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First off let me say that I am not anti-SS. It serves a purpose. However, many people can and do purchase investments at the the rate of SS rate and above. For example, my girlfriend saved/invested 18% of her earnings since the age of 20...even when she wasn't making much. It was a priority! She also lived a good portion of her life below her means. "Most" people could save at the same rate as social security.....especially if they didn't have to pay SS. You just have to make it a priority. Obviously,as you've noted, those at the lower end of the spectrum wouldn't save anything. Unfortunately, in my experience, most people are poor managers of their money. They'd rather spend than save.
The advantage of market based investments is the average rate of return over the last 75 years is much, much higher than the return on SS, however there is an increased risk of a downturn when you need the money.
First, I was like your girlfriend my entire working career - investing about 15% into savings for more than 30 years. And of course that was in addition to SS.
And I agree that one could do better with investment returns than SS, over the long-term. I believe the annual return on stocks over the last 100 years is close to 11%.
Where we disagree is that "most" people could save at the same rate as SS. They won't - not if it is voluntary. You say that it can be done if people just make it a priority, but.....they won't. We will have an even bigger problem when people - the majority of whom haven't even been able to accumulate $1000 in savings - end up at 65 (or 67), having spent their now "excess" money (the SS contributions they no longer have to make) on getting a more expensive home or car, going out to eat more freely, and so on.
What then? We won't let these people starve. What would happen is that we would set up yet another program for the senior "non-savers" to which the diligent savers, those who DID make it a priority, would not benefit. In fact, our taxes would help fund it. So all that is accomplished is that SS continues, in a different form, to the non-savers.
Quantitative easing, fiscal deficits, and interest-free loans to Wall Street over the last ten years exceed the so-called unfunded future liabilities of the Social Security and Medicare programs.
In 2008, The Temporary Liquidity Guarantee Program was quickly enacted to eliminate the cap on FDIC guaranteed deposits. This was done to manage a global panic/ run on FDIC banks. That action guaranteed it was going to be necessary for Treasury to “ invest” in banking institutions.
Of the 780 investments eventually made by the Treasury, 633 resulted in a profit.
From a historical standpoint, The Savings and Loan Crisis in the 80’s required the Treasury to pump $ 293 billion ( nearly $700 billion is 2019 $, due to inflation) into the industry to cover about 1600 failed institutions. Assets ( mostly real estate) were seized and eventually liquidated. Most accounting suggests it was eventually a break even deal, +/-
Quantitative easing, fiscal deficits, and interest-free loans to Wall Street over the last ten years exceed the so-called unfunded future liabilities of the Social Security and Medicare programs.
$2 trillion of that QE went to prop up Fannie and Freddie while the rest of us got shafted by having to continue to pay our mortgages as we signed on to do.
Think about it... The Federal Reserve, which created $2 trillion worth of QE out of thin air to buy F&F MBS. $1.56 trillion worth is STILL on the Federal Reserve's H.4.1. And it matters not one whit to the Federal Reserve if that's never paid back. Those MBS will just roll off the Federal Reserve's H.4.1 as they mature, paid or not. We'll never know because the Federal Reserve doesn't have to recognize or state losses. They just reduce/erase the line item on their H.4.1.
And that all happens WHY? Because that $2 trillion to buy F&F MBS was created with just key strokes and can be erased/deleted just the same without anyone losing any money. The only negative result is the QE used to buy them which can never be reined back in.
Oh, and just for grins... Tens of thousands of mortgage borrowers, if not more, will get their homes for free as this all continues to play out and their mortgage debt just rolls off the Federal Reserve's H.4.1, unpaid...
In 2008, The Temporary Liquidity Guarantee Program was quickly enacted to eliminate the cap on FDIC guaranteed deposits. This was done to manage a global panic/ run on FDIC banks. That action guaranteed it was going to be necessary for Treasury to “ invest” in banking institutions.
Of the 780 investments eventually made by the Treasury, 633 resulted in a profit.
