Social Security

[mystic]

Here is something that concerns me about the Bush plan for letting wage earners put some of their social security contribution into private accounts for investing in stocks and bonds. The additional money going into stock market from private accounts should push up stock prices in the short-run(prices will rise faster than would have been the case in the absence of such accounts). Years from now, however, when these people retire and sell their stock for living expenses, will this tend to slow further increases in stock prices, or worse, cause prices to decline?

I'm no expert on the stock market, and I don't what will happen. However, I guess if what I am concerned about happens, it would be best to get into stocks early and get out early. What do others think?

[Justlisten2]

.....for working folks. That's no surprise though, considering the source. :(

[JSE]

.....for working folks. That's no surprise though, considering the source. :(

Why is it not a good plan? Why is the ability to make a higher return on what your paying in a bad plan? Why is it just bad for working folks. Are these the same working folks that won't have social security when they retire because it's dried up under the current system? SS will be a thing of the past if we do not make changes soon.

Also, Mystic,

I don't think there would be much of an effect when people retire and cash in. I don't think most people all of a sudden "withdraw" all investments when they retire. Most move them around into other more sucure types of investments to earn a income off those investments. Plus, you will also have new workers putting their share of SS into the market. I doubt it would have much of an effect, if any to the market as a whole.

One possible pitfall is people not thinking long term with their SS investment. A lot of people today want instant success and wealth when they invest. 99.9% of the time, this will not happen.

JSE

[mystic]

Why is it not a good plan? Why is the ability to make a higher return on what your paying in a bad plan? Why is it just bad for working folks. Are these the same working folks that won't have social security when they retire because it's dried up under the current system? SS will be a thing of the past if we do not make changes soon.

Also, Mystic,

I don't think there would be much of an effect when people retire and cash in. I don't think most people all of a sudden "withdraw" all investments when they retire. Most move them around into other more sucure types of investments to earn a income off those investments. Plus, you will also have new workers putting their share of SS into the market. I doubt it would have much of an effect, if any to the market as a whole.

One possible pitfall is people not thinking long term with their SS investment. A lot of people today want instant success and wealth when they invest. 99.9% of the time, this will not happen.

JSE

I was looking at it just in terms of personal investment. A lot of money going into the stockmarket doesn't in itself make firms more profitable, and investment in stocks is for profit or anticipation of profit. The economy has to grow. Nevertheless, I think private social security accounts(if it happens) will tend to push stock prices up for many years, and I will increase my taxable investment in an index fund in hopes of benefitting.

I think Bush's plan for diverting SSI contributions into private accounts is unnecessary. If stocks are part of the answer to the demographic tidal wave, have the government start putting SSI money directly into the market in aggregate. Social Security is supposed to be a pooled insurance program, not a private investment program, so why not keep it that way? The working poor are better protected by that kind of system.

Regarless, it probably will be necessary to raise the retirement age and/or reduce benefits for Social Security. I doubt if investing SSI contributions in the stock market will keep this from happening. It seems clear that young workers would do well to save more for retirement. Should we switch from an income tax to a consumption tax to foster savings?

[JSE]

Social Security is supposed to be a pooled insurance program, not a private investment program, so why not keep it that way? The working poor are better protected by that kind of system.

It was supposed to be a "pooled" benefit program but why should we keep pouring water into a pool that has a huge hole in the bottom? The bottom line is that it does not work in it's current form. Changes need to be made if "you and I" are going to benefit from it.


Regarless, it probably will be necessary to raise the retirement age and/or reduce benefits for Social Security. I doubt if investing SSI contributions in the stock market will keep this from happening. It seems clear that young workers would do well to save more for retirement. Should we switch from an income tax to a consumption tax to foster savings?

How will cutting back on the benefits help the working poor you mentioned? SS benfits are not much now. Can a retired person really survive on less? At least Bush's proposed program will give them the opportunity to get a better return on their money and have more for retirement. What is the current rate of return now?

Like you mentioned, the best way to make sure you have money for retirement is to save money now. Compound interest is a beautiful thing. I am shocked how many of my friends invest zero money in a 401K or other type of retirement fund. They have big nice houses and nice cars but nothing in the bank in the form of savings. If one of them lost their job, they would be broke within a month. They always say they will save later. They have been saying that for 10 years now. My wife and I put away about 20% of our income each year. We drive decent cars and have a nice house but they are well below our means. When we are ready to retire, we will have more than enough money. It's about choices.

JSE

[piece-it pete]

JSE,

No kidding! ANYONE with a 401k knows it's better than SS. This whole argument should be "how much" and "how", not "do it at all". I think the Dems are going to look mighty bad over this.

(BTW 20%?! Holy cow man! (fran tarkington says) That's incredible!)

If I could I would dump that lie of SS withholding into my 401k RIGHT NOW.

Those saying there is no crisis are missing something - there is no crisis IF THE CURRENT WITHHOLDING WAS SPENT ON SS. Yeah, like that'll happen.

Mystic I think you've got a valid point. It is a large amount of funds. But I have a hard time believing the Republicans would tank the stock market.

I don't think having the Feds directly invest in the markets' a good idea - talk about letting the fox into the henhouse! And we'd be back in the same boat real quick, the Feds spending the money earned instead of saving it or (gasp) giving it back.

I had an interesting talk with my 401k guy a couple of month ago - he said that blue collar guys are overall TOO conservative with their investments, and are all too likely to end up breaking even. This is a shame IMO.

So you like the national sales tax idea? I must admit it perks my interest but I have no info.

Pete

[JSE]

Peeeeeeete! What's up buddy. Long time no chat.

