Social Security "Reform"
 

I'm reading about the proposal to cut SS benefits. Help me out here. In the context of this proposal please help me to understand the differences, if any, between the following phrases:

*Social Security Reform
*Eliminating Social Security Benefits
*Reneging
*Tax Cuts for Investors

I was skeptical of Dubya's ability to mastermind SS reform, but now I can see his genius. simple. Just stop paying benefits. What an elegant solution. I guess this is ..... "Social Security Reform."

And what if a person does what the gubmint has done? what if a person spends (squanders) the money they would need for retirement? We appear to be ready to let the gubmint get away with this. Do we hold the gubmint to a lesser standard?

Gosh, there's lots more that I don't understand but let's start there.

The end result will & should be: No Social Security.
The thing that sucks is that for 24 years.....I've paid into it!

Fund your retirement yourself. 401Ks.
Pensions...also going the way of the dinosaurs.

Lets add this to the fire -

Longer lives, earlier retirements, broader eligibility, increased benifits - something has got to give. If anyone has any realistic ideas, lets hear them.

Don't like evil Bush?? Well, we heard that before. You can skip that part..

Supe: Have you even read what this is modeled on? The Chilean system?

Go over to the CATO website and take a look.

Social Security was never intended to allow folks to retire and live it up. It was intended to allow a person to subsist. If that person had other irons in the fire, well, good for him. He could have a good time retired. If not, well, maybe you have enough for food and shelter, and a tip for the gravedigger.

I'm a Boomer, and subsistance is what I expect from my SS account, nothing more. If the money is not there, it is another example of government mismanagement, possibly malfeasance. It is not as though we Boomers suddenly appeared and are throwing everything financially out of whack.

Here's a solution: Maybe half the Boomers, the more patriotic ones, should just trundle off and take one for the team, know what I mean?http://forums.pelicanparts.com/uploa...1104986791.jpg







Ed

I've never expected to get anything back from Social Security. To me it is nothing more than another tax on current income to fund current (over)spending by the gub'mint. One reason we are in such deep doo-doo is that the so-called "trust fund" or "surplus" has long since been squandered and is basically a line-item in our national debt. As the numbers of retirees vs. workers shifts in the coming years, there simply won't be enough cash coming into the system to pay out the benefits.

Anybody counting on SS still being around in its current form after 5-10+ (not sure of our average age here) more presidential terms is kidding his/herself.

Social security is a Pyramid Scheme in the process of crushing those who bought in on the bottom.

You either cut benefits, raise drawing age or you raise the earning potential of the social security money (privte sector iinvestments. Sometimes the answer is right in front of you if you can cut thru the crap thrown around by the 2 parties.

Social Security reform has been in place in Chile for 25 years. It is extremely successful.

There, all of the money goes into a retirement account. They are run by Private corps, but are heavily government regulated. The rate of return on the accounts in the 25 year period is over 10%/yr.

You fund your own account until it reaches the point where it will support the "basic payout". At that point, you have a few choices. You can stop funding your "pension". You can continue funding and create a better retirement. Or you can start drawing off money. If you hit the magic number at 45, you can "retire". But you don't have to stop working.

The existing retirees were not removed from the system. The Chilean government continued to pay those people out of the general fund.

Krugman on SS reform:
http://www.bepress.com/cgi/viewcontent.cgi?article=1048&context=ev

Basically, he says there is no crisis and the privatization proponents are idiots. For example, even though revenues may exceed disbursements in 2018, the trust fund will have a healthy income from interest on its government securities. By implication, there is no need to cut benefits. Reading between the lines, Krugman is saying that the whole ss crisis is a Wall Street scam designed to get them lots of management fees from privatisation.

I would much rather have the money to manage myself than to pay in to a Ponzi scheme. My only fear is that some idiot would opt for privitizing their retirement, sink it 100% in to the "next big thing" (think Enron, Global Crossing, etc...), and go crying to the government when they wipe out their retirement.

My only fear is that some idiot would opt for privitizing their retirement, sink it 100% in to the "next big thing" (think Enron, Global Crossing, etc...), and go crying to the government when they wipe out their retirement.

Then too damn bad for them. I actually think the gov't options will be pretty conservative. I also think its about damn time people learn to invest - and not let someone else babysit their money!

One big knock on private costs is the enormous cost of administering a lot of small acounts(unless you are a brokarage that is on the recieving end of those costs) a better choice if this path is taken is to have one large account ala the big state pension systems.

