Full Version: Social Security
The United States' Social Security System is heading towards bankruptcy.
According to Andrew G. Biggs of the Cato Institute
Questions For Debate:
Are the American people receiving a better retirement through social security than they could through a personal savings account?
Is it riskier to have social security in the government's hands or in the hand's of the individual?
According to Andrew G. Biggs of the Cato Institute
QUOTE
Stock returns have averaged 7 percent after inflation throughout American history. Even after the recent market drop, a worker retiring today and holding only stocks would have received about 6 percent annual returns, far above the 2.5 percent return an average couple can expect from Social Security (even after including all survivors and disability benefits). Higher rates of return, compounded over decades, could double or even triple a worker's retirement nest egg...Even a worker retiring in 1933, in the depths of the Great Depression, would have received a 4 percent real average return...Of course, the above examples assume that workers invest exclusively in stocks. But if workers thought that stocks were too risky, they would be free to invest in bonds, money market funds, annuity contracts and other conservative investments -- and still earn a higher return than under the current system. Many workers would do better stuffing the money under a mattress...Given a portfolio of 60 percent stocks and 40 percent bonds, the stock market would practically have to be wiped out to make individual accounts a worse deal than Social Security. Even if the stock market went out of business on the day of a worker's retirement, the bonds alone remaining in his account could in most cases pay higher benefits than Social Security...
Questions For Debate:
Are the American people receiving a better retirement through social security than they could through a personal savings account?
Is it riskier to have social security in the government's hands or in the hand's of the individual?
Your questions' premise, stated as though it were fact, is actually not necessarily so.
From the Economic Policy Institute:
From the Brookings Institute:
And from the Center for Budget and Policy Priorities:
Are the American people receiving a better retirement through social security than they could through a personal savings account?
It probably depends on the person. As for the issue as a whole, I certainly do not subscribe to the idea that privatizing anything is always and necessarily better. I'm not entirely against the idea of offering people the option, but I'd like to study up on this a bit more.
Is it riskier to have social security in the government's hands or in the hand's of the individual?
Would it really be in the hands of the individual? Perhaps the surface choice would; but wouldn't that money be in the hands of the market? I might be wrong, but I thought that the idea behind something like Social Security was to take away the risks associated with the vagaries of the market. Of course, given the way Bush is running this country into the ground, with endless war being coupled with massive tax cuts for the over-solvent, perhaps at this point the market would be less risky!
From the Economic Policy Institute:
QUOTE
The Bush Administration has been making alarming claims that the current Social Security program is "in crisis" and is unsustainable. These exaggerations simply are not true. Estimates by the Social Security trustees (using rather pessimistic assumptions) and the nonpartisan Congressional Budget Office (CBO) indicate that the trust fund is solvent for another 38 to 48 years if we do nothing. In other words, Social Security is not going broke anytime soon. Despite the fact that the Social Security trust fund is as robust today as it has been in recent years, the administration proposes to radically change the Social Security program by cutting benefits while at the same time allowing workers to create individual private accounts. While the exact provisions are not clear, any privatization proposal will not, in and of itself, do anything to ameliorate the shortfall projected in 2042 or 2052.
From the Brookings Institute:
QUOTE
Furthermore, post-retirement inflation erodes private pensions. Social Security, in welcome contrast, fully protects pensioners against inflation. That is another reason why traditional Social Security must be sustained.
Not only would privatization expose workers to risks they are poorly equipped to handle, it would subject their children to debts they should not be asked to bear. The federal budget faces deficits estimated at $5 trillion over the next decade. Diverting 2 percentage points of payroll taxes from Social Security into individual accounts would add just over $1 trillion to that.
The three privatization plans developed by a commission President Bush appointed to design ways to privatize Social Security would each add $4 trillion to government debt by 2040, according to the commission's own estimates. Increasing government borrowing so recklessly would threaten the financial and economic stability of the nation. Siphoning off 2 percentage points of the payroll tax would also hasten the day when the Social Security trust fund is exhausted or benefits must be slashed.
Not only would privatization expose workers to risks they are poorly equipped to handle, it would subject their children to debts they should not be asked to bear. The federal budget faces deficits estimated at $5 trillion over the next decade. Diverting 2 percentage points of payroll taxes from Social Security into individual accounts would add just over $1 trillion to that.
The three privatization plans developed by a commission President Bush appointed to design ways to privatize Social Security would each add $4 trillion to government debt by 2040, according to the commission's own estimates. Increasing government borrowing so recklessly would threaten the financial and economic stability of the nation. Siphoning off 2 percentage points of the payroll tax would also hasten the day when the Social Security trust fund is exhausted or benefits must be slashed.
And from the Center for Budget and Policy Priorities:
QUOTE
The tax cuts and the prescription drug bill were the President’s two principal domestic priorities during his first term. Together, these policies will cost at least five times as much over the next 75 years as the Social Security shortfall (if the tax cuts are made permanent). In other words, the President’s domestic policy initiatives will have resulted in fiscal problems much larger than the problem that he now says he wants to address.
We should note that this comparison uses the Social Security projections of the Social Security Trustees. CBO, in contrast, projects that the Social Security shortfall will be only a little over half as large as the Trustees do; CBO places the shortfall at 0.4 percent of GDP over the 75-year period. If one uses the CBO projection of the Social Security shortfall rather than the Trustee’s projection, the cost of the tax cuts themselves is five times the size of the Social Security shortfall and the combined cost of the tax cuts and drug benefit is about 8.5 times the size of the Social Security shortfall (see Table 1).
Indeed, if the tax cuts are made permanent, the cost of the tax cuts just for the most affluent one percent of Americans will be about the same size as the entire Social Security shortfall. Based on analysis by the Urban Institute-Brookings Tax Policy Center, the cost of the tax cuts for the top one percent of households will equal 0.6 percent of GDP — or $3.4 trillion — over the next 75 years. This is 50 percent larger than CBO’s estimate of the size of the Social Security shortfall (which, as noted, is 0.4 percent of GDP) and nearly the same size as the shortfall that the Trustees project.
We should note that this comparison uses the Social Security projections of the Social Security Trustees. CBO, in contrast, projects that the Social Security shortfall will be only a little over half as large as the Trustees do; CBO places the shortfall at 0.4 percent of GDP over the 75-year period. If one uses the CBO projection of the Social Security shortfall rather than the Trustee’s projection, the cost of the tax cuts themselves is five times the size of the Social Security shortfall and the combined cost of the tax cuts and drug benefit is about 8.5 times the size of the Social Security shortfall (see Table 1).
Indeed, if the tax cuts are made permanent, the cost of the tax cuts just for the most affluent one percent of Americans will be about the same size as the entire Social Security shortfall. Based on analysis by the Urban Institute-Brookings Tax Policy Center, the cost of the tax cuts for the top one percent of households will equal 0.6 percent of GDP — or $3.4 trillion — over the next 75 years. This is 50 percent larger than CBO’s estimate of the size of the Social Security shortfall (which, as noted, is 0.4 percent of GDP) and nearly the same size as the shortfall that the Trustees project.
Are the American people receiving a better retirement through social security than they could through a personal savings account?
It probably depends on the person. As for the issue as a whole, I certainly do not subscribe to the idea that privatizing anything is always and necessarily better. I'm not entirely against the idea of offering people the option, but I'd like to study up on this a bit more.
Is it riskier to have social security in the government's hands or in the hand's of the individual?
Would it really be in the hands of the individual? Perhaps the surface choice would; but wouldn't that money be in the hands of the market? I might be wrong, but I thought that the idea behind something like Social Security was to take away the risks associated with the vagaries of the market. Of course, given the way Bush is running this country into the ground, with endless war being coupled with massive tax cuts for the over-solvent, perhaps at this point the market would be less risky!
Are the American people receiving a better retirement through social security than they could through a personal savings account?
No. But that is not the only issue. For example. My father-in-law had a sizable amount in his 401k (sizable in the sense that he could have covered his modest life-style and taken a vacation one a year or so). He was looking forward to retiring and expanding his wood-shop to start making furniture. Then came the tech market crash and the corporate scandals and the resulting stock losses devastated his 401k. As a result he cannot retire until he has too. Without Social Security he would be doomed to be on public assistance in his "golden" years. The market may average a 7% return but that doesn't matter to those like my Father-In-Law who happen to loss it all right at the end of their working lives.
However, the problem I see with allowing people to invest a portion of their social security in the market is not so much the potential loss, it is the fact that it is not "their" money. The system is designed for people who are currently working to pay the benefits of those who are currently retired. Where will we get the money to pay the benefits of those on the system if we take money out of it?
Is it riskier to have social security in the government's hands or in the hand's of the individual?
Well, the money is at greater risk of loss in the hands of the individual when invested in the market then in the hands of the Government. Both Parties may have mis-managed the funds over the years, But the benefits are still there at least for now.
It's the wrong solution IMHO. A better solution to me would be to allow means testing. Social Security was meant to be a safety net. I do not think that those with retirement incomes over say $100,000.00 need this benefit. As the baby boomers retire and their children and grand-children face the looming possibility of massively increased payroll taxes (a regressive tax) to pay for their retirement I think many with sizeable retirement incomes could live without these checks to the benefit of the younger generations in their own families as well as elsewhere. Also, why have a contribution limit. Those making large sums each year regularly hit a level where they no longer have to pay the SS portion of their payroll taxes until the next year. With this system facing a financial crisis in a few decades why give a further benefit to those who benefit the most from the regressive nature of payroll taxes?
I also feel that it is ridiculous to tax people retirement savings. People who contributed to our society their whole lives, and lived responsibly enough to save for Their personal retirement should not be penalized for that foresight and responsible behavior. Forget tax deferment of investments in 401ks and the like, make it tax free unless money is withdrawn before age 62. This, IMHO would balance the loss of SS income for the people that provided well enough for themselves to loose the social security benefit to means testing.
Another solution to America's retirement problem is to separate retirement savings from Employers. Allow full choice and control for the employee, and allow the employer to contribute, but leave the control of the funds in the employees hands and have the funds be managed independently rather then by Employers. No one stays with a company for 30 years anymore. Why not allow people to keep the same funds if they like them rather then have to roll-over the money every time they have to change jobs?
Allowing people to have more control over their private retirement investments, and allowing them to keep more of it when they retire is a much better Answer to the overall issue of having the money to retire IMHO. As for Social Security, it was meant to be a safety net, not a investment. Means test it, create a actual lock box for it, and improve the opportunities people have for retirement outside of SS. For example. Once means testing is in place we could return to SS being tax free. We could also institute other tax benefits to the retired like eliminating Capital Gains taxes for people over 65, allowing people over 65 to deduct their property taxes (another regressive tax) on the 1040, etc.
SS is in trouble. It is in trouble because politicians of both parties never had the backbone to reduce spending when they could play a shell game with the money and cover their spending with the Social Security Surpluses. The answer is not to remove more money from the system but to remove the politicians hands from the system and allow Americans more opportunities and choices to privately invest in their retirement future.
No. But that is not the only issue. For example. My father-in-law had a sizable amount in his 401k (sizable in the sense that he could have covered his modest life-style and taken a vacation one a year or so). He was looking forward to retiring and expanding his wood-shop to start making furniture. Then came the tech market crash and the corporate scandals and the resulting stock losses devastated his 401k. As a result he cannot retire until he has too. Without Social Security he would be doomed to be on public assistance in his "golden" years. The market may average a 7% return but that doesn't matter to those like my Father-In-Law who happen to loss it all right at the end of their working lives.
However, the problem I see with allowing people to invest a portion of their social security in the market is not so much the potential loss, it is the fact that it is not "their" money. The system is designed for people who are currently working to pay the benefits of those who are currently retired. Where will we get the money to pay the benefits of those on the system if we take money out of it?
Is it riskier to have social security in the government's hands or in the hand's of the individual?
Well, the money is at greater risk of loss in the hands of the individual when invested in the market then in the hands of the Government. Both Parties may have mis-managed the funds over the years, But the benefits are still there at least for now.
It's the wrong solution IMHO. A better solution to me would be to allow means testing. Social Security was meant to be a safety net. I do not think that those with retirement incomes over say $100,000.00 need this benefit. As the baby boomers retire and their children and grand-children face the looming possibility of massively increased payroll taxes (a regressive tax) to pay for their retirement I think many with sizeable retirement incomes could live without these checks to the benefit of the younger generations in their own families as well as elsewhere. Also, why have a contribution limit. Those making large sums each year regularly hit a level where they no longer have to pay the SS portion of their payroll taxes until the next year. With this system facing a financial crisis in a few decades why give a further benefit to those who benefit the most from the regressive nature of payroll taxes?
I also feel that it is ridiculous to tax people retirement savings. People who contributed to our society their whole lives, and lived responsibly enough to save for Their personal retirement should not be penalized for that foresight and responsible behavior. Forget tax deferment of investments in 401ks and the like, make it tax free unless money is withdrawn before age 62. This, IMHO would balance the loss of SS income for the people that provided well enough for themselves to loose the social security benefit to means testing.
Another solution to America's retirement problem is to separate retirement savings from Employers. Allow full choice and control for the employee, and allow the employer to contribute, but leave the control of the funds in the employees hands and have the funds be managed independently rather then by Employers. No one stays with a company for 30 years anymore. Why not allow people to keep the same funds if they like them rather then have to roll-over the money every time they have to change jobs?
Allowing people to have more control over their private retirement investments, and allowing them to keep more of it when they retire is a much better Answer to the overall issue of having the money to retire IMHO. As for Social Security, it was meant to be a safety net, not a investment. Means test it, create a actual lock box for it, and improve the opportunities people have for retirement outside of SS. For example. Once means testing is in place we could return to SS being tax free. We could also institute other tax benefits to the retired like eliminating Capital Gains taxes for people over 65, allowing people over 65 to deduct their property taxes (another regressive tax) on the 1040, etc.
SS is in trouble. It is in trouble because politicians of both parties never had the backbone to reduce spending when they could play a shell game with the money and cover their spending with the Social Security Surpluses. The answer is not to remove more money from the system but to remove the politicians hands from the system and allow Americans more opportunities and choices to privately invest in their retirement future.
Depends on the economic status of the person. Obviously if you're rich, private accounts are probably more beneficial because you are able to overcome any loss through investment in the stock market. But that represents only 1% of the country. The rest of the 99% I don't believe will benefit because it takes the security out of the risk. For example:
Is it riskier to have social security in the government's hands or in the hand's of the individual?
Well in a overall sense I think its better to have it in the government’s hands because they are able to make changes to the system that will help better prepare most for retirement in terms of providing benefits and keeping others from poverty. Also, investing your retirement in the stock market is like opening pandora’s box. Why even take the risk?
The stock market is too up and down to take a chance of losing your retirement.
QUOTE
Two-thirds of older Americans rely on Social Security for half or more of their income. Thirty percent rely on it for 90 percent or more of their income.
Without Social Security, more than half of people 65 and older would live in poverty, compared with the 11% who do.
Without Social Security, more than half of people 65 and older would live in poverty, compared with the 11% who do.
QUOTE
And Social Security is not just a retirement plan. It provides benefits for 6 million disabled workers and dependents and 7 million survivors of workers who have died. There’s no insurance plan on the market that can match those benefits.
Is it riskier to have social security in the government's hands or in the hand's of the individual?
Well in a overall sense I think its better to have it in the government’s hands because they are able to make changes to the system that will help better prepare most for retirement in terms of providing benefits and keeping others from poverty. Also, investing your retirement in the stock market is like opening pandora’s box. Why even take the risk?
The stock market is too up and down to take a chance of losing your retirement.
QUOTE(nivekelly @ Jan 10 2005, 02:05 AM)
Are the American people receiving a better retirement through social security than they could through a personal savings account?
Obviously one could make better investments with the same money if they were qualified to do so. The problem is most people aren’t qualified nor have the will to create such a discipline in their lives. Logically America would be much better off if the interest paid on the national debt were going to US citizens holding government backed certificates than have the debt and interest going to Europe and Asia governments.
Perhaps the minimal privatization should remain in US government or State government backed bonds rather than investments in the private sector if such a system is tested.
Priority of a test program of privatization should be directed towards those most affected, those citizens most likely according to government studies to die younger than others like black males for example.
The problem with the system is it is a survivor program for mates and a workmen’s compensation program all rolled into one. To snip a small portion out of one program is to take chunks out of all programs involved.
When I was a private in the army the “command emphasis”, do it or wish you did, was to volunteer to buy US Savings bonds each month. Like water flowing down hill I chose the path of least resistance and bought a $25.00 bond each month at a payroll deduction of $12.50. I elected for the military to maintain the bonds so I wouldn’t lose them and when I was near retirement I was very happy to learn that the $25.00 bonds that matured at five years were then worth over $100.00 through compounding based on the Fed rate. Such a test program on citizens with projected short life span would be worthwhile in my view.
Close family support of elder family members is not what it was before social security was established so I would be very hesitant to gamble with large scale changes until pilot test program could reveal data.
QUOTE
Is it riskier to have social security in the government's hands or in the hand's of the individual?
Government has proven they will spend all money they have access to. I see no reason for government to have access to SS money. SS reserve should be used to finance our national debt and the interest gained be paid to prop up the system.
To be fair if you do the research it was the Democratic Party that started SS and the same party put it in the reach of politicians to spend, tax and increased the contributions by citizens.
Social Security is broken. It may not fail today, or in 20 years, but eventually (inevitably) it will fail.
Why?
