Retirement Security for All

[ronocnikral]

Quote:

Originally Posted by keegs Dex, A worker at the BMW assembly plant in South Carolina makes half the salary and benefits of his counterpart in Germany. It has double the union participation rate of the US. It has a system of universal health care. It has some of the highest energy costs in the industrialized world. It also has the second largest export economy in the world just behind China. Globalization is part of this no doubt, however it's not the full story.

if you're suggesting we follow a model of other countries, i'm sure the average voter would vote down that proposition if given all the facts. while the US is roughly 3.5x larger by population than germany, the US also lacks the generally higher income tax rates, the ~15% or so SS/healthcare tax (other half matched by employer) and the 19% VAT.

if we could "fix" SS to keep it solvent for an infinite number of moons and distribute the burden of that balance to everyone, i would be happy to turn it more into a limited insurance program to provide basic necessities to those who are unable to. of course, the debate then turns into what are "basic necessities."

[zinger1457]

We have to accept the unfortunate conclusion that the majority of Americans are ignorant about personal finances. Never mind the debt and credit problems that so many get themselves into. Was reading an article in Money magazine that stated 45% of Americans believe that 10-15% is a safe withdrawal rate to keep their retirement savings from running out, 26% believe 7% is a safe withdrawal rate. Unless we can fine a good way to educate our folks on finances we probably need a system that forces them to save toward a personal pension plan, would like to see one that can be transferred from one company to another like a 401K.

[clifp]

Quote:

Originally Posted by brewer12345 Let's make this really easy: there is no foolproof panacea.you pays your money and you takes your chances. And not everyone gets the same deal.

I think the biggest problem with our current pension system, and many of the proposals is that benefits are completely divorced from the economic situation of the institution (company, city or country) that provides the funding. The Detroit Three pensions are a classic example, other than health care cuts AFAIK GM retirees didn't see their benefits cut until the very end. We are seeing same thing with city and state pensioners, the mere thought of them not getting the mandatory annual increase is causing howls of protest.

I don't believe it is a possible to design a pension system which says if you contribute X$ over Y years we are going to give you a pension of $Z for the rest of your life no matter what happens. The world is too uncertain for us ever to have made that promise and it is irresponsible for us to do so in the future.

We a need a system that recognizes that when the Dow drops from 14,000 to 7,000, interest rates go from 5% to 0%, inflation drops from 3% to 0%, and unemployment jumps from 4.5% to 9.5%, that keeping social security and pension (both public and private) checks the same is crazy.

Now I am not advocating that we tie your pension check size to the Dow Jones directly. We need to buffer and moderate the effects. However, I don't think it is unreasonable to have seen a decrease of 5-10% in SS and pension checks in the last couple of years. Plenty of American families have had to with getting by on one instead of two income, many many more have seen a cut in their hours and/or wages. By and large retirees have accumulated the stuff they absolutely must have cars, houses, clothes and are in a better position than a single mom who's full time job just cut cut back to 20 hours a week to tighten their belt.

[harley]

Quote:

Originally Posted by GregLee Oh, I don't think so. The libertarian position is that charity should be private, not governmental, as I recall.

Nope, that is the liberal interpretation of the libertarian position. For some reason liberals can't spell anarchist, so they replace it with libertarian. In the first place we aren't talking about charity. That definitely belongs in the private sector. But a good case could be made that a minimal lifestyle for poor, unlucky, or incapable citizens is a function of the gov't. Maybe the federal government, maybe state level. But Sam's comment was pretty accurate.

I personally like the option I read in a SF book long ago. Let those who can't or don't want to work live in cheap housing, eat nutrutious if not delicious food, have free pot, beer, and cable TV. That will keep them happy. Then those who like to work or want a better lifestyle can get on with it. JMO, of course. Not the platform of the Libertarian Party.

[Rustic23]

Clifp,
It should not be who can do what easier, or fairer. IMHO, a pension is a promise/contract. At the end of a work week, does your employer, look around and distribute the weeks payroll based on who needs it the most? Or, does he distribute it based on what he promised to pay each individual.

[samclem]

Quote:

Originally Posted by Independent I think Sam was referring to my post. The difference is that the current SS system has graded benefits that reflect what you earned when you were working. My suggestion was that everyone gets the same flat, minimal benefit.

Yes. No "progressive" payout as there is with SS. Everyone pays the same absolute $$ in and receives the same absolute $$ out (per month--the ultimate value of the payout depends on how long the recipient lives).

