Tuesday, August 13, 2013

Social Security — A Challenge to Beneficiaries — Why

Always a Challenge to Keep it Viable and Working as Designed

The purpose of this post is two-fold: (1) provide a fact sheet on Social Security and Medicare, which I modified from the one offered at the government site, mostly for my own use and purpose and info for the readers, and (2) lay out the challenges the way I see them in terms I think the reads will appreciate (I like things in simple terms that make sense). It's lengthy, so bear with me and enjoy it for what it is: information you can use.

SOCIAL SECURITY as of July 2013: Almost 58 million Americans in total will receive over $816 billion in Social Security benefits this year:

 Retired workers nearly 37 million @ $47.4 billion - $1,269 average monthly benefit
 Dependents 2.9 million @ $1.8 billion
 Disabled workers 8.9 million @ $10 billion - $1,129 average monthly benefit
 Dependents 2.1 million @ $ point 69 billion
 Survivors 6.2 million @ $6.6 billion - $1,221 average monthly benefit

Fact: Social Security is the major source of income for most of the elderly.

Fact: Social Security provides more than just retirement benefits.

Fact: An estimated 163 million workers are covered under Social Security.

Fact: In 1940, the life expectancy of a 65-year-old was an additional 14 years; today it is more than an additional 20 years.
Fact: By the year 2033, the number of older Americans will increase from 45.1 million today to 77.4 million.
Fact: There are currently 2.8 workers for each Social Security beneficiary. By the year 2033, there will be 2.1 workers for each beneficiary.

Note: The problem with funding Social Security and keeping viable for another 75 years and longer is simple: It is about jobs.

Jobs here at home help people pay into the system they expect to enjoy in their Golden years - that is the answer; not gimmicks from Congress, or the continuing propping up of retirement systems in China or India or elsewhere off-shore. All gimmicks in the world will not fix that obvious cause, no matter how hard any Congress tries to “fix it, or make it work better, or anything else they yammer about.”

Americans need jobs here at home and off-shore that pay lower wages for the importation of lower priced goods that erase American production and jobs. That is the problem, period.

Medicare Fact Sheet: Medicare is the nation’s health insurance program for people age 65 or older.

Certain people younger than age 65 can qualify for Medicare, too, including those who have disabilities, permanent kidney failure or Amyotrophic Lateral Sclerosis (ALS) (commonly referred to as Lou Gehrig’s disease).

Medicare helps with the cost of health care, but it does not cover all medical expenses or the cost of most long-term care. You may buy a Medicare supplement policy (Medigap) from a private insurance company to cover some of the costs that Medicare does not.

Medicare is financed by a portion of the payroll taxes paid by workers and their employers. It also is financed in part by monthly premiums deducted from Social Security checks.

Those seniors over 65 normally apply for Medicare and Social Security at the same time.

How to keep Social Security viable and serving the millions just like it has for over 75 years (my take on the issue);

Question: How come if Social Security is a “Ponzi scheme, or a monstrous lie” that most of the GOP calls it as they play games with it since the days of  Alf Landon in his 1936 presidential speech labeled it that way, has also been very popular as it has helped tens of millions of Americans for over 75 years? How does the GOP explain that. It is by far the best program the U.S. has ever developed and implemented right along side Medicare  and the GI Bill.


Keep an eye open for this latest fad or gimmick to “fix social security” – it’s called the “Chained CPI” – however, it will not “fix” it – it will greatly impact the program and the benefits each month, and get worse over time. It has been explained several ways as this “do nothing” Congress constantly debates the budget, deficit spending, the national debt ceiling, and of course, repealing Obama-care even after trying with 40 votes – now they want to “de-fund or not fund” it. Plus the ever popular: talk of another war in the ME; this time in either Syria or Iran, or both.

1.  This is but one of several proposals to be included in a way to change to the way that inflation is calculated regarding Social Security (COLA included in the monthly checks on an annual basis).

2.  The “Chained-CPI” grows more slowly than the current calculation (CPI-W). It would reduce spending on Social Security as well as other federally administered programs such as Supplemental Security Income and pensions for veterans.

Changing the cost-of-living adjustment (COLA) using a chained CPI would have a detrimental impact on the economic well being of older and disabled Americans and their family members who receive benefits from Social Security. Small reductions to the annual COLA will accumulate over time so that the largest reductions in benefits will be on the oldest beneficiaries and the long-term disabled. For example, 92- year-old beneficiaries who were on the program for 30 years would see an 8.4% cut in benefits. Disabled children could face even larger benefit cuts over their lifetime. Oldest Americans are the least able to absorb cuts to their benefits as they are more reliant on Social Security for their income and have higher out-of-pocket medical spending and a higher poverty rate than younger Americans.

Social Security has been effective for 77 years, and it has helped millions of Americans ever since. Need anyone be reminded that Americans who now live with Social Security, some on a fixed income and who worked hard their whole lives, paid into the system they look forward to enjoying and living on for the rest of their lives.

