As I mentioned in an earlier blog on this site titled “Entitlements is a four-letter word”, Entitlements are under attack – even though it represent money that we have paid into all our working lives. Our government received this money, on our behalf from our employers, and promised we would be able to withdraw this money when we retire.
The problem as I see it is that the government has abused all the money in the Social Security Trust Fund and the money is just not their like they promised it would be.
An additional problem is that some Americans, for various reasons such as those having physical limitations and/or mental health issues are able to apply for early Social Security payments even though they have either not paid into the system at all or paid for a shorter time than is required to be eligible for full Social Security benefits. Some of these individuals are receiving payments at a much earlier age than someone who has worked for years and then applied for SS in conjunction with retiring.
The changes made to the Social Security system to accommodate these individuals are draining the Social Security Fund and will possibly lead to its’ insolvency. The designers of the Social Security system never anticipated there would be individuals receiving SS payments at much earlier ages.
Just look at all the television commercials of law firms who will represent people who feel they are entitled to Social Security Benefits because of medical or mental problems. These lawyers represent these individuals so their law firm can make money – so these lawyers know how to “get around” the system.
One way to correct the “system” is to fund another bucket of money for those individuals and keep the original system with its “bucket of money” for workers who have earned the credits to be eligible for conventional Social Security benefits.
Another change that appears to be in the wings and will probably be passed soon is a Bill to extend the age of eligibility. This change, when passed, will not affect anyone currently receiving Social Security payment nor will it affect those close to retiring. A cutoff date will have to be established.
Currently, you can draw partial benefits and an earlier age and full benefits at the higher age. Congress is considering raising the age limits for both categories by 2 or 3 years.
On the surface, that sounds like something that not only makes sense but something that would not adversely affect anyone unfairly. Considering people are living longer, delaying eligibility might help keep the system solvent.
But here is the glitch in all of this.
American businesses are primarily focused on their bottom line and that is okay to a degree. Some of these companies would do anything to maximize their profits – even to the point of firing middle-aged workers to reduce salaries. If they cannot find a justifiable reason to get rid of a worker or a group of workers, they will simply let them go. Many states have laws regarding the relationship between companies and workers. Basically, some state laws say that a worker may quit anytime he/she wants and the law also states that a company can let anyone go for any reason or no reason at all, but if the reason appears to be against the law, like age discrimination or sex discrimination or other reasons, it is up to the worker to prove that the reason for termination violated a law. It is very hard and expensive for a worker to prove wrongful termination.
But, back to the glitch I hinted at earlier.
Companies, in an effort to maximize earnings to keep their stock price up or to pay higher dividends to shareholders or to reward their senior executives with higher bonuses, frequently resort to terminating middle aged workers who are making higher salaries than some younger and less experienced workers. Sometimes companies will hire a new worker and will have the “older” worker train the new worker and then terminate the older worker after the training period is completed. As legal as this practice seems to be, I find it quite brazen on the company’s part. To accomplish this a company might tell the older worker they are hiring the additional worker to be trained as a backup for when workers go on vacation or when people are sick. It is well within their right to lie, but, again, I find it unethical to say the least.
So, lets get back to the problem with raising the age for eligibility for Social Security.
Defined benefits are almost out the window entirely in this day and age. By “defined benefits”, I mean where companies used to put money aside for you out of their profits and keep it secure for you to receive after you retire from that company. Most companies have stopped that because with Americans living longer, these retired workers will keep drawing that amount for quite a few years and that could be very costly for companies.
To save money, our government and companies came up with 401k programs that encourage an employee to put a percentage of their pay aside from each paycheck, and companies usually match that amount up to a certain percentage. I am not sure of the current law, but I was allowed to put up to 16 percent into my 401k and the company matched 100 percent up to the first 6 percent withheld. The amount above 6 percent and up to 16 percent was still sheltered from current payroll taxes, but it was unmatched by the company.
This sounds wonderful so far, right?
Well, after companies fire a worker in the prime of his/her employment years, that worker finds it harder and harder to find suitable work because of age discrimination. If they do find a job, it will usually be for lower salaries. If they cannot find a job, they might be eligible for unemployment benefits after any termination benefits run out. By that, I mean the company might let you go today and might give you a severance package based on the number of years you worked for the company. Some states will not let you file for unemployment compensation until those benefits run out.
So, the company lets you go at lets say, 58 years of age. You cannot find a job and the severance pay has run out and so has your unemployment – what happens then? The way it is now, in this example you only have to wait 2 years to apply for early Social Security. (Based on you getting lets say 6 months of severance and 18 months of unemployment). Now you are 60 years old and looking forward to reaching 62 years of age so you can apply for reduced Social Security benefits.
Well, guess what, if Congress has their way, the age to apply for early benefits might be raised 3 years and the age for full benefits might also go up 3 years.
The problem is you might need to drain all of your 401k just to survive until your 65th or 68th birthday. The money you put aside to enjoy during the prime of your life might be spent just getting you there.
So, you are caught in the middle – companies dump you early and Congress raises the age of eligibility for Social Security benefits.
Welcome to the real world. Welcome to the erosion of the middle class.