Yep, we put away about 20% each year. That's like $1 mill. :p I wish! As we have made more money, we have not expanded our lifesytle at the same rate. I can afford a Mercedes but I drive a Dodge Truck now. OK, I got the HEMI.

I forgot to comment on the national consumption tax. I think it could work as long as the tax deductions, if any, are kept to a minimum. I would hate to see millions of exemptions on a new consumption tax code. I am sure their would be some, but I would like to see them kept to a minimum. It would be interesting to look at as an alternative. I will call W tonight and see what we can do. :D

JSE

[mystic]

Peeeeeeete! What's up buddy. Long time no chat.

Yep, we put away about 20% each year. That's like $1 mill. :p I wish! As we have made more money, we have not expanded our lifesytle at the same rate. I can afford a Mercedes but I drive a Dodge Truck now. OK, I got the HEMI.

I forgot to comment on the national consumption tax. I think it could work as long as the tax deductions, if any, are kept to a minimum. I would hate to see millions of exemptions on a new consumption tax code. I am sure their would be some, but I would like to see them kept to a minimum. It would be interesting to look at as an alternative. I will call W tonight and see what we can do. :D

JSE

A National consumtion tax like a flat-rate income tax is by its nature a regressive tax because it affects the poor more than the rich. For example, take 30% out of a $500,000 income, and the earner still has $350,000, which should be plenty for food and other basic needs, but take 30% out of a $20,000 income and you may be cutting into the earner's grocery money. So you have to exempt groceries and maybe some other basics from the consumtion tax or the poor could get hammered.

If a National consumption tax means interest income and capital gains would no longer be taxed, people would be encouraged to save and invest more of their income rather than spending it. I think that would be a good thing.

The more I read about Bush's plan for diverting Social Security contributions into private accounts the less I like it. It's a small and insufficient solution for a potentially large problem, and the amount of borrowing for the transition cost could push interest rates up and slow the economy.

[shokhead]

I dont count SS into my retirement. If its there,cool. If SS is your only retirement,your sol. I've talked to my friends that dont do any retirement until i'm blue so i gave up. They want to spend now and whatever happens later,so be it.

[JSE]

A National consumtion tax like a flat-rate income tax is by its nature a regressive tax because it affects the poor more than the rich. For example, take 30% out of a $500,000 income, and the earner still has $350,000, which should be plenty for food and other basic needs, but take 30% out of a $20,000 income and you may be cutting into the earner's grocery money. So you have to exempt groceries and maybe some other basics from the consumtion tax or the poor could get hammered.

If a National consumption tax means interest income and capital gains would no longer be taxed, people would be encouraged to save and invest more of their income rather than spending it. I think that would be a good thing.

The more I read about Bush's plan for diverting Social Security contributions into private accounts the less I like it. It's a small and insufficient solution for a potentially large problem, and the amount of borrowing for the transition cost could push interest rates up and slow the economy.

I think your right that some "items" may need to be exempt like certain groceries. Not Beer and Ho-Ho's for example. Maybe Gas? I don't disagree with that. The main thing I would be concerned about is "right offs". If any new consumption based tax code has as many exemptions as the current system has, there would be no real improvement. The goal is to make it more simple and efficient.

JSE

[piece-it pete]

Peeeeeeete! What's up buddy. Long time no chat.

Yep, we put away about 20% each year. That's like $1 mill. :p I wish! As we have made more money, we have not expanded our lifesytle at the same rate. I can afford a Mercedes but I drive a Dodge Truck now. OK, I got the HEMI.

I forgot to comment on the national consumption tax. I think it could work as long as the tax deductions, if any, are kept to a minimum. I would hate to see millions of exemptions on a new consumption tax code. I am sure their would be some, but I would like to see them kept to a minimum. It would be interesting to look at as an alternative. I will call W tonight and see what we can do. :D

JSE

Call W lol.

Hemi? How cool!

I started saving kinda the same way, as I increase income I add a larger percentage of savings. But not 20% :( . I too could be driving a better car (not a Mercedes!) but am too... conservative....

:D

I originally put most of it into the 401k but have come to realise that may not be the best place for it. I have decided to apply a fair percentage of it into my home mortgage principal (closes next tuesday!) but have not figured out exactly what to do with the balance. I will soon.

Flat tax, sales tax, I think the flat tax is simpler. Mystic, the regressive nature of a flat tax could be adjusted by using tax brackets. Although I have a feeling that the replacement tax system would look a lot like the current one real quick.

Speaking of regressive taxes, SS. Since the gov't is spending SS withholding it is the king of regressive taxes. Heck there's a cap for wealthier folks!

What a crock, it gets me angry every time I think about it. While we're all getting screwed, the poorest are getting screwed the worst! So leave it the way it is - grrr!

Anyway, one way or the other SS is going to cost us A LOT. I think using a 1930s' model is insane, and certainly no help to the above mentioned poor folks. The question isn't is it going to cost us money, it is, but how to spend the megabucks it's going to cost.

I'm open to ideas. Gov't sponsored 401k-like vehicles do look good to me, 'cause they work.

