Social Security and Medicare shortfalls

[M14 Shooter]

Many countries have a broadly diversified pension system that owns more than just government bonds and earns more than a few percent each year. SS should start investing in stocks and other investments.

Hmm. GWB suggested just such a thing in 2005.
The liberal left yelled and screamed and hollered -- and the idea died.

 

[M14 Shooter]

Nah... he's being a government-hating right winger. They've been trying to kill social security since Roosevelt was president.

No one, given the choice, would willingly be part of SocSec...
So, it -should- be killed.

 

[jreeves]

I wasn't just talking about the war, I'm talking about our entire yearly defense budget. We could save 10's of billions, if not 100's, if we simply closed some of the bases around the world that aren't really doing us any good. I'm sure you would argue, but I don't see where we still need to be established in Korea and Japan, for starters.



Well, maybe this helps you recognize why there are so many people who think our government, and people in elite circles, are doing this on PURPOSE. With all that knowledge, and all those brilliant minds, how could it be possible that our government is really that clueless? You mean to tell me that a bunch of anonymous internet message board posters know what the problem is, but people who've been highly educated and are tasked with fixing it DON'T?

There's 2 possible explanations. The system's been so fucked from the inside out, that they don't KNOW how to fix it anymore, or they're screwing us on purpose. I haven't decided yet, but either way we're fucked.


Everything you said sounded great until this. You sound like any one of those other 2-bit pundits on the MSM talking out their asses while trying to sound like they're intelligent. You say this with absolutely no basis other than your opinion, which has obviously been persuaded by OTHER opinions.

Your first paragraph sounds good, close the bases that are no longer needed. Although some of the bases around the world serve logistics needs such as refueling, coordinating equipment and supplies in the event of war.

As far as rebuilding in Iraq, yes I believe terrorist organizations would rebuild. Look at Hamas in Lebanon and Palestinian controled areas, they have rebuilt hospitals, schools and provided monetary funding for rebuilding. In part because of this rebuilding they have won the favor of the populations in these two areas. If you do nothing but destroy Iraq's infrastructure it will create a void and somebody will fill that void.

 

[BruceWayne]

No one, given the choice, would willingly be part of SocSec...
So, it -should- be killed.

I disagree.
Nobody would take part in the contribution aspect, but plenty of people would be more than willing to take part in the receiving aspect.

Given the voter turnout of senior citizens, the chances of eliminating social security are nil.

 

[jreeves]

I disagree.
Nobody would take part in the contribution aspect, but plenty of people would be more than willing to take part in the receiving aspect.

Given the voter turnout of senior citizens, the chances of eliminating social security are nil.

I disagree, Social Security will eventually eliminate itself. It is unsustainable, give it 30 years, people will have no one other than themselves left to blame.

So given the choice if they are educated, they would take a around 5% return on their money in Social Security compared to 10 to 12% in mutual funds? Also the influx in retirement savings would have a net benefit on Wall Street. Nobody's interested in that shit, how foolish of M-14.

 

[BruceWayne]

I disagree, Social Security will eventually eliminate itself. It is unsustainable, give it 30 years, people will have no one other than themselves left to blame.

So given the choice if they are educated, they would take a around 5% return on their money in Social Security compared to 10 to 12% in mutual funds? Also the influx in retirement savings would have a net benefit on Wall Street. Nobody's interested in that shit, how foolish of M-14.

And how do you deal with the people who've paid in their whole lives, and now you want to give them a 0% return on that, so that new payees can get higher returns?
Give them a big middle finger?

FYI, don't expect 10-12% returns from mutual funds in the future. That's unsustainable.

And actually, the influx in retirement savings wouldn't really have a net benefit on Wall St. Rising prices = lower yields.

 

[Toro]

And how do you deal with the people who've paid in their whole lives, and now you want to give them a 0% return on that, so that new payees can get higher returns?
Give them a big middle finger?

FYI, don't expect 10-12% returns from mutual funds in the future. That's unsustainable.

And actually, the influx in retirement savings wouldn't really have a net benefit on Wall St. Rising prices = lower yields.

The long-term return on stocks will be 8%-10%. Compounded over time, that's a lot higher than the 2%-4% that will accrue in the trust fund that buys nothing but treasury debt.

As for those who paid into it, currently, they receive more than what they pay plus their returns. SS is essentially a transfer of wealth between generations. Always has been. If recipients were to receive what they paid in and and what the assets returned, then they would get 20%-50% of their current pension.