Next we have to decide if these are individual benefits or family benefits. I'd say it's most equitable if these are individual benefits earned via an individual work record. If Mr and Mrs Smith want two of these safety-net level checks in their retirement years, then they both would need to have a work history. I suppose the plan could also include provision for electing a "survivor's benefit" payout based on joint life expectancy.

Yes, an "absolute" Libertarian might balk at the idea of any govt seizure of personal assets for this purpose. I'm sympathetic to that. But given the real situation (a Supreme Court that is not strictly constructionist in outlook and which will not prohibit government wealth transfers), this is probably the least intrusive way to prevent steps that would be far worse.

It could also be done at the states, rather than at the federal level. I'm sure NY would set higher taxes and greater benefits than MS. That's the way the cookie crumbles--the taxes and benefits established by the states would be yet another factor that allowed states to tailor programs to suit their situations.

[haha]

Quote:

Originally Posted by zinger1457 We have to accept the unfortunate conclusion that the majority of Americans are ignorant about personal finances. Never mind the debt and credit problems that so many get themselves into. Was reading an article in Money magazine that stated 45% of Americans believe that 10-15% is a safe withdrawal rate to keep their retirement savings from running out, 26% believe 7% is a safe withdrawal rate. Unless we can fine a good way to educate our folks on finances...

The difficulty is that most non-masochists would turn and walk away if told that from $1million they could only safely take $35-$40,000.

ha

[GregLee]

Quote:

Originally Posted by harley I personally like the option I read in a SF book long ago. Let those who can't or don't want to work live in cheap housing, eat nutrutious if not delicious food, have free pot, beer, and cable TV. That will keep them happy. Then those who like to work or want a better lifestyle can get on with it.

I think there was a Robert Heinlein story whose premise was that when taxes rates were reduced, private companies became so much more productive that the government had to somehow avoid controlling too much wealth, so it started giving all citizens a "social dividend", sufficient for a comfortable, but not a luxurious, life.

[clifp]

Quote:

Originally Posted by Rustic23 Clifp, It should not be who can do what easier, or fairer. IMHO, a pension is a promise/contract. At the end of a work week, does your employer, look around and distribute the weeks payroll based on who needs it the most? Or, does he distribute it based on what he promised to pay each individual.

The most successful companies (and not just financial services like Goldman Sacks but even steel companies like Nucor) tie a large portion of employee compensation to the overall profits of the company as well as the output of the employee and/or team. During good times employees may get an additional 10-30% bonus for rank and file employee, and 50% to 200% for managers and executives. During bad times these companies typically ask employees to take pay cuts in the 10+% range first before resorting to mass layoffs (Although in this recession I think they did both.)

I agree that pension are treated as promises/contracts. The problem is that institution making these promises were never in a position to keep them. We know this now, witness Social Security, state pension funds, and the large number of private pension plans being taken over by the PBCG.
It is delusional to think that a company, city, or even country can tell a 25 year old if you save X% of your salary now, we will pay you Y % of your salary in 50 years when you are 75. The only thing we know for certain about the world 50 years from now is that it will be much different than today.

[haha]

Quote:

Originally Posted by clifp It is delusional to think that a company, city, or even country can tell a 25 year old if you save X% of your salary now, we will pay you Y % of your salary in 50 years when your are 75. The only think we know for certain about the world 50 years from now is that it will be much different than today.

Well, it came up roses for people who made just that bet with any government entity over the past 50 years or so.

[brewer12345]

Quote:

Originally Posted by clifp I think the biggest problem with our current pension system, and many of the proposals is that benefits are completely divorced from the economic situation of the institution (company, city or country) that provides the funding. The Detroit Three pensions are a classic example, other than health care cuts AFAIK GM retirees didn't see their benefits cut until the very end. We are seeing same thing with city and state pensioners, the mere thought of them not getting the mandatory annual increase is causing howls of protest. I don't believe it is a possible to design a pension system which says if you contribute X$ over Y years we are going to give you a pension of $Z for the rest of your life no matter what happens. The world is too uncertain for us ever to have made that promise and it is irresponsible for us to do so in the future. We a need a system that recognizes that when the Dow drops from 14,000 to 7,000, interest rates go from 5% to 0%, inflation drops from 3% to 0%, and unemployment jumps from 4.5% to 9.5%, that keeping social security and pension (both public and private) checks the same is crazy. Now I am not advocating that we tie your pension check size to the Dow Jones directly. We need to buffer and moderate the effects. However, I don't think it is unreasonable to have seen a decrease of 5-10% in SS and pension checks in the last couple of years. Plenty of American families have had to with getting by on one instead of two income, many many more have seen a cut in their hours and/or wages. By and large retirees have accumulated the stuff they absolutely must have cars, houses, clothes and are in a better position than a single mom who's full time job just cut cut back to 20 hours a week to tighten their belt.

