Abusing the system? :)

[tskeeter]

there were no benefits for spouses or dependents in the original SS bill. It was passed about five years later. The disability benefits weren't added until 20 years later or so. They're part of the reason that SS taxes, which used to be only 1% had to climb to where they are now.

Dark, I think the last sentence of your comment explains why even wealthy little old ladies should be able to draw SS benefits on their spouse's earnings record. The working spouse had SS withheld from their pay check at a rate that they were told would provide benefits to their surviving spouse. Denying rich little old ladies SS benefits that their spouse "paid" for is the financial equivalent of saying "I know you were supposed to received your spouse's pension after he died. But, you've saved a lot of money and you don't really need the pension to survive, so we're not going to pay you your spouse's pension.". I believe that to refuse to give someone something their family has "paid for" simply because they are wealthy is fundamentally wrong.

In respect to your argument that SS benefits are not means tested, I disagree from a couple of perspectives. The percentage of SS withholding returned to people of means (high income earners) is lower that the percentage of SS withholding returned to poor people. I'd call this a means test. In addition, the SS benefits of people of means (high income earners) are subject to income taxes, while the SS benefits of people earning less than $25K are not subject to income tax. Sounds to me like the after tax SS benefit received by a person of means is less than the same amount of SS benefit received by a poor person. On top of that, the portion of a SS benefit that is subject to income tax increases based on the income (means) of the recipient. So, in the spirit of it ain't what you get, it's what you keep, wealthy, high income, people of means receive proportionately less of what they contribute to SS than poor people. I'd call this reduction of benefits based on the means of the recipient "means testing".

[dancinmama]

May 12, 2011 12:33:05 GMT -5 Sum Dum Gai said:

By the way, whether the old lady gets welfare or SS, the benefits will be paid for by working taxpayers. Does it really make any difference which government bureaucracy's logo is on the check? It's still your money paying for the benefits.

Of course it matters, welfare is means tested. Only the little old ladies who actually need the money get it. SS spousal benefits are automatic. It doesn't matter if the little old lady in question is a multi millionaire, she still gets half her hubbies check, even if he's still alive, even if he's collecting, even if they're still married, even if he's also got millions to his name.

Also, there were no benefits for spouses or dependents in the original SS bill. It was passed about five years later. The disability benefits weren't added until 20 years later or so. They're part of the reason that SS taxes, which used to be only 1% had to climb to where they are now. The COLA adjustment, that everyone takes for granted now, didn't get passed until 1972 for crying out loud when the program was already almost 40 years old.

I understand exactly what you are saying, but then we get into the whole debate of whether someone doesn't have the means because they lived high on the hog and didn't save anything vs the person who has something because they made sacrifices along the way to ensure that they could retire without living in poverty. When you means test something like this, you punish the exact thing that you want to encourage - keeping your living expenses low enough so that you can save for your own retirement.

[Sum Dum Gai]

All I know is that SS contributions are by far the single largest tax I pay. The benefits I'm expected to get back, even I get 100% of what they're promising on my benefit statement, seems really damn small compared to the amount of money I'll have been putting in over the years. I'd much rather see SS means tested, which should lower the cost by a fair margin since a lot of the baby boomers will have pensions and stuff, which means we could lower the taxes, which means I could put the money in my 401k or IRA instead where it'll grow and actually do something worthwhile for me when I'm old.

A lot of you guys are on the other side, where you've already been paying into the system for a long time, or your spouses have, so you want the benefits now. I can't say I blame you. By the time I've spent my decades paying into the system, and know that the money could have been worth millions if I was investing it for my own retirement instead, you're damn straight I'm taking every penny I can get, and my wife will be getting her check off my record too.

[Gardening Grandma]

May 12, 2011 13:23:31 GMT -5 Sum Dum Gai said:

Dark, I'm not aware of ANY welfare program for "little old ladies"....

Low cost senior housing, utility assistance, community paid ride services, meals on wheels, some states have property tax exemptions for the elderly, you've never heard of any of these things? And they all exist while we also give them SS that they didn't pay into.

Dark, Those aren't limited to little old LADIES!

So your largest tax (on about $100K) is the payroll tax? About 8%? Methinks you are whining......

Disclosure: I did pay into the system for 40 years, and earned enough that my own benefit is based on my earnings.

[tskeeter]

Dark I did an interesting exercise once. I figured out how much I have paid into SS. Then I estimated what I would receive in SS benefits. I was surprised at how much larger the projected benefits were than the amount I had contributed over the years. Then I estimated what all those years of withholding would have been worth if I had invested the money rather than paying into SS. Boy was I bummed! Then I played with the numbers to figure out what the rate of return I was getting on my SS "investment" was. Don't remember the exact number, but it was something like 1% or 2%. I concluded that I would be a lot happier if I had been allowed to fund and manage my own retirement assets rather than having our government "manage" them for me.

By the way, if SS withholding is really the single largest tax you pay, I'm pissed that your lifestyle is being subsidized by the federal income taxes I pay. To even things out, please send 15.35% of your gross pay to tskeeter at ...

[sil]

The first generation that collected SS was lucky because they received benefits without paying in.

The last generation that pays into SS is unlucky because they will pay in without receiving benefits.

The under-40 crowd is bent out of shape because we fear that unless we retire in poverty, we'll be a part of the "last generation" of SS payers.

[Sum Dum Gai]

So your largest tax (on about $100K) is the payroll tax?

I'm pretty sure. My federal income tax was about $3k last year. State was significantly lower. My property taxes were also about $3k. I don't know how much I paid in sales tax, but most of what we buy is exempt, so I'm guessing not more than a couple grand tops. My SS was right about $6k, double that if you include my employers contribution.

Do you know how much $12k a year going into a real retirement account will probably be worth by the time I'm 67 and eligible for SS?

By the way, if SS withholding is really the single largest tax you pay, I'm pissed that your lifestyle is being subsidized by the federal income taxes I pay.

I totally agree with you, our current income tax code is completely screwed up. I'll happily support candidates or efforts to make it more fair. In the mean time, I'm not going to overpay just to make a point or something though. Uncle Sam decided that he needs to subsidize my house in CA, and give me some cash because I chose to procreate, who am I to argue?