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  #1421  
Old 09-12-2019, 10:25 AM
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Originally Posted by twig93 View Post
I just picked the years where I found the returns on a website with minimal effort. For what itís worth, my little brother worked almost those exact years and retired, but he is admittedly the exception rather than the rule.
If you are able to retire after working only 18 years, I don't think SS is an issue for you.
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  #1422  
Old 09-12-2019, 03:11 PM
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https://www.vox.com/2019/9/12/208606...jWkm6T48KxhUy0

Quote:
Elizabeth Warren’s plan to expand Social Security, explained
It starts with a $200 per month boost in benefits for everyone
Spoiler:
Social Security is the old warhorse of the American welfare state. Founded in the 1930s, it’s still the government’s biggest, most expensive program. It does more than any other single program to lift households out of poverty and it’s probably the most popular aspect of the social safety net. It’s also been out of the political headlines in recent years, as once-raging debates about the program’s long-time sustainability have taken a back seat to clashes about health care, climate change, and various culture war topics.

But you can’t be the candidate who brags about having a plan for everything without a plan for Social Security, and Sen. Elizabeth Warren is out today with a dramatic proposal to expand benefits and make the tax base that funds the program sharply more progressive.

Warren’s proposal, which would levy a payroll tax on income over $250,000 and on income from investments in order to boost retirees’ average benefits by about $200 a month, doesn’t come out of nowhere. The Massachusetts lawmaker has been a proponent of expanding Social Security benefits since her first year in the Senate, and the idea that the government needs to do more to account for households’ basic financial needs has been integral to her thinking since long before that.

But the plan reflects both how far the contours of the national political dialogue of Social Security have transformed from where they were five to ten years ago, and raises some basic questions about how (if at all) Democrats can cut into Trump’s lead with older voters — and whether they ought to be trying. But more than that, it illustrates an important way that Warren’s view of the basic structure of economic policy differs from what we saw from Bill Clinton or Barack Obama — one that’s much less interested in targeting resources on the neediest and much more interested in the expansive possibilities that are unlocked by truly soaking the rich.

The basics of Social Security
There are a lot of ins-and-outs to Social Security, but the basic contour of the program is that it’s funded by a flat-rate payroll tax, half of which is paid by employees and half of which is paid by employers. The tax applies exclusively to the first $132,900 of a worker’s income and it applies exclusively to wage and salary income, so income from investments is excluded.


Consequently, someone really struggling to get by pays an identical tax rate to a person comfortably earning in the low six figures — and an affluent person will generally pay a lower rate than that, due to both the tax cap and the exclusion of investment income.

At the same time, Social Security benefits are in most cases (there are some small categories like orphans for whom the formula is different) a function of how much tax you paid during your working years. The formula works so that benefits don’t increase fully proportionally with taxes paid, so the program does wind up being mildly redistributive. But Social Security as a whole is much less redistributive than the bulk of the federal government. Rather than collecting highly progressive income taxes and then targeting the benefits at the neediest, Social Security collects from a broad and not-so-progressive tax base and then provides benefits to almost everyone.

In wonkspeak, this is “social insurance” that provides everyone with security against the risk of their retirement savings evaporating due to bad luck or unexpectedly long lifespan with a small amount of redistribution tacked on.

But the program is also not actuarially sound. A combination of growing life expectancy, slowing population growth, and slowing wage growth have created a situation where the program is scheduled to run out of money in 2035. In principle, the federal government could just keep paying benefits. The military doesn't have a dedicated source of tax revenue or a special trust fund, but Congress just keeps authorizing higher and higher defense budgets because that’s what they want to do. But under current law, when Social Security’s trust fund runs dry the government is supposed to sharply cut benefits to keep things on track.

Warren’s plan aims to address solvency, expand benefits, and make Social Security much more redistributive.

The Warren Plan: More Social Security for everyone
The centerpiece of Warren’s plan is a proposal to increase Social Security benefits for all current and future retirees by about $200 per month — a sizable increase from the current average check of about $1,400 or so per month.

Warren also wants to further address several longstanding progressive concerns about Social Security, including the idea that it unfairly treats the poorest workers, the disabled, and people (primarily women) who spent many of their prime working years out of the paid workforce shouldering family care responsibilities. Those groups would all get additional benefits enhancements over and above the basic large increase in benefits that Warren is promising.

Obviously the idea of making benefits more generous across the board, paired with additional special enhancements, runs contrary to the notion that the big problem with Social Security is looming insolvency.

