While Obama hasn’t released his budget yet, the reports are that it will include a proposal to include chained CPI for calculating Social Security inflation. It’s technical and if you manage to stay awake with a detailed explanation of it, congrats. The bottom line is that the calculations of inflation would rise more slowly on the assumption that seniors, people on Social Security Disability and widows would replace things for cheaper ones, so we can give out benefits at a lower rate than inflation.
I’m asleep just writing about it, but it’s a major benefit cut. To get out ahead of it, I’m writing Senators Cantwell and Murray and Representative McDermott (the 3 people who represent me in Congress). I hope you’ll do the same.
Dear Senators Murray and Cantwell and Representative McDermott;
I’m writing to ask you to oppose tying Social Security benefit increases to chained CPI instead of to to inflation. We should be looking at ways to increase benefits to seniors who’ve been paying into the system their whole lives, or at the very least preserving the current benefits.
Social Security is not in crisis right now. While some tweaks may be necessary down the line, they shouldn’t be made just to show that you’re doing something. it’s also abhorrent to talk about benefit cuts — either through this sort of thing or raising the retirement age — before raising or eliminating the earnings cap all together.
Thank you,
Carl Ballard
I’m afraid change to SS is inevitable. It will be made into a “needs based” system at some point in the future. Some people may not get anything from SS while others will have their benefits reduced because they have retirement plans and other assets to support themselves.
There is talk about limiting the size one can accrue in a retirement account. I think the number being tossed about is $3 million. Anything above that amount would presumably be taxed away ann used by the Social Security system to provide retirement funds for others.
I don’t know exactly how far this idea will go, but I think it will be opposed by many folks out there.
@2 Your source?
Mind you, I’m not doubting your sincerity. The GOPers have dropped hints of far worse. For that matter, the operators of the Wall Street Everyone’s-A-Loser Casino will likely prevent any of us mere mortals from collecting anywhere near what we’ve been conned into donating.
My wife and I are both receiving SS benefits after we retired last year. I worked in the trades or logging most of my life and receive [before Medicare and health insurance] about $1350/mo. My wife worked as a waitress [or hospitality as we call it now] except for eight years teaching [6 high school and 2 college]. She receives about $800/mo from SS. She also qualified for about $500/mo from PERS for the teaching gig. SS, to prevent a financial “windfall” reduces her SS by half the value of her PERS. We get by as we own our property and our Airstream outright and live in a place where property taxes and utilities are pretty low. At this point we are mobile, can garden, raise chickens or a calf and can probably eat fish out of Lake Roosevelt without worrying about mercury build-up. But most seniors on SS retirement don’t live in a rural area and don’t have the resources that we do. SS is not, as currently configured, a poverty program but it’s damn close to it. Most seniors on SS don’t have rich resources….My car is a ’96, if it goes out, my replacement limit is probably $1500. Luckily I’m a professional mechanic so I can fix my own, but most folks can’t.
As a society we are going to have to decide what we want from SS [and Medicare and Medicaid and whatever]. I live out here in Kathy McMorris-Rogers and Doc Hastings country and watch the pair of them vote for draconian cuts. The next minute they are back in Moses Lake or Spokane holding press conferences decrying reductions in service to community airports, irrigators, the Grand Coulee Dam, payments to rural counties and so on. Everyone wants someone else ox gored.
A lot of Republicans hate anything to do with the New Deal except for what they get out of it…around here that’s cheap power and lotsa water. In my opinion people like Paul Ryan would willingly take us back to the excesses of the 1920’s and install a theocratic state. Maybe it is time, like my survivalist friend Vern says, to hunker down and arm up.
I’m not sure if I got that straight – does “chained social security” mean that seniors don’t need as much money because if we cut their benefits, they will find a way to get by on less?
If that were true, we could cut benefits to zero, and somehow they would manage to get by just fine? (Memories of the Laffler curve drifting back to mind, for some reason….)
@2 “Anything above that amount would presumably be taxed away ann used by the Social Security system to provide retirement funds for others.”
Whose ass did you pull that out of? Yours? Some rightwing blogger’s?
Yes, some Democrats are talking about Mitt Romney’s $100 million IRA. A $3 million cap means amounts over that would be not be tax deferred.
The key word here is “deferred.” IRAs eventually are taxed. At age 70, you have to begin withdrawing money from your IRA, and paying income taxes on it. That’s always been the law.
You’re also limited in how much of your income you can shelter from taxes by putting it an IRA. That’s always been the law, too.
All an IRA cap would do is limit how much you can shelter in an IRA. How many people would ever reach $3 million?
Given the limit on annual contributions, it’s hard for me to see how anyone can accumulate $3 million in an IRA, unless your wealthy parents put you on the payroll of the business they own when you’re 5 years old — in order to shelter their own income.