Pete

[karl k]

The biggest reason that youth today DON'T start an investment account is the initial funding. So many are just trying to make it in the world and don't have the resources to get investing off the ground. Putting part of your pay(the 4% of current SS money being tossed around would be fine) in an account up front would remove this problem and since the cash not available to them anyway, no harm short term to making it in the world. I believe that once the youth begin to see tangeble gains or losses, they will begin to get involved in their acct's and that will cause the market activity that Mystic speaks of. It won't happen because of those accounts directly, but indirectly through the activity that will occurr once the youth gain the understanding of how investments work and start their own accounts OUTSIDE the retirement accounts they will already have. Greed is a VERY predictible thing and once you have done all you can with the accts the government allows, you will begin to do something with your own money. That's where the market activity will really take off... check the activity in mutual funds and subsequent stocks in the 90's after the big boom in 401K accts. Hell, at the very least, it will begin to throw a wrench in the governments ability to "play" with SS funds and that can't be a bad thing! :D I do agree that you as an individual "could" mess things up so there should be some limits to where you can invest... mutual funds, bonds, T bills, MM should be "safe" enough and still trigger the learning and understanding to further your ability to invest elsewhere. Some of the questions I'm waiting to hear an answer... Who profits from the trading activity in ones acct? Will the handler of such accts be the government, or private investment firms? Will you be able to draw from your SS AND your investment or just SS if disabled? How many choices will be available within the acct? Will your money be the only additions to the acct or will your employer be matching?(4% of your money and 4% of what the employer kicks in) There are alot of details that need to be worked out before I'm 100% on board but I am intrigued by the idea. It's these details that we need before Bush ask's for action by Congress and US...IMO.

On the sales tax thing, I'm not sure I agree with the concept as much as a flat tax for the reason that most "rich" don't spend(or have to spend) the same precentage of their income as the poor. Sure they may buy more expensive houses and cars(big ticket items) but the poor spend more on necessities than luxuries compaired to the rich. I may be swayed to agree IF the necessities are not taxed. This list would include...

All Food(excluding restaurants, alchohol and cigarettes)
All medications
Services like electricity, nat.gas/propane, local phone, trash, water, healthcare, ect.
Purchase of your FIRST place of residence
Purchase of your FIRST car

I would also like to see some kind of basic deduction for children as we have now since kids are a big drain financially on those less off.(not necessarily the EIC but the CTC instead)

For the tax thing to be fair in the big picture, there are other things that need to be priced based on ability to pay for instance healthcare and legal services. If these things are not addressed, most changes to the current tax code would have little or no positive effect(and may be detrimental) on the poor... or the government to receive needed revenue to support current programs and therefore a waste of time and resources. Just my thoughts. :D

[mystic]

The biggest reason that youth today DON'T start an investment account is the initial funding. So many are just trying to make it in the world and don't have the resources to get investing off the ground. Putting part of your pay(the 4% of current SS money being tossed around would be fine) in an account up front would remove this problem and since the cash not available to them anyway, no harm short term to making it in the world. I believe that once the youth begin to see tangeble gains or losses, they will begin to get involved in their acct's and that will cause the market activity that Mystic speaks of. It won't happen because of those accounts directly, but indirectly through the activity that will occurr once the youth gain the understanding of how investments work and start their own accounts OUTSIDE the retirement accounts they will already have. Greed is a VERY predictible thing and once you have done all you can with the accts the government allows, you will begin to do something with your own money. That's where the market activity will really take off... check the activity in mutual funds and subsequent stocks in the 90's after the big boom in 401K accts. Hell, at the very least, it will begin to throw a wrench in the governments ability to "play" with SS funds and that can't be a bad thing! :D I do agree that you as an individual "could" mess things up so there should be some limits to where you can invest... mutual funds, bonds, T bills, MM should be "safe" enough and still trigger the learning and understanding to further your ability to invest elsewhere. Some of the questions I'm waiting to hear an answer... Who profits from the trading activity in ones acct? Will the handler of such accts be the government, or private investment firms? Will you be able to draw from your SS AND your investment or just SS if disabled? How many choices will be available within the acct? Will your money be the only additions to the acct or will your employer be matching?(4% of your money and 4% of what the employer kicks in) There are alot of details that need to be worked out before I'm 100% on board but I am intrigued by the idea. It's these details that we need before Bush ask's for action by Congress and US...IMO.

On the sales tax thing, I'm not sure I agree with the concept as much as a flat tax for the reason that most "rich" don't spend(or have to spend) the same precentage of their income as the poor. Sure they may buy more expensive houses and cars(big ticket items) but the poor spend more on necessities than luxuries compaired to the rich. I may be swayed to agree IF the necessities are not taxed. This list would include...

All Food(excluding restaurants, alchohol and cigarettes)
All medications
Services like electricity, nat.gas/propane, local phone, trash, water, healthcare, ect.
Purchase of your FIRST place of residence
Purchase of your FIRST car

I would also like to see some kind of basic deduction for children as we have now since kids are a big drain financially on those less off.(not necessarily the EIC but the CTC instead)

For the tax thing to be fair in the big picture, there are other things that need to be priced based on ability to pay for instance healthcare and legal services. If these things are not addressed, most changes to the current tax code would have little or no positive effect(and may be detrimental) on the poor... or the government to receive needed revenue to support current programs and therefore a waste of time and resources. Just my thoughts. :D



I agree that young workers need to save more for their retirement, and invest their savings wisely. I'm not so sure, however, having Social Security private accounts will make them save and invest even more. Saving requires finanacial disciplne -- something many young workers(and some older ones too) have not developed. The size of credit card debts carried by some young people I know and others I have heard about doesn't make me optimistic. I'm not saying I was any different. Early in my working life I wasn't good at postponing immediate gratification in favor of long-range goals.

How do you get people to save more? One sure way is to make them do it. How about rasing the worker's contribution to Social Security by a small amount(say 2% of wages), all of which would go into his/her private account? Aside from the funding, it would work the same as private accounts under the Bush plan. I can't immagine that a few pennies on the dollar is going to wreck a person's finances. And after all, this contribution and all it ever earns would be theirs.