To address that, Warren is proposing a rather hefty tax increase on the top 2 percent or so of the population.

First, she wants to impose a 14.8 percent payroll tax (split evenly between workers and employers) on salaries above $250,000 a year. This would create a slightly odd program structure where the payroll tax phases out at $132,900 and then pops back into existence at $250,000. But the goal in creating that doughnut hole structure is to target the tax increase at the top 2 percent of American earners.
Second, she wants to also impose a 14.8 percent tax on the investment income of people earning over $250,000.
In combination, these proposals would change Social Security taxes from something that’s not really a big deal for truly wealthy Americans into one that is. And paired with the big and extremely broad increase in benefits, it also turns Social Security into a serious vehicle for redistribution — taking from the rich and giving broadly to the middle class.

The shifting politics of Social Security
Warren’s proposal on this is distinctive, but it also reflects a larger shift in the larger political dialogue around Social Security.


In the 1990s and 2000s the strong conventional wisdom around Social Security was that benefits needed to be cut — at least for the upper middle class — and the only real debate was about how to structure those cuts. In his first term, President Barack Obama repeatedly offered to cut Social Security benefits in the context of a larger deal with congressional Republicans that would also raise taxes on the rich. His demand was that cuts be “balanced” with tax increases as part of an overall deficit reduction strategy, but the basic need for cuts was a core conviction.

Then two things changed.

One is that left-of-center people became increasingly disillusioned with tax-subsidized savings accounts like 401(k) and IRAs as an approach to guaranteeing retirement security. In the 2016 cycle, Bernie Sanders proposed increasing Social Security benefits (his bill, which Kamala Harris and Cory Booker have cosponsored, offers a more modest $112/month boost and does a bit less in terms of some of Warren’s more targeted enhancements as well), Martin O’Malley proposed an even more ambitious plan to do the same, and Hillary Clinton responded with a more modest Social Security expansion plan. By June 2016, Obama was on the expansion bandwagon too. Warren, meanwhile, had been pushing broadly for expansion, though without a specific plan. Her efforts, along with those of a cohort of like-minded progressive House members, helped play an important role in ultimately killing off Obama’s interest in further pursuing the balanced cuts approach.

The other big change was Donald Trump, who shocked the world by running to the right on immigration but breaking sharply with conservative orthodoxy to oppose any cuts to Social Security and Medicare. By breaking with conservative activists on these two crucial questions, Trump helped obtain a reputation as a relatively moderate Republican — a reputation that helped him win in 2016.

The many versus the few
Of course this program, like pretty much all the other big legislative proposals Democrats are rolling out in the 2020 cycle, is relatively unlikely to be enacted.

But Warren’s Social Security pitch is a good guide to how she thinks about economic policy in general. The way both the Clinton and Obama administrations thought about the safety net was basically that tax revenue is scarce so it’s important to design programs that get the most bang for the buck in terms of helping the neediest. An across-the-board boost in Social Security benefits does not fare particularly well on this metric as a huge share of the new spending ends up going to households with average or above-average income and wealth levels.

The way Warren sees it, by contrast, is that the enormous run-up in inequality over the past 40 years creates a world in which economic resources are plentiful — they’ve just been captured by a small number of people at the very top. By taxing those people — and taxing them fairly heavily — you unlock the possibility of raising living standards for almost everyone.

Under her social security plan, the poor do end up benefitting disproportionately in the sense that an extra $200 a month is a much bigger boost to those at the bottom of the income distribution than to those at the top. But fundamentally, it’s an effort to unify the interests of low-income people with those around the median and even with college-educated professionals in the 80th or 90th percentile — against the concentrated economic power of the very rich.

This is an idea you see reflected in the design of Warren’s Social Security plan, but also her approach to student debt relief, her interest in taxing billionaires’ accumulated wealth, and her fundamental conception of the structure of political conflict. What exactly that would mean for governance relative to the continuation of the Clinton-Obama approach would inevitably depend more on political circumstances than the details of campaign proposals. But it’s a striking difference in philosophies visible not just in the details of Social Security plans but in the basic view of what’s important in economic policy.


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  #1423  
Old 09-13-2019, 01:35 PM
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https://www.thinkadvisor.com/2019/09...&utm_term=tadv

Quote:
Elizabeth Warren Proposes Boosting Social Security by Hiking Taxes on the Rich
Her plan would expand Social Security benefits by $200 per month with a payroll tax increase on incomes above $250,000.