“on the assumption that seniors, people on Social Security Disability and widows would replace things for cheaper ones”
Yup, water instead of milk, herbal remedies instead of doctor visits. Oh, and they could join a nudist colony when they can no longer afford thrift-store clothes.
Chained CPI is paying ransom to GOP budget terrorists. I thought Obama didn’t negotiate with terrorists?
@ 6
Two ways to accrue vast amounts in an IRA:
1. Buy low, while young, and don’t touch it. The AMGN I bought in the early 90s will enable to me retire two years earlier than if I had not bought AMGN.
2. Roll over something else, in which much more can be tax-sheltered, into an IRA. I suspect that’s how Romney did it (along with # 1, investments he bought at ground-floor level and held for decades).
@8…I’d like to think that BO has a grand strategy in place involving giving the Republicans sufficient rope to hang themselves. Unfortunately, when it comes to BO the word appeasement comes to mind. He has demonstrated that he will sell out to the low bid.
@ 10
He has demonstrated that he will sell out to the low bid.
Really, is that a surprise?
Democrat philosophy is to play to the lowest common denominator in any aspect of life. You could call it ‘Leave No Moron Behind’.
@11 Republicans, on the other hand, will immolate themselves (and the whole country) on the conservative principle that “the rich shall pay no taxes.”
@11, 12….I’ve been involved in politics quite a lot and had both the pleasure of working with great ones [Mansfield] and poor ones {Baucus}. BO does not fall into the great range, but he’s not a contemporary Republican which elevates him to at least average.
@ 4
Wharfrat, serious question for you. I’m asking because I assume you did hard manual labor for most of your working life based on what you wrote.
Let’s assume that you had to make a choice between:
1. A reduction in benefits via chained CPI or similar
or
2. An increase in the age at which you would be eligible for retirement benefits, which equates to a reduction in overall benefits.
Which of these would be harder for you (or someone like you), and why?
From 3,
My source is watching two TV news bits about the subject and Googling the topic.
# 10: I wondered about that. I suspect that perhaps he is offering the Republicans a budget which includes at least one element of what they have been asking for – “entitlement reform”. The last thing they (Ryan, Boener) want to do is to pass the President’s budget. Instead, they want to pass their own budget, and force the President to sign it, so Ryan, et al, can take credit for it. They don’t want the President to take the credit, or even to be able to say that it is a bi-partison compromise.
Now watch them squirm as they try to argue that the President’s proposal doesn’t cut enough from Social Security, Medicare, Medicade, AFDC, etc. It puts them in a pretty poor light.
From 6,
Yes, Roger, I used the term “presumably” because that’s what I think will happen. I thought you legal people we good readers!
Traditional IRs are eventually taxed. For traditional IRAs, one must start withdrawing from his or her IRA by April 1st in the year after he or she attains the age of 70.5 years. So, if some one was born on June 1, 1950, he or she will become 70.5 in June of 2020. He or she must start withdrawing from his or her traditional IRA by April of 2021. (See IRS Publication 590 for the tables to determine how much must be withdrawn each year.)
As for Roth IRAs, the owner does NOT have to withdraw from the Roth account. In fact, a Roth IRA is a wonderful way to pass wealth from one generation to the next without excess government interference. Owners get no tax break for their contributions to Roth IRAs, but many see a tremendous benefit in accumulating tax-free forever funds. (There’s a CPA named Ed Slott that talks about this quite a bit on PBS. You should give this guy a look. I assume you have a TV, Roger, right?). Sophisticated people can structure a Roth IRA so that no taxes are ever paid on earnings in a Roth account by following Mr. Slott’s advice.
Now, let’s assume I put all my money in my Roth IRA into a stock ten years ago and is grew incredibly. Suppose I now have $6 million in my Rth IRA. I don’t feel that the government is entitled to swoop in and help themselves to $3 million, do you, Roger? Yes or no? That may not be what the guys I government are proposing, and they had better not be or they’ll have trouble.
From 4,
Sorry for your troubles, Wharfrat. You are certainly struggling.
@17 You’re confusing “presumption” with “ASSumption.” Every first-year law student knows the difference.
Who cares what you “think”? What is that relevant to? Some people “think” the earth is flat and others “think” Obama was born in Kenya and educated by Indonesian terrorists. Anyone can “think”. Being right is the hard part, and you trolls just aren’t very good at that.
Eventually, Social Security benefits will be based on the needs of the individual rather than what is currently done. The message to younger folks is to do a Roth IRA, even if he or she can only contribute a few hundred dollars per year in the earlier years.
Saving and investing for retirement is a many-decade process.
@17 “I assume you have a TV, Roger, right?”
Wrong again.
