
The Rich Are Living Longer and Taking More From Taxpayers - 11thEarlOfMar
https://www.bloomberg.com/news/articles/2017-04-24/the-rich-are-living-longer-and-taking-more-from-taxpayers
======
anthony_romeo
So here's the thing. Social Security (SSDI) is a system you pay into. When you
retire or become disabled, the amount of benefits you are eligible for is
related to the amount you pay in, which is a percentage of your income.
Naturally, if one earns more money over their lifetime they would have paid
more into the system, and thus are getting more Social Security benefits in
return.

For those who have earned very little income over their lifetime, they are
eligible for benefits through the SSI program, which one does not have to pay
for. However, you may not be eligible for SSI if you have too many assets
(e.g. saved money, a 2nd car). The problem is that the cutoff of SSI based
upon assets has not been raised since 1989. You're only allowed to have no
more than $2,000 in savings, basically requiring the applicant to be
completely destitute before becoming eligible. In my personal opinion, this
amount needs to be drastically updated to match modern cost-of-living
standards. This program is far too out-of-reach for those merely dipping their
feet in poverty.

~~~
qntty
What you're describing would be the rich consuming proportionately more SS.
The article is specifically describing how they consume _dis_ proportionately
more SS.

~~~
dkrich
The main problem I have with the article is that it is phrasing it as a
"handout" and the payouts coming as "courtesy of the American taxpayer." In
reality, they are collecting money that they put in, so the article is making
sensationalist claims that aren't factual.

~~~
scarface74
[http://www.politifact.com/truth-o-
meter/article/2013/feb/01/...](http://www.politifact.com/truth-o-
meter/article/2013/feb/01/medicare-and-social-security-what-you-paid-what-yo/)

 _According to the institute’s data, a two-earner couple receiving an average
wage — $44,600 per spouse in 2012 dollars — and turning 65 in 2010 would have
paid $722,000 into Social Security and Medicare and can be expected to take
out $966,000 in benefits. So, this couple will be paid about one-third more in
benefits than they paid in taxes._

 _Some types of families did much better than average. A couple with only one
spouse working (and receiving the same average wage) would have paid in
$361,000 if they turned 65 in 2010, but can expect to get back $854,000 — more
than double what they paid in. In 1980, this same 65-year-old couple would
have received five times more than what they paid in, while in 1960, such a
couple would have ended up with 14 times what they put in._

 _Such findings suggest that, even allowing for inflation and investment
gains, many seniors will receive much more in benefits than what they paid
in._

~~~
wooter
Its also compulsory. I can't opt out and as you noted, the returns are
shrinking drastically. It also passed as a savings program regardless of the
horrible bookkeeping that the government is doing to keep an crappy system
afloat. In fact, they have told us for 50+ years that its perfectly
sustainable while plundering the institution to live beyond our means in other
areas.

As for how its used by retirees today and in the past, would anyone sell stock
that is paying insane an unsustainable dividends? Would you blame the investor
or the company? Even if its compulsory to buy?

~~~
dragonwriter
> I can't opt out

You absolutely can opt out by choosing to exclude employers that are either
mandated, or who have chosen despite not being mandated, to participate in SS.
Or by choosing to live by some means other than wage-labor (if you make all
your income from capital investments, you have successfully opted out of SS.)
No one is coercing you to the contrary (well, except the coercion to wage-
labor that affects most of the population under capitalism and which has not
generally been eliminated in modern mixed economies; but even there there are
some wage-labor options outside of the Social Security mandate.)

~~~
jhall1468
Opting out and not participating in a wage-base economy are absolutely NOT the
same thing. Opting out implies a simple choice. This is not a choice, this is
either effectively be fantastically wealthy (and live off capital investments)
or be fantastically poor (and live off welfare). Since the former isn't really
a choice, you get to either opt-out of FICA, or opt-in to being destitute.

~~~
dragonwriter
> Opting out and not participating in a wage-base economy are absolutely NOT
> the same thing.

To the extent capitalism _isn 't_ slavery they absolutely are.

We can, of course, debate the extent to which capitalism is or isn't slavery.

Of course, again, you can still opt-out of Social Security _within_ the wage-
labor economy, it just narrows your choices of acceptable employment
opportunities. [0]

[0] [http://finance.zacks.com/groups-not-pay-social-security-
syst...](http://finance.zacks.com/groups-not-pay-social-security-
system-8212.html)

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gavman
The article ignores the fact that while the wealthy may be living longer, they
also disproportionately _fund_ social security. They may be receiving benefits
for more years, but while I don't know the numbers, I would guess their ROI is
much much smaller than the bottom 20% of earners.

There is certainly a very valid separate point to be made about how in the US
wealth leads to longer/healthier lives and we definitely need to think about
how to fix that, but putting it in terms of receiving more social security
feels disingenuous to me.

~~~
NoGravitas
No, they really don't disproportionately fund Social Security. Quite the
opposite, in fact. You only pay Social Security payroll taxes on the first
$127,200 of your annual income. So if you make $250k, your payroll tax rate is
effectively _half_ that of someone making 125k (numbers rounded off here,
don't nitpick).

