Billionaires and Roth IRAs: the case for tax reform

[NorthDallas40]

Bush 2 proposed a modest revision to SS which would have allowed people to self direct their funds. You would have thought Armageddon was upon us the way politicians and media wailed about it.

Yep FDR was really a brilliant man and easily the most Machiavellian POTUS ever in my opinion. He knew they would never touch his legacy.

 

[walkenvol]

You fundamentally misunderstand how Social Security works (and has always worked). I quote directly from the Social Security Administration:

"When you work, you pay taxes into Social Security. We use the tax money to pay benefits to:

• People who have already retired.
• People who are disabled.
• Survivors of workers who have died.
• Dependents of beneficiaries.

The money you pay in taxes isn’t held in a personal account for you to use when you get benefits. We use your taxes to pay people who are getting benefits right now. Any unused money goes to the Social Security trust fund that pays monthly benefits to you and your family when you start receiving retirement benefits."

Learn About Retirement Benefits | SSA

Given your misunderstanding, I understand why you feel the way you do. I would object, for instance, were the government taking from the 401k balances of some to provide a spousal benefit to others.

Given how Social Security actually works, however, your proposal would unjustly deprive of their rightful portion those who have already paid (often more than) their fair share and who are already disadvantaged by a tax structure that has long put its thumb heavily on the scales in favor of the interests of dual-income families.

Good day to you and yours.

Respectfully Duck, it appears you view the current situation of SS as being the way it always was. As McDad mentioned, as recently as Bush it was being suggested to allow ones SS contributions to be invested in alternative avenues to garner potential greater returns. Indicating the POTUS was viewing it more like an IRA than a welfare program.

Good discussion, but are you profiting from the spousal benefit and it appears to be influencing your perception

 

[LouderVol]

SS works because it’s the biggest ponzi scheme going. Imagine if you could take 12% of your income and invest it. You’d have millions by 65. Not only that but you’d have a transferable asset that could create generational wealth. Instead Uncle Sam gives you maybe $25k for ten years and if you croak your wife can have 80% of your benefit if she forfeits hers. When she dies the jig is up. If you’re middle class you’ll never break even or come ahead on SS unless you live to be 120.

The break even point is really really low. I forget the exact number, but for ~95% of contributors its typically a net loss.

IIRC I would have to get full benefits at 67 and live to 97 to break even. Assuming nothing changes.

 

[LouderVol]

It may be, but it is the only thing keeping a lot of people out of poverty or in less poverty than they would have been. You would think if it was so easy to just save 12% of your income everyone would do it. Sadly, most people refuse to think that far ahead and invest nothing, don't earn enough for 12% to be available or enough, or just save less than 12% (I saw between 5-8% contribution rates for people in their 20s which is the most critical time to start saving).

And because the vast majority cant think ahead the vast minority who does think ahead must also contribute to the masses.

People dont learn because no one is allowed to burn their hand anymore. Let people experience the shock for a while of no welfare and you would see a drastic shift in mindsets when it comes to work and saving. As we see with Covid and expanded UE, more welfare doesnt help. It just makes more people dependent.

 

[walkenvol]

And because the vast majority cant think ahead the vast minority who does think ahead must also contribute to the masses.

People dont learn because no one is allowed to burn their hand anymore. Let people experience the shock for a while of no welfare and you would see a drastic shift in mindsets when it comes to work and saving. As we see with Covid and expanded UE, more welfare doesnt help. It just makes more people dependent.

What would stop the masses from coming to your place and taking what they believe they are entitled to have? Would be a wild experiment

 

[McDad]

The break even point is really really low. I forget the exact number, but for ~95% of contributors its typically a net loss.

IIRC I would have to get full benefits at 67 and live to 97 to break even. Assuming nothing changes.

We pay 12.4 percent of payroll for SS tax. half coming from us, half "coming" from our employer. Truthfully, the employee pays the full amount. Someone working 47 years at an average wage of 25 an hour, 40 hours per week will be paying 124. per week. That money put into a simple index fund every month for 47 years averaging 10% is over 5.6 Million dollars.

 

[volkyries]

And because the vast majority cant think ahead the vast minority who does think ahead must also contribute to the masses.

People dont learn because no one is allowed to burn their hand anymore. Let people experience the shock for a while of no welfare and you would see a drastic shift in mindsets when it comes to work and saving. As we see with Covid and expanded UE, more welfare doesnt help. It just makes more people dependent.

