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And where would these private accounts reside? They have to be handled some way if they are to earn. And that is the problem.
You pay into it, and they earn interest, but you do not have the opportunity to gamble it away like we do here. The funds are controlled by private pension companies and behave like CDs, or money market accounts (I do not know the details). When you retire they will pay you 60% of your salary (depending on your lifetime contributions). And you get anohter 20% from a government fund, which is tax payer funded. So, they get about 80% of their earnnings in their retirement. The contributions are mandated by law, so everyone who works will have money in their retirement, and it comes mostly from sources other that the tax payer.
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.
You pay into it, and they earn interest, but you do not have the opportunity to gamble it away like we do here. The funds are controlled by private pension companies and behave like CDs, or money market accounts (I do not know the details). When you retire they will pay you 60% of your salary (depending on your lifetime contributions). And you get anohter 20% from a government fund, which is tax payer funded. So, they get about 80% of their earnnings in their retirement. The contributions are mandated by law, so everyone who works will have money in their retirement, and it comes mostly from sources other that the tax payer.
CDs? Money market accounts? Sorry, you've lost at that point. The control passes from you to ??? And then its over. Its just the earnings aspect problem again.
Actually, social security has some very good features that would be quite difficult to replicate with individual investing if not impossible. Like disability, survivorship, spousal benefits.
Social security privatization wouldn't work in practice politically, and I say that as a libertarian.
This is why:
1) Social security is NOT a savings program, it is pay-as-you-go (a trust fund "invested" by our government in it's own debt is notional only). When it was first set up, people were let in without working a full career. The money put in for this first generation was paid for their benefits rather than saved and truly invested. This created an implicit debt; each generation pays for the one beforehand but there isn't any benefit from interest / time value of money. The interest that isn't being earned on investments that aren't being made because the system is pay-go is very real even if there isn't any notional value. If you were ever to privatize, you would have to pay down that implicit debt first by taxing people both for the contributions for their individual account AND to provide benefits for the people still in the pay-go system. This would be massively expensive and the generation asked to bear that burden wouldn't tolerate it politically.
2) Social security is partially a welfare and redistribution system. People who work less than a full career, non-working spouses, and the disabled take out much more than they put in. Low income people get more out relative to what they put in than higher income people. This makes privatization very difficult -- if you make private accounts mandatory, the people benefiting from the current system would fight the change tooth and claw. If you make them optional (in a way that handled point (1) ), every person planning to work a full career at a lower-middle class or better pay rate without a non-working spouse would (or should, humans don't always behave rationally) immediately opt out for an individual account, and the rump system full of people taking more out of the current structure than they put in would collapse.
Social security privatization wouldn't work in practice politically, and I say that as a libertarian.
This is why:
1) Social security is NOT a savings program, it is pay-as-you-go (a trust fund "invested" by our government in it's own debt is notional only). When it was first set up, people were let in without working a full career. The money put in for this first generation was paid for their benefits rather than saved and truly invested. This created an implicit debt; each generation pays for the one beforehand but there isn't any benefit from interest / time value of money. The interest that isn't being earned on investments that aren't being made because the system is pay-go is very real even if there isn't any notional value. If you were ever to privatize, you would have to pay down that implicit debt first by taxing people both for the contributions for their individual account AND to provide benefits for the people still in the pay-go system. This would be massively expensive and the generation asked to bear that burden wouldn't tolerate it politically.
2) Social security is partially a welfare and redistribution system. People who work less than a full career, non-working spouses, and the disabled take out much more than they put in. Low income people get more out relative to what they put in than higher income people. This makes privatization very difficult -- if you make private accounts mandatory, the people benefiting from the current system would fight the change tooth and claw. If you make them optional (in a way that handled point (1) ), every person planning to work a full career at a lower-middle class or better pay rate without a non-working spouse would (or should, humans don't always behave rationally) immediately opt out for an individual account, and the rump system full of people taking more out of the current structure than they put in would collapse.
Certain European countries have privatized SS systems that work (but America is NOT Europe.)
Privatized SS could work, but the American plans to privatize SS offered are nothing but political favors to Wall Street and corporate America.
You guys like your SS because your collecting the money now, by the time I get to it, the system will be bankrupt and insolvent....per the CBO (Congressional Budget Office)...
Thats why we need it privatized.
You must remember you will still have to pay almost as much FICA tax to pay for the SS SSDI and Medicare of current senior citizens and disabled so I hope you have a little more income to put into your private account because we won't be around or your kids won't be paying for your future retirement suckers!!!! You are just going to have to quit buying those iPad 6s, big expensive cars and SUVs and rent small apartments rather than buying tract mansions!
CDs? Money market accounts? Sorry, you've lost at that point. The control passes from you to ??? And then its over. Its just the earnings aspect problem again.
Apparently it is not over for them as most enjoy 70% or more income during their retirement and it is not coming from the tax payers. You do not have to agree it is a good system, I am simply showing it as an example of an alternative to our system which puts the tax-payer on the hook for all of it. Like I said I do not know the details on how they invest the money, so I am not sure if it is CDs etc, but I do know it is not available for them to gamble with, or pull it out when you are 35 yrs old to buy a BMW like we do here in US.
Certain European countries have privatized SS systems that work (but America is NOT Europe.)
True.
Quote:
Privatized SS could work, but the American plans to privatize SS offered are nothing but political favors to Wall Street and corporate America.
True again. The private option ideas offered by US politicians are all about everyone opening an account with a Wall Street company which would result in them raking in billions in fees from every American. This type of private account was tried in UK, and the banks ended up raking in 50% of the gains on the accounts.
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...
You are simply wrong.
Let me ask you this. Who collects U.S. government bills that are "due?"
It could be partially privetizied. Many European countries have do so, like Finland for example and it works very well. Employers are mandated to extract a certain percentage from their employees wages and invest it on private retirement accounts. When people retire, most of their mone comes from these private accounts and the tax payer is off the hook.
Well, let's just say that I'd expect the Finnish corporations to do the right thing.
American corporations...not so much. Hell..not at all.
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