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  #1321  
Old 04-25-2019, 01:36 PM
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Mary Pat Campbell
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https://www.pionline.com/article/201...25#cci_r=73393

Quote:
Social Security costs projected to surpass income next year, report says

Spoiler:
Starting in 2020, the Social Security trust funds for retirement and disability insurance will begin drawing down assets to pay benefits, according to the Social Security trustees' annual report issued Monday.

It would be the first time since 1982 that Social Security's total cost has exceeded its total income, the report said.

The trust funds — one that covers retirees and their families and one that covers disabled workers and their families — will be out of money by 2035. The fund devoted to retirees is projected to become depleted in 2034, at which time Social Security revenue will cover only 77% of benefits promised, the report said.

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If "substantial actions" are deferred for several years, the burden would be concentrated on fewer generations, the trustees said. Much larger changes would be necessary if action is deferred until 2035.

Projected costs are expected to rise more rapidly as more baby boomers retire than people enter the workforce. Social Security's annual cost, in relation to the projected gross domestic product, is predicted to increase to about 5.9% by 2039, up from 4.9% in 2019, according to the report.

The trustees urged lawmakers to address the problem quickly. "Implementing changes sooner rather than later would allow more generations to share in the needed revenue increases or reductions in scheduled benefits," the report said.

In Congress, Rep. John B. Larson, D-Conn., who is chairman of the House Ways and Means Social Security Subcommittee, introduced the Social Security 2100 Act in January. The bill, for which no markup or vote has been scheduled, aims to shore up Social Security by implementing an across-the-board benefit increase for current and new beneficiaries and improving cost-of-living adjustments, among other provisions. The added benefits would be paid for by gradually increasing the contribution rate beginning in 2020 so that by 2043, workers and employers would pay 7.4%, instead of the 6.2% today, according to the congressman's website.

Senate Finance Committee Chairman Chuck Grassley, R-Iowa, said in a statement that bipartisan work will be needed to shore up both Social Security and Medicare. "While the strong economy and labor markets are helping Americans across the board, Social Security and Medicare trust funds also benefit," Mr. Grassley said. "However, it remains that those trust funds are not financially sustainable, and reforms are necessary to ensure stability and sustainability of Medicare and Social Security programs."

In a statement Monday, Treasury Secretary Steven T. Mnuchin said, "We remain committed to further bolstering the programs' finances, which will benefit from the long-term growth we will see as a result of the administration's economic policies."


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  #1322  
Old 04-26-2019, 01:42 PM
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https://www.deseretnews.com/article/...-cJZEd6EnR2nrY

Quote:
Jay Evensen: Want to fix Social Security? Have more babies

Spoiler:
The newest report from the Social Security Board of Trustees was released Monday. Unfortunately, a lot of people are missing the point.

Yes, the report actually moves back the projected date at which Social Security’s costs will exceed the taxes collected for the program, to 2020. The date at which the program’s retirement payments are expected to completely exhaust its reserve was moved one year back, to 2035, but the program’s disability payments now are projected to be in good shape until 2052, which is 20 years later than previously projected.

Some people are claiming this as a reason to breathe easier, saying it shows there is no reason to panic or to cut benefits in anticipation of problems in 2035. Things change. Let’s just wait and see what happens next.

But the trustees themselves say this would be foolish. It’s easier to fix anticipated problems today, while they remain relatively far in the future. The disability fund projections improved because today’s economy is so strong that many disabled workers have found jobs and no longer seek claims. We should all hope those conditions continue; however, history would suggest otherwise.

But the big point most people seem to be missing concerns Social Security’s underlying long-term problem. Simply put, Americans aren’t having enough babies.

" The big point most people seem to be missing concerns Social Security’s underlying long-term problem. Simply put, Americans aren’t having enough babies. "
The premise behind Social Security is that today’s workers are taxed to provide benefits for today’s retirees. Already this is a problem, with members of the large baby boom generation retiring and smaller younger generations bearing the burden. But the problem promises to get worse in the future.

