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To: letters@suntimes.com From: Scott Sinnock ssinnock@netzero.com, 9:00pm, October 17, 2012 Subject: Social Security Entitlements On October 17, Vern Lee in a letter to the editor wrote that Social Security is an "earned benefit", a "return on an investment" and not an "entitlement". That is true for about 10 years of typical benefits. After that, total benefits start to exceed all "contributions" plus interest earned, if such "personal accounts" were invested at a reasonable interest rate. Of course no such "personal accounts" exist, as Mr. Lee notes, only a lump-sum "trust fund". So, I ran the numbers for a typical Social Security "account", you can too. In almost all cases a person's Social Security "contributions" plus reasonable interest are completely depleted after about 10 years of benefits. Mr. Lee indicated he is 75. If he retired at 65, he is just about to go on the dole. From here on out, someone else is paying your Social Security, Mr. Lee. Do you feel you deserve your current, COLA adjusted benefit for your lifetime? If so, I suggest that contrary to your statement, you consider someone else's money as your "enti tlement" for your many years of hard work. (end of "letter", following is a note to the editor:) I have an EXCEL spreadsheet I could send that verifies this claim. You can adjust interest rates, contributions, and benefits, which are available from on Social Security's web site or you can use your own. No matter how the numbers are run, about 10 years of benefits seem to always use up the total "investment" on your "personal account". To do this kind of analysis you have to make several assumptions because no "personal accounts" exist. The Social Security Administration (SSA) provides a calculator on its website that estimates a retirement benefit based on inputs of the last year worked, last salary, and number of years worked. This plus historical data on interest rates in general, salary history, and known Social Security "tax" rates and "cut-off" incomes allows reasonable, defensible assumptions. For example, I assumed the rate of return on "contributions" was 50% of the prime rate as my baseline. Your EXCEL guru's could make a much better tool I am sure, I just spent a few hours. But the issue is; do you have the courage to take on the almost universally believed claim, so well put by Mr. Lee, that Social Security contributions plus interest more than pay for the benefits. Do you want to take on the issue of the massive transfer of wealth from the young to the old, with Social Security and other pensions a big part, medical insurance, medicare, etc. the other. I am 66, born January 9, 1946, almost the "first" baby boomer. Full retirement benefits started for me this spring; the tsunami has just begun to rise. If I live to be 85, someone else, the young, will have to give me about 300,000 to 500,000 dollars, if I live to 95, perhaps a million. Its in the spreadsheet. Do I deserve it? The system worked fine when lots of young were taxed at a low rate to pay low benefits to a few old folk. Now there are fewer young, more old, and higher benefits. We ALL know this, but NOBODY talks about it. Will you? | But the issue is; do you have the courage to take on the almost universally believed claim, so well put by Mr. Lee, that Social Security contributions plus interest more than pay for the benefits. Do you want to take on the issue of the massive transfer of wealth from the young to the old, with Social Security and other pensions a big part, medical insurance, medicare, etc. the other. I am 66, born January 9, 1946, almost the "first" baby boomer. Full retirement benefits started for me this spring; the tsunami has just begun to rise. If I live to be 85, someone else, the young, will have to give me about 300,000 to 500,000 dollars, if I live to 95, perhaps a million. Its in the spreadsheet. Do I deserve it? The system worked fine when lots of young were taxed at a low rate to pay low benefits to a few old folk. Now there are fewer young, more old, and higher benefits. We ALL know this, but NOBODY talks about it. Will you? Do the numbers, tell the story: the "story" being "earned" versus transferred money in Social Security and other pensions and, most importantly, where it is transferred from, including age cohorts, which I have never seen. But don't the young deserve to know what they are paying for? It is not an issue of principle, but one of fairness. The young have always taken care of the old, but I think we may now be demanding too much, more than the young would willingly give if they knew what they were supporting. The spreadsheet (or your better version, database or other computer program) makes the "excess" benefits explicit, at least for Social Security. Will you tackle the big lie? The lie is that we "earned" our retirement benefits in an actuarial way. Perhaps it isn't a lie, perhaps it just hasn't been told. It is the issue of our times, I think. What kind of "retirement" do people deserve above and beyond what our "investments" provide. As long as the misperception persists that benefits are "earned" financially, the raid on the treasury will continue. I have asked all my friends, many with graduate degrees, and they almost universally believe that they "contributed" enough to cover their retirement. In fact most believe they are getting screwed by the system and will not even get back what they put in plus interest. This misperception MUST be corrected if we are to rationally address the "cost of retirement" issue, but the forces that will deny or confuse the issue are everywhere, and, by the way, we old folks vote in larger percentages than any other group. It will be a long process. I think the spreadsheet (actually just the numbers, no matter their form) is a good place to start. So I implore you, be bold, make the assumptions so you can do the numbers, then, please, tell the story. Scott Sinnock 205 West Todd Avenue Apartment 201 Woodstock, IL 60098 tel. 815.206.0634 ssinnock@netzero.com |