Social Security: Privatized accounts

Gus Orviston · 03-19-2005, 06:06 PM

I have been listening and wondering about the privatized SS account plan being proposed. Intiially I am all for it, but I have some concerns and would like to have an open discussion it.

To start off with I want to poll to see the alignment...

Keeping it simple the poll questions is either a thumbs up or down. While there are other ideas that will emerge the only two in the poll will be Yes, do it,, No, leave it alone. voting no doesn't mean there might be a better way.

gus

baltz526 · 03-19-2005, 06:15 PM

being self employed i would love to be able to put 4% of the 15+% i now pay into the ss self employment tax into a intrest bearing retirement account.

TheRogue · 03-19-2005, 06:18 PM

The problem I have with it is that the administration presented this idea from the beginning to "fix" SS. Finally just this last week, President Bush admitted that privatizing would do absolutely nothing to fix the current long-term crisis.

Frankly, SS will be a small portion of my retirement. I, like you I'm sure, have a significant portion of my income going into my own retirement accounts.

I was listening to the radio the other day....there was a poll done of financial managers by someone, over 60% of them were for privatization as a way for people to take control of their own destiny. In that SAME poll, over 60% of these SAME financial managers said that most people weren't capapable of managing their own retirement finances effectively!!

Social Security was started by just that.....SECURITY. Allowing someone to loose 1/2 of it by stupid investments, or get shafted by an Enron/Tyco/take your pick, just doesn't make much sense to me.

That's my thinking on the matter, anyway. Let the administration get it out in the open, and discuss it honestly.....it doesn't do a darn thing to fix the long term problems of SS, and will cost billions, and billions, of dollars to implement.

TR

baltz526 · 03-19-2005, 06:31 PM

i already pay over 15% of every dollar i make to ss and i get the yearly letter, i'll get $748.00 when i retire at age 67 years 10 month. like most people all extra money go's into the main residence before the retirement ira.so some years nothing is put in.more people are in this position and the younger you are the worse the problem is. and with federal deposit insurance on these retirerment accounts the risk of losing all 4% of the yearly gross is a good trade off.

baltz526 · 03-19-2005, 06:44 PM

within a few generations of building these individual retirerment accounts. and being transferable to your spouse and the next generation. the pressure on the ss system would be slowly reduced over the next twenty to forty years and your grandchildren would have a good start on their retirerment when they where born.i think this type of future of the ss system was the original intent when the ss program was started.the long term betterment of society.

Thumper · 03-19-2005, 06:50 PM

There is no 4% Administration privatization plan. The President has asked that the dialog begin, nothing else.

baltz526 · 03-19-2005, 06:55 PM

the 4% is the best idea that is being discussed and if anything gets passed this is going to be part of it.

Gus Orviston · 03-19-2005, 07:39 PM

TR, I disagree with you! It won't cost billions to implement, the assessment is 1-2 Trillion dollars to implement

.

based on Biz week's roll up.

You also make a good point.. the program was put in place to be a security umbrella not a retirement plan. It is a pay as you go system, and when it was started the initial SS benifactors never paid a dime into the system. So it has been and now we face the baby boomers retiring.

AS for the Aminstration plan.. no is isn't in front of congress, but I think it can/will be in the second term.

If enacted, those of us 50-55 and under won't be getting anything more,,, we will get less. And the generation to follow will also. It is projected it will take 2-3 generations to recoupe the current gap, and make up for the removal of the 4%.

That analysis is based on if the market ecomony in the next 75 years, matches the last 75. So we most likely won't be growing out of the problem

Bush also is posing that we grow SS benefits at a slower pace. Tie the payout growth to the Price Index and not inflation. That will further trim benefits. AND raise the retirement age up to account for the longer we are all living.

Oh, and on top of that raise the FICA cap from 90K to a higer income bracket.

From the numbers it is a long term fix, but short term we will all be voting we get less for 2-3 generations.

Are you willing to give a bit more fix it.. is there a better solution.. TR, you are right, my plan is to hopefully not rely on that money at all...but my retirement target got further away the last 3 years.

gus

03-19-2005, 08:07 PM

Quote:

There is no 4% Administration privatization plan. The President has asked that the dialog begin, nothing else.

BS Jack!!! It sure seems funny that GOA says there is no imminent threat and key republican leaders won't support what the president has in mind so all the sudden he just wants to open a dialog? He knows there isn't support for his plan and now he is changing the story.
He said the same doom and gloom about SSA all the way back in 1978 when he ran for Congress. He said then that the system would go broke by the 90's and guess what....it didn't

baltz526 · 03-19-2005, 08:21 PM

i'll be 46 in a few days,i have no kids,i may never draw a dime of the 15% i pay yearly to ss, i would like to see my wife or her adult child to inherit some of this money i will be paying in to ss. is this worth a few dollars less in ss payments to people getting ready to retire in the next ten years,twenty years i think so.in twenty one years and ten months i'll get to collect $748.00 or if i had a account set up collecting 4% of my yearly gross for the next twenty one years growing at 2% annually i would get about the same amount every month in ss total retirment income, but i could pass the remaining balance in this account onto the next generation at my death.but if it was growing at 6% annually i would get a larger check every month and heaven forbid the economy was growing at 15% annually i would get a good boost to my monthly check, over what i'll get now just drawing the standard ss monthly check. right now our retirerment plan is to build equity in real property.and i have no faith the existing ss system will be alive in twenty one years ten months.

