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Old 01-13-2016, 11:50 AM
 
1,842 posts, read 1,481,966 times
Reputation: 1313

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Quote:
Originally Posted by Escort Rider View Post
Quote:
Originally Posted by GeoffD View Post
It's creative accounting. They are counting "interest income" from the money the trust fund has "lent" to the Federal government. If all you count is payroll tax revenue, it's negative cash flow.
It's not "creative" accounting, it's straight-forward, normal accounting. All federal bonds pay interest. It's the cost of incurring debt, and it doesn't matter whether the purchaser of the bond was an individual, a foreign government, or the Social Security system in times of surplus payroll tax revenue.
Just because the accounting is correct doesn't mean it's something that would pass muster in the private sector. In government accounting, it's often proper to expense capital investment and call an expense an investment.

The Social Security Trust Fund is about the same as when I want to take a vacation to Europe, but don't have the money, I just run it through the credit card and write out on the back of an envelope "I owe me $5,000 and call that retirement savings." You can't owe money to yourself and that is what the trust fund is.

The Trust Fund was spent as it came in from the Get-Go. Reagan did it and so did everybody else till the cash-flow went negative as Obama took over. The year-to-year increase in the national debt was consistently higher than the stated budget deficit. When Clinton was in office and was showing a budget surplus, the deficit kept increasing ( what? ).

The trust fund is just money that current taxpayers will have to come up with to benefit retirees for however long it can be kept up. It's the same as increasing the 6.2% OASDI tax to pay benefits. The only difference between that underfunded pension and the underfunded state and local pensions is that the Federal government can always pay the dollars since that is where dollars are born.
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Old 01-13-2016, 02:36 PM
 
Location: Living rent free in your head
31,084 posts, read 13,607,016 times
Reputation: 22142
Quote:
Originally Posted by TuborgP View Post
Again it is your choice and we all make and live with our choices for better or worse. I was not talking as much about forums as I was workplace and neighborhood and broader community friends etc etc. I mean take a look at average family income in various areas. If you live in a community with a six figure average family income it isn't unreasonable that a number of the folks there will live with six figure retirement incomes. Especially with two professional spouses doing their own retirement thing. Same with home equity. Probably more of it with older folks in a neighborhood of 500K homes that have done well with appreciation over the years vs a neighborhood of 50K homes. Take what ever average appreciation percentage you want and apply it two the two price points and see who on average will have the most home equity if they decide to sell. Now depending on which neighborhood you live in your world perspective and reality could be very different.
Of course your neighborhood is different than an internet forum...I'm talking about people on forums who pretend to be someone other than who they are. Not too long ago a person wrote a long and detailed post describing their great success, they went on to claim it was due to hard work and raw ambition. I thought the person's screenname sounded familiar so I looked through some of his posts, last year he wrote a post asking for recommendations for low income housing. And THAT is why I take what people say here with a grain of salt and don't give a second thought to their recipes for success.
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Old 01-13-2016, 04:29 PM
 
29,782 posts, read 34,876,173 times
Reputation: 11705
Quote:
Originally Posted by 2sleepy View Post
Of course your neighborhood is different than an internet forum...I'm talking about people on forums who pretend to be someone other than who they are. Not too long ago a person wrote a long and detailed post describing their great success, they went on to claim it was due to hard work and raw ambition. I thought the person's screenname sounded familiar so I looked through some of his posts, last year he wrote a post asking for recommendations for low income housing. And THAT is why I take what people say here with a grain of salt and don't give a second thought to their recipes for success.
I remember that and as someone else says usually they give themselves away after awhile. I treat internet forum for what they are as a place to explore some thoughts on a topic of interest. I Google like crazy on here seeking validation and followup on thoughts. I often then post links which can drive some crazy.
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Old 01-13-2016, 05:36 PM
 
Location: Living rent free in your head
31,084 posts, read 13,607,016 times
Reputation: 22142
Quote:
Originally Posted by TuborgP View Post
I remember that and as someone else says usually they give themselves away after awhile. I treat internet forum for what they are as a place to explore some thoughts on a topic of interest. I Google like crazy on here seeking validation and followup on thoughts. I often then post links which can drive some crazy.
well said
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Old 01-13-2016, 07:31 PM
 
13,923 posts, read 7,416,674 times
Reputation: 25430
Quote:
Originally Posted by IDtheftV View Post

The Social Security Trust Fund is about the same as when I want to take a vacation to Europe, but don't have the money, I just run it through the credit card and write out on the back of an envelope "I owe me $5,000 and call that retirement savings." You can't owe money to yourself and that is what the trust fund is.
To enhance the analogy to align with the point I was making:

The note on the back of the envelope says "I owe me $5,000 and will pay me 5% interest on the loan".