It is based upon a ratio of current workers to current retirees. Fewer workers mean that the tax on each worker is higher. As life expectancy increases, so does the total amount of benefit each retiree receives.
In 1937, payroll taxes were 2%. Today, they are around 13%. History of Social Security
I did the math here
Social Security also does not build wealth for future generations of low income workers. With a private account, if a tax payer does not reach retirement, his family benefits. If a retiree does not exhaust his account (my projections go out for 25 years of retirement, or age 88), his family benefits.
This broken system needs to be changed.
Why?
It is based upon a ratio of current workers to current retirees. Fewer workers mean that the tax on each worker is higher. As life expectancy increases, so does the total amount of benefit each retiree receives.
In 1937, payroll taxes were 2%. Today, they are around 13%. History of Social Security
I did the math here
QUOTE
Type in 0 as the starting balance. If you contribute $100 per month ($1200 per year) A $100 per month contribution would be applicable for a person making around $9700 per year ($810 per month). Over a period of 42 years (Age 21 to Age 63) at 5% interest (and continuing to get 5% during retirement), the annual payout would be $11500 or about $960 per month which is just about what a retiree currently gets from Social Security.
Those calculations are for someone at or just above the poverty line (currently $9310 for a family of 1).
We can demonstrate that even the poorest person can get the same benefits out of Social Security through a private retirement account.
Those calculations are for someone at or just above the poverty line (currently $9310 for a family of 1).
We can demonstrate that even the poorest person can get the same benefits out of Social Security through a private retirement account.
Social Security also does not build wealth for future generations of low income workers. With a private account, if a tax payer does not reach retirement, his family benefits. If a retiree does not exhaust his account (my projections go out for 25 years of retirement, or age 88), his family benefits.
This broken system needs to be changed.
QUOTE
Social Security also does not build wealth for future generations of low income workers. With a private account, if a tax payer does not reach retirement, his family benefits. If a retiree does not exhaust his account (my projections go out for 25 years of retirement, or age 88), his family benefits.
This broken system needs to be changed.
This broken system needs to be changed.
Amlord, Isn't their a bigger risk investing your money in the stock market?
if the market crashes (very possible scenario considering how much money the gvoernment spends today and the growing deficit), how will people recover?
I do believe some changes need to be made however, reform as the President proposed like private accounts in my opinion isn't the cure-all solution.
Are the American people receiving a better retirement through social security than they could through a personal savings account?
If this is a comparison with FDIC insured personal savings accounts, you bet! Two percent is 100% more than one percent, plus as mentioned, inflation is considered in the payouts.
But I think the comparison is with personal investment accounts. From recent economic trends, how can anyone think these things are at all dependable enough for retirement? Why not compare with T-bills and bonds?
In all, trust in the stock market isn't exactly at an all-time high. Why, big corporate heads have lied straight faced! Oh my.
Is it riskier to have social security in the government's hands or in the hand's of the individual?
Individuals are known to fall for scam artists on a regular basis. Individuals respond to the most outrageous advertising campaigns and I think this is a little of both. Someone will be making lots of money, but it won't the the folks doing the investing.
We've seen this happen with health care once it was privatized into HMOs. Expect the same from the privitization of SS.
A more sensible way to go is to raise the cap on SS taxes. Put it up into the $200,000 gross range. I think it's near $90,000 now. We might be looking at fewer workers supporting more retirees (although the population keeps growing and baby boomers keep dying), but hopefully the workers will be making a lot more money than those who retired and supported the generations before them.
In all, I think the efforts at privitizing SS are scams.
If this is a comparison with FDIC insured personal savings accounts, you bet! Two percent is 100% more than one percent, plus as mentioned, inflation is considered in the payouts.
But I think the comparison is with personal investment accounts. From recent economic trends, how can anyone think these things are at all dependable enough for retirement? Why not compare with T-bills and bonds?
In all, trust in the stock market isn't exactly at an all-time high. Why, big corporate heads have lied straight faced! Oh my.
Is it riskier to have social security in the government's hands or in the hand's of the individual?
Individuals are known to fall for scam artists on a regular basis. Individuals respond to the most outrageous advertising campaigns and I think this is a little of both. Someone will be making lots of money, but it won't the the folks doing the investing.
We've seen this happen with health care once it was privatized into HMOs. Expect the same from the privitization of SS.
A more sensible way to go is to raise the cap on SS taxes. Put it up into the $200,000 gross range. I think it's near $90,000 now. We might be looking at fewer workers supporting more retirees (although the population keeps growing and baby boomers keep dying), but hopefully the workers will be making a lot more money than those who retired and supported the generations before them.
In all, I think the efforts at privitizing SS are scams.
Are the American people receiving a better retirement through social security than they could through a personal savings account?
Hmmm...I think the aspect this question is really directed at (the recipients) is the wrong aspect to answer the question from. Rather, the question should be asked from the perspective of those paying in. In this regard, the answer can not be anything but a resounding, deafening, NO! Why? Because the government is currently using the SS program as a means of stealing trillions of dollars (yes, with a 'T') from the American people. It does this through the myth of the SS Trust Fund..for which it has been collecting money for decades, but for which is has yet to contribute a single dime into. Rather, this money has simply been spent on other things. Further, they are shortly going to have the unmitigated gall of attempting to collect this same money, which we, the American people have already paid in, from us again!!!! Private acccounts would prevent this type of financial trickery, because the money would actually have to go into these accounts, removing the governments ability to spend it for us beforehand.
Is it riskier to have social security in the government's hands or in the hand's of the individual?
[/quote]
See above...and then tell me if this question really needs to be asked. Clearly, it is the ultimate risk to allow the government access to this money..if they have it, they will spend it. NOTHING could be riskier than that. Further, the additional taxes they are going to inflict on us to make up for the money they've already spent will further detract from the American people's ability to save for themselves, simply worsening the cycle. The only solution is to do anything possible to take the money out of the governments hands, as they have never, in their entire history, demonstrated the ability to save it on your behalf.
As for the original intent of this question (ie, are private accounts better than the current system in terms of expected return)..again, this is pretty simple. How many financial advisors tell their young clients to put most of their money into fixed return investments? None. Why? Because, over time, investing in the market is ALWAYS the better alternative. Yes, it does have risk...and you are rewarded for taking that risk with higher average returns. Everyone knows this...but those opposed to the private accounts flog this horse to scare people away. Either these people are lying or financially uneducated...in neither case should they be paid much attention to. It would be very worthwhile to ask all the critics of such a system where their personal retirement funds are allocated...I expect you would find that the vast majority of them had been invested in the very type of funds they are railing against, unless they are of the age at which capital preservation should start to overrule wealth creation. Which should be all the information anyone would need to know to judge their credibility on the issue.
Over time. As they always have. Also, you must consider what would happen to SS in that scenario....interest rates would surely rise, causing financing the federal deficit to become unmanageable, leading inevitably to drastic cuts in government programs such as SS.
This is the classic argument against, which has two flaws. First, it ignore the fact that the government is currently fleecing you by spending money it is supposed to be saving, with the intent of taxing you for it again. Burying it in the ground would be a far better alternative to that. Second, this is classic liberal 'the common man is incompetent' bullhickey. If someone doesn't have the will to learn about the single biggest financial decision in their life (yes, bigger than your house)...then I have better things to do with MY money than support their ignorance. A short, 20-30 minute discussion with a financial advisor would be more than sufficient to answer this question...if you're not sure, you put your money into an account which mirrors the S&P 500, and you leave it there until you near retirement age. There, that wasn't so hard, was it? Anyone who doesn't have the will to learn that shouldn't have direct access to MY wallet. Plus, look at this from the other perspective...imagine how much better off we would be if everyone did become more financially aware of things like this? We would be a much more productive country, with all the benefits that would entail.
See, that's the myth. The reality is that you've already lost it...the government has been busying spending it as soon as they took it from you. So, THERE IS NO MONEY FOR YOUR RETIREMENT! We have only the hope that they'll get the money from somewhere (which they will, by raising taxes). So, you'll end up contributing to your retirement twice...once when they stole it from you, and once again when they had to replace what they stole. Exactly how do you figure that's the better system?
Good question...the answer is that the private accounts will be funded with the money that was supposed to be going into the Social Security Surplus. Basically, all it is doing is forcing the government to be doing with that money what it was supposed to be doing all along....saving it for your retirement. Currently, its just gone. So, your return on this investment over the current plan is infinite (something/zero). Don't know about you, but I'll take something over nothing anytime.
True...there wasn't a dime in it before, and there's not a dime in it now. Which makes you understand why the author didn't provide the exact figures in the statement, doesn't it?
You mean, like the current system of spending the money that's supposed to going into the trust fund, with the intent of raising taxes later to cover the deficit? I guess the difference being at least this time we'd be asked....
...and compare that to the risk of giving the government your money to keep for you (wink, wink)? Hardly the better alternative, I think.
PS...I apologize in advance for my cynicism and any sarcasm....this is just an issue that absolutely gets my blood boiling! The government has been stealing Trillions of dollars from us...and we're allowing it, and they're going to do it to us again! ARGHHHHH!!!!! Please keep this in mind if I have unintentionally offended anyone.
Hmmm...I think the aspect this question is really directed at (the recipients) is the wrong aspect to answer the question from. Rather, the question should be asked from the perspective of those paying in. In this regard, the answer can not be anything but a resounding, deafening, NO! Why? Because the government is currently using the SS program as a means of stealing trillions of dollars (yes, with a 'T') from the American people. It does this through the myth of the SS Trust Fund..for which it has been collecting money for decades, but for which is has yet to contribute a single dime into. Rather, this money has simply been spent on other things. Further, they are shortly going to have the unmitigated gall of attempting to collect this same money, which we, the American people have already paid in, from us again!!!! Private acccounts would prevent this type of financial trickery, because the money would actually have to go into these accounts, removing the governments ability to spend it for us beforehand.
Is it riskier to have social security in the government's hands or in the hand's of the individual?
[/quote]
See above...and then tell me if this question really needs to be asked. Clearly, it is the ultimate risk to allow the government access to this money..if they have it, they will spend it. NOTHING could be riskier than that. Further, the additional taxes they are going to inflict on us to make up for the money they've already spent will further detract from the American people's ability to save for themselves, simply worsening the cycle. The only solution is to do anything possible to take the money out of the governments hands, as they have never, in their entire history, demonstrated the ability to save it on your behalf.
As for the original intent of this question (ie, are private accounts better than the current system in terms of expected return)..again, this is pretty simple. How many financial advisors tell their young clients to put most of their money into fixed return investments? None. Why? Because, over time, investing in the market is ALWAYS the better alternative. Yes, it does have risk...and you are rewarded for taking that risk with higher average returns. Everyone knows this...but those opposed to the private accounts flog this horse to scare people away. Either these people are lying or financially uneducated...in neither case should they be paid much attention to. It would be very worthwhile to ask all the critics of such a system where their personal retirement funds are allocated...I expect you would find that the vast majority of them had been invested in the very type of funds they are railing against, unless they are of the age at which capital preservation should start to overrule wealth creation. Which should be all the information anyone would need to know to judge their credibility on the issue.
QUOTE
Amlord, Isn't their a bigger risk investing your money in the stock market?
if the market crashes (very possible scenario considering how much money the gvoernment spends today and the growing deficit), how will people recover?
if the market crashes (very possible scenario considering how much money the gvoernment spends today and the growing deficit), how will people recover?
Over time. As they always have. Also, you must consider what would happen to SS in that scenario....interest rates would surely rise, causing financing the federal deficit to become unmanageable, leading inevitably to drastic cuts in government programs such as SS.
QUOTE
Obviously one could make better investments with the same money if they were qualified to do so. The problem is most people aren’t qualified nor have the will to create such a discipline in their lives.
This is the classic argument against, which has two flaws. First, it ignore the fact that the government is currently fleecing you by spending money it is supposed to be saving, with the intent of taxing you for it again. Burying it in the ground would be a far better alternative to that. Second, this is classic liberal 'the common man is incompetent' bullhickey. If someone doesn't have the will to learn about the single biggest financial decision in their life (yes, bigger than your house)...then I have better things to do with MY money than support their ignorance. A short, 20-30 minute discussion with a financial advisor would be more than sufficient to answer this question...if you're not sure, you put your money into an account which mirrors the S&P 500, and you leave it there until you near retirement age. There, that wasn't so hard, was it? Anyone who doesn't have the will to learn that shouldn't have direct access to MY wallet. Plus, look at this from the other perspective...imagine how much better off we would be if everyone did become more financially aware of things like this? We would be a much more productive country, with all the benefits that would entail.
QUOTE
Why even take the risk?
The stock market is too up and down to take a chance of losing your retirement.
The stock market is too up and down to take a chance of losing your retirement.
See, that's the myth. The reality is that you've already lost it...the government has been busying spending it as soon as they took it from you. So, THERE IS NO MONEY FOR YOUR RETIREMENT! We have only the hope that they'll get the money from somewhere (which they will, by raising taxes). So, you'll end up contributing to your retirement twice...once when they stole it from you, and once again when they had to replace what they stole. Exactly how do you figure that's the better system?
QUOTE(overlandsailer)
Where will we get the money to pay the benefits of those on the system if we take money out of it?
Good question...the answer is that the private accounts will be funded with the money that was supposed to be going into the Social Security Surplus. Basically, all it is doing is forcing the government to be doing with that money what it was supposed to be doing all along....saving it for your retirement. Currently, its just gone. So, your return on this investment over the current plan is infinite (something/zero). Don't know about you, but I'll take something over nothing anytime.
QUOTE
Estimates by the Social Security trustees (using rather pessimistic assumptions) and the nonpartisan Congressional Budget Office (CBO) indicate that the trust fund is solvent for another 38 to 48 years if we do nothing. In other words, Social Security is not going broke anytime soon.
Not true. This calculation is counting the governmental IOU's for what they've been spending out of the Trust Fund as 'real' money. It's not...taxes will have to be raised to meet those obligations (or spending drastically decreased, and we all know what the chances of that are).QUOTE
Despite the fact that the Social Security trust fund is as robust today as it has been in recent years
True...there wasn't a dime in it before, and there's not a dime in it now. Which makes you understand why the author didn't provide the exact figures in the statement, doesn't it?
QUOTE
Not only would privatization expose workers to risks they are poorly equipped to handle, it would subject their children to debts they should not be asked to bear.
You mean, like the current system of spending the money that's supposed to going into the trust fund, with the intent of raising taxes later to cover the deficit? I guess the difference being at least this time we'd be asked....
QUOTE
I might be wrong, but I thought that the idea behind something like Social Security was to take away the risks associated with the vagaries of the market.
...and compare that to the risk of giving the government your money to keep for you (wink, wink)? Hardly the better alternative, I think.
PS...I apologize in advance for my cynicism and any sarcasm....this is just an issue that absolutely gets my blood boiling! The government has been stealing Trillions of dollars from us...and we're allowing it, and they're going to do it to us again! ARGHHHHH!!!!! Please keep this in mind if I have unintentionally offended anyone.
I haven't viewed any responses yet so i will go at this cold. Social Security will run out eventually. That is a fact and it is unavoidable. The population is growing at too fast a rate and with all these people retiring, by the time my generation roles around we will have no SS.
Bush's plan is a start. Just $1300 in private accounts and the rest is still run by the government. This and cutting benefits should increase money. Now cutting benefits sounds scary...unless you know what he actually means. Every year your SS benefits increase by a percentage. By cutting benefits he means cutting the percentage increase. So your benefit will always increase but just not by as much.
I am taking a moderate approach to SS privatization. I do not think SS is in the huge crisis some Repubs make it out to be, but i also think it is ridiculous to believe that it doesnt need some type of reform.
Some people's arguments that people do not know how to invest their money properly and they wil lend up losing their money. But i think that once people start using private accounts, and some start making money, it will entice others to go private as well. This will move us into full privatization which could be a good thing in a monopolistic system.
People should have control over their own lives and their own money. Also keep in mind how privatized SS will cut government entitlement spending. This will create more money for discretionary spending which benefits everyone. At the current rate, entitlement spending will be great because the government will have to make up for its promises. Than as they try to pay off the SS fund, the debt keeps growing larger and the debt gains interest making it harder to pay off.\
Bottom Line: We need to do something now so future generations do not suffer. This is a progressive move by the president and a smart one.
Bush's plan is a start. Just $1300 in private accounts and the rest is still run by the government. This and cutting benefits should increase money. Now cutting benefits sounds scary...unless you know what he actually means. Every year your SS benefits increase by a percentage. By cutting benefits he means cutting the percentage increase. So your benefit will always increase but just not by as much.
I am taking a moderate approach to SS privatization. I do not think SS is in the huge crisis some Repubs make it out to be, but i also think it is ridiculous to believe that it doesnt need some type of reform.
Some people's arguments that people do not know how to invest their money properly and they wil lend up losing their money. But i think that once people start using private accounts, and some start making money, it will entice others to go private as well. This will move us into full privatization which could be a good thing in a monopolistic system.
People should have control over their own lives and their own money. Also keep in mind how privatized SS will cut government entitlement spending. This will create more money for discretionary spending which benefits everyone. At the current rate, entitlement spending will be great because the government will have to make up for its promises. Than as they try to pay off the SS fund, the debt keeps growing larger and the debt gains interest making it harder to pay off.\
Bottom Line: We need to do something now so future generations do not suffer. This is a progressive move by the president and a smart one.
