Privatized Social Security: How big of an issue is it really? (salary, generation)

[Weichert]

Originally Posted by Finn_Jarber

Insurance in case you get old Yes, everyone will claim that "insurance". Anyway, I gave you an example of another way of handling it where the taxpayer is not on the hook.

Hmmm. Have you looked at the stock market lately? Nothing like several years ago but still ...

Worthless retirement investments don't work out very well.

[USAGeorge]

Why worry about SS?
I am near seventy and out of the game but these younger folks are being screwed by the largest Ponzi scheme ever. The Government is living large and when the bills come due the burden will fall on the young folks...That's a screwing and a half in my book...BTW it's over $300,000 per average household....But no worry because inflation when it takes off will cut that amount in half in real dollars...

[Hoonose]

Originally Posted by lycos679

Millennials are larger than boomers, but the seniors actually vote. Since the SS payments aren't expecting to be cut for 20 years and millennials will be the voting cohort to pander to, raising funds for SS depends on us in about 20 years time. The flip side is millennials lean D, (and D's love to tax) but don't hold allegiance to either party.

You don't understand the nature of money of our money if you still believe all that.
Numbers of people, numbers of years, and taxes don't matter.
Votes matter, but not because of the proper understanding of money.

We can always have what 'we the people want. Within sensible limits and +/- inflation. Dollars should not be the issue. Votes are an issue. And our ability to provide in the future all the requested goods and services is an issue. Future SS might be cut due to ignorance. Or it might be cut because there are so many seniors getting so much money and then buying up all the stuff the rest of society wants. i.e. limits in goods and services. Not the money.

[Hoonose]

Originally Posted by Gemdiver

At least give the option to privatize. Let me control how my social security portion is utilized.

It's not yours to control.

No one has any portion. No more than their taxes give them ownership of a portion of our military or Federal highways.

Set up an IRA or 401k if you want control.

[Finn_Jarber]

Originally Posted by Weichert

Hmmm. Have you looked at the stock market lately? Nothing like several years ago but still ...

Worthless retirement investments don't work out very well.

What has the stock market got to do with it? I know in US 401K type retirement accounts are linked to the stock market, but the example I gave you was from Finland, where the private accounts are not handeled that way.

[chad3]

Originally Posted by TRICITIESTITAN

I'm interested in getting people's thoughts on this one. SS is our biggest entitlement program and the largest government spending program that we have. Privitization will obviously be another discussed topic moving forward and during the debates of 2016, but is it all for not? What are the odds that it would ever actually be replaced with private accounts? I've always personally supported privitization of SS, but I concede that there are compelling arguments on both sides.

Here are a few arguments that I agree with for privitization:

1). The average return of SS for a worker that has paid into it his/her entire life is around 2.4% whereas someone that has placed money into the S&P 500 from 1926-2002 is closed to 7.5%. The funds in question are normally less-volatile mutual funds that tend to be considerably conservative in strategy.

2). Back when SS started the wages of 17 workers paid the benefits of one retiree....now it's 2.1 workers to 1 retiree. We all know that isn't sustainable.

3.) The times in the past when SS had a surplus the government funnelled it into random other programs. With retirement accounts, the money doesn't get diverted to random other programs.

4). More transparency in what money is truly YOURS.

5). Our increasing life expectancy is burdensome to the current system and only increases it's unsustainability.


Any thoughts or arguments to the contrary?

Arguments against privatization:

1.) Wall Street CEO's will take $279 billion dollars in fees from everyones SS money. Wall Street fees could easily burn up as much as 15 cents out of every dollar of a worker's annual investment.

2.) Today's workers would have to bear the transition costs of switching to privatization, estimated at nearly $5 trillion over just the first twenty years- a cost that would fall on today's young people.

3.) Between 2001 and 2003, the NASDAQ lost 75% of its value. And the market took a major downturn again in 2008. Nest eggs can disappear in an instant - and take months, if not years, to rebuild.

4.) Republican politicians want to privatize SS as a favor for the Wall Street brokers and fund managers who give them campaign money.

BERA GETS SUPPORT OF ALLIANCE FOR RETIRED AMERICANS | Bera for Congress
The Truth About Social Security and Privatization
The Biggest Deal: Lobbying to Take Social Security Private

[Weichert]

Originally Posted by Finn_Jarber

What has the stock market got to do with it? I know in US 401K type retirement accounts are linked to the stock market, but the example I gave you was from Finland, where the private accounts are not handeled that way.

