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The above is from a Washington Post OP-Ed and reflects thinking that proposals to ration SS benefits in a different fashion could really just be a back door way to erode support and do away with.
Liberals have had a running internal debate since the '60s, and probably going back to the New Deal, whether programs should be broad-based (if not universal) to maintain popular support, or should target the neediest, which risks undermining popular support.
Means-testing Social Security (for example) is a good way to erode support if it becomes just another welfare program.
Liberals have had a running internal debate since the '60s, and probably going back to the New Deal, whether programs should be broad-based (if not universal) to maintain popular support, or should target the neediest, which risks undermining popular support.
Means-testing Social Security (for example) is a good way to erode support if it becomes just another welfare program.
Well, I think the liberals, or progressive minded people have come down squarely on the side of broad based support, especially for SS. There is a movement to expand SS, not contract it.
The move from defined pension benefits to 401K type pensions has not been a good move, imho. It allowed employers, like my son-in-laws, to first stop the match, then stop contributing at all during the recession. His employer never picked up contributions again. It is all on my SIL - the contributions, the allocations, the reallocations etc.
If you think the broad base of Americans, or even an average base of Americans know how to invest, how to reallocate, how to withdraw- you are sorely mistaken.
I feel we need to support a society where all people having income security and health security, especially in old age, upon death or disability. That is exactly why SS was put into place. Having those, contributes tremendously to a robust economy, consumer spending, consumer saving and sleeping well at night.
Well, I think the liberals, or progressive minded people have come down squarely on the side of broad based support, especially for SS. There is a movement to expand SS, not contract it.
The move from defined pension benefits to 401K type pensions has not been a good move, imho. It allowed employers, like my son-in-laws, to first stop the match, then stop contributing at all during the recession. His employer never picked up contributions again. It is all on my SIL - the contributions, the allocations, the reallocations etc.
If you think the broad base of Americans, or even an average base of Americans know how to invest, how to reallocate, how to withdraw- you are sorely mistaken.
I feel we need to support a society where all people having income security and health security, especially in old age, upon death or disability. That is exactly why SS was put into place. Having those, contributes tremendously to a robust economy, consumer spending, consumer saving and sleeping well at night.
There is a significant downside to employer based pensions, namely that if you leave the employer before retiring they typically don't provide a very robust benefit. I'd rather a plan that didn't tie me down to an employer for my entire career. That's an advantage of IRAs and 401k plans.
Workers are required to contribute 10% of their salary to the program. They may contribute more if the choose, up to 20%. The money is invested in a number of private investment companies. Over the 30 year history of the program it produces results that are far better than our social security system. It also seems to have achieved the objectives you identified above, namely a robust economy, consumer spending and saving, and people being able to sleep at night secure that they have a decent retirement benefit coming.
I'm not suggesting we should copy this program, or that it's 30 year history is proof that it will work in perpetuity. However, it is an interesting example of how a government run program with individual accounts can work much better then what we have. IMO we should be looking at a program like this, and working out how to manage a transition from the current program to one that would be better for all involved.
There is a significant downside to employer based pensions, namely that if you leave the employer before retiring they typically don't provide a very robust benefit. I'd rather a plan that didn't tie me down to an employer for my entire career. That's an advantage of IRAs and 401k plans.
Workers are required to contribute 10% of their salary to the program. They may contribute more if the choose, up to 20%. The money is invested in a number of private investment companies. Over the 30 year history of the program it produces results that are far better than our social security system. It also seems to have achieved the objectives you identified above, namely a robust economy, consumer spending and saving, and people being able to sleep at night secure that they have a decent retirement benefit coming.
I'm not suggesting we should copy this program, or that it's 30 year history is proof that it will work in perpetuity. However, it is an interesting example of how a government run program with individual accounts can work much better then what we have. IMO we should be looking at a program like this, and working out how to manage a transition from the current program to one that would be better for all involved.
Dave
Chilean market is up by a factor of 18 since 1987. What happens to these pension accounts in a long drawn out bear market? What would be available to the average working stiff if we didn't spread ourselves around the world?
Chilean market is up by a factor of 18 since 1987. What happens to these pension accounts in a long drawn out bear market? What would be available to the average working stiff if we didn't spread ourselves around the world?
That's a bit of a red herring argument when the return on your Social Security taxes is low single digits at best. It's not very hard to do better than that even in relatively poor market conditions.
