If Social Security Had Been In Private Accounts The Stock Market Drop Could Have Been A Disaster

[Andylusion]

Couple of things

1. the market has almost recovered from the drop
2. investing is a long term proposition, you would only have lost if you bought the day before the drop
3. the market has grown over time at around 10% per annum
4. SS if broke, the fix is simple. Collect SS taxes on all income, not just the first 110K
5. Dems mixed SS with the general fund.

Warren Buffet has a total salary of $100,000 a year.

Nearly all wealthy people, have a lower cash income relative to their wealth. Increasing the top income cap, wouldn't get so much as a penny from Warren Buffet.

And as the tax rates go up on the wealthy, two things will happen.... A: they will demand larger payouts, relative to the higher amount of Social Security they pay in. The last bill to increase the upper tax limit, included larger payouts, thus defeating the purpose of increasing the tax revenue.

B: They will cut their cash wages, in favor of alternative compensation. Again defeating the purpose of increasing the tax base.

There is no solution to Social Security. The only solution is based on the idea that people will agree to pay more tax, without an increase in benefits. That's never going to happen. In Greece, the public routinely work black market jobs, to avoid paying their taxes.

That will be the future of America if we continue on this road.

 

[healthmyths]

Well, no shit.
If Social Security Had Been In Private Accounts The Stock Market Drop Could Have Been A Disaster

The stock market continued a period of volatility on Monday. Media reports sounded the alarm as the DOW opened 1,000 points down and other indexes took huge hits, only to climb back up a bit later in the day. While that performance, which had some people calling it black Monday, may have knocked a good deal of money out of people’s 401(k) retirement accounts, Social Security benefits remain by and large untouched by such fluctuations.

Some Republicans, however, are interested in changing that.

In June, presidential candidate Jeb Bush said that he thinks the next president will have to try to privatize Social Security. Others have gotten behind the idea as well: Sen. Rand Paul (R-KY) drafted a plan in 2013 that included partial privatization, and Sen. Ted Cruz (R-TX) is in favor of using private accounts. Rep. Paul Ryan (R-WI) has included privatization in his budget blueprints.

The market drop, and ones before, expose the dangers of such a plan, which usually entails diverting some or all of the money workers contribute to Social Security through their paychecks into private investment accounts. That would put individuals in charge of making smart enough investment choices in the market to make big enough returns to support themselves in retirement.

But the reality is that’s not within reach for most individual people. During a market rout like Monday’s, many people will panic and sell. “We know a lot of people do what economists say is irrational, they sell at a low point,” said Dean Baker, co-director of the Center on Economic and Policy Research. Research shows that the best thing to do during a downturn is to hold out if possible. But that’s not how most people will react. “People see something like this and go, ‘I better get out,'” Baker said. “When they see the market start to go up, they say, ‘I better buy in,’ and then they’ve lost a lot.”

This is one of the big problems with privatizing Social Security: individual investors don’t tend to be that savvy in chasing higher returns. “A lot of people make wrong decisions,” Baker said. This is even true when it comes to retirement planning: Many people leave money on the table with their 401(k)s by not taking advantage of employer matches or cash out when they switch jobs and incur taxes. The point of Social Security contributions is to make saving for retirement mandatory, he pointed out. But “if you do that and then just tell people to do whatever you want [with the money], then a lot of people will make mistakes and end up with not very much in retirement.”

On a larger level, putting people’s Social Security contributions into private accounts makes them far more exposed to the irrationality of the market. “What’s beautiful about Social Security is that in the long the return workers get on contributions is linked to productivity growth and wage growth,” said Monique Morrissey, an economist at the Economic Policy Institute. “Whereas markets are notoriously volatile and often behave in ways that are not based on the fundamental strength and weakness of the economy.”

The premise is that ALL of SS funds were in the stock market... which is totally a false premise!
The "privatization of SS" is based on freedom of choice!
A) Choose to tell SS where to put the SS payments... OK I choose to put into the same investments the SS does US Treasuries!
B) Choose to let SS put the SS payments in to US treasuries.

That is what privatization is all about. Freedom to choose.
NOW yes there would be idiots probably like you that would be so stupidly greedy you'd have all your accumulated funds in
the stock market all the time right up to the collapse and yes YOU"D have taken a loss... BUT WAIT!!!