Are the American people receiving a better retirement through social security than they could through a personal savings account?
No and no. The problem as I see it is less social security and more a profound mismanagement of the funds. Here are the arguments for change as I see them:
1. Financial mismanagement
The government continues to "rob Peter to pay Paul" with regard to social security funds. Simply locking up those funds so that they can only be used for social security would effect a good solution. Privatization in and of itself does guarantee any better management of the funds. No matter what, you must introduce some sort of policy/rules/laws to manage the funds properly. This is why I find it disingenuous for the privatization proponents to argue this. Let me put it succinctly: solving the financial mismanagement problems is independent of privatization.
2. Social responsibility vs. "enlightened" self-interest
The privatization proposal is based on a philosophy that the government should not be in the role of wealth redistribution whereas social security is all about wealth redistribution. Ultimately, this is the philosophical battleground. In order to even begin to find common ground, it is important to agree on the problems we wish to solve with a retirement program.
a. Should government have a role in helping retired folks?
b. If so, what amount of financial help should the government provide?
c. Is there a baseline of financial help?
d. Should help be scaled based on earnings? Which direction? Linear, exponential?
I'm sure there are more question to ask. The thing is: privatization can be a good thing. I think most everyone can agree that privatized telephone service has been good whereas I think most people agree that privatized nuclear missile ownership is not good. Social security falls somewhere between those two extremes. It isn't clear that privatization is always virtuous or the best solution in all cases. So, we need actual data, experimental evidence (hopefully) before we can make a reasonable call on this subject.
3. Law of unintended consequences
The California power crisis a couple years back serves as a good example of privatization policies run amok. What was implemented did the exact opposite of what was intended. This is very, very bad. The system must be designed (or gamed, if you will) in such a way to give the solutions we desire. Privatization will not magically do this for us. Without rules to guide the policies, then pure self-interest will always take precedence.
Is it riskier to have social security in the government's hands or in the hand's of the individual?
Well, Dubya's proposal doesn't really put it into the hands of the individuals. The government still insists that you save your money in an account. If we're really going down the privatization road, then it's worth evaluating the repercussions of doing away with private accounts all together. And why not? This would be the ultimate form of privatization which would make all those supply-siders oh-so-happy.
No and no. The problem as I see it is less social security and more a profound mismanagement of the funds. Here are the arguments for change as I see them:
1. Financial mismanagement
The government continues to "rob Peter to pay Paul" with regard to social security funds. Simply locking up those funds so that they can only be used for social security would effect a good solution. Privatization in and of itself does guarantee any better management of the funds. No matter what, you must introduce some sort of policy/rules/laws to manage the funds properly. This is why I find it disingenuous for the privatization proponents to argue this. Let me put it succinctly: solving the financial mismanagement problems is independent of privatization.
2. Social responsibility vs. "enlightened" self-interest
The privatization proposal is based on a philosophy that the government should not be in the role of wealth redistribution whereas social security is all about wealth redistribution. Ultimately, this is the philosophical battleground. In order to even begin to find common ground, it is important to agree on the problems we wish to solve with a retirement program.
a. Should government have a role in helping retired folks?
b. If so, what amount of financial help should the government provide?
c. Is there a baseline of financial help?
d. Should help be scaled based on earnings? Which direction? Linear, exponential?
I'm sure there are more question to ask. The thing is: privatization can be a good thing. I think most everyone can agree that privatized telephone service has been good whereas I think most people agree that privatized nuclear missile ownership is not good. Social security falls somewhere between those two extremes. It isn't clear that privatization is always virtuous or the best solution in all cases. So, we need actual data, experimental evidence (hopefully) before we can make a reasonable call on this subject.
3. Law of unintended consequences
The California power crisis a couple years back serves as a good example of privatization policies run amok. What was implemented did the exact opposite of what was intended. This is very, very bad. The system must be designed (or gamed, if you will) in such a way to give the solutions we desire. Privatization will not magically do this for us. Without rules to guide the policies, then pure self-interest will always take precedence.
Is it riskier to have social security in the government's hands or in the hand's of the individual?
Well, Dubya's proposal doesn't really put it into the hands of the individuals. The government still insists that you save your money in an account. If we're really going down the privatization road, then it's worth evaluating the repercussions of doing away with private accounts all together. And why not? This would be the ultimate form of privatization which would make all those supply-siders oh-so-happy.
I agree with Amlord and Hobbes (mark this date on your calendars, fellas) that something needs to be done, and needs to be done now. I don't, however, agree that the stock market is necessarily the way to go about it.
As OverlandSailor pointed out, if these accounts were to be set up like our current 401-k systems, in the stock market, there is a very real possiblilty of losing everything you had put aside, and at the point where you may need it most.
This kind of system is just begging for problems in other areas, as well. Who administrates this? The government, or private stock brokers? At what transaction rate? What kind of "load"? Will you really be making anything, if you have a disreputable broker? Like AuthorMusician, I could easily see a nationwide version of the California "energy privatization" happen, if this were all conducted through the private side.
I think a better way to go, would be through a combination of state and federal long-term bonds (all of which generally pay higher than SS interest). Perhaps throw in some long term certificates of deposit, that have to be rolled over until retirement age - say age 62.
For those that require, or desire a more aggressive financial stance, stocks will always be available through 401-k's or mutual funds, or whatever. But, again, what we are talking about here, is something to replace social security with, that will pay at least as well at retirement, if not a bit better, to ensure that everyone is not left completely destitute when they retire. And to do it in a vehicle that keeps Congess's hands off of the funds.
As OverlandSailor pointed out, if these accounts were to be set up like our current 401-k systems, in the stock market, there is a very real possiblilty of losing everything you had put aside, and at the point where you may need it most.
This kind of system is just begging for problems in other areas, as well. Who administrates this? The government, or private stock brokers? At what transaction rate? What kind of "load"? Will you really be making anything, if you have a disreputable broker? Like AuthorMusician, I could easily see a nationwide version of the California "energy privatization" happen, if this were all conducted through the private side.
I think a better way to go, would be through a combination of state and federal long-term bonds (all of which generally pay higher than SS interest). Perhaps throw in some long term certificates of deposit, that have to be rolled over until retirement age - say age 62.
For those that require, or desire a more aggressive financial stance, stocks will always be available through 401-k's or mutual funds, or whatever. But, again, what we are talking about here, is something to replace social security with, that will pay at least as well at retirement, if not a bit better, to ensure that everyone is not left completely destitute when they retire. And to do it in a vehicle that keeps Congess's hands off of the funds.
The risk of catastrophic loss is extremely low. Even looking at a one year snap shot (and let's face it, saving for retirement is not a one year event), the greatest loss was around 25%.
In recent years, although we have had some tough years, the average return in the 1yr, 3yr, 5yr and 10yr timeframe all beat the 1% mark Dow Jones Averages Statistics
Here is a chart of the Dow over its history. Find me a period of 25 years when the market did not go up... chart of the DJIA for the last 104 years (1897 - 2000). . If you said the start or end point was the beginning of the Great Depression, go to the head of the class. However, what you must realize is that no one withdraws their money completely upon retirement. The balance continues to climb during retirement.
Check out this site: Historical Stocks/Shares Performance Returns
Even if you had the worst luck ever, you could recover over a 25 year period. Any 25 year period. For the vast majority of investors, average return would be over 10% per year.
The Five Biggest Stock Market Myths
The greatest advantage of the stock market is that it is not a zero sum game. It is not gambling. As companies prosper, the investor (in this case, the retiree) prospers. Why do we exclude the working class from benefitting from the advantages of investing in the market?
Let me answer cgorham's question...
As I said, no one removes all of their money from the market on any given day. Crashes are the result of overpriced markets, which simply mean that the previous gains were not accurate. The crash in 2000 was a correction to the rampant bull market of the 1990s (which was largely based on fraud and speculation). The same was true in the Great Depression. Rampant speculation created an over valued market. The bull portion of the market was too bullish.
The value lost in 2000 (and 1987 and 1929) was unearned value "gained" in the previous years. In the case of 1929, it lead to an extended Depression (possibly lengthened by FDR's policies). Since then, corrective measures and safe guards have been put into place to curb the market. In recent years, the 20%+ losses in the last few years are offset by the 20%+ gains over the 5 previous years. The average gain over the last 10 years (including those big loss years) is over 10% per year.
In recent years, although we have had some tough years, the average return in the 1yr, 3yr, 5yr and 10yr timeframe all beat the 1% mark Dow Jones Averages Statistics
Here is a chart of the Dow over its history. Find me a period of 25 years when the market did not go up... chart of the DJIA for the last 104 years (1897 - 2000). . If you said the start or end point was the beginning of the Great Depression, go to the head of the class. However, what you must realize is that no one withdraws their money completely upon retirement. The balance continues to climb during retirement.
Check out this site: Historical Stocks/Shares Performance Returns
QUOTE
The 1920s bull market peaked on September 7, 1929. If someone had invested their money in the stock market on September 7, 1929, it would have taken until September 1954 to break even using the price index benchmark but on a total return basis (allowing for dividends), the investor would have broken even nine years earlier, in 1945.
Even if you had the worst luck ever, you could recover over a 25 year period. Any 25 year period. For the vast majority of investors, average return would be over 10% per year.
The Five Biggest Stock Market Myths
The greatest advantage of the stock market is that it is not a zero sum game. It is not gambling. As companies prosper, the investor (in this case, the retiree) prospers. Why do we exclude the working class from benefitting from the advantages of investing in the market?
Let me answer cgorham's question...
QUOTE(cgorham)
Isn't their a bigger risk investing your money in the stock market?
if the market crashes (very possible scenario considering how much money the gvoernment spends today and the growing deficit), how will people recover?
if the market crashes (very possible scenario considering how much money the gvoernment spends today and the growing deficit), how will people recover?
As I said, no one removes all of their money from the market on any given day. Crashes are the result of overpriced markets, which simply mean that the previous gains were not accurate. The crash in 2000 was a correction to the rampant bull market of the 1990s (which was largely based on fraud and speculation). The same was true in the Great Depression. Rampant speculation created an over valued market. The bull portion of the market was too bullish.
The value lost in 2000 (and 1987 and 1929) was unearned value "gained" in the previous years. In the case of 1929, it lead to an extended Depression (possibly lengthened by FDR's policies). Since then, corrective measures and safe guards have been put into place to curb the market. In recent years, the 20%+ losses in the last few years are offset by the 20%+ gains over the 5 previous years. The average gain over the last 10 years (including those big loss years) is over 10% per year.
Hey Folks, here's what I've got, and I think, with modifications, it could work for everyone.
I do not pay SS tax. Many state & local government employees don't, if they have a pension. We still pay Medicare Tax.
I have a pension run by a pension board, required by Congress to be actuarily sound. My union has a representative on said board. 8% of my paycheck goes to the pension, and I can retire with 25y of service at 62.5% of my salary, plus raises indexed at the base pay of those still working (better than COLA). Inflation will not erode my pension.
I also have deferred comp, more or less like a 401K.
As far as I'm concerned, if pension companies could compete for individual customers, we'd have no problem. Make each employer withold 10% of wages & salary for transfer to a pension company.
As far as SS running out of money, here's how it works. In the next 10 years, SS starts paying out more than it recieves in payroll taxes. At that point special bonds from other gov't agencies get called back in to provide cash to the SS recipients. To pay these bonds, those other government agencies must raise cash through general revenue (income taxes). So, it's a wash. In 40-70 years, all of these bonds will have been called in, at which point congress is supposedly bound to raise payroll taxes or reduce benefits, or more likely, continue to pay benefits out of general revenue, as it will have then been doing for 30-60 years.
So, imho, SS is not a crisis, nor will it be one in the future. Likewise, allowing some of the payroll tax money to be individually saved doesn't make it a crisis either. However, it's not the best thing we could be doing with our money.
I think the biggest and best argument for SS privatization is the ability for intergenerational wealth to be transferred. The arguments regarding rate of return, etc. aren't nearly as convincing: the overall 'rate of return' for the SS system is better than the individual rate, due to income redistribution; and the stock market's historical performance is probably not sustainable forever: most of the market's gains have been due to every increasing P/E ratios, not due to increasing productivity & efficiency. The economy overall has grown at a rate of around 3.4% over the last 100 or so years, I suspect that eventually the performance of the market will approach this.
As far as the effects of losing the supposed 'progressive' nature of social security, I feel the opportunity for families to inherit wealth would far outweigh the loss of income redistribution. Don't forget that their are other forms of welfare to take care of 'the poor'.
I do not pay SS tax. Many state & local government employees don't, if they have a pension. We still pay Medicare Tax.
I have a pension run by a pension board, required by Congress to be actuarily sound. My union has a representative on said board. 8% of my paycheck goes to the pension, and I can retire with 25y of service at 62.5% of my salary, plus raises indexed at the base pay of those still working (better than COLA). Inflation will not erode my pension.
I also have deferred comp, more or less like a 401K.
As far as I'm concerned, if pension companies could compete for individual customers, we'd have no problem. Make each employer withold 10% of wages & salary for transfer to a pension company.
As far as SS running out of money, here's how it works. In the next 10 years, SS starts paying out more than it recieves in payroll taxes. At that point special bonds from other gov't agencies get called back in to provide cash to the SS recipients. To pay these bonds, those other government agencies must raise cash through general revenue (income taxes). So, it's a wash. In 40-70 years, all of these bonds will have been called in, at which point congress is supposedly bound to raise payroll taxes or reduce benefits, or more likely, continue to pay benefits out of general revenue, as it will have then been doing for 30-60 years.
So, imho, SS is not a crisis, nor will it be one in the future. Likewise, allowing some of the payroll tax money to be individually saved doesn't make it a crisis either. However, it's not the best thing we could be doing with our money.
I think the biggest and best argument for SS privatization is the ability for intergenerational wealth to be transferred. The arguments regarding rate of return, etc. aren't nearly as convincing: the overall 'rate of return' for the SS system is better than the individual rate, due to income redistribution; and the stock market's historical performance is probably not sustainable forever: most of the market's gains have been due to every increasing P/E ratios, not due to increasing productivity & efficiency. The economy overall has grown at a rate of around 3.4% over the last 100 or so years, I suspect that eventually the performance of the market will approach this.
As far as the effects of losing the supposed 'progressive' nature of social security, I feel the opportunity for families to inherit wealth would far outweigh the loss of income redistribution. Don't forget that their are other forms of welfare to take care of 'the poor'.
QUOTE(Amlord @ Jan 10 2005, 02:34 PM)
The risk of catastrophic loss is extremely low. Even looking at a one year snap shot (and let's face it, saving for retirement is not a one year event), the greatest loss was around 25%.
In recent years, although we have had some tough years, the average return in the 1yr, 3yr, 5yr and 10yr timeframe all beat the 1% mark Dow Jones Averages Statistics
In recent years, although we have had some tough years, the average return in the 1yr, 3yr, 5yr and 10yr timeframe all beat the 1% mark Dow Jones Averages Statistics
I understand what you're saying here Amlord and I agree that the market generally has a better overall return rate, even in some of it's worst years then social security.
However, lets re-examine my father-in-laws situation. The man, like me is blue collar, and like me hates finance. He, like me, has money withheld from his check to go into a moderate-risk, mutual fund in a 401K through his employer. He, like me, and like most average Americans, has no desire to read financial papers, track market trends, and constantly move his account around to different funds, though he has the ability to do so. At 60, his 401k account went from hundreds of thousands of dollars to a few tens of thousands thanks to the tech market crash and the general market crash that followed the Corporate scandals (Enron, Tyco and the like), and the brokerage debacles. He cannot possibly make up what he lost before retirement, even if he waited unit the suggested 67 to do so.
This loss has resulted in him being unable to retire. He will not have enough money, even with social security to retire and be able to support himself and his wife, let alone any adult children that have not flown the cope yet.
What the overall performance numbers fail to take into account is what happens to those people who take the big losses at the end of their investment life. What happens to them? What will we do when this happens to some?
I know VERY few people who can live on their current social security benefit alone. How would someone like this live if they lost even a small part of that benefit because they had the money in the wrong place, at the wrong time in their lives?
IMHO, as I mentioned in my earlier post, there are better solutions to the SS problem. This just doesn't happen to be one of them in my eyes.
Edited to add: For those keeping score, I a well aware of the fact that I am posting this outside of the hours I specified in my New Years Resolution. However, as I have barely visited AD in about a week and have not posted in at least that long I figure I can cut myself some slack.
QUOTE(SWM28WDC @ Jan 10 2005, 03:16 PM)
As far as SS running out of money, here's how it works. In the next 10 years, SS starts paying out more than it recieves in payroll taxes. At that point special bonds from other gov't agencies get called back in to provide cash to the SS recipients. To pay these bonds, those other government agencies must raise cash through general revenue (income taxes). So, it's a wash. In 40-70 years, all of these bonds will have been called in, at which point congress is supposedly bound to raise payroll taxes or reduce benefits, or more likely, continue to pay benefits out of general revenue, as it will have then been doing for 30-60 years.
So, imho, SS is not a crisis, nor will it be one in the future. Likewise, allowing some of the payroll tax money to be individually saved doesn't make it a crisis either. However, it's not the best thing we could be doing with our money.
So, imho, SS is not a crisis, nor will it be one in the future. Likewise, allowing some of the payroll tax money to be individually saved doesn't make it a crisis either. However, it's not the best thing we could be doing with our money.
