Could you retire without social security?

[Westernskies]

But, the people who "qualified .. under the current requirements" wrote tax rates and benefit formulas. If the taxes are inadequate to fund the benefits, I'm not sure if "we" should feel bound by them.

We already have "self-funded/self-directed buy up options to complement SS minimums". Anybody can choose to save more, we even give tax incentives to people who save with IRAs, 401Ks, etc. What more do you mean?

"We" all live under a system of representative government. If you don't like what happened in the past, elect leaders who [-]promise what you want to hear[/-] can deliver the changes you feel are necessary in the future; you can't rewrite history to suit the present, and selectively decide which programs you want to be "bound by". You get the same voice in the process as anyone else.

 

[samclem]

Quote:
Originally Posted by samclem
In funding their pensions, do private companies normally buy their own bonds to finance 100% of their ABO/PBO?

No, but if they did they would get complementary government housing!

Yeah, that's one of the problems with saying SS should be run like a private pension system. Private corporations pile up govt bonds and make other investments that are intended to pay for the benefits they've promised retirees. It doesn't work when the US government does this--when they buy corporate stocks and bonds, that makes the US government part owners of private companies, which isn't good. When they "invest" the money in government bonds, that just means they spent the money and have an IOU, from and to themselves for that amount. There's no money in a "lockbox", all the IOUs need to be paid back by taxpayers when due, or rolled over into even more debt. That starts in a couple of years, it's not the oft-cited 2040 date when SS "runs out of money." SS starts to be a big political headache as soon as outflows exceed inflows. It already happened briefly last year (IIRC).

 

[Independent]

"We" all live under a system of representative government. If you don't like what happened in the past, elect leaders who [-]promise what you want to hear[/-] can deliver the changes you feel are necessary in the future; you can't rewrite history to suit the present, and selectively decide which programs you want to be "bound by". You get the same voice in the process as anyone else.

You are correct that we can't rewrite history. The taxes and benefits paid in the past are all water over the dam. But, with regard to SS, we (e.g. voters/congress) can change the benefit formula for current and future retirees.

I was actually more interested in the other part of your post. What's the SS1 and SS2 you're talking about?

 

[Westernskies]

You are correct that we can't rewrite history. The taxes and benefits paid in the past are all water over the dam. But, with regard to SS, we (e.g. voters/congress) can change the benefit formula for current and future retirees.

I was actually more interested in the other part of your post. What's the SS1 and SS2 you're talking about?

Just thinking at this point ...but here are my initial musings:

SS1 would be our current system. Those already retired and in the system keep collecting based on the benefit formulas they paid into and are (in my mind ) owed.

SS2 would be the new system, whatever it looks like (new and improved with higher premiums, lower payouts, better payouts, lower premiums, a prize in every box- we don't know and can only speculate and argue about what it should look like at this point) People just entering the workforce would be covered under SS2.

Those of us caught in the middle (I'm 53 for example) would collect a pro-rated benefit based on their years of eligibility in either system. (in my case ~35 years of SS1 and ~12 years of SS2)

Seems like a good way to balance past promises with future realities. Similar programs are working with public and private pension plans, union contracts, etc.

YMMV.

 

[saluki9]

Yeah, that's one of the problems with saying SS should be run like a private pension system. Private corporations pile up govt bonds and make other investments that are intended to pay for the benefits they've promised retirees. It doesn't work when the US government does this--when they buy corporate stocks and bonds, that makes the US government part owners of private companies, which isn't good. When they "invest" the money in government bonds, that just means they spent the money and have an IOU, from and to themselves for that amount. There's no money in a "lockbox", all the IOUs need to be paid back by taxpayers when due, or rolled over into even more debt. That starts in a couple of years, it's not the oft-cited 2040 date when SS "runs out of money." SS starts to be a big political headache as soon as outflows exceed inflows. It already happened briefly last year (IIRC).

I've worked with pension plans for almost 15 years now, I'm well aware of how they run.

There is no reason the US couldn't establish something similar to a sovereign wealth fund

 

[bbbamI]

Bacon is good! Even though there isn't any bacon in my shrimp po'boy.

Oh those are shrimp...that makes sense. When I first looked at it I thought those were tater tots.

Bowing out now...carry on all...

 

[samclem]

I've worked with pension plans for almost 15 years now, I'm well aware of how they run.

There is no reason the US couldn't establish something similar to a sovereign wealth fund

And as a citizen, I'm "well aware" that there's a perfect reason the US shouldn't do this--because there's zero potential that there won't be political meddling in decisions on which securities to buy (Halliburton? Altria?) and in the management of the companies. The last time "we" bought a company we fired the CEO.
I suppose someone will suggest a blind trust, or neutral investment management. Sure . . .