LET's TAKE A LOOK at an analysis of what would have happened if over 43 years of working you'd had all your money
into the "risky stock market"
$30,000 is all this RISKY loss would have been as the down dropped 1.79%!!!

^DJI Historical Prices | Dow Jones Industrial Average Stock - Yahoo! Finance
Dow Jones Industrial Average Return Calculator - Don't Quit Your Day Job...
http://stateofworkingamerica.org/chart/swa-income-table-2-2-average-household-income/
Social Security Tax Rates

So check out the above links... plug in your own numbers and you will see $1,694,258 from SS IF you'd been in the RISKY market!!!

 

[Flash]

[

There is no solution to Social Security. The only solution is based on the idea that people will agree to pay more tax, without an increase in benefits. That's never going to happen. In Greece, the public routinely work black market jobs, to avoid paying their taxes.

That will be the future of America if we continue on this road.

Social Security was always a bad idea that was going to go really bad one of these days and bankrupt the country. Unfortunately we are approaching that time now with a $56 trillion dollar future entitlement program.

Why people were so weak minded as to agree to be taxed more so that the inefficient government (managed by corrupt politicians elected by special interest groups) would promise them some rinky dink pension if they lived is absolute stupidity.

We should all be responsible for our own retirement fund. If some of the idiots in this country chose to spend their money on pot and big screen TVs instead of providing for their retirement then that is their problem, not mine.

 

[rdean]

Regardless, you're misunderstanding, well, the entire point of SS.

Spamming more from a special interest Washington DC lobbyist group.....

Not an argument, and most of what they say is wrong.

For example, yes it is subject to fluctuations of the market. Fact: over the 30 year period, they have made substantially more than Social Security, as the numbers I posted prove.

Good, ignore inflation risk, the fact it doesn't serve low income people well, and the fact that it isn't based on being basic protection.

That's a lie. Sorry, you lied.... again.

A low income person, making just $15,000 a year, will put into Social Security, over $174 a month into Social Security. For that money, they will earn at retirement $800 a month.

Impoverishment for the rest of their life.

If you take that same amount, $174 a month, and place it into an average growth stock mutual fund, or set of mutual funds, they will have $400,000 to $600,000. Enough for a comfortable basic living. By far better than $800 a month.

Now which plan, the left-wing social security plan, or the right-wing capitalist plan, is better for the impoverished?

By far, ours is.

Oh dear lord, see, this is the funny thing, social security is a safe guard, you want people to put shit into mutual funds which are unstable, and make ridiculous assumptions. You want seniors and people not very educated in the workings of investment and the complexities to attempt to do the stupid bullshit you're proposing. How many seniors on social security vote republican, and how many vote democrat? Social security is complemented by programs like food stamps, medicaid, medicare, etc.. Of course, you probably want to trash those to. Luckily, your views are so out of touch with reality they're meaningless to actual political discussion.

Again, you are the one making assumptions. You already ruined the lives of the elderly. They are doomed to impoverishment until they die. You screwed the hell out of them, and they are finished. There is no solution for them. They just live and die, in social impoverishment that you gave them.

It's the next generation I'm trying to help.

And unlike your brainless screwball claims, my mutual funds have done fantastic. Huge returns on my investment. You can't stand that? Fine. Stay poor. But don't be surprised if I convince as many as possible to join me in making money for retirement.

If you actually owned any mutual funds you would know what a disaster they were when Republican deregulation brought down the economy in 2008-9. I bet you can't even explain what they are.

 

[rdean]

If they invested on the day before the drop. Otherwise you're talking out of your ass

Liberals are the stupidest people on Earth, it's a wonder they've figured out how to breed

We don't have to figure it out. Unmarried and related conservatives show us how it's done.

 

[depotoo]

It isn't that the loserterian gives a single fuck about peoples retirement. As far as they're concerned the smaller the government + the bigger the corporation = the better. Fuck all you poor suckers.

You do realize for those that actually work, smaller government translates into more i their own pockets to be able to live on, and save for retirement, right? Where you have come up with your interpretation of policies is beyond me.

 

[CrusaderFrank]

If they invested on the day before the drop. Otherwise you're talking out of your ass

Liberals are the stupidest people on Earth, it's a wonder they've figured out how to breed

We don't have to figure it out. Unmarried and related conservatives show us how it's done.

