A
Antigeek
Guest
This is two parts, so I'll deal with Social Security first ,and investment second.
The problem with Social Security and ending it is everyone has paid into it. We've grabroad
people who, justifiably so, were counting on it as a portion of their retirement income and have paid into the system for 30, 40, maybe 50 years and in that time didn't make the necessary plans for retirement that would allow for Social Security to end. To eliminate SS it will take a gradual reduction in benefits over a couple generations, but will require funding over that time frame. So here's my idea...
The 'typical' American gets his/her first job at about 16, and retires around 65. That's 49 years of employment, 49 years of paying into Social Security, and justifies expecting to receive Social Security benefits. Unfortunately, the system will break down at some point, leaving everyone empty handed, unless some radical steps are taken to fix/change/eliminate it.
My idea to fix/eliminate the system is simple. Year 65 counts as 100%, year 15 counts as 0%. Every year between that counts as it's corresponding percentage, and that percentage is what you will receive of your Social Security benefits when you reach the retirement age of 65, or the half that your spouse will get if you die. Those close to retirement will get almost all, and those nrabroad
yet in the workforce will get none. As retirees die off, Social Security tax will be reduced until it's enough to just fund the disabled and the program will be strictly a safety net for those who can't work due to a disability.
Now, the question becomes one of "what's in it for me to lose my Social Security benefits?" It's a fair question, because for the middle age who may have been irresponsible, having that retirement safety net yanked out from under them is a scary proposition. They have to look at the real possibility of nrabroad
having enough money to retire and still eat people food instead of dog food. So to encourage their planning for retirement, as well as giving them a break on the loss of Social Security benefits, I propose tax breaks on their 401k distributions, with a percentage that corresponds to their loss of Social Security. If you fall in the bracket that is only getting 50% of your Social Security (today's 40 year old), you'll only pay 50% of the tax rate on your 401k distributions you take after retirement. If you're just entering the workforce today and are only getting 4%, 2%, or 0% Social Security, then you'll only pay that tax rate on your distributions. Additionally, if you want to, you can opt out entirely of receiving Social Security payments and pay 0% tax on your 401k distributions, no matter what age you are. You'll still have the same annual limits on your 401K contributions, your catch up contributions, etc. But you'll either get your percentage of SS and your retirement taxed at a much lower rate, or no SS and your retirement distributions tax free.
I'd imagine a system like this would encourage everyone to save as much as they can, because between their contributions, employer contributions, and the prospect of compounding interest and prabroad
entially tax-free monetary growth, one would be absolutely foolish to nrabroad
take advantage of this sort of deal. And it would lessen the burden on the Social Security system if people close to retirement have saved and invested wisely and the tax break ends up being a better deal for them than paying their tax percentage and getting the reduced Social Security.
I'm nrabroad
an economist or a finance guru, so I don't know what the holes in my idea are. Hopefully someone can point them out to me.
The problem with Social Security and ending it is everyone has paid into it. We've grabroad
people who, justifiably so, were counting on it as a portion of their retirement income and have paid into the system for 30, 40, maybe 50 years and in that time didn't make the necessary plans for retirement that would allow for Social Security to end. To eliminate SS it will take a gradual reduction in benefits over a couple generations, but will require funding over that time frame. So here's my idea...
The 'typical' American gets his/her first job at about 16, and retires around 65. That's 49 years of employment, 49 years of paying into Social Security, and justifies expecting to receive Social Security benefits. Unfortunately, the system will break down at some point, leaving everyone empty handed, unless some radical steps are taken to fix/change/eliminate it.
My idea to fix/eliminate the system is simple. Year 65 counts as 100%, year 15 counts as 0%. Every year between that counts as it's corresponding percentage, and that percentage is what you will receive of your Social Security benefits when you reach the retirement age of 65, or the half that your spouse will get if you die. Those close to retirement will get almost all, and those nrabroad
yet in the workforce will get none. As retirees die off, Social Security tax will be reduced until it's enough to just fund the disabled and the program will be strictly a safety net for those who can't work due to a disability.
Now, the question becomes one of "what's in it for me to lose my Social Security benefits?" It's a fair question, because for the middle age who may have been irresponsible, having that retirement safety net yanked out from under them is a scary proposition. They have to look at the real possibility of nrabroad
having enough money to retire and still eat people food instead of dog food. So to encourage their planning for retirement, as well as giving them a break on the loss of Social Security benefits, I propose tax breaks on their 401k distributions, with a percentage that corresponds to their loss of Social Security. If you fall in the bracket that is only getting 50% of your Social Security (today's 40 year old), you'll only pay 50% of the tax rate on your 401k distributions you take after retirement. If you're just entering the workforce today and are only getting 4%, 2%, or 0% Social Security, then you'll only pay that tax rate on your distributions. Additionally, if you want to, you can opt out entirely of receiving Social Security payments and pay 0% tax on your 401k distributions, no matter what age you are. You'll still have the same annual limits on your 401K contributions, your catch up contributions, etc. But you'll either get your percentage of SS and your retirement taxed at a much lower rate, or no SS and your retirement distributions tax free.
I'd imagine a system like this would encourage everyone to save as much as they can, because between their contributions, employer contributions, and the prospect of compounding interest and prabroad
entially tax-free monetary growth, one would be absolutely foolish to nrabroad
take advantage of this sort of deal. And it would lessen the burden on the Social Security system if people close to retirement have saved and invested wisely and the tax break ends up being a better deal for them than paying their tax percentage and getting the reduced Social Security.
I'm nrabroad
an economist or a finance guru, so I don't know what the holes in my idea are. Hopefully someone can point them out to me.