 

[Westernskies]

Oh those are shrimp...that makes sense. When I first looked at it I thought those were tater tots.

Bowing out now...carry on all...

Only those "rich" SS recipents can afford to eat shrimp. It'll be tater tots for the rest of us.

Thread is now back on track. Glad I could do my part to help.

 

[Westernskies]

There is no reason the US couldn't establish something similar to a sovereign wealth fund

We had one. Worked great for years. It was called Social Security. Unfortunately, it went the way of Medicare, Medicaid, Freddie Mac, Sally Mae, Cash for Clunkers, Energy Star Appliance Rebates, Student Loans, Free Cheese, Savings and Loans , PBGC, and and a whole myriad of other government-funded/underwritten/subsidized/managed programs.

I don't want a "sovereign wealth fund" here in the US, it would just create the next financial meltdown/bailout/ finger-pointing/hand-wringing/ "no one saw it coming" / "it is all the previous generations' fault" situation; albeit on a potentially unrecoverable scale.

 

[GregLee]

I just can't get interested in this issue of the SS system going broke. I don't think it can, provided the Federal Government remains solvent. (Now that might be a problem.) It just seems like an accounting problem of how we rationalize the expense of all those payments to retirees. As we all know, there's no "trust fund" in any real sense. We can continue to try to fund the SS payments from SS tax income, but we don't really need to. We could take the moneys from general revenues or, which these days is the same thing, get it by selling more Treasury bonds. It will be gotten somehow, because too many voters want those SS checks. In my view, the future of the SS system is as secure as the credit of the US government.

 

[Nodak]

I remember being 21 years old in my first Megacorp job and having people tell me that SS would be gone by the time I retired. That was 42 years ago and it hasn't happened yet. I get minimal SS due to my CSRS pension but it goes into a savings account and I haven't needed it yet.

 

[samclem]

In my view, the future of the SS system is as secure as the credit of the US government.

You said it. In the news today:

Two major credit ratings agencies warned Thursday that the United States might tarnish its triple-A credit rating if its national debt kept growing.
It was not the first time the agencies, Standard & Poor’s and Moody’s Investors Service, warned that the nation’s gilt-edged rating might fall into jeopardy.
But the two statements, made within hours of each other, were seized on by deficit hawks as further evidence that the government must reduce spending and debt to avert disaster.

 

[saluki9]

I don't want a "sovereign wealth fund" here in the US, it would just create the next financial meltdown/bailout/ finger-pointing/hand-wringing/ "no one saw it coming" / "it is all the previous generations' fault" situation; albeit on a potentially unrecoverable scale.

Here's a hint, we already have a couple of them

 

[Westernskies]

Here's a hint, we already have a couple of them

So, create another?

 

[Independent]

Just thinking at this point ...but here are my initial musings:

SS1 would be our current system. Those already retired and in the system keep collecting based on the benefit formulas they paid into and are (in my mind ) owed.

SS2 would be the new system, whatever it looks like (new and improved with higher premiums, lower payouts, better payouts, lower premiums, a prize in every box- we don't know and can only speculate and argue about what it should look like at this point) People just entering the workforce would be covered under SS2.

Those of us caught in the middle (I'm 53 for example) would collect a pro-rated benefit based on their years of eligibility in either system. (in my case ~35 years of SS1 and ~12 years of SS2)

Seems like a good way to balance past promises with future realities. Similar programs are working with public and private pension plans, union contracts, etc.

YMMV.

I think that if you take this a little further you'll discover there's a shortage of dollars. To take the simplest example, suppose SS2 works like this "You pay the same tax rate, but 100% of your taxes go into your individual account". In your case, you'd expect to retire with 35/49 of your SS1 benefit, plus any income you can generate from your individual account.

That sounds good until you try to find the person who's paying taxes into SS1 15 years from now to fund your substantial SS1 benefit. All the active workers' taxes are going into their individual accounts.

We'd all like to believe there is some other structure for SS2 that will make this work, it's just a matter of fiddling with the variables. Lots of people have tried, AFAIK, nobody has succeeded.

 

[Independent]

I've worked with pension plans for almost 15 years now, I'm well aware of how they run.

There is no reason the US couldn't establish something similar to a sovereign wealth fund

I can understand why people would be concerned about the politics of a gov't owned pile of private investments, but that's a second level issue to me.

The first issue is finding the money to buy those investments. If your work with private plans includes calculating an APO, you should be good enough with math to take a run at the numbers.