Spoiler:
Elizabeth Warren released a plan Thursday to expand Social Security benefits by $200 per month with a payroll tax increase on incomes above $250,000, her latest attempt to court voters who want a larger safety net.

Her proposal would impose a 14.8% tax on annual earnings above $250,000 (or $400,000 for joint filers), split evenly between employers and employees. It would impose a separate 14.8% tax on investment income.
The policy, if enacted, would raise average monthly Social Security benefits from $1,395 to $1,595 if implemented in 2020, according to an analysis by economist Mark Zandi of Moody’s Analytics that was shared by Warren’s campaign.

It would index Social Security benefits to a faster rate of inflation and bolster benefits for widows and widowers and caregivers of children younger than six.
All told, Warren’s plan would extend the solvency of Social Security by about two decades to 2054, Zandi said.

“We need to get our priorities straight. We should be increasing Social Security benefits and asking the richest Americans to contribute their fair share to the program,” Warren wrote in a post for medium.com, calling her plan “the biggest and most progressive increase in Social Security benefits in nearly half a century.”

Warren’s proposal indicates how far Democrats have moved since 2011, when President Barack Obama offered to cut Social Security benefits as part of a “grand bargain” compromise with Republicans to reduce the deficit. It’s in keeping with Warren’s broader policy pitch to enhance the middle class safety net by taxing upper incomes.
Her policy paper comes on the day of the third Democratic debate in Houston, the first time all of the four leading contenders will be on stage together.

She follows rival Bernie Sanders, a fellow senator and rival for the Democratic nomination, who pushed for an expansion of Social Security benefits during his unsuccessful 2016 presidential campaign. Legislation by Sanders to expand Social Security has been cosponsored by 2020 contenders Kamala Harris and Cory Booker.

The Warren and Sanders plans are unlikely to become law in the near future as Republicans, who control the White House and the Senate, oppose raising payroll taxes and prefer to tackle Social Security’s long-term problems by reducing benefits.
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Old 09-15-2019, 06:13 PM
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https://www.forbes.com/sites/ebauer/...M#555a9cdc6829

Quote:
Elizabeth Warren’s Social Security Proposal Doesn’t Go Far Enough: It’s Time For A Basic (Retirement) Income

Spoiler:
Senator and presidential candidate Elizabeth Warren has a new – and expansive – proposal for Social Security. It’s a grab-bag of changes, as seems to be the norm these days, a list that includes the following:

A $200 flat boost to all recipients’ benefits. (Is the $200 a one-time boost, or does it grow with inflation, and why not integrate that into the formula itself?)
Cost-of-living increases based on the CPI-E, a version of the consumer price index that’s based on a “basket of goods” of a typical older person, with more weight given to healthcare, for example.
A caregiver credit based on the median wage, for each month an individual provides 80 hours of unpaid care to an under-age-6 child, a disabled dependent, or an elderly relative. (There seems to be no requirement that individuals be out of the workforce, so this would appear to boost benefits for all parents with below-median income.)
A boost to surviving-spouse benefits to 75% of the level the couple had been receiving when both were alive. (Is this “fair” or an unfair subsidy for married couples? You be the judge.)
A boost for surviving spouses with disabilities, by repealing age requirements.
Elimination of the Windfall Elimination Provision and Government Pension Offset for public workers. (Warren characterizes the WEP as unfairly “slash[ing] Social Security benefits”; the reality is that without the WEP, workers with both private-sector and non-Social-Security-participating public sector work years would get benefits more generous than people would judge to be fair. For instance, without the WEP, a full-career schoolteacher who works in the private sector in the summer would appear to Social Security’s benefit formula to have been poor and benefit from the relatively more generous benefit formula for the poor.)
Restoration of dependent (children’s) benefits for adult college students, and expansion through age 24.
A reduction by up to three years of the Social Security averaging period for individuals in apprenticeships and job-training programs, to boost average wage history and benefits. (Why give special treatment only to these programs? The 35 year averaging period already excludes 14 years from an adult working lifetime – ages 18 to 67 – to account for education, unemployment and other absences from the workforce.)
A minimum benefit of $1,501 for any worker – that is, 125% of the single poverty level plus $200, with 30 years of work history. (Note that this is actually more than the current average benefit. For a married or cohabitating couple, their combined benefits would be 220% of their combined poverty level; even for unmarried retirees, the benefit is slightly more than the eligibility level for Medicaid.)
And, like all such proposals, an additional tax on the upper middle class and the wealthy to fund it – expressed as a 14.8% “Social Security contribution requirement” on income above $250,000 plus a 14.8% investment income tax, this is really nothing more than raising marginal income tax rates and directing the income towards Social Security. (If this tax parallels the equivalent tax for Medicare, it’s unindexed and will affect more and more workers over time. Also, I will repeat again my observation that, even if you think there’s more “room” for tax hikes, there are opportunity costs to every tax increase – money spent on Social Security cannot also be spent on healthcare or childcare or parental leave. At the same time, Vox writer Matthew Yglesias explains Warren’s thinking differently: rather than spending the same pot of money half a dozen times, “The way Warren sees it, . . . economic resources are plentiful — they’ve just been captured by a small number of people at the very top.”) Unlike many such proposals which claim to achieve long-term solvency, Warren only goes so far as to say that these changes extend the Trust Fund solvency by 20 years, not permanently. (Recall that the Trust Fund is currently projected to be depleted in 2035 – and this, and future cashflow projections, are optimistically based on a future increase in fertility levels that may not happen.)
So how do you make sense of this? Some of these change seems small-bore – special Social Security benefit provisions for apprenticeship students, for instance. Others are expansive, like the new much higher minimum. What nearly all have in common is the elimination or weakening of the link between benefits and lifetime wages. Canada provides caregiver credits by dropping years from the averaging requirement, so as to retain the link to an individual’s actual work history, but Warren proposes treating individuals as “median earners” for every year in which they can claim part-time caregiving. The surviving-spouse boost further increases benefit levels for couples vs. singles. The WEP elimination ignores a worker’s true employment history. The new tax on high earners purely injects more money into the system without any relationship to benefit accruals. The flat-dollar benefit boost and the new minimum benefit are obviously unrelated to income.

