Question : do you agree or disagree with my answer for question(Estimates vary w
ID: 2654769 • Letter: Q
Question
Question: do you agree or disagree with my answer for question(Estimates vary widely as to when the trust fund for SS retirement benefits will be depleted. However, there is wide agreement that the program as currently structured is not sustainable in the long run. Increasing revenue and/or decreasing benefits will be necessary. What changes would you make to keep the program viable?)?Please be very specific.
In order to make the Social Security program viable in the future, the following steps need to be implemented:1-Remove the payroll tax cap so that all payroll wages above $113K are taxed; however, the tax increase should be implemented on a tiered approach for each $50K over the current earned income cap. For example, wages between $113K and $163K would be taxed at 2% for social security, $163.1K to $213K at 1.5%, and the rate would be reduced as each income block increases. This would increase cash flows to the program and reduce the programs deficeit. It is critical to remember that if taxes are increased on social security, other taxes must be decreased in order to keep the overall tax rate for individuals and corporations constant. If taxes increase, corporations have the tendency to reduce their work force, and not hire additional employees. Increases in unemployment could adversely impact the overall solvency of the Social Security program.
2-Giving the citizens the option of managing a portion, but not all, of the Social Security account. The government manages the SS fund at a more effective administrative costs than the private sector; however, they are not able to generate the returns that a private investment firm can because they are forced to invest in Treasury Bonds for the growth of the trust fund. With that in mind, high risk and high rewards comes into play. If an individuals entire account was managed by a private investment firm, the risk of financial loss increases in the event of market recession or stock market crash. Therefore, it is imperative that a portion of the account be managed by the government to hedge that risk. This strategy would reduce the administrative costs of the government.
3-Increase the retirement age to 70, as overall health care is leading people to live longer lives, and therefore have the ability to work longer as well. As "60 is the new 40" philosophy is becoming prevalent in America, it is plausible to expect employees to work longer. Additionally, if the employee wants to take the SS benefit before age 70, the reductions in benefits should be increased to 35 to 40% until the age of 70.
3-Eliminate the cost of living adjustment (COLA) and structure the SS benefit payouts like an annuity, where the recipient would receive a set monthly amount for life. This would enable the administration to budget and project the cash flows of the program with more accuracy, and reduce expenses that are currently hindering the vitality of the programs finances.
4-Educate the American population on the overall purpose and structure of the program, so that they understand what is paid in is to help all of us replace income due to retirement or disability, and educate the country on what is actually paid by an Employee, Employer, and then what is eventually paid out in benefits
Explanation / Answer
Answer
Note : Answer is given in bold fonts for each points.
Question: do you agree or disagree with my answer for question (Estimates vary widely as to when the trust fund for SS retirement benefits will be depleted. However, there is wide agreement that the program as currently structured is not sustainable in the long run. Increasing revenue and/or decreasing benefits will be necessary. What changes would you make to keep the program viable?)?Please be very specific.
In order to make the Social Security program viable in the future, the following steps need to be implemented:
1-Remove the payroll tax cap so that all payroll wages above $113K are taxed; however, the tax increase should be implemented on a tiered approach for each $50K over the current earned income cap. For example, wages between $113K and $163K would be taxed at 2% for social security, $163.1K to $213K at 1.5%, and the rate would be reduced as each income block increases. This would increase cash flows to the program and reduce the programs deficit. It is critical to remember that if taxes are increased on social security, other taxes must be decreased in order to keep the overall tax rate for individuals and corporations constant. If taxes increase, corporations have the tendency to reduce their work force, and not hire additional employees. Increases in unemployment could adversely impact the overall solvency of the Social Security program.
My opinion on point No.1 : Tax system should be progressive ( i.e. higher the income, Higher taxes). wages between $113K and $163K would be taxed at 2% for social security, $163.1K to $213K should be at 2.5% and not 1.5%, and the rate should be increased as each income block increases.
There is very less correlation between increase of social security tax and hiring of additional employees by corporations. Hiring of additional employees by corporations depends on its revenue and profitability growth, capital expansion plans and overall macro economic growth..
2-Giving the citizens the option of managing a portion, but not all, of the Social Security account. The government manages the SS fund at a more effective administrative costs than the private sector; however, they are not able to generate the returns that a private investment firm can because they are forced to invest in Treasury Bonds for the growth of the trust fund. With that in mind, high risk and high rewards comes into play. If an individuals entire account was managed by a private investment firm, the risk of financial loss increases in the event of market recession or stock market crash. Therefore, it is imperative that a portion of the account be managed by the government to hedge that risk. This strategy would reduce the administrative costs of the government.
My opinion on point 2 : There is always more risk when you invest in equity. Social security program must decide in its policy proportionate investment cap in equity, corporate bonds, treasury bonds for social Security account so as to manage overall investment risk. Administrative costs must also be capped by tender based system whether It is managed by government or private investment firm.
3-Increase the retirement age to 70, as overall health care is leading people to live longer lives, and therefore have the ability to work longer as well. As "60 is the new 40" philosophy is becoming prevalent in America, it is plausible to expect employees to work longer. Additionally, if the employee wants to take the SS benefit before age 70, the reductions in benefits should be increased to 35 to 40% until the age of 70.
My opinion on point 3 : I agree with point 3 but employee should allowed to take the SS benefit before age 70 with reductions in benefits with slab system ( younger the age, more reduction in benefits).
4-Eliminate the cost of living adjustment (COLA) and structure the SS benefit payouts like an annuity, where the recipient would receive a set monthly amount for life. This would enable the administration to budget and project the cash flows of the program with more accuracy, and reduce expenses that are currently hindering the vitality of the programs finances.
My opinion of Point 4 : I agree with point No. 4.
5-Educate the American population on the overall purpose and structure of the program, so that they understand what is paid in is to help all of us replace income due to retirement or disability, and educate the country on what is actually paid by an Employee, Employer, and then what is eventually paid out in benefits
My opinion on Point No.5 : I agree with point no. 5. When American Citizens will understand benefits of Social security program, they will ethically promote Social Security program at business and profession level.