I am all for letting people burn their hands or to suffer when they don't have food, shelter, etc when they don't plan for the future. Unfortunately the majority of people are not willing to watch the human suffering and let people live with their choices. Perfect example of that in the news now is how we have to get every American out of Afghanistan. Why were those people there to begin with and why didn't they leave earlier? Should we just tell them they should have made better decisions and leaving a few behind or potentially go back to war for not getting out by August 31st?

 

[LouderVol]

What would stop the masses from coming to your place and taking what they believe they are entitled to have? Would be a wild experiment

I would be pretty far down the list. And SS or no, I am going to have more than most people because I take care of myself. So SS isnt the thin blue line holding them back.

 

[DuckInAPen]

Respectfully Duck, it appears you view the current situation of SS as being the way it always was. As McDad mentioned, as recently as Bush it was being suggested to allow ones SS contributions to be invested in alternative avenues to garner potential greater returns. Indicating the POTUS was viewing it more like an IRA than a welfare program.

Good discussion, but are you profiting from the spousal benefit and it appears to be influencing your perception

I measure respect by deeds, not words. When, instead of engaging my argument on its merits (or lack thereof), you repeatedly dismiss it out of hand as a projection of what you conjecture to be my self-interest, I can be forgiven for doubting the sincerity of your expressions of respect.

As we can't come to any agreement on what is a simple question of objective fact -- what Social Security is and has been, regardless of whether we like what it is or has been -- or even on the means by which we could answer such a question definitively (you seem to think a former president's unsuccessful policy initiative from a decade-and-a-half ago sheds meaningful light on the question), I see no way for us to have a fruitful discussion of whether maintaining Social Security's spousal benefit is good policy. This is, therefore, my last contribution to this conversation.

I leave you, though, with these two questions to ask yourself (and let me be clear that I'm in no wise challenging you to answer them publicly in this forum):

1) Who paid for the retirement benefits of the first generation to receive Social Security?

2) If it is true, as I contend (and as is easily verifiable or falsifiable) that those first benefits were paid by the generations that were then still gainfully employed, in what year did Social Security benefits cease being sustained primarily by the new contributions of then-current workers and come to be disbursed primarily from the accumulated contributions of then-current retirees (rendering it, as you wrote, "more like an IRA")?

Best wishes to you and yours.

 

[SpaceCoastVol]

What in the hell is a “reasonable retirement amount”?

It is an amount, determined by the liberal elite, above which you will face heavy penalties to be in possession of.

 

[05_never_again]

It is an amount, determined by the liberal elite, above which you will face heavy penalties to be in possession of.

That would change over time, becoming much lower as time went on. The AMT and the income tax itself have operated this way.

 

[SpaceCoastVol]

Youre correct. In just a few pages since OP the bar has been lowered from those with Billions to 5 Million.

And remember, JoeBi isn't gonna raise taxes on anyone making under $400K.

 

[SpaceCoastVol]

You fundamentally misunderstand how Social Security works (and has always worked). I quote directly from the Social Security Administration:

"When you work, you pay taxes into Social Security. We use the tax money to pay benefits to:

• People who have already retired.
• People who are disabled.
• Survivors of workers who have died.
• Dependents of beneficiaries.

The money you pay in taxes isn’t held in a personal account for you to use when you get benefits. We use your taxes to pay people who are getting benefits right now. Any unused money goes to the Social Security trust fund that pays monthly benefits to you and your family when you start receiving retirement benefits."

Learn About Retirement Benefits | SSA

Given your misunderstanding, I understand why you feel the way you do. I would object, for instance, were the government taking from the 401k balances of some to provide a spousal benefit to others.

Given how Social Security actually works, however, your proposal would unjustly deprive of their rightful portion those who have already paid (often more than) their fair share and who are already disadvantaged by a tax structure that has long put its thumb heavily on the scales in favor of the interests of dual-income families.

Good day to you and yours.

Sounds strangely similar to a Ponzi scheme

 

[DancingOutlaw]

We pay 12.4 percent of payroll for SS tax. half coming from us, half "coming" from our employer. Truthfully, the employee pays the full amount. Someone working 47 years at an average wage of 25 an hour, 40 hours per week will be paying 124. per week. That money put into a simple index fund every month for 47 years averaging 10% is over 5.6 Million dollars.

Are you telling me you're unsatisfied with your multimillion dollar investment being turned into $2k a month for 8 years?

 

[walkenvol]

It is an amount, determined by the liberal elite, above which you will face heavy penalties to be in possession of.

The only proposal was a cap on tax free accounts where any monies exceeding the cap would be transferred back to the account owner like any other ROTH distributions which are non taxable events. Where is the heavy penalty?