That would explain a lot about you. You must have Duggar's Complete "Be Fruitful and Multiply" CD's at home

 

[Remodeling Maidiac]

If they invested on the day before the drop. Otherwise you're talking out of your ass

Liberals are the stupidest people on Earth, it's a wonder they've figured out how to breed

We don't have to figure it out. Unmarried and related conservatives show us how it's done.

That would explain a lot about you. You must have Duggar's Complete "Be Fruitful and Multiply" CD's at home

He certainly has the fruity part down pat

 

[nat4900]

But YOU don't gamble over 40 years! You invest in equities from your 20s to 40s and obviously accumulations.
There have been MORE UPS that Downs obviously I guess you idiots don't think about that or else THERE would never be a DJI!
Then from your 40s to 60s... moving more from high risk securities to lower risk investments and finally at retirement most of
it in highly secure investments. I mean you being a government lover why not have treasury bills?
See that is why if WE the vast majority of people had been GIVEN the CHOICE see you keep referring to "privatizing" it was always
going to be a CHOICE... i.e. I would have the POWER to choose... Do I want to tell SS where to put my money when I'm in my 20s i.e. high risk great appreciation, then in my 40s tell SS to put in lower risk and then retire all in to secured.. OR if I didn't want to choose that the traditional SS. EITHER WAY I would have the choice. NOT as it is now.
If I'd had the choice when I first started SS deductions in the 60s, today I'd had a million dollars in SS. Of which maybe half would be used in retirement, 1/4 medical bills and the rest a nest egg for my SON and his family to build on!

BUT selfish ignorant people like you without the benefit of the FACTS think privatizing was all investing in the market and that was the stupid ass meme put out by ignorant selfish people!

Typical right wing stupidity and brain washed regurgitation. The stock market IS a gambling casino......The zero-sum syndrome is very applicable...for every "gained" dollar from someone, there is a "lost" dollar by someone else.

Who took it in the gut during this latest stock market plunge? Holders of 401K plans.

 

[Andylusion]

Spamming more from a special interest Washington DC lobbyist group.....

Not an argument, and most of what they say is wrong.

For example, yes it is subject to fluctuations of the market. Fact: over the 30 year period, they have made substantially more than Social Security, as the numbers I posted prove.

Good, ignore inflation risk, the fact it doesn't serve low income people well, and the fact that it isn't based on being basic protection.

That's a lie. Sorry, you lied.... again.

A low income person, making just $15,000 a year, will put into Social Security, over $174 a month into Social Security. For that money, they will earn at retirement $800 a month.

Impoverishment for the rest of their life.

If you take that same amount, $174 a month, and place it into an average growth stock mutual fund, or set of mutual funds, they will have $400,000 to $600,000. Enough for a comfortable basic living. By far better than $800 a month.

Now which plan, the left-wing social security plan, or the right-wing capitalist plan, is better for the impoverished?

By far, ours is.

Oh dear lord, see, this is the funny thing, social security is a safe guard, you want people to put shit into mutual funds which are unstable, and make ridiculous assumptions. You want seniors and people not very educated in the workings of investment and the complexities to attempt to do the stupid bullshit you're proposing. How many seniors on social security vote republican, and how many vote democrat? Social security is complemented by programs like food stamps, medicaid, medicare, etc.. Of course, you probably want to trash those to. Luckily, your views are so out of touch with reality they're meaningless to actual political discussion.

Again, you are the one making assumptions. You already ruined the lives of the elderly. They are doomed to impoverishment until they die. You screwed the hell out of them, and they are finished. There is no solution for them. They just live and die, in social impoverishment that you gave them.

It's the next generation I'm trying to help.

And unlike your brainless screwball claims, my mutual funds have done fantastic. Huge returns on my investment. You can't stand that? Fine. Stay poor. But don't be surprised if I convince as many as possible to join me in making money for retirement.

If you actually owned any mutual funds you would know what a disaster they were when Republican deregulation brought down the economy in 2008-9. I bet you can't even explain what they are.

I do own a mutual fund. Two in fact.

No, actually when the stock market crashed in 2007, that's right when I started buying.

Almost 1/4th of my total investment is all growth from my investments. For some reason it cut off the dates. That's 2010, to 2015.

Fantastic improvement.

This is the American Growth Fund, one of the two funds I own. As you can see, It's done fantastic.

See, when the stock market crashes, that's when I buy into them. I opened this account in 2007. There was a massive drop in 2007. So literally for the entire year or more, I put more money in, and more money in, and the value of my portfolio was exactly nearly the same each month. In June, I dumped several thousand in, and in July, the amount would be lower, or the same as it was in June, because the market was diving, while I buying.

