Social Security ....The monthly Check...yes or no

[Jeff Altweg]

I get a rather small monthly check, and am enrolled in Medicare ,it's the most important card I carry.
The Amish are exempt, and live it,for the most part, My own Dad lived to be 97 years old , never took a check from the system, because he was against it , and lived it,too.
Many Many non -Amish , but Anabaptist folks , don't pay into the system ,but when they get older, realize their assets are few ,then want to join up ,get that monthly check, and the medical help from medicare....through credits they may have earned many years ago....
This has worked in the past , as I have known a number of people that did this, And I don't blame them ....i've always urged people to get back on early instead of waiting so long, as very few of them ,(Except the Amish) are really against the system, just trying to save money, in my opinion, and observation.
Anyways , whoever is in charge of the system , caught on to this, and several years ago ,made the new ruling , that to get into the SS program again, after being exempt , you must have 10 years of credit ,after getting back on....
This has caught a lot of frugal Anabaptists by surprise , and they are now strictly enforcing it ,which is their right to do.
If you were ,or are anytime in your Life Exempt from SS , you can get back on, sure, but you must have 10 years credits ,after that point in time,after you joined up to paying SS again , to draw benifits from SS....

[Ken]

Two points of correction to what you wrote.

First, the 10-year rule applies to all recipients, not just anyone who has exempted in the past. It is actually 40 credits or 40 quarters of eligible earnings for which you paid into the program. So for some people who only have short seasonal jobs it may take them longer than 10 years. In 2023 the amount of one credit is $1,640 so you need to earn $6,540 in 2023 to earn all 4 credits for the year. If you earn less than that you'll get less credits. They are inflation adjusted so the amount of one credit is different each year. This is the table going back to 1978 when they changed the law and one credit was worth $250: https://www.ssa.gov/OP_Home/handbook/ha ... -0212.html

I think prior to 1978 they counted cash work paid in agriculture as eligible for credits which is how some Anabaptists qualified even if they had exempted as long as they could document they had 10 years of farm work for cash of some sort. But that changed and after 1978 you had to have 10 years of social security taxes paid into the system, records of cash wages no longer counted.

Second, this isn't something that Social Security did specifically to address Anabaptists or or others who opted out. It was a change that came with a change of law by Congress in 1977 during the Carter administration to tighten up the requirements and make it less of a welfare program. It was probably directed more at migrant farm workers and the like and an effort to get them legitimate and paying taxes rather than working for cash under the table. There are exceptions to the 10 year rule for the disabled who can't work. And for non-working spouses who get benefits based on their spouses income.

It all seems very reasonable to me. People who don't work (or don't pay into the system) don't earn benefits. So, for example, some wealthy person who never works but lives only on an inheritance or trust fund their whole life isn't going to earn social security. They will have reported investment income for the purpose of income tax, but not wage income for the purpose of social security. Likewise if you choose not to pay in for religious reasons you don't earn credits. Simple as that.

I think my own Menno great grandfather who had exempted for many years as a farmer and Mennonite preacher was finally able to get into the system in the early 1960s based on history of farm income and was able to draw a small income from it in his retirement. But that door was closed in 1978

[Josh]

I get a rather small monthly check, and am enrolled in Medicare ,it's the most important card I carry. The Amish are exempt, and live it,for the most part, My own Dad lived to be 97 years old , never took a check from the system, because he was against it , and lived it,too.

Medicare eligibility has nothing to do with Social Security. Currently, CMS has decided that people who renounce insurance but later decide they want Medicare can have it and they don't care if the person was previously exempt.

Many Many non -Amish , but Anabaptist folks , don't pay into the system ,but when they get older, realize their assets are few ,then want to join up ,get that monthly check, and the medical help from medicare....through credits they may have earned many years ago....

That seems fine then. If you earn social security credits, you have them. If you didn't earn them, you don't have them. Social Security pays out based on what you previously paid in.

Incidentally, it's a much better deal for most people to invest 15.3% of their income elsewhere and use that to retire... a typical Amish person invests in real estate which is one of the best performing investments there is.

