We need a new way to fully fund retirements (engaged, genius, mother)
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You seem to be focusing on motivation: you use phrases such as "feel sorry" "brought it on themselves" "lazy or no ambition."
Motivation is largely irrelevant, don't you think? What matters is results.
You were quoting snippets of me paraphrasing what others have said on this thread as if I were saying it; very misleading. No, I am not focusing on motivation. I am focusing on reality; people are at or near retirement and not prepared. We (tax paying citizens, through the government) will provide for them but I think we need to structure the system differently to account for this. We shouldn't have some people getting a little from SS and some from welfare and some SNAP and some HUD and some Medicaid; I think we need a retirement system that works for all citizens. Some people literally fall in gaps, where they really don't get enough to meet basic needs, but they get enough to disqualify them from programs to pick up the difference. Some people just get too confused about all the things they have to do, so we have case workers to help them sort though it. We probably spend just as much on overhead as we do on actual benefits.
Good retirement is an incentive program to attract quality applicants -if it is a false promise then the job need to be looked at by applicant a bit harder -what other false promises are on the table ?
Yeah, that's what I was talking about when I said they have discussed it, but will wait until the funding gap is a bigger problem and then blame it on spending instead of their tax cut.
We (tax paying citizens, through the government) will provide for them but I think we need to structure the system differently to account for this. We shouldn't have some people getting a little from SS and some from welfare and some SNAP and some HUD and some Medicaid; I think we need a retirement system that works for all citizens.
The "poverty" rate for persons over 65 is only 9.3%, which means that 91.7% aren't in poverty. It's unknown how many of them applied for Social Security at age 62, resulting in a loss of 25% of their benefit.
Since HUD, SNAP and Medicaid benefits can range from $1,500 to $2,000/month, you'd have to nearly double the current FICA Payroll Tax from 6.2% each for employer and employee to 12.4% for each.
It was pretty clear to me, from about the age of 30, that this was my responsibility. I tried hard and came very close. I retired at age 73. At least I am comfortable. The far future - gasp and pray.
However, that doesn't mean that I ignored Social Security, my pensions from my employers, or various voluntary pre-tax plans, such as the IRA. Most "advanced" countries that are not locked into an ethic of mindless individualism have forced savings plans for those in the work force and some sort of safety net to protect the sick and poor in their old age.
The current problem in the US with entitlements isn't so much an issue of personal irresponsibility, as it is a problem with Congressional irresponsibility to take an even-handed and balanced approach to budgeting across the spectrum of Federally-funded programs, compounded by its paranoia about raising taxes to support its own special interest funding.
No amount of education would ever result in the majority of people being financial geniuses to manage their investments to their own advantage.
You cannot "better educate" the workforce and get positive results.
Less than 10% of people are "A" students. Those are the people you want to receive advanced education. About 15% are "B" students. It's beneficial to educate those people.
But, the overwhelming majority of people are "C" students or lower, they don't belong at a university and there's no benefit to providing them with advanced education.
All you would do is flood the market with people who have college degrees, which would drive wages and salaries down.
Worse than that, since employers want value for their labor, a degree would become the new high school diploma, used as a benchmark in hiring, and that would negatively impact those who didn't have degrees.
Or they can avail themselves of public transportation. In any event, it doesn't require to new cars saddled with car payments and the higher insurance costs that come with new cars.
That defeats the whole purpose of Social Security, which is to have a guaranteed retirement income, no matter what.
The overwhelming majority of people simply don't understand investing, and there's no way to educate them to a level where they would ever be able to understand investing.
There's also the ethical and moral issues involved in forcing people to support publicly-traded corporations.
Then there's the matter of physical injury or debilitating diseases and illnesses which bar people from working. The Social Security system provides for that, while your idea does not.
It would also require Congress to enact legislation to protect those funds from creditors, debt collectors, ex-spouses, child support and court judgments, lest the money in those accounts be disbursed accordingly, which would leave the individual with very little or nothing.
Again they don't have to understand investing. The default investment will be a broad based mutual fund that reflects the performance of the economy as a whole. You only have to select a mutual fund on your own if you want to and are comfortable with it. It's not rocket science, by the way. Anyone can learn it.
There are no ethical or moral issues in supporting publicly traded corporations relative to handing the money over to the State. And if there are, they are far less insidiously evil than allowing the State to take your money against your will, and utilize it for the unearned and undeserved benefit of others. I'll take the American economy ethically over the State any day of the week, and it's not even close.