And maybe that’s fine - after all, the current system has a benefit formula heavily tilted in favor of low earners as it is. Politicians of various stripes will nonetheless tell their constituents that they earned their benefits fair and square, regardless – as Warren herself says: “Social Security is an earned benefit –– you contribute a portion of your wages to the program over your working career and then you and your family get benefits out of the program when you retire or leave the workforce because of a disability.”

Today In: Money
But these are all half-measures.

If we really want to ensure that Social Security provides benefits to everyone sufficient to meet their basic needs, then the obvious solution is simply a flat “basic income”-like benefit.

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And at the same time, Warren writes:

“For someone who worked their entire adult life at an average wage and retired this year at the age of 66, Social Security will replace just 41% of what they used to make. That’s well short of the 70% many financial advisers recommend for a decent retirement” –

suggesting to readers that she thinks that Social Security itself should fill that gap, something that places her well outside mainstream opinion that what’s needed is more attention to plans or programs that help middle-class Americans achieve this for themselves. (Though, for a couple, $1,500 x 12 = $18,000; x 2 = $36,00 which is 70% of $51,000, as another indicator of how high her minimum benefit level is.)

What we need, instead, is my comprehensive three-tranche Social Security reform, in which all Americans are kept out of poverty with a flat “basic income” benefit, structures are put into place for second-tranche-income retirement savings and risk-sharing life-income drawdown, and Americans make their own choices on upper-tranche income saving. The concept of income tranches means that no one is expected to save on that portion of their income that is just enough to meet their basic needs – as Andrew Biggs wrote recently at MarketWatch, the lowest earners may be better off not saving for retirement at all – but save only for retirement on that slice of income above this level. The flat benefit means that we can include every American but fund it through an income tax that leaves debates about the “fair share” of rich or poor taxpayers behind. And a second-tranche-income retirement savings program, by incorporating retirement savings into a wholly-redesigned Social Security program, likewise leaves behind debates about “privatization” or “unfair government savings mandates” for something new.

Or, on the other hand, maybe not so new.


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Old Yesterday, 03:50 PM
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https://www.forbes.com/sites/ebauer/...-it-look-like/

Quote:
Let’s Talk ‘Basic Retirement Income’ Social Security Reform - What Would It Look Like?
Spoiler:
Last week, I promoted, in contrast to Elizabeth Warren’s Social Security plan, a basic retirement income. That’s not a pipe dream. In various other developed countries, it’s a perfectly normal way to provide Social Security benefits.

