Social Security Changes

Discussion in 'Political Discussions' started by Khan, Feb 3, 2005.

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  1. Khan

    Khan New Member

    What do people think of the president's Social Security proposal so far? I'm having trouble cutting through the partisan crap to figure out its real net change.
     
  2. nosborne48

    nosborne48 Well-Known Member

    I'm having a hard time with this, too. I disagree with the President's critics in three ways:

    1) The sooner corrective action is taken, the cheaper that action will be. Time, in a retirement context, really IS money and it's irreplacable.

    2) I don't see how the President's plan will end up costing the federal government more in the long run. True, the General Fund would have to make up for the loss of some present contributions, but that should be offset by the government having to pay significantly reduced benefits eventually.

    3) I don't think that a private account is necessarily a gamble. The citizen COULD invest only in U.S. Treasury Bonds, or heck, even gold bullion if he chose. Not much risk there.

    It really bothers me that, if I die now with all my children grown, my Social Security contributions become the property of the government. The argument there is, I had the benefit of disability insurance all these years, but it ends up being very, very expensive insurance, costing tens and tens of thousands of dollars. Besides, it's damned difficult to actually COLLECT under that policy.

    I think that the President's description of an "ownership society" is accurate (for once) and I think it would be a real improvement.

    It should be noted that Congress would need to come up with a trillion dollars or so precisely BECAUSE they raided the Fund for all these years, treating it as an "off the books" source of tax revenue, which was, frankly, dishonest.
     
  3. Charles

    Charles New Member

    I'm sure more detailed proposals are on the way. As I understand it, the key part of President's idea is to allow workers to voluntarily contribute some portion of the money already withheld for Social Security to an individual retirement account.

    The President suggested that the individual retirement accounts could operate in a fashion similar to TSP.

    http://www.tsp.gov/features/chapter01.html#sub1
     
  4. decimon

    decimon Well-Known Member

    It would seem that things are not as they seem. Seemingly, that is.

    Whatever.

    Full story here.
     
  5. Khan

    Khan New Member

    Yeah, I read that and it certainly cleared things right up. Clear as mud.
     
  6. decimon

    decimon Well-Known Member

    Hope springs eternal so I'd hoped the Bushies would come through on the ownership aspect of the proposed reform. Doesn't seem so. Or not in any meaningful way.
     
  7. qvatlanta

    qvatlanta New Member

    Here's my problem with that. I've seen, in our 401(k), co-workers making horrible choices among the funds. Since I actually research funds and stocks pretty carefully before I buy any, I know their investments are MUCH more risky than they think they are, and for some of them they would get a better return simply by putting the money in a savings account. I've offered my advice before but if they're not interested, there's no point in pressing. The average citizen is mostly ignorant about risks and rewards associated with financial investments. And is it really fair to ask all of them to educate themselves to the right level? In order to make a choice, you have to be educated enough to make the right choice, and if someone shoves a stack of fund choices under the nose of a 50-year-old janitor with no HS diploma -- who does valuable work for society but may know very little about investments -- and you tell them to pick the least risky one... what do you think is going to happen? On the other hand, I anticipate the rejoinder according to the motto "if you're going to be dumb, you've got to be tough", and truly people will have to learn fast and it would increase the national financial investment savvy. But in the meantime a LOT of people are going to lose a LOT of money and net savings of the average American would plummet.
     
  8. qvatlanta

    qvatlanta New Member

    Also, gold is a risky investment! It's useful to have in a lot of investment scenarios, especially as a hedge. But a lot of its value is based on perception, not supply and demand, and the price is certainly not stable. If you bought gold in the 80s and sold it in the 90s you would have lost a ton of money.
     
  9. -kevin-

    -kevin- Resident Redneck

    at the risk of starting a large debate. One of the areas of Social Security that can be looked at are the benefits paid out to ex spouses upon death of a former spouse. If an individual has been married many times then all the spouses can tap into the funds and receive payment without reduction, so essentially all the ex spouses are receiving the same amount as the surviving spouse. I'm having a tough time with this aspect since I believe payments should follow the same rules as divorce. I am not saying don't benefit minor children from the marriages only the ex spouse.