SWM28WDC, that's hardly a wash....where do you expect this income tax money to come from? Don't know about everyone else, but that comes from...my income. The very same place they already took it from. The very income I am trying to save for my own retirement, but can't do it sufficiently because of the money I'm currently paying into the non-existent trust fund. In fact, I think a very good argument could be made that the activities of Congress the past 30 years regarding this trust fund could be considered treasonous...unless everyone here is just fine with Congress lying to our faces and setting up a huge future tax burden, which could call into question either the solvency of the government or the functioning of our entire economy, is somehow OK? In fact, I think we should be able to flatly refuse to pay any such future tax increase...since we have in fact already done so. Although the money went into the general fund (meaning they intended to spend it all along)...the tax itself was earmarked for a specific purpose. There are precedents for governments being unable to collect additional monies when taxes specified for certain purposes are not used for that purpose (indeed, without such a system, what's the purposes of earmarked taxes?). Why is everyone here not outraged at this? How much money are we willing to continue to flush down the drain here? Honestly, I do not understand...are we so jaded by our government that they can steal trillions of dollars from us...and we don't care? If someone walked up to you and mugged you for the same amount (which is the same thing)....would you still be so apathetic about it? Especially if you knew full well they were going to mug you again in the future? No, I don't understand at all.....
QUOTE(overlandsailor)
I know VERY few people who can live on their current social security benefit alone. How would someone like this live if they lost even a small part of that benefit because they had the money in the wrong place, at the wrong time in their lives?
How do you propose these same people live when SS benefits are slashed to cover the looming shortfall? Even though, in the situation you described, much of your Dad's wealth went away....ALL of the money contributed to the SS Trust Fund is gone. Every last penny. (Which is proof positive that putting this into the government coffers is absolutely the worst place, all the time.) So, your dad's account, even with this disastrous situation, is far, far ahead of money contributed to the government for future use--even Enron employees were treated better than we have been.
QUOTE
See, that's the myth. The reality is that you've already lost it...the government has been busying spending it as soon as they took it from you. So, THERE IS NO MONEY FOR YOUR RETIREMENT! We have only the hope that they'll get the money from somewhere (which they will, by raising taxes). So, you'll end up contributing to your retirement twice...once when they stole it from you, and once again when they had to replace what they stole. Exactly how do you figure that's the better system?
Here's another reality, there is good chance that over 30 years your retirement will be reduced or lost in the stock market. Are we supposed to just trust Wall street??
QUOTE
Its important to recognize that investing Social Security money in the stock market does not create new wealth. The stocks draw a higher return than government bonds, the gains from having Social Security in the market would come at the expense of other stock holders, who would get a lower return, and at the expense of the general budget, as the government would now be paying higher interest rates on its bonds.
The lower return to stockholders can be thought of as a tax on capital income, whereas the higher interest payments on government bonds can be viewed as a transfer of general revenue. If taxing capital and transferring money from general revenue are considered desirable ways to increase the returns to Social Security, this can be accomplished without actually placing Social Security money in the stock market.
The lower return to stockholders can be thought of as a tax on capital income, whereas the higher interest payments on government bonds can be viewed as a transfer of general revenue. If taxing capital and transferring money from general revenue are considered desirable ways to increase the returns to Social Security, this can be accomplished without actually placing Social Security money in the stock market.
Thats why private accounts make the problem worse. There will be no security in Social Security anymore. Re-name it Social Risk at the stockholers expense.
QUOTE(Hobbes @ Jan 10 2005, 03:59 PM)
QUOTE(overlandsailor)
I know VERY few people who can live on their current social security benefit alone. How would someone like this live if they lost even a small part of that benefit because they had the money in the wrong place, at the wrong time in their lives?
How do you propose these same people live when SS benefits are slashed to cover the looming shortfall? Even though, in the situation you described, much of your Dad's wealth went away....ALL of the money contributed to the SS Trust Fund is gone. Every last penny. (Which is proof positive that putting this into the government coffers is absolutely the worst place, all the time.) So, your dad's account, even with this disastrous situation, is far, far ahead of money contributed to the government for future use--even Enron employees were treated better than we have been.
I don't dispute that most of Social Securities problems, are the result of financial mismanagement on the part of congress (not all, as the population trends still have something to do with it (though the problem would be looming far, FAR in the future if the money had been left alone). For that matter, most of the problems we face at the federal level today are the result of financial mis-management on the part of congress.
I simply disagree with the proposed solution. We have a government based on various checks and balances. We agree that the major portion of the problem is the result of congressional misdeeds. How do we address those by moving a small portion of the funds to the private sector? Wouldn't it make more sense to draft a law, that either required a super majority to overturn or was drafted as a constitutional amendment to require that funds collected from payroll taxes to fund social security actually go to social security and only social security?
And again I ask. If we were to privatize social security, partially, or completely, how would we handle those who loose their investments due to poor investment strategies, poor timing, or some new variation of market crushing scandal? So sorry, deal with it? Or take the money from somewhere else in government, perhaps even a new tax increase to make up for it so that they can survive?
QUOTE
How do you propose these same people live when SS benefits are slashed to cover the looming shortfall?
Actually, my first post covered several ideas on how to address shortfalls without tax increases or reducing benefits to those who need it. What it your proposal addresses the issue of those who find themselves without benefits do to market crash, government funding collapse, or both?
In my father-in-laws case, he has the benefit of at least falling back on Social Security in the wake of the loss of almost his entire retirement savings. That was the point of SS in my opinion. A safety net. If Social Security was privatized, and the market crashed resulting in the near complete loss of his retirement savings what would he then have to fall back on? Welfare? The goodness of others? The backs of his children?
Social Security is flawed. Those flaws need to be and can be addressed. To abandon it entirely is to return America to the position it was in prior to Social Security. A position where the young have to support the Old, or the old starved. Most of the young can barely support themselves these days. I live very frugally, but if I had to take on the support of a family member I would either need government assistance or a lottery win. And I would likely be unable to save for my own retirement as a result, which would lead to my daughter having to care for me. Who will take care of the old who because of financial bad luck have no retirement savings if we scrap social security?
As for the difference between living off of Social Security or Welfare, ask the elderly about it. You will likely get a one word answer. Dignity.
QUOTE
Over a period of 42 years (Age 21 to Age 63) at 5% interest (and continuing to get 5% during retirement), the annual payout would be $11500 or about $960 per month which is just about what a retiree currently gets from Social Security.
Such is not true. Social Security benefits theoretically grow at about 2.5-3% a year. I say theoretically because the money you send in each year is not actually growing, it is being spent on Iraq, the Mars Project and so on.
QUOTE
However, lets re-examine my father-in-laws situation. The man, like me is blue collar, and like me hates finance. He, like me, has money withheld from his check to go into a moderate-risk, mutual fund in a 401K through his employer. He, like me, and like most average Americans, has no desire to read financial papers, track market trends, and constantly move his account around to different funds, though he has the ability to do so. At 60, his 401k account went from hundreds of thousands of dollars to a few tens of thousands thanks to the tech market crash and the general market crash that followed the Corporate scandals (Enron, Tyco and the like), and the brokerage debacles. He cannot possibly make up what he lost before retirement, even if he waited unit the suggested 67 to do so.
I am sorry for your father-in-law's loss of money and I will not lie, I enjoy the financial newspapers.
Yet, I do not believe that is necessary for success in investing. And, there are many plans and investing types that are much lower risk. For example, Vanguard funds are low cost, index tracking funds. I prefer to reccomend these for the passive investor. The charges are low, and would be ideal for the personal accounts. I also think the money should not be regulated by the government, but the government should provide information on different types of investing and the different risk calibers. If you have invested with a Vanguard fund you still would have lost money in the tech crash, yet the losses would be minimized because they are not holding as-risky investments as the mutual fund. QUOTE
Why even take the risk?
The stock market is too up and down to take a chance of losing your retirement.
The stock market is too up and down to take a chance of losing your retirement.
That is a common misconception about the stockmarket. Many believe that since stocks bounce around on a daily basis, they are unregulated and overly-volatile investment vehicles. I believe differently unless people are picking up individual, highly speculative stocks. For the average American, they would like to have a retirement and in investing in an index fund, or quality company, they will have a much safer retirement then they would with social security. For example Vanguard Large Cap Index Fund , the fund averages a 12% return since its inception in 1976, and although its five year average is -2%, its 1 year, 3 year, and 10 year are all positive. If you would have bought that in the beginning of this year, you would have made around 10%, or the interest earned in social security in about 4 years.
QUOTE
If we were to privatize social security, partially, or completely, how would we handle those who loose their investments due to poor investment strategies, poor timing, or some new variation of market crushing scandal?
The answer is simple, the government would provide the potential investor with numerous, low risk strategies such as index funds and high quality stocks. These would be on the list for reccommended investments. Bond funds and government bonds are another possible strategy. With all of these low risk investments, in the long term (20-35 years) they will be up.
QUOTE(overlandsailor @ Jan 10 2005, 05:35 PM)
I don't dispute that most of Social Securities problems, are the result of financial mismanagement on the part of congress ...I simply disagree with the proposed solution.
I have no problem with this...note that nowhere in my posts have I been advocating the proposed solution, except in contrast to the status quo. I just think the vast majority of the public is unaware of the scale of malfeasance that has caused the problem to begin with...and that since they are unaware, they leave open the distinct possibility of it incurring again.
QUOTE
And again I ask. If we were to privatize social security, partially, or completely, how would we handle those who loose their investments due to poor investment strategies, poor timing, or some new variation of market crushing scandal? So sorry, deal with it? Or take the money from somewhere else in government, perhaps even a new tax increase to make up for it so that they can survive?
A very valid question. The harsh answer would be that there are already welfare programs in place to deal with just such situations, but I am not necessarily advocating that. Rather, I would again compare it to the status quo...where we basically have a system that will leave EVERYBODY in that situation, not just a small minority.
QUOTE
That was the point of SS in my opinion. A safety net.
And there we have the real long term solution....let Social Security get back to its original design. It never was intended to be the sole source of support for so many people...it was merely a safety net. In its inevitable fashion, our government has let it grow far beyond its initial mission, in order to curry favor. The fact that this favor was bought at the expense of people not even born yet made it all the easier.
QUOTE
Social Security is flawed. Those flaws need to be and can be addressed. To abandon it entirely is to return America to the position it was in prior to Social Security. A position where the young have to support the Old, or the old starved.
Not that I am in favor of going this direction...but having the young support the old is exactly what Social Security does...it just spreads the cost more.
QUOTE
And I would likely be unable to save for my own retirement as a result, which would lead to my daughter having to care for me....As for the difference between living off of Social Security or Welfare, ask the elderly about it. You will likely get a one word answer.
Again, this is what Social Security does...it takes away from your retirement to pay for the retirement of those currently in it...with the expectation that others will do that for you in the future. So, what really have we gained?
I guess throughout this I have not said what I would like to see done. What I would like is very simple...I would like the government to admit what they have done before taking more of my money to fix it. In all of the proposed solutions...no one seems willing to own up to the problem. Why then should I contribute any more money to it....if no one owns up to it, we have no reason to suspect the problems won't occur again. Actually, I think now would be the perfect political opportunity to do so...I think it would help to bring all government costs under control since they would inevitiably come under closer scrutiny. Sadly, I think that's exactly what the politicians are afraid of.
QUOTE(OS)
Social Security is flawed. Those flaws need to be and can be addressed. To abandon it entirely is to return America to the position it was in prior to Social Security. A position where the young have to support the Old, or the old starved.
QUOTE(Hobbes)
Not that I am in favor of going this direction...but having the young support the old is exactly what Social Security does...it just spreads the cost more.
It spreads the cost ALOT more. Could you possibly support an elderly member of your family on what you pay into social security?
QUOTE(OS)
And I would likely be unable to save for my own retirement as a result, which would lead to my daughter having to care for me....As for the difference between living off of Social Security or Welfare, ask the elderly about it. You will likely get a one word answer.
QUOTE(Hobbes)
Again, this is what Social Security does...it takes away from your retirement to pay for the retirement of those currently in it...with the expectation that others will do that for you in the future. So, what really have we gained?
But, what it gives you is a guaranteed (at least for a few more decades) safety net. If all your retirement investments go belly up you still have SS. What other retirement investment vehicle is this way? In a way it is like insurance. We all pay a known loss regularly (our premiums) to insurance companies to protect against large unknown losses in the future. The vast majority of us never file a claim against our insurance, yet our way of life is safer because we pay for the insurance.
Social Security, IMHO should operate the same way. We all pay into the system through each check, to insure ourselves in case our personal retirement strategy goes belly up. In the end, most people would never see the Social Security Benefit because it would be unnecessary. It would be similar to how unemployment works now.
What we have not covered here is the benefit society gains from social security. Without it, many Elderly Americans would have to work full time to survive. This results in fewer jobs being available to younger generations. More unemployed younger Americans means more people on public assistance. This is not a winning scenario. Many elderly Americans have to work part time as it is because in many areas of the country, the Social Security Benefit does not cover the cost of living. Still others choose to work simply because they want to do something regularly or just want the extra spending money. But the majority choose to be retired because they want the "life of leisure" and can have it because of Social Security, even if that "life of leisure" is limited to baking, small carpentry projects, and cable TV.
I noticed when you quoted me above you left out the word Dignity. Make no mistake, this is the MASSIVE difference in the eyes of the majority of elderly Americans between Social Security and Welfare. Nearly all of these Americans put in their time, were productive, helped build and defend this country. I am sicked regularly by the general lack of respect Americans show their elders as it is (Asian Cultures have it right on this one IMHO). If we were to simply rename Social Security Elder Welfare you would massively harm these people. Embarrassing and shaming those who built the country we enjoy today (This is NOT directed at you Hobbes, just people in General).
Social Security is meant to be a safety net and should be returned to that status. We can enable Americans to better save for their retirement though various matching contribution ideas, tax deductions, etc. But leave this program in place for those unfortunate enough to need it. If it truly becomes a safety net where only those who "failed" to properly prepare for retirement get this benefit, will it possible take on the same Stigma as Welfare? Perhaps, But hopefully, we will have enough sense to promote it differently.
I read a very good article concerning Britains experiment with converting people from the nations basic pension plan(equivalent to our Social Security) to personal pensions in 1988. The authors name is Norma Cohen of The Financial Times. To view the article you may have to signup up for a free trial period or get the info from a site that carries some of her articles.
Following are her ideas on Britains experiment with personal pensions.:
For all the fanfare that surrounds the Bush administration’s efforts to present a bold new idea on pension reform, the truth is that it is not new at all. In fact, the proposal looks suspiciously like the plan set in train during Thatcher’s first term in 1979 and which has since led Britain to the brink of a crisis. Since then, the nation’s basic pension, which is paid for out of tax receipts, has shrunk dramatically. The United Kingdom has the stingiest state pension program of any G8 nation, and there is growing consensus -- even among British conservatives -- that reform is needed. And ironically enough, considering that America is on the verge of copying Britain’s mistake, most experts seek reform in the direction of a more generous, and simpler, basic state pension -- one similar in design, in other words, to America’s Social Security program.
David Willetts, the Conservative MP who is the opposition spokesman on pensions (and whose intellectual agility has earned him the sobriquet “Two Brains”), is one admirer of the U.S. system. “I like the way they distinguish between Social Security and means-tested welfare,” he says. “They have higher Social Security benefits to keep elderly people off welfare.” And last year, in a startling reversal of its decades-old policy, the Confederation of British Industry, the United Kingdom’s premier business group and the functional equivalent of the U.S. Chamber of Commerce, called for a more generous state retirement benefit, saying -- remember, this is the nation’s leading business lobby talking -- that it would even support raising taxes to help pay for it. (It also called for raising the retirement age.)
Britain’s experiment with substituting private savings accounts for a portion of state benefits has been a failure. A shorthand explanation for what has gone wrong is that the costs and risks of running private investment accounts outweigh the value of the returns they are likely to earn. On average, fees and charges can reduce pension lump sums by up to 30 percent on retirement. The nation’s savings industry, which sells those private accounts, has already acknowledged this. Which brings us to irony No. 2: Just as the United States prepares to funnel untold billions to its private sector for the management of private accounts, back in 2002, many U.K. insurance companies, mindful of tough new rules against giving bad advice, began to write to their customers urging them to consider abandoning their private savings and returning to the state pension system -- something hundreds of thousands of Britons have done already.
And this is the system that the United States is seeking to emulate?
And what is Britains answer to this failure?
But whatever the solution to that challenge, there is little disagreement within the United Kingdom that the path chosen by successive governments over the past 25 years is not the right one. The Pensions Commission recently completed the most comprehensive review ever of the U.K. system and concluded that there are only four possible solutions for the difficulties ahead: cutting state retirement benefits, increasing taxes, increasing savings, or delaying retirement. While noting that there is no political support for the first choice, the commission concluded that each of the three other choices, on its own, is too painful. Only some combination of them is likely to help Britain’s elderly obtain retirement with dignity. Adair Turner, chairman of the commission, a vice chairman of Merrill Lynch in London, and the former director general of the United Kingdom’s biggest business lobbying group, says, “There are no other choices.”
And so, at the exact moment that America contemplates replicating this disaster, many in Britain -- some conservatives included -- are looking more and more kindly on American Social Security as a model for reform. The National Association of Pension Funds, a group of employers who sponsor the nation’s largest schemes, is urging government not to expect the private sector to shoulder the burden of keeping the nation’s elderly from poverty. Chief executive Christine Farnish notes that it’s “actually cheaper for the state to carry the risk,” adding that in looking for a system that offers the best combination of modest guaranteed retirement benefits delivered at low cost, the U.S. Social Security program seems the best model. “It doesn’t have to make a profit, and it delivers efficiencies of scale that most companies would die for,” she says.
