Social Security News Gets Worse

Category: Financial and taxes in retirement

January 8, 2013 — By now you have probably heard the projections that Social Security will have exhausted the trust funds it built up for future payments by 2033. Unless something is done before then, starting that year payments coming in will only be able to fund about 75% of promised benefits. The New York Times just reported a new study by researchers at Harvard and Dartmouth, “Social Security: It’s Worse Than You Think“, that shows that the government is underestimating how long Americans will live and how much Social Security will need to pay out – which makes things even worse than we have been told. The second part of this article tells about a new online service at the Social Security Administration.

Here are some of the conclusions made by Gary King, director of the Institute for Quantitative Social Science at Harvard and Samir S. Soneji, a demographer and assistant professor at the Dartmouth Institute for Health Policy and Clinical Practice:

– Social Security uses “antiquated and unreliable methods” to forecast how long people will live
– King and Soneji project that a 50 year old male will live 13 months longer than the Social Security Administration’s forecast.
– Too many beneficiaries and not enough workers: In 1990 there were 3 workers paying taxes for each social security beneficiary. But by 2031 there will only be 2.4 paying taxes
– The SSA doesn’t take into account current health trends that affect mortality. For example, smoking has declined tremendously, while the incidence of obesity has increased. (One increases projected lifetimes, while the other shortens it)

The authors point out that something needs to be done if future recipients are going to be able to get promised benefits or something close to them. While our politicians are afraid to tackle this issue for fear of invoking the wrath of the AARP and current recipients, there are some solutions:
– Raise payroll taxes
– Reduce benefits
– Raise the annual limit on income subject to the payroll tax (currently capped at $113,700)


Social Security Announces MySocialSecurity Account
The SSA is helping social security recipients avoid long telephone or in-person waits with a new online service, MySocialSecurity. Once registered, recipients can access these services online:

Get your benefit verification letter.
Check your benefit and payment information and your earnings record;
Change your address and phone number; and
Start or change direct deposit of your benefit payment.

You need to register online for the service. To do that you have to provide some personal information about yourself and give answers to some questions that only you are likely to know. Next, you create a username and password that you will use to access your online account. You can sign up yourself at http://www.socialsecurity.gov/myaccount/

Note: Be sure to take our new “What is Your Social Security IQ Quiz“. It will give you a score and detailed explanations to make you a Social Security expert (our best advice, read this article first!).


Comments
Anyone have any other suggestions for fixing Social Security? If so we would love to hear them.

Posted by Admin on January 8th, 2013

34 Comments »

  1. Raise the limit already,who came up with the 113,700 dollar max out,? and why.

    by Cory — January 9, 2013

  2. When we build the Rock Till Ya Drop, we will build so future retirees coming after us will have a more affordable place to live. Lots of solar and geo-thermal. Yes they’re expensive but I fear this will be the last generation that has some money put away for retirement. And since we can’t take it with us why not step up to build affordable, sustainable retirement complexes that we leave behind for those whose retirement will be more bleak

    by Jerry — January 9, 2013

  3. I agree, raise the limit. There shouldn’t be a limit, you earn more money, you pay more taxes. No wonder the rich get richer.

    by Marilyn — January 9, 2013

  4. Another possible solution. Make all wage earners pay the SS taxes. I don’t exactly know the specifics, but many wage earners are not required to pay into the SS system. All US citizen wage earners should be required to pay into this system.

    by brfgolfnut2 — January 9, 2013

  5. Read the article:
    “Too many beneficiaries and not enough workers: In 1990 there were 3 workers paying taxes for each social security beneficiary. But by 2031 there will only be 2.4 paying taxes”.

    Raising the limit is not the only thing that will help this problemUnfortunately not enough people listened to Paul Ryan and what he was trying to explain about SS, Medicare. It just became a emotional political battle instead of a rational discussion on what needs to be done to prevent this

    the “rick” can not pull us out of this, anymore than they can pull us out of the deficient.

    by susan — January 9, 2013

  6. There are many things that can be done, we just need to be creative. SS to me is like insurance, you need to be in it to claim a benefit and the more you put in the more you get as a benefit. So raising the limits can and should be done to some extent. We can also invest the money in US treasuries, instead of it being a piggy bank for Congress to spend and leave IOUs. This would be a safe investment. If one dollar in ten is misused due to waste, fraud, overpayment etc., why not outsource to companies to get a finders fee for uncovering the abuse. The government certainly isn’t going to do it. Building affordable, sustainable retirement complexes costs money and with over 16 trillion in debt, we don’t have the money to get started. If the younger generation wants the traditional SS or choose to opt-out a portion and payroll deduct the money and put it in secure money markets or treasuries, they should have the choice. Part of the money should go into the fund in case they become disabled. Personally, I would choose to do the latter, a least the government couldn’t spend it before I had a chance to use it myself. If more money is needed, then we can talk about increasing age, rates, payouts etc.