The trustees’ report assumes the U.S. fertility rate will be 2.0 (meaning two children on average per woman of childbearing age) by 2027. But the actual rate, according to the report, was about 1.74 last year, and it has been on a long-term decline.

As Elizabeth Bauer, an actuarial and Forbes.com contributor, wrote, such a miscalculation won’t change the 2035 insolvency date for retirement benefits because today’s babies won’t be working by then, but “those low rates have a significant impact on the long-term finances of the program.”


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The report itself shows that a fertility rate of 1.8, rather than 2.0, would mean a much larger deficit to overcome over 75 years.

What to do? That’s a difficult question, but perhaps Hungary, the tiny former Soviet bloc nation in Central Europe, has an answer.

Like many European countries, Hungary has been worried that its declining fertility rate would threaten its long-term ability to thrive economically.

Nearly a decade ago, political leaders there began implementing family oriented policies aimed at supporting strong families as the key to survival. As a result, according to various sources, newlyweds receive subsidies and qualify for low-interest loans, some parents can qualify for a mortgage subsidy and paid maternity leave now applies even to grandparents, in an effort to help parents return to work sooner.

Parents, meanwhile, get three years of paid leave, and the government pays for day care. Mothers with four or more children receive income tax exemptions, a logic that, unfortunately, seems lost on many who advocate higher taxes for Utahns with big families. Also, the more children one has, the more paid vacation one receives. Women who have worked at least 40 years can retire in order to spend more time with grandchildren.

President Viktor Orban recently told a gathering of U.S. political officials that these policies have helped to increase marriage rates by 43 percent over eight years, and birth rates by 21 percent, while divorces have declined.

The United States should take note. Such programs would be, of course, expensive. But the same could be said for long-term fixes to Social Security, especially given the lack of support in Congress to raise taxes, increase the retirement age or institute a means test for benefits.

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Solving the declining fertility rate would help a host of other long-term problems related to the economy as well, as I wrote in a recent column.

Not everyone is ignoring this problem. Writing for The Motley Fool several weeks ago, Sean Williams said, “With birth rates falling for nearly a decade straight, this is beginning to look less like an anomaly and more like a new normal. For those of you expecting to be reliant on Social Security income during retirement, this is certainly a wake-up call.”

A lot depends on whether the right people hear that call and answer it.


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  #1323  
Old 04-26-2019, 03:46 PM
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https://www.forbes.com/sites/erikshe.../#230b4c99a6a7

Quote:
The Government Which Put Social Security At Risk Wants Recipients To Bail It Out

Spoiler:
You've likely heard the latest annual estimates: the main trust fund for Social Security—the Old-Age and Survivors Insurance (OASI)—has until 2034 until it runs dry. The other trust fund for disability payments—Disability Insurance (DI)—would be depleted by 2052 at current rates. If that money was used to cover OASI shortcomings, it would only add a year and then, in 2035, all the money would be gone.

Medicare is in even poorer shape. It also has two funds: The Hospital Insurance (HI) and Supplementary Medical Insurance (SMI) trust funds. At current rates, the HI fund will be depleted by 2026. The SMI fund seems fine for the time being.

These dates could be worse—were worse last year—but they should be scary. We have a segment of the population growing older, which will retire or, at least, expect retirement benefits even if they can't afford to stop working. Medical issues will increase. Many millions of people have paid all their lives into these systems and expect to collect.


Unfortunately, most aren't educated to how these programs work. Both systems are pay-as-you-go, which means that, from day one, the taxes paid into Social Security and Medicare went to cover those who were already in the programs. Money left over would go into the trust funds. There was no general mechanism to pay now for the future. None of this was like a traditional pension fund or even a 401(k).

The trust funds also weren't exactly that. They were really accounting entries to track money. The government has borrowed trillions from them in return for special Treasury bonds. This isn't insane or unusual, by the way. U.S. bonds have been considered the safest possible investments in the world, and probably have been the only financial instrument that was safe enough. Putting money into the stock market to grow the fund might seem a good idea to many, but the problem is the size of the moneys involved. The idea of the U.S. investing trillions into stocks, only to rebalance and change the portfolio would create giant waves and massive instability.

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The U.S. will continue to make interest payments to the various trust funds, but the whole system needs more money. Congress goes back and forth on combinations of additional payroll taxes, cutting benefit growth, possibly changing eligibility dates, or some mix of it all. But it seems likely that regular folk will feel the pinch, one way or another. We will all have to sacrifice under such a regimen.

However, one obvious problem is the 2017 tax cuts. Most people don't seem to feel a benefit, although corporations are doing well by it. Many of the biggest tax avoidance tools were left in place while statutory rates—typically significantly more than the effective rates companies pay after deductions—were dropped from 35% to 21%. Even as corporate income tax payments drop for companies, they've hit new heights for individuals, so many have less money to put toward retirement.

Another result is the growing deficit. At the six-month mark in the federal October through September fiscal year, the overrun was at a pace 27% higher than the government projections. If it continues, and there's no data suggesting that it might suddenly turn about, the deficit this year will hit $1.4 trillion, far ahead of the predicted $1.09 trillion.

The Trump administration has projected growing deficits through 2022 and then ones that would generally fall. But if deficits already grow significantly faster than projected and, if economists are right, the growing economy that was supposed to bring in more tax revenue will likely fall, the general budget pressure will grow far more than the administration thinks. There will be less, not more, money available in general. Add in the likelihood of growing interest payments (currently close to $900 million every day) as we leave the era of ultra-low rates behind — one expert I spoke with guessed that interest on the debt would double within a few years — things are going to become unsupportable.

The biggest area of weakness is corporate taxes and some of the cuts badly need to be reversed. The U.S. could keep a lower rate and still increase tax revenue, helping to keep everything in a more stable status.


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  #1324  
Old 04-26-2019, 03:46 PM
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https://www.thinkadvisor.com/2019/04...&utm_term=tadv


Quote:
5 New Facts About Social Security's 2018 Earnings

Spoiler:
Low interest rates and a rigid rate structure have hurt the mother of all retirement annuity gorillas.
The giant Federal Old-Age and Survivors Insurance (OASI) trust fund — the fund that makes Social Security retirement benefits payments — is reporting a $22 billion operating loss for 2018 on $831 billion in revenue, compared with $26 billion in operating earnings on $826 billion in revenue for 2017.
(Related: Social Security Trust Fund Set to Go Bust by 2035)
The OASI trust fund backs its Social Security retirement benefits obligations with a portfolio of $2.8 trillion in government bonds. The size of the portfolio held steady between 2017 and 2018.
The bonds in the portfolio in 2018 paid interest rates ranging from 1.375% to 5.25%, and the average rate increased to 2.875% for bonds purchased in 2018, from 2.25% in 2017.
But, because the overall average portfolio yield is continuing to fall, bond interest revenue fell 3%, to $81 billion.
Benefits payments, meanwhile, increased much faster than payroll tax revenue.
Gridlock in Washington could change things, but, in the past, the trust fund “depletion dates,” or dates when program funds empty out, have served mainly to focus congressional attention on passing rescue bills. For insurance lobbyists, the major significance of that activity is that Medicare and Social Security rescue bills often end up serving as tugboats for moving other, less glamorous financial services legislation through Congress.
For a look at more OASI financial details, see the data cards in the slideshow above.
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Old 04-26-2019, 04:04 PM
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https://www.thinkadvisor.com/2019/04...&utm_term=tadv

Quote:
The Social Security Trust Fund Is Full of IOUs, Right? Wrong.
The IOU pejorative dates back to the 1930s. Here's how the trust funds really work, according to policy experts.
Spoiler:
The annual calculations regarding the sustainability of the Social Security and Medicare trust funds are misleading and meaningless, and these funds have no assets other than a federal promise to pay. Right?
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Wrong, say two Social Security experts.
(Related: Social Security Trust Fund Set to Go Bust by 2035 )

