Otto von Bismarck and Social Security

Note the original concept was to provide benefits for ". . .those who are disabled from work by age and invalidity"

The original retirement age to qualify for benefits was 70.....

At the time average life expectancy at birth was about 45....

Boomsday

I agree with every word Dave said there. Wise man he must be, hope I could have put together as intelligent response to the the question OP presented.

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Mikko

Social Security will survive if young workers and employers contribute through payroll deductions.

No thanks. I don't need to be forced into saving money in an account run by someone over whom I have no control. Forget it. Remember Enron? Same thing- No control= all gone at the whim of unscrupulous people.

I believe that in this day and age, if someone wants to retire, they had better saved enough to do it. Relying on a government Ponzi scheme as a means to support my final years is not what I'd call a good idea.

A quick note on this... SS is an insurance scheme - always has been, always will be. Premiums are collected on those who are currently working in order to pay the benefits of those that have earned their way in to the scheme (not counting the original receipients when SS was created). When SS was created the average length of benefits was calculated to something a little over 3 years net. Obviously this has changed quite a bit.

But this is not the first time that SS was a bit upside down. Because of the political constituencies involved, there really is no chance that benefits will be reduced even though we have a glut of payees and a dearth of payors fast approaching (can you say baby-boomers?). Unfortuantely young workers (as a whole) don't vote and are becomeing less % numerous. Also unfortunately, retirees vote in very large %, so any kind of measured, balanced approach to securing the scheme will not fly.

The bottom line is that SS will be "saved" as it always has been: higher payrol taxes. Period. Whether this means that the ceiling will get extended (likely), or the tax rate will rise probably depends on which party controls congress at the time of the change.

The argument about "fairness" has little to do with SS policy, IMHO. This third-rail of politics means that the smallest and least powerful constituency is likely to get screwed, i.e. young, rich workers. Nothing unusual here.

JT

If I were a fireman with a defined benefit pension plan, I would probably agree with you. Unfortunately, there aren't too many of those left outside of the public sector.

Mike, I can't find it at the moment, but I read a proposal to extend the eligibility date for retirees by one month for each remaining year of work, e.g. a 55 y/o born on 1/1, who today qualifies for early at 1/1/2017, would not become eligible until 8/1/2017, adding 1 month for each of the 7 years. I read that doing something this small would have a very significant effect given the number of babyboomers in queue.

Having been involved in the financial services industry for almost 25 years now I should know better. But, as I approach the age of 54, I am now hoping that I see at least some return on the contributions I have been making into SS since the age of sixteen.

To address your question directly, you will not find any EXACT figures because all projections must contain too many variables/assumptions. Incremental changes to starting dates, tax rates, benefit amounts, etc. can make a huge difference when extrapolated over many years. That said, I suggest you go to www.heritage.org and read some of their recent writings.

Also, there have been some good threads posted here recently about retirement income, using bonds versus annuities, retirement planning software, etc. As I have posted elsewhere, creating sustainable streams of income will be the holy grail for investment advisors, financial planners, etc. Be careful if you plan to use a professional though. There are many who sound intelligent and may appear competent who are simply sales people at heart.

Thanks for that info; this is actually what I was looking for. I've heard these projections before--that some incremental changes made now could sustain the viability of the program through the magic of compounding returns. Nonetheless, as Tom suggests, there are a significant number of variables that could effect the outcome. It's kind of disturbing that no one in a position to do so actually seems willing to tackle this with even an incremental approach.

As I recall, when SS was created there were about 16 wage earners supporting each retired beneficiary. That number is now down below four and will drop to about two in the years to come. Either we need to start making a lot more babies or change our expectations.

I've already started my son, who's 23, along the path of self-sufficiency in retirement; I've told him not to expect that he'll have a pension or Social Security to rely on in 40 years.