Details here: [http://thehill.com/blogs/congress-blog/economy-
budget/204996...](http://thehill.com/blogs/congress-blog/economy-
budget/204996-scrapping-the-social-security-payroll-tax-cap) and
[https://en.wikipedia.org/wiki/Social_Security_Wage_Base](https://en.wikipedia.org/wiki/Social_Security_Wage_Base)

~~~
khuey
The benefits received compared to income taxed slopes downward pretty
dramatically within the range of income that is subject to FICA taxation. The
Primary Insurance Amount is currently 90% of the first $885/mo, 32% of the
next $4451/mo, and 15% of the amount above that. So Social Security will
replace most of a low-income person's income during retirement (and it's also
tax free for those people) but will replace a much smaller proportion of a
higher income person's income despite the latter having paid more taxes to
fund SSI.

~~~
zacharytelschow
This is what people don't understand. Though the contributions may happen at a
flat rate, the payouts are highly progressive. While the rich may get out more
in absolute terms, on a per month basis it isn't much more and they still will
have a worse ROI on SS than the poor will.

------
loeg
> The U.S. retirement system looks more even-handed if you include in the
> analysis all government benefits received and all taxes paid by Americans
> after age 50.

This graph shows a roughly flat benefits-less-revenue per quintile, but is
still disingenuous because it ignores revenue from under age 50. Social
security payouts start as early as 62 — so this only factors in 12-20 working
years and ignores the first 28-32 working years. I would guess the higher
quintiles at 50 also paid more in Social Security taxes during their younger
working years.

I suspect a lifetime graph of benefits less revenue would show the system is
still progressive, if not as progressive as it was 30 years ago.

Either way — the headline statement, "Wealthy Americans Consumer
Disproportionately More Social Security," is false.

~~~
jeffdavis
I am confused by the wording of that graph. Does it include a lifetime of
contributions and a lifetime of benefits? Or 12-15 years of contributions and
a lifetime of benefits?

~~~
twoodfin
I think it's the (less interesting) average benefit minus tax per year, not in
aggregate. The latter is presumably much harder to measure. I'd be shocked if
high earners with average life expectancies could expect to recoup (inflation-
adjusted) their lifetime contributions, given the "bend points" of the
benefits formula.

~~~
basseq
Correct. Given average life expectancies, the IRR of contributions vs.
benefits of Upper-Middle and Top 20% are 2.9% and 1.7%, respectively. Given a
3.22% inflation rate, both are negative (meaning the returns don't even keep
up with inflation).

------
sp332
I dunno, "living longer" is one of the least offensive ways someone can get
disproportionately more money from taxpayers. I think the focus should be on
the opioid epidemic that is shortening middle-aged people's lives.

~~~
NoGravitas
Well, it's concerning that in the US, wealthier people live longer. Generally,
when you hear someone trying to justify the extreme wealth inequality of the
US (compared to most of the developed world), the response is along the lines
of, "well, there's huge inequality in relative terms, but that's not
important, because in absolute terms, the poor in the US are pretty well off".
But if being poor in the US means you _die young_ , then wealth inequality is
pretty important in terms of quality of life!

~~~
pdonis
_> if being poor in the US means you die young_

That's not what the article is saying. According to the table it gives, the
life expectancy of the bottom 20% is still 76.1 years. That's not "young". It
_is_ significantly younger than the top 20%.

 _> wealth inequality is pretty important in terms of quality of life_

I think it's hard to make this case just based on life expectancy; what we
really need is some way of quantifying how healthy the bottom 20% are from,
say, age 60 on (or even earlier), compared to the top 20%. I suspect that this
would show a much larger disparity than just the life expectancy data.

~~~
Recurecur
> The life expectancy of the bottom 20% is still 76.1 years. That's not
> "young".

It's also worth considering that the lowest 20% is much more likely to
encounter violent crime, and also more likely to enlist in the military. I'm
sure those things play into lower life expectancy as well.

~~~
pdonis
The key thing to look at here would be the variability: what is the standard
deviation of life expectancy for the bottom 20%, vs. the top 20%? The factors
you bring up would suggest that the SD should be significantly higher for the
bottom 20%.

------
aaronchall
The rich pay everyone's share. [1]

SS benefits are a really bad deal for those who would otherwise save. [2]

Ergo, forcing the wealthy to participate in Social Security benefits the rest
of us at their expense.

[1] [https://www.aei.org/publication/cbo-study-shows-that-the-
ric...](https://www.aei.org/publication/cbo-study-shows-that-the-rich-dont-
just-pay-a-fair-share-of-federal-taxes-they-pay-almost-everybodys-share/)

[2] [http://www.reuters.com/article/us-column-miller-
socialsecuri...](http://www.reuters.com/article/us-column-miller-
socialsecurity-idUSBRE89H0YG20121018)

~~~
basseq
I built a quick model to compare IRR of contributions vs. benefits using the
numbers in the Bloomberg article and income distribution reports[1].

