Monday, January 31, 2005

Smart People Read This Blog

Reader Ooser Nahmay on Social Security, from the comments:
While it is true that the 76 million baby-boomers will start hitting the Social Security rolls in 2008, the number receiving benefits in 2008 will be just those born in 1946 who retire at the reduced-benefit age of 62. The last of the baby-boomers who reach their full retirement age won't begin receiving benefits until 2031. Social Security certainly needs to be looked at, but depending on who is opining, Eli is either already here, he is visible down the road, or he has not even appeared over the horizon, and with all the variables involved in calculating where Eli is, nobody can know absolutely. What is certain is that Eli is not standing our proverbial doorstep -- the 1.5 trillion dollar social security trust fund surplus assures that. But what is also certain is that with Americans retiring earlier, new retirees outnumbering new workers, and birth rates dropping each year, the seemingly large surplus will not last forever. Steps do need to be taken. Payroll tax increases...reduced benefits...higher contribution limits...diversified investment options...greater incentives to work longer...allow more immigrants in...or Logan's Run.

* * *

The income limit that is subject to the Social Security is adjusted annually, but the tax percentage does not change. It is, and has been since the early 1980's, 6.2% of an employee's pay, with the employer's contribution being an identical dollar-for-dollar match, resulting in a total tax of 12.4% for every dollar of earned income, up to the limit. In 2004, the income limit was $87,900 and for 2005 it is $90,000.

The unknowns that you mentioned, as they relate to Social Security, are just that; unknown. They are statistical guesses, which obviously, cannot not be relied upon. By law, the Social Security Administration has do provide a 75-year projection of its financial condition, and in doing so, must make estimates of such things as birth rates, life expectancies, immigration levels, inflation, and disability percentages, as well as average incomes and retirement ages. In this his day and age, when lawmakers cannot even define what a "family" is, how can they possibly know what the average life expectancy in 2080 is going to be.

As for allowing private investment of Social Security dollars -- well, my fear is twofold. First, what happens to those individuals who make poor investment choices with their tax dollars? Is the government going to sit idly by and watch them retire in poverty? Secondly, could you imagine the fees the investment firms would earn if, suddenly, 150 million individual investment accounts were put in their hands? Alternatively, individuals would have to invest through a government-controlled source, i.e. a new federal agency. Another layer of government controlling individual's investments does not give me a warm and fuzzy feeling.

There you go.

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