Inflation and SS Triggers

[indiajust]

Social Security operates on a pay-as-you-go (PAYGO) basis; almost all of the funds coming in are immediately paid out to current beneficiaries. This system displaces private, fully funded alternatives under which the funds coming in would be saved and invested for the future benefits of today’s workers. The result is a large net loss of national savings, which reduces capital investment, wages, national income, and economic growth. Moreover, by increasing the cost of hiring workers, the payroll tax substantially reduces wages, employment, and economic growth.

--- This is a more investing centric approach to the problem. It's from a 1994 report on FICA.

 

[indiajust]

If all Social Security payroll taxes were privately invested, that investment would produce a net benefit of from $10 trillion to $20 trillion in present value.

---- A different way of saying the same thing.

 

[youbet]

I think it would help if boomers paid for a greater share of the retirement resources we are consuming between SS and Medicare.

+1

Very much agree! Burdening youngsters with a lopsided burden because we Boomers didn't pay in enough vs. what we are consuming is the wrong thing to do.

 

[youbet]

If all Social Security payroll taxes were privately invested, that investment would produce a net benefit of from $10 trillion to $20 trillion in present value.

---- A different way of saying the same thing.

I'd like to read some more about that. Where did you find those numbers?

 

[pb4uski]

Choosing a retirement location is hardly a one dimensional choice, as a quick peek at the ex-pat sites show. The benefits of reform will have no effect on me, as I am already at the finish line. Future generations will pay taxes and opportunity for naught.

I carried my quotes around in a hanging file folder, pre-Internet. Too many moves to keep the heavy paper copies and journals. Like my color family pix from the 70's that turned to purple and brown mud in the albums, it no longer exists.

My expectation is that the reform bill is already written and waiting for the crisis, just like the patriot act, and we will pass it to find out what it contains.

Until then my worst case plan covers the monetary destruction to pay for these programs. It is anyones guess how the demographic decline will interact with these programs. Younger folks can't fix it, and if elders won't, then it breaks in an uncontrolled manner.

And we are back to pirate territory.

I see, you're one of those glass-half-full types.

 

[pb4uski]

I'd like to read some more about that. Where did you find those numbers?

Yeah, good luck with that. S/he's just making stuff up.

 

[pb4uski]

Social Security operates on a pay-as-you-go (PAYGO) basis; almost all of the funds coming in are immediately paid out to current beneficiaries. This system displaces private, fully funded alternatives under which the funds coming in would be saved and invested for the future benefits of today’s workers. The result is a large net loss of national savings, which reduces capital investment, wages, national income, and economic growth. Moreover, by increasing the cost of hiring workers, the payroll tax substantially reduces wages, employment, and economic growth.

--- This is a more investing centric approach to the problem. It's from a 1994 report on FICA.

We've already tried that with the current 401k/403b, et al retirement saving programs and it has been a HUGE failure. If people actually saved, then it would have a decent chance of success, but they don't.

The way middle income people live beyond their means and live from paycheck-to-paycheck, it is outrageously naive to presume that if SS didn't exist that what is now collected in SS taxes would be saved and invested... it would be spent on even more living beyond their means and then they wouldn't have a bottle to piss in when they retired... that would be an unmitigated disaster.

 

[athena53]

There's a famous quote from an early FICA administrator who admitted that folks were supposed to die and never get paid anything. An actuarially sound program eliminates killing the customer to balance the books. That allows the less healthy to both participate and use as needed, while eliminating a "final solution" approach that is all too common in government.

Well, of COURSE that's how SS works. It's how every annuity-type program works, including the actuarially-sound ones. When actuaries evaluate how well-funded private plans are, they take mortality into account. I'd have to do some research but I believe that when the retirement age of 65 was originally set for SS, about half of people were expected to die before that age. Their contributions will fund benefits for the people who do live to collect. In the case of SS and some private plans, of course, there may be benefits for survivors.

 

[jazz4cash]

This latest subject needs to be a thread of it’s own, maybe in the Public Policy Forum.

 

[MRG]

We've already tried that with the current 401k/403b, et al retirement saving programs and it has been a HUGE failure. If people actually saved, then it would have a decent chance of success, but they don't.

The way middle income people live beyond their means and live from paycheck-to-paycheck, it is outrageously naive to presume that if SS didn't exist that what is now collected in SS taxes would be saved and invested... it would be spent on even more living beyond their means and then they wouldn't have a bottle to piss in when they retired... that would be an unmitigated disaster.

+1
For a decade my VP insisted his leadership talk to our staff about the importance of contributing to their 401k accounts. So every year I talked, one on one, with about 30 people, all well compensated IT professionals. What an eye opener that was. Very few even contributed enough to get the employer match!

Then I know what a self employed family member did. Their mostly cash business had few controls on what was reported to the government and FICA paid; they're surprised how little they are entitled to, but they always had a new vehicle. Today they struggle to find that bottle.....

 

[Chuckanut]

If all Social Security payroll taxes were privately invested, - that is the rub. Who invests them? How? What happens if the investments don't do well.

 

[Gumby]

If all Social Security payroll taxes were privately invested, - that is the rub. Who invests them? How? What happens if the investments don't do well.

And if the government is doing the investing, how do you prevent politicians from directing that the program invest in things they like and shun things they loathe. For example, I have done quite well with Altria over the years, but I can imagine certain politicians pitching a fit if the hypothetical "national retirement fund" were invested in that.

 

[CRLLS]

And this is why the privatization of SS has been discussed for at least 25 years. I was brought up with the 3 legged stool analogy for retirement, Social Security, Pension and private savings. Unfortunately, pensions have changed considerably. most corporations have moved to 401K's, leaving pensions in the dust. I have then seen companies change from offering matching funds to no match. Either way, 2 of the 3 legs today are under the control of the individual in their investing of their nest-egg. I have seen how many did not sign up for 401k's causing laws to be made for new hires to automatically be enrolled unless action was taken to decline. Sadly, many decline. I think those same people are the ones that are not building their own personal savings for retirement. People are so stupid!

I would hate to see the SS convert to privatization for nothing else but to provide some stability in retirement savings. I think of it as a 67/33 AA, where the 33 is SS and is the equivalent of bonds. Not the greatest return, but stable and calculatable. It never was intended to be a high-risk investment.