Social Security – Redux

I called this Redux because I wrote this one, Social Security less than a year ago.  Government programs that you thought you could rely upon are really at the whim of whoever is in office at the time.

The other day I received the most interesting notification from the Social Security Administration (SSA).  Entitled “Important Information,” it first announced that I got a raise, albeit a 1.5% raise. [sigh] From there it went on with the following question:

What If I Worked in 2013?

• If you were “full” retirement age (currently age 66) or older throughout the year, you may keep all of your benefits no matter how much you earn.  But, if you were younger than full retirement age at any time during the year, there is a limit to how much you can earn before your benefits are reduced.
• If you were younger than full retirement age all year in 2013, the earnings limit was $15,120.  We must deduct $1 from your benefits for each $2 you earned over $15,120.
• If you reached full retirement age during 2013, the earnings limit was $40,080.  We must deduct $1 from your benefits for every $3 you earned over $40,080 until the month you turned age 66.
• The earnings your employer reports are the amount that will be on the W-2 you will receive.

As you night expect if you have read any of my essays, I have some serious problems with this.  Let’s march on through them one by one, shall we?

1. December 15 is a hell of a time to be notifying someone about their earning limitations for 2013.  By now, they’ve already earned it according to the old rule of $30,000.  Now the SSA puts in a retroactive rule that cuts their earnings allowance in half, and as a result of their following the old rule, their social security check(s) for 2014 will be cut by 70%.  I always thought retroactive laws were unconstitutional, but apparently not when it benefits the Government.
2. The word “earn” bothers me.  What they really mean is “earned income,” that is, getting a paycheck from a regular job.  As an example, you turn 62 in 2012 and you find out that you are eligible for the average social security benefit of $1000 a month.  You currently make $15 an hour which is in line with what you’re allowed to earn.  Your eyes get really big at this point.  You just realized that you can get an extra $1000 from the Government and finally pay some bills, buy food, buy clothes for your family, and put gas in your car.  Then after you’ve done all that, the SSA comes along with this retroactive announcement.
3. The word “earn” does not mean “unearned income.”  Unearned income is dividends, interest on bank deposits, etc.  You can receive all of that you want without penalty.  I had to read this part several times to bring myself to actually believe it!
4. Now, if you worked hard your whole life, put some money away every month, put some money in an IRA or 401k at work every month, and invested reasonably well, you might have saved $500,000.  If you were getting an average of 5% dividends or bank interest (that’s pretty good these days) then you would be retiring on $25,000 a year before taxes.  If you are lucky enough to be receiving even a small pension, say $6000 a year, it would bring you to $31,000 a year.  An additional $12,000 a year in social security would be a big help.  This scenario would mean you could live out your days with an annual income of at least $43,000 before taxes.
5. Let’s say you’ve “put away” $20 million over your working lifetime.  At 5% (and I’m sure you’re getting more than that) you would have unearned income of $1 million per year.  SSA says, “no problem, you get your full benefit.”  An extra $36,000 – $48,000 a year in social security is meaningless to you but there are enough of those examples to be a drain on an already strained trust fund.
6. Every President from Roosevelt to Reagan has said publicly and loudly that “the social security system is not intended to make people rich, it is intended to help people live an acceptably normal life throughout their retirement years.”  So, what the hell happened?
7. To provide social security in any amount to someone with unearned income of $1 million per year is ethically and morally reprehensible.  What can the current President and Congress be thinking to allow such a thing to happen?  Have they completely lost sight of Roosevelt’s original intent of the system?  Have they fallen prey to the argument that everyone should get out of the system what they put in?

Here’s my solution to the social security “problem.”

• Everyone pays 6% social security contributions on every dollar they earn.  That’s earned income, unearned income, $10,000 a year, or $100 million a year.  Everyone!
• Everyone who is retired with income of $100,000 (COLA adjusted every year) or more does not qualify for social security.  That’s earned income, unearned income, it doesn’t matter.  You don’t need the money and there are many people who do.
• The Government needs to stop playing with the COLA formula.  It’s been working fine for 50 years.  The cost of hamburger and the cost of gasoline is what it is.  Get over it!  We live with it every day.  Stop trying to balance your budget with this accounting trick.

You see, that wasn’t hard now was it.

Please feel free to share this post on your favorite social network below.