Today, the Social Security Trust Fund is cash flow negative. It pays out more in benefits than it collects in payroll taxes. The government tries to claim that it's not cash flow negative because the Federal government is "paying" the trust fund "interest". Doesn't matter. It all comes out of the same general budget.

The reality is that rich people pay most of the taxes. It's mostly rich people who are likely to bear the brunt of the tax hikes required to fund Social Security. To get Social Security back to cash flow neutral, there's really no choice but to lift the cap on FICA and make FICA apply to passive income the same way Medicare now applies to passive income. Otherwise, "repaying the trust fund" eats the Federal budget alive. I figure payroll taxes will go up a bit for everybody, too. Long term, collections are about 30% short. I figure it will be 2/3 rich people, 1/3 everybody covering the shortfall.

I think this thread has shown fairly clearly that it wouldn't be possible to cut Social Security benefits. Something approaching 2/3 of people retiring 20 years from now will have Social Security as their only source of income.
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Old 01-13-2016, 07:45 PM
 
13,923 posts, read 7,416,674 times
Reputation: 25430
Quote:
Originally Posted by TuborgP View Post
I remember that and as someone else says usually they give themselves away after awhile. I treat internet forum for what they are as a place to explore some thoughts on a topic of interest. I Google like crazy on here seeking validation and followup on thoughts. I often then post links which can drive some crazy.
It's really challenging collecting enough information to formulate a viable retirement plan. In my personal experience, the financial services people are more interested in lining their own pockets than looking out for my interests. I've been planning and trying to execute my plan for 6+ years and I keep learning more information that causes me to re-do my planning. This message board on CD is quite useful and has given me lots of things to think about and dig into that have refined my planning.
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Old 01-13-2016, 09:42 PM
 
1,734 posts, read 1,950,095 times
Reputation: 3901
Quote:
Originally Posted by TuborgP View Post
I have had good neighbors and known good people with a focus on family and future. I understand your point and wouldn't expect a bar to be fruitful discussion grounds. Most of the folks I have known on a personal level are not divorced with a strong family focus of college expectations and intergenerational wealth. You have a different level of discussions when your kids play play travel team sports which can be a significant cost. I know my immediate neighbors in the last couple of neighborhoods were financially focused and knew what retirement for them was going to cost and how to get there. May have meant working to save until 66 or so but they weren't going out earlier just to go out until they had the financial base they wanted. When you say divorced with children you are already saying behind the eight ball. Sunday afternoon for married with children can often be family time and family activities often with other families.
Tuborg - respectfully, this line of argument sounds a tad strident. It is the libertarian screed, shrieked by every member of the cohort receiving a defined benefit pension plan, to support a premise of innate superiority.


Jim Otar (about whom I first heard on this Retirement forum) is a respected Canadian engineer and financial advisor. He is the author of the "asset multiplier" theorem. That is - for every $1 you require to bridge a gap between assured retirement income streams and projected retirement needs, you need to plan for $29 (or so - depends on your conservatism) invested and working. And that the "new black" SWR is 2.1%.


I respect an engineer more than I respect a shill. I know what the prep work entails.


That said, Otar demonstrates the critical factor in bridging the gap between "income requirement" and "assured income streams": TIMING LUCK. To put it in Pfau's terms, "sequence of returns risk" - over which those of us in the great unwashed have no control. Zero.


I can well see why you pat yourself on the back, having chosen a career with a defined benefit pension plan, during a time when markets were rising (hence annuities rich). Further, you have "chosen" wisely and married a solid individual with similar values. That, also, is a matter of self-aggregation.


There are some here who have not been similarly stricken on the head by the law of numbers. Ten per cent of the most successful in society are psychopaths. If you are targeted as a "good earner" by a psychopath, you will never know what hit you. Had you been born five years later, you would have witnessed a deterioration in annuity value. A depreciated value for your time, so to speak.


So, kindly tone it down a bit. I do not dismiss your talent, or capability. However, IMHO, you are the recipient of a bolt of lightning which struck you strictly based on your demographic position during your initial five years in the work force. Put you in the same career choice circumstance five years before, or five years behind - you might ought not be in the catbird seat now.