This has worked in the past , as I have known a number of people that did this, And I don't blame them ....i've always urged people to get back on early instead of waiting so long, as very few of them ,(Except the Amish) are really against the system, just trying to save money, in my opinion, and observation.
Anyways , whoever is in charge of the system , caught on to this, and several years ago ,made the new ruling , that to get into the SS program again, after being exempt , you must have 10 years of credit ,after getting back on....

Ken's post goes into greater detail, but this is not correct.

This has caught a lot of frugal Anabaptists by surprise , and they are now strictly enforcing it ,which is their right to do.
If you were ,or are anytime in your Life Exempt from SS , you can get back on, sure, but you must have 10 years credits ,after that point in time,after you joined up to paying SS again , to draw benifits from SS....

Nothing is being strictly enforced. Every single American has to have 10 years of credits to get Social Security benefits (other than 5 credits to get disability). And for people like myself, the retirement age is bumping higher and higher. I might not be able to get any benefits until I'm well into my 70s. Financial planners and advisors recommend not relying on Social Security for retirement income due to the inherent funding problems of the current system on a long-term basis.

[Ken]

Incidentally, it's a much better deal for most people to invest 15.3% of their income elsewhere and use that to retire... a typical Amish person invests in real estate which is one of the best performing investments there is.

Financial planners and advisors recommend not relying on Social Security for retirement income due to the inherent funding problems of the current system on a long-term basis.

Perhaps. But the reality is that most Americans (or most Americans of modest means) are not going to invest 15% of their gross income unless the government does it for them. And even those who do save and invest don't always invest wisely. And without social security as a backstop we would certainly have FAR higher levels of poverty among the elderly. In a perfect world it wouldn't be necessary but we don't live in a perfect world with perfect people. Far from it. And I think we are unlikely as a society to allow vast numbers of our elderly to live in dire poverty. So if we didn't have social security, we'd end up inventing something similar to replace it.

As for the long-term outlook of social security? Nothing is ever for certain in this country or any other. We could experience any number of financial or social Armageddon scenarios that collapse the financial system. But but will affect ALL investments and savings, not just social security.

From my point of view social security isn't going anywhere. We have an increasingly aging population that votes at higher rates than young people and the notion that politicians are going to vote to bankrupt the system seems pretty unlikely. The easiest issue in American politics to demagogue is social security. There is a reason they call it the third rail of American politics.

With a little bit of political will the program could easily be placed on a path to permanent solvency with 2 simple steps that don't involve raising the retirement age further. First, they could raise or eliminate the income cap on social security taxes. For 2024 it is $168,600 meaning that every dime of income above that is untaxed for social security. When the program was started in the 1930s the income cap captured about 95% of all income in the US, now it is down to around 80% and falling which is mostly due to income inequality. And second they could modestly raise the tax rate from 6.2% to say 7%.

Finally, if neither of those things happen, the actual most likely scenario instead of cutting benefits is that they will just cover the social security deficit by taking money from general revenues (or adding to the deficit).

Either way, the prudent thing to do is treat social security as longevity insurance as a backup in case your personal savings fails. It is good for that because it is inflation-adjusted. So if you run out of other money when you hit 85 or 90 you still at least have that backstop. My own parents, for example, are pretty frugal and thrifty and always have been. The don't really need their social security checks so they mostly just save their social security earnings and donate it to their church or other charities. But if their other savings collapsed it would still be there a backstop and they wouldn't be forced to move into our back bedroom. We live in the suburbs. We don't have a "dawdy haus"

[RZehr]

When Social Security was implemented in 1935, the general life expectancy was around 60 years. And the benefits were set to begin at age 65. It looks to me that its intention was not to allow for people to live long lives of luxury and leisure for the last 20 or so years of their lives.

So if Social Security was adjusted for life expectancy inflation along with monetary inflation, todays life expectancy of about 76 years would mean that social security benefits would kick in around 81 years of age.