    The other issue is the federal retirement system. As CSRS (normally not paying into social security and not receiving based upon civil service) employees retire more employees of the new system, FERS, are filling the vacancies. FERS employees pay into social security. So in essence you have another source of income to the social security base, and as the US Govt is a large employer these fund contributions will continue to rise as employees move to the FERS system.

    If allowed to place money outside of social security many would opt in to a personal account and defeat one of the reasons for the FERS transition.

    I don't know what the best course is to "fix" social security but I would like to see a hard examination of the programs it funds and the checks and balances on the abuses.
     
  10. gkillion

    gkillion New Member

    This is so typical of the left. The average American is too "dumb" to know how to spend or invest his or her own money. Can you honestly tell me that my money is safer in Washington than it would be if I had a little bit of control over it.

    Social security is no guarantee. Today is my 40th birthday. All my life I've heard people say that we can't count on social security to be around when we retire. Politicians from both sides have whined and cried about the sad state of the SS program for as long as I can remember.

    Untill now, all they've done is talk about it. I'm grateful that we finally have a President who has the hair to DO something about it. Who know if his plan will work, but any plan is better than the one we have now. You have to start somewhere. Nosborne was dead-on right about time being money when it comes to retirement. The longer we wait, the more we will lose.
     
  11. qvatlanta

    qvatlanta New Member

    "This is so typical of the left. The average American is too "dumb" to know how to spend or invest his or her own money. "

    This is not leftism. It is simple cynicism. There is a vast realm of unethical stockbrokers, snake-oil salesmen, out-and-out con artists, degree mill operators and so forth in the informal economy and they would all be broke if the average American always invested their money wisely. I place exactly as much trust in the government as I do in the average American; a very carefully qualified amount. Since the late 90s it has become easier and easier for individuals to invest in the stock market with less and less amounts of money, which is a positive development.... but this flexibility should be balanced against savings security when it comes to national policy.
     
  12. gkillion

    gkillion New Member

    People have been getting taken since the dawn of time, and I agree that it is usually because of their own ignorance. But should we all be expected to bail them out. Information is everywhere today. Claiming ignorance is not an excuse anymore.

    Talk about getting taken...when Social Security was devised the average life expectancy was less than 65.

    You mention savings security. Why not let the feds take our FICA contributions and put them in a money market or CD. It's not much, but it's a better, and more secure return than SS.

    I can't believe that any intelligent person is truly objectively opposed to changing the current system.
     
  13. nosborne48

    nosborne48 Well-Known Member

    qyatlanta,

    You are certainly right about ONE thing...a consequence of the "guaranteed contribution" type retirement plan replacing the traditional "guaranteed benefit" type plan (which I still have, thank God) was that it forced large numbers of people into financial investing who really have no business there.

    To pick stocks and bonds successfully requires at least three things:

    1) A sound knowledge of corporate finance;

    2) Careful, ongoing research; and

    3) Access to timely, accurate information.

    Very few individual investors are able or willing to invest wisely.

    Thing is, 80% or more of the professional money managers out there UNDERPERFORM the markets even though in theory they have all these things in spades.

    Sooo...according to Motley Fool, www.motleyfool.com, the best thing to do is invest in broad based, low fee index funds. And ANYBODY can manage to do THAT.

    As to gold, yeah, yeah, you're right, making money in gold bullion ain't likely. But over the long term, gold has been a fairly decent store of value.

    Indeed, a part of me can't resist the doubtless idiotic notion that specie based 100% metal backed hard money is probably a serious restriction on government largess and a significant protection of the savings of poor folks, but what do I know?

    P.S. I don't own gold. I prefer U.S. Savings Bonds. They are almost as safe and pay a tiny bit of interest.
     