I don't like Bush's proposal to carve private accounts out of what already is being contributed to Social Security. Why? Because this plan calls for the Government to borrow money to make up for the amount going into these accounts during a transition period. Otherwise, benefits to retired workers can not be sustained. I don't remember seeing estimates on the duration of this transition period and the cost to taxpayers. But for many years, this would amount to borrowing money to invest in the stock market, since in the absence of the proposed private accounts the money would not have to be borrowed. If history is a guide, stock market returns should be higher than interest paid on the borrowed funds, but this is not guaranteed. The borrowing could also cause interest rates to rise for a time, and result in a slowing of economic growth, thus hurting some of the very people who are supposed to be helped.

[karl k]

I agree that young workers need to save more for their retirement, and invest their savings wisely. I'm not so sure, however, having Social Security private accounts will make them save and invest even more. Saving requires finanacial disciplne -- something many young workers(and some older ones too) have not developed. The size of credit card debts carried by some young people I know and others I have heard about doesn't make me optimistic. I'm not saying I was any different. Early in my working life I wasn't good at postponing immediate gratification in favor of long-range goals.

How do you get people to save more? One sure way is to make them do it. How about rasing the worker's contribution to Social Security by a small amount(say 2% of wages), all of which would go into his/her private account? Aside from the funding, it would work the same as private accounts under the Bush plan. I can't immagine that a few pennies on the dollar is going to wreck a person's finances. And after all, this contribution and all it ever earns would be theirs.

I don't like Bush's proposal to carve private accounts out of what already is being contributed to Social Security. Why? Because this plan calls for the Government to borrow money to make up for the amount going into these accounts during a transition period. Otherwise, benefits to retired workers can not be sustained. I don't remember seeing estimates on the duration of this transition period and the cost to taxpayers. But for many years, this would amount to borrowing money to invest in the stock market, since in the absence of the proposed private accounts the money would not have to be borrowed. If history is a guide, stock market returns should be higher than interest paid on the borrowed funds, but this is not guaranteed. The borrowing could also cause interest rates to rise for a time, and result in a slowing of economic growth, thus hurting some of the very people who are supposed to be helped.

I would even be for an increase of 10-20% more than what you currently pay in SS(amounts to an extra $250-$500 a yr for $40K income) and having THAT go to your account. Once everyone has established a set amount and the "boomers" have retired, you can begin to re-adjust the numbers on the witholding to what it is currently with 4% in your account. You're still borrowing I suppose but atleast your way it would be payed for as we go(same as a tax increase) and with my numbers, you would have established a better suppliment for the reduced SS benefits that will inherently occurr 10-20yrs down the road. In either case, everyone will have to take more responsibility for their own retirement instead of relying on the government and big company pensions. I personally started a 401K when it was available and "played" with it to the greatest extent possible and now I'm about to dive in with the "big boys" and see what kind of damage I can do. It was because of this experience that I gained the knowledge and confidence to do what I'm about to do. My goal is to not need SS when I retire as the guarentee is questionable at best and even if it works out, the benefit isn't enough to survive on anyway.
:(

[JSE]

Mystic and Karl K,

I am open to ideas as long as we do something. I like the idea of being in control or part or my SS and I am not opposed to giving a little more to SS from my check as long as I can control that amount. I am even open to limited sources to invest that money in. I just want them to do something that makes sense. Letting it sit there in it's current form will result is nothing for you and me. NO SOUP FOR YOU ! NO SS FOR YOU!

JSE

[piece-it pete]

Hello, Karl!

Great post.

I think I've figured it out!

If the big problem with SS is that the gov't can't save the funds (and it is), then what Bush is doing is taking it away from them (Dems AND Reps). He's trying to make it untouchable. THIS is what I like about our current leader.

Mystic, either way this is gonna cost a fortune. How do we want the money spent? The gov't has already spent billions upon billions (3 billion a week in 1996) of money that was SUPPOSED to be saved for the boomers. Give them more, they'll spend it.

Pete

[Justlisten2]

Why is it not a good plan? Why is the ability to make a higher return on what your paying in a bad plan? Why is it just bad for working folks. Are these the same working folks that won't have social security when they retire because it's dried up under the current system? SS will be a thing of the past if we do not make changes soon.
JSE

While I agree that changes have to be made soon to save the SS system, my fix would be much simplier. Just eliminate the cutoff (for the wealthy), and make all Americans (including government officials) pay SS on all income. Problem solved. We'd even have extra money and be able to cut the SS tax rate from around 7% to around 4%. ;)

[risabet]

Hello, Karl!

Great post.

I think I've figured it out!

If the big problem with SS is that the gov't can't save the funds (and it is), then what Bush is doing is taking it away from them (Dems AND Reps). He's trying to make it untouchable. THIS is what I like about our current leader.

Mystic, either way this is gonna cost a fortune. How do we want the money spent? The gov't has already spent billions upon billions (3 billion a week in 1996) of money that was SUPPOSED to be saved for the boomers. Give them more, they'll spend it.

Pete

The Bush plan, and it is truly bush, is a thinly veiled attempt by the Neo-conservatives to begin the dismantling of the Social Security System. When the system runs out of money under this plan, and it assuredly will, then the goal will have been reached and one of the entitlements that the neo-cons hate will be gone. A more realistic "fix" would be to simply remove the cap on income subject to SS taxes and the system would be viable long into the future.

[piece-it pete]

The Bush plan, and it is truly bush, is a thinly veiled attempt by the Neo-conservatives to begin the dismantling of the Social Security System. When the system runs out of money under this plan, and it assuredly will, then the goal will have been reached and one of the entitlements that the neo-cons hate will be gone. A more realistic "fix" would be to simply remove the cap on income subject to SS taxes and the system would be viable long into the future.

ris,

OMG! I finally see it - the "neocons" are out to destroy the working class and turn our great country into a vassal state!