So let’s take some examples from the world of state retirement systems outside the United States, drawing from the Country Profiles in the OECD Pensions at a Glance 2017 and Social Security Programs Throughout the World (plus other knowledge I’ve acquired along the way). This is, of course, in addition to the system in the United Kingdom that I profiled some time ago.

The Netherlands

The Dutch provide a flat benefit of EUR 14,650 per year, or about $16,200 at today’s exchange rates, for a person living alone, or EUR 10,265 ($11,300) for a person living with another adult (the system doesn’t care if you’re married, cohabitating with a romantic partner, or sharing expenses with a roommate; the only exception is your parent or child). This benefit is paid without any regard for earnings history; it is only adjusted for immigrants or others who have lived outside the country, with a proration for less than 50 years of residence. This is funded by a payroll tax of 17.9% of pay up to EUR 33,994 (about $37,500), paid by employees only (that is, there is no employer portion). The benefit is also paid beginning at age 67 (as soon as a short phase-in is finished); there is no such thing as an early retirement benefit.

Today In: Money
In addition, the vast majority of employers (about 90%) provide either a defined benefit or a defined contribution pension plan, either sponsored by the employer or by the industry in a way similar to (but far more successful than) American multiemployer plans. Unlike in the U.S., their defined contribution plans do not involve employer matching of voluntary employee contributions, but are fixed contributions. And for the segment of the population that has insufficient postretirement income (e.g., immigrants without reciprocal benefits from other countries they’ve lived in) there are supplemental anti-poverty benefits.

Another distinctive feature of the Dutch pensions is that, because the Social Security benefit is flat, the employer benefits include in their formulas an offset so that the pension is designed to replace marginal income above what’s replaced by the government benefit.

Ireland

The Irish benefit is based on work history, but not, as in the United States, a formula based on average pay in one’s working lifetime. Instead, all that matters is having had earned income for a sufficient length of time. To receive the maximum annual benefit of EUR 14,252 ($14,250), or EUR 13,380 ($14,800 if living alone), one must have had 40 years of full-time employment; however, time spent unemployed and looking for work, or not working due to disability or while caring for a child or a dependent adult, can be counted towards this 40 year requirement. The benefit is paid at age 66, rising to 67 in 2021 and 68 in 2028, with no early retirement option. Additional benefits are provided for those with financial need.

Employee contributions are paid at the rate of 4% on all earnings (no ceiling); however, the first EUR 18,304 annually ($20,200) is exempt from taxes; upon earning that next dollar, the full contribution kicks in but with a credit that phases out so that a worker who gets that next pay raise that boosts his income up to EUR 18,305 pays tax of EUR 108.16 per year. Employers contribute 8.6% of payroll for workers with earnings of EUR 19,552 ($21,600), or 10.85% for workers with earnings above this level. In both cases, these contributions also fund disability, unemployment, and other benefits. (More information is available at Citizens Information.ie.)

This benefit is often paired with an employer plan but that’s not as prevalent as in Ireland; the OECD says that about half of workers have employer-provided plans. As in the United States, defined benefit plans had been prevalent until they became too expensive; now defined contribution is the norm.

Australia

Australia’s our model if we get nervous about providing benefits to wealthy Americans, because they means-test their flat pension, called an Age Pension. For a single individual, the maximum benefit amounted to AUD 22,677 in 2016 ($15,600). For couples, the benefit is reduced to AUD 17,094 ($11,700). This benefit is reduced based on both assets and income, in a gradual manner; currently the OECD reports that 58% of retirees receive the maximum benefit and 42% receive a reduced benefit. As with Ireland and the Netherlands, there is no early retirement option; benefits are payable at age 65, increasing to age 67 in 2023.

If benefits are phased out over time for higher-income retirees, wouldn’t that cut into incentives to save? Australia solves that problem, in part, by mandating savings, through its Superannuation Guarantee, or “Super” (you can read my earlier description here), a mandatory employer contribution to a defined contribution plan of 9.5%. And, yes, even though that’s an employer contribution, it’s generally acknowledged that this is actually an amount coming out of employee paychecks indirectly. That contribution amount is scheduled to increase to 12% over the period from 2021 to 2025, but it’s an open question whether this increase will actually occur, precisely because of the acknowledgement that these increases will come out of workers’ pockets. In fact, there have even been calls for Super participation to be optional, with the extra cash going into worker’s pockets, for low-income workers – or at least one call, from a senator this past summer.

Why not here?

