Is Social Security an insurance policy or a retirement pension? What do you think?
I say it's always been meant to be an insurance policy; a 'just in case' scenario. The reason I feel this way is, the only way you can draw on it or get it, is to qualify for it.
Life insurance is like that. The only way anybody gets any money is to die, same goes for the car insurance you buy; you have to have a wreck for it to pay out.
With Social Security, you have to reach a certain age before drawing on it or become disabled and even then you have certain requirements to meet to get it.
The only difference between the Social Security insurance and life or automobile insurance is, you have to buy Social Security (pay into the pool). Life and auto are optional (you don't 'have' to drive a car).
Health care will soon be a lot lot Social Security where you are mandated to buy it....like the name says, it's "health insurance".
Like life and automobile and soon, health insurance, the cost depends on your age, health, weight, bad habits, etc... In other words, if you don't meet the basic requirements for a lower premium you will be charged more.
Why can't we do the same for Social Security? Only instead of charging more for bad habits or bad health, perhaps we should charge more by level of income. The dreaded word, 'means' testing. In my view there are two ways to approach means testing. Right now we pay approximately 6.2% (without the payroll tax cut we currently have) as employees into Social Security. Perhaps that percentage should increase after a certain level of income. Currently Social Security is only taken on the first $106,000 of anyone's income, including the very wealthy, millionaires and billionaires. Let's change that rule a bit. For every dollar an employee makes above $106,000, the employee shall pay an additional 2% payroll tax. 6.2% on income below $106,000 and 2% for any amount above $106,000.
Example:
Employee makes $200,000 a year. He pays 6.2% payroll tax on the first $106,000 and additionally the employee will pay 2% payroll tax on the remaining income amount of $94,000.
Meanwhile you have more money coming into the pool.
The second option of 'means' testing is, lets go back to my original premise that Social Security is an insurance program and not a pension program. If and when you qualify you can draw on the insurance plan. What are the qualifications you ask? Like life and auto insurance, something has to happen for you to get the money; you have to be a certain age and have a limited income. Hince, Social Security is insurance for those that didn't quite get lucky through life with a great job.
If you are the right age and your income is below a certain amount, you qualify. If you are the right age but your income is above a certain amount you do not qualify to draw it. It's an insurance policy remember.
If at a later date you lose that income and need the insurance money, you can reapply.
Meanwhile, you have less people drawing from the pool but everybody paid for the insurance. It's like having automobile insurance. You may go all through life and never use it, all that money down the drain...but...it's there IF you need it.
It's similar to how we currently tax any income a person on Social Security makes above a certain amount, I believe that amount is $25,000.
Either way, WaLa! Social Security is saved for future generations.
UPDATE: I was asked the following after someone read this diary:
There’s quite a bit in that piece. I agree, it’s insurance. Like insurance, if you never have an accident, you don’t get your premiums back. It’s insurance.You brought up something I have never considered before: that is, the idea that ‘premiums’ could be calculated differently depending on your circumstances. Currently there are people drawing social security benefits who never paid a dime into it. Spouses who never had earned income, children, etc. I propose that a person with a non-earning spouse who will be eligible to receive SS payments be required to pay a higher premium and the same for every child. It’s insurance for them as well. Not just the earner.
I don’t exactly believe that SS is in trouble of going bankrupt. What I know is that there are a lot of people getting social security checks who never paid a dime into it and I think that should change. When SS was originally implemented the only people who could draw from it were the people who paid into it.
Here's my answer to that question:
Logically you are correct. But you’d probably be hurting the people that need the INSURANCE (something to fall back on) the most. For example, mothers that stayed home with the kids while dad worked out. Mothers, fathers and children that lost their spouse/parent because of early death.Like you I especially don’t approve of anybody coming into our nation and getting free assistance without having paid into the system ever.
What we could do is, if you claim your spouse/kid(s) on your tax forms, and that spouse is not working, you must pay an additional amount of Social Security premium for that spouse or child, say 1% or so. Keep in mind, those of you that think this isn’t fair to parents, parents get benefits that single or married people without children do not get on their taxes and in many cases more salary/benefits (ex: free tuition at college for employees and family) at their work place. This idea should continue for children until they are no longer in college (parents get benefits while they are there). If at a later date the spouse or child (out of school) goes to work, the additional premium is stopped.
This premium program would include my idea that if you make a certain dollar amount you should pay an additional 2%, for example, on that income.
That would bring in additional dollars on top of one or both my ideas in the original column.
I assume you understand that my idea of premiums being ‘means’ tested was mainly for those that are wealthy and do not need the income to live on.
I realize that most will consider all these ideas as tax increases, but which is better and more kind? Taxing those people a little more or making a factory worker or nurse or waitress work till they are 70 years old?