    by Joyce — January 9, 2013

  7. It may have to come down to means testing. If you have no other income or up to $25,000, you get 100%. If you have income over $25,000, SS payments may have to be broken down into percentages. And if you are of millions, you may only get what you have put into SS, or 10% until total contributed is reached. Again, if you pay taxes, it is easy to see how much you would receive. Additionally, many of the people getting SS and never contributed should be removed from payments.

    by Edward — January 9, 2013

  8. I have paid the required quarters in to SS. However, because I will retire from teaching in Louisiana State, I am not entitled to the full amount due to the “Windfall Elimination Prevision” which prohibits those with a state retirement benefit from receiving social security. Perhaps those in the private sector recieving a pension should be held to the same limitations.
    At the minimum, one should be able to receive at least what they have contributed. Also, those who are not contributing should not be withdrawing.

    by Wendy — January 9, 2013

  9. The handdrawngs on the walls, and we need a pinchant!

    by lunare — January 11, 2013

  10. Wendy, I am in the same situation as a retiring teacher from Maine…a pittance of a pension from the state cancels out my participation in SS. I too have paid into SS from many years through summer jobs in the private sector – way more quarters than required. The fact that only 14 states consider their pension a “windfall” is an appalling and glaring unfair practice by government leaders! Had I driven 30 minutes and crossed the border into NH to teach for 30 years, I could collect both a state pension and ful. SS benefits! Keep talking, writing, and educating both politicians and the public about this unfair practice. Those of us in these 14 states should receive equal and fair retirement benefits!

    by Sandy — January 12, 2013

  11. Annapolis, Md.

    Yes, your wife would need to forgo contributing to the HSA in order to begin collecting Social Security.

    “By law, Social Security benefits and Medicare Part A are linked together,” explains Kia Green Anderson, a spokeswoman for the Social Security Administration. “If a person is entitled to Social Security benefits and meets the Medicare requirements, they are entitled to Medicare Part A,” which covers hospital care and is usually free. It isn’t possible to take Social Security and say no to Medicare.

    But individuals who are covered by Medicare can’t contribute to an HSA, because those accounts are available only to people who have high-deductible health plans. (People with HSAs can use pretax dollars to pay unreimbursed medical expenses and can carry over unused sums to future years.)

    This month, the Supreme Court declined to hear a case that sought to sever that link between Social Security and Medicare, so that a person could receive Social Security but opt out of Medicare

    In Today’s Wall Street Journal.

    by John Taylor — January 15, 2013

  12. Restore the (expected)span of benefits. Since 1935, when SS was started, the average life span of a person reaching 65 has increased 2.6 years for men (more for women). So raising the age for SS benefits would restore the original expectations.

    by Old Nassau — January 17, 2013

  13. Just because life expectancy has increased doesn’t necessarily mean that “work life” expectancy has increased. Many folks may be living a few years longer than their parents or grandparents did but are still not physically able to work for those extra years. We live longer but are we healthier? Probably not. Are the life expectancy numbers inflated by the advances of modern medicine to be able to keep people alive (but perhaps not really functioning or certainly not healthy enough to work) where in the past they may have just succumbed sooner because medicine did not have a way to keep them alive? I cannot imagine working until my full SS retirement age of 67.5 years. I’m retiring early and when my money runs out I’ll consider doing a “Thelma and Louise”. I’d rather have a few years of retirement while I am still in good enough shape to enjoy them than to work until I physically can’t just so I can get the monthly pittance that SS will give me back out of the $$ I paid in a >50 year work history.

    by PJ Heart — January 18, 2013

  14. I will trade you my private sector “defined contribution” retirement plan with NO health insurance in retirement PLUS my SS checks for your state worker “defined benefit” retirement plan with full medical coverage any day.

    by PJ Heart — January 18, 2013

  15. PJ Heart,
    Kudos for your comment on retireing earlier then the 67 years. Folks that are in construction, such as plumbers, roofers, building construction, etc., cannot climb around as when they were younger in their youth. A person that sits behind a desk & strokes a computer keyboard can work until that age because there is no physical work involved. So the facts that you stated are right on but our ‘Do Nothing Congressmen’ do no seem to think so. They are now looking at increasing that 67 age to 70. Not so good for the future generation.

    by Botch57 — January 19, 2013

  16. PJ Heart- What state worker “defined benefit” pension plan with full medical were you referring to? My wife is a state worker and has health care when she retires but she’ll have to buy it.

    by Lefty Omalley — January 19, 2013

  17. ” A person that sits behind a desk & strokes a computer keyboard can work until that age because there is no physical work involved.”