“The law requires annual reports,” Nancy Altman, president of Social Security Works, a group that supports expanding the Social Security system, told ThinkAdvisor in a Monday email message. Altman, a former tax attorney and the co-founder of the group, was the assistant to former Federal Reserve Board Chairman Alan Greenspan when he chaired the bipartisan commission that developed the 1983 Social Security amendments.
Shai Akabas, economic policy director for the Bipartisan Policy Center in Washington, echoed Altman’s stance. The Boards of Trustees for Social Security and Medicare “are required by law to issue yearly reports on the status of both of Social Security’s trust funds — the Old-Age and Survivors Insurance (OASI), and the Disability Insurance (DI) trust funds — and the two Medicare trust funds,” he said. “Much of what is included in the reports is required precisely by statute.”
The two programs are “insurance programs,” added Altman, who also taught at Harvard University’s Kennedy School of Government and the Harvard Law School.
The Federal Insurance Contributions Act, or FICA, “requires that the revenue be dedicated to Social Security, only to be used for the payment of benefits and related administrative costs. Until the funds are needed, the law requires that the monies be held in trust and invested,” she explained. “From the beginning, Congress has required that the funds be invested in the most secure investment around — Treasury bonds backed by the full faith and credit of the United States. These are not casual promises to pay, but legal instruments that have the same legal protection and standing as all other treasury bonds.”
The “IOUs” pejorative was “first used in the 1936 presidential election by Alf Landon to try to discredit the newly enacted program,” Altman continued, and those who still call them IOUs “are either uninformed or deliberately seeking to undermine confidence.”
BPC’s Akabas, who assisted Fed Chairman Jerome Powell in his work on the federal debt limit, and now steers BPC’s Commission on Retirement Security and Personal Savings, told ThinkAdvisor in his email message that the Social Security OASI trust fund “is indeed an accounting mechanism rather than a store of value, but it is important for both political and policy reasons.”
Why? “First, by law, the program cannot pay out more in benefits than its income once the trust fund’s assets are exhausted. That would mean a 23% cut to benefits in 2034. So there are serious practical implications of the trust fund balance, which is one reason why it’s important to have that information disseminated.”
From a policy perspective, he continued, “the program for many years took in more than it paid out (reducing annual budget deficits), so on a cumulative basis, the program has more than paid for itself to date and has not yet added to debt held by the public. For that and other reasons, there is a compelling case that reforms to make the program sustainable can and should be phased in gradually.”
The trust fund is also a focal point for political action, Akabas added. “If the trust fund didn’t exist and there was no automatic change in benefits on the horizon to keep the program in balance, then the will for political action to reform the program and make it sustainable would likely be even lower than it is today. In fact, the trust fund is what forced action in the 1980s deal that extended the life of the program for more than half a century.”
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Old 04-29-2019, 03:12 PM
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https://reason.com/2019/04/22/social...m_medium=email

Quote:
Social Security Will Be Insolvent in 16 Years
So we're probably only 15 years away from Congress deciding that's a big enough crisis to do something about it.

Spoiler:
Social Security will be insolvent and unable to pay the full value of promised benefits by 2035—that's one full year later than previously expected—and Social Security's costs will exceed its income by 2020, according to a new report published Monday by the program's trustees.

At the end of 2018, Social Security was providing income to about 67 million Americans. About 47 million of them were over age 65, and the majority of the rest were disabled. If nothing changes, the Social Security Trust Fund will be fully depleted by 2035 and the program would impose across-the-board cuts of 20 percent to all beneficiaries. That may sound like it's a long way off, but 51-year-old workers today will be just hitting retirement age when the cuts kick in. Some current retirees will still be younger than 80.

By that point, some parts of Medicare will already be unable to cover the full cost of benefits.

The trustees' report released Monday shows that the trust fund for Medicare Part A, which covers hospital and nursing home costs, will be gone by 2026. Medicare Part B, which covers routine medical care like visits to the doctor, and Medicare Part D, which covers prescription drugs, are on more solid footing and will remain solvent "indefinitely."

