The Numbers Case For SS Reform

[Fmr jarhead]

my question is- of all my investments which one do you think i will gain the worst rate of return on?

The 6.4% of your earnings that is matched by your employer (12.8%) up to the first $90,000 you make....or roughly $11,520 per year that the government takes will earn the lowest rate of return.

Anyone care to do the math on what you would receive if you earned 90K for 10 years, and that was the only money you invested at an average rate of return?

Figure a long term investment of only 10 years.....and deposited once every 2 weeks.

It would net over $166,000 at a 6.9% return.

If you lived another 20 years (240 months) your investment would return 1275 per month before you ran out of cash!

Now the scenario is quite different for Social Security.....I would much rather be in control of that money, than let Congress decide what to do with it. (after all, I earned the money, and I should be allowed to fund my own retirement as I see fit!)

 

[Itsthetruth]

And what rate of return will the government guarantee you under so-called private investment accounts be it 10, 20 or 30 years?

 

[Itsthetruth]

Participants Would Forfeit Part of Accounts' Profits

By Jonathan Weisman
Washington Post Staff Writer
Thursday, February 3, 2005

Under the White House Social Security plan, workers who opt to divert some of their payroll taxes into individual accounts would ultimately get to keep only the investment returns that exceed the rate of return that the money would have accrued in the traditional system.

The mechanism, detailed by a senior administration official before President Bush's State of the Union address, would hold down the cost of Bush's plan to introduce personal accounts to the Social Security system. But it could come as a surprise to lawmakers and voters who have thought of these accounts as akin to an individual retirement account or a 401(k) that they could use fully upon retirement.

• OPTIONS: Workers would be able to choose among several stock, bond and mixed-investment funds.

• LIMITATIONS: Participants would have no access to the accounts before retirement and could not borrow against the balance.

• AT RETIREMENT: Participants would be required to buy annuities to ensure steady payments out of the accounts over a lifetime.

"You'll be able to pass along the money that accumulates in your personal account, if you wish, to your children . . . or grandchildren," Bush said last night. "And best of all, the money in the account is yours, and the government can never take it away."

The plan is more complicated. Under the proposal, workers could invest as much as 4 percent of their wages subject to Social Security taxation in a limited assortment of stock, bond and mixed-investment funds. But the government would keep and administer that money. Upon retirement, workers would then be given any money that exceeded inflation-adjusted gains over 3 percent.

That money would augment a guaranteed Social Security benefit that would be reduced by a still-undetermined amount from the currently promised benefit.

In effect, the accounts would work more like a loan from the government, to be paid back upon retirement at an inflation-adjusted 3 percent interest rate -- the interest the money would have earned if it had been invested in Treasury bonds, said Peter R. Orszag, a Social Security analyst at the Brookings Institution and a former Clinton White House economist.

"I believe you should be able to set aside part of that money in your own retirement account so you can build a nest egg for your own future," Bush said in his speech.

Orszag retorted: "It's not a nest egg. It's a loan."

Under the system, the gains may be minimal. The Social Security Administration, in projecting benefits under a partially privatized system, assumes a 4.6 percent rate of return above inflation. The Congressional Budget Office, Capitol Hill's official scorekeeper, assumes 3.3 percent gains.

If a worker sets aside $1,000 a year for 40 years, and earns 4 percent annually on investments, the account would grow to $99,800 in today's dollars, but the government would keep $78,700 -- or about 80 percent of the account. The remainder, $21,100, would be the worker's.

With a 4.6 percent average gain over inflation, the government keeps more than 70 percent. With the CBO's 3.3 percent rate, the worker is left with nothing but the guaranteed benefit.

If instead, workers decide to stay in the traditional system, they would receive the benefit that Social Security could pay out of payroll taxes still flowing into the system, the official said. Which option would be best is still unclear because the White House has yet to propose how [much] guaranteed benefits would be cut for those with individual accounts.

The administration official explained that the "benefit offset" merely ensures that those who choose personal accounts are not given an unfair advantage over the traditional system.

Robert Pozen, a Massachusetts investment executive who served on the president's Social Security Commission, said the mechanism makes sense. Workers who draw money out of the Social Security system for their accounts should have to pay that money back with interest.

"They hope people will think they will take on these accounts and after 40 years, they'll have this huge windfall, but that won't happen," said Dean Baker, co-director of the liberal Center for Economic and Policy Research. "I think they're trying to confuse people."

http://www.washingtonpost.com/wp-dyn/articles/A59136-2005Feb2.html?sub=AR

[When workers retired, most would be required to use at least part of their accounts to buy from the government lifetime annuities, financial instruments that provide a guaranteed monthly payment for life but that expire at death. Despite Mr. Bush's declaration that money in the accounts could be passed on to children and grandchildren, the principal of an annuity cannot be inherited.]

 

[Avatar4321]

And what rate of return will the government guarantee you under so-called private investment accounts be it 10, 20 or 30 years?