It's true that Chilean markets have done very well over this time period. Some would argue that the forced investment under this program is part of the reason why that's the case. Certainly there were other factors at work, among them the broader free market reforms implemented by a group of Chilean ministers that had studied under Milton Friedman at the University of Chocago. There's another lesson for us there.
By comparison, the S&P 500 is up by a factor of about 8.5 over this time period, still much higher than your returns on social security.
There are not too many historical examples of really long bear markets. That said, they do occur (see Japan). Earlier in this thread I had proposed an alternative where we transition to a system of private accounts much like Chile, with the additional feature that all participants would pay a small tax above the contributions to their accounts to fund a minimum benefit guarantee for those retirees that happen to retire at a bad time, for example near the end of a long bear market. Since most people would not have the experience of poor market returns over a 30+ year career, it seems the required tax to fund this guarantee would be low. The devil is in the details, but to me this seems like a promising alternative.
I'm not sure if this is really what you meant, but I certainly would not propose that investments be limited to those in the United States. Like any good diversified portfolio there should be a foreign component. Part of the program has to involve some pretty clear boundaries on how the money is invested to avoid issues with people not investing their accounts appropriately.
If you don't rely on market returns the alternative seems to be the failing system we have today. We soon will have to face the reality of some combination of higher taxes and/or benefit reductions.
That's a bit of a red herring argument when the return on your Social Security taxes is low single digits at best. It's not very hard to do better than that even in relatively poor market conditions.
It's true that Chilean markets have done very well over this time period. Some would argue that the forced investment under this program is part of the reason why that's the case. Certainly there were other factors at work, among them the broader free market reforms implemented by a group of Chilean ministers that had studied under Milton Friedman at the University of Chocago. There's another lesson for us there.
By comparison, the S&P 500 is up by a factor of about 8.5 over this time period, still much higher than your returns on social security.
There are not too many historical examples of really long bear markets. That said, they do occur (see Japan). Earlier in this thread I had proposed an alternative where we transition to a system of private accounts much like Chile, with the additional feature that all participants would pay a small tax above the contributions to their accounts to fund a minimum benefit guarantee for those retirees that happen to retire at a bad time, for example near the end of a long bear market. Since most people would not have the experience of poor market returns over a 30+ year career, it seems the required tax to fund this guarantee would be low. The devil is in the details, but to me this seems like a promising alternative.
I'm not sure if this is really what you meant, but I certainly would not propose that investments be limited to those in the United States. Like any good diversified portfolio there should be a foreign component. Part of the program has to involve some pretty clear boundaries on how the money is invested to avoid issues with people not investing their accounts appropriately.
If you don't rely on market returns the alternative seems to be the failing system we have today. We soon will have to face the reality of some combination of higher taxes and/or benefit reductions.
Dave
I read recently the return on SS is .3 of 1%. That's probably accurate.
Not ringing any alarm or anything but there are cases in history where markets have gone lower for decades at a time or more. On balance share prices are up since 1932. I would have preferred returns on my 43 years in the Fund to be closer to the broad market don't get me wrong but if something went haywire the govt would have to provide some kind of safety net for the vast majority anyway.
I very, very strongly disagree with means testing. Outrageous proposal, IMO. It is not only Christie, at least 2 other GOP candidates are also proposing means testing (Cruz, Bush) that I know of. I sure hope this never happens.
BayArea, so, you are willing to give up your SS benefits because of this "logic"? I got news for you. This is how insurance works. Current premiums pay benefits. SS is insurance. If I buy an annuity,
it would NOT be OK for the insurance company, after taking my money, to then say I can't have the monthly income, or less than promised, because they think my income is high. I have paid into SS all my life, now some politians want to take it away from me now that I finally can get the benefit I paid for. Outrageous!!!
I very, very strongly disagree with means testing. Outrageous proposal, IMO. It is not only Christie, at least 2 other GOP candidates are also proposing means testing (Cruz, Bush) that I know of. I sure hope this never happens.
I'd have no problem with symbolic means testing. There are very few people showing 6-figure income as a retiree. It's symbolic since eliminating distributions to sub-1% of retirees isn't going to change the finances of Social Security at all.
My concern is that what we eventually end up with won't be that kind of symbolic means testing. It wouldn't surprise me if proposals were floated to start phasing it out at median household income and eliminating distributions at 2x median household income. As the population of the United States ages and we converge on something like 2.8 workers per retiree, there are going to be all kinds of proposals to slash Social Security spending.
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