If you consider the nature of the American Social Security program, ever since its inception, politicians have told us that it’s an “earned” benefit – but at the same time, we know that in various ways, that’s already not the case (such as benefits for spouses, or even the basic benefit formula itself, giving a benefit to low-income workers that’s disproportionately high, considering their lifetime earnings relative to higher-income workers). What’s more the growing calls for eliminating the ceiling in order to have above-the-ceiling workers pay their “fair share” are based on the growing expectation that Social Security should be about redistribution of income rather than earning benefits.

And when we look at the diversity of welfare programs in America, they have one fundamental premise: their recipients should be employed, or looking for employment. Here’s the fundamental requirement for TANF (traditional cash welfare) here in Illinois: “Develop a plan for becoming self-sufficient and follow it.” For SNAP (food stamps), “We expect people who can work to try and do so.” Medicaid similarly requires that recipients be employed or engaged in seeking employment, job training or the like, though with various waivers available.

But once an individual has reached the age of 65, those requirements cease. SSI (Supplemental Security Income, for individuals whose Social Security benefits alone are not enough to stay out of poverty) requires only the attainment of age 65, not any past or present efforts to find work. (Why doesn’t this age increase in tandem with the Social Security retirement age? No idea.) We are collectively entirely comfortable with the government ensuring that, regardless of whether they worked hard, or hardly worked, during their younger years, Americans past a certain age do not live in poverty.

All of which adds up to this: the time is ripe for a flat Social Security benefit for all.

(How do we get there? How should the government help middle-class families who want more than simply staying out of poverty? I’ll get to that in future articles.)




https://www.forbes.com/sites/ebauer/.../#16e1e11626e5
Quote:
Farewell, FICA - And Other Basic Retirement Income Details
Spoiler:
Since I’m on my soapbox again about Social Security reform, here are some questions and answers on my preferred approach, a Basic Retirement Income.

How’s it paid for?

To start with, the key point is how it’s not paid: a move to a new Social Security system would enable ourselves to eliminate the FICA tax.

After all, there’s general agreement that the FICA tax is regressive, hitting low-wage earners at a greater rate than wealthy folks who have exceeded the year’s ceiling. For this reason, a “payroll tax holiday” is a popular recession-fighting move (proposed by the Trump administration to ward of a feared recession now, and implemented in 2011 - 2012), but because of the need to keep money flowing into the Social Security Trust Fund, Congress redirects an equivalent amount of funds from general revenues (that is, borrowed funds) into the Trust Fund.

Eliminating the FICA tax, and funding a Basic Retirement Income with general federal revenues (for instance, a tax hike on all income) would remedy this issue.

Today In: Money
And, in fact, of the three systems I profiled earlier this week, the Netherlands has a payroll tax similar to ours, except with a much lower ceiling, Ireland has payroll tax which exempts low-income workers, and Australia has no specifically-dedicated tax for their Age Pension at all.

Now, what the proper marginal tax structure should be, I won’t opine on, except to express a general preference for a system in which everyone pays something and wealthier folk pay relatively more, but we take care not to let “fair share” rhetoric evolve into imagining that the wealthy can pay for everything.

Is this an undeserved benefit for those who cheat the system and don’t pay their taxes?

Well, sure. And I’m all for stepping up enforcement on nannies, day laborers, and everyone else who works under the table in the shadow economy, which was estimated by one course at $2 trillion. But the benefits gained from restructuring the system are meaningful enough to accept this. And is the prospect of future Social Security benefits really motivating people to report their taxes, who otherwise wouldn’t? There are so many other advantages for dishonest workers and employers, in terms of unpaid income taxes, boosted eligibility for means-tested benefits, ability for employers to skip workers’ compensation and pay a subminimum wage, and for a segment of the workforce, ability to work without legalization to do so – all of which still exist and still warrant greater enforcement of the law than we’re doing at present regardless of whether or not Social Security/state-provided retirement benefits are tied to reported and taxed income.

What about the benefits I already have owed to me?

A move to a flat benefit would inevitably have a very long transition period. However true it may be that one has no legal right to Social Security benefits, we’d fail at the overall objective of a system in which Americans have reasonable living standards in retirement, if we leave middle-class folk counting on a higher benefit, high and dry. There are 35 years in the averaging period for Social Security earnings; this suggests that we’d transition to the new system over 35 years, during which time workers would get prorated benefits from each system.

Why not just boost minimum benefits and keep the system as-is otherwise? Or better yet, boost benefits for everyone?

