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  •  Bozmo's link above is based on FRA = 67 (1+ / 0-)
    Recommended by:
    Bozmo2

    so I've stated this in those terms, which specify a 30% discount at age 62.

    I'm not sure what the discount is from 66 to 62, but it's roughly a quarter, IIRC (or less than I've described).

    I know what the principle behind it is and it makes actuarial sense, I think. But, as I've stated elsewhere, delaying retirement until 70 and then living to 95 - or having your spouse live to 95 - gives you a big leg-up on your cohort, as does having the cap removed and insuring several hundred thousand dollars a year in income and then living a long time.

    People who think the poor are screwed in SS because they receive so many fewer months of benefits should be leery of increasing the cap and potentially helping the well-off still more.

    Too late for the simple life, too early for android love slaves - Savio

    by Clem Yeobright on Sun Apr 28, 2013 at 04:55:12 PM PDT

    [ Parent ]

    •  I was with you until your last paragraph ... (2+ / 0-)
      Recommended by:
      AoT, Clem Yeobright

      Increasing the cap is a bad thing?

      “I'd rather have a bottle in front of me than a frontal lobotomy.” ― Dorothy Parker

      by Bozmo2 on Sun Apr 28, 2013 at 06:06:58 PM PDT

      [ Parent ]

      •  Increased contributions means increased benefits (1+ / 0-)
        Recommended by:
        Bozmo2

        At the high end, it would take a long time to get back what you put in - except the people who will be eligible for the high benefits are the people who will be collecting the longest.

        SS actuaries say that as a group the high-earners/high-collectors will not recoup their contributions and therefore raising the cap can be expected to be a net plus to SS. But individually, some will make out like bandits just by living a long time. If you're collecting $15k a month (in 2013 dollars) and you've already gotten back everything you put in, it's going to annoy a lot of poorer people living on their $900 a month.

        And that's based on predictions of life expectancy that may not be accurate 30 years from now. What if it becomes routine for someone with $100k a year to spend on medical care to live to be 100? And what if s.he is collecting $200k a year from SS covering those costs?

        See a problem there? It sort of changes everything, doesn't it?

        Too late for the simple life, too early for android love slaves - Savio

        by Clem Yeobright on Sun Apr 28, 2013 at 06:32:58 PM PDT

        [ Parent ]

        •  I do see your point (1+ / 0-)
          Recommended by:
          Clem Yeobright

          “I'd rather have a bottle in front of me than a frontal lobotomy.” ― Dorothy Parker

          by Bozmo2 on Sun Apr 28, 2013 at 06:39:32 PM PDT

          [ Parent ]

          •  If your SS is $1500 and your b-in-l's is $2500 (1+ / 0-)
            Recommended by:
            Bozmo2

            it's something you can deal with, especially if your wife is drawing $750 'on your account' and his wife has passed on, for example.

            But if you are drawing $1500 a month and your brother-in-law and his wife together are getting $15,000 - which would happen if he had averaged $800k a year for 35 years (all in 2013 dollars) - it may be harder to be philosophical.

            And if your kid is self-employed and making $50k a year and scrambling to pay $6,200 in Social Security tax - that is, paying in a whole year 12 days of his uncle's benefit - you could even become doubtful about the legitimacy of SS, couldn't you?

            SS will be fine if we raise the minimum wage and get the economy growing again.

            Trying to 'punish' the wealthy using Social Security may turn into a fool's errand, and I don't think it's wise. The last laugh may not be ours.

            Too late for the simple life, too early for android love slaves - Savio

            by Clem Yeobright on Sun Apr 28, 2013 at 06:57:09 PM PDT

            [ Parent ]

            •  You make many valid points and I agree (1+ / 0-)
              Recommended by:
              Clem Yeobright

              the solution will be in employment.

              “I'd rather have a bottle in front of me than a frontal lobotomy.” ― Dorothy Parker

              by Bozmo2 on Sun Apr 28, 2013 at 07:03:45 PM PDT

              [ Parent ]

              •  Right now, there's a lot of income (1+ / 0-)
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                Bozmo2

                not subject to FICA: the Earned Income Tax Credit.