They can alleviate a lot of the problems in SS by raising the age of eligibility. 40 years ago, the average life span was 65. Today, it is approaching 75. By raising the age of eligibility to, say 70, you can wipe out trillions of dollars of liabilities.

 

[rayboyusmc]

Yipee, makes me want to jump aboard another unsustainable social program, universal healthcare.

Maybe if we hadn't borrowed the Social Security trust fund to pay other bills, the money would contniue to be there for the original purpose it was put there. How can you say it is an unsustainable program when it isn't the program that is broken its the crooks who steal from it.

Don't blame social security, blame the stupid politicians who steal the money and then claim it can't be sustained.

Each week, through FICA contributions from their paychecks, millions of Americans contribute to the Social Security trust funds, the federal 'nest egg' that provides for their future benefits.
Under the budget proposed by the Bush Administration, the government is expected to borrow over $2 trillion from these Social Security trust funds to pay for government spending over the next ten years. Moreover, Administration officials and Republican congressional leaders have called the trust funds "a mere accounting device"1 from which employees will get "nothing in return"2 - indicating that the federal government does not plan to honor its commitment to paying back what it has borrowed from Social Security.

Another liberal plot.
http://oversight.house.gov/story.asp?ID=847

 

[Paulie]

A little logical thinking should lead one to believe that the purpose of mandating someone to pay into a "trust fund", is really only to be able to pilfer it for spending purposes. Obviously, if SS was voluntary, the contribution amount would pale in comparison.

Just the fact that it gets pilfered, and at the same is required by all on-the-books incomes, is enough to make me believe it was intended as a way to steal more money from Americans.

If my landlord had told me he took my security deposit and spent it on something for himself, I'd fucking bludgeon him.

 

[jreeves]

And how do you deal with the people who've paid in their whole lives, and now you want to give them a 0% return on that, so that new payees can get higher returns?
Give them a big middle finger?

FYI, don't expect 10-12% returns from mutual funds in the future. That's unsustainable.

And actually, the influx in retirement savings wouldn't really have a net benefit on Wall St. Rising prices = lower yields.

Indeed, historically stocks have offered the highest possible returns of all the asset classes. Ibbotson Associates, the Chicago-based consulting company, provides some statistics that demonstrate the high performance of stocks. Since 1926, the stocks that make up the S&P 500 (a listing of 500 commonly traded large cap stocks, including such titans as Monsanto, Microsoft, Campbell Soup and General Electric) have achieved an average annual growth rate of almost 12%. That's nearly double the rate for the next most historically lucrative investment choice, long-term corporate bonds, which have grown at about 6.5%.

http://www.infoplease.com/ipa/A0872962.html

So your assumption that mutual funds won't achieve those type of returns are flawed. Considering that we have had a World War, numerous natural disasters, terror attacks, anything else you can think of and still the 12% return on mutual funds exists, that's over a hundred years of past performance.

No, retirees money should have the option either mutual funds or bonds. Not government ran, low return, retirement would definetly be better than the current system. FYI, I'm not for government ran retirement to begin with, but I do acknowledge the catch-22, you have millions of seniors who have paid into the system.

I think you if you take billions of dollars and invest that money in the stock market, it would definetly be a huge boost. Where does your assumption that it would create rising prices/low yield come from, your opinion? Don't you think by growing stock prices that would also increase the dividends that stock owners would get? It's a win-win situation, decrease the overhead for SS as well increasing returns on people's SS payments.

 

[jreeves]

Maybe if we hadn't borrowed the Social Security trust fund to pay other bills, the money would contniue to be there for the original purpose it was put there. How can you say it is an unsustainable program when it isn't the program that is broken its the crooks who steal from it.

Don't blame social security, blame the stupid politicians who steal the money and then claim it can't be sustained.




Another liberal plot.
http://oversight.house.gov/story.asp?ID=847

Hey genius there's already 1.8 trillion dollars missing from the trust fund. Where did that money go?

 

[Paulie]

Indeed, historically stocks have offered the highest possible returns of all the asset classes. Ibbotson Associates, the Chicago-based consulting company, provides some statistics that demonstrate the high performance of stocks. Since 1926, the stocks that make up the S&P 500 (a listing of 500 commonly traded large cap stocks, including such titans as Monsanto, Microsoft, Campbell Soup and General Electric) have achieved an average annual growth rate of almost 12%. That's nearly double the rate for the next most historically lucrative investment choice, long-term corporate bonds, which have grown at about 6.5%.

http://www.infoplease.com/ipa/A0872962.html

So your assumption that mutual funds won't achieve those type of returns are flawed. Considering that we have had a World War, numerous natural disasters, terror attacks, anything else you can think of and still the 12% return on mutual funds exists, that's over a hundred years of past performance.