With some massive assumptions (that I can enumerate if anyone is interested),
the Bottom 20% quintile gets a 6.5% IRR on lifetime benefits vs.
contributions. The Top 20%, by comparison, gets a 1.7% IRR. So _despite "the
rich taking more"_, the system is still very progressive. Just, perhaps, not
_quite_ as progressive as it used to be—but certainly not "proportionate" or
"disproportionate" in favor of the wealth.

To give you a sense, had a Top 20%-er turning 65 in 2016 invested his or her
SS contributions over the years in a Dow Jones Index Fund, the value of their
investment would be $1.1M... versus the $290k lifetime benefit they would
receive from the government. (It's pretty much a wash for a Bottom 20%-er:
their DJI investment would be worth $136k vs. $130k in SS Lifetime Benefits).

[1] [https://www.cbo.gov/sites/default/files/113th-
congress-2013-...](https://www.cbo.gov/sites/default/files/113th-
congress-2013-2014/reports/49440-Distribution-of-Income-and-Taxes-2.pdf)

~~~
basseq
Oh, and for those who are thinking, "Huh, 6.5% return is pretty good",
remember that's based on _individual contributions alone_. Your employer
contributes the same amount on your behalf. Meaning that for a Top 20%-er, you
and your employer are contributing more than you will see back in absolute
dollars (ignoring inflation, which makes it worse—you and your employer give
me $1 in 1970s dollars and I give you $0.90 in 2017 dollars).

------
rdl
Rich white women seem to benefit substantially at the expense of middle-income
black men, specifically, too.

The racial disparity in life expectancy is bad on its own, but has a financial
impact here.

(And women live longer, plus often end up with a superior amount of SS to what
they've earned themselves due to spousal benefit, including survivor benefit.
That is one of the overt goals of the system, though, and probably broadly
supported.)

------
cgy1
OTOH, I wonder whether the opportunity costs of paying social security taxes
are disproportionately higher for the rich than for the non-rich. What I mean
is if the rich, instead of paying social security taxes, were able to invest
that money, are they likely to generate much greater returns than the amount
of social security benefits that they end up receiving in the current system?

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MrTonyD
Was it Howard Zinn or Noam Chomsky who described these types of arguments as:
"fighting over the scraps".

The point being that we are missing the bigger picture - the massive bulk of
the money is going to the rich and we need to fix that problem. Then there
will be plenty of money for Social Security - and it will be possible to fix
it.

~~~
joelrunyon
"the massive bulk of the money"

What "the money?" Are you talking income, earnings, government payout, overall
wealth?

Your argument goes to crap really quickly unless you're specifying where the
problem is originating from...

~~~
MrTonyD
Guess you haven't heard about the 1% with most of the wealth? If so, then I
don't think I can offer you any advice.

~~~
joelrunyon
You're being argumentative without being useful.

You're not offering any advice at all.

"THE MONEY" ≠ Wealth ≠ Income. They are separate, unique things. You need to
acknowledge the differences before you can have a useful discussion.

Unless, of course, you're just mad that some people have a lot of money. In
which case, you can just yell about some people having "ALL THE MONEY" and not
actually work towards a solution.

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mankash666
Complete mis-representation of the truth. The rich pay more into the system
than they cost [1] , and the non-rich cost more than they pay - which is OK as
the system is designed to be that way.

This article is sensationalist click-baity crap that wants to paint a picture
where the rich somehow feed off the poor.

[1]: [http://www.pewresearch.org/fact-tank/2016/04/13/high-
income-...](http://www.pewresearch.org/fact-tank/2016/04/13/high-income-
americans-pay-most-income-taxes-but-enough-to-be-fair/)

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dkrich
Here's an idea- give people with a certain income the option to not pay into
SS with the obvious consequence of not being able to collect. Make this option
available to people at a certain age or less (maybe 40), so that those closer
to retirement don't get hosed after having paid in for most of their working
lives.

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rogov
I would be interested in seeing how much it costs the top quintiles to stay
alive that much longer than the lower quintiles. I suspect their SSDI payments
aren't enough to cover the costs on average.

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rhino369
Let me opt then.

------
snappyTertle
Does anyone actually like social security?

~~~
pwthornton
It's very popular, since most Americans don't have anything significant in
savings for retirement.

"Eight in 10 Americans think Social Security has been good for the country,
with 70 percent of young adults agreeing and almost nine in 10 senior citizens
saying the same."

[http://www.politico.com/story/2011/09/poll-social-
security-s...](http://www.politico.com/story/2011/09/poll-social-security-
still-popular-064766)

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skilesare
I have a modest proposal that is a kind of earned basic income. Would love
comments and feedback.

Http://skilesare.github.com/immortality

Its a long term solution and doesn't fix the immediate problems.

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antisthenes
I've never seen so much poor reading comprehension and economic illiteracy
concentrated in 1 thread.

The TL;DR point of the article is that the rich live longer, thus collecting
far more SS benefits than the less wealthy percentiles.

Yes, accounting for the fact that they pay more into it.