The other knock of course is the tremendous transition cost which will measureable increase the already exhorbitant national debt(unless the gub'mint reneges on it's promises of the last 80yrs) either course will very likely panic investors is US notes.

Bottom line?
No right answer here....unfortunately.

I'm swamped, but here are my comments:

Craig is unrealistic. "Too bad for them" has little meaning. Perhaps those people will just die? Even if they (folks who are going to mismanage and lost their returement money) are beggars on the street corner, then there would be TONS of them and if they're not dying of starvation, then we'll be paying a cost to keep them alive. You cannot just say "too bad for them." It CAN'T work, even if we wanted it to, and Americans have always said "yes" when the question is "Are we going to take care of the unfortunate people in our society?" "Too bad for them" is as ignorant as "Nuke the Iraqis and Iranians and North Koreans and....."

Bill is right. This industry (retirement, insurance industries) are all about economies of scale, and are (ideally) best administered by an entity like a government agency. The larger the org, the smaller the administrative costs per account. Sure, everyone's disappointed with gubmint's performance here, but the problem has not been the administering agency. The problem is the guys you elected, and let them go unsupervised. Gubmint also does not collect a profit. Again, this is a perfect example of (even if you want people to 'handle' their own investment decisions) an industry that government is ideally suited to handle. Even if you toss your beer can at the screen, kiss your stock car #3 model, mispronounce some cuss words and insist that we have corporations take administrative costs and profits from our accounts, some gubmint agency is going to have to spend almost as much to regulate and watchdog those corporations as they would have spent just administering investors' decisions.

Krugman is probably right.

I'm short of time, and even if I were not, CATO stuff would be last on my reading list. I've reviewed their "research" a good number of times before. They write the conclusion first, and then go collect the data. If you like CATO, then you still don't know whether you like economics or not, since that's decidedly not what they do there.

Back to my observation. To a genius like Dubya, SS reform is as elegant as reneging on promised benefits. That, my friends, is "privatization." I wish he were just a plain 'ol idiot, instead of what he apparently actually is.

To a genius like Dubya, SS reform is as elegant as reneging on promised benefits. That, my friends, is "privatization." I wish he were just a plain 'ol idiot, instead of what he apparently actually is.

Supe,

Just remember that it was not Bush, but the Democrats who voted to use the SS funds to fund the budget many years ago. Had the fund been left alone after it was started there would be enough money there to keep everyone going for a long time to come...

Any President who took the office in this time period, when the "boomers" start to retire is going to have this problem. How to deal with it is a good question. I am not counting on having any SS funds at my disposal, but if something trickles out it would help considering I have been paying into it for 35+ years.

I would rather have something private so that our future generations can guarantee that they have a retirement. We, unfortunately are screwed but we might be able to keep this from happening again...

JoeA

Re-read my reply in the correct context, supe.
--------------------------------------
My "too damn bad for them" comment was a direct reply to this:

"My only fear is that some idiot would opt for privitizing their retirement, sink it 100% in to the "next big thing" (think Enron, Global Crossing, etc...), and go crying to the government when they wipe out their retirement."

So yes, too damn bad for them if they are an idiot. As a privatized individual (assuming this DOES happen), educate yourself and make at least a somewhat informed decision. If not......too damn bad.

At the VERY LEAST, let's see the 'gubmint' offer a list of relatively conservative investment choices -

I am sick of the government playing $ babysitter to US citizens.

So let's hear your solution.

Well, I intended and just failed to include a comment that hoped you would not consider my choice of words a personal attack. I understand my choice of words like "ignorant" are potentially offensive. Don't mean it personally, really.

My point is not so much that I have a plan (although, I do think I see some opportunities and I'm as fond as anyone of giving people independent investment decisions). My point is that we are going to pay for these peoples' mistakes no matter what. It's not a matter if "if" or "whether," it's a matter of "how."

Joe, most folks notice that both sides of the aisle are guilty here. Not you? Are you aware that both houses of Congress have been Republican now for going on 30 years now?

i hope the long living geezers are enjoying my contributions. for me, i dont expect to see any.

i dont understand, or remember. which president dipped into the kiddie first? CALPERS is a badboy pension. why cant SS work the same way? explain it like you are talking to a 10 year old, i just dont get financial mumbo jumbo.

Happened right before the time frame you are talking about. The cow is out of the barn now, we cannot change that.

We have to come up with a solution and it is not going to be easy. No matter who is in office it will be a tough nut to handle....

