Social Security Questions

[saganista]

Originally Posted by Yeledaf

Because SS as presently constituted does not and cannot function as the primary source of retirement income for all citizens. Note that I have not used the words "should" or "should not."

Your statement is contrary to easily observable fact. 20% of elderly married couples and 40% of elderly singles depend on SS for at least 90% of their income. They are all getting by. Not lavishly, not even acceptably well by the standards of many, but despite the fact that SS is easily their primary source of income, they are all getting by. What would it be about you that would make you unable to do the same?

Originally Posted by Yeledaf

No, it is that such menus are foreign to the thinking of many average Americans.

I see. Average Americans find the already existing array of tax-deductible saving plans to be alien devices of some sort, yet you want all of them to start depending on such things for their retirement security. Is that about right?

Originally Posted by Yeledaf

Not at all. Hence my suggestion that such choices be made intelligible and transparent to everyone who participates in such a plan. To suggest otherwise would be criminally irresponsible.

So again, the average American is not a very savvy investor in your view, yet you want to appoint them all to the position of asset manager? You believe that transparency (usually a laudable thing) will turn everyone into an investment guru? What percentage of people do you expect not to be gobbled up by market pros? Fund managers are whales. Individual investors are plankton. The usual thing will happen. Over and over and over again. Of course, the government could always constrain individuals to investing only in very safe things. Like US Treasury securities...or should I be using the term "worthless IOU's" for those?

Originally Posted by Yeledaf

There is no reason to assume that such would be the case any more than it is so with SS, which some assure us is totally funded and safe for decades to come.

Do the math. Every dollar you divert from SS into some privatized account is a dollar that has to be borrowed in order to keep SS beneficiaries whole. The numbers run into the trillions for any sizable privatization plan.

Originally Posted by Yeledaf

Absolutely not. Such exhorbitant costs (which in your example far exceed anything like the fee structure of reputable investment firms) would have to be strictly limited and legislated against.

Again, do the math. What rate would you allow managers to earn? Would a rate of 1.2% per year be seen as reasonable? If so, at the end of 40 years of investing $10K per year at a constant real rate of return of 3%, you would have lost 24% of your expected pot of gold to management fees. It's the magic of compounding working in reverse. Privatization schemes are little more than a license to steal granted to money managers.

[Mircea]

Originally Posted by saganista

The larger point in this case is that SS privitization schemes undo and disserve the objectives that underly the program. They make retirement security weaker and more difficult to obtain.

But that isn't true. If the social security tax I paid during my military service through 1991 had been invested in stocks, I could retire now. Today. Not 25 years from now.

In fact, I would have retired or been in semi-retirement 3 years ago.

Why should I have to work 25 more years because the government wants me to work for 25 more years?

Originally Posted by saganista

And a supplement to income would likely be seen by most as being income.

That's a matter of properly educating people.

It should be on standardized tests students take.

72) Social Security is income.

a) True

b) false

Answer: b) False

Originally Posted by saganista

Company pensions are disappearing

Because of the cost of regulation. It's cheaper to dump the burden of responsibility on someone else, since there's no civil liability.

Originally Posted by saganista

the personal savings rate struggles to stay above zero

That is solely the fault of Americans.

Dumbbutt Me Generation Dan buys a $350,000 McMansion with 0% for 30 years.

He pays the $350,000 price tag plus $425,000 in interest for a total of $775,000

Smart Sam lives with his wife in a cramped apartment for 3-5 years to scrimp and save for a 20% down-payment.

They pay a total of $539,000 for their $350,000 McMansion including interest for the house.

Because Smart Sam and his wife made a short-term sacrifice, they saved $236,000 and took nice romantic vacations and invested the rest in a money-market plan at 8% and netted a cool $1.1 Million after 20 years.

See the difference?

You want to know why the Middle Class has no money? I just proved to you why they don't and it's no one's fault but their own, and they deserve everything they have coming to them.

Originally Posted by saganista

and the future of Medicare hangs upon our near-term ability to craft an effective verison of health care reform.

Not gonna happen. As long as people can't think outside the box and insist on having anachronistic hospitals, they'll always be paying at least 700% more than they have to pay.

Originally Posted by saganista

Social Security exactly as it is today will meet 100% of its objectives until well into the second half of the century.

That isn't true. The June 2008 report moves the Operating Fund insolvency date from 2016 back to 2017 instead of 2015 like many predicted.

The date was moved back because the stupid Boomers are still buying houses and taking out 2nd and 3rd mortgages at age 60. So they have to stay in the work force.

In a recession/depression, the Boomers are the most vulnerable because they drive up health care and their salaries and benefits cost the most. Those at retirement age will retire to collect Social Security, which pays more than unemployment.

So the Boomers are sucking up the Operating Fund, they aren't paying into it any longer, and lots of others are unemployed and not paying into the Operating Fund.

That'll move the insolvency date for the Operating Fund up real fast. By June 2011, it could be 2012.

At that point Congress will have to raise the Social Security Tax (during a recession) to cover the Operating Fund; or they'll have to lift the cap on Social Security Wages (a tax during a recession); or they'll have to tap into the Trust Fund and convert the IOUs back into cash.

What countries will be buying US debt during a recession?

The Trust Fund is supposed to have enough money to last until 2042-2048, but that is if, and only if, the US does not enter into a recession or a depression. If the US goes into a depression around 2015 like it should, the Trust Fund will be insolvent by 2024.

And don't forget that unemployed people don't pay Medicare taxes.

Originally Posted by saganista

Social Security does not mandate or establish a preference for any form of living arrangement. Many retired and elderly people continue to live with their children. Many still establish households of convenience. Many however have a strong preference to remain independent, not wishing to become a burden upon their children or anyone else. This is a matter of personal choice, and choice, you'll remember, is important.

That's a life-style choice for which I am not legally, morally or ethically obligated to subsidize.

If they want to live on their own, fine, but they pay for it, not me. If they can't afford it, they'll have to make other arrangements.

Originally Posted by saganista

Can you back up such an assertion? Where has anyone at all encouraged such behavior? Don't take any initiative, don't save, don't invest. Show me any people who offer such advice. Show me any who take it.

Haven't been in a school lately have you?

"Finally, opponents worry that such a change could be the first step down a slippery slope toward the end of government-guaranteed retirement income." [emphasis mine]

That's from a text book. A government text-book American Government and Politics Today: The Essentials published in 2006 (page 494).

That was part of the textbook's discussion on Social Security, which it claims is "government-guaranteed retirement income." Nowhere in the text book does it mention personal responsibility in any context.

I can list dozens of textbooks that describe Social Security as either an entitlement, income or both. At one time there were 3 to 3 dozen text book publishers per state, now there's only 3 or 4 in the whole country.

"That's because the Republicans won't let your mommy and daddy have health care and want to take away Social Security."

That's an actual quote by a teacher in response to a 3rd grader's question/comment (which I can't remember because I was so astonished by the teacher's answer). This was also the same teacher that claimed humans caused the hole in the ozone layer. I would have loved to stay for the class on the UN, but I probably would have vomited.