But I knew that I was buying stock in major companies. I knew that while the portfolio value was falling, in reality I was adding more and more stocks in companies, to my portfolio, and when the market recovered, those stocks would go up dramatically.... and they did.

Notice also that my mutual fund, beat the market average routinely.

That's where people who live based on fear, lose in the market. When the market went down, my first response was to buy into the market. When the market crashes, that's like having a sale at your favorite store. Stocks are on sale. You don't sell off your stocks when prices go down, anymore then if porterhouse steak was on sale 50%, meant you sold off all the steak in your freezer. That's when BUY... not sell.

 

[David_42]

Good, ignore inflation risk, the fact it doesn't serve low income people well, and the fact that it isn't based on being basic protection.

That's a lie. Sorry, you lied.... again.

A low income person, making just $15,000 a year, will put into Social Security, over $174 a month into Social Security. For that money, they will earn at retirement $800 a month.

Impoverishment for the rest of their life.

If you take that same amount, $174 a month, and place it into an average growth stock mutual fund, or set of mutual funds, they will have $400,000 to $600,000. Enough for a comfortable basic living. By far better than $800 a month.

Now which plan, the left-wing social security plan, or the right-wing capitalist plan, is better for the impoverished?

By far, ours is.

Oh dear lord, see, this is the funny thing, social security is a safe guard, you want people to put shit into mutual funds which are unstable, and make ridiculous assumptions. You want seniors and people not very educated in the workings of investment and the complexities to attempt to do the stupid bullshit you're proposing. How many seniors on social security vote republican, and how many vote democrat? Social security is complemented by programs like food stamps, medicaid, medicare, etc.. Of course, you probably want to trash those to. Luckily, your views are so out of touch with reality they're meaningless to actual political discussion.

Again, you are the one making assumptions. You already ruined the lives of the elderly. They are doomed to impoverishment until they die. You screwed the hell out of them, and they are finished. There is no solution for them. They just live and die, in social impoverishment that you gave them.

It's the next generation I'm trying to help.

And unlike your brainless screwball claims, my mutual funds have done fantastic. Huge returns on my investment. You can't stand that? Fine. Stay poor. But don't be surprised if I convince as many as possible to join me in making money for retirement.

If you actually owned any mutual funds you would know what a disaster they were when Republican deregulation brought down the economy in 2008-9. I bet you can't even explain what they are.

I do own a mutual fund. Two in fact.

No, actually when the stock market crashed in 2007, that's right when I started buying.

View attachment 48794

Almost 1/4th of my total investment is all growth from my investments. For some reason it cut off the dates. That's 2010, to 2015.

Fantastic improvement.

View attachment 48795

This is the American Growth Fund, one of the two funds I own. As you can see, It's done fantastic.

See, when the stock market crashes, that's when I buy into them. I opened this account in 2007. There was a massive drop in 2007. So literally for the entire year or more, I put more money in, and more money in, and the value of my portfolio was exactly nearly the same each month. In June, I dumped several thousand in, and in July, the amount would be lower, or the same as it was in June, because the market was diving, while I buying.

But I knew that I was buying stock in major companies. I knew that while the portfolio value was falling, in reality I was adding more and more stocks in companies, to my portfolio, and when the market recovered, those stocks would go up dramatically.... and they did.

Notice also that my mutual fund, beat the market average routinely.

That's where people who live based on fear, lose in the market. When the market went down, my first response was to buy into the market. When the market crashes, that's like having a sale at your favorite store. Stocks are on sale. You don't sell off your stocks when prices go down, anymore then if porterhouse steak was on sale 50%, meant you sold off all the steak in your freezer. That's when BUY... not sell.

So, in other words, only people who know the market will have a chance to retire.. Brilliant.

 

[Dont Taz Me Bro]

There would be no 'social security' if all citizens had were private accounts – whether there was a stock market drop or not.

Of course there would be.

The raison d'etre of Social Security is to safeguard retirement funds from the capricious volatility of private markets.

There is no guarantee that you will ever receive your Social Security simply because the government currently controls it. As a matter of fact, it's been heading towards insolvency for quite some time. My generation won't receive a dime of it, but we'll pay into it our entire lives to fund your generation's greed.

Hence the clueless idiocy of conservative advocacy of 'privatizing' Social Security.