I'm burning my copy of "Conscience of a Conservative" and joining the Democrat party.

:D

Not bloody likely.

Neocons want to keep control of our money as much as the Dems.

Although raising the cap would help a lot in the short term, it does not change the basic problem with SS - our fearless Congressmen of both stripes SPENDING THE DAMN MONEY.

Doesn't anyone remember that raising SS income (by a lot) was tried before, fairly recently? Us "middle aged" folks (arrrrrgh - that applies to me?! When did that happen?) certainly remember when that increase hit our paycheck.

They were going to put the extra income away for - drum roll please - baby boomer retirement. And what are we doing now? We're giving the same bunch of guys MORE MONEY? Hell-oooo, how stupid do they think we are?

Honestly we don't want a truthful answer, it will go beyond insulting 'cause there's a great deal of truth in it, as they know, from experience.

Pete

[mystic]

ris,

OMG! I finally see it - the "neocons" are out to destroy the working class and turn our great country into a vassal state!

I'm burning my copy of "Conscience of a Conservative" and joining the Democrat party.

:D

Not bloody likely.

Neocons want to keep control of our money as much as the Dems.

Although raising the cap would help a lot in the short term, it does not change the basic problem with SS - our fearless Congressmen of both stripes SPENDING THE DAMN MONEY.

Doesn't anyone remember that raising SS income (by a lot) was tried before, fairly recently? Us "middle aged" folks (arrrrrgh - that applies to me?! When did that happen?) certainly remember when that increase hit our paycheck.

They were going to put the extra income away for - drum roll please - baby boomer retirement. And what are we doing now? We're giving the same bunch of guys MORE MONEY? Hell-oooo, how stupid do they think we are?

Honestly we don't want a truthful answer, it will go beyond insulting 'cause there's a great deal of truth in it, as they know, from experience.

Pete

Pete

Our contributions to the Social Security Trust Fund are used to buy interest bearing U.S. Government securities that are similar to Treasury bonds. Money from these borrowed funds are spent on a variety of government programs. An alternative would have been to invest the SS contributions in a corporate bond index fund or a combination corporate bond/stock index fund. Without the SS contributions to government securities, however, our government would have had to raise more money through Treasury bonds.

At some point (about 2022?) it will be necesary to start redeeming these special securities. My guess is the government will borrow (issue Treasury bonds) to cover the redeemptions.

[piece-it pete]

Mystic,

Yep, spent. That money was supposed to be saved to take care of the boomers. Now our intrepid leaders are hooked on the income. Not just a tax, but highly regressive one at that.

Set up individual accounts and that money stays ours.

Pete

[mystic]

Mystic,

Yep, spent. That money was supposed to be saved to take care of the boomers. Now our intrepid leaders are hooked on the income. Not just a tax, but highly regressive one at that.

Set up individual accounts and that money stays ours.

Pete

Pete, you sound like you are afraid the government is going to default on those SS securities in the trust fund because it has already spent that money. The government spends all the money it borrows by way of Treasury bonds too. Treasuries are considered the safest investment in the world, and are favored by all kinds of investors, including(get this) private pension funds. As an individual investor, I have bought Treasury securities(i.e., loaned the government money), and of course the government spent the money. I'm not afraid my loan will not be paid back just because the money was spent..

If you fear the USA will honor its obligations on Treasury securities, but default on the SS trust fund securities, I can understand your concern. But do you really think that is likely?

[piece-it pete]

Pete, you sound like you are afraid the government is going to default on those SS securities in the trust fund because it has already spent that money. The government spends all the money it borrows by way of Treasury bonds too. Treasuries are considered the safest investment in the world, and are favored by all kinds of investors, including(get this) private pension funds. As an individual investor, I have bought Treasury securities(i.e., loaned the government money), and of course the government spent the money. I'm not afraid my loan will not be paid back just because the money was spent..

If you fear the USA will honor its obligations on Treasury securities, but default on the SS trust fund securities, I can understand your concern. But do you really think that is likely?

I am not worried in the slightest that the US will default on its' obligations.

After all, they can always dip back in our pockets (which is what they did last time) anytime they wish.

The fact stands: they jacked our SS withholding WAY up to "save" the system, and spent the money. Heck still spending it RIGHT NOW.

Doesn't the regressive nature of this stealth tax bother you at all?

Pete

[mystic]

I am not worried in the slightest that the US will default on its' obligations.

After all, they can always dip back in our pockets (which is what they did last time) anytime they wish.

The fact stands: they jacked our SS withholding WAY up to "save" the system, and spent the money. Heck still spending it RIGHT NOW.

Doesn't the regressive nature of this stealth tax bother you at all?

Pete

Pete, I'm not sure what you mean by "the regressive nature of this stealth tax." To me a regressive tax is one that hurts the poor. Social Security seem to do just the opposite.

The Social Security Administration's web site shows that benefits are relatively greater for low income workers. For example, based on calculations from the web site, a person with an annual income of $20,000 who turned 65 in 2015 could draw annual benefits of $8,940, which is equal to 45 percent of the income, whereas a person with an annual income of $80,000 could draw annual benefits of $20,424, which is equal to only 26 percent of the income. I hope I did the calculations right.

If you are interested in estimating future benefits for yourself or someone else, here is the place to go: http://www.socialsecurity.gov/cgi-bin/benefit5.cgi

[piece-it pete]

Mystic,

'Cause SS is basically an operating tax (at least that's how the brave representitives of both parties actually use it) it should be viewed as one, unless we're talking theory. Our elected heros - masters of the smoke and mirrors.