  14. qvatlanta

    qvatlanta New Member


    True, as I mentioned earlier, "if you're going to be dumb, you've got to be tough". On the other hand, the changes would make things a lot more complicated for senior citizens to learn and understand, and this is the group that probably gets "taken" more than any other.
    Fixed income returns aren't necessarily the solution, since they'd be very influenced by interest rates and inflation, but they could be a part of a solution. I think the core of the idea behind Social Security is to have a safety net that protects people from bad luck and/or poor choices. I don't want to live in a country where I see 80-year-old women and small children begging on the street, as you so often see in countries with inadequate safety nets... and I like the idea that the safety net is there for me in case my own plans go horribly wrong. It's not a terribly good insurance system, and I think it definitely needs fixing, but making it more complicated while at the same time less secure is just not the way to go. I would like to see detailed analyses of what would happen in the new plan under these circumstances or a combination thereof:

    1) the value of the dollar crashes
    2) a major recession hits
    3) a major boom in the economy happens
    4) massive inflation
    5) a decline in immigration and population growth
    6) an increase in immigration and population growth

    I also admit I don't have any terribly good ideas on how to fix the present system.
     
  15. decimon

    decimon Well-Known Member

    I can't claim to be on top of this but Chile has long had a privatized system with a retained safety net. I've read that some Eastern European countries are doing much the same as Chile. There are examples to look at if you're interested to the point of near masochism. :)
     
  16. qvatlanta

    qvatlanta New Member

    Yep, that totally amazed me when I found it out. It made me feel better about cautiously investing some money myself. I figure that as long as I keep reminding myself that I don't really know what I'm doing and that the odds are only somewhat better than blackjack, I'm ahead of the game.

    I think right now European bond funds are a fairly safe (but not terribly high-income) investment considering the shakiness of the dollar.
     
  17. Mr. Engineer

    Mr. Engineer member

    Virtually every legitimate economist has run Bush's numbers and have come to the same conclusion - GW plan won't work.

    SS was never meant to be an investment and never really meant to be a sole source of income for retirees. To make it such invites disaster. What happens to those who make poor investments, or get taken (remember Enron and WorldCom investors?). Do they simply starve without any source of income? In the end, we all will pay.

    What really needs to be revamped is government pensions. I don't know about the federal level, but in CA, a Public Safety PERS retirement can get you 3/50. You can make up to 90% of the average of the highest 3 years of income for life after 30 years of employment. NO ONE in the private sector (other than top level execs) receives this. Why should government employees get this (non-PSE's receive 2%/55 which is still higher than most non-government employees). I support Arnold's plan to revamp PERS into a 401K type of system. That would save the state millions.
     
  18. decimon

    decimon Well-Known Member

    Is there any statement too outrageous for you?

    The problem here, Mr. Logician, is that no one is calling for SS to be a sole source of income for retirees. Your arguments have more straw than a horse ranch.
     
  19. -kevin-

    -kevin- Resident Redneck

    The Federal Employee Retirement System (FERS) is 1% per year and you must meet both time in service and age limitations to draw a retirement. (exceptions exist for law enforcement and some other positions)Social security is touted as being a part of the total retirement package. Most states have a better retirement system than the Feds. But to move into your points take look at the highest salary available to a federal employee and it rarely exceeds the mid six figure income. This same level of responsibility in corporate america is significantly higher. In the old CSRS system it was possible for a federal employee to draw 80% of the high three average salary. (CSRS employees are not eligible for SS based upon their federal service.)

    We all must make our own decisions of course, and while I understand your point I don't complain about my private sector counterparts making twice my salary. While I believe we as a society must care for those that cannot take care of themselves I have no sympathy for folks who made the wrong career choice or jumped on a fast moving train that wrecked (i.e dot.coms).

    You are exactly correct that social security shouldn't be the only retirement for an individual, unfortunately this is the case for many folks, and in some instances not of their own making.

    As for every leading economist against the President's plan. I believe Dr. Mankiw, a Harvard professor, is the advisor for the economic plan. So much for Harvard types, eh?
     

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