I will start by stating that I think the average long term board reader will be unlikely to ever consider me to be a shill for the insurance industry. (i.e. consider yourself warned)

There is a way to do this that is reflective of economic reality, while softening the blow. If you look at the history of the life insurance industry, many mutual insures sell "participating" policies. Put simply, the insurer sells a product (whole life insurance, fixed annuity, etc.) and guarantees certain minimum policy benefits over the long term. These minimum guarantees are typically way "out of the money" and not likely to get triggered in most states of the world. These guarantees are also backed by the insurer's capital base. Anything beyond the minimum guarantee depends on how well the insurer does with a particular block of policies. If they have good insurance experience and/or above expected investment returns, that is reflected over a period of years in the policyholder's return. Conversely, if they have bed experience/results the policyholders take the hit as well.

There are plenty of drawbacks and potential pitfalls to this sort of thing, but there is a model out there. But it is expensive and most of the electorate are firm believers in something for nothing.

[clifp]

Quote:

Originally Posted by brewer12345 There is a way to do this that is reflective of economic reality, while softening the blow. If you look at the history of the life insurance industry, many mutual insures sell "participating" policies. Put simply, the insurer sells a product (whole life insurance, fixed annuity, etc.) and guarantees certain minimum policy benefits over the long term. These minimum guarantees are typically way "out of the money" and not likely to get triggered in most states of the world. These guarantees are also backed by the insurer's capital base. Anything beyond the minimum guarantee depends on how well the insurer does with a particular block of policies. If they have good insurance experience and/or above expected investment returns, that is reflected over a period of years in the policyholder's return. Conversely, if they have bed experience/results the policyholders take the hit as well. There are plenty of drawbacks and potential pitfalls to this sort of thing, but there is a model out there. But it is expensive and most of the electorate are firm believers in something for nothing.

Participating policies, I haven't heard that term in a very long time. I am guessing the insurance industry doesn't push it much lately. But this is essentially what I am talking about.

I also have no objection to what Sam says and W2R is concerned about. I certainly don't want to see homeless old folks living in tent cities, and I more than happy to pay additional taxes/receive lower benefits to support this minimum level of benefits. In my ideal world most retirement saving would be controlled by the individual. However as we know lots of people are clueless about money and the government has some obligation to protect them from their own stupidity. If for no other reason than to keep the rest of us from having to support them in their old age. So I would favor requiring a mandatory conversion of a portion of your retirement account into one of participating annuities.

So for example at age 68 you had 1 million saved up in your retirement account and the minimum 'pension' benefit was say $1500 month, you'd need to purchase one of these annuities that paid at at least $1500/month. How you investing the remaining money was up to you but taxpayers would no longer be on the hook if you meet Bernie Madoff...

[M Paquette]

Quote:

Originally Posted by GregLee I think there was a Robert Heinlein story whose premise was that when taxes rates were reduced, private companies became so much more productive that the government had to somehow avoid controlling too much wealth, so it started giving all citizens a "social dividend", sufficient for a comfortable, but not a luxurious, life.

"Beyond This Horizon"

The citizens received an annual dividend courtesy of the social credit, an oldie but goodie, where supposedly surplus production, a sort of economic growth, would be balanced by a surplus credit (the value of the production) paid as the dividend. The model proposed by Douglas as his Social Credit system doesn't match up well with modern understandings of economics or monetary systems.

[GregLee]

Quote:

Originally Posted by M Paquette "Beyond This Horizon" The citizens received an annual dividend courtesy of the social credit, ...

Yes, thank you. That's the one I was thinking of.

[harley]

Quote:

Originally Posted by M Paquette "Beyond This Horizon" The citizens received an annual dividend courtesy of the social credit, an oldie but goodie, where supposedly surplus production, a sort of economic growth, would be balanced by a surplus credit (the value of the production) paid as the dividend. The model proposed by Douglas as his Social Credit system doesn't match up well with modern understandings of economics or monetary systems.

Quote:

Originally Posted by GregLee Yes, thank you. That's the one I was thinking of.

excellent book. But I was actually trying to remember Mercenary from Tomorrow - Wikipedia, the free encyclopedia by Mack Reynolds.