That being the reality, as a tax it's horribly regressive.

Pete

[mystic]

Mystic,

'Cause SS is basically an operating tax (at least that's how the brave representitives of both parties actually use it) it should be viewed as one, unless we're talking theory. Our elected heros - masters of the smoke and mirrors.

That being the reality, as a tax it's horribly regressive.

Pete

I can't find "operating tax" in any of the online economics dictionaries or tax glossaries, so I can't figure out what you mean. Please explain it.

[piece-it pete]

Mystic,

You're right, it's absolutely a madeup phrase on my part :) .

To explain: The gov't is using it as common operating income. When the last great saving increase was passed it was supposed to be in what was called during the Gore/Bush campaign a "lockbox". Forgive me in advance for saying "ha!".

They've got a bridge to sell us, too.

GWB can't say this plainly, as the GOP is as deep into it as the Dems. But it has become clear that he's trying to take our basic retirement funding away from Congress. I'm now 100% on board, but strongly doubt Congress will give back their precious income. I will be shocked if this flies. Of course, Reagan did put the tax reform though, but some Dems LIKED him!

That's why I believe we should be working on how, not why. Honest men can disagree.

Pete

[mystic]

Mystic and Karl K,

I am open to ideas as long as we do something. I like the idea of being in control or part or my SS and I am not opposed to giving a little more to SS from my check as long as I can control that amount. I am even open to limited sources to invest that money in. I just want them to do something that makes sense. Letting it sit there in it's current form will result is nothing for you and me. NO SOUP FOR YOU ! NO SS FOR YOU!

JSE

According to an article in today's New York Times (quoted from below), the Bush Administration is open to the idea of personnal accounts as a supplement to Social Security rather than carving the accounts out of the current contribution. It would mean a small increase in the SS contribution, but since all the increase would go into their personal accounts, workers might be willing. I like the idea.

"WASHINGTON, March 2 - Treasury Secretary John W. Snow said Wednesday that the Bush administration would not rule out consideration of a very different approach to private investment accounts for Social Security from the one advocated so far by the White House.

Mr. Snow said the administration wanted to encourage the development of as many ideas as possible and that it was open to looking at personal accounts that would supplement Social Security rather than, as in the plan President Bush has proposed, replace a portion of the traditional government-paid benefit."

[MomurdA]

There are too many old people, and they are getting older, and staying alive longer. Whoever started the SS tax could not have forseen the 'baby boom' after WW2, or the advance in medical technology which allows people to stay alive longer. The only solution without affecting the SS tax system, is for a 'Logan's Run' type government program. Think of the TV ratings!! Just kidding.

It seems to me that in 40 years, when the population has 'evened out' that the problem could just go away. Of course, if my grandparents are still alive in 40 years then thats not going to happen. The last thing i want to do is give my Uncle Sam more money, or more control over the money I already give him. He cannot spend it wisely, he has no spending limit, and he has no intention of paying back his debts. even if Bush's plan gowes through, in 10 or 15 years, the govt will find a way to spend that money on defense or transportation, so its not like it will even be there when I retire. Solution: End the SS tax, give me 6% more income and let me do with it what I want. If I dont have enuf when I retire, then Im SOL. Too bad that will never happen. Nobody takes reponsibility for themselves, they would rather let the govt tell them what they can and have to do.

[mystic]

There are too many old people, and they are getting older, and staying alive longer. Whoever started the SS tax could not have forseen the 'baby boom' after WW2, or the advance in medical technology which allows people to stay alive longer. The only solution without affecting the SS tax system, is for a 'Logan's Run' type government program. Think of the TV ratings!! Just kidding.

It seems to me that in 40 years, when the population has 'evened out' that the problem could just go away. Of course, if my grandparents are still alive in 40 years then thats not going to happen. The last thing i want to do is give my Uncle Sam more money, or more control over the money I already give him. He cannot spend it wisely, he has no spending limit, and he has no intention of paying back his debts. even if Bush's plan gowes through, in 10 or 15 years, the govt will find a way to spend that money on defense or transportation, so its not like it will even be there when I retire. Solution: End the SS tax, give me 6% more income and let me do with it what I want. If I dont have enuf when I retire, then Im SOL. Too bad that will never happen. Nobody takes reponsibility for themselves, they would rather let the govt tell them what they can and have to do.


Yes, the demographic problem of too many retirees and too few workers could start correcting itself as the boomer retirees die off and are replaced by the "birth dirth" retirees. I haven't studied the population statistics by age, so I'm not sure about the effect of this age shift. Another thing to consider is the overall dependency ratio, which compares the number of workers to the number of non-workers(retirees and children.)

I'm puzzled as to why you think the Federal Government will not make good on its debt to the Social Security trust fund. This debt has the same status as Treasury securities, which are considered the world's safest investment period. It would be ironic if the Government defaulted on its SS debt while making good on Treasuries held by private pension trust funds.

People were responsible for taking care of themselfs before Social Security existed. The problem was many of our less fortunate citizens got their butts kicked by the collapse of the stock market and the depression, and went into old age in poverty. The extended family, which was supposed to be a safety net, wasn't enough during those times.

It's too bad the extended family has fallen out of favor. I like the idea of grandparents caring for their grandchildren while the parents are at work.

[shokhead]

You like the idea of grandparents taking care of grandkids while parents are at work? . Gee,thats nice of you to give the gp zero life after taking care of there kids and working there whole life just to retire and take care of the grandkids. Are you nuts are what? I see that crap everyday. A generation gap between them is nothing but trouble and is one of the HUGE problems now adays. Can we give parents any less of a responseable as they allready have. Have kids and then dump them on grandparents and schools to do there job.