Joe A

Nice open mind Supe.

Supes -

Nah, I don't take stuff personally. Met you once about 1 year ago.
You seem like a good guy....

Just pollyticks..

Craig

Do yourselves a favor and max out your 401ks to CYA.
SS is a bit like Unions.....outlived their usefulness. I've belonged to several -

Whoops!!

Assume that people are allowed to invest what would be their Social Security contribution and the market goes South. Does that mean those folks are S.O.L., or will this require yet another program to replace the minimum subsistence that S.S. provides? The "reform" will require additional personnel to monitor to assure conformance to the rules. So, even bigger government from those who eschew smaller, less intrusive government. The primary purpose of Social Security is not to provide a lucrative retirement, but to insure some degree of fiscal safety, something that invidivual investments cannot guarantee.

The only folks who will definitely make out with reform are stock brokers (hey, bring it on!!). For the rest of you, it is a crap shoot.

If Congress could keep its meathooks out of the fund, things might just be a bit less serious than they are. However, greed is what runs the federal government. The Social Security "lock box" is chock full of IOUs from Congress.

There are already 401k, 403b, 457, Ira, Roth Ira and other instruments out there. So, why is the President so intent on tinkering with something he obviously does not understand? Could it be to deflect the public's interest in other topics? Why not a looksee into the costs of medical service?

As a financier, I am appalled at the ignorance in Washington re: this situation, and the reluctance of our elected officials to "fess up" to precisely what the problem is, take responsibility, stop raiding, and move on to more pressing items of business. I am extremely concerned with predatory lending practices that are driving people closer to bankruptcy. Does the subject of interest only mortgages sound a little like the last option of people with too much plastic and not enough paper? Despite opinions to the contrary, the economy is NOT as healthy as it should and could be, currently driven by debt.

Smoke and mirrors, gentlemen, simply smoke and mirrors.

And no one to step up to the plate and take charge intelligently.

I made money on my 401k and other investments straight thru the recession and all. I did this by simply spending a few hours each week checking fund performance and adjusting accordingly. This past year has been a boon for me. I'm 34, I don't expect to recieve any SS benefit and as a capitalist I'd much prefer to invest my SS contribution as I see fit. This is simply how I feel, I hate paying taxes and nothing anyone says will change how I feel. Basically any chance I get to have greater control over my money and future I will take it. Generations ago we had a population that understood the value of saving. Today we have a population intently focused on buying things they cannot afford, I was guilty of this in the past and it hurt me financially. Now that I have "seen the light" I realize I don't need a bigger house of a new car every year, what I need is the piece of mind of knowing that I will be financially secure do to my investments. If I could invest my SS contributions myself I'd be better of today AND tommorrow. I'd bet there are a lot of younger Americans who feel just like I do and that is why SS reform will be pushed.

Christian, I have the same philosophy as you.
Learned the hard way and now I 'do the prudent thing' -

Not everyone is astute as the two of you. That is the plain truth. Sure, I did the same thing; invested every damn penny I could lay my hands on. But, most folks I know are like ostriches and have their heads in the fiscal sand. So, consider that you may be doing the right thing, but most will not. So, when their productive years are over with, how will they survive? Don't say it isn't your problem, because it will be. And the problem is compounded by the changes in retirement accounts offered by businesses such as the change from defined benefit to defined contribution and even worse, very. Again, luck of the draw. Enron comes to mind. How will those people survive? And look at the disclaimer on all investments outside those covered by federal law. The institute goes bust, you can lost it all

I recommend prudence in spending and credit use, and maxing out every legal investment opportunity that can be written off or defers taxes. Consider the SS account...the IOUs from Congress cannot be invested and that is one of the primary reasons the return is as low as it is. Government can invest quite well. Look at the New York State retirement fund. Weathered the past few years quite well.

it' about...
 

Supe brings up the safety net issue and I think is correct that the gubment will step in. I think one thing that is missing in this net is something we have lost over the years, family. What happened to the extended family? I will return to my family farm and be a doddering old fool someday and I won't need the gov to provide for me. I will get to work/play farmer and do something productive with and for my relatives until they plant me Most may not have a farm but what about other family members and places. Have we gotten so out of touch?

david

Backs up what Moneyguy said:
 

Relying on SS for retirement? How about your pension?
Take a look:

http://forums.pelicanparts.com/uploa...1105321558.jpg

Personal perspective
I have invested two groups of money in my lifetime. Money for retirement and money for college education of three kids.

My personal money history: day traded in late 70’s and made maybe 10%, lost a year’s pay in early 80’s following advice of stockbrokers, lost half a year’s pay in the early 90’s trying to do charting, lost 10K in a real estate Limited Partnership in the mid 90’s. Recently, I bought Lucent in the 30’s- yeah bad choice. Past retirement age and I have only my house paid for and 50k in an IRA. Now pause for a second, and think what losing a year’s pay early on would do to you.

Kid’s education money I put in US treasuries in the late 70’s, did well, sold in late in 80’s and bought a condo to rent, did okay, sold it as kids started to go to college in late 90s, and put the money in highly regarded mutual funds. Yeah, you guessed it, they now all have capital losses on their income taxes and we now have Stafford and PLUS loans to pay off.

Now my bother in law is even worse off, he has lost everything in the market and his big pension from his first job of 25 years got nicked by 34% when the company failed and their just wasn’t enough in the kitty and all his company stock was worthless. He did the American patriotic thing and bought stock in his company. It was Pan Am.

I do have one friend who did okay when he left the rocket company I worked for in 95, went into chip manufacturing, got his stock options, sold before the bust and is now retired. That was a wise decision as the rocket company closed its’ doors last year. I was fortunate in that I left in 95 to go work for a defense contractor higher up the food chain.

Another friend did not choose quite so luckily, was just laid off from his electronics job, and will probably exhaust all his stock option money getting a new job this year.

Bottom line for me, any of you in the 20-40 years range who think that the stock market is the answer may be fooling yourselves. From my experience, I would only trust real estate and US treasuries.

Parting thoughts;

I think the Social Security system has put the money in the best place it could have gone-investing in the US.

Privatization only supports the brokers and the very wealthy.

Think of brokers as falcons and you are the doves, and the very wealthy as the falconers.

Any time a broker calls you with a good idea for investing-sell.

Well, Enron is a good example of how it can go bad, but is it possible the SS system is basically the Enron of 2030? Emphasis should be placed on the fact nothing is guaranteed, even a SS check.

I do agree privatization has some pros. I think individuals should get an option: 1)let the gubmint manage my SS fund, or 2)let gubmint manage 50% of my SS check, and I take care of the rest. Regardless, somebody is going to get rich whether it be fatcat politicians or wall street gurus. The difference is empowerment of the individual. However, this is moot if you are relying on SS as your lone means of retirement. If you ain't preparing for retirement, you're in for a rough ride.

SS is just one of the major retirement issues. SS doesn't fix the pathetic low savings rate.

Thank goodness rental income is not subject to SS/Medicaid taxes. I'm glad to be out of that mess.

How do you gurus suggest changing the "live only for today" mindset of the average American?

I have been wrestling with this for years one client at a time. Maybe I change an individual's behavior here or there, but so few it makes little difference.

There is a dichotomy out there, folks...people want smaller less obtrusive government, but at the same time want government to "take care of them". Don't fool yourselves into thinking it is any other way.

And what will be the "cost" of federal oversight of a privatization system? A lot of us in the financial business look at it as a potential license to steal.

Work up a Lotus sheet on the potential earnings over twenty years of 4% of your annual salary and tell me what you get and at what assumed rate of return you are using.

Smoke and nirrors, like I said earlier, a way of deflecting attention away from other more pressing issues.

Well, from my perspective.
1) No fat cat is getting rich through Social Security.
2) No one relies on SS, it is intended as a subsistence.
3) Individual empowerment is what my brother in law and I did.
4) SS is not like Enron. SS is guaranteed-its as good as the US government. As good as US treasuries.
5) I see no pros to privatization

Steve..All good points. A primary problem that the Prez is not addressing is the need for some absolute minimum guarantee for that subsistence level. For every poster who thinks they can outfox the market and predict the future, good luck. Ain't gonna happen. I have seen too many who have thought this and lost their socks. The economy may continue to improve, but then again it may not. We have to remember that the economy is changing in the US of A, from producer of goods and services to importer of same, limiting the absolute growth.

I would love to see the "happy times" of the 90s return, but I am not betting on it in the near future. What I see is a continuing march toward a society with overwhelming debt and a very low rate of savings. Yeah..let's refinance that house, use the paper profits to buy more toys.

And, in the end, the grasshopper will be knocking on the ant's door pleading for help whan the snows of Winter arrive.

It is obvious that I am a very conservative investment counselor. My clients lose very little in the bad times because of that philosophy.