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Home / Business / Forget social insurance – Here's a wiser alternative – The Motley Fool

Forget social insurance – Here's a wiser alternative – The Motley Fool



Social Security helps more than 62 million people each month to get the financial support they need. Most people who earn social security benefits are retirees who have worked for decades in the expectation that they will get some of the program when they stop working. For many of the 43 million retirees who receive monthly social security checks, the first time they ever got cash from the program after working a full career.

Recently, lawmakers in Washington have proposed a few ways people could claim social security benefits earlier in life. One proposal would appeal to those who seek payments for family leave after the birth of a child while another is looking for ways to pay off student loan debt. In both cases, however, the trade-off accepts less money in retirement. This is not financially acceptable to most Americans, so the better alternative is to follow a roadmap that social security has previously used to extend benefits beyond the retirement income.

  U.S. Capitol building seen from the center

Source: Getty Images

2 Ideas Washington has for early access to social security

A few other proposals have suggested allowing Americans to provide financial support in return to give up part of their future social security benefits. Under a proposal, those who agreed to take out social insurance would be able to pay off part of their debt for student loans. In a bill enacted by late-year MP Tom Garrett (R-Va.), People would pay $ 550 in debt when they reach retirement age, and their one-month claim-date increases later. With a maximum of 73 credits, this would provide more than $ 40,000 in immediate funding – but at the cost of treatment, as if their full retirement age was 73 instead of 67 and they could not even claim early benefits before the age of 68.

The other proposal has received more attention from commentators and the general public. According to a suggestion by Senator Marco Rubio (R-Fla.), New parents could get a family holiday for a while after the birth or adoption of a child. Again, the compromise would be that they would have to accept a delay in their social security benefits. The calculations under the Rubio proposal are complex and subject to actuarial adjustments, but the general idea behind the legislation is similar to the loan proposal for student loans – but with less flexibility from parents.

The pros and cons of the proposals

Those who support the proposals like the fact that people can choose to use them. In particular, those who deduct the idea of ​​the family from the obligation to provide holiday offers argue that voluntary social benefit funding leaves the field open to other competing ideas, including private employers offering paid leave to their employees. If a worker has already received private benefits through work, they could retain their retirement benefits by not using them for family leave.

Nevertheless, the obvious drawback in either case is the one who chooses early ways to divert money from social security would end up with fewer retirement benefits. In some cases, the impact would be enormous, and those who spend tens of thousands of student loan debt could potentially lose many times that amount on pension payments, even after considering the effects of inflation over the course of a career. [19659008] An Alternative to Reducing Performance

Paying people for the services they want is a taxable way to meet foreseeable needs. In both student loan and family leave loans, the introduction of a mechanism whereby participants repay their advances through payroll or other taxes would be without prejudice to essential retirement benefits.

The introduction of new payroll taxes to cover additional benefits has precedents. The disability insurance program was added to social security in the late 1950s and a separate percentage of payroll tax was levied. The trust funds for disability and retirement benefits are technically different so that everyone can work on their own.

However, there is no reason why social security would have to pay a wage tax for everyone. Limiting additional taxes to those who actually take advantage of it would result in a larger tax, which, however, accurately reflects the value of what the beneficiary received from the program. With the aim of revenue neutrality, such a tax would be closer to a loan in terms of its repayment terms. But provisions that would allow would-be parents to invest in the system before they had children could lower their costs.

Looking for solutions

Social security is primarily for retirement and the bridging of retirement benefits in favor of an immediate financial need endangers the entire original purpose of the program. By examining more closely whether they could provide access to these benefits without pensions to the would-be users of Washington's recent proposals, social security could avoid a major problem on the road.


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