    That is a truism that has recently been brought into question: http://www.mayoclinic.com/health/sitting/AN02082

    “Any extended sitting — such as behind a desk at work or behind the wheel — can be harmful. What’s more, spending a few hours a week at the gym or otherwise engaged in moderate or vigorous activity doesn’t seem to significantly offset the risk. ”

    They say sitting behind a desk all day is as bad for your health as smoking. We’ve buried too many of DH’s fellow desk jockeys. We are getting him out of the rat race as soon as possible to try to avoid the same fate.

    by Julie — January 20, 2013

  18. The main thing I take away from all of this…
    Save…Save…Save
    Do not rely on SS for your every need. It will not be there to give you a lavish retirement. It was never intended to do that and it never will. You only have yourself to provide for the type of retirement you want to have. If your retirement does not live up to your expectations you only have yourself to blame. What ever SS money you get should be considered a bonus.

    by Larry — January 21, 2013

  19. I agree with Larry, but I wouldn’t call SS a “bonus” (because we have paid into the system) but rather a “supplement” to other retirement savings. Retirees were not supposed to be entirely dependent on SS for their total retirement income. Too many people depend on SS to live and then complain when it is not enough. Disciplined saving is not easy as we all know, but it is vital if you want to retire comfortably. Just sayin’

    by Nancy — January 21, 2013

  20. Unfortunately, way too many people depend totally on social security for their retirement. There is plenty of poverty within the ranks of the elderly.

    by Bob P — January 21, 2013

  21. My father was handicapped and never earned enough to save anything. He was heavily dependent upon S/S. And yes it was no where near enough to live on considering he was also a “notch baby”. He got screwed on S/S. If it were not for subsidized housing he would have been living under a bridge. (or with me if I had the room).

    by Mark P — January 22, 2013

  22. Mark, my comment was not directed to those who have special needs. Thank goodness there are government programs to help those with disabilities. Were you referring to disability payments from Social Security? I’m sure navigating through that process is probably not easy. My comment was directed at those people who “live for today” and expect the government to take care of them when they retire. I apologize if my comment was misconstrued.

    by Nancy — January 22, 2013

  23. The WEP, Winfall Elimination Provision, provides fairness to social security payment calculations, since the affected municipal employees DID NOT PAY SOCIAL SECURITY TAXES on their municipal salaries, only on side jobs. For a complete explanation, go to http://www.ssa.gov/pubs/10045.pdf.

    by Gary C — January 22, 2013

  24. Many of those people who “live for today” may have worked hard their entire lives, and then been victims of corporate layoffs that have been going on since the 90s. Erratic work history since that time, doing the best they can to survive by living one day at a time. Caught again in the last financial collapse when companies stopped hiring for several years. Living on savings that have dwindled, just doing the best they can to survive and keep their heads above water. I agree that SS was not meant to be the sole means of support in retirement, but, sadly some people have not had much of a choice.
    Thank goodness SS is there for most of us, even for those who state it is a “socialist” program.

    by Fionna — January 23, 2013

  25. I know you meant no harm Nancy. I was just sayin. My father got screwed at every turn for his handicap. When I was younger Most would not hire him due to his handicap, citing their insurance company would not cover him if he got hurt (back when they still could discriminate based on disability) Then if that isn’t bad enough there are no additional exemptions for the deaf. THe blind get an additional exemption.No Nancy my father did not qualify for any disablity payments, being deaf does not qualify. He finally got a job washing dishes at a hospital when I was in High School which paid a barely livable wage.

    by Mark P — January 23, 2013

  26. Gary – the problem with WEP is that it is not the same for all states. My teaching colleagues in a neighboring state, only 20 miles from me will be collecting both a state retirement pension (very small amount) as well as SS if they meet the required quarters. I worked for many years out of the education field, and paid into SS as required. I did so willingly, thinking that a small SS payment would be helpful in retirement. I will not be able to draw a SS pension however because my state is one of only 14 states that disallows state pensions and SS benefits. My state pension is very small, unlike many other states who reap lavish retirements on their publish employees. To add insult to injury, my husband has worked in the private sector and has paid dutifully into SS since he was 15 years old. When he passes, I will also be denied any survivor benefits…I find this all appalling! I tell new younger teachers to cross the state line and teach “next door” to avoid this slap in the face!