It is important to remember that insolvency is not the same as bankruptcy. By 2026 and 2034, respectively, Medicare and Social Security will not have enough money to pay the full cost of their obligations, but that's not the same as saying they'll have no money at all.

It's also important to keep in mind that these projections are constantly shifting based on economic data, demographic trends, and actuarial projections. Last year, Social Security was supposed to hit insolvency in 2034. The year before, the trustees said insolvency wouldn't hit until 2037. It's a moving target, but time keeps on slipping and ignoring the looming crisis won't make it go away.

Still, Congress could be spurred to action by the threat that Social Security will post losses in just two years. The last time that happened, in 1982, it provided an impetus for federal policymakers to make several changes, including an increase to the payroll tax, that kept the federal old-age pension program solvent. Without policy changes, the new report shows that Social Security would start losing money in 2020 and would continue to operate in the red for decades to come—long past the point when the program would be able to fund its promises to retired Americans.

Right now, there's not much evidence that federal policymakers are ready for that challenge. President Donald Trump has repeatedly promised not to touch Social Security while he's in office, while Democrats in Congress are eyeing Medicare for All proposals that would likely pile massive new obligations onto a federal entitlement program that's already struggling under its own weight.

"That fact that we now can't guarantee full benefits to current retirees is completely unacceptable, and it should be cause enough for every policymaker to rally around solutions to restore solvency to those programs," said Maya MacGuineas, president of the Committee for a Responsible Federal Budget, a nonpartisan group that advocates for balanced budgets, in a statement. "Certainly we should be focused on saving Social Security and Medicare before we start promising to expand these programs."

What's really needed is a complete reconsidering of the relationship between older Americans and those entitlement programs. Both Social Security and Medicare were designed more than half a century ago for an entirely different workforce and population. When Social Security launched in 1935, the average life expectancy for Americans was 61—that means the average person died four years before qualifying for benefits.

Meanwhile, demographics are blowing up the basic premise of how Social Security is funded. There were 2.8 workers for every Social Security recipient in 2017. That's down from 3.3 in 2007, and that's way down from the 5.1 workers per beneficiary that existed in 1960.

Today, the two programs function mostly as a giant conveyor belt to transfer wealth from the young and relatively poor to the old and relatively rich, allowing the average person (who now lives to be 78) more than a decade of taxpayer-funded retirement.

When and if Congress gets around to doing anything, both programs should be restructured to ensure they take care of the truly needy, rather than being benefits for anyone who has reached an arbitrary age. As Reason's Nick Gillespie and Veronique de Rugy wrote in a still-very-relevant 2012 feature on the future of America's entitlements, "Focusing on those truly in need instead of automatically shoveling out larger and larger amounts to well-off senior citizens is the best way to avert looming fiscal catastrophe and restore some morality to an indefensible system."

Those entitlement programs are also the primary drivers of our national debt, which just hit $22 trillion and is on pace to reach levels not seen since World War II by the end of the next decade.

"Every day that passes, the problem gets bigger and the solutions become more difficult to implement," said MacGuineas.

About the only way Congress will get off the hook is if climate change kills everyone in the next 12 years.

https://www.forbes.com/sites/ebauer/...U#a47a231646e6
Quote:
The Social Security Trust Fund Clock Continues To Tick

Spoiler:
It's time, again, for the annual Social Security Trustees' Report. The headline figures, as always, are the change in the dates at which the various trust funds are projected to be depleted. Combining OASI (Old-Age and Survivors Insurance) and DI (Disability Insurance) together, the depletion date has been extended one year further out, from 2034 to 2035. Taking the two programs separately, the old-age fund's depletion date remains unchanged at 2034, a mere 15 years from now, but the disability fund's depletion date was extended from 2032 to 2052. When each of these funds are depleted, they will be able to pay out 77% and 91% of benefits, respectively, out of incoming tax revenues.

What's going on?

