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View Diary: Social Security Benefits will be Cut by 23% for 88 Million Americans: This Should be a Huge Issue (97 comments)

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  •  In the scenario you posit there is no way (0+ / 0-)

    manner or means that the retiree would not receive the maximum retirement income from Social Security. So, no, they wouldn't only get $2,600 per month.

    Besides, there are other ways to skin the cat, without lowering benefits or raising retirement age. But all of these demand that more revenue be brought into the trust funds. That likely means a modest increase in Social Security taxes for all, and an elevation of the cap in one form or another.

    •  any idea what the (0+ / 0-)

      maximum is? i have no idea.

      •  Currently the amount of income (4+ / 0-)

        in wages that one pays FICA tax on is $117,000. After you hit that number no more money is deducted from your paycheck. So anyone who makes more than that a year gets a bonus after they've paid their yearly amount.

        Easiest fix? Tax income earned on investments as well as wages. (And listen to the screams of the financial's about time they experienced some pain.)

        •  Moonspinner - there is a good reason investment (1+ / 0-)
          Recommended by:

          income isn't taxed for SocSec, although it is now taxed for Medicare. At its foundation SocSec is wage insurance. When we retire our investment income doesn't stop so there is no reason to "insure" it. In addition as FDR noted regarding SocSec "From capital nothing is asked and to capital nothing is given". FDR was clear that SocSec should never be an income transfer program because people would then think it was welfare and it would be come vulnerable.

          The cap plays an important role in the program, although I do favor a significant cap increase. No one receives a "bonus" when their income exceeds the current cap amount because everyone who contributes at the cap receives the same SocSec benefit and the investment return within SocSec, even at the current cap amount, is poor for high income earners.

          I wrote a diary about all of this for Social Security Defenders and you can read it here:

          "let's talk about that"

          by VClib on Wed Mar 19, 2014 at 07:07:00 PM PDT

          [ Parent ]

      •  Around 31k. (2+ / 0-)
        Recommended by:
        ItsSimpleSimon, HeyMikey

        .................expect us......................... FDR 9-23-33, "If we cannot do this one way, we will do it another way. But do it we will.

        by Roger Fox on Wed Mar 19, 2014 at 03:40:11 PM PDT

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      •  Yes, I have a very clear notion of what the max (3+ / 0-)
        Recommended by:
        Roger Fox, HugoDog, HeyMikey

        SS is. (And Roger has the answer for someone retiring this year).

        But, under your scenario someone has to have put an absurd amount of money into the system - over the next 30 or more years. (Total in $75 million).

        Now, honestly, we know the example is intended to be absurdist - but two things arise.

        First, we are talking of 30 years into the future. Inflation is going to continue - that monthly figure will rise. It compounds, so, no it isn't going to be $2,600.

        Second, just as is the case with present-day Social Security, those who make the current cap will not be getting the same returned retirement income (on a per month basis) that accrues to lower earners. And, it is designed that way - to provide better support for those below the median wage. Any shift in the cap would have to structure the returns received by those making larger inflows now, when they retire.

        Or else, it would not be perceived as fair.

        •  There are lots of answers (5+ / 0-)

          to your question depending on the various proposals.

          Some would raise the cap and leave the current 'bend points' alone. Some would raise the cap and institute new 'bend points' and so establish four typical replacement rates rather than the three we have today.

          And yes under the current Schedule average benefits in real terms are set to almost double over the 75 year window which amount of course is compounded in nominal terms by inflation.

          The current system is set up to replace about 50% of income for workers under the first bend point, 40% for those between the first and second, and 30% for those above. But the actual rates of replacement 'bend' at 75%, 40% and 15%, meaning that a simple cap increase would have upper income SS benefits going up but not at the same proportion as they would for people making around the median today. That is benefits go up but replacement rates go down.

          People who resist simple cap increases by insisting on some strict means testing of the result need to examine the actual results under any given proposal rather than this blanket "Bill Gates gets a $10 million SS check and that is not right" deal.

          Details matter. A lot.

          SocSec dot.Defender at - founder DK Social Security Defenders Group

          by Bruce Webb on Wed Mar 19, 2014 at 04:50:16 PM PDT

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