And where would these private accounts reside? They have to be handled some way if they are to earn. And that is the problem.

[phma]

Originally Posted by chad3

Arguments against privatization:

1.) Wall Street CEO's will take $279 billion dollars in fees from everyones SS money. Wall Street fees could easily burn up as much as 15 cents out of every dollar of a worker's annual investment.

2.) Today's workers would have to bear the transition costs of switching to privatization, estimated at nearly $5 trillion over just the first twenty years- a cost that would fall on today's young people.

3.) Between 2001 and 2003, the NASDAQ lost 75% of its value. And the market took a major downturn again in 2008. Nest eggs can disappear in an instant - and take months, if not years, to rebuild.

4.) Republican politicians want to privatize SS as a favor for the Wall Street brokers and fund managers who give them campaign money.

BERA GETS SUPPORT OF ALLIANCE FOR RETIRED AMERICANS | Bera for Congress
The Truth About Social Security and Privatization
The Biggest Deal: Lobbying to Take Social Security Private

I'm with chad3 !!! The bankers will find a way to take everything you have and not one of them will spend a day in jail. They have 24/7 to think about it and come up with a plan. Plan for your own retirement. And pay the insurance premium for SS to supplement it. We couldn't stop the government from stealing it and you will never stop a banker either because they are one in the same.

[go-getta-J]

No to privatization.

Social Security was never intended as an investment account for retirement. From the beginning, it's sole purpose was to provide a safety net against elderly poverty. It provide's a baseline, albeit spartan, income to those who did not have the foresight to save for retirement or lost their nest egg for whatever reason. The original idea was for SS to provide the baseline, and have individuals privately fund their retirement lifestyle via personal savings/investments and corporate pensions.

Also it's a guaranteed income, not subject to the flimsical whims of the greedy/fearful financial markets.

Since the majority of Americans do a terrible job of saving for retirement on their own, and those that do have a very limited understanding of the financial markets and risk management; I fail to see any benefit whatsoever of a 100% DIY old age pension.

I say this as one of the few Millenials who don't froth at the mouth at grandpa getting a check to keep him from eating pet food. It helps for a more stable society and I have bigger fish to fry than worry at a measly 7% of my gross pay.

[nicet4]

Originally Posted by shooting4life

No need to privatize it, just better link benefits to contributions and allow people the option to opt out, so those who think to privatize it is a good idea they can determine what is the best use of their own money.

Just because it needs to be said, SS is not a retirement program. Plan for your retirement when you are young and never stop paying into it. Just ask anyone who is still working in their early 60's and they will tell you the same.

I've been working for a while and for everyone's enjoyment here's a snapshot of past earnings from my most recent social security statement.



Just to put it into perspective when adjusted for inflation $302 in 1966 would be equivalent to $2,217.02 today.

In case you're thinking I was a poor boy I wasn't rich but $4,759 in 1970 would be equivalent to $29,173.65 today and $19,900 in 1980 would be equivalent to $57,442.41 today.

My income kept going up and a number of years I hit the maximum and stopped paying social security taxes about mid summer. In 1988 I had earned $45,000 by August 1st which would be equivalent to $90,476.25 so I think I had a number of good years.

When I started in 1966 the ss tax rate was 3.85% which came up to 7.7% when you added the employers contribution.

In 1988 the combined rate for employee and employer was 12.12% so I paid $5454 in social security taxes for 1988 which would be equivalent to $10,965.72 today.

Like anyone who has worked for nearly 50 years I had some good years and some not so good years. In 1992 I made a total of $15,721 so as my wife remeinds me my income has always been like a roller coaster ride.

Adjusting for inflation it appears I have earned slightly less than $2.7 million in wages since 1966.

Since 1966 the total social secuirty and medicare taxes I have paid in are $228,349 a figure that is not adjusted for inflation.

Interest Rates on Savings Accounts since 1960

and

Historical Social Security Tax Rates

I decided to find out how much money would I have had on December 31, 2012 if I had taken the total money paid into social security and medicare putting it instead into a simple bank passbook savings around.

Simple bank passbook savings account and not a high performing mutual or money market fund.

Well, turns out I would have accumulated a total of $642,601.28 the morning of January 1, 2013.