To begin with, why such a dramatic improvement in the status of the disability fund? The Trustees' summary explains:


The change in the reserve depletion year for DI is largely due to continuing favorable experience for DI applications and benefit awards. Disability applications have been declining steadily since 2010, and the total number of disabled-worker beneficiaries in current payment status has been falling since 2014. Relative to last year’s Trustees Report, disability incidence rates are lower in 2018. They also are assumed to rise more gradually from the current levels to reach ultimate levels at the end of 10 years that are slightly lower.

What's this mean? In part, the prosperous economy has meant that more people with disabilities are finding employment and are able to stop claiming Social Security disability benefits, or never need to begin doing so in the first place. This means that actual disability recipients are fewer in number than was forecast, and that they have changed the assumptions going forward as a result. That's great news -- if that continues to be true in the long-term.

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But there's another change in the American economy and society that the report has not reflected, and that's the declining fertility rate, which the report continues to assume will be a level of 2.0 children per woman in the year 2027 and later. While the report acknowledges that the 2018 fertility rate is an estimated 1.74, it nonetheless maintains a 2.0 fertility rate because

the Trustees expect the total fertility rate for future years to remain relatively close to the average level since the end of the baby-boom era (p. 81)

after assuming a recovery period extending to 2027.

Now, I'm not going to second-guess the experts at the Social Security Administration with respect to their selection of economic assumptions such as wage increases or inflation. And likewise, estimates regarding immigration are so impacted by policy decisions as to make it very difficult to forecast in the long-term. I will also observe that future fertility rates will not have an impact on the OASI trust fund depletion because no baby born in the future will be working 15 years from now.

However, the historic lows in American fertility rates appear to be here to stay, or, at least, a part of long-term changes in society that we have no grounds for believing will reverse themselves, and those low rates have a significant impact on the long-term finances of the program. Based on the report's sensitivity projections, the actuarial balance, that is, the program deficit as a percentage of taxable payroll, worsens considerably if the assumed fertility rate drops from 2.0 to 1.8: from -2.38% to -2.55% for the 50 year projection and from -2.78% to -3.22% in the 75 year projection. In 2093, that is, at the end of the 75 year projection and as the cumulative consequence of the lower fertility rate, the projected deficit moves from -4.11% to -5.63%.

Is this intolerable? Not a big deal in the grand scheme of things? Easily solved by bringing in more immigrants? A win for the environment and habitat preservation for which higher social insurance costs are a small price to pay? Regardless of one's point of view, it matters. What's more, the metric of trust fund depletion year focuses our attention so much on a single year in the near future that it appears to be preventing us from seeing the big picture.

Does it matter?

The same arguments are being rehashed year after year. "The fair thing to do is to increase the retirement age because people are living longer." "No, all we need to do is increase taxes on the wealthy to fix the shortfall." "No, these aren't welfare programs; the responsible way to fund middle-class social insurance programs is by having the middle-class pay for them." But we -- the American public at large and our representatives, Republican and Democrat, in Congress -- never seem to get past talking at each other to working together to solve the problem.

About this time a year ago, I wrote an article I titled, "The Social Security Trust Fund Is Real - But So What?" in which I hoped to persuade readers that the money in the trust fund is real money, the government has a real obligation to pay back the bonds when the trust fund redeems them, full faith and credit, yadda yadda yadda -- and yet, in the end, it just doesn't matter. Congress may solve the issue of trust fund depletion by increasing taxes to replenish the fund. They might, on the other hand (as I cynically tend to expect to happen), wait until 2034 and then pass a series of stop-gap measures enabling general revenues to supplement FICA tax collection as needed to avoid reductions in benefits.

What matters is the big picture. How much "room" is there for a broad-base or high-income tax hike specifically meant to fund Social Security, relative to so many other competing priorities, from education to parental leave/child care and other benefits for parents, to the anticipated needs of future displaced workers, and medical care for workers and the anticipated growing cost of Medicare/Medicaid/long-term care for the elderly? Promoting a fix without looking beyond the single metric of trust-fund depletion or 75-year solvency will miss the point entirely.
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Old 04-30-2019, 03:54 PM
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https://www.marketwatch.com/story/so..._share_twitter

Quote:
Opinion: Social Security could provide cheaper and better annuities than the private sector

Spoiler:
At a recent Brookings Institution forum on the decumulation of wealth in 401(k) plans, Dick Thaler, a behavioral economist and Nobel laureate, suggested that workers be allowed to send the Social Security Administration a portion of their 401(k) savings in exchange for an annuity.