Yet, somehow now it's all bad or awful and needs “fixing,” which in political lingo means dramatic changes that will hurt the program and those looking forward to benefiting from it.  Some have advocated even handing it over to Wall Street bankers and brokers or other private account managers to make it better? Need anyone be reminded of 2008 near total economic meltdown of Wall Street and every bank in the country.

Those banks, we are still being reminded of even today, cheated millions of people on their mortgages while they now have regained huge profits. That kind of business model for handling Social Security – I don’t think so.

We all know that the GOP-Rightwing Market-driven mentality is simple: “– leave the market alone, get government out of the way and it will take of itself and us.”

What’s wrong with that picture?

1.  They assume that all of your Social Security taxes would be invested. That is totally impossible.

2.  Their calculators ignore the turbulence and fluctuations (2008 comes to mind and the turmoil that followed all across Wall Street).

3.  They mechanically imply that every investor does very well – a lot like those who bilked the Mutual Fund accounts over time - remember all those FBI perp walks?

The false part continues with questionable assumptions that the high past growth rates of stock prices (prior to the current crash and burn we still see) will resume and continue, and that all of the increased value will go directly to stockholders (and your SS account).

As anyone who invests in a mutual fund knows, or should know, those commissions, the slick marketing, and growing administrative costs significantly reduce what ends up in your bank account at the end of the month. Why?

They subtract all those tens of thousands of dollars from your “profits” into their profits (read: their nest eggs and not yours). Keep in mind THAT DOES NOT happen now with social security. It may not offer big earnings or huge profits, but for over 75 years it has offered: security you can count on and peace of mind for millions (only income for some).

So, should we give it to the next Enron, Tyco, WorldCom, or any of their accountant firms like Arthur Andersen who handled their money and drove them into the ground?

Ask yourself, where did their investor’s money go? Belly up is the short answer. in those companies money go? Easy answer: down the drain. Keep in mind that brokerage houses, failed banks, and mutual funds have been very active in the campaign to privatize Social Security. No one has to wonder why: it’s a solid source of investment money for them to play with, and it doesn’t cost them a dime – so no wonder they want their grubby hands on it.

Further, they all would stand to gain enormous fees if billions of dollars are shifted each year from Social Security payments into some weird account under Wall Street management. Of course, those fees must come from somewhere, namely from the balances in individual accounts.

Is it any wonder why the GOP still clings to the 1936 idea of we don’t need any social security or anything else “social change” – just put us in office and in charge and we will make you rich and free and without any big government programs.”

That’s also what they hoped for in 2012 – what did they get? Well, I hope you remember.

Keep in mind that many Wall Street Mutual Fund managers raked off over $1.2 TRILLION – yes, TRILLION from many investors. With so much money in hand they thought no one would notice and that is their hook: “Give us your money and we will earn plenty on top of that for you.” (Funny, they seldom mention their profit and loss number, right Mr. Madoff??). 

The CHAINED CPI background:

We all know about the CPI (Consumer Price Index), which measures the average change over time in prices paid by urban consumers for a representative market basket of goods and services.  It is the major economic indicator that is used to track changes in the cost of living over time – the COLA.

The CPI directly affects the income of 10 of millions of Americans since it is used to adjust their income in things like their Social Security benefits; the income eligibility levels for most government assistance programs like food stamps for example; for most tax brackets as well as other features of the individual income tax rules; and COLA, which is directly related to wage adjustments in the private sector (small hikes to keep up the COLA we are told and it varies annually in small percentage points that equal real money – somewhat like a “pay raise”). A 2-3 percent COLA hike is a lot of money for people on Social Security as their only income. Likewise a flat nothing or small hike means a huge difference in their budget plans, too.

The CPI-Chained vs. the CPI:  CPI as it now works is the formula that looks at how the price of stuff we need (e.g., food, clothes, etc.) changes over time. It's used to make cost-of-living adjustments in programs such as Social Security, Veterans benefits, and food stamps. It various annually and is set by Congress for all the programs it impacts.

Now, the Chained CPI is a little twist on that process since it would measure the same cost of the same things but slightly differently. It assumes that when prices go up for one thing like meat for example, people will settle for a cheaper substitute like if beef prices were to go up a few pennies or more, then they would buy more chicken and less beef to compensate, or vice versa. 

Note: Less expensive imports for a certain produce also plays a huge role as shoppers always look for bargains that end up working against domestic products on par with the cheaper imports and that affects wages and a lot of other thing tied directly to income and the COLA and well ... your rent and car payments, too.

The COLA adjustments would be lower with the chained CPI than with the plain old CPI, and thus depending on which formula is used, the amount of your Social Security payments could and would change over time. Ergo: you would lose money.

Helpful Links and Resources:

Go here and see how much you would lose – fill in the calculator and see the results ... it only takes a couple of minutes. 

With the "Chained CPI" who would lose the most (the poorest naturally) explained here.

Again, my purpose: inform and provide assistance. Enjoy.

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