Here is the key:

We know that a pay-as-you-go system generous enough to provide middle-class levels of income is not sustainable. Worldwide, countries which had provided such generous systems are reforming them because of the burden it places on their budgets. In Canada, which as an exception to the rule, has actually increased benefits just recently, they are funding the increases through a real investment fund, setting contributions in an actuarially-correct manner, and phasing the increase in to ensure that it is fully funded through this investment fund – all of which are much more difficult conditions for the American system to follow, not just because we’re accustomed to “free lunch” promises but because Canada is so much smaller than the U.S., and the Canada Pension Plan investment fund invests in American companies such as Petco, Univision, and Neiman Marcus.

At the same time, Democrats have proposed a number of variants on supplemental savings programs, either mandatory (with employer or employee contribution mandates and with or without opt-out options) or voluntary, such as OregonSaves, or the Theresa Ghilarducci/Tony James Rescuing Retirement plan.

As you might imagine, Republicans oppose these sorts of government mandates, but many of them likewise support some variant of a privatized Social Security, though it’s never fully fleshed out.

But rather than making progress on reform, we are still endlessly wringing our hands about the coming Trust Fund insolvency.

How do we get from here to there? Not by more partisan debates. Not by one side or the other finding their way to an unassailable supermajority. But by incorporating a new mandatory savings program into the overall understanding of “What Social Security Is” as a second layer in a hybrid system, so that the savings mandate is just as acceptable for a new generation as paying FICA taxes are now.

And, yes, that second layer could not be a simple 401(k) account. We need new visions for ways to incorporate forms of risk-sharing and investment-return smoothing, so as to not provide a rock-solid guarantee, which, if we’re honest, simply isn’t realistic, but instead a system that balances all concerns.

Which is, incidentally, a significant part of the reason why I’m watching for updates in the PBGC multi-employer plan insolvency threat; aside from the financial losses participants will experience, and which will be all the worse if remedies aren’t found, multi-employer plans are the closest sort of arrangement we currently have to what should one day, with a lot of work put into reforming the structure of the plans, be a mainstream retirement plan for all Americans.


https://www.forbes.com/sites/ebauer/.../#14f1ecbd49d9
Quote:
Bernie Sanders Wants A Scandinavian-Model Social Insurance System. Sure, Why Not? (For Retirement Anyway)
Spoiler:
Last week, at the most recent Democratic presidential-primary debate, Bernie repeated the defense of Democratic Socialism that he’s given in the past, in response to a linkage of his beliefs to socialism as practiced in Venezuela:

“In terms of democratic socialism — to equate what goes on in Venezuela with what I believe is extremely unfair. I’ll tell you what I believe in terms of democratic socialism. I agree with what goes on in Canada and Scandinavia, guaranteeing health care to all people as a human right. I believe that the United States should not be the only major country on Earth not to provide paid family and medical leave. I believe that every worker in this country deserves a living wage and that we expand the trade union movement.”

Now, in those European countries who have a much heavier emphasis on social welfare provision, they call their model “social democracy” because they know full well that “socialism” has a specific meaning that is not merely the extensive provision of social insurance/social assistance benefits in a capitalist economic system.

Today In: Money
And in a prior article on another platform, I observed that even in countries with the most generous of medical benefits by the state, the state provision appears to top out at 85%, with the remaining 15% paid by individuals out-of-pocket or via private health insurance; the proposals of Sanders and others for “Medicare for All,” in which (unlike the current Medicare program) all care is covered without any cost-share, go well beyond this.

But the greater irony is what retirement systems look like in the three countries of Scandinavia, which are – really – not what you’d expect at all for countries that are popularly understood to be paradises of income redistribution.

(As with my prior article on basic retirement income systems, this information comes from the Country Profiles in the OECD Pensions at a Glance 2017 and Social Security Programs Throughout the World, where not otherwise specified.)

Denmark:

Denmark, as it turns out, has a Basic Retirement Income system, too. Similar to the Netherlands, the benefit is prorated based on length of residency, requiring 40 years of residence for the maximum benefit. It’s payable at age 65, increasing to age 67 by 2022 and then age 68 in 2030.

The basic benefit is DKK 75,924 per year, or about $11,200, with a means-testsed supplement of up to DKK 83,076 for singles or DKK 41,436 for married or cohabitating recipients ($12,300 or $6,100), for a potential maximum benefit of $23,500 or $17,400, but with a phase out that’s similar to the Australian system, reducing the supplement with earnings of $13,000, reducing the basic benefit at $48,800, and eliminating all benefits at $85,300, at current exchange rates. (See the local website, for which I relied on web browser translation to read, for details.)