Quote:

Welcome to the corporate wars! It's a crooked road to world peace...but it works. Warfare between nations has been banned. Taking it's place are the Corporate Wars-full scale battles between mercenary armies hired by large corporations ostensibly to settle trade disputes. But the wars are also free entertainment for the masses. In a world where most jobs have been taken over by automation, free tranquilizers have to be issued to the vast lower class to keep them subdued. The Corporate Wars offer what little excitement their lives hold - deadly serious fighting action - live and in color. But when you play with armies, you play with fire. The world's leaders seem to have forgotten that, but Joe Mauser hasn't.

[keegs]

Quote:

Originally Posted by ronocnikral if you're suggesting we follow a model of other countries, i'm sure the average voter would vote down that proposition if given all the facts. while the US is roughly 3.5x larger by population than germany, the US also lacks the generally higher income tax rates, the ~15% or so SS/healthcare tax (other half matched by employer) and the 19% VAT. if we could "fix" SS to keep it solvent for an infinite number of moons and distribute the burden of that balance to everyone, i would be happy to turn it more into a limited insurance program to provide basic necessities to those who are unable to. of course, the debate then turns into what are "basic necessities."

Morning Ron,

I was responding to Dex's comments regarding labor costs and US global competitiveness (or perhaps the lack thereof).

Clearly we're not going to maintain our living standard exporting tube socks but I don't believe labor costs tell the whole story here. As I pointed out, Germany has maintained a competitive manufacturing sector despite its relative high cost structure, including as you mention, its very high taxes.

So what's their secret and how can we steal it? That's my point.

Perhaps some of our problem here in the US (assuming you see this as a problem of course) has to do with corporate quarterly earnings pressures and perhaps to court rulings as it relates to shareholder rights etc..etc.....

For example there's the odd businesses model like Costco, which routinely outperforms its competitors only to take a pounding from WS for its generous hourly compensation packages. It's interesting to me that corporate executives aren't likewise taken to task or to court for their bazillion dollar pay packages or their reckless management decisions.

So maybe one could conclude this has something to do with the golden rule?

As this all relates to SS though...my position is that it's fully funded until 2040. I have never in all my forty years in the labor force been unemployed. I have allot of skin in the game. The Mrs. as well.

I'm in favor of lettng actuarial science determine what adjustments need to be made to sustain it (SS) beyond that point but there's time for that.

[keegs]

Quote:

Originally Posted by Rustic23 The good folks of New Jersey should not be taxed to help the economy of Texas or any other state other than New Jersey. And, they should not be taxed to build a stadium, art museum, zoo, hotel, local road i.e. one not used for interstate commerce, or anything else Texan's might want. Neither should Texans have to pay for things New Jersey wants. Yep, you guessed it, I am am not a proponent of the way the commerce clause has been interpreted. "To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes".

Rusty,

Can you say how the commerce clause relates to NJ taxpayer contributions to federal spending in Alabama, Alaska, Mississippi, Texas...?

[brewer12345]

Quote:

Originally Posted by keegs Rusty, Can you say how the commerce clause relates to NJ taxpayer contributions to federal spending in Alabama, Alaska, Mississippi, Texas...?

Why argue about this? It is the law of the land and so I am taxed to provide tobacco farmer subsidies, bridges to nowhere in Alaska, Canadian border crossings from West Nowhere, Montana (where the Canuckistani have closed their side of the crossing), and any other damn fool thing you can imagine. But I am tired of being the rented mule of the rest of the US, so I will be splitting in a few years. Good luck with your local funding problems.

[Independent]

Quote:

Originally Posted by clifp However as we know lots of people are clueless about money and the government has some obligation to protect them from their own stupidity. If for no other reason than to keep the rest of us from having to support them in their old age. So I would favor requiring a mandatory conversion of a portion of your retirement account into one of participating annuities. So for example at age 68 you had 1 million saved up in your retirement account and the minimum 'pension' benefit was say $1500 month, you'd need to purchase one of these annuities that paid at at least $1500/month. How you investing the remaining money was up to you but taxpayers would no longer be on the hook if you meet Bernie Madoff...

When I see these mandatory savings schemes I always think the same thing.
1) The gov't is going to take a chunk of my earnings off the top, regardless of my current financial position.
2) I can't get at that money during my working years.
3) When I retire, the only way I can get it is in the form of a monthly check that lasts as long as I live.

I put 1, 2, and 3 together and get something that looks remarkably like Social Security.

[harley]

Quote:

Originally Posted by keegs Rusty, Can you say how the commerce clause relates to NJ taxpayer contributions to federal spending in Alabama, Alaska, Mississippi, Texas...?

The commerce clause relates to EVERYTHING. Without exception. It's the law of the land, and I'm sure that it will soon be interpreted as covering the requirement to buy health insurance. Resistance is futile. You will be assimilated.