                For some reason, we've decided that it's fine in our society to pay people less than they need to live on in their employment and then have the government make it up to them with a negative income tax. But that money doesn't get counted for retirement: no contributions, no benefits. The SS income replacement formula then errs in assuming it is genuinely based on total income.

                If we raise the minimum wage to a living wage, the income that people actually end up with will be the basis for their contributions to SS and also their benefits from SS. And we can get rid of the EITC (or cut it back to deal with extraordinary cases only).

                Too late for the simple life, too early for android love slaves - Savio

                by Clem Yeobright on Sun Apr 28, 2013 at 07:13:09 PM PDT

                [ Parent ]

        •  I guess I was thinking about raising the ceiling (2+ / 0-)
          Recommended by:
          Clem Yeobright, Cassandra77

          on the portion of income subject to SS tax. Doesn't SS have a maximum benefit amount ~$2500?

          “I'd rather have a bottle in front of me than a frontal lobotomy.” ― Dorothy Parker

          by Bozmo2 on Sun Apr 28, 2013 at 06:49:27 PM PDT

          [ Parent ]

          •  SS pays income replacement on a formula (2+ / 0-)
            Recommended by:
            Bozmo2, WillR

            and it is committed to replacing 15% of income at the high end.

            Since there is a maximum amount of income you are allowed to insure - the 'cap' - there is a maximum benefit by the formula, which actually is about $3500 for an individual who has earned the cap for 35 years and delays retirement until 70 - plus, of course, half again for a spouse and perhaps the same for an ex-spouse (or two).

            It wouldn't be much of an insurance program if increased premiums didn't generate increased benefits, would it? It would just be an income tax by another name.

            Too late for the simple life, too early for android love slaves - Savio

            by Clem Yeobright on Sun Apr 28, 2013 at 07:04:39 PM PDT

            [ Parent ]

            •  We can add another tier above the old cap (2+ / 0-)
              Recommended by:
              Clem Yeobright, Bozmo2

              and replace at something more like 8%.

              This will still be great for those folks who have just a few years of very high income, like many athletes or musicians who get a break, because they'll pay more in in the good years doing a lot to raise their lifetime average.

              But it will be very little in the way of return for those with multi-million dollar yearly incomes.

              "Paid Activist" is an oxymoron.

              by JesseCW on Sun Apr 28, 2013 at 07:09:57 PM PDT

              [ Parent ]

              •  Sounds like Simpson-Bowles. (0+ / 0-)

                Someone will have to go testify to Congress that we've managed to re-work the SS formula in such a way we can guarantee that a certain class of people will get screwed over - even though the concept and the principle of SS is that nobody is guaranteed to be screwed over, just more or less likely to get back his/her contributions in benefits.

                Why would we want to do that?

                If it's an income tax, then why not add it to the income tax? Why distort Social Security?

                It's like selling lottery scratcher tickets with a maximum payout of 99 cents and then compelling people to buy them.

                Too late for the simple life, too early for android love slaves - Savio

                by Clem Yeobright on Sun Apr 28, 2013 at 07:49:08 PM PDT

                [ Parent ]

                •  How would anyone get "screwed over"? (3+ / 0-)
                  Recommended by:
                  Cassandra77, Bozmo2, Clem Yeobright

                  We've already accepted the principle of a smaller percentage return for the very well off.

                  That's been integral to the program since its start.  It's nothing new.

                  As the life expectancy for the poor continues to widen and life expectancy for the very wealthy continues to climb, we're going to have to address the gap or wind up with nothing but lemon socialism.

                  "Paid Activist" is an oxymoron.

                  by JesseCW on Sun Apr 28, 2013 at 08:05:38 PM PDT

                  [ Parent ]

                  •  Live long enough and you get 'your money' back (0+ / 0-)

                    Now you want to fiddle with the formulae to make it physically and mathematically impossible for a certain subset to recoup. You don't want to go to Congress and say

                    Very few upper income people will be able to recoup their contributions; hell, a couple would have to delay retirement until 70 and then both live to be 86 before they started pulling down $3m in benefits per year above and beyond anything justified by their contributions while working and how often is that going to happen?
                    So you make sure you can tell Congress people above the current cap will have to live to be 127 fucking years old in order to recoup (hehehe) - and THAT is supposed to bolster support for SS in Congress OR in the population in general? I'm going to guess even the people getting the $800/month SS benefits would think that unfair and demeaning to themselves and the nature of their income replacement benefits.