From a historical standpoint, The Savings and Loan Crisis in the 80’s required the Treasury to pump $ 293 billion ( nearly $700 billion is 2019 $, due to inflation) into the industry to cover about 1600 failed institutions. Assets ( mostly real estate) were seized and eventually liquidated. Most accounting suggests it was eventually a break even deal, +/-
What about what's on the Federal Reserve's H.4.1? The $2 trillion in QE used to buy F&F MBS was created by the Federal Reserve with just key strokes and can be erased/deleted just the same from their H.4.1 without anyone losing any money. Home sellers, builders, and mortgage lenders, and the investors who bought Fannie's and Freddie's MBS were all made whole by the Federal Reserve, while the Federal Reserve took on that $2 trillion in debt that never even actually has to be paid back. Just the entry line on the H.4.1 is reduced/erased as the debt matures and rolls off paid or not. The only negative result is the QE used to buy them which dilutes the value of the $US and can never be reined back in.
Location: Live:Downtown Phoenix, AZ/Work:Greater Los Angeles, CA
27,606 posts, read 14,601,062 times
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Quote:
Originally Posted by InformedConsent
$2 trillion of that QE went to prop up Fannie and Freddie while the rest of us got shafted by having to continue to pay our mortgages as we signed on to do.
Think about it... The Federal Reserve, which created $2 trillion worth of QE out of thin air to buy F&F MBS. $1.56 trillion worth is STILL on the Federal Reserve's H.4.1. And it matters not one whit to the Federal Reserve if that's never paid back. Those MBS will just roll off the Federal Reserve's H.4.1 as they mature, paid or not. We'll never know because the Federal Reserve doesn't have to recognize or state losses. They just reduce/erase the line item on their H.4.1.
And that all happens WHY? Because that $2 trillion to buy F&F MBS was created with just key strokes and can be erased/deleted just the same without anyone losing any money. The only negative result is the QE used to buy them which can never be reined back in.
Oh, and just for grins... Tens of thousands of mortgage borrowers, if not more, will get their homes for free as this all continues to play out and their mortgage debt just rolls off the Federal Reserve's H.4.1, unpaid...
That's not what happened. Individual homeowners/borrowers didn't get any of the money, it ALL went to the financial institutions, so people underwater didn't "get their homes for free", they got foreclosed and evicted and their credit ruined
Individual homeowners/borrowers didn't get any of the money, it ALL went to the financial institutions, so people underwater didn't "get their homes for free", they got foreclosed and evicted and their credit ruined
Nope. How do you think home sellers, builders, etc., get paid when someone takes out a mortgage to buy a home? Serious question. Think about that and give us your answer.
And, no, many of those who are 5+ years behind on their mortgage payments did NOT get foreclosed on and evicted. Hence, the "Home Free" reference in the title of the NY Times article I posted. Read it.
Location: Live:Downtown Phoenix, AZ/Work:Greater Los Angeles, CA
27,606 posts, read 14,601,062 times
Reputation: 9169
Quote:
Originally Posted by InformedConsent
Yes, it is.
Nope. How do you think home sellers, builders, etc., get paid when someone takes out a mortgage to buy a home? Serious question. Think about that and give us your answer.
And, no, many of those who are 5+ years behind on their mortgage payments did NOT get foreclosed on and evicted. Hence, the "Home Free" reference in the title of the NY Times article I posted. Read it.
You're wrong. Henry Paulson and Tim Geithner were more concerned about the CDO's the top 9 banks still held on their balance sheets causing them to be overleveraged relative to their liquid capital, so their first thought was to basically have the government buy the CDO's, but they realized it would take too long, so they gave the banks capital injections of millions of dollars instead. No homeowners got any of the money
The problem with your idea is their would be no guaranteed payout, since most investment accounts have risk involved. So another 2008 happens, and all your hard earned money could be wiped out, then your screwed....
No guaranteed payout? You have a model that predicts a scenario where investment in the market would go to $0? If we ever live to see that, no amount of money will save anyone. You cant assume a dooms day scenario is in play and just avoid all rational planning because of it.
All investment accounts have risk, its a fact of life, if there was no risk there would be no reward.
If another 2008 happens, hopefully people will have learned that if you are 5ish years from retirement, your money doesn't belong 100% tied up in stocks. The government could easily enforce or recommend standard asset allocations by age to help greatly reduce the risk you are raising.
These are incredibly weak reasons to avoid an individual controlled account.
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