Social Security Crisis?

[Shapley]

GC,

My view of the problem is this: Neither FDR, JFK, LBJ, RWR, nor GWB, or the Congress' that serves during their term can deliver on promises beyond their term of four years. Whatever promises Congress' past may have made regarding SS, any Congress with the cojones to do so can abolish, modify, repair, ruin, or otherwise tamper with the system.

From what I can see, GWB is attempting to alter the system in a manner that will keep it within the funding allocation for a long time to come, by reducing the rate of growth of the "entitlements" to a level consistent with inflation. You have nowhere been promised that your benefits would increase faster than inflation, nor that you would receive a given rate of return on your "investment", nor that you will receive any return at all. I receive a statement annually from SS, telling me how much I have paid, etc., etc., and it tells me that, if certain things happen and my income continues along certain lines and I retire at a certain age, I can "expect to receive" a certain amount of income from SS. There is no promisory language in the form.

Hell, Bill Clinton promised me a middle class tax cut, as have numerous other politicians over the past few decades. Very few have delivered. What makes you think the "promise" of SS is any more valid?

I need a beer!

V/R
Shapley

[OperaTenor]

You all talk about 401k's and pension plans like they're an entitlement!

I submit those with the least means to save/invest will be the ones who will suffer the most from this "reform".

RC's right, the bell curve will continue to flatten.

[dai bread]

As one who has spent much of his working life in dirty-collar workplaces, I can assure you that pissing money against a wall is a lot more common than some of you seem to think.

Perhaps the people do it because of the Govt. pension that they know they will get when they retire, but somehow I don't think so. These are people engaged in manual work, sometimes heavy, and there is no way they could keep working until age 70, regardless of alcohol consumption.

Periodically, calls for a rise in the pension age are made here, and they always founder on the same rock. Those calling for the increase are well-heeled office types; those who would suffer the increase are not, and we-the-people know it.

It is all very well to talk of individual responsiblity, but an increasing number of people need to be saved from themselves. "Homeless" people, for instance. Also, before you can save you need something to save from; i.e. decent wages.

Why the number of inadequate people should be increasing, I do not know. At a guess, the increase is simply a mathematical function relating to population growth. I sometimes wonder what the bottom of society is like in a big country.

[analog]

quote:
--------------------------------------------------------------------------------
Originally posted by deathstalker82:
You will be hard pressed to find somewhere that doesn't have a halfway decent retirenment set-up for their employees.
--------------------------------------------------------------------------------

DS: Glad to see young folks thinking ahead.
The big company I worked for changed our retirement plan about six years ago - they eliminated it. Everyone who was vested got a cash account set up for them, in an amount equal to the present worth of their pension as figured by some "value of an annuity" formula. New employees have only a 401 plan. A friend in HR told me they'd likely do something similar with healthcare. The company's cold heartless accountants are protecting it against runaway inflation like we're seeing in medicine right now. I think company pensions will soon be a thing of the past.

So, DS, - my advice is invest to the max in your voluntary 401K. If we'd had them when I was your age I would be rich now. If 401's had been mandatory, I daresay most of us older boomers would be in a position to simply forego our SS "for the common good". Then SS would have plenty of money for those who really need it...

So, if the "privatization plan" returns SS to an individual investment account plus a small tax for charity, as it was originally envisioned (pre 1939), I think it deserves consideration.

<small>[ 02-02-2005, 07:12 PM: Message edited by: analog ]</small>

[shostakovich]

Well, Bush gave a very good speech, written by people a lot brighter than he is. It was laudatory to many nations, primarily Iraq. There was a threat to Iran and Syria. There were some neat anecdotes. But it was largely an hour of generalization. One specific was a call for a constitutional amendment banning gay marriage. He is still pushing privatization as the solution to the SS problem.

OT wrote, "I submit those with the least means to save/invest will be the ones who will suffer the most from this "reform".

That's essentially my view. If the market could guarantee a better return than SS, there would be no argument. But personal investing comes with no guarantee. The people least competent to invest are the ones who need the "security" of SS. If Bush's idea were so good, the government should be gambling our money for us to get us a better return. But his proposed plan will help those who need retirement help least and hurt those who need it most.
The president says he is open to all possible solutions --- except one, the one that works. Increase the SS withholding.

Along similar lines, he is planning to propose a budget that will reduce spending (I don't know how he can do that with an extra dept --- Homeland Security --- revisions in intelligence without cutting personnel, a war that is not going away), allow for permanent tax cuts, and reduce the deficit by half in 4 years. The tax cuts are a major CAUSE of the deficit.

