather than die alone. Can I get a waiver for paying SS checks if I set up my grand parents with master guest room or guest house on my property?

 

[Kimura]

^bump for SS

 

[oldfart]

^bump for SS

Thanks! We were going nowhere fast, but maybe now is a good time to try to make sense of it again.

The truth is that there is no real way a financial program can transfer real consumption from one generation to another. There is no way that people today can "save" for their retirement. We cannot stockpile food, clothing, medical care, and so forth for the future, we can only invest in the capital, physical and human, to provide those things in future decades. And that is not savings, it is investment.

There is no necessary reason to believe that any financial program, public or private, will lead to the kind of investment today's generation will need in the future. No one has ever explained how putting money into IRAs promotes medical research, builds housing for the elderly, or transit for those who no longer can drive. Theoretically markets with perfect information, perfect competition, perfect foresight, and immortal players could do it, but that's a lot to ask.

So what happens if we do not properly invest? Inflation. People pull money out of their retirement savings, demand increases, and with no increased supply through investment, the additional demand is manifested as price increases instead of production increases.

The purpose of public saving through payroll taxes and private savings through retirement plans is to reduce current demand to make room for public and private real investment to provide those services in the future. There is no necessary reason why the savings will be invested wisely, but there is at least a chance for a society to choose wisely.

For future questions on the role of taxes and saving to reduce current demand and free up resources for investment, I will defer to Kimura, who has a better grasp of this than I.

 

[Kimura]

^bump for SS

Thanks! We were going nowhere fast, but maybe now is a good time to try to make sense of it again.

The truth is that there is no real way a financial program can transfer real consumption from one generation to another. There is no way that people today can "save" for their retirement. We cannot stockpile food, clothing, medical care, and so forth for the future, we can only invest in the capital, physical and human, to provide those things in future decades. And that is not savings, it is investment.

There is no necessary reason to believe that any financial program, public or private, will lead to the kind of investment today's generation will need in the future. No one has ever explained how putting money into IRAs promotes medical research, builds housing for the elderly, or transit for those who no longer can drive. Theoretically markets with perfect information, perfect competition, perfect foresight, and immortal players could do it, but that's a lot to ask.

So what happens if we do not properly invest? Inflation. People pull money out of their retirement savings, demand increases, and with no increased supply through investment, the additional demand is manifested as price increases instead of production increases.

The purpose of public saving through payroll taxes and private savings through retirement plans is to reduce current demand to make room for public and private real investment to provide those services in the future. There is no necessary reason why the savings will be invested wisely, but there is at least a chance for a society to choose wisely.

For future questions on the role of taxes and saving to reduce current demand and free up resources for investment, I will defer to Kimura, who has a better grasp of this than I.

I always find your posts insightful. I inevitably end up reading some of your more in-depth posts twice.

My biggest problem with FICA is it's just regressive, which inevitably causes me to go off on these diatribes about funding SS out of the general revenue.

However, in its current incarnation, I view SS taxes as the functional equivalent of purchasing a government bond. We give the federal government our $$$$ now and it returns it to us at some later date. The difference between the two being the returns seniors will receive.

 

[RKMBrown]

^bump for SS

Thanks! We were going nowhere fast, but maybe now is a good time to try to make sense of it again.

The truth is that there is no real way a financial program can transfer real consumption from one generation to another. There is no way that people today can "save" for their retirement. We cannot stockpile food, clothing, medical care, and so forth for the future, we can only invest in the capital, physical and human, to provide those things in future decades. And that is not savings, it is investment.

There is no necessary reason to believe that any financial program, public or private, will lead to the kind of investment today's generation will need in the future. No one has ever explained how putting money into IRAs promotes medical research, builds housing for the elderly, or transit for those who no longer can drive. Theoretically markets with perfect information, perfect competition, perfect foresight, and immortal players could do it, but that's a lot to ask.

So what happens if we do not properly invest? Inflation. People pull money out of their retirement savings, demand increases, and with no increased supply through investment, the additional demand is manifested as price increases instead of production increases.

The purpose of public saving through payroll taxes and private savings through retirement plans is to reduce current demand to make room for public and private real investment to provide those services in the future. There is no necessary reason why the savings will be invested wisely, but there is at least a chance for a society to choose wisely.

For future questions on the role of taxes and saving to reduce current demand and free up resources for investment, I will defer to Kimura, who has a better grasp of this than I.

I always find your posts insightful. I inevitably end up reading some of your more in-depth posts twice.

My biggest problem with FICA is it's just regressive, which inevitably causes me to go off on these diatribes about funding SS out of the general revenue.

However, in its current incarnation, I view SS taxes as the functional equivalent of purchasing a government bond. We give the federal government our $$$$ now and it returns it to us at some later date. The difference between the two being the returns seniors will receive.

It's not like a bond at all. You are "forced" to pay into SS, unless you are one of the few lucky folks who are exempted. You don't "own" your SS, you can't sell it, you can't transfer it to your children in your estate. For many people it does not earn interest, in fact for many they loose half the money they put in. Hell for some they loose all of the money they put in. Further for each subsequent generation it has cost them double the amount of income to fund SS than the previous generation paid in by % of income. Thus it's not like a bond at all, from an investor's perspective it's more like a government mandated ponzi scheme. From a social perspective it's nothing but welfare for the masses. From a realist perspective it's just another failed experiment in socialism.