@17 “Now, let’s assume I put all my money in my Roth IRA into a stock ten years ago and is grew incredibly. Suppose I now have $6 million in my Rth IRA. I don’t feel that the government is entitled to swoop in and help themselves to $3 million, do you, Roger? Yes or no? That may not be what the guys I government are proposing, and they had better not be or they’ll have trouble.”
This argument rests on so many ASSumptions we may as well talk about money growing on trees. Why are you wasting everyone’s time with a stupid hypothetical no one has proposed and which will never come to pass? Let’s talk about real issues here.
@20 Eliminate the first sentence of this comment and you’re more or less there.
The only way a Roth outperforms a traditional IRA in after-tax net, though, is if the investments in the Roth outperform those in the IRA.
Investment income and gains are tax-free in a Roth, but because you start out with after-tax dollars, you put much less into a Roth than an IRA, everything else being equal. Which means your money compounds more slowly in the Roth.
I ran spreadsheets on this some time ago, and if everything else is constant, you end up with the exact same amount of after-tax dollars with either type of IRA. Which means there is no inherent advantage to a Roth over a traditional IRA.
From 22,
“Wasting everyone’s time?” You whole life has been a waste of everyone’s time. And hanging out on blogs like this one isn’t exactly spending time meaningfully.
Answer the question: should the government pass a law whereby it caps the maximum that can be in a retirement account to $3 million?
@24 You sure have a penchant for sweeping generalizations and grandiose statements, which is a form of intellectual laziness.
As for your question, no, because only a tiny number of retirement accounts ever reach $3 million, and that money will be taxed anyway, either at the front-end (Roth) or upon withdrawal (traditional IRA), so the net contribution to government tax revenues would be minimal or non-existent, which means it’s nothing but play-to-the-crowd political grandstanding.
From 23,
That’s why Roth IRAs exist: to let retirement investors have more than one option in structure. Some people value the current tax deductions more highly than others who value tax-free income,of the Roth IRA.
Mathematically it’s better to start taking Social Security at 62 rather than waiting until 65 or 66, but there are other factors to consider. If one wants to continue to work or has another source of income, waiting until age 70 has the promise of more money if one simply waits. I think, if memory serves, that SS payments rise about 8% for every year one delays starting to payments. That’s a nice incentive for waiting for many people. I know people who have done both strategies, and they all appear to be satisfied with their choices.
Just because you choose one course of action, Roger, does not mean that course of action is the “correct” course for everyone. I thought you guys promoted diversity. What’s wrong with someone doing something other than what you do?
From 25,
FINALLY! Roger gave a direct answer to a direct question! Alert the media!!!
Roger,
Google “Ed Slott” to learn more about Roth IRA planning. You don’t have a TV, but you can educate yourself with your computer,too!
@15 In fact, there was a piece about it in this morning’s Fairview Fishwrap–and a Reuters article about the apparent snivel the administration is having over this being leaked before they wanted to talk about it themselves.
Apparently the number being tossed around is a $3 million maximum for all combined retirement accounts–amounts above that would be taxable income. I’d say that number is a little on the low side–it wouldn’t affect us (we’re in our sixties and no way will be accumulate that much) but unless we can get a handle in inflation (fat chance!) our kids would get screwed. I can certainly see a cutoff somewhere between there and Romney’s supposed $100 million “nest egg”.
@114….Serial C….personally I would have worked an extra couple of years as the last 4 years I taught [rather than worked] auto and diesel technology. Realistically the chained CPI will probably have minimal effect on us.Many of my contemporaries, especially those working diesel, are pretty beat up by their mid-fifties. I’m probably not a great example as I have lupus/immuno-suppresive hemolytic anemia-sorta rare for an old white guy. There’s no way I could have kept up in a competitive shop environment, but I was reasonably ok in the classroom. From what I have read about chained CPI it makes some assumptions about seniors on SS that certainly don’t hold true for folks at the lower middle end of the economic scale. If your SS income is low enough you can trigger income-related housing, transportation, even possibly SNAP. Above that but below, say, $1800/mo living gets touchy sometimes. I’m fortunate to be able to make some informed choices about where to live. We deliberately chose to move back to Washington in a rural area. The choice of living here on the Colville reservation turned out to be serendipity….a close community, respectful of children and elders, minimal crime, a great community health center happy to take Medicare and my Medicare Supplemental insurance, a community center where we have showered three times a week while we work on getting utilities in the property, etc.
@18…TYA [a great band by the way, Alvin Lee, guitar god] I don’t see us a struggling in the usual sense of the word. The challenge is adapting to a different life style which involves spending a lot less money and spending it more cautiously. Honestly, I like retirement in my current situation. I have an income which allows me to live in a place I love, close to the kid and grandkids [but not close enough to have them annoy me], in a reasonably progressive state with “Death with Dignity” laws. I still live better than many Americans and certainly live better than a great part of the world.
@ 30
That helped me a lot, wharfrat. Thanks for sharing.