[Josh]

Incidentally, it's a much better deal for most people to invest 15.3% of their income elsewhere and use that to retire... a typical Amish person invests in real estate which is one of the best performing investments there is.

Financial planners and advisors recommend not relying on Social Security for retirement income due to the inherent funding problems of the current system on a long-term basis.

Perhaps. But the reality is that most Americans (or most Americans of modest means) are not going to invest 15% of their gross income unless the government does it for them.

True. But Amish people certainly do this. There is no epidemic of Amish people struggling in old age (despite Jeff's claims). They have one of the best elder care setups in the country, actually.

And even those who do save and invest don't always invest wisely. And without social security as a backstop we would certainly have FAR higher levels of poverty among the elderly. In a perfect world it wouldn't be necessary but we don't live in a perfect world with perfect people. Far from it. And I think we are unlikely as a society to allow vast numbers of our elderly to live in dire poverty. So if we didn't have social security, we'd end up inventing something similar to replace it.

Yes, but the Amish have been exempt for a long time and they seem to be investing their extra money very wisely and in turn not being a drain on social services at all (as I documented in my other thread, if the Amish did take advantage of social safety nets, they would cost the government a lot of money instead of paying the government lots of taxes).

As for the long-term outlook of social security? Nothing is ever for certain in this country or any other. We could experience any number of financial or social Armageddon scenarios that collapse the financial system. But but will affect ALL investments and savings, not just social security.

From my point of view social security isn't going anywhere. We have an increasingly aging population that votes at higher rates than young people and the notion that politicians are going to vote to bankrupt the system seems pretty unlikely. The easiest issue in American politics to demagogue is social security. There is a reason they call it the third rail of American politics.

It isn't a political matter that social security is going bankrupt. As the population ages, more and more people are drawing on the benefit and fewer and fewer young people paying into it. Since Social Security doesn't save or invest what is paid into it, that means we are dependent on young people paying in. The current "solution" is to (a) keep raising the retirement age and (b) keep fiddling with CPI so that social security benefits don't have to keep up with inflation.

With a little bit of political will the program could easily be placed on a path to permanent solvency with 2 simple steps that don't involve raising the retirement age further. First, they could raise or eliminate the income cap on social security taxes. For 2024 it is $168,600 meaning that every dime of income above that is untaxed for social security. When the program was started in the 1930s the income cap captured about 95% of all income in the US, now it is down to around 80% and falling which is mostly due to income inequality. And second they could modestly raise the tax rate from 6.2% to say 7%.

Ken, I don't think increasing the marginal tax rate from 22% to 37% (for married couple earning $170k) is remotely reasonable nor politically tenable. And the net effect of that would be that a lot of business owners, etc. would just decide to earn less.

Likewise, I don't think taxes need raised higher. Raising it from 6.2% to 7% (you do realise Social Security is 12.4%, right, not 6.2%?) is, again, an increase on everyone. Most Americans don't need to see even smaller paychecks with inflation already hammering on them.

Either way, the prudent thing to do is treat social security as longevity insurance as a backup in case your personal savings fails. It is good for that because it is inflation-adjusted. So if you run out of other money when you hit 85 or 90 you still at least have that backstop. My own parents, for example, are pretty frugal and thrifty and always have been. The don't really need their social security checks so they mostly just save their social security earnings and donate it to their church or other charities. But if their other savings collapsed it would still be there a backstop and they wouldn't be forced to move into our back bedroom. We live in the suburbs. We don't have a "dawdy haus"

The prudent thing to do is not rely on it at all, because a long term Ponzi scheme probably won't be there when you need it. I think betting on Americans to start having larger families in 25 years is not a safe bet, and for me relying on Social Security would be that. So I'll continue to find myself paying in - but knowing I will never get a benefit in return.

[Josh]

When Social Security was implemented in 1935, the general life expectancy was around 60 years. And the benefits were set to begin at age 65. It looks to me that its intention was not to allow for people to live long lives of luxury and leisure for the last 20 or so years of their lives.