And that is how the British eye, wearied after beholding decades of privatization “reform,” views the American system, which has served the United States so remarkably well for seven decades but which supposedly is now in dire crisis and must be overhauled by the time the forsythia bloom. It’s a point of view Americans would do well to take in.
Following are her ideas on Britains experiment with personal pensions.:
QUOTE
For all the fanfare that surrounds the Bush administration’s efforts to present a bold new idea on pension reform, the truth is that it is not new at all. In fact, the proposal looks suspiciously like the plan set in train during Thatcher’s first term in 1979 and which has since led Britain to the brink of a crisis. Since then, the nation’s basic pension, which is paid for out of tax receipts, has shrunk dramatically. The United Kingdom has the stingiest state pension program of any G8 nation, and there is growing consensus -- even among British conservatives -- that reform is needed. And ironically enough, considering that America is on the verge of copying Britain’s mistake, most experts seek reform in the direction of a more generous, and simpler, basic state pension -- one similar in design, in other words, to America’s Social Security program.
David Willetts, the Conservative MP who is the opposition spokesman on pensions (and whose intellectual agility has earned him the sobriquet “Two Brains”), is one admirer of the U.S. system. “I like the way they distinguish between Social Security and means-tested welfare,” he says. “They have higher Social Security benefits to keep elderly people off welfare.” And last year, in a startling reversal of its decades-old policy, the Confederation of British Industry, the United Kingdom’s premier business group and the functional equivalent of the U.S. Chamber of Commerce, called for a more generous state retirement benefit, saying -- remember, this is the nation’s leading business lobby talking -- that it would even support raising taxes to help pay for it. (It also called for raising the retirement age.)
Britain’s experiment with substituting private savings accounts for a portion of state benefits has been a failure. A shorthand explanation for what has gone wrong is that the costs and risks of running private investment accounts outweigh the value of the returns they are likely to earn. On average, fees and charges can reduce pension lump sums by up to 30 percent on retirement. The nation’s savings industry, which sells those private accounts, has already acknowledged this. Which brings us to irony No. 2: Just as the United States prepares to funnel untold billions to its private sector for the management of private accounts, back in 2002, many U.K. insurance companies, mindful of tough new rules against giving bad advice, began to write to their customers urging them to consider abandoning their private savings and returning to the state pension system -- something hundreds of thousands of Britons have done already.
And this is the system that the United States is seeking to emulate?
And what is Britains answer to this failure?
QUOTE
But whatever the solution to that challenge, there is little disagreement within the United Kingdom that the path chosen by successive governments over the past 25 years is not the right one. The Pensions Commission recently completed the most comprehensive review ever of the U.K. system and concluded that there are only four possible solutions for the difficulties ahead: cutting state retirement benefits, increasing taxes, increasing savings, or delaying retirement. While noting that there is no political support for the first choice, the commission concluded that each of the three other choices, on its own, is too painful. Only some combination of them is likely to help Britain’s elderly obtain retirement with dignity. Adair Turner, chairman of the commission, a vice chairman of Merrill Lynch in London, and the former director general of the United Kingdom’s biggest business lobbying group, says, “There are no other choices.”
And so, at the exact moment that America contemplates replicating this disaster, many in Britain -- some conservatives included -- are looking more and more kindly on American Social Security as a model for reform. The National Association of Pension Funds, a group of employers who sponsor the nation’s largest schemes, is urging government not to expect the private sector to shoulder the burden of keeping the nation’s elderly from poverty. Chief executive Christine Farnish notes that it’s “actually cheaper for the state to carry the risk,” adding that in looking for a system that offers the best combination of modest guaranteed retirement benefits delivered at low cost, the U.S. Social Security program seems the best model. “It doesn’t have to make a profit, and it delivers efficiencies of scale that most companies would die for,” she says.
And that is how the British eye, wearied after beholding decades of privatization “reform,” views the American system, which has served the United States so remarkably well for seven decades but which supposedly is now in dire crisis and must be overhauled by the time the forsythia bloom. It’s a point of view Americans would do well to take in.
QUOTE(popeye47 @ Jan 14 2005, 10:54 PM)
I read a very good article concerning Britains experiment with converting people from the nations basic pension plan(equivalent to our Social Security) to personal pensions in 1988. The authors name is Norma Cohen of The Financial Times. To view the article you may have to signup up for a free trial period or get the info from a site that carries some of her articles.
Following are her ideas on Britains experiment with personal pensions.:
For all the fanfare that surrounds the Bush administration’s efforts to present a bold new idea on pension reform, the truth is that it is not new at all. In fact, the proposal looks suspiciously like the plan set in train during Thatcher’s first term in 1979 and which has since led Britain to the brink of a crisis. Since then, the nation’s basic pension, which is paid for out of tax receipts, has shrunk dramatically. The United Kingdom has the stingiest state pension program of any G8 nation, and there is growing consensus -- even among British conservatives -- that reform is needed. And ironically enough, considering that America is on the verge of copying Britain’s mistake, most experts seek reform in the direction of a more generous, and simpler, basic state pension -- one similar in design, in other words, to America’s Social Security program.
David Willetts, the Conservative MP who is the opposition spokesman on pensions (and whose intellectual agility has earned him the sobriquet “Two Brains”), is one admirer of the U.S. system. “I like the way they distinguish between Social Security and means-tested welfare,” he says. “They have higher Social Security benefits to keep elderly people off welfare.” And last year, in a startling reversal of its decades-old policy, the Confederation of British Industry, the United Kingdom’s premier business group and the functional equivalent of the U.S. Chamber of Commerce, called for a more generous state retirement benefit, saying -- remember, this is the nation’s leading business lobby talking -- that it would even support raising taxes to help pay for it. (It also called for raising the retirement age.)
Britain’s experiment with substituting private savings accounts for a portion of state benefits has been a failure. A shorthand explanation for what has gone wrong is that the costs and risks of running private investment accounts outweigh the value of the returns they are likely to earn. On average, fees and charges can reduce pension lump sums by up to 30 percent on retirement. The nation’s savings industry, which sells those private accounts, has already acknowledged this. Which brings us to irony No. 2: Just as the United States prepares to funnel untold billions to its private sector for the management of private accounts, back in 2002, many U.K. insurance companies, mindful of tough new rules against giving bad advice, began to write to their customers urging them to consider abandoning their private savings and returning to the state pension system -- something hundreds of thousands of Britons have done already.
And this is the system that the United States is seeking to emulate?
And what is Britains answer to this failure?
But whatever the solution to that challenge, there is little disagreement within the United Kingdom that the path chosen by successive governments over the past 25 years is not the right one. The Pensions Commission recently completed the most comprehensive review ever of the U.K. system and concluded that there are only four possible solutions for the difficulties ahead: cutting state retirement benefits, increasing taxes, increasing savings, or delaying retirement. While noting that there is no political support for the first choice, the commission concluded that each of the three other choices, on its own, is too painful. Only some combination of them is likely to help Britain’s elderly obtain retirement with dignity. Adair Turner, chairman of the commission, a vice chairman of Merrill Lynch in London, and the former director general of the United Kingdom’s biggest business lobbying group, says, “There are no other choices.”
And so, at the exact moment that America contemplates replicating this disaster, many in Britain -- some conservatives included -- are looking more and more kindly on American Social Security as a model for reform. The National Association of Pension Funds, a group of employers who sponsor the nation’s largest schemes, is urging government not to expect the private sector to shoulder the burden of keeping the nation’s elderly from poverty. Chief executive Christine Farnish notes that it’s “actually cheaper for the state to carry the risk,” adding that in looking for a system that offers the best combination of modest guaranteed retirement benefits delivered at low cost, the U.S. Social Security program seems the best model. “It doesn’t have to make a profit, and it delivers efficiencies of scale that most companies would die for,” she says.
And that is how the British eye, wearied after beholding decades of privatization “reform,” views the American system, which has served the United States so remarkably well for seven decades but which supposedly is now in dire crisis and must be overhauled by the time the forsythia bloom. It’s a point of view Americans would do well to take in.
Following are her ideas on Britains experiment with personal pensions.:
QUOTE
For all the fanfare that surrounds the Bush administration’s efforts to present a bold new idea on pension reform, the truth is that it is not new at all. In fact, the proposal looks suspiciously like the plan set in train during Thatcher’s first term in 1979 and which has since led Britain to the brink of a crisis. Since then, the nation’s basic pension, which is paid for out of tax receipts, has shrunk dramatically. The United Kingdom has the stingiest state pension program of any G8 nation, and there is growing consensus -- even among British conservatives -- that reform is needed. And ironically enough, considering that America is on the verge of copying Britain’s mistake, most experts seek reform in the direction of a more generous, and simpler, basic state pension -- one similar in design, in other words, to America’s Social Security program.
David Willetts, the Conservative MP who is the opposition spokesman on pensions (and whose intellectual agility has earned him the sobriquet “Two Brains”), is one admirer of the U.S. system. “I like the way they distinguish between Social Security and means-tested welfare,” he says. “They have higher Social Security benefits to keep elderly people off welfare.” And last year, in a startling reversal of its decades-old policy, the Confederation of British Industry, the United Kingdom’s premier business group and the functional equivalent of the U.S. Chamber of Commerce, called for a more generous state retirement benefit, saying -- remember, this is the nation’s leading business lobby talking -- that it would even support raising taxes to help pay for it. (It also called for raising the retirement age.)
Britain’s experiment with substituting private savings accounts for a portion of state benefits has been a failure. A shorthand explanation for what has gone wrong is that the costs and risks of running private investment accounts outweigh the value of the returns they are likely to earn. On average, fees and charges can reduce pension lump sums by up to 30 percent on retirement. The nation’s savings industry, which sells those private accounts, has already acknowledged this. Which brings us to irony No. 2: Just as the United States prepares to funnel untold billions to its private sector for the management of private accounts, back in 2002, many U.K. insurance companies, mindful of tough new rules against giving bad advice, began to write to their customers urging them to consider abandoning their private savings and returning to the state pension system -- something hundreds of thousands of Britons have done already.
And this is the system that the United States is seeking to emulate?
And what is Britains answer to this failure?
QUOTE
But whatever the solution to that challenge, there is little disagreement within the United Kingdom that the path chosen by successive governments over the past 25 years is not the right one. The Pensions Commission recently completed the most comprehensive review ever of the U.K. system and concluded that there are only four possible solutions for the difficulties ahead: cutting state retirement benefits, increasing taxes, increasing savings, or delaying retirement. While noting that there is no political support for the first choice, the commission concluded that each of the three other choices, on its own, is too painful. Only some combination of them is likely to help Britain’s elderly obtain retirement with dignity. Adair Turner, chairman of the commission, a vice chairman of Merrill Lynch in London, and the former director general of the United Kingdom’s biggest business lobbying group, says, “There are no other choices.”
And so, at the exact moment that America contemplates replicating this disaster, many in Britain -- some conservatives included -- are looking more and more kindly on American Social Security as a model for reform. The National Association of Pension Funds, a group of employers who sponsor the nation’s largest schemes, is urging government not to expect the private sector to shoulder the burden of keeping the nation’s elderly from poverty. Chief executive Christine Farnish notes that it’s “actually cheaper for the state to carry the risk,” adding that in looking for a system that offers the best combination of modest guaranteed retirement benefits delivered at low cost, the U.S. Social Security program seems the best model. “It doesn’t have to make a profit, and it delivers efficiencies of scale that most companies would die for,” she says.
And that is how the British eye, wearied after beholding decades of privatization “reform,” views the American system, which has served the United States so remarkably well for seven decades but which supposedly is now in dire crisis and must be overhauled by the time the forsythia bloom. It’s a point of view Americans would do well to take in.
Look. The system does look good right now. But we are running out of money for Christ's sake. is it favorable that perhaps the system remain how it is and we do not use private accounts? Possibly, but the reality of the situation is that in a number of years, there wont be any money left to pay benefits. This is something not mentioned at all by Norma Cohen.
The average rate of return on your SS taxes is 2.2%. All the money put into the SS Fund for all your working life and you will only see about 2.2% of it. How is this a successful system? The population is constantly growing larger and larger. People of my generation will have nothing left.
Furthermore, i regards to comparing the US and UK. Its different. Comparing any two countries is so different. The UK has a population of approx. 60 million. The US is heading towards 300 million people. The population difference alone makes the arguments different.
The article has one view of the system, while i can find another article which probably says the opposite. Thats the problem with economics, you can highlight one factor and disregard another to make it seem like something is good/bad. SS is not being completely privatized...only partially. This is reasonable to make up for the money we wont be able to pay future generations. Also, it is a good experiment to see how a fully privatized SS may function. If it turns out well and people make money, the people will call for it to be privatized. Personally, i hope it does eventually become privatized because it gives one more responsibility and control over their own lives and it dramatically reduces Mandatory Entitlement Spending in the Federal Budget.
QUOTE(lederuvdapac @ Jan 14 2005, 11:39 PM)
The average rate of return on your SS taxes is 2.2%. All the money put into the SS Fund for all your working life and you will only see about 2.2% of it. How is this a successful system? The population is constantly growing larger and larger. People of my generation will have nothing left.
Furthermore, in regards to comparing the US and UK. Its different. Comparing any two countries is so different. The UK has a population of approx. 60 million. The US is heading towards 300 million people. The population difference alone makes the arguments different.
And the first part of this., I would like to see the source for the statistics about a 2.2% rate of return on payments into Social Security. Leder explains rate of return differently than I understand it. As I would guess the way the number works, if you pay $ into the system while working, the payments received back later would average a 2% annual increase in value after paying in money.
But since we all live lives of different lengths this number seems to not have a great amount of worth. The person who dies at 55 receives $0 from this system, while the person who lives to 102 probably gets back a much better rate of return than 2%.
I don't like the logic of arguing that the UK is not a good example because it only has 60 million people. Who have often taken programs used by individual states and applied them to the whole country. An short example of this is that the state of Wisconsin was considered the laboratory of Progressivism at the turn of the 20th century.
What it the difference to using a portion of Social Security funds to create retirement accounts? That is only using a portion of the large fund to "experiment" with the results it produces to determine if the whole system should be changed over.
I view social security more as an insurance plan than as a retirement savings plan. Social Security helps for those of us who live much longer than average. Most of us would prefer a long life to a short one, but we don't know how long we will live. If you knew you would live a long and active life and die at the age of 95. then you might change the way you plan for retirement. You might work longer, you could plan for how many dollars it would take you to get to the end of your life. It wouldn't be a perfect science, but it would be easier for planning reasons to know your exact age at death ahead of time.
Social Security would be like 1000 high school graduates getting together and making an agreement to set some money aside for retirement to guarantee that the members who reach the age in which they can no longer effectively provide an income for themselves can receive some supplemental income to help them. This allows the 1000 to have a better idea for how to plan for an uncertain number of years in retirement. Those who retire at 65 may have been able to keep working at their jobs efficiently for 1 or 2 or 5 or 10 more years, depending, but if they reach 80 and realize that they are running out of money for which to take care of themselves, they likely cannot then return to the workforce and come up with the cash. Their good fortune of having a long life could then become an unfortunate issue of having to become dependent on others for assistant. If it is their children, they will lament the burden they are placing on their children, and their children will have a reduced ability to pay for their retirement. If it is society then we go right back to the government in drawing money to support the aged who are now on welfare and instead of receiving insurance benefits that participated in with there generation in creating, they are to end their years drawing welfare from the government. I think OS hit the nail on the head with the word dignity.
There are things I do not like about Social Security, but I think it is dangerous to take away the insurance aspect of the income supplement and think of it like retirement savings. All of us may make it to a point where we outlive reasonable retirements savings, just lie all of us may get cancer. For both of these issues, an insurance based solution seems easier for middle class Americans, than creating a reserve pool of wealth to address the issue.
We have a good way of life in the United States and insurance programs are good ways to protect that for individuals. Social Security is a good idea in terms of having everyone pay in premiums for those of us who will need the returns later. As we live longer as a society it will either cost more, or benefits will start paying later.
One adjustment I think would work would be a plan to keep payments higher if recipients could plan to defer the first year that they would have to receive them. I.e. I retire at the age of 65 and plan for my retirement through my personal planning for the first five years of my retirement, and then at 70 I start collecting payments that last to the end of my life. For deferring the payments until 70 I get 125% of the monthly check I would have gotten at 65. This is not a new idea, but I don't think many people think of moving into retirement and delaying the receipt of Social Security payments for a few years. It could be a good adjustment that leaves our 85 year olds in better financial position than the Bush proposal would.
Is it riskier to have social security in the government's hands or in the hand's of the individual?
I saw this item on MSNBC in an article about identity theft (a VERY interesting article).
The article mentions that even though SS knows that there are people using stolen numbers, they don't even bother to notify the true owner of the number! I guess as long as the dollars are rolling in, they don't care.
Dang, maybe privatization's not such a bad idea after all!
I saw this item on MSNBC in an article about identity theft (a VERY interesting article).
