No. of Recommendations: 6
https://jillonmoney.substack.com/p/social-insecuri...Social Insecurity 2033
Social Security's trust fund is on track to run dry in 2033, which means the program and every recipient will be subjected to automatic cuts.
Hours before the Federal Reserve said that it would leave short term interest rates at 4.25-4.5 percent (no surprise there), a more impactful announcement emerged from the Social Security Board of Trustees. Social Security's trust fund is on track to run dry in 2033, which means the program and every recipient will be subjected to automatic cuts that will slash benefits by 23 percent unless Congress finally gets its act together.
You are likely familiar with this story, because it has been forming for more than 20 years. In its 2014 report, the trustees put it bluntly: “Neither Medicare nor Social Security can sustain projected long-run program costs in full under currently scheduled financing, and legislative changes are necessary to avoid disruptive consequences for beneficiaries and taxpayers.”
Social Security 101: In the rest of the article, Jill lays out the history, the issues, and the potential solutions. It's worth the few minutes it takes to read to see things laid out clearly.
No. of Recommendations: 2
Simple solution:
Pass a law requiring Social Security to collect taxes from all taxpayers who are paid 90% or less of the total earned wages paid in the US.
Problem solved. The current level of Social Security taxation covers only the low-80% or so of total wages earned and paid.
No. of Recommendations: 10
Or simply handle the tax the way Medicare does and remove the income cap on how much is taxed.
Jeff
No. of Recommendations: 0
remove the income cap on how much is taxed.
That would cause people to leave the US because ALL income was subject to FICA. By limiting to the 90% cap, highest earners (not the people who rely on passive investments for income) will likely accept it as reasonable.
No. of Recommendations: 28
Interesting on how countries differ.
The Canadian pension system was pay-as-you-go (current payments funded from current employment taxes) until the 1990s, when it became quite clear that that wasn't going to work out long term: it was going to be untenable unless something changed. Sound familiar?
I guess it had been clear for a while, but they did act. Contribution rates were 1.8% of payroll from inception of the system until 1986: 1.8% for the employee, plus 1.8% for the employer, total 3.6%. The rates rose slowly for a few years 1987-1996 at 2.8% each, then rose quickly 1997-2003 to 4.95% each. The extra contributions were enough to start building a pension fund. The contribution rate was steady at that level for 16 years, but was bumped up again 2019-2023 to 5.95% each where it is now holding steady. i.e., a "tax wedge" of about 12% for pensions alone.
The fund is now up to something like C$700bn, termed a "strong surplus" by the actuaries, so current forecasts are that it won't go broke...it's expected to be more that fully funded to at least the 2090s.
If there is a lesson, perhaps it's that sometimes you just gotta raise taxes. Just suck it up.
The US motto is "life, liberty and the pursuit of happiness". Canada's is a more boring "peace, order, and good government".
Jim