[mystic]

You like the idea of grandparents taking care of grandkids while parents are at work? . Gee,thats nice of you to give the gp zero life after taking care of there kids and working there whole life just to retire and take care of the grandkids. Are you nuts are what? I see that crap everyday. A generation gap between them is nothing but trouble and is one of the HUGE problems now adays. Can we give parents any less of a responseable as they allready have. Have kids and then dump them on grandparents and schools to do there job.

I like the idea of grandparents taking care of grandchildren if they want to do it. I suppose if the extended family was an economic necessity, grandparents who were a part of such families might feel obligated to help out by caring for the children, and some might not want this responsibility. If a grandparent resented having to care for a grandchild, the arrangement would not be good for her/him or the child. I have observed, however, that many grandparents like caring for their grandchildren, and they have the time and experience to be good at it.

[kexodusc]

This is a great discussion.
Ya know, having recently moved to Canada, I have a unique perspective on this.
SS was really mishandled from the start. Canada had a similar problem with its Canada Pension Plan, but have since taken measures to fix this.

I like the idea of SS being a sort of forced savings, what I don't like is the poor way SS has been handled since inception.
I don't like the idea of empowering the masses to "gamble" with their retirement. I'm an investment manager by profession, I've worked for pension plans in both the US, and Canada now. One thing is painfully clear to me: Most people don't know how to save for retirement, and if left to them, they will hurt themselves. They just will. The only people that are going to cash in on this are brokers, advisors, and lawyers when the crap hits the fan.
I also don't like shifting retirement income liability from government guarantee to the individual, with no guarantee. For supplemental savings, that's fine. But for a bear minimum standard of living, that's aweful. I think the Bush and co. should be sued to hell for breaching every moral and fiduciary responsibility to everyone who's ever paid into SS. They're only telling people 1/2 of the story - the "what if everything goes right" part. Anyone else work in the investment/pension industry? As we've seen the last 20 years, nothing's gone right. Ask Delta Airlines.

That being said I think many people could manage their money better than the governments have over the years. Some will beat the market rate of return and cash in on this plan. I'm just not sure that's the goal here.

Nobody seems to think of the national catastrophe that could happen if people end up doing worse than they expected...We could have millions of seniors with less than what SS would have provided, and then surely taxes would be increased to provide for these people. Or families would be burdened even more.

Not sure what the right answer is here, but I do know we don't have it yet (and I know the Dems haven't come up with anything, at least give Bush credit for trying something).

As for mass buying and selling in the stock market affecting prices dramatically, well, it wouldn't really happen that way as long as the national wealth, and population don't decrease. There's always a new generation of risk taking investors. There could be a few minor price fluctuations, but usually people get out of risky equity long before the retirement date, and this is done very gradually (if it's done right). The demand for stocks won't change the fundamental value of the underlying assets (companies). You might see a minor shift in the way companies raise capital, particularly if there's a huge demand for bonds and less demand for stocks. Junk bonds, anyone?

[Shwamdoo]

I don't like the idea of empowering the masses to "gamble" with their retirement.

I love the idea of the government allowing the masses to handle, or "gamble" with, their own retirment. That is the idealistic American in me speaking. Whatever happened to laissez-faire capitalism and economic freedom?

That said, I understand that without Social Security the number of seniors on welfare would be overwhelming. Whats that?...end welfare? No, no no, the poverty rate would go through the roof. It seems that there is no easy way out. No matter which way the government decides to turn, a large portion of the population will be at a loss. Poor poor politicians...


I like the idea of SS being a sort of forced savings, what I don't like is the poor way SS has been handled since inception.

I agree completly. This seems like the most logical solution. However, what about people who rely on welfare? How will they pay for their own savings?

P.S. Cool subject. I find it difficult even to take a side myself.

[kexodusc]

Well, I don't consider us fundamental capitalists...we're only capitalist when it's convenient.
I think every American has a duty to ensure a solid future for the country. If we were an isolated economy, then I wouldn't worry, but as it stands, an aweful lot of our consumption sends money outside the USA. We're not terribly self sufficient, as much as we hate to admit it.
I'd just as soon avoid a crisis than have to deal with one.

What's worse, people are just living longer and longer.(well okay, that's not ALL bad). I don't know how this is going to get any better, but I sure hope it doesn't get worse.

[Shwamdoo]

Well, I don't consider us fundamental capitalists...we're only capitalist when it's convenient.

Well put.

[piece-it pete]

Mystic,

Sounds corny but I'd like to thank you (and the other posters) for your reasonable attitude, it's nice to see a conversation that is actually moderate and thoughtful vs yes/no.

Really. :)

I spoke to my dad about SS, and he remembers some of the national debate at the time. Interestingly, Roosevelt not only used the phrase "private account", but also said it was to be totally voluntary!

Just FYI. How things change. Particularly when Congress is involved.

Precious few folks believe our Federal gov't is going to totally renig on their promises, although they could thusly: "It is too expensive. We have to cut benifits and raise the retirement age". Sound familiar?

If they would have done what they said they were going to do, we would be on easy street today. It doesn't matter if they will repay the money when due - it's spent. If you subtract the excess SS income, that we were told would be saved to solve our current problem, the federal deficit has been WAY out of control for a long, long time, including the so-called "balanced budget" years, when over 3 billion A WEEK coming in from SS was included. A farce is a farce, by any other name :) .

