OT: Tyler Summitt will continue to collect Pat's pension ... until he dies | Page 3 | The Boneyard

OT: Tyler Summitt will continue to collect Pat's pension ... until he dies

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It is NOT a Ponzi scheme.....
The Federal Old-Age and Survivors Insurance Trust Fund and Federal Disability Insurance Trust Fund (collectively, the Social Security Trust Fund or Trust Funds) are trust funds that provide for payment of Social Security (Old-Age, Survivors, and Disability Insurance; OASDI) benefits administered by the United States Social Security Administration.[1][2][3]


In a way it is a classic Ponzi scheme. No money was collected to fund the payments to those who are covered. The money I contributed when I worked went to pay benefits for people who had retired decades before. I just started collecting - and I have to hope that young workers will pay for my benefits. Thus the whole system relies on "newcomers" to the system to fund the payments that are due. It differs from a classic Ponzi scheme in that the federal government is involved - but there is a danger at some point in the future that the system will collapse under its own weight. Current federal deficit using GAAP accounting, where all unfunded obligations are included, has been estimated at over $200 Trillion. The published national debt does not include federal pension obligations, accrued obligations for social security, or accrued obligations for medicare. All of those will theoretically be funded on a pay-as-you-go basis, somewhat similar to the way Madoff funded his obligations. The difference, of course, is that the federal government can just continually raise taxes or confiscate assets to fund the bankrupt programs - unless the system collapses under its own weight.
 

JS

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The Republicans have been trying to destroy Social Security (and Amtrak and the Post Office and the National Endowment ad nauseam) for decades.
OK, the thread has been verging on politics for a while and is now crossing the line.

Any more such comments will require the thread to be closed.

Am reluctant to do that, as it's become kind of an interesting off-season OT discussion if it can stay nonpartisan.
 
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In a way it is a classic Ponzi scheme. No money was collected to fund the payments to those who are covered. The money I contributed when I worked went to pay benefits for people who had retired decades before. I just started collecting - and I have to hope that young workers will pay for my benefits. Thus the whole system relies on "newcomers" to the system to fund the payments that are due. It differs from a classic Ponzi scheme in that the federal government is involved - but there is a danger at some point in the future that the system will collapse under its own weight. Current federal deficit using GAAP accounting, where all unfunded obligations are included, has been estimated at over $200 Trillion. The published national debt does not include federal pension obligations, accrued obligations for social security, or accrued obligations for medicare. All of those will theoretically be funded on a pay-as-you-go basis, somewhat similar to the way Madoff funded his obligations. The difference, of course, is that the federal government can just continually raise taxes or confiscate assets to fund the bankrupt programs - unless the system collapses under its own weight.
It is insurance: A promise of compensation for specific potentialfuture losses in exchange for a periodic payment. Insurance is designed to protect the financial well-being of an individual, company or other entity in the case of unexpected loss. Some forms of insurance are required by law, while others are optional. Agreeing to the terms of an insurance policy creates a contractbetween the insured and the insurer. In exchange for payments from the insured (called premiums), the insurer agrees to pay the policyholder a sum of money upon the occurrence of a specific event.

or more specifically, an annuity: a fixed amount of money that is paid to someone each year. : an insurance policy or an investment that pays someone a fixed amount of money each year.

It isn't a Pon·zi scheme: ˈpänzē ˌskēm/noun form of fraud in which belief in the success of a nonexistent enterprise is fostered by the payment of quick returns to the first investors from money invested by later investor.
 

RockyMTblue2

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Can I get college credits toward an actuarial degree if I read all this stuff? :eek:
 
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Cajun, I hope you are already retired.

The reality is that the Trust Fund (as it is quaintly called), is massively underfunded versus future obligations. That is not a problem as long as incoming contributions exceed payments, as has been true its entire existence thus far.

Last projection I saw, however, said that this annual surplus ends in 2021 and outgoing payments will then exceed exceed income. Given demographic and economic changes the continuing projection is that full "guaranteed" monthly payments will thus cease in 2033, but be able to continue at 75% indefinitely. There are steps which can be taken to address this, but they will be painful (e.g. increased taxes, reduced benefits, means testing).

In summary, Social Security is probably closer to a Ponzi scheme than insurance. Sorry.
 
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One other step to address the problem is to create inflation. If payments into the system are increased through inflation but payments out, aren't, the system could be inflated out of trouble. Now, payments out will be occasionally be increased to account for inflation but if those increases are kept below actual inflation, you can keep the ship afloat a little longer. The problem is that our "great" economy refuses to inflate very much despite all the stimulous and the historic level and period of easy money.
 
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Charles Ponzi was a Boston swindler who conned investors out of millions in 1920 by promising returns of up to 100 percent in 90 days on investments in foreign postal coupons. After first-round investors harvested those profits, others flocked to Ponzi, unaware his "profits" consisted of money paid in by other investors.

In contrast, Social Security is more like a "pay-as-you-go" system transferring payroll tax payments by workers to retirees. The American Social Security system has been in continuous successful operation since 1935. Charles Ponzi's scheme lasted barely 200 days.

Mitchell Zuckoff, a Boston University journalism professor who has written a book on Ponzi, noted three critical dissimilarities between Social Security and a Ponzi scheme:

• "First, in the case of Social Security, no one is being misled," Zuckoff wrote in a January 2009 article in Fortune. "Social Security is exactly what it claims to be: A mandatory transfer payment system under which current workers are taxed on their incomes to pay benefits, with no promises of huge returns."