QUOTE
With every paycheck, U.S. workers pay FICA taxes, destined for Social Security funds. But each year, millions of payments are made to the agency with mismatched names and numbers. The Social Security Administration has no idea who deserves credit for the taxes paid by those wage earnings -- so no one gets it. The amount of uncredited Social Security wages is now an enormous $420 billion, an amount that sits in what's called the Earnings Suspense File, an accounting limbo. MSNBC
The article mentions that even though SS knows that there are people using stolen numbers, they don't even bother to notify the true owner of the number! I guess as long as the dollars are rolling in, they don't care.
Dang, maybe privatization's not such a bad idea after all!
QUOTE(Eeyore @ Jan 15 2005, 08:51 AM)
I view social security more as an insurance plan than as a retirement savings plan. Social Security helps for those of us who live much longer than average. Most of us would prefer a long life to a short one, but we don't know how long we will live. If you knew you would live a long and active life and die at the age of 95. then you might change the way you plan for retirement. You might work longer, you could plan for how many dollars it would take you to get to the end of your life. It wouldn't be a perfect science, but it would be easier for planning reasons to know your exact age at death ahead of time.
You are correct in that it's supposed to be an insurance plan. However the AARP and other lobbies now identify it as an entitlement, a benefit, "the third rail of policymaking" and frankly this is a generational transfer payment. Much of the social security payout goes to people that don't even need it, and comes from workers who are being robbed of the chance to invest 12% of their pay - a significant sum that could fund a handsome retirement package.
QUOTE(Eeyore)
Social Security would be like 1000 high school graduates getting together and making an agreement to set some money aside for retirement to guarantee that the members who reach the age in which they can no longer effectively provide an income for themselves can receive some supplemental income to help them. This allows the 1000 to have a better idea for how to plan for an uncertain number of years in retirement. Those who retire at 65 may have been able to keep working at their jobs efficiently for 1 or 2 or 5 or 10 more years, depending, but if they reach 80 and realize that they are running out of money for which to take care of themselves, they likely cannot then return to the workforce and come up with the cash. Their good fortune of having a long life could then become an unfortunate issue of having to become dependent on others for assistant. If it is their children, they will lament the burden they are placing on their children, and their children will have a reduced ability to pay for their retirement. If it is society then we go right back to the government in drawing money to support the aged who are now on welfare and instead of receiving insurance benefits that participated in with there generation in creating, they are to end their years drawing welfare from the government. I think OS hit the nail on the head with the word dignity.
Dignity or not, it's more like 1000 high school graduates getting together and deciding to fund 10,000 current retirees, sending 12% of their pay to Florida or whatever. It's not savings, it's current workers paying for current retirees. That's why we need to address it now, before the demographics get even worse.
QUOTE
One adjustment I think would work would be a plan to keep payments higher if recipients could plan to defer the first year that they would have to receive them. I.e. I retire at the age of 65 and plan for my retirement through my personal planning for the first five years of my retirement, and then at 70 I start collecting payments that last to the end of my life. For deferring the payments until 70 I get 125% of the monthly check I would have gotten at 65. This is not a new idea, but I don't think many people think of moving into retirement and delaying the receipt of Social Security payments for a few years. It could be a good adjustment that leaves our 85 year olds in better financial position than the Bush proposal would.
Eeyore, they already do this, but in reverse. You get less if you take SS early, like 62, and you only get 100% after a certain age, which will eventually scale up to 70.
QUOTE(Eeyore @ Jan 15 2005, 08:51 AM)
Social Security would be like 1000 high school graduates getting together and making an agreement to set some money aside for retirement to guarantee that the members who reach the age in which they can no longer effectively provide an income for themselves can receive some supplemental income to help them. This allows the 1000 to have a better idea for how to plan for an uncertain number of years in retirement.
It would only be like this if the people in charge of these 1000 people's money told them they needed to contribute some more money into it to provide for their retirement, and then squandered every last extra penny contributed....and then had the complete gall to ask for more money again. I would expect that most of the 1000 would, at that point, look into another alternative.
I will agree with you, though, that it allows them to have a better idea of how to plan for retirement. I just think that they would only consider plans that had nothing to do with those that stole the money initially.
Daffy's article just provides yet more evidence that the very last place we want to place our trust on this is with the government.
QUOTE(Hobbes @ Jan 27 2005, 07:40 PM)
QUOTE(Eeyore @ Jan 15 2005, 08:51 AM)
Social Security would be like 1000 high school graduates getting together and making an agreement to set some money aside for retirement to guarantee that the members who reach the age in which they can no longer effectively provide an income for themselves can receive some supplemental income to help them. This allows the 1000 to have a better idea for how to plan for an uncertain number of years in retirement.
It would only be like this if the people in charge of these 1000 people's money told them they needed to contribute some more money into it to provide for their retirement, and then squandered every last extra penny contributed....and then had the complete gall to ask for more money again. I would expect that most of the 1000 would, at that point, look into another alternative.
I will agree with you, though, that it allows them to have a better idea of how to plan for retirement. I just think that they would only consider plans that had nothing to do with those that stole the money initially.
Daffy's article just provides yet more evidence that the very last place we want to place our trust on this is with the government.
There is no reason why the Social Security surplus can not be set aside. Whether this is done by a governmental agency or a private company. This is supposely a government "by the people,for the people, and of the people". So I don't understand why the people (in voting) can't demand our Social Security payments be in a separate lockbox.
Also turning our money over to Wall Street or Brokerage houses is no better. They will fleece you just as badly. And wait until you get the outlandish fees (15-30%) that will be taken out of your account. And that is like letting the fox guard the henhouse. And who is going to protect the American people from these Wall Street thieves(not the politicans who already are fleecing us)?
Or you might get lucky and invest your money in "Enron,MCI,Global Crossing,KMART,Tyco,and countless other companies. Wall Street is only for the INFORMED INDIVIDUAL. The vast majority of the public are not informed properly to invest their money in such a place as this.
QUOTE(popeye47 @ Jan 28 2005, 12:21 PM)
Or you might get lucky and invest your money in "Enron,MCI,Global Crossing,KMART,Tyco,and countless other companies. Wall Street is only for the INFORMED INDIVIDUAL. The vast majority of the public are not informed properly to invest their money in such a place as this.
Nor apparently are they informed enough to provide money to the government...which has been stealing it on this issue for decades now, apparently right in front of everyone's noses. So, what exactly is it that you are suggesting? Further, it is the epitome of liberal elitism to suggest that the poor, stupid people are simply incapable of making the proper choices with their money. That is pure bull hockey. Who is better able to decide where to put one's money than that person himself? Has the government provided the slightest evidence that they are more capable? Let's examine the results. EVERY SINGLE PENNY CONTRIBUTED TO THE SOCIAL SECURITY TRUST FUND IS GONE! Pretty hard to do worse than that, wouldn't you agree? So, any investment choice made in the stock market would do at least as good, and 99.9999% of them would do better. Those are pretty good odds, don't you think? You show me someone who trusts the government with their money more than they do themselves, and I'll show you a fool. Unless you also think the government should, in these people's interest, simply confiscate their paycheck, and determine for them how they should spend their money? Anyone capable of managing their daily finances is capable of making investment choices--they do it all the time in their daily lives. As I stated earlier in this thread, a wealth of infomation could be gathered in a 30-60 minute session with a financial advisor. The default choice of investing everything into a S&P 500 fund would work just fine for the vast majority of people. That would give them some 30 years or so to learn what they should do as they approached retirement age. Let's face it...if they can't figure that out in 30 years, why should I have to contribute my hard-earned money to their ignorance? I have enough trouble figuring out how to support both my own retirement, and supporting those already receiving SS. Why should I (and my children) be burdened with the ignorance of others? Or, perhaps more to the point...why should I and my children be forced to support the liberal elistism of others? And isn't it quite funny that those who support this notion that the poor stupid people aren't capable of making these financail decisions are doing nothing to educate them? Either the problem isn't as big as it might seem, or their concern for the issue isn't that great...or, deep down, they know that isn't the problem.
QUOTE(Hobbes @ Jan 28 2005, 02:40 PM)
QUOTE(popeye47 @ Jan 28 2005, 12:21 PM)
Or you might get lucky and invest your money in "Enron,MCI,Global Crossing,KMART,Tyco,and countless other companies. Wall Street is only for the INFORMED INDIVIDUAL. The vast majority of the public are not informed properly to invest their money in such a place as this.
Nor apparently are they informed enough to provide money to the government...which has been stealing it on this issue for decades now, apparently right in front of everyone's noses. So, what exactly is it that you are suggesting? Further, it is the epitome of liberal elitism to suggest that the poor, stupid people are simply incapable of making the proper choices with their money. That is pure bull hockey. Who is better able to decide where to put one's money than that person himself? Has the government provided the slightest evidence that they are more capable? Let's examine the results. EVERY SINGLE PENNY CONTRIBUTED TO THE SOCIAL SECURITY TRUST FUND IS GONE! Pretty hard to do worse than that, wouldn't you agree? So, any investment choice made in the stock market would do at least as good, and 99.9999% of them would do better. Those are pretty good odds, don't you think? You show me someone who trusts the government with their money more than they do themselves, and I'll show you a fool. Unless you also think the government should, in these people's interest, simply confiscate their paycheck, and determine for them how they should spend their money? Anyone capable of managing their daily finances is capable of making investment choices--they do it all the time in their daily lives. As I stated earlier in this thread, a wealth of infomation could be gathered in a 30-60 minute session with a financial advisor. The default choice of investing everything into a S&P 500 fund would work just fine for the vast majority of people. That would give them some 30 years or so to learn what they should do as they approached retirement age. Let's face it...if they can't figure that out in 30 years, why should I have to contribute my hard-earned money to their ignorance? I have enough trouble figuring out how to support both my own retirement, and supporting those already receiving SS. Why should I (and my children) be burdened with the ignorance of others? Or, perhaps more to the point...why should I and my children be forced to support the liberal elistism of others? And isn't it quite funny that those who support this notion that the poor stupid people aren't capable of making these financail decisions are doing nothing to educate them? Either the problem isn't as big as it might seem, or their concern for the issue isn't that great...or, deep down, they know that isn't the problem.
You must be on a rant today,Hobbes, because I can't see where I mentioned poor stupid people. I mentioned [COLOR=green]INFORMED PEOPLE[B]which is completely different than poor stupid people. You can have a college degree or a masters degree and still be uninformed in certain areas.
There have been at least 1 million people that have lost most of their retirement in failed or poorly managed companies in the past 4 or 5 years.
In fact the Dow Jones average has never recovered all of its losses since 2000 and that has been 5 years ago.
I know that politicans have stolen the money(everyone knows that including me) but instead of fixing that you want to go off half cocked on to some other scheme. The system needs a few minor adjustments but doesn't need a complete overhaul or complete destruction of the old system.
So if we have a percentage of people that lose most of their retirement in the stock market who helps them out. Does the government do that or just say the hell with them.
And your statement about anyone that takes care of their finances is capable of making investment choices is quite untrue. That has been proven over and over with people losing money in the stock market but having no trouble paying their bills and having a good credit score.
And where do you get the remarks: it is the epitome of liberal elitism to suggest that poor stupid people can't make decisions. Don't put words in my mouth just because you are having a bad hair day. It is no more liberal than conservative. Don't get hung up on trying to position people in certain catageories.
I personally think that all the fear mongering about the fickleness of the stock market is being blown out of proportion. The percentage investment of SS contributions (whatever it may be 2%, 4%....) will be voluntary. That means that risk is assumed by the contributor. Just as with anybody who invests money into the market, they are responsible for educating themselves about trends, portfolio's, etc. I have a strong feeling that people who know nothing and care nothing for the stock market and investments will continue to let the government manage their money.
For me the question boils down to individual sovereignty. Do I, or do I not have the right and duty to make arrangements for my own future, retirement and possible medical bills? I don't want to disparage those who place trust in the government for their needs, but I would rather choose not to. Why can't that be my right? I know, people (and Spock) will argue the good of the many outweighs the good of the few. But surely we can come up with a solution that would allow government to provide for those who wish it, and allow people to make their own arrangements if they see fit.
What I find most disturbing is pundits and politicians who treat any discussion or debate about reforming SS as taboo. Personally I believe it is because if you are less beholden to the government, the less power of fear they have over you. Think about it, if you don't have to rely on SS because you have your own arrangement, politicians would no longer be able to scare you with talking points about how the opposition wants to destroy Social Security, or scare seniors by implying they would no longer get their check.
My closing rant is one of semantics. If SS supporters call voluntary investment of up to 2-4% 'privatization' then what in the world would they call my personal wish of not paying into or receiving SS at all?
For me the question boils down to individual sovereignty. Do I, or do I not have the right and duty to make arrangements for my own future, retirement and possible medical bills? I don't want to disparage those who place trust in the government for their needs, but I would rather choose not to. Why can't that be my right? I know, people (and Spock) will argue the good of the many outweighs the good of the few. But surely we can come up with a solution that would allow government to provide for those who wish it, and allow people to make their own arrangements if they see fit.
What I find most disturbing is pundits and politicians who treat any discussion or debate about reforming SS as taboo. Personally I believe it is because if you are less beholden to the government, the less power of fear they have over you. Think about it, if you don't have to rely on SS because you have your own arrangement, politicians would no longer be able to scare you with talking points about how the opposition wants to destroy Social Security, or scare seniors by implying they would no longer get their check.
My closing rant is one of semantics. If SS supporters call voluntary investment of up to 2-4% 'privatization' then what in the world would they call my personal wish of not paying into or receiving SS at all?
QUOTE(popeye47 @ Jan 28 2005, 02:23 PM)
You must be on a rant today,Hobbes, because I can't see where I mentioned poor stupid people. I mentioned INFORMED PEOPLE[B]which is completely different than poor stupid people. You can have a college degree or a masters degree and still be uninformed in certain areas.
Well... guilty. This is an issue that gets my dander up. The poor I was referring to wasn't an economic or educational reference; rather, the point I was trying to make is that almost everyone can become informed on this...that should never be a reason to abondon the program. The basics of what to do can be picked up quite quickly...and time spent becoming more informed to make even better choices would have more benefit than almost any other use of that time. Consider that the average person could make almost as much over the course of his lifetime in his/her investments as he/she would working...yet he/she usually spends approximately 2000 hours/yr working, and about 10 minutes/year filling out their companies 401k plan. So, it is to all our benefit for everyone to become much more informed on this issue...and nearly everyone who does become informed will want to maintain as much control over their finances as possible...and will certainly not want to continue to flush money down the SS drain if they can avoid it.
QUOTE
There have been at least 1 million people that have lost most of their retirement in failed or poorly managed companies in the past 4 or 5 years.
In fact the Dow Jones average has never recovered all of its losses since 2000 and that has been 5 years ago.
In fact the Dow Jones average has never recovered all of its losses since 2000 and that has been 5 years ago.
Compare this to the COMPLETE loss of ALL of the hundreds of billions that ALL of us have contributed to the SS Trust Fund, which will NEVER be recovered. Also, yes, people lose money in the stock market. Most people make money. Over time, almost everybody makes money, and they make a lot more money than they would by putting that money towards SS. So, are you stating that we should lower the returns (and therefore retirement funds available) for everyone just to avoid the loss that a small number of people might suffer? Again...why should we all have to pay for their choices? Why should my retirement be drastically diminished just to eliminate the poor choices of a small number of people?
QUOTE
So if we have a percentage of people that lose most of their retirement in the stock market who helps them out. Does the government do that or just say the hell with them.
First, there are already safety nets in place. Second, how much of your retirement are you willing to contribute to solve this problem? With the current system, it is several hundred thousand dollars per person (difference in return from the stock market vs. govt. investment, plus the cost/person of the hundreds of billions they have already wasted)....don't know about you, but I find that pretty excessive.
QUOTE
And your statement about anyone that takes care of their finances is capable of making investment choices is quite untrue. That has been proven over and over with people losing money in the stock market but having no trouble paying their bills and having a good credit score.
Don't equate some people losing money in the market over a certain time frame with a failure of the entire system. I am curious...how many financial experts do you think recommend SS over personal investment in the stock market? I'llwager none is the correct answer. Why is that? Because investment in the stock market is the superior choice over time...and by a fairly wide margin. Further, your example of certain individual companies is easily solved...most of the programs being discussed don't allow choosing individual stocks for investment, but are instead limited to a choice amonst different mutual funds.
QUOTE
I know that politicans have stolen the money(everyone knows that including me) but instead of fixing that you want to go off half cocked on to some other scheme. The system needs a few minor adjustments but doesn't need a complete overhaul or complete destruction of the old system.
OK, this one floors me. You think it is completely irresponsible that some people have lost money investing in a very few companies, yet having the government blatantly steal hundreds of billions of dollars, thereby putting all of our retirements at risk, and requiring trillions of dollars to recover requires just a few minor adjustments? Huh?
QUOTE
And where do you get the remarks: it is the epitome of liberal elitism to suggest that poor stupid people can't make decisions. Don't put words in my mouth just because you are having a bad hair day. It is no more liberal than conservative. Don't get hung up on trying to position people in certain catageories.
Well, I'm always having a bad hair day, so don't think that's the issue...anyways, just got it cut yesterday
. I was referring to the concept of the government having to step in and make these decisions for the people who are somehow incapable of making the decision on their own. This concept is indeed the epitome of liberal elitism, and has nothing to do with conservatism (in fact, it is quite the opposite). This is liberal in that it is looking to the government to solve a social problem, and elitist in that it assumes that the masses are incapable of making such decisions on their own, and need the help of the chosen few to make these decisions for them. That's liberal elitism, plain and simple. I am not casting you or anyone else into that viewpoint...but let's call it what it is (and I'll be just as glad to point out similar elitism from within conservative circles when it is warranted).If you are instead referring to the fact, which I will admit, that the vast majority of people need to learn a whole lot more about how to invest for their retirement...then we are agreed. But that doesn't mean they can't learn...and its certainly not sufficient to waste trillions of dollars on an inferior system, especially when the basic decisions to be made could be summarized in a couple of short paragraphs.