Every example I've seen of converting SS into a pre-funded (at least nominally pre-funded) plan runs out of money. Some generation ends up paying for two retirements (their parents and their own), or some generation doesn't get any retirement benefits at all, or two generations each get half the bad results, etc.

Have you looked at the numbers?

 

[saluki9]

The first issue is finding the money to buy those investments. If your work with private plans includes calculating an APO, you should be good enough with math to take a run at the numbers.

Every example I've seen of converting SS into a pre-funded (at least nominally pre-funded) plan runs out of money. Some generation ends up paying for two retirements (their parents and their own), or some generation doesn't get any retirement benefits at all, or two generations each get half the bad results, etc.

Have you looked at the numbers?

I have, but only out of my own curiosity.

Any time you take a "pay-go" plan and try to turn it into a funded plan you are correct that one generation winds up paying twice. I however would like to see what would happen if in years when the program is running a surplus we were able to earn returns of 1 or 2% higher that the program does by purchasing treasury securities.

 

[samclem]

I however would like to see what would happen if in years when the program is running a surplus we were able to earn returns of 1 or 2% higher that the program does by purchasing treasury securities.

We'd have to hurry . . . we might have a couple more years of surpluses, depending on the economy of course.
Still, it's possible in theory that we might convert a portion of the pile of treasury securities (money we owe ourselves) into some type of sovereign wealth fund. But, to do that we'd have to either:
1) Pay ourselves off with real money so we'd have money with which to buy these private or foreign equities. I don't think we've got a source of real money for that, unless we print it.
2) Just offer to give some of these treasury securities to the holder of the equities we want--a simple exchange. I'm not sure that would send the right message to the world markets. The last thing we want is for foreigners to stop buying US treasury securities, but they might lose faith if they see even the US government doesn't want to hold them.

So, thank goodness, it's probably impractical.

 

[movaly1]

I'm hoping to retire in 14-18 years... and I am not counting SS in any of my calculations.

 

[79protons]

This thread is getting old. SS is safe...probably as safe as the public pension system, but you don't see many posts about people saying they are not counting their pension in their retirement plans...

 

[haha]

This thread is getting old. SS is safe...probably as safe as the public pension system, but you don't see many posts about people saying they are not counting their pension in their retirement plans...

Like Robert Shiller says, almost everything is a to a large degree a media manipulated fad.

The dominant current manipulation is to make people assume, and thus accept, that they have no right to expect social security, and that they will thus not get it, or it will be greatly reduced, or that it is stealing from younger people, or that it is merely "welfare" or whatever.

The public workers' unions are a bit harder nut to crack, they may take a few more years of softening up first.

Ha

 

[Westernskies]

This thread is getting old.

Thanks for doing your part.

 

[harley]

This thread is getting old. SS is safe...probably as safe as the public pension system, but you don't see many posts about people saying they are not counting their pension in their retirement plans...

The question wasn't whether SS is safe or not, it's could you retire without it. Being of fairly conservative bent (financially), ~60% of the people here say they could. When asked why they would bother, they said they don't count on it, but will accept whatever they can get. If you read through the thread, it's the people that are counting on it that have gotten all offensively defensive.

Personally, I believe SS is as safe as a federal gov't pension.

 

[79protons]

The question wasn't whether SS is safe or not, it's could you retire without it. Being of fairly conservative bent (financially), ~60% of the people here say they could. When asked why they would bother, they said they don't count on it, but will accept whatever they can get. If you read through the thread, it's the people that are counting on it that have gotten all offensively defensive.

Personally, I believe SS is as safe as a federal gov't pension.

My point was why not count on SS if it lets you retire a number of years earlier than you could if you don't count on it? I guess if you really love your j*b, 40+hr work week, and commute, then you are well served by not counting on SS in your estimate of a retirement portfolio, but then I would also suggest that you not count your public pension (for those that have one) in order to be equally safe and conservative.

Maybe everyone in the 60% section of the poll is not depending on a public pension in their retirement plans, but I sure do see a lot of posts about FIRE where people say "I have x saved and will get a small pension" instead of "I have x saved and may get a small pension but have left it out of my calculations just like I am leaving out SS"

 

[Independent]

I have, but only out of my own curiosity.

Any time you take a "pay-go" plan and try to turn it into a funded plan you are correct that one generation winds up paying twice. I however would like to see what would happen if in years when the program is running a surplus we were able to earn returns of 1 or 2% higher that the program does by purchasing treasury securities.

Almost all those surplus years are behind us. Looking forward, I'd say the answer is "too little to notice". The Trustees' Report has a lot of tables, IV. B1. seems relevant 2010 Trustees Report: Section IV.B, Long-range estimates