• Second, he wrote, "A Ponzi scheme is unsustainable because the number of potential investors is eventually exhausted." While Social Security faces a huge burden due to retiring Baby Boomers, it can be and has been tweaked, and "the government could change benefit formulas or take other steps, like increasing taxes, to keep the system from failing."

• Third, Zuckoff wrote, "Social Security is morally the polar opposite of a Ponzi scheme. ... At the height of the Great Depression, our society (see 'Social') resolved to create a safety net (see 'Security') in the form of a social insurance policy that would pay modest benefits to retirees, the disabled and the survivors of deceased workers. By design, that means a certain amount of wealth transfer, with richer workers subsidizing poorer ones. That might rankle, but it's not fraud."
 

Atleast5char

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Read in the WSJ that some civil war widows, married early in life to aging vets are still collecting from USA>!!!!!!!
As of 6 months ago, there was only one beneficiary still alive, the daughter of one of the marriages you mention. She was receiving about $73 a month.
 

vtcwbuff

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SS is less of a Ponzi scheme and more of a crap shoot. How much return you get on the money the government took from you depends on beating the life expectancy odds. I'm probably on the plus side, but my long term financial advisor died a couple of months ago at age 64, a couple of years from his planned retirement. Uncle Sam gets to keep all the money they took from him.

I do know that had I invested what SS took from me I would have a lot better return on my money.
 
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SS is less of a Ponzi scheme and more of a crap shoot. How much return you get on the money the government took from you depends on beating the life expectancy odds. I'm probably on the plus side, but my long term financial advisor died a couple of months ago at age 64, a couple of years from his planned retirement. Uncle Sam gets to keep all the money they took from him.

I do know that had I invested what SS took from me I would have a lot better return on my money.

and there are a lot of people whose investments didn't work and now SS is all they have. I don't measure success by whether I get every penny (with interest) out of SS that I put in to it, I just need to know that if my investments don't work, if I suffer disability, get laid off from a job and my retirement fund goes belly up I know SS will be there to help. I know when I die my SS will be there to help my wife thru the end of her life.

The best Insurance is the one you never have to use...... I pay for medical insurance but I will be perfectly happy if I never have to use it.

Not everyone gets breast cancer but my wife did .... I don't know how we would pay for her care without insurance. And insurance doesn't work if risks are not shared by the community as a whole.
 

Kibitzer

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As a matter of possible interest (since all US taxpayers provide funding) my wife will be entitled to 55% of my military retirement pension when I die. When I retired from the service in 1973 I signed up for the survivors' benefit plan; a little bit of my military pension has been deducted monthly ever since. I guess (no research, just a supposition) that my arrangement is typical for federal employees.
 
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As a matter of possible interest (since all US taxpayers provide funding) my wife will be entitled to 55% of my military retirement pension when I die. When I retired from the service in 1973 I signed up for the survivors' benefit plan; a little bit of my military pension has been deducted monthly ever since. I guess (no research, just a supposition) that my arrangement is typical for federal employees.
You should be aware that beginning Oct. 1, 2008, any retiree who has paid 360 months of SBP premiums and has reached the age of 70 is no longer required to make monthly payments for their SBP coverage.
 

Kibitzer

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You should be aware that beginning Oct. 1, 2008, any retiree who has paid 360 months of SBP premiums and has reached the age of 70 is no longer required to make monthly payments for their SBP coverage.

Yes. Thanks. I neglected to mention that -- or that I can't designate my little great granddaughter as the recipient of this largess.
 
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This seems perfectly normal. Relative to pay out, keep in mind that most government employees are underpaid relative to commercial world throughout their career. For every Pat Summit, there are 1000 Clerks making $28,000 per year managing key programs or systems within a city, county, or state.
The key here, as several posters have suggested, is that the kid is getting nothing more than an actuarially accurate amount. Pat decided to give up some money up front to get him some money on the other end. It's perfectly legal. My last job was with a governmental entity and if I recall correctly, I had three options for taking lesser amounts now and providing money to my spouse if I croak before she does. In our case it makes good sense to do that because she is 9 years younger than me. She is likely to outlive me, so why shouldn't I provide at least a little something for her welfare when she reaches retirement age?

As someone pointed out, government pensions can be a good deal for employees who have accepted lower salaries when compared to similar private sector jobs. Here in Arizona, I MUST give up 9-10 percent of my pay to the retirement system. My employer then matches it. What this is is a positive incentive to provide retirement benefits. If the private sector would do something like it, everyone would be better off, at least when they retire. The key is that it is not optional. It is an unfortunate fact that given a choice. many people take the money now instead of setting it aside. This system removes that action as a possibility, to the ultimate benefit of the retiree.
 

KnightBridgeAZ

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As some may know, my wife is disabled and gets Social Security Disability.

Now, for my wife, she was covered by a private disability plan of her employer when she became ill. She gets the same combined amount (private and Social Security) that she would have gotten from her plan without the Social Security, however, they required her to apply to the Social Security Administration. Who (at least in NJ) refuses almost all applications. However, her former employer used a consulting firm who filed the appeal, and the appeal judge was basically like "why was this denied?" which is not always the outcome.

I try never to criticize benefits that folks have worked to earn, regardless of how those benefits are funded. Pat Summitt worked to earn a pension, and did something perfectly legal in naming a beneficiary. While it is true that Tyler may not be in the poor house without the funds, think of other folks, in the same pension system as Pat, that may be dependent on those funds.
 
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