Is anyone here claiming that the US government is not going to honor the spent surplus money?
The money has not been stolen. It has been finessed with accounting and that is yet another diverted burden that is going to be shifted to the next generation of tax payers by the present. Instead of dealing with this reality, the present administration and its supporters have chosen to opt for tax cuts without reducing government spending. The future of that program is high debt payments and major service reductions, all to be handled by future presidents.
One way around that is to try to get around having to pay that money back. Todays retirees already have paid into the system over the years and they are owed support by today's workers in return. Any revision of the system where it actually turns into investment accounts will have to account for the accumulated debts owed to those who have been paying in in good faith all of these years.
The reality is that the system seems far from bankrupt. There is a projected shortfall of $3.7 trillion dollars over 75 years. Perhaps if we simply stopped running up debt this would become an issue of minor adjustment.
If we are going to honestly debate about overhauling the whole system, then let's be honest about the costs of making the switch.
Social Security is not broken. It is relatively sound for the next 75 years. I am all for looking at solutions that will make the system work better, but forgetting that arriving retirees have not already support past retirees is not a fair way to do it.
I believe the trust fund debt will be honored by the government. I think the vast majority of people agree with me here. So surplus money is like all of the rest of our massive debt accumulated by the government, it is paid when due, even with the issuance of new bonds.
The real crisis coming is the fact that this surplus which has been silently paying for running our government is going to become a burden and not a secret supplement to our government.
As this happens, more and more dollars will be devoted to servicing debt and less and less services (military, social, government all of them) will be able to be provided. We have been living on the next generation's money for a generation and it has been dishonest.
Lowering taxes without cutting spending his been the order of two Republican 8 year terms. Every day we continue to run up debt makes it harder for our future governments to keep things working well.
The money has not been stolen. It has been finessed with accounting and that is yet another diverted burden that is going to be shifted to the next generation of tax payers by the present. Instead of dealing with this reality, the present administration and its supporters have chosen to opt for tax cuts without reducing government spending. The future of that program is high debt payments and major service reductions, all to be handled by future presidents.
One way around that is to try to get around having to pay that money back. Todays retirees already have paid into the system over the years and they are owed support by today's workers in return. Any revision of the system where it actually turns into investment accounts will have to account for the accumulated debts owed to those who have been paying in in good faith all of these years.
The reality is that the system seems far from bankrupt. There is a projected shortfall of $3.7 trillion dollars over 75 years. Perhaps if we simply stopped running up debt this would become an issue of minor adjustment.
If we are going to honestly debate about overhauling the whole system, then let's be honest about the costs of making the switch.
Social Security is not broken. It is relatively sound for the next 75 years. I am all for looking at solutions that will make the system work better, but forgetting that arriving retirees have not already support past retirees is not a fair way to do it.
I believe the trust fund debt will be honored by the government. I think the vast majority of people agree with me here. So surplus money is like all of the rest of our massive debt accumulated by the government, it is paid when due, even with the issuance of new bonds.
The real crisis coming is the fact that this surplus which has been silently paying for running our government is going to become a burden and not a secret supplement to our government.
As this happens, more and more dollars will be devoted to servicing debt and less and less services (military, social, government all of them) will be able to be provided. We have been living on the next generation's money for a generation and it has been dishonest.
Lowering taxes without cutting spending his been the order of two Republican 8 year terms. Every day we continue to run up debt makes it harder for our future governments to keep things working well.
QUOTE(Eeyore @ Jan 28 2005, 04:43 PM)
Is anyone here claiming that the US government is not going to honor the spent surplus money?
The money has not been stolen. It has been finessed with accounting and that is yet another diverted burden that is going to be shifted to the next generation of tax payers by the present.
The money has not been stolen. It has been finessed with accounting and that is yet another diverted burden that is going to be shifted to the next generation of tax payers by the present.
Let me see, this would be just the same as the accounting practices at ..... Enron? Except with a whole lot more zeroes in it, and with direct effect on everyone in the US not just now, but for several generations in the future? How the same people that decry what happened there can pooh-pooh this issue baffles me.
Eeyore, this is not just an accounting sheenanigan. The money that was supposed to be there isn't..its gone. There shouldn't be anything to shift...it should already be taken care of. We have already paid for fixing this problem. And we're idiots if we blindly just go ahead and pay for it again, without demanding some public accounting of just exactly what happened to our money the first time.
As to whether or not they're going to honor the surplus...suppose we all refuse to fund it again (which I think does have some legal grounds)? Then, they'd be faced with a dilemma (as they should)...cut the SS benefits, or cut some other programs? Not sure which one they'd choose...are you?
QUOTE
One way around that is to try to get around having to pay that money back.
Absolutely. I have run this up the flagpole on several occasions, but have not gotten a response. It seems to me that since this was a targeted tax, we should be able to avoid having to fund it again. Which I would dearly love to do...or least be able to threaten to do. That might restore a little fiscal responsibility to our government.
QUOTE
Social Security is not broken. It is relatively sound for the next 75 years.
No, it isn't. This figure is based on the (false) assumption that the trust fund exists.
QUOTE
I believe the trust fund debt will be honored by the government.
And where exactly do you think the government is going to get the money? They're going to take it from us...AGAIN! Please don't tell me this doesn't make you angry.
QUOTE
The real crisis coming is the fact that this surplus which has been silently paying for running our government is going to become a burden and not a secret supplement to our government.
No, the real crisis is that they have been using the surplus for all these years to fund the government in the first place.
QUOTE
Lowering taxes without cutting spending his been the order of two Republican 8 year terms. Every day we continue to run up debt makes it harder for our future governments to keep things working well.
Eeyore, if you want to debate whether or not the Republicans have been addressing this issue in the past...well, they haven't. But this is as bipartisan a problem as has ever existed. Neither party stood up and said 'Spending this money now is wrong'. Rather, both parties participated in the spending orgy. So, both parties are equally to blame. In fact, I think a good argument could be made that what they have done with the money is treasonous...maybe a few public hangings would do wonders towards modifying their attitudes towards spending our money so dishonestly in the future. At the very least, I think we should demand some public accountability before contributing 1 single penny back into the Trust Fund. But, I don't think we'll get even that. Which makes me sad, and angry. Very angry, in fact. And I can't understand why everyone else isn't just as angry.
QUOTE
Eeyore, if you want to debate whether or not the Republicans have been addressing this issue in the past...well, they haven't. But this is as bipartisan a problem as has ever existed. Neither party stood up and said 'Spending this money now is wrong'. Rather, both parties participated in the spending orgy. So, both parties are equally to blame. In fact, I think a good argument could be made that what they have done with the money is treasonous...maybe a few public hangings would do wonders towards modifying their attitudes towards spending our money so dishonestly in the future. At the very least, I think we should demand some public accountability before contributing 1 single penny back into the Trust Fund. But, I don't think we'll get even that. Which makes me sad, and angry. Very angry, in fact. And I can't understand why everyone else isn't just as angry.
HOBBES,now you are talking and we are on the same page. It is a spending orgy by our government. If you can find big enough tree,I will gladly help you hang all of those involved in spending money from the Social Security funds. There is no excuse,whatsoever in their action.
I agree with EEYOREin his reasoning.
I wish to God that there was a way that politicans could be made to honor their commitments and do their duty and serve their constituents as they have sworn to do.
QUOTE
POPEYE STATES:
Or you might get lucky and invest your money in "Enron,MCI,Global Crossing,KMART,Tyco,and countless other companies. Wall Street is only for the INFORMED INDIVIDUAL. The vast majority of the public are not informed properly to invest their money in such a place as this
Or you might get lucky and invest your money in "Enron,MCI,Global Crossing,KMART,Tyco,and countless other companies. Wall Street is only for the INFORMED INDIVIDUAL. The vast majority of the public are not informed properly to invest their money in such a place as this
As I said before, I do not believe Americans should be investing in individual companies, but rather diversified indexes such as foreign stock exchanges, American stock exchanges and commodities.
QUOTE
There have been at least 1 million people that have lost most of their retirement in failed or poorly managed companies in the past 4 or 5 years.
In fact the Dow Jones average has never recovered all of its losses since 2000 and that has been 5 years ago.
In fact the Dow Jones average has never recovered all of its losses since 2000 and that has been 5 years ago.
That quote is simply ludicrous, you are comparing social security to the 5 year returns of the American stock market. If considering the stock market for a social security alternative at least look at a typical social security time span. I look at this example for a fair time frame comparison. Morgan Growth Fund. Now I will compare, both starting in 1960 to now with an annual contribution of $500 and starting amount of $2,000. The stock market returns will be 11.87% per year, and social security will be 2.5% a year. According to the MoneyChimp Compounding Interest Calculator A starting principle of $2,000 with annual addition of $500 at 11.87% compounding for 45 years will return a whopping 1,039,972.00 retirement after 45 years. Lets compare that to social securities' 2.5%, which might be an exaggeration. Social security would return 47,852.82.
This means the stock market's return was superior to the social security return by over 2100%!
Let's not look at the five year averages for the 45 year process of social security.
Do you disagree?
Edit changed a statistical error.
QUOTE(nivekelly @ Jan 29 2005, 09:53 PM)
QUOTE
POPEYE STATES:
Or you might get lucky and invest your money in "Enron,MCI,Global Crossing,KMART,Tyco,and countless other companies. Wall Street is only for the INFORMED INDIVIDUAL. The vast majority of the public are not informed properly to invest their money in such a place as this
Or you might get lucky and invest your money in "Enron,MCI,Global Crossing,KMART,Tyco,and countless other companies. Wall Street is only for the INFORMED INDIVIDUAL. The vast majority of the public are not informed properly to invest their money in such a place as this
As I said before, I do not believe Americans should be investing in individual companies, but rather diversified indexes such as foreign stock exchanges, American stock exchanges and commodities.
QUOTE
There have been at least 1 million people that have lost most of their retirement in failed or poorly managed companies in the past 4 or 5 years.
In fact the Dow Jones average has never recovered all of its losses since 2000 and that has been 5 years ago.
In fact the Dow Jones average has never recovered all of its losses since 2000 and that has been 5 years ago.
That quote is simply ludicrous, you are comparing social security to the 5 year returns of the American stock market. If considering the stock market for a social security alternative at least look at a typical social security time span. I look at this example for a fair time frame comparison. Morgan Growth Fund. Now I will compare, both starting in 1960 to now with an annual contribution of $500 and starting amount of $2,000. The stock market returns will be 11.87% per year, and social security will be 2.5% a year. According to the MoneyChimp Compounding Interest Calculator A starting principle of $2,000 with annual addition of $500 at 11.87% compounding for 45 years will return a whopping 1,039,972.00 retirement after 45 years. Lets compare that to social securities' 2.5%, which might be an exaggeration. Social security would return 47,852.82.
This means the stock market's return was superior to the social security return by over 2100%!
Let's not look at the five year averages for the 45 year process of social security.
Do you disagree?
Edit changed a statistical error.
I agree with you , especially in investing with Vanguard(which is the most efficiently run mutual fund company). That is where my 401k from work is invested.
But when telling individuals where to put their money, is a different story. In our 401k at work, I have preached to not put all your eggs in one basket. But what do they do, they put most of their money in the companys fund. People will not listen to good advice. And that is the problem with trying to get individuals to be informed. Most will just listen to you and do what they want. The majority of my friends have done the same thing and have lost money for the past 5-10 years, and over the long term(20-30 years) they haven't averaged over 5-6% per year.
What i am trying to say is that on paper your plan looks good, but I just don't think people will listen to informed sources and get burnt.
If the government put the social security funds in treasury or bonds they should average at least 4-6% per year. And there is very little danger (or none)of people losing any money.
QUOTE
But when telling individuals where to put their money, is a different story. In our 401k at work, I have preached to not put all your eggs in one basket. But what do they do, they put most of their money in the companys fund. People will not listen to good advice. And that is the problem with trying to get individuals to be informed. Most will just listen to you and do what they want. The majority of my friends have done the same thing and have lost money for the past 5-10 years, and over the long term(20-30 years) they haven't averaged over 5-6% per year.
I agree with you on the fact that an unregulated private accounts are a bad idea, at least from the start of the private accounts. I also agree that people will be arrogant and not acknowledge the truths about conservative and profitable investing. I believe that the ideal way into going into the private accounts would to be to give people choices, yet not complete freedom of the money. For example, a pamphlet would be mailed out containing to information, risk factors, average returns, pros, and cons about different types of funds. These funds would range from Money Market Funds, to Bond Funds, to Stock Funds (Foreign and Domestic), and Bond/Stock combination.
The people should not be given complete freedom until they have proven sufficient knowledge of the stock market. This is because you do not want to give this money out to someone who will use it to pay for a new lawnmower, nor do you want the person to go to the racetrack and bet it away.
Yet, I feel the best way to fix the problem is to invest the money, yet, complete freedom cannot be granted from the start.
Once again I think the folks that propagate the idea of "privatizing" social security are purposely, in some cases, ignoring the historical context and need for social security INSURANCE.
It was shady practises of unrestrained capitalism that led to the great depression, and the wiping out of all retirement funds for so many families, that actually threatened our national survival- we need this net for national survival in case the economy tanks to that level again.
That being said- anyone that relies on Soc Sec being more than 35% of thier retirement income is a blooming idiot LOL
- especially if you are under 40 today 
It was shady practises of unrestrained capitalism that led to the great depression, and the wiping out of all retirement funds for so many families, that actually threatened our national survival- we need this net for national survival in case the economy tanks to that level again.
That being said- anyone that relies on Soc Sec being more than 35% of thier retirement income is a blooming idiot LOL
- especially if you are under 40 today
President Bush is endangering my retirement and the retirements of millions of Americans by taking the first step in his plan to dismantle Social Security.
Bush's plan to dismantle social security arrives in a corporate environment where fraud is rampant and the consequences to the perpetrators are minimal. The trend for corporate and private retirement plans over the past 20 years has been to remove the protections that would provide guarantees to those who invest in them.
Enron employees walked away with exactly $0 from their pensions while creditors and executives walked away with the spoils (AND ARE BACK IN BUSINESS UNDER ANOTHER NAME). The stock market has become a rich source of "magical funding" for corporate America out of the pocket of us "little Americans". Rampant lying and fraudulent reporting on corporate financials continues with little or no oversight. Oh, at least until the cash flow fails and the lie can no longer be hidden.
It is now S.O.P in America for corporations to declare bankruptcy to escape their pension obligations and promises. These corporations return to business as usual FREED of their obligations to former employees. And all this arrives in service to the new Holy Ghost called GREED. Daily corporate rights expand while yours shrink. This is Bush's plan for our future.
If you wish to remain ignorant of the facts and the truth, then you do so not only at your peril but also at that of your children. Bush's plan will assure that America has a society fully polarized into the have's and have not's. Here in Oklahoma, I don't think there will be much doubt about which side of the social scale we and our children will be residing.
Bush's plan to dismantle social security arrives in a corporate environment where fraud is rampant and the consequences to the perpetrators are minimal. The trend for corporate and private retirement plans over the past 20 years has been to remove the protections that would provide guarantees to those who invest in them.
Enron employees walked away with exactly $0 from their pensions while creditors and executives walked away with the spoils (AND ARE BACK IN BUSINESS UNDER ANOTHER NAME). The stock market has become a rich source of "magical funding" for corporate America out of the pocket of us "little Americans". Rampant lying and fraudulent reporting on corporate financials continues with little or no oversight. Oh, at least until the cash flow fails and the lie can no longer be hidden.
It is now S.O.P in America for corporations to declare bankruptcy to escape their pension obligations and promises. These corporations return to business as usual FREED of their obligations to former employees. And all this arrives in service to the new Holy Ghost called GREED. Daily corporate rights expand while yours shrink. This is Bush's plan for our future.
If you wish to remain ignorant of the facts and the truth, then you do so not only at your peril but also at that of your children. Bush's plan will assure that America has a society fully polarized into the have's and have not's. Here in Oklahoma, I don't think there will be much doubt about which side of the social scale we and our children will be residing.
QUOTE(LNAB @ Jan 30 2005, 01:56 PM)
President Bush is endangering my retirement and the retirements of millions of Americans by taking the first step in his plan to dismantle Social Security.
If you wish to remain ignorant of the facts and the truth, then you do so not only at your peril but also at that of your children.
The ignorant people in this country may be those that rely on SS as their retirement. Anyone who doesn't make additional arrangements for their well being are fools. That being said, I agree with CR and others that SS is intended to be more of an insurance than a retirement.
What I despise is the fascist like mindset of government control of my money. If we, as a nation can spend money on $600 toilet seats, highways to nowhere and other assorted pork products, then certainly we can find a way for me to be able to invest up to 4% of my SS contributions.
But then the scaremongers would have 4% less power over me. Can't have that can we?
QUOTE(Dontreadonme @ Jan 30 2005, 04:16 PM)
QUOTE(LNAB @ Jan 30 2005, 01:56 PM)
President Bush is endangering my retirement and the retirements of millions of Americans by taking the first step in his plan to dismantle Social Security.
