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Marc Allen, you could post that on some of the actuary boards and see the reactions that you might get.
Yes, the math is that complex. I took the 1st two actuary exams myself way back when. They were exceedingly complex and difficult. And required a full working knowledge of calculus, diff equations and mathematical statistics with every trick gotcha question that exists thrown in. And these were the prelim "easy" exams. I passed them but decided then that I'd rather do something else with my life rather than spend the next 5-10 years studying those things with no assurance of ultimate success (the failure rate is quite high).
Marc Allen, you could post that on some of the actuary boards and see the reactions that you might get.
Yes, the math is that complex. I took the 1st two actuary exams myself way back when. They were exceedingly complex and difficult. And required a full working knowledge of calculus, diff equations and mathematical statistics with every trick gotcha question that exists thrown in. And these were the prelim "easy" exams. I passed them but decided then that I'd rather do something else with my life rather than spend the next 5-10 years studying those things with no assurance of ultimate success (the failure rate is quite high).
Look, I respect the effort that you've made to educate yourself and I'll readily admit that there are no simple solutions...
..that said, the issue at hand isn't that hard to comprehend once ideological stances are dispensed with...
Social Security is a promisory note, not a savings account. People didn't save for themselves, they paid for the generation before them...yet they seem to support the idea that in a down economy, in a period of massive transition, that they're owed a greater percentage than what they paid.
Again, ask the actuaries. See what their response is.
Social security, Medicare and PBGC have actuaries on their staff simply because the issues involved are very complex. Far more so than you are trying to portray.
I think the math is beyond basic algebra - but not very complex. The factors that enter into calculations like this that are much more complex (and subject to *lots* of manipulation) are the assumptions that are "baked into the cake". Everything ranging from life expectancies to interest rates/rates of return to estimates of average health care use to what amount of tax dollars will be collected based on various tax rates to inflation rates - etc. - etc. To give an example - I think that a lot of people assumed for a long time that most people my age would take Social Security at normal retirement age (age 66). But - because of the economy - and the distortions caused by raising the "normal" retirement age to 66 - while keeping "early retirement" at age 62 - a lot more people are taking early SS than was contemplated perhaps 10 years ago.
To give another example - if I knew what my rate of return would be in the future - exactly when I was going to die - and how inflation would change my cost of living - it wouldn't be difficult for me to figure out about how much money I can spend now (and how much I should save). OTOH - the government isn't like me. Because it doesn't have any savings - just income and spending (with spending far exceeding income). IOW - Marc is correct. SS isn't a savings account - it's a promissory note. Robyn
...Regarding the math - yes Ma'm, I've actually done it (many moons ago) - the results were pretty clear. SS benefits are about the best deal, in total, that anyone ever offered the American public. JMO
Well the entire premise of this thread is that SS was a great deal for many people in the past - is a good deal for some people now (and not so good for other people now) - and won't be a good deal at all for many people in the future. I happen to agree with that premise. Do you (keeping in mind that the "American public" is far from homogeneous)? Robyn
Again, ask the actuaries. See what their response is.
Social security, Medicare and PBGC have actuaries on their staff simply because the issues involved are very complex. Far more so than you are trying to portray.
Ideological stances have nothing to do with it.
Pension plans have actuaries too. Many of whom are still assuming the plans will make 7%+ a year on average for the next 30 years . When the reality looks more like this:
No, the math is far beyond algebra. Also far beyond calculus.
About the most simple example that I can think of as an illustration is : calculate your mortgage loan repayment (knowing, of course, the mortgage amount, and interest rate for 30 years) without using a calculator. Or : How much would I have to save each month at a given earnings rate in order to accumulate a set sum of money for ummm say 30 years (again, without a calculator). Note - they are both the exact same question, just stated differently. And neither question involve calculus (but are just a prelim for what follows).
If you are interested in this kind of stuff you might be able to find a very well known text written by Jordan, title is Life Contingencies. Was used for many years in the actuary exams. It deals with just what the title implies. I spent a week or so browsing thru it years ago, it convinced me I wasn't interested in the subject or the field. Still have a copy of it somewhere.
No, the math is far beyond algebra. Also far beyond calculus.
About the most simple example that I can think of as an illustration is : calculate your mortgage loan repayment (knowing, of course, the mortgage amount, and interest rate for 30 years) without using a calculator. Or : How much would I have to save each month at a given earnings rate in order to accumulate a set sum of money for ummm say 30 years (again, without a calculator). Note - they are both the exact same question, just stated differently. And neither question involve calculus (but are just a prelim for what follows).
If you are interested in this kind of stuff you might be able to find a very well known text written by Jordan, title is Life Contingencies. Was used for many years in the actuary exams. It deals with just what the title implies. I spent a week or so browsing thru it years ago, it convinced me I wasn't interested in the subject or the field. Still have a copy of it somewhere.
I use a really old money management program - Managing Your Money (DOS version) - that can calculate any of this as fast as it takes me to fill in the blanks. I am sure there are newer and zippier calculators. I have a couple of stand-alone bond calculator apps as well (and before that - I had an HP calculator that did the same thing). But now - when I buy bonds on line - the brokerage firms I use have built-in calculators).
I am old enough to own books like "Bond Values Tables" (30+ years old) - and early editions of Fabozzi's Handbook of Fixed Income Analysis. The latter goes into the math in very great detail.
But why would anyone bother to do this math by hand these days? Just for fun? Perhaps it's the same actuaries who know all this math who don't have a clue about investment returns. Robyn
By hand? No, thats no fun. But if you can do it by hand it means that you do understand the intricacies involved. The 2 questions above are subtly different. But they both do (or can) involve the use of series solutions (some of which become very involved indeed).
You'd be very wrong re investment returns. Insurance companies rely heavily on their actuaries in order to make a profit (per my brother).
The problem with calculators is that people use then so much that they don't bother learning the underlying concepts of what they are calculating.
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. When the reality looks more like this:
