"They don't understand that the money the pay into it now is being spent now and that when they go to collect they will be depending on someone elses work."

No, I think all older people like me know this. We bought into it.

So now as Bryan points out, we have diminshing support. So we need to make some adjsutments, some might say sacrifices.

Maybe raise the CAP, I am above it.
Maybe raise the age gradually for benefits. That would affect me also.
Maybe apply SS tax to non earned income. That would affect me also.


Maybe do away with the latest tax cuts for the top 1% nOW THAT WOULD NOT AFFECT ME.

"adjusting" == raising taxes, right? That's what I'm gathering from your three solutions.

I dont thinkI have ever read so much in the way of misinterpretation re: retirement, social security, and the ability of people to save.

First: those in the lowest income brackets have a hard time making current expenses, let alone saving for retirement. By a specific amount being set aside every payday through Social Security, ift could be, in effect, forced savings if accounts were individually set up

Second: Many so-called "middle class" individuals are so busy spending beyond their limits that they cannot save any meaningful amount. Look at the penchant for "refinincing" a home so the additional value can be expended on more and more toys.

Third: Building on the second point above, the majority of individuals below a certain age look upon retirement as something in the far future, to be worried about later.

Fourth: Up to 4% of salary could be diverted into an individual investment account, to be invested in carefully chosen low yield, therefore safe, investments. So an individual could, if making 100k, invest 4k per year at maybe 6 percent. Using the rule of 72, the first year would double in 12 years, quadripule in 24. Do the math, depending on how many years you have left to invest and assuming the 6% rate holds.

Fifth: Assuming the retiree wants to maintain the principal for future emergencies (long term care, etc), then the nest egg will have to be one million for every 60 k in annual payout, assuming the same 6% rate of return.

Sixth: Therefore, the individual receiving 12k from the Social Security system would have had to amass 200 k in order to match the SS payout in private investments.

For many citizens, the Social Security system is a forced retirement savings account that they otherwise would not or could not contribute to. It should be looked at as an insurance policy into which the individual and the employer pay premiums. Insurance, by its very nature, is there to cover emergencies or to cover certain contingencies when they arise. Nursing care insurance comes to mind. If the person is (un)lucky enough to need it, it kicks in. If the individual dies before it is required, it goes into a pool for the others. That's the way insurance works.

I appears that most on this board, being Porsche owners and all, are not familiar with how the other half lives or how difficult it is to raise a family, pay for shelter, food, education. etc on $12 an hour. Some, I am sure, are, and the difference shows in their responses.

I'll bet you're math impaired! That would explain why you think SS won't collapse -- of course there is no shortage of people (who can do math) on both sides of the political spectrum who are warning about the impending collapse of the system.

Your math impairment could also explain your losses in the stock market. At age 39 I've already built the start of a decent retirement plan with stock investments in my Roth IRA; if I had everything I've paid in SS taxes invested in my Roth instead, I would literally be ready for retirement right now!

Making money in the stock market takes work, but if you're willing to do the work -- and paid attention during school so you can do basic math -- it's pretty hard to lose money. All the people I've known who have lost money in the market, simply were not willing to put the hours of research in such as I do. They were content to "hand their money" to some "manager" expecting him/her to do the work. If you want success (and this applies to most any endeavor) you have to take an active role in the process!

Ummm.... If the whole issue for you is reducing your personal tax burden, then we thank you for your input and hope you find some other topic to discuss. For some of us, there is a sense of responsibiliy component that makes this much more complex than it is for you.

Exactly! I believe that an agency whose sole mission is to provide welfare is likely to more efficiently identify need and provide resources effectively.

Compulsory retirement investing is a different kettle of fish altogether and should be managed with a focus on traditional investment strategies.

Asking SSI to do both effectively is just setting the agency up for failure.

It's going to be expensive no matter how we deal with the problem. I'd rather set the ship on a proper course, knowing there will be cost in the transition.

Impending collapse is a lie. I keep saying this, but the year 2050 for a reduction to 75% of benefits can not be considered an impeding collapse. No the shortage of support is on your side.

At 39, good for you that you have something decent saved up.

My recent loses were primarily in highly regarded mutual funds which then had some accounting irregularities show up. Hard work and research would have never revealed that.

My brother in law, did the Amercian patriotic thing and invested all his money in the company he worked for. Too bad a terrorist decided that Pan Am should fall out of the sky. But again, I guess hard work and research would have revealed that too.

Your arrogance is amazing, but considering your youth and that you have made money, I guess it is understandable.

No, it's not "arrogance," it's called "compentence" -- what I think is arrogant is that you think you're entitled to other people's money!

Well, I have paid into it for almost 40 years. So you would deny it to me now? thanks

Competent:

Respectfully submitted:

If I had a c note for every investor who thought he knew how to manipulate the system....even AAII and Motley Fool make big mistakes in predicting.....

And, BTW..I have an MS in finance and am an accredited investment counselor....and have had setbacks as well, despite sophisticated software and analysis.

The only thing that can be depended upon not to change is change itself.....

As to being entitled to other people's money..Where do you think your "profits" come from? On a short term scale, investing is a zero sum game.

I wholly disagree with you here Mike. It's my opinion that by providing a safety net, it promotes irresponsible behavior. It creates a kind of moral hazard, if you will. People should be afraid of the negative consequences of their actions. I think that we, as a society, should allow people to fail miserably.

There is a "Demotivator" from Despair.com that sums it up beautifully: It could be that the purpose of your life is only to serve as a warning to others.

I believe that it is an individual's responsibility to save for retirement. Growing up in abject poverty is motivation to do better for oneself. Growing up knowing that you will always be taken care of fosters the belief in some people that they never need to do more than bare minimum to get by.

I wouldn't oppose a very small program that provided minimal retirement benefits (enough for food and shelter) if you fell below some present value of lifetime earnings at a given age.

Social security has been a big part of the death of individual responsibility.

There is no "manipulation" of the system; it's about understanding economics, business, math, consumer behavior, human psychology, etc. I also am not saying I have never had a loss -- I've had some huge ones, but I knew the risks before making those investments. There are known variables and unknown ones; one can eliminate the unknowns through research, but often not completely. Just as in life generally, investing involves risk -- when people want "risk free" returns, they get scammed through things like SS!


Investing is NOT any "zero sum game"!!! Investing is about business and the creation of wealth. I could go into a long explanation, but don't have time right now (and am extremely surprised that you could achieve advanced degrees and not understand this).

Legion:

Once again, respectfully..

How does one protect those who did plan but were unfortunate enough to work for, or be invested in Enron, Global Crossings, or the like? Other disasters can occur: Assume an individual who has saved and invested and his (or her) mate decides to run away with the maid or poolboy. Half of everything owned goes away. Can happen. Does happen. Seen it too often to recount. Amazing how much power people have over you and how little you have over them. How to make a small fortune? Start with a big one.

Whereas I do not agree with giveaway programs, do you really believe that every individual should be left on his or her own? The future is always uncertain.

I may lean toward the conservative on a lot of things, but the following words still bring chills:

"Are there not workhouses? Are there not prisons?"

Economic disparity brings about a class society. Class societies, history teaches us, bring about unrest and revolution. The Roman Empire, in its long history, had a basic understanding of this philosophy, hence the policy of bread and circuses. And it still failed in the end.

Would you have those that fail even with an attempt just go homeless? You say that there should be a benefit that makes up for food and shelter - how much do you think these people get? Do you see people getting pimp rich off of social security? My wife's father died and he was living off of it in a home (PArkinson's) he had enough to pay for his modest funeral in his checking account (By modest I mean we had him cremated and put in an inexpensive burial urn and then drove him ourselves to the family plot in southern IL. We dug his grave with other family members ourselves) and we got a check from SS for $255.

SS is not intended for those who would like to retire sipping martinis and snorting blow off a hooker's a$$ for the rest of their lives. I have my 401k for that thank you.

oops - double posted.

Good points Bob. I know I can (and do) sound this way, but I really don't view this as an "I'm right and you're wrong" kind of issue. My style of writing is the product of a very argumentative family.

Unfortunate things that are not within their control happen to people. I feel bad for them. If it's a friend or family member, I'll help them get back on their feet. I just have a problem paying taxes to provide for many anonymous people that couldn't provide for themselves, regardless of circumstance. I feel that if you want to help those anonymous victims, give to a charity. I have a big problem with it being compulsory.

I don't think that you are wrong, just have that you have a different opinion. I am a strong libertarian. I want to be wholly responsible for myself and do not want to be made to be responsible for other people. I think charity is best administered person to person...and then through non-governmental agencies.

A reduction to 75% is indeed a "collapse". Imagine if your paycheck was being cut that much..

Why not now raise the retirement age, limit payments or tighten elegiblity?? Because it is almost politically impossible. If it so difficult make incremental change, how is 25% is no big deal??

The system is broken, retiring at 62, living to 92 with no work is no longer realistic. I see "reform" of some sort as a good thing. I think it will turn SS into a base safety net, with all payouts above that as part of an expanded 401K scheme.

Two personal stories: my godfather worked in his own store for 40 years, a year beofre he retired, he signed up for SS which he received for the next 15 years.. And his widow 15 years more..
Local pizza place had every sibling and cousin come for work for a few years - they now sitting home in Sicily getting the same SS check as my dad..

No wonder the damm thing is broke..

Being wholly responsible for oneself is a worthy attitude. I think most poeple are like that.
But things happen. I could look on SS as the insurance program to provide charity on a societal level. But mostly I look on it as a program to provide subsistence to those who due to the genepool, life circumstances, whatever,... just couldn't save.

a reduction of 25% 40 years from now is hardly a collapse.

the other two stories need some follow through. How much did they really receive and for how long did they contribute?

I will take it that by broke you mean in need of a fix, rather than promote the idea that there is no mony for anyone.

gajindabe

I think by concerted effort we could get the age limit raised, and we could tighten elegibility and some means testing..

I could support those as well as eliminating the CAP, and applying SS tax to unearned income.

Legion..

Read carefully..the zero sum was in reference to the short time frame. Surprised with your advanced investment acumen, you didn't catch that. And, creating wealth is not as straightforward as you might think. If a piece of real estate increases in price by 100% (ognore inflation for this example), has the owner's actual wealth increased since all othe properties in the immediate area have probebly gone up by similar percentages? Sure, the owner can refinance, substituting cash for equity. If the owner uses the cash to buy "toys", then over time, net worth goes down. If the owner invests, then he or she hopes that the investment earns enough to offset the additional expense of interest and principal payments. If not, once again, net worth goes down. And, if the real estste market turns down, and the mortgage exceeds the property value, what then? Like I said before, investment is a crapshoot.

I really do hope that your fortune maintains itself well into the future. Unfortunately, for many it will not, due to poor decisions or unfortunate events beyond their control. For these less fortunate, there has to be a solution, and whatever it is, it will ultimately come from those of us who have been more fortunate, either through luck or hard work.

BTW...I am certain you are aware of this, but you are approaching the age where more and more of your accumulated wealth should be put in less and less volatile investments.

Develop some positive feelings for those who are the victims of circumstances. One day you could be counted among them

Simplistically...yes. I think that risk exists for a reason and should not be removed. The risk of failure is what makes success great. The chance of success is what makes failure palatable. The first thing that I learned out of college is that results count, not effort.

My own father is essentially homeless right now--completely because of his own failures. He ran out of money because of his business failures; he became homeless because of his personal failures. Aside from being a total jerk, he stole/coerced me out of about $20,000. He has taken more from other family members. I recently found out that my family essentially lived off of this stolen money while I was growing up. I refuse to let him come live with me unless I get to set some ground rules...and he flat out refuses to have any conditions put on him. I haven't even gotten to mention to him what the conditions would be, he refuses just based on the principle that there would be any conditions. He knows the conditions that I would insist on would be designed to prevent him from pillaging my finances (thus being homeless myself).

As such, it would be a great risk to my and my wife's future to take in my father (financial stress, emotional stress) and at this point I'm not willing to take that risk.

Legion..

You live too far east for your outlook..

Buy sme acreage in Montana, stock up on ammo and weaponry (especially land mines), make certain you have no disabilities that might require medical assistance, plant crops, build a few bunkers and wait for the ultimate collapse of society. It will happen.

There is nothing wrong with libertarian POVs, except in the extreme they are unrealistic. Who will build your rifles? (dependence upon an outside source) as an example. Society is so intermeshed and complex that no individual can be totally self sufficient. It ain't a perfect system, but if we could simply take the "politics" out of politics, it might be an affordable system.

Our viewpoints are both on the same side of center, they just differ in degree.

Okay...that made me laugh.

Let me sum up my philosophy briefly. I am 26. Rather than pay in to Social Security, I would prefer to have the opportunity to take that money and invest it myself for my own future. If I am successful, I expect a gin martini at my beach-front bungalo promptly at noon when I retire. If I fail miserably, I expect to be punching out for my break at Micky D's around noon while my friends are comfortably retired. I don't expect anyone else to take care of me. As such, I don't like the idea of being forced to take care of other people. I think it should be voluntary.

I understand that most people are probably more compassionate than me. If I was appointed benevolent-dictator-of-the-world-for-life, people would fulfill this need solely through charitable giving.

On an aside, believe it or not, I stopped voting Libertarian because I felt their vision scales back the government too much.

I know Bob answered this, but I wanna add to it. I think to some extent it holds in the long term.

If the long term return of the market is 7% (which it is, I think, in the US), then if somone is earning significantly over this ... someone else has to be losing. It's not quite that simple (due to the increase in total capitalisation has new companies become part of the sharemarket), but it is at least somewhat true.

I think the big problem with your SS system is one faced in different guises around the world, and I don't think it has been adequately addressed here:

a) people retire (lets call it 65)
b) not all people choose to (or are successful in) saving for this point in time
c) society chooses to provide a safety net for these people

and... the problem

d) there are now (and in the future, forecast to be) many, many more retirees.

Tinkering with SS, inventing other methods, encouraging SERIOUS savings - none of this hides the fact that sooner or later there are going to be less workers and more calling on the safety net. The more generous this net is (in NZ we simply provide a benefit to those over 65 based on about 60% of the average wage, I think - no real strings attached. It is somewhat generous), the bigger the future problem.

Not sure what the solution is though!

We should - but Bush as already taken those retired and near retirement off the table.. Dont discount the politics in this. These old timers have one focus and they vote. We aint taking nuthing from them.

The basic justification for SS - it that it is indeed a "retirement plan". Just one run by the feds. To change the CAP and SS to unearned income just makes it a tax and a redistribution plan. Lots and lots of folks dont like that, me included.

It can function - we just need make it realistic. I like the investment part of plans proposed - government IOUs are not the most efficent use of capitol..

You're being too optimistic!

What if you fell ill - while working at Micky D's - and hadn't been able to afford health insurance?

Loved it..

Ya gotta ask the question...

What is the difference between the gumment forcibly collecting money through SS and other taxes or forcing charitable contributions?

Seems as if they are darn close to the same thing!!

PS the story of your dad does a lot to explain things. Wish things were different......

I don't have all the answers. This is just where I stand today. Maybe my opinions will change as time goes on? When I was younger, I was libertarian to the point of anarchy...I didn't believe there should be a government.

Now, I said charitable contributions should be voluntary...it's just in my dictator-for-life scenario, that would be the only method allowed! : )

I've got to go home (at work). Thank you for the discussion. I always enjoy having my arguments intelligently challenged. I'll be thinking this one over for a while (weeks...months...years). Who knows? Maybe I'll emerge with a new position?

GAIJINDABE
(I need to learn how to copy a post in block)
(We should - but Bush as already taken those retired and near retirement off the table.. Dont discount the politics in this. These old timers have one focus and they vote. We aint taking nuthing from them.)

I am one of them and am offering up changes.

I asked and was told to push the QUOTE button in the lower right corner of someone's post. It works.

here, I am seeing more of the Neanderthal notion of "Let them eat cake" or "Fend for themselves, the gubmint should not be in the business of promoting irresponsibility." I understand and agree with some of this emotion, but the folks who think 'fend for themselves' is a viable option (or excuse for being greedy) are either young or not smart or both. Mercifully, I see here mostly mature folks who (even in spite of conservative leanings) recognize that taking care of the most unfortunate in our society is both a moral and a practical imperative. And again, if you don't understand the truth in what I just said then come back in twenty years and we can talk.

It seems fairly clear that with a few judicious tweeks, the current system is not going to become insolvent. And yet, there is still this strong Republican push for "privatization." Have you guys heard of the Republican party's reputation for being the party of Big Business? Any idea where that might be coming from?

And finally, if we achieve the goal that practically, morally and politically we will be forced to achieve (the retirement security of society's least fortunate), and if we still want the government to administer an investment portfolio service for individual Americans (one has to wonder why we would do this with the first goal already achieved, and also why we would task the gubmint with administration), then fine. But the current idiocy is this talk of diverting funds from an already (reportedly) insolvent gubmint program toward corporations, as a way of "saving" it. seems to me this would make it even more insolvent. So, our current "administration" seems clearly to be doing what got us into trouble in the first place. Raiding.

SUpe..

That's the crux of the problem!!

Less money in= less available to go out. Sounds about right for a government that likes to run on credit.

I am getting suspicious that this whole thing is like three card monte..diverting attention from other more pressing things...

tabs is laughing his arse all the way to the bank right now. :) As far as I know, long-term and some short-term capital gains are also exempt from SS taxes. Rental income is also exempt (yea! for landlords).

If social security is a safety net, so be it. However, if we don't consider privatization for individuals could not the government offer the collected funds for private investment? I'd love a plan where I could access government funds at a modest short-term rate of say 6-8%. I obtain money for my investments and the government nets more return for its constituents.

moneyguy1, you're the first/only investment pessimist financial planner I've seen. ;)
jurgen

Turbo6:

Card carrying pessimist and proud of it!!

Put it this way..Pessimists are very happy since their expectations are so low, they are usually pleasently surprised!!

Actually, being pessimistic re: investment is just another way of saying conservative and cautious.

I was just thinking how ironic it is that I am the one offering to raise the cap, raise the age, put ss tax on nonearned income, all of which would directly affect me, and I am in the group exempted from Bush's plan.

And then Gaijindabe is worried about what us old folks would say. I suspect the old folks who might be against what I have considered are Bush supporters. I was going to say Republican, but I am a registered Republican.

So I see the same group against more taxes in the young and old.

But just perhaps, since many of us just now exempted were raised in the glory days of self service to our nation, you might find that more of us are willing to give up some of our benefits so that our children will enjoy the same.

Holy s--t!!! You just peed on my retirement scenario:(