03-19-2005, 08:30 PM

A few observations in your logic here baltz
1.In twenty years when you reach full retirement you'll receiving more than $748. Those numbers are based on what you have paid in now.
2.Social security is an insurance policy. You are paying the premiums with your 15%
3. You say "is this worth a few dollars less in ss payments to people getting ready to retire in the next ten years,twenty years i think so" That seems a bit selfish doesn't it?

Silver Hilton · 03-19-2005, 08:33 PM

I think you have to separate the questions of private acounts and of fixing social security, because they really don't have much to do with each other. If we want to ensure the funding of SS indefinitely, well, then we need to do that. I'm in favor of that. If we want to enact a forced savings plan as way of achieving another tax cut, well, we can do that too. I'm not sure how much I think of that idea, but I could be persuaded on some aspects of it. But it's inaccurate, and I think a bit dishonest for the administration to position the private accounts as a solution to the social security problem, because the proposal as it stands actually worsens the social security payments shortfall, by redirecting funds to the private accounts.

I'm not in favor of deficit spending. I'm not in favor of the government borrowing money so that it can distribute money to various groups, which is what the proposal on the table amounts to. Any solution to the social security problem that has the word "borrow" is simply postponing, not solving the problem.

baltz526 · 03-19-2005, 08:44 PM

my main point is i have no faith in the current insurance to be able to make payments in twenty one years ten months. and according to the letter i just got the payment i'll get in 21y 10m is $748.00. this is based on if i pay in at the same rate i did in 2003 for the next twenty one years ten months. for the amount to be higher i would need to gross more per year.

Thumper · 03-19-2005, 08:51 PM

Quote:

BS Jack!!!

Again, there is no administration plan. The President has indicated an interest in opening a discussion. Everything is on the table. Do you not want a discussion of the options?

Silver Hilton · 03-19-2005, 08:56 PM

Quote:

A few observations in your logic here baltz

2.Social security is an insurance policy. You are paying the premiums with your 15%

I don't think it's accurate to call SS an insurance policy. SS is an entitlement program. What you pay in has at most a loose relationship to what you get out. It's a tax for those of us in the work force (and our employers) and a benefit for those who are entitled to collect it. Insurance has a direct relationship to the premium you pay and the benefit you collect. This doesn't really exist for SS - there are lots of folks who collect despite not having paid in, and there is a cap to what you can collect, regardless of how much you pay.

lost_sailor · 03-20-2005, 10:51 AM

The problem: Social Security has more money going out than coming in.

The solution: put less money in.

:whazzup:

Right in line with the whole bottomless-deficit strategy.

They'll need to rename it "Social RISK"

Jennie@ifish · 03-20-2005, 11:23 AM

Remember the no politics rule on ifish? I'll talk to the other mods, but I do believe this one is fairly... uh... political.

Jen

TheRogue · 03-20-2005, 12:04 PM

I vote we leave it open for now. It hasn't gotten partisan, and let's face it....Social Security affects ALL of us, Rep, Dem, Communist, Green Party, Independent.

As always, we defer to your wishes!!

TR

Jennie@ifish · 03-20-2005, 12:30 PM

OK... then I wish to be well!

OK, let's see how it goes... The minute you guys start getting political or it begins to divide people, it's closed... so beware! :smile:
Jen

ampersat · 03-20-2005, 01:23 PM

And let's keep it a clean fight, er I mean discussion. No blows below the belt, no name calling, no rabbit punches or ankle biting. Now, go back to your corners and come out talking.

Ding, ding!

Big TULE · 03-20-2005, 01:48 PM

Well i guess i am a little young, but at 28 i would like to take the money and let me invest it how i please. The way it is going i will never see social security, so my attitude towards it is let me invest it my way.
And if that attitude is selfish so be it, it is my money and i worked hard to earn it...

BrianMaguire · 03-21-2005, 03:35 PM

I am not for it or against it. I would like more detail before I made up my mind.

garyk · 03-21-2005, 09:25 PM

Quote:

I don't think it's accurate to call SS an insurance policy. SS is an entitlement program.

Actually it's most accurate to call it what it technically is - a government underwritten annuity. Through your FICA taxes you're purchasing an annuity. I'm surprised how many folks don't "get" this concept. One that's guaranteed for life. And it's there to draw upon pre-retirement should you be unlucky enough to become disabled through illness or accident. And it's management fees are far lower than those of commercial firms that offer annuities.

Now, as to whether private accounts are a good idea from a personal investment viewpoint (and ignoring all the societal good and social-contract aspects).

IF you are young, and IF have that increasing rare, defined-benefit pension, with payments indexed to inflation and of sufficient size, than yes, private accounts will likely put you ahead.

IF HOWEVER, you're like most modern wage-earners and without a defined-benefit pension and instead invested in a defined-contribution plan- 403b, 401k, and/or some flavor of IRA, and/or some sort of private investment account, than you're already betting heavily on the stock market. If you've done any retirement research you know the prime directive, from Warren Buffet on down is one word -- diversification.

IF you're already heavily into the market, why forgo the diversification offered by a government annuity, and its certainty of payment?

I view Social Security as another pillar upon which to build a secure retirement. Call me an economic conservative, but from a risk/benefit viewpoint, it doesn't make sense to make an even larger share of my retirement portfolio subject to the vagaries of the stock market. (We can save the whole topic of brokerage fraud for another thread).