Two things I want to tell you if you are < 40. Don't you dare tell me I am going to get more out of it than I paid in because if I had simply paid into an average yield mutual fund I would have over $2 million today and not the $642,601.28 that is in my account but not really because government has already spent it long ago.

I am 66 and not collecting yet as I want to wait until my wife is 66 and then we will go together. A little more than a year to go and I will start taking my share.

My share, if I start taking at age 67 1/2 as I plan to do, is estimated to be $2,520/month.

My wife, who was a stay at home mom most of her life, will receive what she is entitled to on her work history or 50% of my full retirement age benefit whichever is more. My full age (age 66) benefit is $2,250 so she'll get 50% of that for $1,125/month.

Combined our benefit will be $3,645 which might not sound like a lot but there's more. The big secret here is that $3,645 is totally exempt for all federal and state taxes so it's exactly like a take home pay. Based on a 4.33 week month that's equivalent to a weekly take home check of $841.80.

Unless you earn a lot of money social security is not taxable income and many states have moved retirement income from being taxed under state income taxes.

At this rate my wife and I both have to live 176 months (14.6 years) to get our money back. What's the chances of both of us living into our early 80's?

But then there is Medicare which works out really well for me.

In case you are wondering Medicare is NOT FREE.

I pay $104.90 monthly for my Part B plus another $142 for my supplement and another $30 for a total of $276.90 every month. Very shortly my wife will be on Medicare as well and she'll pay the same $276.90 I do for a total premium payment of $553.80 every month so don't think what we get is free to us. But it's a super good deal, the $142 is for a Medicare Plan F supplement which is the most costly supplement but with it we never pay any deductibles or co-pays. Like many 66 year old's I've had some minor health issues over the past year and not once have I had to take my wallet out to pay anything.

So, seeing how much I paid in over the years, along with what I might have made in a mutual fund, did I get shafted?

My answer might surprise you but I don't think so.

Two things come into play for me.

This is rather minor but in the future our social security payments will be indexed to inflation and who knows what that might be like in 15 years?

The big issue for me is already passed and that's disability and survivors benefits.

Looking at one of my older statements if I had been disabled my monthly disability payment would have been just under $2,000/month. On top of this my children and wife would have been entitlted to benefits as well.

Even bigger is survivor benefits.

What happened if I had died in an auto accident when I was 34 with a young wife and children at home?

Yeah, I had life insurance that I seem to remember was half a million which was a lot of money in 1981 but not that much today. Half a million is not that much to support a wife with two growing children that have 10 years before high school graduation and then college. Even back then you'd burn though half a million so fast it would make your eyes spin.

I I had died my wife would have received the equivalent of up to $3,849 monthly and my wife would have received the equivalent of $2,200 monthly once she hit full retirement age even if she never worked.

If you think it is a bad deal I have a challenge for you. Go out and try to purchase a disability insurance plan that pays $2,000 monthly for the rest of your life. On top of this purchase a plan where the payments are indexed to inflation. If you can find it, I don't think it is available, you will be shocked at the premium payments and I doubt many of us could afford them.

Social security is not just for old age. It's protection for families.

I don't know about you but I would hate to have the USA look like Mexico where widowed mothers go hungry and children are left to go without and beg. If you are a young man with children the last thing I would want to happen is for your children to go hungry because due to unfortunate accident or disease. That just wouldn't be right. With say a $300,000 insurance policy and social security every month your wife and children might not be living at the Ritz but they won't be living on the streets either.

I am about as conservative as they come on this forum so it might surprise you to learn I like social security. I like it because I recognize it's a lot more than just for old geezers.

The one area I would like to see improved is to allow employees to opt for a younger full retirement age if they so desire.

Right now it is 66 and due to come up but some men have jobs where it's unsafe for them to work past age 60. Pipe fitter for example; You don't send a 67 year old climbing 12' ladders and riding lifts while carrying 80 lbs of steel fittings.

I recognize I am very fortunate in that I work in a field where I can work into my late 60's and 70's but some people don't have this option. Why not something where at age 30 a worker can opt into a higher paying a higher percentage of SS tax. My not something like "for every extra 1% in taxes you pay from the time you are 30 to retirement age you can lower your retirement age by one year"? Pay an extra 6% and you can retire at age 60 with full benefits instead of having to work to 66?

Something totally voluntary.