Hence, the cruel reality of an ignorant Marxist like yourself.

 

[David_42]

There would be no 'social security' if all citizens had were private accounts – whether there was a stock market drop or not.

Of course there would be.

The raison d'etre of Social Security is to safeguard retirement funds from the capricious volatility of private markets.

There is no guarantee that you will ever receive your Social Security simply because the government currently controls it. As a matter of fact, it's been heading towards insolvency for quite some time. My generation won't receive a dime of it, but we'll pay into it our entire lives to fund your generation's greed.

Hence the clueless idiocy of conservative advocacy of 'privatizing' Social Security.

Hence, the cruel reality of an ignorant Marxist like yourself.

Hilarious, calling someone a marxist when failing to understand what marxism actually is, believe me, no one on here is a marxist, not even close. The government will never let people not get social security, believe me, we can save it by raising the contribution, etc, etc.. Regardless, telling people to rely on private, risky ways to ensure their retirement, especially for those in poverty, is ridiculous.

 

[Dont Taz Me Bro]

Well, no shit.
If Social Security Had Been In Private Accounts The Stock Market Drop Could Have Been A Disaster

The stock market continued a period of volatility on Monday. Media reports sounded the alarm as the DOW opened 1,000 points down and other indexes took huge hits, only to climb back up a bit later in the day. While that performance, which had some people calling it black Monday, may have knocked a good deal of money out of people’s 401(k) retirement accounts, Social Security benefits remain by and large untouched by such fluctuations.

Some Republicans, however, are interested in changing that.

In June, presidential candidate Jeb Bush said that he thinks the next president will have to try to privatize Social Security. Others have gotten behind the idea as well: Sen. Rand Paul (R-KY) drafted a plan in 2013 that included partial privatization, and Sen. Ted Cruz (R-TX) is in favor of using private accounts. Rep. Paul Ryan (R-WI) has included privatization in his budget blueprints.

The market drop, and ones before, expose the dangers of such a plan, which usually entails diverting some or all of the money workers contribute to Social Security through their paychecks into private investment accounts. That would put individuals in charge of making smart enough investment choices in the market to make big enough returns to support themselves in retirement.

But the reality is that’s not within reach for most individual people. During a market rout like Monday’s, many people will panic and sell. “We know a lot of people do what economists say is irrational, they sell at a low point,” said Dean Baker, co-director of the Center on Economic and Policy Research. Research shows that the best thing to do during a downturn is to hold out if possible. But that’s not how most people will react. “People see something like this and go, ‘I better get out,'” Baker said. “When they see the market start to go up, they say, ‘I better buy in,’ and then they’ve lost a lot.”

This is one of the big problems with privatizing Social Security: individual investors don’t tend to be that savvy in chasing higher returns. “A lot of people make wrong decisions,” Baker said. This is even true when it comes to retirement planning: Many people leave money on the table with their 401(k)s by not taking advantage of employer matches or cash out when they switch jobs and incur taxes. The point of Social Security contributions is to make saving for retirement mandatory, he pointed out. But “if you do that and then just tell people to do whatever you want [with the money], then a lot of people will make mistakes and end up with not very much in retirement.”

On a larger level, putting people’s Social Security contributions into private accounts makes them far more exposed to the irrationality of the market. “What’s beautiful about Social Security is that in the long the return workers get on contributions is linked to productivity growth and wage growth,” said Monique Morrissey, an economist at the Economic Policy Institute. “Whereas markets are notoriously volatile and often behave in ways that are not based on the fundamental strength and weakness of the economy.”

And how would it be faring at DOW 16,600?

Anyone who points to the crash of '08 as a reason why Social Security shouldn't be privatized has demonstrated their complete lack of understanding in the field of Economics. Then again, you are a Socialist, so you've already demonstrated that.

 

[Dont Taz Me Bro]

The government will never let people not get social security

 

[David_42]

"
Right now, Social Security provides a guaranteed income, paying benefits every month for life, with increases for inflation. After adjusting for risk, Social Security has a rate of return equal to that of any mix of financial assets in private accounts.


And risk must be taken into account, because stock market returns are never guaranteed! As we've seen in recent years, returns can fluctuate wildly. One need only be reminded that between 2001 and 2003, the NASDAQ lost 75% of its value. And the market took a major downturn again in 2008. Nest eggs can disappear in an instant - and take months, if not years, to rebuild.