    by Sandy — January 24, 2013

  27. Sandy,
    Could you reveal the state that allows retired teachers to collect on SS and their teacher pension? I, too, have worked in the private sector since age 15, and began teaching at age 48. California makes us choose between collecting SS or our pension. We’re thinking of retiring out of CA and I wonder if a state that allows both collections would be worth pursuing.

    by Maggie Schultz — January 25, 2013

  28. why does it feel like only gvt workers can retire. my friend is retiring after 25 years with a 95,000 pension and Cadillac health plan. Me. I cant afford to ride in a Cadillac. There is a whole lot of hurt coming. Just read the news on retirement.I found it on the retirement site.
    http://www.streetauthority.com/income-investing/15-reasons-us-retirement-crisis-even-worse-you-think-460074

    by salty — January 25, 2013

  29. Salty – I’m 63 and retired for good in Dec of last year. I’m also not a government worker though my wife is and she is still working. Your friend must have made a great deal of money each year to recieve 95,000 since my wife will have worked for 40 yrs and will recieve less then 30% of that amount. I worked for a company in the private sector that was union and had a company sponsored pension plan retiring from there at age 55. I also particpated in the 401k plan with company match. To help my plan work I spent the last 8 yrs doing a variety of jobs, none paying that well but it helped as I didn’t need to dip into my retirement savings. I started planing for our retirement when I was in my late 30’s so now that I’m there my assumptions have for the most part panned out. Health care is higher then I projected but manageable since we will be paying for it ourselves. Not all government workers get free or cadillac plans and that statement flies in the face of the myth bantered about by those who would like to do away with pension plans starting with government workers. I have found, much to my dismay that many Americans seem to be ok with the elimination of pension plans and other retirement plans. Then there’s another group that will vilify others that recieve retirement benefits because they don’t. It’s the “why should they have it when I don’t” mentality. Since you still have time before you can receive S.S. you may want to find a job that can help reduce your need to use retirement funds. It worked for me maybe it will work for you.

    by Lefty Omalley — January 25, 2013

  30. From the link Salty provided: “Dwindling saving patterns seem to be sweeping away the image of the relaxing “golden years” and replacing them with a harsh reality.”

    Yes, you have to work hard to plan for retirement. You have to plan and save, and it should be no surprise that retirement is not possible if you have not done so. The article you linked basically said that many have not prepared, and will now pay the price of continuing to work. We are only in the position we are in because we have not raised our standard of living in over 20 years, instead saving and investing the pay increases towards our long term goals. Retirement, particularly before Soc Sec is available, is an exclusive club and the price you pay for membership is planning.

    by Julie — January 26, 2013

  31. I feel I have to point out, in defense of people who planned, the stock market with its recent spikes and crashes has been unreliable for both savings and retirement accounts and the job market with companies folding and downsizing has added another unfortunate dimension. Many older Americans have planned as best they could and still find themselves with diminished savings and/or out of work or underemployed through no fault of their own. Even the value of our homes has decreased in many locations and we were “downsized” without the intension of doing so!

    by cherie — January 26, 2013

  32. Maggie – check this link for more info on the SS Gov. Offset and the SS WEP law. I teach in Maine and have contributed to the state public employees retirement fund for 33 years. I DO NOT expect any of that time to be covered by SS as I did not pay into it then. However, the unfair nature of this law also denies me the many years of work out of state and during school breaks in Maine in which I DID pay into SS, as well as survivor benefits should my husband pass away.not the case next door in NH. Full retirement from state and SS, including all non-teaching job contributions. I will be shopping at Goodwill and Food pantries at the point when I am alone and living on my sole state pension. After 33 years of teaching what a sad way to treat teachers – no wonder young people do not want to become teachers!
    http://www.nea.org/home/16819.htm

    by Sandy — January 26, 2013

  33. check out this petition to eliminate the cap on social security earnings as a solution to the social security solvency concerns

    https://petitions.whitehouse.gov/petition/keep-social-security-solvent-removing-cap-withholdings/Tb5PBNvG

    by Marie Taylor — January 26, 2013

  34. 3 1/2 years ago this retirement article was written in Top Retirements and since then still nothing has been fixed with Social Security or Medicare. Read this article to see what a mess we all are in and the future recipients too. Why can’t Congress do their job and come up with solutions? Are they going to wait till 12 years from now, minutes before they go on holiday vacation to tweak things?

    http://www.newstimes.com/news/politics/article/Trustees-Meager-hike-in-Social-Security-benefits-8318303.php

    by Louise — June 23, 2016

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