                    Too late for the simple life, too early for android love slaves - Savio

                    by Clem Yeobright on Mon Apr 29, 2013 at 01:15:57 AM PDT

                    [ Parent ]

                    •  "Live long enough and..." Dude. A working class (1+ / 0-)
                      Recommended by:
                      Clem Yeobright

                      male with no diploma has a 50/50 chance of making full retirement age.

                      Period.

                      Getting "your money back" is a bad joke for the people who make this country function already, and it's getting worse, not better.

                      Wash. Judge Tells Cops To Return Man’s Marijuana Or Be Found In Contempt

                      by JesseCW on Mon Apr 29, 2013 at 10:15:08 AM PDT

                      [ Parent ]

                      •  You're right. SS should be SUSPENDED (0+ / 0-)

                        until nobody dies before 66. And Boeing gets those damned batteries fixed ... And gay athletes get the respect they deserve too ... Dammit!

                        Too late for the simple life, too early for android love slaves - Savio

                        by Clem Yeobright on Mon Apr 29, 2013 at 10:28:45 AM PDT

                        [ Parent ]

            •  I want to thank you for taking the time and (1+ / 0-)
              Recommended by:
              Clem Yeobright

              patience to have this discussion with me. It has been very informative and I see it from an entirely different perspective although I think we agree more than disagree on a few things. :)

              “I'd rather have a bottle in front of me than a frontal lobotomy.” ― Dorothy Parker

              by Bozmo2 on Sun Apr 28, 2013 at 07:14:51 PM PDT

              [ Parent ]

        •  But the entire system HAS to be... (1+ / 0-)
          Recommended by:
          Clem Yeobright

          But the Social Security HAS to be...
          ...based on actuarial premises if it's to be self sustaining and achieve its goals of insuring people for lifetime retirement. As a result, there will be outliers who get more/less than others.

          The table below, if my math is correct, shows about what a person at various AIME levels would receive under current law if it had been effect (indexed for inflation of course) forever and if there had never been a FICA cap.

          This table really only applies to people who started working in 1990 or later. Note that almost all current retirees, as well as those currently under 43 years of age, who worked throughout their life had at least some of their wages taxed below the current 12.4% FICA rate yet don't receive a benefits reduction to reflect this - so they are generally receive better "return on investment" on their FICA taxes than those who retire twenty years from now.

          The first three rows represent the current bend points and cap.

          Annual
          Average
          Indexed
          Income
          Annual
          Benefits
          % Benefit vs.
          FICA Contribution
          (Relative)
          $9,492 $8,543 90%
          $57,216 $23,814 42%
          $113,700 $32,287 28%
          $10,000,000 $1,515,232 15%
          Raising the cap clearly can't "hurt" lower income people. Anyone who makes a middle class income, on the average, over the top 35 years of their career likely subsidize those who made less. Clearly those who reliably hit the cap in their top 35 earning years (for example, a typical engineer in a technology center) already subsidize others.

          Roughly speaking (mostly because I'm ignoring people who work many years and die before 62 and not trying to account for the increasing retirement age), unless workers who make an inflation adjusted career average income of over the current cap have an average life expectancy much higher than that of a low income worker (say 77 years vs about 125 years!), the increased benefits to the well-off will be exceeded by the increased contribution of the well-off.

          There is obviously the risk that opening this discussion up in the political arena will make all those whose career average inflation adjusted income (actually the top 35 years worth) exceeds $9,500 (i.e., about 1/2 of minimum wage for regular full time work) aware of the progressive (politically - economically the policy is regressive) nature of FICA taxation and reduce support for the entire system, so it may not be wise to push to raise the cap and expose the little understood phenomena that probably less than one out of 200 voters understand.

          •  A couple of points (1+ / 0-)
            Recommended by:
            WillR

            1. Couples. You leave out the spousal benefits. Change the number on the bottom row in the middle to 2,272,848 and you have a different situation: the break-even point comes at about age 85, and if the high-earner delays retirement to age 70 and takes 24% more per year, it comes a few months sooner still. After that the $2.2m or $2.7m per annum is a complete drain on SS. Then, after one member of the couple passes on to just reward, the survivor continues to receive the somewhat unjust reward of $1.5m or $1.9m for perhaps another 10 or even 15 years. True, collectively SS still probably comes out ahead, but individually some people will do VERY well. And fiddle with life expectancy at retirement just a bit arbitrated by income level and you've put SS in the soup, haven't you? And for what? To punish high earners, right? Punish ME similarly, PLEASE!