This is about retirement funding, not illness. Debilitating illness is handled by health insurance. Private insurance can be purchased for catastrophic loss of income.
As far as laws, they can be designed to handle all the issues you raise. Your SSIF (Social Security Investment Fund) could be granted safe harbor from all potential litigants, including the IRS.
Under this plan, you'd have to be utterly useless NOT to end up with $1,000,000 in the bank at retirement. Many people would end up with lots more. Imagine 15% of your income invested with compounding from the time you are a teenager. Compare that to a garbage social security check that often amounts to 1/3 of your income. So if you were making $60K, you get $20K/year for 15 years until you die at about 80. That's about $300,000. I'll take the $1,000,000.
I’m not worried about retirement. I’ve traveled to enough countries to learn that there is always a country you can move to in order to lower your cost of living while maintaining the same standards. Thailand has a retirement visa and a nice ex-pat community. I’m sure Costa Rica and similar countries have the same.
But the point is you have to do whatever it takes to make sure the money doesn’t run out, assuming you don’t have a lifetime pension.
Again they don't have to understand investing. The default investment will be a broad based mutual fund that reflects the performance of the economy as a whole. You only have to select a mutual fund on your own if you want to and are comfortable with it. It's not rocket science, by the way. Anyone can learn it.
There are no ethical or moral issues in supporting publicly traded corporations relative to handing the money over to the State. And if there are, they are far less insidiously evil than allowing the State to take your money against your will, and utilize it for the unearned and undeserved benefit of others. I'll take the American economy ethically over the State any day of the week, and it's not even close.
This is about retirement funding, not illness. Debilitating illness is handled by health insurance. Private insurance can be purchased for catastrophic loss of income.
As far as laws, they can be designed to handle all the issues you raise. Your SSIF (Social Security Investment Fund) could be granted safe harbor from all potential litigants, including the IRS.
Under this plan, you'd have to be utterly useless NOT to end up with $1,000,000 in the bank at retirement. Many people would end up with lots more. Imagine 15% of your income invested with compounding from the time you are a teenager. Compare that to a garbage social security check that often amounts to 1/3 of your income. So if you were making $60K, you get $20K/year for 15 years until you die at about 80. That's about $300,000. I'll take the $1,000,000.
there is a big flaw in us trying to grow our own pension money by investing in markets .
i will call it personal cash flow sequence risk .
ss is insurance not an investment . it is supposed to be there and last regardless where markets ,rates and inflation goes and do it with consistency for everyone ..
we would all be very dependent on the market cycle we caught based on your income growth and savings rate .
so the problem with the concept is your personal sequence risk.
lets take a 30 year average return of say 9% nominal growth cagr . that sounds wonderful right ? as well as very do-able returns.
here is the problem .
what if all the best market years were in the first 1/2 of your career when you made relatively little money , like 1987 to 2003 when for 17 years markets averaged 13.47% , now you started making some real dough as your career ramps up and you started to beef up savings , but now you hit 2000- 2015 with near zero after inflation growth ? the problem is most of us have careers that ramp up as time goes on and pay and savings increases so we have relatively little going in early on and more going in much later on .
well the markets average is still pretty good because markets do not have to worry about the balance being acted on . but you do .
so all the best market years you still had relatively low pay and a low savings rate with a small balance being acted on , while the markets had an incredible run up . now that you finally ramped up in pay and are saving a whole lot more with a nice juicy balance accumulated you got a crappy return for the next 15 years on the bulk of that money .
i mention it because that is my story of my career . my early years at low pay and low balance saw fabulous market returns , but by the time i ramped up and had a nice balance markets died for 15 years . take the 2 cycles together and markets had a pretty normal average return just as they always did , but my money did not reflect that kind of growth because of personal sequence risk . yet looking at the market averages they show nothing out of the ordinary as the 2 cycles average out . but our balances see it in a different light because of the sequences acting on the balances at that time . .
that is the problem us retirees have . a mere 7% drop in a market decline is really very little percentage wise . in fact if you are in your early years of investing , in dollars , maybe it represents a month or two of contributions .
well that mere 7% drop percentage wise acting on you when you are running with your maximum lifetime balance can represent 9 years of max contributions in my case in dollars . . so the market action vs your balances at the time vary greatly , almost to the point of not being able to act as insurance with any consistency
so while nominal market returns are just that and are quite consistent , the effect on us depends on the balances we attained at the time those market forces act on our balance .
so those who catch the bear market early on and the biggest run ups later , in their personal cycle will do great . those who catch the run up early on in the cycle and the bear market later will do poorly . yet the markets will still have the same 9% average or so .