The government doesnt have to guarantee you anything. Havent you figured that out yet? The whole point of the system is to allow you to invest in whatever youd like, to let you determine what kind of returns you would like to be making with your money. The whole problem with the system is that the governments in control. Its about time people had some choice. Vote Pro-Choice for Social Security!

 

[Avatar4321]

But it could come as a surprise to lawmakers and voters who have thought of these accounts as akin to an individual retirement account or a 401(k) that they could use fully upon retirement.

Tell me exactly, why is it that any law that a lawmaker passes would come as a surprise to them? Does that make any sense. See if you are are lawmaker passing a law you are going to have the law say exactly what you want it to say. Where is the surprise in that?

If the lawmaker doesnt know whats in the law he passes, then its about time for him to get out of Washington.

 

[Itsthetruth]

The government doesnt have to guarantee you anything. Havent you figured that out yet? The whole point of the system is to allow you to invest in whatever youd like, to let you determine what kind of returns you would like to be making with your money. The whole problem with the system is that the governments in control. Its about time people had some choice. Vote Pro-Choice for Social Security!

Yes. Under the government run "private investment accounts" the government will control "your" money. The government will decide how much of that money is returned to you. The government will keep most of your money. And if the market crashes just before you retire you'll get next to nothing. The government won't guarantee a thing!

Your promised social security benefits are guaranteed. Every social security benefit promised has been paid in70 years. Without any increase in the social security tax "cap" every promised benefit will be paid at least until 2042. And if we do have an actual problem 40 or so years down the road we can increase the cap on incomes taxed to end that "problem".

The only thing that can endanger the solvency of the social security trust fund would be the introduction of so-called private investment accounts. Those who want to destroy social security hope their private accounts scheme will be adopted. That's not very likely.

Still want a government run "private investment account"?

 

[rtwngAvngr]

Yes. Under the government run "private investment accounts" the government will control "your" money.

No. wrong.

The government will decide how much of that money is returned to you.

Wrong. A lie.

The government will keep most of your money.

Another artifact indicating ignorance.

Your promised social security benefits are guaranteed.

they can guarantee all they want. It's a lie when the system is not capable of funding all promises.

Every social security benefit promised has been paid in70 years.

going forward, this will not be the case.

Without any increase in the social security tax "cap" every promised benefit will be paid at least until 2042. And if we do have an actual problem 40 or so years down the road we can increase the cap on incomes taxed to end that "problem".

bad solution. tax hikes slow the economy.

The only thing that can endanger the solvency of the social security trust fund would be the introduction of so-called private investment accounts.

the inherenet insolvency of the system is a problem as well.

remember:


Pon·zi scheme ** (*P*)**Pronunciation Key**(pnz)
n.
An investment swindle in which high profits are promised from fictitious sources and early investors are paid off with funds raised from later ones.

 

[Itsthetruth]

You haven't presented the slightest shred of evidence to refute any of the information contained in the article. All you have done is deny the information provided.

Since you can't refute the information your denial is meaningless.

 

[rtwngAvngr]

You haven't presented the slightest shred of evidence to refute any of the information contained in the article. All you have done is deny the information provided.

Since you can't refute the information your denial is meaningless.

Dude. The whole system is a ponzi scheme that cannot possible continue as it is. we have to fix it sometime. Why procrastinate? Do you really see no flaw in ponzi schemes? You're thick as a brick.



Pon·zi scheme ** (*P*)**Pronunciation Key**(pnz)
n.
An investment swindle in which high profits are promised from fictitious sources and early investors are paid off with funds raised from later ones.

 

[Huckleburry]

Right Wing,
We have invited you to refute these charges again and again, yet all you are able to do is parrot ponzi scheme and charge us with dwarfed inteligence. You know us liberals are a bit thick and what we really need is for well educated conservatives to show us through econometric proofs how privitized social security is going to save us. Thus far the right has been unwilling to stand up and actually show how there system works. Remeber, in economics numbers speak louder then rhetoric.
Avatar,
Why not adress the substance of the article rather than some off handed comment about lawmakers? You donot need to answer this question, rather, I would like to see a spirited defense of the proposed system. After all itsthetruth just handed you a spirited attack.

 

[Itsthetruth]

Dude.
Pon·zi scheme ** (*P*)**Pronunciation Key**(pnz)
n.
An investment swindle in which high profits are promised from fictitious sources and early investors are paid off with funds raised from later ones.

Ponzi scheme would be a more appropriate description of the "private investment accounts" scam, not the Social Security Trust Fund.

Social Security does not promise "high profits" from stock market investments. The funds are not raised from "fictitious sources". Fund revenues are generated by taxes on both employers and employees and also earnings on several trillion dollars invested in government guaranteed securities.

The term "Ponzi scheme" has always been a description used when referring to of bogus stock market and private insurance swindles. Nice try but no cigar.

Now how about providing some convincing arguments (back by evidence) to refute the article you dismiss without presenting any facts?

I hope you don't just expect everyone to take your word on face value.