The amount eligible for annuitization could be capped at $250,000 or even $100,000 — the median balance for workers with 401(k) holdings.

Read: This one investment move can give you lifetime yearly income in retirement

I’ve always thought that the government could play a useful role in the annuity market by eliminating many of the problems that make the private provision of individual annuities expensive, complex, and risky. Individuals with 401(k) balances simply cannot go out and purchase the same annuity that they would have received under a traditional defined-benefit plan for a number of reasons:

•Annuitization under a traditional defined-benefit plan is generally mandatory, so everybody participates. When annuitization is voluntary, only those who expect to live for a long time are likely to find the product attractive. This “adverse selection” significantly increases the cost per dollar of annuity income.

•Administrative and marketing costs are significantly higher when annuities are purchased one-by-one rather than in bulk, as done under a defined-benefit plan.


•Participants must now also worry about when they purchase an annuity. Payments will be high when interest rates are high and low when they are low. That is, in a 401(k) environment, the interest rate risk shifts to the individual participant.

• Finally, if individuals have to shop for annuities on their own, they will have to consider the health of the insurance company.

If the goal is to encourage annuitization, the product must be made as cheap, easy, and safe as possible. In my view, the government has several potential advantages here:

•The government could lower administrative costs dramatically by pooling large numbers of participants.

•The government does not need to include a buffer in the price to cover the tail risk that a cure for cancer suddenly increases lifespans by five years.

•If lower costs increase participation, adverse selection would also be reduced, thereby further improving the payout per dollar of premium.

•The government could adopt some procedure to smooth out payments over time so that different cohorts did not end up with dramatically different payout rates.

•With the government as the provider, concern about the solvency of the insurance company also disappears.

•Finally, the government already offers inflation-indexed annuities (i.e., Social Security benefits).

Let me make two friendly comments to Thaler’s proposal. First, people don’t like annuities, so they may not be thrilled by access to even the really cheap inflation-indexed annuities provided through Social Security. The only way to get widespread participation would be to have a default whereby, for example, 50% of a worker’s 401(k) holdings are automatically transferred to Social Security up to a cap of, say, $100,000.

Read: Not sure where to retire? Try MarketWatch’s customized tool to find the best place for you

Second, the staff of the Social Security Administration has been cut repeatedly, even in the face of the retirement of the baby boom generation. Between 2010 and 2018, SSA staff fell by 12%, while the number of retirement beneficiaries increased by 20%. If Congress were to make the wise decision to allow people to buy into Social Security, it would need to ensure that the agency has the staff to take on this broader mandate.


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Old 04-30-2019, 04:35 PM
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When Social Security launched in 1935, the average life expectancy for Americans was 61—that means the average person died four years before qualifying for benefits.
I hate it when journalists cite this statistic; it represents a fundamental misunderstanding of what Social Security is and what its benefits were understood to be at that time. In particular, anyone who dies before reaching working age is irrelevant to the retirement benefit portion of the program. The right statistic would be something like "In 1935, X% of 18 year olds were expected to live to age 65, and the life expectancy of 65 year olds was Y".
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Old 05-01-2019, 09:18 AM
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Originally Posted by Werewolf View Post
I hate it when journalists cite this statistic; it represents a fundamental misunderstanding of what Social Security is and what its benefits were understood to be at that time. In particular, anyone who dies before reaching working age is irrelevant to the retirement benefit portion of the program. The right statistic would be something like "In 1935, X% of 18 year olds were expected to live to age 65, and the life expectancy of 65 year olds was Y".
Journalists write for the layman, not experts. Get over it.
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Old 05-01-2019, 09:36 AM
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Journalists write for the layman, not experts. Get over it.
Disinformation is harmful to a democratic society which rely on well informed voters making mostly the right choices over long periods of time.
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