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I aggree, military spending, social security, and medicare are 80% of our budget. We need to lower all three. So many people defend social security and i dont understand it. The elderly are statically the richest group of people. Democrats are all about redistributing the wealth but they want to take from the poor and give to the rich with this social entitlement. I know there are some elderly that have it rough but most of them have been saving and paying down their martgage their whole lives and have accumulated a lot of wealth. So why do we have college kids and newly married couples who are starting families and everyone else paying them? It needs to be restructured badly.
The reality is still that most old people don't have that much money. Most people simply do not save enough when they are working. The 1/3 who save c0nsistenly are the ones who would be ok without Social Security. But the other 2/3 of senior citizens would be hurt pretty badly if Social Security went away.
I find this tragic, because most people have the ability to save enough while they're working to prevent such heavy dependence on a government program. But it is the reality, nonetheless.
People are reliant on themselves with social security, to say it once more, your social security payments are based on your earnings.
Privatizing social security achieves nothing, it simply puts the money into Goldman Sachs, etc hands instead of the government. The minute they screw up they are going to be at the governments door-step begging for money.
I don't get why privatizing Social Security automatically means the money goes into the hands of Goldman Sachs.
Why couldn't we have a plan like Federal Government workers already have? Basically, I think they get to choose from 5 different index funds with ultra low expense ratios.
Personally, I'd be in favor of having a fund like Vanguard Balanced Index (VBINX), which is 60% an index of the entire US stock market and the other 40% is an index of the entire US investment grade bond market. No investment decisions required on the part of the worker. The expense ratio for this fund is an already cheap .25%. But if everyone were participating, everyone could easily get the Institutional Share class, which is .08%. If people wanted to save more, they could still have 401Ks and IRAs for that.
The real problem is the system is set up so that today's workers pay for today's retirees. So, any privatization would mean that new workers would have to pay into both the new and the old systems, while only getting the benefit of one of them.
Right and you'd expect the returns to be fairly low, social security does more than a "private account". Social security guarantees payments until you're dead, private accounts do not. The only way to get this guarantee is to save for 40~50 years worth of retirement, yet nobody does this.
The conservative group you are linking to conveniently ignores this issue.
This is because they have a lower than average life span, but how would things be better with private accounts? Low-income African-Americans often don't even have bank accounts, yet they are going to open and manage a retirement portfolio?!?! This stuff is a complete joke written by people living in Ivory towers.
"The only way to get this guarantee is to save for 40~50 years worth of retirement, yet nobody does this." And your solution is to reward people for not having good saving habbits. Keep kicking that can.
"The only way to get this guarantee is to save for 40~50 years worth of retirement, yet nobody does this." And your solution is to reward people for not having good saving habbits. Keep kicking that can.
To say it once again, social security is not a "reward" its a system we pay into, and you are naturally ignoring the point. Comparing the return on social security and what you'd get in a say 401(K) is an apples to oranges comparison, you're getting a lot more out of what you put into social security. Social security payments include disability, they include death benefits and as I mentioned before they guarantee a life-time of benefits once you retirement. The latter issue is only possible if social security has no cash-value.
I don't get why privatizing Social Security automatically means the money goes into the hands of Goldman Sachs.
Because who do you think the trades go through? Goldman Sachs, etc will find more and more ways to skim off people's retirement portfolio.
Quote:
Originally Posted by mysticaltyger
Why couldn't we have a plan like Federal Government workers already have?
Federal government workers pay into social security, they also pay into what is essentially a pension system as well. They don't have "private accounts".
Quote:
Originally Posted by mysticaltyger
The real problem is the system is set up so that today's workers pay for today's retirees.
Sorry but every retirement system is set-up this way, stocks, bonds, etc don't have intrinsic value, they are only valuable if someone is willing to purchase them in the future. Now...when you are retired and selling your stocks who is buying them? Today's workers.
The real problem here is that you guys think financial instruments and even cash have intrinsic value, but they don't, they are all worthless without the sweat of today's workers.
To say it once again, social security is not a "reward" its a system we pay into, and you are naturally ignoring the point. Comparing the return on social security and what you'd get in a say 401(K) is an apples to oranges comparison, you're getting a lot more out of what you put into social security. Social security payments include disability, they include death benefits and as I mentioned before they guarantee a life-time of benefits once you retirement. The latter issue is only possible if social security has no cash-value.
Here's my point, i am an excellent saver, so why do i need to pay into social security? They should let people opt out. They could still tax us a percentage to go to the people in real need. I would much rather pay 25% and put the rest into mutual funds that will give me a larger return. Whats wrong with that?
People are reliant on themselves with social security, to say it once more, your social security payments are based on your earnings...
You are almost right. The first generation of SS recipients didn't pay in a penny. The 2nd and 3rd generations didn't pay in enough.
But your point is true enough for most everyone alive today.
Even so, I think you miss the point.
1) SS is quasi-defined benefit; every now and then Congress just decides to pass a law raising the SS payments to the recipients, completely independent of actuarial accuracy. Elders vote and they vote their pocketbook.
2) it is paid out by the federal government.
3) the implicit guarantee is that it is risk free, backed by the full faith and credit if the USA
The moral hazard is that many people choose not to save for retirement because, obviously, the Federal Government will ultimately take care of them through expansions in medicare, prescription drug coverage, social security, elder housing, and a myriad of social services that comprise the so-called safety net. By analogy, the safety net is no longer just above the floor; it is instead just under the high wire.
Let's do a thought experiment. Imagine two otherwise identical families, with identical incomes & numbers of children & fringe benefits.
Family "A" does what it thinks is responsible: they save, they clip coupons, they do not spend money on flat screen TVs and vacations. They send their kids to college & pay the bill (they have accumulated some wealth because of their saving so they don't qualify for financial aid).
Family "B" does something different. They do not save. They have the latests electronic gizmos, eat out a lot, do not budget, take vacations, every room has a flat screen TV and TiVo, the kids rack up a couple hundred bucks a month in iTunes charges, they have the latest iPhones, iPads, new Escalades each year, and never save for retirement. Their kids get need-based financial aid to go to college.
Now they are both 67 years old, retire, and file for social security. SS is means tested, of course - and the income family "A" has from investments means their SS benefit is reduced to zero. Bupkis. Family "B" has not saved, so they get full social security and the entire host of social services offered at the Federal, State and Local level.
And Congress, seeing all the millions of people on subsistence incomes such as Family B, votes them more benefits, taxing the "wealthy" people like Family A.
It is a clear moral hazard. You want Family B to save, but they don't have a strong incentive to do so because Uncle Sam is always there with the safety net.
Here's my point, i am an excellent saver, so why do i need to pay into social security? They should let people opt out.
The system would not work if people could opt out, firstly most people would opt out and not save. Secondly, what makes it work is that the risk gets pooled among such a large population.
Quote:
Originally Posted by maschuette
They could still tax us a percentage to go to the people in real need.
Again most elderly depend on social security so you'd end up paying a similar amount yet get no benefits.
I'm not sure what you mean by "I'd much rather pay 25%....". Regardless, you're going to do better investing in mutual funds. Again, comparing the return of mutual funds and social security benefits is apples to oranges. You'd have to price in the disability, death benefits, and the life-long retirement benefits.
Now they are both 67 years old, retire, and file for social security. SS is means tested, of course - and the income family "A" has from investments means their SS benefit is reduced to zero. Bupkis. Family "B" has not saved, so they get full social security and the entire host of social services offered at the Federal, State and Local level.
All this and you don't even have the basic facts right.... Social security is not "means-tested", both families would get social security.
There is no moral hazard in social security, its just a forced retirement savings plan.
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