My point? Why is this deficit OK, but not any other? It comes down to how we spend the trillions it's going to take, not are we going to spend them. I am dead set against throwing good money after bad, just letting Congress spend more and more of what is in theory our savings for basic retirement.

We believe the Feds are going to be solvent 20-30 years from now because history has shown it will. I believe the stock market will continue to grow over the next 20-30 years because history has shown it will.

And it's hardly like SS will allow day trading. Unless we hit another Depression (unlikely, but possible - terrorist nuking New York City? Just one scenario) private accounts would be fine, particularly when you consider how restricted those accounts will be.

Of course, if we hit a Depression gov't receipts will dry up too. And our gov't spends a much higher percentage of our income now than it did then - it will hit the gov't a lot harder. Where will they get the money to cover those promissary notes then?

Believe it or not I'm far from certain private 401k-like accounts are the answer, but I KNOW giving Congress money to save is a fools' game, through repeated proof.

The best argument (outside of keeping it away from the happy thieves in Congress) for the 401k-like vehicles is that it forces the accumulation of wealth on the poor.

It is known that poor folks overall do not understand the accumulation of wealth, and just how it affects your standard of living. They bankroll the States' gambling (be it lottery or whatever) in the hopes of a quick strike, and one of the reasons is they believe it's their only way.

Personal account? Hey look, I have $5,000, or $10,000, or much more! It will be a gift to my kids when I'm gone. Or a downpayment on a house (I like this idea, to a degree). Regardless, it gives them an ownership stake in things, something we all take for granted.

Yes, it will take many years. Is that a reason not to do it? How long did it take to bring down the USSR, or help build the EU, or bring about the integration of China into the world community?

And I've got to touch on the fact of the massively reggresive nature of our current SS system again. The poor pay no Federal tax, the working poor actually get money back ( the earned income credit) EXCEPT for SS withholding, which is a fair chunk of money, that the rich get a huge break on. I'd think that my respected friends sitting left of me would be more concerned about this than a grumpy old selfish righty (poke, poke)!

Pete

[kexodusc]

Mystic,
The best argument (outside of keeping it away from the happy thieves in Congress) for the 401k-like vehicles is that it forces the accumulation of wealth on the poor.

I think you've said it all in this sentence.

We could get lucky and an epidemic will spread through senior homes, thereby reducing the massive liabilities...people have to quit being so greedy and living so long!

...(with apologies to any seniors reading this).

[mystic]

Mystic,

Sounds corny but I'd like to thank you (and the other posters) for your reasonable attitude, it's nice to see a conversation that is actually moderate and thoughtful vs yes/no.

Really. :)

I spoke to my dad about SS, and he remembers some of the national debate at the time. Interestingly, Roosevelt not only used the phrase "private account", but also said it was to be totally voluntary!

Just FYI. How things change. Particularly when Congress is involved.

Precious few folks believe our Federal gov't is going to totally renig on their promises, although they could thusly: "It is too expensive. We have to cut benifits and raise the retirement age". Sound familiar?

If they would have done what they said they were going to do, we would be on easy street today. It doesn't matter if they will repay the money when due - it's spent. If you subtract the excess SS income, that we were told would be saved to solve our current problem, the federal deficit has been WAY out of control for a long, long time, including the so-called "balanced budget" years, when over 3 billion A WEEK coming in from SS was included. A farce is a farce, by any other name :) .

My point? Why is this deficit OK, but not any other? It comes down to how we spend the trillions it's going to take, not are we going to spend them. I am dead set against throwing good money after bad, just letting Congress spend more and more of what is in theory our savings for basic retirement.

We believe the Feds are going to be solvent 20-30 years from now because history has shown it will. I believe the stock market will continue to grow over the next 20-30 years because history has shown it will.

And it's hardly like SS will allow day trading. Unless we hit another Depression (unlikely, but possible - terrorist nuking New York City? Just one scenario) private accounts would be fine, particularly when you consider how restricted those accounts will be.

Of course, if we hit a Depression gov't receipts will dry up too. And our gov't spends a much higher percentage of our income now than it did then - it will hit the gov't a lot harder. Where will they get the money to cover those promissary notes then?

Believe it or not I'm far from certain private 401k-like accounts are the answer, but I KNOW giving Congress money to save is a fools' game, through repeated proof.

The best argument (outside of keeping it away from the happy thieves in Congress) for the 401k-like vehicles is that it forces the accumulation of wealth on the poor.

It is known that poor folks overall do not understand the accumulation of wealth, and just how it affects your standard of living. They bankroll the States' gambling (be it lottery or whatever) in the hopes of a quick strike, and one of the reasons is they believe it's their only way.

Personal account? Hey look, I have $5,000, or $10,000, or much more! It will be a gift to my kids when I'm gone. Or a downpayment on a house (I like this idea, to a degree). Regardless, it gives them an ownership stake in things, something we all take for granted.

Yes, it will take many years. Is that a reason not to do it? How long did it take to bring down the USSR, or help build the EU, or bring about the integration of China into the world community?

And I've got to touch on the fact of the massively reggresive nature of our current SS system again. The poor pay no Federal tax, the working poor actually get money back ( the earned income credit) EXCEPT for SS withholding, which is a fair chunk of money, that the rich get a huge break on. I'd think that my respected friends sitting left of me would be more concerned about this than a grumpy old selfish righty (poke, poke)!

Pete

Thank you! I have enjoyed the discussion and have learned from the many members who have participated. It will be interesting to see what our elected officials do.

[piece-it pete]

It will be interesting to see what our elected officials do.

Sadly, if I had to bet it would be on them doing nothing of substence :sad: . Hope I'm wrong!

Pete