 

[rtwngAvngr]

Ponzi scheme would be a more appropriate description of the "private investment accounts" scam, not the Social Security Trust Fund.

Social Security does not promise "high profits" from stock market investments. The funds are not raised from "fictitious sources". Fund revenues are generated by taxes on both employers and employees and also earnings on several trillion dollars invested in government guaranteed securities.

The term "Ponzi scheme" has always been a description used when referring to of bogus stock market and private insurance swindles. Nice try but no cigar.

Now how about providing some convincing arguments (back by evidence) to refute the article you dismiss without presenting any facts?

I hope you don't just expect everyone to take your word on face value.

But early investors are paid off from money from newer investors. Our government doesn't bother with making up fictitious sources. I guess in that sense it's an unabashedly honest screwjob. bend over, lefty.

Social Securities promises are lies. believe them if you want. You're an idiot if you do.

 

[Itsthetruth]

I see you're still having trouble finding any facts to refute the original article posted. Giving up?

 

[rtwngAvngr]

I see you're still having trouble finding any facts to refute the original article posted. Giving up?

Why don't you instead tell me why people should trust a ponzi scheme for their retirement.

Older investors are paid off with new money coming in. Our government doesn't bother making up fictitious sources, so in that sense it's an unabashedly honest screwjob. Bend over, lefty.

 

[Huckleburry]

What happens if the stock market goes to shit as it did in the 30's and in 00's or what about the bond market like the 70's and 80's. What happens if there are exogenous shocks to the system that cause unexpected rises inflation and interest rates? Rightwing talking to you would be a lot more fun if you knew what you were talking about, but as is we just have to listen to repeat fox news. I have neighbors I can listen to the bobble heads on fox news on my own, thanks for your concern though.
Ps. what is the definition of Ponzi scheme again?

 

[rtwngAvngr]

What happens if the stock market goes to shit as it did in the 30's and in 00's or what about the bond market like the 70's and 80's. What happens if there are exogenous shocks to the system that cause unexpected rises inflation and interest rates? Rightwing talking to you would be a lot more fun if you knew what you were talking about, but as is we just have to listen to repeat fox news. I have neighbors I can listen to the bobble heads on fox news on my own, thanks for your concern though.
Ps. what is the definition of Ponzi scheme again?

Yep. Fear, Uncertainty And Doubt. The system we have now is a GUARANTEED faiure. Any rational person should want to take a chance with success.

 

[no1tovote4]

What happens if the stock market goes to shit as it did in the 30's and in 00's or what about the bond market like the 70's and 80's. What happens if there are exogenous shocks to the system that cause unexpected rises inflation and interest rates? Rightwing talking to you would be a lot more fun if you knew what you were talking about, but as is we just have to listen to repeat fox news. I have neighbors I can listen to the bobble heads on fox news on my own, thanks for your concern though.
Ps. what is the definition of Ponzi scheme again?

Even with the decline, if you average over a 30 yr period there is an increase in the money put into the stock market. The main protection against a crash is to diversify. Once again you think only inside the box of SS and not to other investments.

The point I have tried to make to you is that the SS system is not designed to be your sole support during your retirement, even when being created it was one of the promises that the Dems made that they would not allow the citizens to fall into that line of thinking. The "gauranteed" part of SS is still there for your use if you think it wiser not to invest in Bonds and Markets.

Personally I will not limit myself to the small investments allowed by this system and refuse to commit my future to a "gaurantee" from the Government. However I do approve of the fact that at least a small part of the money that I put into the SS system will be set aside and controlled by me, that my children can inherit what I put into the system is incentive enough. That the Government cannot use that money to fund alpine slides in Jamaica is just a serious bonus.

I truly do believe that, as Reagan said, that some of the most feared words that one can hear are, "We are from the Government, we are here to help...". Incentivizing dependence on Government rather than responsibility of the individual for his own future is directly in opposition to the philosophy that has made this the "richest nation in the world".

 

[Huckleburry]

Except that has truth pointed out the private accounts are converted into annuities when you retire so that wealth is non-transferable and by the presidents own admission privatization aggravates, rather than ameliorates the problem facing SS. Fixing SS is needed, privitization however is not the solution it promises to be.

 

[no1tovote4]

Except that has truth pointed out the private accounts are converted into annuities when you retire so that wealth is non-transferable and by the presidents own admission privatization aggravates, rather than ameliorates the problem facing SS. Fixing SS is needed, privitization however is not the solution it promises to be.

The thing of it is, I am not even trying to argue that it fixes the program. I am saying that it is an improvement and that the improvement is worth the cost.

 

[Huckleburry]

If you read my earlier posts you will see that this started with a question. I asked the conservatives on this board to lay down a coherent argument supporting the presidents plan. The performance thus far has been lackluster at best. Privitization comes at a hefty cost (two trillion), has yet to actually work anywhere else in the world, and does little to fix the current problem. Knowing this I would argue that we should focus on fixing the problem rather than chasing around private accounts.