With privatization, some might do well, many might lose - but our society would lose the benefit of the sound, basic income security provided by Social Security retirement, disability and survivor benefits.
"

 

[Andylusion]

ww

But YOU don't gamble over 40 years! You invest in equities from your 20s to 40s and obviously accumulations.
There have been MORE UPS that Downs obviously I guess you idiots don't think about that or else THERE would never be a DJI!
Then from your 40s to 60s... moving more from high risk securities to lower risk investments and finally at retirement most of
it in highly secure investments. I mean you being a government lover why not have treasury bills?
See that is why if WE the vast majority of people had been GIVEN the CHOICE see you keep referring to "privatizing" it was always
going to be a CHOICE... i.e. I would have the POWER to choose... Do I want to tell SS where to put my money when I'm in my 20s i.e. high risk great appreciation, then in my 40s tell SS to put in lower risk and then retire all in to secured.. OR if I didn't want to choose that the traditional SS. EITHER WAY I would have the choice. NOT as it is now.
If I'd had the choice when I first started SS deductions in the 60s, today I'd had a million dollars in SS. Of which maybe half would be used in retirement, 1/4 medical bills and the rest a nest egg for my SON and his family to build on!

BUT selfish ignorant people like you without the benefit of the FACTS think privatizing was all investing in the market and that was the stupid ass meme put out by ignorant selfish people!

Typical right wing stupidity and brain washed regurgitation. The stock market IS a gambling casino......The zero-sum syndrome is very applicable...for every "gained" dollar from someone, there is a "lost" dollar by someone else.

Who took it in the gut during this latest stock market plunge? Holders of 401K plans.

I had a 401K plan, and I made money during the plunge. Fail?

 

[David_42]

ww

But YOU don't gamble over 40 years! You invest in equities from your 20s to 40s and obviously accumulations.
There have been MORE UPS that Downs obviously I guess you idiots don't think about that or else THERE would never be a DJI!
Then from your 40s to 60s... moving more from high risk securities to lower risk investments and finally at retirement most of
it in highly secure investments. I mean you being a government lover why not have treasury bills?
See that is why if WE the vast majority of people had been GIVEN the CHOICE see you keep referring to "privatizing" it was always
going to be a CHOICE... i.e. I would have the POWER to choose... Do I want to tell SS where to put my money when I'm in my 20s i.e. high risk great appreciation, then in my 40s tell SS to put in lower risk and then retire all in to secured.. OR if I didn't want to choose that the traditional SS. EITHER WAY I would have the choice. NOT as it is now.
If I'd had the choice when I first started SS deductions in the 60s, today I'd had a million dollars in SS. Of which maybe half would be used in retirement, 1/4 medical bills and the rest a nest egg for my SON and his family to build on!

BUT selfish ignorant people like you without the benefit of the FACTS think privatizing was all investing in the market and that was the stupid ass meme put out by ignorant selfish people!

Typical right wing stupidity and brain washed regurgitation. The stock market IS a gambling casino......The zero-sum syndrome is very applicable...for every "gained" dollar from someone, there is a "lost" dollar by someone else.

Who took it in the gut during this latest stock market plunge? Holders of 401K plans.

I had a 401K plan, and I made money during the plunge. Fail?

Congratulations?
Typical U.S. Worker Saw 401(k) Lose 24.3% in 2008 - BusinessWeek

 

[kaz]

Well, no shit.
If Social Security Had Been In Private Accounts The Stock Market Drop Could Have Been A Disaster

The stock market continued a period of volatility on Monday. Media reports sounded the alarm as the DOW opened 1,000 points down and other indexes took huge hits, only to climb back up a bit later in the day. While that performance, which had some people calling it black Monday, may have knocked a good deal of money out of people’s 401(k) retirement accounts, Social Security benefits remain by and large untouched by such fluctuations.

Some Republicans, however, are interested in changing that.

In June, presidential candidate Jeb Bush said that he thinks the next president will have to try to privatize Social Security. Others have gotten behind the idea as well: Sen. Rand Paul (R-KY) drafted a plan in 2013 that included partial privatization, and Sen. Ted Cruz (R-TX) is in favor of using private accounts. Rep. Paul Ryan (R-WI) has included privatization in his budget blueprints.

The market drop, and ones before, expose the dangers of such a plan, which usually entails diverting some or all of the money workers contribute to Social Security through their paychecks into private investment accounts. That would put individuals in charge of making smart enough investment choices in the market to make big enough returns to support themselves in retirement.