No, retirees money should have the option either mutual funds or bonds. Not government ran, low return, retirement would definetly be better than the current system. FYI, I'm not for government ran retirement to begin with, but I do acknowledge the catch-22, you have millions of seniors who have paid into the system.

I think you if you take billions of dollars and invest that money in the stock market, it would definetly be a huge boost. Where does your assumption that it would create rising prices/low yield come from, your opinion? Don't you think by growing stock prices that would also increase the dividends that stock owners would get? It's a win-win situation, decrease the overhead for SS as well increasing returns on people's SS payments.

I agree with you about retirement funds being more rewarding in the stock market, but it still doesn't change the fact that the federal government has no authority to take your money from you for it's own version of a retirement account.

 

[jreeves]

I agree with you about retirement funds being more rewarding in the stock market, but it still doesn't change the fact that the federal government has no authority to take your money from you for it's own version of a retirement account.

I agree, but there is a catch-22 what do you do about all of the people who have paid into the SS trust fund?

 

[Paulie]

I agree, but there is a catch-22 what do you do about all of the people who have paid into the SS trust fund?

To me, it's the same as anything else that gets heavily debated. It's lengthy existence ALONE is enough to keep it from ever being abolished. There's already way too much dependence on it to take it away now. And like you said, there are too many beneficiaries already with liabilities due or coming due.

It reminds me of the Iraq War argument. We've already undertaken the effort, now we need to finish the job. Same with SS. We've already undertaken the effort, now we need to finish the job.

The problem, as usual, is that it never should have existed in the first place.

It's never going to change. The SS tax will never stop. It will continue to be a hot topic at election time, cause more divide, and then be much ado about nothing after the election is over, just like everything else.

 

[jreeves]

To me, it's the same as anything else that gets heavily debated. It's lengthy existence ALONE is enough to keep it from ever being abolished. There's already way too much dependence on it to take it away now. And like you said, there are too many beneficiaries already with liabilities due or coming due.

It reminds me of the Iraq War argument. We've already undertaken the effort, now we need to finish the job. Same with SS. We've already undertaken the effort, now we need to finish the job.

The problem, as usual, is that it never should have existed in the first place.

It's never going to change. The SS tax will never stop. It will continue to be a hot topic at election time, cause more divide, and then be much ado about nothing after the election is over, just like everything else.

I agree with you in the sense that politicians won't do anything about it but I disagree with you that the issue will go away long term. The Social Security system will go bankrupt under it's current system. Our Representatives in Washington need to stop being political cowards and solve the problem. The CBO knows there is a problem, the President and any other reasonable person.
I don't think the solution is eliminating SS but restructuring how benefits are invested is the solution.

 

[BruceWayne]

So your assumption that mutual funds won't achieve those type of returns are flawed. Considering that we have had a World War, numerous natural disasters, terror attacks, anything else you can think of and still the 12% return on mutual funds exists, that's over a hundred years of past performance.

Ever read the fine print at the bottom of every mutual fund boasting xx% returns?
*Past performance is not a guarantee of future performance

I'm going to have to go ahead and go with Warren Buffett over you as a predictor for future stock returns. And if you'd like to discuss this further, I'd love to, but I think we should start another thread.

 

[jreeves]

Ever read the fine print at the bottom of every mutual fund boasting xx% returns?
*Past performance is not a guarantee of future performance

I'm going to have to go ahead and go with Warren Buffett over you as a predictor for future stock returns. And if you'd like to discuss this further, I'd love to, but I think we should start another thread.

I'm not saying the market couldn't go down here and there, but 12% would be your return over the long haul. I mean come on, the Great Depression, 9/11, Hurricane Katrina, World War II, is there something other than those things that could cause the rate of return lower than 6%?

 

[BruceWayne]

I'm not saying the market couldn't go down here and there, but 12% would be your return over the long haul. I mean come on, the Great Depression, 9/11, Hurricane Katrina, World War II, is there something other than those things that could cause the rate of return lower than 6%?

The math you're claiming is impossible.
http://money.cnn.com/magazines/fortune/fortune_archive/1999/11/22/269071/index.htm

Now, I'd like to argue that we can't come even remotely close to that 12.9%, and make my case by examining the key value-determining factors. Today, if an investor is to achieve juicy profits in the market over ten years or 17 or 20, one or more of three things must happen. I'll delay talking about the last of them for a bit, but here are the first two:

(1) Interest rates must fall further. If government interest rates, now at a level of about 6%, were to fall to 3%, that factor alone would come close to doubling the value of common stocks. Incidentally, if you think interest rates are going to do that--or fall to the 1% that Japan has experienced--you should head for where you can really make a bundle: bond options.

