Retirement Savings Accounts Draw U.S. Consumer Bureau Attention

[Toro]

And the idiots at CalPERS who predict a 8% return and only get 3% are, right?

The only thing keeping public pensions alfoat is tax money.

I don't know anything about CalPERS but I assume they've invested in stocks, bonds and mutual funds and have to deal with Wall Street brokers and traders. If that's the case, they're doomed to poor performance. Everyone associated with Wall Street is a thief.

The issue is they assume a 9% rate of return, and end up with a 3% rate of return. So any shortfall in thier anticipated return is made up by the state and local general funds.

Where else do you think ALL pensions invest? 401k's and pensions invest in the same place.

But typical progressive response is to "blame wall street"

CalPERS uses a 7.5% actuarial return. They recently lowered it from 7.75%. And over time, the fund has earned about that amount. They earned more in the 90s during the equity bull market and earned less in the equity bear market.

 

[Foxfyre]

I would not have a problem with a competent review board who would rate financial investment firms as 1) Honest and transparent 2) Competent. Wait. We already have that with Morning Star and other rating systems.

All the government has to do is educate the public on how to access those ratings and encourage them to invest only in the most solid and conservative ones if loss of their savings is a big issue.

And that is ALL the government should do.

 

[martybegan]

I don't know anything about CalPERS but I assume they've invested in stocks, bonds and mutual funds and have to deal with Wall Street brokers and traders. If that's the case, they're doomed to poor performance. Everyone associated with Wall Street is a thief.

The issue is they assume a 9% rate of return, and end up with a 3% rate of return. So any shortfall in thier anticipated return is made up by the state and local general funds.

Where else do you think ALL pensions invest? 401k's and pensions invest in the same place.

But typical progressive response is to "blame wall street"

We only blame Wall Street because Wall Street is guilty.

Retirement income should be guaranteed by the government. We shouldn't have to rely on capitalists and their stooges.

And how would the government create wealth without investment? We already have people working now paying for retirees now, its called social security. its stating to lose money. You propose more of that?

Again the typical "Wall Street Bad, unga bunga" leftist mantra.

 

[Joe Steel]

...People already are invested in government debt through SS. They don't need the government forcing people into government debt at near multi-century lows in rates at the end of a 30 year bull market in bonds.

I've never heard SS described as an investment in government debt. Probably because it isn't entirely accurate. Most of the benefit comes from, and will come from, FICA collections.

However, even if what you suggested were true, low government returns are better than no returns. Remember Enron? Enron employees had a 401(k) heavily invested in Enron stock. When it tanked, they got nothing.

 

[Foxfyre]

...People already are invested in government debt through SS. They don't need the government forcing people into government debt at near multi-century lows in rates at the end of a 30 year bull market in bonds.

I've never heard SS described as an investment in government debt. Probably because it isn't entirely accurate. Most of the benefit comes from, and will come from, FICA collections.

However, even if what you suggested were true, low government returns are better than no returns. Remember Enron? Enron employees had a 401(k) heavily invested in Enron stock. When it tanked, they got nothing.

The same thing happens if you stuff your money under a mattress and your house burns down. Or if your kids have reached majority and you die before you collect social security, the money belongs to the government and your heirs have no claim on it. You can't give it away, bequeath it to anybody, and have no means to increase its value. You have no say in how the money is invested or spent and no recourse when it loses value year after year after year.

All that is needed to protect 401K and other retirement accounts is to make it illegal and impossible for an unethical company to touch those funds. Make them the property of the employee that the employer cannot access and the problem is solved without costing the taxpaper a single dime.

 

[martybegan]

...People already are invested in government debt through SS. They don't need the government forcing people into government debt at near multi-century lows in rates at the end of a 30 year bull market in bonds.

I've never heard SS described as an investment in government debt. Probably because it isn't entirely accurate. Most of the benefit comes from, and will come from, FICA collections.

However, even if what you suggested were true, low government returns are better than no returns. Remember Enron? Enron employees had a 401(k) heavily invested in Enron stock. When it tanked, they got nothing.

When SS starts paying out more than it takes in, it has to cash in these special government bonds. Guess where the money comes from to pay off the bonds?

 

[Toro]

I've never heard SS described as an investment in government debt. Probably because it isn't entirely accurate. Most of the benefit comes from, and will come from, FICA collections.

This is very basic stuff.

By law, income to the trust funds must be invested, on a daily basis, in securities guaranteed as to both principal and interest by the Federal government. All securities held by the trust funds are "special issues" of the United States Treasury. Such securities are available only to the trust funds.

Trust Fund FAQs

aka "non-marketable" debt

The fund is required by law to be invested in non-marketable securities issued and guaranteed by the "full faith and credit" of the federal government.

