Saturday, June 29, 2013

Social Security Truisms ... A Bad Deal for Today's Workers is Going to be a Worse Deal for Tomorrow's Workers

Want some facts on Social Security and how today's workers are paying more and will be receiving less than current retirees? Until recently, recipients put less in than they later received, representing what amounted to a  great deal for those early beneficiaries of the program. Now with more people receiving benefits and fewer making contributions, the great deal is less than a good deal for future retirees. In the future it's going to be a very bad deal.

That's just the math. It's not exactly a Ponzi scheme or a chain letter situation, but it certainly rhymes. The first beneficiaries get the great deal, and the later ones hold the empty bucket.

But that's not America. That's not the way we pass on our wonderful heritage to future generations. At least that's not the idea. But it is definitely the way the current sick political system of short termism is taking us, even though it's going to result in economic disaster down the road if we don't change course.

Want some specifics on how it's only going to get worse for future workers compared to today's workers?

And want to reflect also on how government entitlement programs are weakening America and harming the future prospects for the young and unborn?

It's a tragedy in the making, and it needs to be addressed. But first, we have to know the facts.

10 things Social Security won't tell you has the facts in #3 of the ten part story:

3. “This used to be a much better deal.”

Today’s workers—boomers, Gens X, and Gen Y—frequently carp about Social Security, but it isn’t all sour grapes or skepticism about paying into a system with an uncertain future. Employees today pay more in Social Security taxes than previous generations did. They’re also likely to get smaller benefits relative to the taxes they paid in when it is their turn to retire.

Over the years, as the Social Security Administration has come to grips with the cost of its benefit program and the ranks of eligible beneficiaries has swollen, taxes to fund the program have gone up and up, a trend that experts say is likely to continue over the coming years.

Workers now pay 6.2% in payroll taxes (temporarily reduced to 4.2% in 2011 and 2012)—nearly double the 3.6% tax rate workers paid in 1965. Over the same time period, the maximum earnings eligible for taxation have also increased from $4,800 (equivalent to about $35,400 in 2013 dollars) to $113,700 in 2013. {NOTE: The 6.2% employee contributions are matched dollar for dollar by employers.}

For example, a single man who retired in 1980 at age 65 after earning an average wage of $44,600 (in 2012 dollars) would have paid about $98,000 in Social Security taxes, and probably received $207,000 in lifetime benefits, according to a study by the Urban Institute, a nonpartisan policy think tank in Washington, D.C.

By contrast, a single man making the same average wage today and retiring in 2030 will likely pay $404,000 in lifetime taxes but receive just $339,000 in lifetime benefits—about 16% less than he paid in. “People who were first in the system got a great rate of return,” says Alan Gustman, an economics professor at Dartmouth College. “It’s the younger generation that is going to be in the most difficult position.”

The Social Security Administration said in a statement that Social Security taxes have increased because the number of people collecting benefits is growing at a faster pace than the number of people working and paying taxes. The imbalance is also partly due to the fact that the earliest beneficiaries only paid taxes in the later stages of their careers."
Summing Up

Facts are stubborn things.
For Social Security and other entitlements programs, it's only going to get worse.

Becoming even more of a welfare society will not result in improving the general welfare of our citizens. It's especially unfair to the poor and young.

We the People have to have to summon up the guts to change course and get government elitists and bureaucrats on the sidelines as spectators instead of playing the role of head coach or quarterback.

Otherwise our generation will assure that team U.S.A. will become a loser for future generations, and nobody wants that to happen. Not even our global competitors.

American Exceptionalism must not become a thing of the past.

That's my take.

Thanks. Bob.

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