Reply to High earners/savers: How do you feel about social security?

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[quote=Anonymous][quote=Anonymous]I've been a fan of means-testing SS ever since I started studying tax policy over 20 years ago. [/quote]

I used to think this was a good idea, until it dawned on me that it only serves to reward spendthrift/irresponsible behavior.

Take two neighbors: 
- both earn a solid UMC income; 
- one guy lives frugally and saves for retirement and after working saving for 45 years has a decent amount of retirement savings - not wealthy but enough to afford a retirement; 
- the other neighbor spends all his money, takes fancy vacations, drives new cars, etc., doesn’t save for retirement

If we means-test them both at 68 (or whatever the retirement age is by then) one looks “poor” and the other does not. So we subsidize the irresponsible neighbor and he ends up living a retirement lifestyle funded by taxpayers while the responsible guy gets nothing, after living a much more frugal life.

Perhaps “means testing” based on “how much did you earn during your working years?” instead of “how much do you have saved by retirement age?” would be a better way to do it. Of course, you can’t stop people from being irresponsible with their money, so we’d likely end up with a lot of people who COULD have saved for their retirement, but didn’t.

I understand that only the first X amount of income is subject to social security taxes. I guess the first thing we can fix is to remove that cap and increase benefits somewhat for the higher earners (since they’ll pay so much more in taxes).

All that said, I’m living frugally and saving for retirement and not counting on SS because I expect to get screwed by the govt as I’ve outlined above, because it’s just the way I was raised.

There’s always a problem with these govt subsidies, including SS — they incentivize bad behavior and penalize good behavior. 
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