Last edited by mathjak107; 03-15-2018 at 04:05 AM..
there is a big flaw in us trying to grow our own pension money by investing in markets .
i will call it personal cash flow sequence risk .
ss is insurance not an investment . it is supposed to be there and last regardless where markets ,rates and inflation goes and do it with consistency for everyone ..
we would all be very dependent on the market cycle we caught based on your income growth and savings rate .
so the problem with the concept is your personal sequence risk.
lets take a 30 year average return of say 9% nominal growth cagr . that sounds wonderful right ? as well as very do-able returns.
here is the problem .
what if all the best market years were in the first 1/2 of your career when you made relatively little money , like 1987 to 2003 when for 17 years markets averaged 13.47% , now you started making some real dough as your career ramps up and you started to beef up savings , but now you hit 2000- 2015 with near zero after inflation growth ? the problem is most of us have careers that ramp up as time goes on and pay and savings increases so we have relatively little going in early on and more going in much later on .
well the markets average is still pretty good because markets do not have to worry about the balance being acted on . but you do .
so all the best market years you still had relatively low pay and a low savings rate with a small balance being acted on , while the markets had an incredible run up . now that you finally ramped up in pay and are saving a whole lot more with a nice juicy balance accumulated you got a crappy return for the next 15 years on the bulk of that money .
i mention it because that is my story of my career . my early years at low pay and low balance saw fabulous market returns , but by the time i ramped up and had a nice balance markets died for 15 years . take the 2 cycles together and markets had a pretty normal average return just as they always did , but my money did not reflect that kind of growth because of personal sequence risk . yet looking at the market averages they show nothing out of the ordinary as the 2 cycles average out . but our balances see it in a different light because of the sequences acting on the balances at that time . .
that is the problem us retirees have . a mere 7% drop in a market decline is really very little percentage wise . in fact if you are in your early years of investing , in dollars , maybe it represents a month or two of contributions .
well that mere 7% drop percentage wise acting on you when you are running with your maximum lifetime balance can represent 9 years of max contributions in my case in dollars . . so the market action vs your balances at the time vary greatly , almost to the point of not being able to act as insurance with any consistency
so while nominal market returns are just that and are quite consistent , the effect on us depends on the balances we attained at the time those market forces act on our balance .
so those who catch the bear market early on and the biggest run ups later , in their personal cycle will do great . those who catch the run up early on in the cycle and the bear market later will do poorly . yet the markets will still have the same 9% average or so .
This is the clearest I have ever seen this explained - thanks! I am trying to commit this to memory. The other reason I don't like the "invest it yourself" idea for SS is that people who don't really understand what they are doing can get a hot tip and throw everything in at exactly the wrong time. Lots of people got into tech stocks late 90s right before the bubble burst. Those that didn't freak out and stayed in are mostly okay again, assuming they had time to wait and didn't retire and need the money (there's that pesky timing thing again) and didn't have a lot in companies that folded.
They don't need to be smart enough. The withholding is direct deposited into an account controlled by a trustee. The individual can't touch it. But he can select investments like stocks, bonds, mutual funds. His money remains HIS MONEY, but it out of reach just like current social security withholdings, until he retires, when it is converted to an annuity.
Oh, Marc. Been there. No they won’t. People feel “a bird in the hand is worth two in the bush”. They’ll take the cash and leave it in a money market because they don’t want to lose anything.
I was talking to a older friend about retirement funds and she has a couple hundred thousand she rate chases in jumbo CDs. She has a couple of pensions.
She asked me and nearly fainted when I told her we were in mutual funds and will always have money in mutual funds because we don’t have pensions.
Then, she told me that the last place she worked went to a 401k system, and she went to the meeting because she could have switched over. When she heard the words, yes, you can lose your investment when the market goes down, she and many others walked.
This the same thing I experienced with my coworkers when I tried to talk them into opening 401ks. A lot wouldn’t do it. A large number of those who did, just used the money market. My HR benefits person actually said to me at my level, basically entry level, out of the 30 of us only three were investing.
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