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Home / Business / The terrible social security proposal that just will not die – the Motley fool

The terrible social security proposal that just will not die – the Motley fool



Social security is very likely the most important social program in this country. The Center for Budgetary Policy and Policy Priorities carried out an analysis in 2016 that left 22.1 million people, including 15.1 million retirees, above the federal poverty level solely on the basis of guaranteed monthly social security payments.

Social Security Administration data confirm the importance of the program. Of the old beneficiaries, 62% depend on social security to provide at least half of their monthly income, with 34% relying on the program for almost their entire income (90% or more). In other words, if there were no social security, we would have a serious problem of older poverty in our hands.

  Dice and casino chips are on two social security cards.

Source: Getty Images

Social security is facing an impending crisis

The financial foundation that social security has provided for seniors for 78 years is beginning to crumble. The Social Security Board's latest annual report estimates that the program will pay more for the first time in the next 36 years ($ 1

.7 billion per bridging loan) than it did earlier this year. With the exception of 2019, it is expected that this net cash outflow from the program will increase significantly each year, reducing the $ 2.9 trillion in social reserves in asset reserves. By the year 2034, this excess money is expected to be completely consumed.

So, what's that? In clearer English, it signals that the current payout plan is unsustainable. Social security can and will survive for future generations, even without surplus cash, but a blanket cut in social benefits of up to 21% may be needed to make this possible.

With $ 13.2 Trillion in Cash Deficit The beneficiaries of the 2034- 2092 program depend on Capitol Hill lawmakers to find solutions. But not every "fix" proposed will be a winner.

There is a "new" proposal for social security on Capitol Hill

Case study: Sen. Marco Rubios (R-Fla.) Recently conducted "Economic Security"

The idea behind this bill, which Entrance of President Trump's daughter, Ivanka, and similar to a policy paper from the Independent Women's Forum in January, is to give new parents the option to use their future benefits to free themselves from their jobs longer

  A man and a woman are holding a newborn baby.

Source: Getty Images

New parents would be allowed to do their future social security benefits (ie benefits they would otherwise receive upon reaching the qualifying retirement age) to earn income, allowing them to vacation between two and three months to take care of her job to take care of her newborn. In return, they would have to wait between three and six months longer to reach legitimate age before they can sign up for retired pension benefits.

Rubio and his team have three benefits from the New Parents Act. First, of course, (new) parents would have additional financial and personal flexibility in raising their newborn.

Second, it is likely to reduce the economic distress for companies that offer paid leave to workers who have just taken their family. When social security benefits are passed on to workers, companies can increase their capital.

And third, it could potentially reduce long-term program spending. If older workers have to wait longer to receive benefits, this would reduce the number of years they received a payout. This could lose part of the projected 13.2 trillion cash shortfalls between 2034 and 2092.

  A worried mature couple checking their finances.

That's why this Social Security proposal is terrible

But as I announced in April, and earlier in February, when this was nothing but an idea, it's a terrible proposition. 19659002] The most blatant problem is that this would not do anything against the impending shortage of social security funds. The Trustees project envisages a reduction of 21% in 16 years. However, the projected benefits of workers who wait longer for benefits will only be realized through the program over the next three to four decades. In other words, certainly, it will reduce social security expenditure, but it does not do anything to tackle the more pressing medium-term cash outflows.

To make matters worse, the Act on Economic Security could actually make a difference for new parents even worse in the short and medium term. If parents decide to use their future benefits as a source of income, it will aggravate the program's net cash outflow and deplete its assets at a much faster pace.

Another problem is employee productivity. While this bill would allow workers to use their own future benefits, rather than employers providing their workers with paid leave, this could negatively impact productivity as new parents are encouraged to stay longer. If these employees play an important role in a business, it could be bad news.

And, most frightening of all, it would reduce the lifelong benefits that parents receive that decide to take advantage of future parental leave benefits. A study by the Urban Institute found that only a 12-week paid parental leave would reduce lifelong payouts by about 3%. If parents have four children and thus take four paid 12-week holidays, the lifetime benefits could be reduced by about 10%! That could put these people in a precarious financial position when they retire.

  A hundred-dollar bill that burns from the inside out.

[Quelle: Getty Images]

It is also worth noting that the Urban Institute estimates that around a quarter of these "loans" under the Social Security program will never be amortized by lower pay during retirement. Between parents who have died at a young age, who can receive disability insurance, or simply do not work enough to earn the lifelong working credit needed to benefit pensioners, these loans would essentially be lost through the program go.

You see, there are many unique ways in which social security could be improved, and the same could be said for the parental leave policy. However, this is a social security proposal that needs to be buried.


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