"Social Security is a compact between generations. Since 1935, America has kept the promise of security for its workers and their families. Now, however, the Social Security system is facing serious financial problems, and action is needed soon to make sure the system will be sound when today's younger workers are ready for retirement.
In 2016 we will begin paying more in benefits than we collect in taxes. Without changes, by 2037 the Social Security Trust Fund will be exhausted and there will be enough money to pay only about 76 cents for each dollar of scheduled benefits...."Well there you have it. There's simply not enough money in the bank to pay for all the obligations. A solution must be found, and whatever proposal goes on the table is likely to raise serious objections from those whose financial interests will be harmed by the proposed solution.
Clearly, sacrifices need to be made, and a number of sound options have been put on the table, including raising the retirement age, indexing benefits to inflation rather than to salary increases and so forth. However, there has been one proposed solution that is really upsetting to me - the idea that Social Security benefits should be means tested.
My wife and I consistently pay the maximum annual amount in Social Security taxes - currently 6.2% of our salary, each. We make a decent living, and I am not going to apologize for it. It is already pretty clear that we can expect to receive far less in benefits than we pay out in taxes, and you know what, I am OK with that. I make more money, I will pay my fair share. This is part of the social contract - we should take care of those less fortunate in our society. However, I think that it is completely unfair to charge us hundreds of thousands of dollars over our working lives, claiming that this money will be used to guarantee us regular income in retirement, only to later take the money and run.
Alpaca and I work hard. We take take sizable chunks of our paychecks and save them - setting money aside for a rainy day and ultimately to give us the lifestyle that we want in retirement. And, yes, we also want to leave something to our kids when we are gone. The money which we save will become income generating assets. Under the means testing proposal, our hard work and propensity to save could be used to revoke or reduce our right for Social Security income. Income which we rightfully earned and paid for with our hard-earned, maxed-out taxes. We don't have to save. We could take the money and just spend it, but that would be irresponsible, wouldn't it?
Means testing is a pernicious approach that penalizes the saver compared to the spender. If instead of saving our money today we spent it all, leaving nothing for retirement, we would have no "means" that could be used as justification to reduce or eliminate our Social Security income. This policy would perversely encourage people to spend rather than save their extra income. Great for the economy today, horrible for our economic prospects as a nation.
I am willing to work a few more years before I am entitled to receive Social Security payments. I also think it's justifiable to index Social Security to inflation rather than to salary increases. I think that taking away our hard earned Social Security benefits for which we are paying over a lifetime of hard work is nothing short of robbery.
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