In addition, there’s what’s called the “social insurance” pension, old-age pension, or ATP, and this is really an odd duck, as far as what we’re used to in the U.S. It’s a contributory system, but with a flat contribution, variable only by hours worked, not by pay. The contribution works out to 270 kroner per month, split 2/3 employer, 1/3 employee — or about $13 per month per employee. And benefits are paid out in line with contributions paid in, based on the investment income the fund earns.

But the bulk of Danish workers’ retirement income comes from employer-provided DC plans. These are not 401(k)s; the employer pays the whole contribution, and it’s technically voluntary, but generally the result of collective agreements, and, as in the Netherlands, about 90% of employees have these. OECD reports that ontributions are typically 12% of pay for lower-income workers, and up to 18% for higher income workers, because the state pension replaces proportionately less of their pay. Some 20-25% of this amount goes to fund other types of insurance, such as disability and survivor’s benefits.

And Danish workers are protected from investment risks, not by any sort of magic, or governmental guarantees, but by something that’s well-nigh incomprehensible in the United States: the DC plan contributions are invested in deferred annuities.

Norway:

Remember Bush’s individual account proposal for Social Security? Well, the Norwegians were paying attention. Sure, this isn’t a system of funded accounts, but benefits are based directly on contributions in a “notional defined contribution” formula, after a 2011 pension reform.

Individual workers contribute 8.2% of pay, and employers 14.1%; this funds old age retirement benefits as well as disability and maternity.

Standard Social Security benefits are based on accruals of 18.1% of pay, up to a ceiling of NOK 708,992 (about $79,300 at current exchange rates). These accruals grow at the rate of annual average wage increases (rather than based on investment income or a set interest rate), and at retirement, are converted into benefits based on a life expectancy factor which varies each year based on life expectancy in that year. For years of unemployment, or parental leave, amounts are credited based on hypothetical earnings.

Low income workers receive a minimum benefit of NOK 175,739 ($19,700), prorated if one’s work history (including years of childcare, jobseeking unemployment, and mandatory military/civilian service) is less than 40 years, payable at age 67.

In addition, employers are obliged to contribute 2% of pay into a private-sector Defined Contribution benefit; at retirement, a private-sector annuity is purchased with the accumulated funds.

Sweden:

Sweden also reformed its system into a notional-account program in 2011. Employees pay 7% of pay, employers 10.21%, up to a ceiling of SEK 504,375 ($52,000). Of this, 14.88% is allocated to the notional-accounts system and 2.33% to a true Defined Contribution account. As with Norway, the notional accounts are increased by economy-wide wage increases, as well as the reallocation of accounts of those who have died, within that age cohort. At retirement, the benefit is annuitized based on age-appropriate life expectancy and a real discount rate of 1.6% (that is, an after-inflation rate). Benefits are increased more-or-less in line with inflation after retirement but with adjustments for any imbalances in the “notional fund.”

Again, as with Norway, there is a minimum benefit, in this case SEK 96,912 (single) or SEK 86,448 (married); that’s $10,000 or $8,900. (There are also supplemental benefits that are not considered part of this system.)

For the portion of the contribution that funds a true private sector Defined Contribution account, workers choose their fund provider themselves, and can elect a traditional or a variable annuity at retirement.

In addition, most workers (90%), blue- and white-collar, are a part of nationwide collective agreements which include a further Defined Contribution account, called the ITP (or ITP1 or ITP2 or ITPK). At least half of this must be invested in “insurance” (that is, a deferred-annuity type investment).

Replacement Rates

The OECD has helpfully done the math to boil down these benefit provisions into a “replacement ratio” which is also available for all OECD countries, including the United States, where the OECD assumes that a worker receives a 9% Defined Contribution supplemental benefit, including self- and employer-provided average benefits.

All of which adds up to the following calculation:

pensions
Scandinavian pension comparisonsDATA FROM OECD PENSIONS AT A GLANCE 2017
Yes, the Danish system with its very generous Basic Retirement Income comes out highest. But the Norwegian and Swedish systems, even including mandatory employer benefits, are not exceptionally higher than US Social Security, and when the US 401(k) system is added in, American retirees come out on top.

So, by all means, let’s reform our system to reflect the Scandinavian system. Which one do you choose?
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