Social Security Trust Fund - Wikipedia, the free encyclopedia

However, even if what you suggested were true, low government returns are better than no returns. Remember Enron? Enron employees had a 401(k) heavily invested in Enron stock. When it tanked, they got nothing.

Since social security began in 1939, government debt has returned 3,700% while the stock market has returned 144,900%. Now, I don't know about you, but I'd rather have 144,900% than 3,700%.

I agree that stocks are not always the best investment under all circumstances. However, it's not for you to decide what's best for me. If you want to invest in government debt, fine. But forcing people to invest in government debt near the end of a 30 year bull market in government debt is a bad idea.

FTR, a generation ago, a 30 year government bond yielded 10%. Today, it yields 3.2%. If interest rates rise to 10% over the next 10 years, the price of that "safe" 30 year government bond falls by 58%. I'm betting you didn't know that.

 

[Foxfyre]

And the final ugly little secret is there is nothing in the Constitution or the law to protect your investment in social security debt. The Congress, with a simple majority vote and a swipe of the President's pen, could eliminate the Social Security program this afternoon, pronounce the fund empty and that there would be no further payments, and you would have zero recourse to do one damn thing about it.

Now admittedly, no politician in Washington is about to commit that kind of political suicide right now. But as the government acquires more and more power and becomes ever bolder in circumventing the Constitution, is it possible that at some point they have enough power to declare the Constitution null and void and set in practice something else? It couldn't happen here? Don't bet on it. The Founders knew it could which is why they encouraged us to be ever vigilent to protect and defend our liberties, or we would absolutely without any doubt lose them.

The more power we give to government to give us what we want, the more power we give them to take anything they want.

 

[Toro]

And the final ugly little secret is there is nothing in the Constitution or the law to protect your investment in social security debt. The Congress, with a simple majority vote and a swipe of the President's pen, could eliminate the Social Security program this afternoon, pronounce the fund empty and that there would be no further payments, and you would have zero recourse to do one damn thing about it.

^^^^
That.

I think that eventually, they will raise the age which you can collect SS.

 

[Dugdale_Jukes]

How great is it that federal pensions and most state government pensions are guaranteed on the backs of taxpayers?

A surprising number of state constitutions guarantee state employee pensions regardless of hardship to state taxpayers. In California, for example, something over 12,000 of these grifters have pensions above $100,000.

George Washington wasn't worth $100,000 a year to American taxpayers in retirement. Who believes some 20th century bureaucrat or cop is?

 

[BillyV]

FTR, a generation ago, a 30 year government bond yielded 10%. Today, it yields 3.2%. If interest rates rise to 10% over the next 10 years, the price of that "safe" 30 year government bond falls by 58%. I'm betting you didn't know that.

Some bond brokers will tell you that you can only lose money if you sell them prior to maturity.......

 

[Joe Steel]

I've never heard SS described as an investment in government debt. Probably because it isn't entirely accurate. Most of the benefit comes from, and will come from, FICA collections.

This is very basic stuff.

By law, income to the trust funds must be invested, on a daily basis, in securities guaranteed as to both principal and interest by the Federal government. All securities held by the trust funds are "special issues" of the United States Treasury. Such securities are available only to the trust funds.

Apparently not that basic. You seem to have misunderstood. The investment will cover only the difference between benefits due and FICA collections. That will amount to less than 30% of the total.

 

[BillyV]

I've never heard SS described as an investment in government debt. Probably because it isn't entirely accurate. Most of the benefit comes from, and will come from, FICA collections.

This is very basic stuff.

By law, income to the trust funds must be invested, on a daily basis, in securities guaranteed as to both principal and interest by the Federal government. All securities held by the trust funds are "special issues" of the United States Treasury. Such securities are available only to the trust funds.

Apparently not that basic. You seem to have misunderstood. The investment will cover only the difference between benefits due and FICA collections. That will amount to less than 30% of the total.

Yes, but those new collections are also invested on a daily basis. The benefits will still be paid from those investments.

 

[Joe Steel]

However, even if what you suggested were true, low government returns are better than no returns. Remember Enron? Enron employees had a 401(k) heavily invested in Enron stock. When it tanked, they got nothing.

...

All that is needed to protect 401K and other retirement accounts is to make it illegal and impossible for an unethical company to touch those funds. Make them the property of the employee that the employer cannot access and the problem is solved without costing the taxpaper a single dime.

How do you protect the money from market risk? In October 2008 many 401(k)s lost 40-50% of their value.