So if Social Security was adjusted for life expectancy inflation along with monetary inflation, todays life expectancy of about 76 years would mean that social security benefits would kick in around 81 years of age.

That's true. But if most people expected to never receive any benefits, they might object to shelling out 15.3% of their income to this program. In 1935, the Social Security tax rate was 1% and capped at $3,000.

Now it's 15.3% and capped at $168k (and note that proposals from folks like Ken are that it should be even higher).

[RZehr]

When Social Security was implemented in 1935, the general life expectancy was around 60 years. And the benefits were set to begin at age 65. It looks to me that its intention was not to allow for people to live long lives of luxury and leisure for the last 20 or so years of their lives.

So if Social Security was adjusted for life expectancy inflation along with monetary inflation, todays life expectancy of about 76 years would mean that social security benefits would kick in around 81 years of age.

That's true. But if most people expected to never receive any benefits, they might object to shelling out 15.3% of their income to this program. In 1935, the Social Security tax rate was 1% and capped at $3,000.

Now it's 15.3% and capped at $168k (and note that proposals from folks like Ken are that it should be even higher).

Wow, I didn't know that it was only 1% back then.

[mike]

Incidentally, it's a much better deal for most people to invest 15.3% of their income elsewhere and use that to retire... a typical Amish person invests in real estate which is one of the best performing investments there is.

Financial planners and advisors recommend not relying on Social Security for retirement income due to the inherent funding problems of the current system on a long-term basis.

Perhaps. But the reality is that most Americans (or most Americans of modest means) are not going to invest 15% of their gross income unless the government does it for them.

True. But Amish people certainly do this. There is no epidemic of Amish people struggling in old age (despite Jeff's claims). They have one of the best elder care setups in the country, actually.

And even those who do save and invest don't always invest wisely. And without social security as a backstop we would certainly have FAR higher levels of poverty among the elderly. In a perfect world it wouldn't be necessary but we don't live in a perfect world with perfect people. Far from it. And I think we are unlikely as a society to allow vast numbers of our elderly to live in dire poverty. So if we didn't have social security, we'd end up inventing something similar to replace it.

Yes, but the Amish have been exempt for a long time and they seem to be investing their extra money very wisely and in turn not being a drain on social services at all (as I documented in my other thread, if the Amish did take advantage of social safety nets, they would cost the government a lot of money instead of paying the government lots of taxes).

I don't know about the Amish in particular, but I am aware that there are many other conservative Anabaptists who currently have financially struggling older people in their communities and who are wondering what to do. In fact, one answer that is being worked on is a financial program that is very similar to Social Security. It's been a couple months since I saw the brochures advertising the program and a meeting for anyone interested. But as I recall, it is a voluntary program where people agree to put a certain percentage of their income into a savings account that they control, and possibly also contribute to a general fund which would be available for charitable purposes or especially acute needs. I believe there may be something like auditors or trustees that administrate the program to ensure everyone is following through with their commitments. The goal is to make sure people are thinking about their future and saving up for it. The program has a name, but I don't remember it.

This tells me a few things. There are aging people among the plain folks who don't have enough real estate or business or other assets that they can liquidate or pass along to their children who can then support them in their older years. So, they are completely reliant on their children, not that it is a bad thing for children to care for their parents. There is also the fact that many plain people have children who leave the culture and may not practice the same level of support for their parents that some do. A lot of what has made it work for the Amish is not so much that they have extreme wealth but that children will support their parents in their old age including taking them into their own household if necessary, which cuts back drastically on the money they need to live on in their older years. Also, not all plain people have children, and not of their children live in the same community as they do. And enough of these people are becoming financially destitute that there is a growing need for something to be done.

Demographic changes are coming for the plain people. They have been having smaller and smaller families along with the rest of society. This is going to matter in the coming years, as fewer young people will be working to support the number of retirees in their communities. It's a problem everywhere, and plain folks are no exception.

[mike]

The difference of course between the privately-run program I described (by memory and probably getting facts wrong) and Social Security, is that it will probably be much better run than SS with an actual chance that the participants will get back all of their investment with a return.