Does social security matter anymore?
Answers
4075 points
EthanR answered one year ago …
Social Security matters to persons who have no other retirement income, or limited income coming in. With the restrictions on how much one can earn before their Social Security gets cut, those who are earning higher amounts may not be relying on Social Security anymore. Social security also matters to children who have lost a parent.
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2769 points
Oldman answered one year ago …
Any one who receives Social Security has the equivalent of a bond component in their portfolio...and even better, a somewhat-inflation-indexed type of bond or annuity.
If you discount the stream of income from an average SSI payout of $1000.00 after tax and $1200 before deductions for Medicare...the net present value of the equivalent bond portfolio woul be over $450.000.00 in taxable U.S. or Corporate bonds...or an immediate annuity requiring about $500,000...so it represents a significant chunk of a portfolio.
In the far future, say 30 years from now, the Social security current liabilities will be causing more outflow than growth in the Gov'ts. mythical calculations. Inflation will have eaten a lot of the value, but it still will be a tremendous component of one's portfolio.
2769 points
Oldman answered one year ago …
I made a BooBoo!. The average income from an immediate annuity /$100,000 deposit, pre tax, is about 620/mo/10 yr guaranteed, for a male, and somewhat less for a female at age 65. By age 70, this deposit will yield about 650.
So each $1200 from SSI really is the equivalent of a $200,000 - 250,000 bond equivalent, because at max, only 85% is taxed; and there's some inflation protection. Also, it pays, if you have other savings, or employment, to DELAY taking SSI, because: the COLA's increase each year, there's a generous (8%) incremenrt/yr before payouts begin...and that's the base for all other increases due to CPI, and if the spouse will have a lower SSI, at the older person's death, the spousal benefit will be significantly increased. The only hangup is Medicare, whose costs to enroll increase beyond age 66.
989 points
rvilmur answered one year ago …
As a social security collector of $1424/month after medicare deductions, it does matter to me. It is extra money for spending and investing. I do not really consider social security to be inflation protected as I started with $1427 per month and no medicare deductions five years ago when I was 62. The government statisticians have figured out how reduce the official inflation numbers to well below what the consumer experiences.
If you are still working and paying into the system, the deduction from your paycheck and what your employer is also taxed, is a significant chunk of your income. This tax will probably rise in the future as the payers/collectors ratio drops.
So, yes social security is important for everyone. It is an income redistribution program that you have no choice to opt out of. The social security trust fund is an accounting myth as the government spends all the excess social security contributions and still runs a huge deficit. Overall because any money that runs through the government shrinks, it is a drag on the economy. But, since most people don't know how to save money, you just can't replace it with private savings plans.