But the reality is that’s not within reach for most individual people. During a market rout like Monday’s, many people will panic and sell. “We know a lot of people do what economists say is irrational, they sell at a low point,” said Dean Baker, co-director of the Center on Economic and Policy Research. Research shows that the best thing to do during a downturn is to hold out if possible. But that’s not how most people will react. “People see something like this and go, ‘I better get out,'” Baker said. “When they see the market start to go up, they say, ‘I better buy in,’ and then they’ve lost a lot.”

This is one of the big problems with privatizing Social Security: individual investors don’t tend to be that savvy in chasing higher returns. “A lot of people make wrong decisions,” Baker said. This is even true when it comes to retirement planning: Many people leave money on the table with their 401(k)s by not taking advantage of employer matches or cash out when they switch jobs and incur taxes. The point of Social Security contributions is to make saving for retirement mandatory, he pointed out. But “if you do that and then just tell people to do whatever you want [with the money], then a lot of people will make mistakes and end up with not very much in retirement.”

On a larger level, putting people’s Social Security contributions into private accounts makes them far more exposed to the irrationality of the market. “What’s beautiful about Social Security is that in the long the return workers get on contributions is linked to productivity growth and wage growth,” said Monique Morrissey, an economist at the Economic Policy Institute. “Whereas markets are notoriously volatile and often behave in ways that are not based on the fundamental strength and weakness of the economy.”

So let's compare:

- Social security in private hands. Let's say your account was $100K, it would have dropped below $90K. Ouch.

- Social security now. Your account is worth zero, there is no trust fund, it's all smoke and mirrors. So, your account worth $0 when the market dropped is still worth $0.

I'm not seeing the disaster we averted...

 

[bripat9643]

Well, no shit.
If Social Security Had Been In Private Accounts The Stock Market Drop Could Have Been A Disaster

The stock market continued a period of volatility on Monday. Media reports sounded the alarm as the DOW opened 1,000 points down and other indexes took huge hits, only to climb back up a bit later in the day. While that performance, which had some people calling it black Monday, may have knocked a good deal of money out of people’s 401(k) retirement accounts, Social Security benefits remain by and large untouched by such fluctuations.

Some Republicans, however, are interested in changing that.

In June, presidential candidate Jeb Bush said that he thinks the next president will have to try to privatize Social Security. Others have gotten behind the idea as well: Sen. Rand Paul (R-KY) drafted a plan in 2013 that included partial privatization, and Sen. Ted Cruz (R-TX) is in favor of using private accounts. Rep. Paul Ryan (R-WI) has included privatization in his budget blueprints.

The market drop, and ones before, expose the dangers of such a plan, which usually entails diverting some or all of the money workers contribute to Social Security through their paychecks into private investment accounts. That would put individuals in charge of making smart enough investment choices in the market to make big enough returns to support themselves in retirement.

But the reality is that’s not within reach for most individual people. During a market rout like Monday’s, many people will panic and sell. “We know a lot of people do what economists say is irrational, they sell at a low point,” said Dean Baker, co-director of the Center on Economic and Policy Research. Research shows that the best thing to do during a downturn is to hold out if possible. But that’s not how most people will react. “People see something like this and go, ‘I better get out,'” Baker said. “When they see the market start to go up, they say, ‘I better buy in,’ and then they’ve lost a lot.”

This is one of the big problems with privatizing Social Security: individual investors don’t tend to be that savvy in chasing higher returns. “A lot of people make wrong decisions,” Baker said. This is even true when it comes to retirement planning: Many people leave money on the table with their 401(k)s by not taking advantage of employer matches or cash out when they switch jobs and incur taxes. The point of Social Security contributions is to make saving for retirement mandatory, he pointed out. But “if you do that and then just tell people to do whatever you want [with the money], then a lot of people will make mistakes and end up with not very much in retirement.”

On a larger level, putting people’s Social Security contributions into private accounts makes them far more exposed to the irrationality of the market. “What’s beautiful about Social Security is that in the long the return workers get on contributions is linked to productivity growth and wage growth,” said Monique Morrissey, an economist at the Economic Policy Institute. “Whereas markets are notoriously volatile and often behave in ways that are not based on the fundamental strength and weakness of the economy.”

How would that have been a "disaster?" They still would have had far more money in their accounts than they have now, which is nothing.