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Old 10-12-2008, 06:54 PM   #21
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I am against privatizing SS, but I am not against investing a portion of the trust fund in equities to increase the long-term rate of return above that which can be earned on Treasury securities. I would like to see a system that kept the benefit formulas the way they are now, but have the SS trust fund run like a pension plan. IMO, the main problem with privatizing SS is that it becomes impossible to "diversify across time", and folks who retire during a market downturn would lose benefits relative to those who retire when the market is performing well. Since most corporations have moved away from defined-benefit plans into defined-contribution plans (e.g., 401k's), the current SS model has become even more important as a portfolio diversifier.
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Old 10-12-2008, 07:02 PM   #22
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I think it was REW who brought up a good point about giving back the SS money.
You would have already paid tax on it, so maybe not as good a deal as you may think.
Not true. You either take a Schedule A Deduction for the repaid amount or Credit on Line 70 of 1040 in year of repayment for the difference in what your taxes paid were less any additional amount paid because of SS benefits repaid. (page 81 IRS Publication 17 for details as per IRC Ruling 1341). I will be doing it for this tax year and will receive a refund of every dollar I have paid on previous SS benefits received and repaid this year.
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Old 10-12-2008, 07:06 PM   #23
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Social Security

"Even an absolutely safe U.S. Treasury Bond or Note rate of return of 5% would significantly beat the current rate of return on Social Security benefits which is only about 1%. "

"An additional extreme negative associated with the Social Security pension is that the benefits die with the retiree whereas with self-funded private retirement plans there will be a death benefit equal to the remaining account balance in the private plan. "

Imagine if a mother and father were able to leave their privatized portion of SS to their children or favorite charity.

"Another extraordinary fact pertaining to this issue, and one that is relatively unknown by most Americans, is the fact that many federal and state employees already have fully-privatized retirement benefits. In other words, many federal and state employees have the equivalent of their entire Social Security tax go into an individual account plan that can earn a real market rate of return like in a Section 401(k) and the other private retirement plans discussed below."
When did that happen?
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Old 10-12-2008, 07:07 PM   #24
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Not true. You either take a Schedule A Deduction for the repaid amount or Credit on Line 70 of 1040 in year of repayment for the difference in what your taxes paid were less any additional amount paid because of SS benefits repaid. (page 81 IRS Publication 17 for details as per IRC Ruling 1341). I will be doing it for this tax year and will receive a refund of every dollar I have paid on previous SS benefits received and repaid this year.
Cool, that's the 1st good news I've heard in a while. Then Dex is right if the health is good it's a no brainer.
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Old 10-12-2008, 07:16 PM   #25
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Not true. You either take a Schedule A Deduction for the repaid amount or Credit on Line 70 of 1040 in year of repayment for the difference in what your taxes paid were less any additional amount paid because of SS benefits repaid. (page 81 IRS Publication 17 for details as per IRC Ruling 1341). I will be doing it for this tax year and will receive a refund of every dollar I have paid on previous SS benefits received and repaid this year.
This is good information OAG. Thanks.
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Old 10-12-2008, 07:59 PM   #26
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One of the last and IMO best proposal was to allow people to divert 2% of the their SS payments into the equivalent of the government employee Thrift Savings PLan TSP.

Looking at the 5 year share prices for the TSP we have the following.

G FUND F FUND C FUND S FUND I FUND

12.6445 11.8774 10.3219 12.5657 13.6660 Oct 10,2008
10.1600 9.8600 10.9700 11.8200 11.7200 Oct 3, 2003

So with the sole exception of the C fund which basically the equivalent of the S&P 500 all of the investment are up. (I'm not sure how dividends/cap gains are reflected) Not being fortunate enough to access to the TSP choices, I don't have data how actual participant fared, but I don't see how anybody who had been steadily saving for 5 years would have been devastated.

Any current/past government employees want to share there 5 year performance figures for TSP investing?
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Old 10-12-2008, 08:02 PM   #27
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One of the few benefits of a private SS plan would be that it could be set up so the government couldn't "borrow" it, as has been done, leaving nothing in the SS Trust Fund.

If the private plans were just invested in Treasuries with guaranteed returns, a "lock box" as Al Gore termed it, then I might be in favor of it.

I am and would always be against a private SS plan that would turn over the investment of it to private banksters. We can now see where that leads.
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Old 10-12-2008, 08:28 PM   #28
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I think it was REW who brought up a good point about giving back the SS money.
You would have already paid tax on it, so maybe not as good a deal as you may think.

I think you get credited (refunded) the tax you paid. A bit of extra work to figure it out tho.
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Old 10-12-2008, 09:05 PM   #29
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I think it was REW who brought up a good point about giving back the SS money.
You would have already paid tax on it, so maybe not as good a deal as you may think.
You can refile you taxes for a certain number of years - three? I don't think you could do it back eight years.
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Old 10-12-2008, 09:16 PM   #30
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So instead of privatizing social security by allowing us to put our own money in the stock market, the government is taking our tax dollars and buying company stock.

I'd rather put my own money in the stock market instead of giving it to the government to bail out companies for which I have no sympathy.
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Old 10-12-2008, 11:26 PM   #31
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Studies have shown that even putting all your and the companies contributions into 30 yr treasury bonds would have given you a much better income than the current system AND you might have had something to leave after your death.
The problem with this calculation is that it ignores the issue of who pays your parents living expenses while you are putting all of your taxes into treasury bonds.