 

[Foxfyre]

However, even if what you suggested were true, low government returns are better than no returns. Remember Enron? Enron employees had a 401(k) heavily invested in Enron stock. When it tanked, they got nothing.

...

All that is needed to protect 401K and other retirement accounts is to make it illegal and impossible for an unethical company to touch those funds. Make them the property of the employee that the employer cannot access and the problem is solved without costing the taxpaper a single dime.

How do you protect the money from market risk? In October 2008, many 401(k)s lost 40-50% of their value.

You cannot protect people from all risk. How do you protect the money from a government determined to spend us into bankruptcy? 401k or IRA contributions don't have to go into the market for that matter, though anybody who doesn't utilize conservative investment in the market for part of their retirement is losing a ton of money over the years. We took that 50% hit in 2008 too, and our investments are STILL in much better shape than they would have been in the social security fund.

But if you want no risk, then invest in FDIC insured CDs or Savings Bonds or some other guaranteed vehicle that will of necessity produce less yield but will still be worth more than the money the government takes for Social Security.

And man what a buying opportunity that 2008 crash was. The Dow closed at a low of 7449. It closed yesterdy right at 14,000. The average performing stock would have pretty much doubled in value if you had bought it at the 2008 low. And that's in what most of us are frustrated with as a fairly flat market lately. Meanwhile inflation whittles away at your social security investment nickle by nickle every day.

 

[Toro]

I've never heard SS described as an investment in government debt. Probably because it isn't entirely accurate. Most of the benefit comes from, and will come from, FICA collections.

This is very basic stuff.

By law, income to the trust funds must be invested, on a daily basis, in securities guaranteed as to both principal and interest by the Federal government. All securities held by the trust funds are "special issues" of the United States Treasury. Such securities are available only to the trust funds.

Apparently not that basic. You seem to have misunderstood. The investment will cover only the difference between benefits due and FICA collections. That will amount to less than 30% of the total.

Link?

I understand how the trusts work. I work in the business. It is structured as a pooled government bond fund, where benefits and liabilities are credited and debited based on income, years worked, interest accrued, etc. That money goes in and out of the trusts is not the issue because every defined benefit pension fund works that way also.

 

[martybegan]

However, even if what you suggested were true, low government returns are better than no returns. Remember Enron? Enron employees had a 401(k) heavily invested in Enron stock. When it tanked, they got nothing.

...

All that is needed to protect 401K and other retirement accounts is to make it illegal and impossible for an unethical company to touch those funds. Make them the property of the employee that the employer cannot access and the problem is solved without costing the taxpaper a single dime.

How do you protect the money from market risk? In October 2008, many 401(k)s lost 40-50% of their value.

Over time you move your funds in the 401k from stock based funds to bond based funds and money markets. Before you hit 50 most of your $$ should be in high risk items (stocks). Over time you move money to bonds, then money markets.

At my age (38) recessions dont mean much. While I lose share VALUE, I can buy shares of the fund at a lower cost, increasing my COUNT. The key is to move out of the volatile funds near a peak to safer funds for maximum return.

It really isnt that hard.

 

[Dugdale_Jukes]

A fool and his money are soon parted.....anyone who trusts the government to "take care of them" is a fool. Government regulations that are designed to "protect" fools invariably create more fools and lots more fraud.

State licensing laws are a perfect analogy. If you are "licensed" by the state to perform some service, lazy consumers do not bother to check your references, why would they? You are "licensed".....

The only people less likely to make the Nobel list than folks who believe licensing equals competence are people who believe that markets are inherently EITHER efficient or trustworthy.

There has never in history NOT been some regulation of commerce including finance; claims to the contrary are absolute proof of the ignorance of claimants. Further, regulation is always stacked against consumers; all that has ever varied is which interest group does the stacking.

Next.

 

[Joe Steel]

This is very basic stuff.

Apparently not that basic. You seem to have misunderstood. The investment will cover only the difference between benefits due and FICA collections. That will amount to less than 30% of the total.

Yes, but those new collections are also invested on a daily basis. The benefits will still be paid from those investments.

Only the difference between collections and current benefits, the surplus, is invested. That surplus was created precisely because of the shortfall the actuaries predicted.

 

[Foxfyre]

Apparently not that basic. You seem to have misunderstood. The investment will cover only the difference between benefits due and FICA collections. That will amount to less than 30% of the total.

Yes, but those new collections are also invested on a daily basis. The benefits will still be paid from those investments.

Only the difference between collections and current benefits, the surplus, is invested. That surplus was created precisely because of the shortfall the actuaries predicted.

FICA collections, however, are NOT invested in anything. They are spent as soon as they are collected and anticipated future revenues are borrowed against. They aren't banked so that they even collect interest, much less invested.