(2) Corporate profitability in relation to GDP must rise. You know, someone once told me that New York has more lawyers than people. I think that's the same fellow who thinks profits will become larger than GDP. When you begin to expect the growth of a component factor to forever outpace that of the aggregate, you get into certain mathematical problems. In my opinion, you have to be wildly optimistic to believe that corporate profits as a percent of GDP can, for any sustained period, hold much above 6%. One thing keeping the percentage down will be competition, which is alive and well. In addition, there's a public-policy point: If corporate investors, in aggregate, are going to eat an ever-growing portion of the American economic pie, some other group will have to settle for a smaller portion. That would justifiably raise political problems--and in my view a major reslicing of the pie just isn't going to happen.

So where do some reasonable assumptions lead us? Let's say that GDP grows at an average 5% a year--3% real growth, which is pretty darn good, plus 2% inflation. If GDP grows at 5%, and you don't have some help from interest rates, the aggregate value of equities is not going to grow a whole lot more. Yes, you can add on a bit of return from dividends. But with stocks selling where they are today, the importance of dividends to total return is way down from what it used to be. Nor can investors expect to score because companies are busy boosting their per-share earnings by buying in their stock. The offset here is that the companies are just about as busy issuing new stock, both through primary offerings and those ever present stock options.

So I come back to my postulation of 5% growth in GDP and remind you that it is a limiting factor in the returns you're going to get: You cannot expect to forever realize a 12% annual increase

Interest rates can't fall forever. Corporate profits as a percentage of GDP can't rise forever. Dividends are sporting a measly ~2% yield. Unless you're expecting GDP to rise at a 10% annual rate (an expectation that will get you laughed at in most economic circles), how do you expect to earn that 12% return?

 

[jreeves]

The math you're claiming is impossible.
http://money.cnn.com/magazines/fortune/fortune_archive/1999/11/22/269071/index.htm


Interest rates can't fall forever. Corporate profits as a percentage of GDP can't rise forever. Dividends are sporting a measly ~2% yield. Unless you're expecting GDP to rise at a 10% annual rate (an expectation that will get you laughed at in most economic circles), how do you expect to earn that 12% return?

Here's how it can it's called total return of investment.
The second main measure of evaluating how well a mutual fund does is total return. Total return includes dividends and capital gains that the fund distributes to shareholders. A mutual fund incurs capital gains when it sells some of its portfolio holdings to lock in profits or redeem fund shares.

In other words, total return assumes that fund shareholders reinvest all their dividends and capital gains during the period for which the return is calculated. While this assumption may not mirror every investor's use of fund distributions, it allows for comparisons with other funds.
http://money.aol.com/investing/fct1/_a/yields-and-returns/20050225134009990015

Wonder why Buffet has been downplaying the market, could it be that he is looking to add to his fortune, by buying low priced stocks. Every person who knows anything about investing will tell you that mutual funds offer the highest total rate of return. I could post a billion of articles stating over the long haul, the total rate of return for mutual funds will be anywhere between 10 to 12%.

 

[BruceWayne]

Here's how it can it's called total return of investment.
The second main measure of evaluating how well a mutual fund does is total return. Total return includes dividends and capital gains that the fund distributes to shareholders. A mutual fund incurs capital gains when it sells some of its portfolio holdings to lock in profits or redeem fund shares.

In other words, total return assumes that fund shareholders reinvest all their dividends and capital gains during the period for which the return is calculated. While this assumption may not mirror every investor's use of fund distributions, it allows for comparisons with other funds.
http://money.aol.com/investing/fct1/_a/yields-and-returns/20050225134009990015

Wonder why Buffet has been downplaying the market, could it be that he is looking to add to his fortune, by buying low priced stocks. Every person who knows anything about investing will tell you that mutual funds offer the highest total rate of return. I could post a billion of articles stating over the long haul, the total rate of return for mutual funds will be anywhere between 10 to 12%.

I'm sorry, but that doesn't explain anything (I'm well aware of what capital gains are, so spare me the rhetoric). The stock market is ultimately limited to economic growth and dividends.

And no, you won't find thousands of articles that say the return for mutual funds will be 10-12%. They will say previous returns have been 10-12% and prior returns are no guarantee of future performance.

And your little conspiracy theory on Buffett is ridiculous. He's looking to buy individual securities, not the market anyway.