What Does the Government Owe Retirees?

As government moves forward with pending budget cuts a lot of things are going to get looked at one of those is going to be federal benefits for the retired. In fact the government is already slicing into retiree checks.

Higher federal withholding is taking a bite out of retirees’ annuity checks

The suddenly shrinking checks have hit retirees generally, not just those who were employed by the federal government. On Thursday, the IRS posted information on “Why Employees and Retirees May See Changes in 2011 Payments and Withholding.”

The OPM had provided an explanation for the bigger tax bite, but some retirees found the explanation wanting. As the Diary reported this month, the OPM said the expiration of a tax credit resulted in smaller checks for some annuitants. – Washington Post excerpt

I know I’m being pessimistic here but we’ve got to get real with ourselves how much longer can the government pay out to retirees? I really don’t see a scenario where we fix the situation and get back to where we were 20 years ago. This is going to sound like a crazy idea but what if the gov’t started phasing out Social Security, not the actual payment of it but where the money goes, and reallocated the money to other gov’t programs.

I realize that this is a young man’s perspective but I keep hearing “make and investment in our future” but I keep seeing investments in the past. I know we can’t pull the plug on SS just yet but phasing it our completely over the next 50 years (effects me) isn’t a bad idea. Yes it may widen the gap between rich and poor but isn’t that what happens in capitalism?

Should we start phasing out Social Security?


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Shannon Donelson

Are we talking just social security? Or pensions as well? I agree to a certain degree, but I also know people who benefit from these programs.

Ron Gallant

I’ll give another young man’s opinion, quite a complex issue here.

Is SS the problem? Well yes and no… yes in that Congress (in their infinite wisdom) has made a habit of depleting the trust fund for other programs. Without this history, the program wouldn’t be in such tough shape. You also have the largest influx of retirees (boomers) about to file in US history…that alone is a major problem.

Now SS operates independent from other government spending since it is a joint contribution from the employer and employee, most of us pay into it every check. I remember reading that they will have enough in the trust fund to pay out about 75% of promised benefits, even when I retire (and I’m 25)…that’s far from the ultimate naysayer predictions that SS is broke next year.

This program was created far back to facilitate a standard retirement savings for older Americans. Unfortunately, given the difficulty many have in saving for retirement, it has become the ONLY source of income when some middle/lower class citizens stop/can’t work. With an average benefit around $1100, these people are not living high on the hog, so to speak.

I don’t see phasing it out as the answer, however changes can be made. Another gradual raising of the retirement age should be put on the table, but so should other proposals. Why do we allow those with considerable net wealth (say $2m+) to draw? And how do we crack down on SS Disability fraud that enables cheaters to receive a lifetime income.

Few will argue that we should do nothing and let it be. Obviously even 75% of benefits won’t be enough for most people. Eliminating it gradually serves no humane purpose. Businesses will not re-invest their portion of the savings into new hiring or to their employees 401(k), and employees (many financially illiterate) will not save their contribution.

We would then return to the days where the elderly had no dignity and their parents needed to house, feed, and clothe them as children. This was life prior to the Great Depression.

Jenyfer Johnson

I have to agree with Ron, when he says let’s crack down hard on the fraud that seems to be prevalent in the SS system right now. Hence the headlines a week or so ago about the 100+ people arrested and the huge amount of money involved in Medicare fraud we all just heard about?? How often do we hear about people who are getting checks “because the can’t work” and they walk in, seemingly perfectly fine, many are seeing doctors just like the ones that got busted in the Medicare fraud, who will write-up what they need to get their SS disability.

I don’t mean to discount the HONEST people that really do need SS disability, but there is alot of fraud out there that needs to be cleaned off the rolls before we cut funding for honest disabled and older people!!

Claire Gesalman

Let’s get our facts straight. Social Security and Medicare are two different things, administered by different agencies, for different purposes. As a goverment employee under FERS, who was promised Social Security as one of the legs of the “three legs” of my retirement, I just cringe every time someone starts talking about taking away Social Security benefits. It just does not add up. That system is not the problem that people make it out to be. If there is fraud in billing under Medicare, then root it out. If people are claiming disability under Social Security who should not be, then stop them. But don’t chop down the tree because of a few diseased branches. The federal budget is not suffering because of SS and Medicare. It is suffering because politicians are unwilling to do what they should and raise taxes on everyone, especially the well-to-do. Recent polls state that people would rather pay higher taxes than have the government slashed.

Cheryl Wahlheim

I don’t necessarily disagree with you Stephen, but we should absolutely make changes to Social Security right now. No person or couple making $50,000 or more per year in other income should be receiving Social Security. I remember it was a photo op when the Reagans went to the Social Security office to apply for Social Security!

Henry Brown

I would offer that by simply changing the time of eligibility and requiring everyone to pay into the system regardless of how much they earn, that the issue of SS truly going “bankrupt” could be pushed out some 20 or 30 years.

Could make a case AGAINST setting the limit of $50,000 per couple. I am hoping to retire very soon(within the year) and as most people retiring am going to have to have awfully close to the same income to maintain my “lifestyle” My FERS retirement pay would push me very close to the “50,000 dollar limit” GS-12 step 10 with 40 years of service and then you add in the TSP “output” and am well beyond the beyond the limit and that doesn’t count my spouses retirement check from the private sector.

Have some degree of heartburn with setting limits any lower than what level the “payer” has been required to pay into the system. Not sure that it would be doable but, set a limit as the maximum pay the family got during their work history, with a upper limit of maybe 125,000 (GS-13 step 10) or even 150,000 (GS-14 Step 10)