We had private, informal, pay-as-you-go retirement programs before we had public pay-as-you-go plans like SS. (Anyone who said "I need to have enough children so I will have someone to care for me in my old age" was part of one of those private plans.) Social Security simply replaced the old paygo systems with a new paygo system.

If we want to move to an "advance funded" plan, some generation has to pay for both their parents retirement and their own retirement. So far, we haven't found the volunteers.
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Old 10-13-2008, 05:18 AM   #32
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You can refile you taxes for a certain number of years - three? I don't think you could do it back eight years.
Look back a couple of responses #24. Read the Instructions that come with your IRS 1040 - No amended returns, no 3 year look back, one time and fairly simple. 3rd Grade math like adding and subtracting 5 or 6 digit #'s.
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Old 10-13-2008, 06:41 AM   #33
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"Another extraordinary fact pertaining to this issue, and one that is relatively unknown by most Americans, is the fact that many federal and state employees already have fully-privatized retirement benefits. In other words, many federal and state employees have the equivalent of their entire Social Security tax go into an individual account plan that can earn a real market rate of return like in a Section 401(k) and the other private retirement plans discussed below."
When did that happen?
Never heard of it. I have no idea what they are talking about. Maybe our 5% TSP match? But, we still pay social security tax.

When I was on the faculty at LSU prior to my federal employment, I had a number of retirement options. One was making regular SS contributions, but it wasn't required; I chose instead to put that money in a 401K type of investment. But I haven't seen that option since working for the federal government.

As a consequence of my LSU choices, my future SS checks will be significantly lower than they might otherwise have been. In retrospect, I should have chosen SS.
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Old 10-13-2008, 07:54 AM   #34
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I think many of you are much more trusting of a government run system than I am. I'd rather be able to invest my money in some traditional conservative vehicles than pay into the current scheme. Or at least have the option to do it.
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Old 10-13-2008, 08:31 AM   #35
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I fundamentally disagree, but I am a pinko. I hope you are consistent in your views and would stop public funding of education. We could switch to users fees for those who utilize it. Why should we tax singles and gay couples to fund straight couples' kids' education? The answer, of course, is the good of society as a whole. Just the way I see a SS safety net for the poor.
As far as I can tell, pretty close to 100% of children do not have the ability to fund their own education, and the education of the masses benefits us all. OTOH, pretty much everyone has the ability to get a job and fund their own retirement, and I do not benefit from it at all (in fact it is a net loss to my pocketbook). Why should I be forced to help?

If we are going to publicly fund everyone's retirement, why not their healthcare, house,energy and car? Let's be honest, all of these are essential to living and participating in the modern world.

And please note, I have no problem with the government forcing people to save for retirement, because if they don't we are going to have loads of starving old people in the street, and the fact of the matter is that if this happens, we are going to help them. Thus, it is my interest to make sure they have a retirement. I just want them to fund their own.
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Old 10-13-2008, 10:18 AM   #36
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77, you can evidently re-do your taxes, or take a credit.

shhhhh!

(we don't want the tax folks to hear that...)

ta,
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Old 10-13-2008, 10:21 AM   #37
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With the markets melting down I'm sure glad that the politicians didn't succeed in the scheme to privatize social security. Shifting the risks to individuals didn't look nearly as stupid then as now.
What if one of the choices was investing in 10-year Treasuries? All the proposals I saw had that as a choice. Considering the internal IRR of SS is 2% or less, I would gladly take the Treasury option..........
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Old 10-13-2008, 12:04 PM   #38
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The problem with this calculation is that it ignores the issue of who pays your parents living expenses while you are putting all of your taxes into treasury bonds.

We had private, informal, pay-as-you-go retirement programs before we had public pay-as-you-go plans like SS. (Anyone who said "I need to have enough children so I will have someone to care for me in my old age" was part of one of those private plans.) Social Security simply replaced the old paygo systems with a new paygo system.

If we want to move to an "advance funded" plan, some generation has to pay for both their parents retirement and their own retirement. So far, we haven't found the volunteers.
not true - it was to phased in starting with young workers- parents ok
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Old 10-13-2008, 12:51 PM   #39
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What if one of the choices was investing in 10-year Treasuries? All the proposals I saw had that as a choice. Considering the internal IRR of SS is 2% or less, I would gladly take the Treasury option..........
I'm sure you are probably right about the IRR, but I just tried calculating it for my own case. I am age 53 and having been paying in since 1987.

I have entered the total contributions year by year (including employer contributions and checked against my SS statements). Other than 1987 which was a part year for me, I have always hit the max contributions. I entered the contributions year by year and continued that on for this year and next (after which it is zero as I will be RE'ed).

I went on-line and got an SS estimate under that same scenario which says $1,427/mo at 62

SS is COLA'ed so to get an equivalent lifetime COLA'ed annuity I went on the VG website and for lifetime annuity of $1,427/mo with 50% survivor for spouse they quoted $322,000 (which is $106K less than if I had assumed 25 x annual income for self funding).

That gives an IRR of 2.44% to get to $322K or 3.95% to get to $428K.

Still not a wonderful IRR but better than I expected from reading here.

So what am I doing wrong in my calculation?
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Old 10-13-2008, 01:06 PM   #40
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So what am I doing wrong in my calculation?
I answered my own question. I filled in the VG form wrongly, and the quote was $271,039 for me and DW at age 62.

... and that gives an IRR of 1.51%
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