            2. Progressivity. How can you call it 'economically regressive' that the lowest-earners recoup 100% of the contributions made in their name in 5 years - or about 3 for a couple - and those in the middle in under 10 while those at the top may require more than 25? And I say 'made in their name' to treat with the 'true' FICA rate of 12.4%, and not the 6.2% that many people would use to evaluate their benefit/cost situation.

            3. The danger to SS is not, I think, that people will be awakened to a realization that SS is a bad deal for them - because it's not - but that 'we' will re-engineer it to the point that we'll be feeling okay with our $1500 a month (plus the wife's $750) in benefits until we hear a friend or neighbor say

            My brother-in-law is retiring next month and he and his wife will be getting $15,000 a month in Social Security. They're going to take a 6-month world cruise with some of it and bank the rest.
            That doesn't happen today and it doesn't have to happen ever, as long as we forget about 'punishing' the well-off.

            Too late for the simple life, too early for android love slaves - Savio

            by Clem Yeobright on Mon Apr 29, 2013 at 12:53:13 AM PDT

            [ Parent ]

        •  2300 is the maximum monthly amount right now (2+ / 0-)
          Recommended by:
          Bozmo2, Clem Yeobright

          So if they pay in on more earnings and keep it at that amount, things would be better.

          I belong to the Honey Badger Wing of the Democratic Party. We're mad as hell and we're not going to take it anymore. Have you seen our videos?

          by Cassandra77 on Mon Apr 29, 2013 at 06:30:47 AM PDT

          [ Parent ]

          •  But that's a function of the formula, NOT a cap (0+ / 0-)

            For the record:

            SS says the maximum product of the formula for a 66-year-old retiring in 2012 was $2513

            http://ssa-custhelp.ssa.gov/...

            but if that same person were 70 s.he would receive a 32% bump and thus receive over $3300 per month ...

            What would be the sense of a statutory cap anyway?

            Too late for the simple life, too early for android love slaves - Savio

            by Clem Yeobright on Mon Apr 29, 2013 at 07:05:38 AM PDT

            [ Parent ]

            •  I am curious about your thoughts on means testing (1+ / 0-)
              Recommended by:
              Clem Yeobright

              in addition to increasing the ceiling or even removal of the ceiling?

              “I'd rather have a bottle in front of me than a frontal lobotomy.” ― Dorothy Parker

              by Bozmo2 on Mon Apr 29, 2013 at 08:23:55 AM PDT

              [ Parent ]

              •  SS is a little program with a simple purpose (0+ / 0-)

                People who can't - or shouldn't be asked to - work any more need a source of income replacement so they don't have to depend on the charity of relatives or greatly reduce their standard of living. It should be that one creates enough wealth during one's working years to devote a part of an excess beyond immediate needs to manage that. It's part of human dignity, and if it doesn't happen to be true for a specific individual there is enough 'play' in the economy that it can be made true.

                SS is not intended to replace ALL income or even the 90-28-15 shares of income to all levels; it's intended for the basics. You contribute to insure up to the maximum income you are allowed to insure (the cap), and you draw benefits based on your contributions. Spousal (and ex-spousal) benefits are an utter anomaly in this system; try negotiating an annuity that will pay you 50% more than the next guy because your spouse happens to be alive - and then another 50% because your ex-spouse is too.  The human dignity principle trumps all the rest and it's figured into the actuarial calculations.

                Means testing and benefit ceilings are antithetical to the insurance concept of SS. As is insurance of investment income which some here vigorously advocate (unearned income, of course, continues past retirement and it would be silly for SS to pay a supplement replacing it when it never went away, wouldn't it?)

                My recommendation: Leave Social Security alone. I've not seen a 'fix' proposed that doesn't threaten it at its core.

                 

                Too late for the simple life, too early for android love slaves - Savio

                by Clem Yeobright on Mon Apr 29, 2013 at 09:03:46 AM PDT

                [ Parent ]

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