If you wish to remain ignorant of the facts and the truth, then you do so not only at your peril but also at that of your children.
The ignorant people in this country may be those that rely on SS as their retirement. Anyone who doesn't make additional arrangements for their well being are fools. That being said, I agree with CR and others that SS is intended to be more of an insurance than a retirement.
What I despise is the fascist like mindset of government control of my money. If we, as a nation can spend money on $600 toilet seats, highways to nowhere and other assorted pork products, then certainly we can find a way for me to be able to invest up to 4% of my SS contributions.
But then the scaremongers would have 4% less power over me. Can't have that can we?
I have a question...do you think there are MORE company/privately funded pension plans for the average American worker today than existed in the 1960's?
I believe the answer to that is NO. Companies no longer have any motivation to participate in the "retirement" of long term employees.
Enter to 401K, SEPS etc....funds managed at a cost of 20 to 25% (SS management is 1%) to the investor. Company participation is usually limited. Also, there are NO mandates for these companies to provide these plans at all too you.
I think you and I can sound very high and mighty about "saving for our retirement" when you and I have the disposable income to invest. The largest growing business segment growing in this country is RETAIL. Retail doesn't pay well, offers little to NO benefits and certainly makes a standard practice of abusing it's employees on MANY LEVELS. THESE PEOPLE are the working poor! They are NEVER going to have a "liveable" retirement plan because WAL-MART is not going to make that feasible.
In my city...OVER 60% of the people deemed HOMELESS ... HAVE A JOB! But some woman with two kids and a deadbeat ex aren't going to be able to feed, cloth and provide medically for themselves on $7.50 an hour! These people are NOT abusing substances or being lazy! THEY WERE ONE PAYCHECK AWAY FROM THE STREET..and something happened to send them there (kid got sick, they got sick and missed a paycheck). And you THINK these people need to be RESPONSIBLE and provide for their retirement! Heck, I have a friend who finally got food stamps (after much work and being told...get a boyfriend by the social worker)....she had 3 kids, a highschool education and an ex-husband who was paying her $300 a month in child support! Do you HONESTLY think she had one dime to invest in her retirement!
SIMPLISTIC ... people with simplistic, myopic reasons to justify their positions...we ALL need to look a bit beyond our "own little drama" to realize that the MYTH that POOR PEOPLE ARE POOR BECAUSE THEY ARE LAZY is more often a lie than the truth.
And in truth, I think the conservative agenda is INTENTIONALLY trying to expand the "working poor" because that's good for "business"....and "cheap labor".
QUOTE(LNAB @ Jan 30 2005, 04:33 PM)
SIMPLISTIC ... people with simplistic, myopic reasons to justify their positions...we ALL need to look a bit beyond our "own little drama" to realize that the MYTH that POOR PEOPLE ARE POOR BECAUSE THEY ARE LAZY is more often a lie than the truth.
And in truth, I think the conservative agenda is INTENTIONALLY trying to expand the "working poor" because that's good for "business"....and "cheap labor".
You realize I'm sure, that I'm not advocating taking away anyone's Social Security. If you would like the government to continue to manage your money, then by all means, let them.
I'm not sure how it is a 'little drama' to want to be financially sovereign, without it being at the expense of anyone else......the fact of the matter is, we could afford to give the equivalent SS payments to those in need without even taking in 'contributions' from me or you. For the last four years, the Connecticut Cowboy has spent our money like a drunk Private at the strip club on payday. We need a top down financial reform of the entire government. That may be fodder for another thread, but that taking place would likely render this discussion moot.
As for your comment about poor people, I don't so much think that they are lazy, but ignorant. When I see the poor that I know spend more time and effort into savings and investments than nails, extensions and Nintendo, I'll certainly have more compassion.
But for the time being, since neither government reform nor household reform are likely, you certainly can't find fault with my desire of financial sovereignty, if we can find methods of funding SS for those in need.....can you??
QUOTE(LNAB @ Jan 30 2005, 05:33 PM)
QUOTE(Dontreadonme @ Jan 30 2005, 04:16 PM)
QUOTE(LNAB @ Jan 30 2005, 01:56 PM)
President Bush is endangering my retirement and the retirements of millions of Americans by taking the first step in his plan to dismantle Social Security.
If you wish to remain ignorant of the facts and the truth, then you do so not only at your peril but also at that of your children.
The ignorant people in this country may be those that rely on SS as their retirement. Anyone who doesn't make additional arrangements for their well being are fools. That being said, I agree with CR and others that SS is intended to be more of an insurance than a retirement.
What I despise is the fascist like mindset of government control of my money. If we, as a nation can spend money on $600 toilet seats, highways to nowhere and other assorted pork products, then certainly we can find a way for me to be able to invest up to 4% of my SS contributions.
But then the scaremongers would have 4% less power over me. Can't have that can we?
I have a question...do you think there are MORE company/privately funded pension plans for the average American worker today than existed in the 1960's?
I believe the answer to that is NO. Companies no longer have any motivation to participate in the "retirement" of long term employees.
Enter to 401K, SEPS etc....funds managed at a cost of 20 to 25% (SS management is 1%) to the investor. Company participation is usually limited. Also, there are NO mandates for these companies to provide these plans at all too you.
I think you and I can sound very high and mighty about "saving for our retirement" when you and I have the disposable income to invest. The largest growing business segment growing in this country is RETAIL. Retail doesn't pay well, offers little to NO benefits and certainly makes a standard practice of abusing it's employees on MANY LEVELS. THESE PEOPLE are the working poor! They are NEVER going to have a "liveable" retirement plan because WAL-MART is not going to make that feasible.
In my city...OVER 60% of the people deemed HOMELESS ... HAVE A JOB! But some woman with two kids and a deadbeat ex aren't going to be able to feed, cloth and provide medically for themselves on $7.50 an hour! These people are NOT abusing substances or being lazy! THEY WERE ONE PAYCHECK AWAY FROM THE STREET..and something happened to send them there (kid got sick, they got sick and missed a paycheck). And you THINK these people need to be RESPONSIBLE and provide for their retirement! Heck, I have a friend who finally got food stamps (after much work and being told...get a boyfriend by the social worker)....she had 3 kids, a highschool education and an ex-husband who was paying her $300 a month in child support! Do you HONESTLY think she had one dime to invest in her retirement!
SIMPLISTIC ... people with simplistic, myopic reasons to justify their positions...we ALL need to look a bit beyond our "own little drama" to realize that the MYTH that POOR PEOPLE ARE POOR BECAUSE THEY ARE LAZY is more often a lie than the truth.
And in truth, I think the conservative agenda is INTENTIONALLY trying to expand the "working poor" because that's good for "business"....and "cheap labor".
This is exactly why the poor need Social Security reform.
Today's SS system gives the working class nothing to leave their family. It builds no wealth. A private account would allow such wealth building.
On top of that, these working people have no additional income to "sock away". Only their Social Security taxes (payroll taxes) are available. Why not allow these people something which they can call their own?
Hobbes' analysis is correct about the overall "scheme" of the system. The government "loaned" itself the money and when the bill comes due, will generate the money needed by taxing us further. It really is unrelated to the financial responsibility (or lack thereof) of any government.
There never was a "Social Security lockbox". That is a thing of fiction. The government has been spending this money for decades and passing the costs of government down to the next generation (via bonds).
The use of government securities (T-bonds and such) as popeye suggested is basically the same thing, guaranteeing a return of whatever percentage (let's say 5%). That 5% return is still paid for by future taxes. It is still spending the money of future taxpayers.
The whole system is a farce. It is a Ponzi scheme. Unfortunately, participation in the scheme is mandatory, not voluntary. The house of cards may not fall today, but it soon will. Better to reform it sooner than later.
you ignore about 3 points to make your comments
1) the working poor DO NOT have money to invest...so now we'll take a PORTION of the SS withholding money that is MATCHED by employers (by law) and throw it into the system that HISTORICALLY does not OUTPERFORM the SS Retirement system for the SMALL INVESTOR. The previous post which cited the performance rates for the stock market ARE NOT valid figures for the small investor (just ask those whose pensions and portfolios were devestated in 2000)
2) Administration cost...20 to 25% vs 1%. SS has done an excellent job of managing the money and the numbers that are being THROWN OUT by the administration on the solvency of the fund are HYPE...they are based on the "worst case scenario's given a unrealistic set of events". Further, these analysis were presented by groups that were funded by the very people who "privitazation" will enrich
3) IF you have so much money to invest in the more "risky" stock market, then avail yourself of what already exists...your company 401K, an IRA, an SEP. Hold out an additional amount and pay yourself. Leave the "retirement" safety net in place and intact. Bush's proposal wants to cut a hole in the middle that will end up collapsing the system and guaranteeing NO ONE's retirement
and also...the taking of the SS security money is absolutely correct! But the neo-con agenda is once again the invocation of the Jedi mind trick. Let's convince the American people that the SS system is in crisis (not true) so that we can invoke a "risky scheme" which enriches our friends, funds wall-street and then when we CAN'T FUND the mandate...we can point back to the CRISIS that never existed in the first place as the cause....
it's a game...if Bush wants more private accounts, then take the restrictions off the ira's and 401ks....but THAT doesn't allow him to dismantle the INSURED retirement for the working poor does it . After all, his plan will provide the economy MANY future Wal-Mart greeters.
1) the working poor DO NOT have money to invest...so now we'll take a PORTION of the SS withholding money that is MATCHED by employers (by law) and throw it into the system that HISTORICALLY does not OUTPERFORM the SS Retirement system for the SMALL INVESTOR. The previous post which cited the performance rates for the stock market ARE NOT valid figures for the small investor (just ask those whose pensions and portfolios were devestated in 2000)
2) Administration cost...20 to 25% vs 1%. SS has done an excellent job of managing the money and the numbers that are being THROWN OUT by the administration on the solvency of the fund are HYPE...they are based on the "worst case scenario's given a unrealistic set of events". Further, these analysis were presented by groups that were funded by the very people who "privitazation" will enrich
3) IF you have so much money to invest in the more "risky" stock market, then avail yourself of what already exists...your company 401K, an IRA, an SEP. Hold out an additional amount and pay yourself. Leave the "retirement" safety net in place and intact. Bush's proposal wants to cut a hole in the middle that will end up collapsing the system and guaranteeing NO ONE's retirement
and also...the taking of the SS security money is absolutely correct! But the neo-con agenda is once again the invocation of the Jedi mind trick. Let's convince the American people that the SS system is in crisis (not true) so that we can invoke a "risky scheme" which enriches our friends, funds wall-street and then when we CAN'T FUND the mandate...we can point back to the CRISIS that never existed in the first place as the cause....
it's a game...if Bush wants more private accounts, then take the restrictions off the ira's and 401ks....but THAT doesn't allow him to dismantle the INSURED retirement for the working poor does it . After all, his plan will provide the economy MANY future Wal-Mart greeters.
QUOTE(LNAB @ Jan 30 2005, 06:37 PM)
...the taking of the SS security money is absolutely correct! But the neo-con agenda is once again the invocation of the Jedi mind trick. Let's convince the American people that the SS system is in crisis (not true) so that we can invoke a "risky scheme" which enriches our friends, funds wall-street and then when we CAN'T FUND the mandate...we can point back to the CRISIS that never existed in the first place as the cause....
Gee, LNAB.....it looks like Bill Clinton was a Neo-Con. After all, in a speech at Georgetown University in 1998 he stated If we don't do anything, one of two things will happen, either Social Security will go broke and you won't ever get the benefits you are promised. Or if we wait too long to fix it, the burden on society of taking care of the baby boomers' Social Security obligations will lower your income and lower your ability to take care of your children to a degree most of us who are your parents think would be horribly wrong and unfair to you and unfair to the future prospects of the United States.
Clinton kept referring to the 'looming fiscal crisis in Social Security' when the debate raged over how to spend the projected surplus near the end of his presidency.
According to the Congressional Budget Office:
QUOTE
Starting in 2028, annual revenue and interest earnings will no longer be able to cover all benefits. The trustees will have to start redeeming Treasury bonds that Social Security holds in its so-called trust fund.
By 2042 (according to the trustees, 2052 according to the CBO), Social Security will not have enough money to pay full promised benefits; it could pay only 70 percent of promised benefits. That would last until 2078, when a combination of factors might allow a slight increase.
By 2042 (according to the trustees, 2052 according to the CBO), Social Security will not have enough money to pay full promised benefits; it could pay only 70 percent of promised benefits. That would last until 2078, when a combination of factors might allow a slight increase.
Link
Now, your idea of a crisis and mine may differ, but it's safe to say that we can't keep going down this road without doing something concerning SS reform.
QUOTE
1) the working poor DO NOT have money to invest...so now we'll take a PORTION of the SS withholding money that is MATCHED by employers (by law) and throw it into the system that HISTORICALLY does not OUTPERFORM the SS Retirement system for the SMALL INVESTOR. The previous post which cited the performance rates for the stock market ARE NOT valid figures for the small investor (just ask those whose pensions and portfolios were devestated in 2000)
I shall start out by saying the working poor do have money to invest if they have money they put in Social Security. You asked me to ask people who lost their money in the stock market in 2000 whether or not my figures were correct. My statistics were correct because you are comparing my 45 year returns of a diversified index fund to people who had all their eggs in one basket (pension funds) and logically stupid investments (dot coms). LNAB my facts were not incorrect, you are just attempting to distort them by comparing them to non-diversified pension plans and portfolios overloaded on overpriced dot com stocks. Also, please do not criticize my figures as you did without a source. Thanks, and if you find a source showing my long term figures to be incorrect than I will acknowledge my faults.
may I point you to another article...that doesn't "hype" the wonderful returns being touted for "private accounts".
http://www.pensiondynamics.com/columns/2004/101104.htm
realistic solutions with realistic transitions...FINE...but ultimately I honestly believe that given the regulatory environment in the stock market (the SEC has essentially done NOTHING to address the fraud that was outed in 2000)...the small investor is going to serve as nothing but "fresh meat" for the traders...whether or NOT they are investing thru a SS tool or not
and...I will keep looking for a small investor ROR...while not withdrawing my contention that the rate you refer to does NOT represent the typical return for this group.
http://www.pensiondynamics.com/columns/2004/101104.htm
realistic solutions with realistic transitions...FINE...but ultimately I honestly believe that given the regulatory environment in the stock market (the SEC has essentially done NOTHING to address the fraud that was outed in 2000)...the small investor is going to serve as nothing but "fresh meat" for the traders...whether or NOT they are investing thru a SS tool or not
and...I will keep looking for a small investor ROR...while not withdrawing my contention that the rate you refer to does NOT represent the typical return for this group.
There is very little risk in putting people's money in an Index fund. It is the individual stocks that are a risk, not the market as a whole.
Also, very little knowledge is needed to put one's money in an index fund. It is quite easy, in fact.
As for returns vs. administration: of course Social Security has low overhead. It basically takes the money it gets today and hands it out to others tomorrow. The administration of the collection end is done by employers (flat tax, basically) and the outlays are fixed for the most part. The only administration is adding new enrollees and taking dead people off the list. There is no "money management" there, which is why there is no overhead. It is all computerized, I'm sure.
The "privitization" here is a tiny fraction of the overall SS picture. It creates individual accounts, just like the average American thinks he is currently getting with Social Security.
A small investor who deals with individual stocks is taking a huge risk. A small investor in an Index fund is not. Not unless the whole US economy goes kaput. If that happened, there would be nothing stopping us from going back to the Ponzi scheme...
Also, very little knowledge is needed to put one's money in an index fund. It is quite easy, in fact.
As for returns vs. administration: of course Social Security has low overhead. It basically takes the money it gets today and hands it out to others tomorrow. The administration of the collection end is done by employers (flat tax, basically) and the outlays are fixed for the most part. The only administration is adding new enrollees and taking dead people off the list. There is no "money management" there, which is why there is no overhead. It is all computerized, I'm sure.
The "privitization" here is a tiny fraction of the overall SS picture. It creates individual accounts, just like the average American thinks he is currently getting with Social Security.
A small investor who deals with individual stocks is taking a huge risk. A small investor in an Index fund is not. Not unless the whole US economy goes kaput. If that happened, there would be nothing stopping us from going back to the Ponzi scheme...
QUOTE
the small investor is going to serve as nothing but "fresh meat" for the traders...whether or NOT they are investing thru a SS tool or not
and...I will keep looking for a small investor ROR...while not withdrawing my contention that the rate you refer to does NOT represent the typical return for this group.
and...I will keep looking for a small investor ROR...while not withdrawing my contention that the rate you refer to does NOT represent the typical return for this group.
I will point to yet another, readily available source, ;The Lazy Person's Guide to Investing.' This book teaches the average person how to obtain great long term returns above 10%.
"10.29% Annual Compounding Return from 1973 to 1991, this including the bear market of 1982 and the crash of '87...the trick is 50-50 asset allocation in two index funds, the Vanguard Bond Fund and the Vanguard 500 Index"(p.10-11).
"A 25-25-25-25 allocation in a large cap fund, foreign fund, small cap fund, and domestic fund...had a solid 13.5% average annual return for 20 years"(p.33,35).
One more benefit that would come from privatizing would be an increased popularity in investing and the stock market. More Americans would understand how the market works, how to analyze companies and how to profit through investing.
I provided you with two more sources on my theory that the stock market index approach would far exceed the current social security returns.
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