FWIW, those of us in the great unwashed will be left behind, wandering around in the deteriorating communities abandoned by the early boomers who have gone on to meet their Makers.


It's a cliff, really. Has nothing to do with anything other than an accident of timing and fate. Let me conclude by saying that for any initiative about which I have any say whatsoever, my vote will be for smaller government, so as to tone down the fatuousness of those who have been born on third base and believe the position is attributable to their own merits.
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Old 01-13-2016, 11:26 PM
 
825 posts, read 565,308 times
Reputation: 2603
Quote:
Originally Posted by TuborgP View Post
I have had good neighbors and known good people with a focus on family and future. I understand your point and wouldn't expect a bar to be fruitful discussion grounds. Most of the folks I have known on a personal level are not divorced with a strong family focus of college expectations and intergenerational wealth. You have a different level of discussions when your kids play play travel team sports which can be a significant cost. I know my immediate neighbors in the last couple of neighborhoods were financially focused and knew what retirement for them was going to cost and how to get there. May have meant working to save until 66 or so but they weren't going out earlier just to go out until they had the financial base they wanted. When you say divorced with children you are already saying behind the eight ball. Sunday afternoon for married with children can often be family time and family activities often with other families.
I've also known good people, married for 20+ years, with a focus on family and future, too. Folks who were financially focused and knew what retirement would cost for them and how to get there. Married people with children who spent Sunday afternoon doing family time and activities with other families...

...until the day that their spouse announced that he/she wanted a divorce and walked out. In the aftermath of unilateral divorce, the whole financial ballgame changes, and "behind the eight ball" isn't the half of it.

Just today, a coworker confided in me that her husband of 25 years had made his divorce pronouncement and walked out. It can and does happen to anyone. Just like any other piece of bad luck that blows one's careful financial plans to smithereens.

If you are lucky enough not to have been forced through the crucible of divorce, maybe show a little humility. Everyone thinks that it won't happen to them. But it happens to 40-50% of married people.
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Old 01-14-2016, 02:00 AM
 
29,782 posts, read 34,876,173 times
Reputation: 11705
i merely state my reality which is very different than the one I was born into. Also I have seen and worked with many and seen the result of their choices first hand. Mostly good some not as good. Illness because of smoking is not fate but choice as our drugs and promiscuity etc. I rarely comment on others other than a market guy so multiple length comments on me are amusing. Recommending what works is not the same as disparaging what didn't. However marriage/divorce along with two income couples are part of the retirement discussion at least in my reality. So I will share mine and you yours or we shall ignore others realities as we discuss. The affirmation of what has worked for folks is not a put down of those who it either didn't work for or didn't put it in place. In summary one of the strongest paths to retirement is a two income couple each with their own complete package of retirement benefits and assets. If achievable great if not there are other ways that can be used instead. Many young folks are evidently incorporating this into their life planning.

Last edited by TuborgP; 01-14-2016 at 02:54 AM..
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Old 01-14-2016, 06:54 AM
 
33,046 posts, read 22,067,502 times
Reputation: 8970
Quote:
Originally Posted by GeoffD View Post
To enhance the analogy to align with the point I was making:

The note on the back of the envelope says "I owe me $5,000 and will pay me 5% interest on the loan".

Today, the Social Security Trust Fund is cash flow negative. It pays out more in benefits than it collects in payroll taxes. The government tries to claim that it's not cash flow negative because the Federal government is "paying" the trust fund "interest". Doesn't matter. It all comes out of the same general budget.

The reality is that rich people pay most of the taxes. It's mostly rich people who are likely to bear the brunt of the tax hikes required to fund Social Security. To get Social Security back to cash flow neutral, there's really no choice but to lift the cap on FICA and make FICA apply to passive income the same way Medicare now applies to passive income. Otherwise, "repaying the trust fund" eats the Federal budget alive. I figure payroll taxes will go up a bit for everybody, too. Long term, collections are about 30% short. I figure it will be 2/3 rich people, 1/3 everybody covering the shortfall.

I think this thread has shown fairly clearly that it wouldn't be possible to cut Social Security benefits. Something approaching 2/3 of people retiring 20 years from now will have Social Security as their only source of income.

Which is precisely why we should reduce our excessive housing regulations now.

Since we cannot magically raise the incomes of all these people, we must accommodate a reduction in spending and living standards.
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