As I said, it was a great speech. The devil will be in the details.
Shos


PS: I'm sick of hearing about Bush's charm. Since Laura can stand him, I have no doubt that he makes great personal company. It's (most of) his policies that stink to high heaven [tax cuts, Medicare, the environment, the war].

It's too bad that most voters couldn't separate the message from the messenger.

[shostakovich]

Oh, yes, to be fair and balanced, let me add that the democratic response from Reid and Pelosi was an embarrassment. They need speech writers desperately.

[Selma in Sandy Eggo]

Perhaps they should consider retaining the services of smarter writers, with larger vocabularies and quicker wits. I would be available were I not occupied with the translation of Engineer into Mechanic, but I think I know where they could find a retired math prof with a fine vocabulary and political interests. <grin>

Your museum is being fluffed up, at the moment, isn't it? Docenting at a lull? Interested in a challenge? There's a real need. <more grinning> <followed by a thoughtful Hmmm>

[Trumpetmaster]

When I was young (too many years ago) my grandfather was the sole bread winner of the family. He did not plan for retirement and totatly relied on SS to support he and my grandmother. They lived till their mid 70's.
I remember each week going up to visit them with my parents. We would bring lots of food. My parents would give them money. Enough to hire someone to assist cleaning their apartment as they could no longer do these tasks.
I guess I hate hospitals because one of the last words my grandfather said to me from his hospital "death" bed was "I never thought I would be in this position". When he died, he left my grandmother penniless. SS was not enought to pay rent, food, etc.. It was very hard for her and I don't know what would have happened if it were not for what my parents did. From that time my dad taught me to save/invest wisely, and not rely on SS as the primary source of funding for my retirement. The companines I have worked for fortunately have had 401K plans (pre and post tax options) with matching contributions. I don't even think about relying on pension money for retirement. I am striving to build my own nest egg that will be supplemented by whatever SS and pension dollars offer.

Bush said last night was those 55 and older will not see a change in SS. What about all the people under 55. I think this statement was extremely politically motivated as there are more "older" americans now than ever before.
I realize we need reform/change in the way the SS system is currently run, but don't believe what Bush is proposing is the correct path. I think there might be other options to explore.

Sorry for the length.
Howard

[barfle]

GC, Social Security has been a Ponzi scheme from the get-go. The only way the original idea could work is for a labor force that is large enough to support the retirees, which means a population that is increasing at a rate only seen during the baby boom and/or not very many people living much beyond their retirement age.

Shap, although a congress may not be able to promise results beyond their existing term, unfortunately many of the bills they pass seemingly live forever. Otherwise, SS would have died with FDR.

OT, I submit that the "reform" won't involve any decrease in contribution (that sounds so voluntary, doesn't it), simply a say-so in how that money is cared for until its time to withdraw it.

Dai Bread, I might suggest the thought that the reason so few people are taking care of themselves is because they think someone else (like a government program) will do it for them.

Analog, excellent advice. The 401k program started when I was in my late 30s. The company I was working for at the time made outstanding contributions to the employees' accounts, and in just a few years I had $30,000 in my account. In what turned out to be a short-sighted plan, I took a lump-sum payment for the whole thing when I was laid off from that company, and my attempt at entrepreneurship lost it all. Since that time, I've participated to the max in every 401k plan I've been eligible to, in spite of my employers' token contributions. I'm now participating to the max in the federal "Thrift Savings Plan" which is growing me quite a nest egg.

Unfortunately, Shos seems to feel that in order to save a few fools from their own folly, that those of us who make wise investments must also make mediocre or poor investments. I'll agree that Bush is just another Republican borrow-and-spend big government advocate, as compared to Democrats' policies of tax-and-spend big government, which is why I characterized the major candidates in the way I did. I admit I did not stay up to hear the entire speech. It started at 9PM on the east coast, and 9:30 is about when I have to hit the hay. I read a few excerpts in the paper this morning, and from what I see there, Bush wouldn't know a liberty if it bit him in the backside. His inaugural address now has quite a hollow ring to it.

The Democratic response remains a topic of which I know nothing. There wasn't even an article on it in the paper I read.

Howard, I'm glad you learned from the mistakes of others. It was good that your grandfather had family to return the favor of supporting them, but far too many people run out of cash before they run out of breath.

I'm over 55 myself, and I am still not fully confident in SS to provide me with income (however meager) until I attain room temperature. If the plan is what I believe it to be (that I can control how some of my SS funds are invested), then I would be eager to participate. I understand that some of the changes are going to result in payouts not increasing as much as they would have. This neither dismays me nor surprises me. SS, as I noted above, has been a Ponzi scheme from the get-go. With birth rates stabilizing, you need to either increase the income, decrease the outgo, or both.

[piqaboo]

SS is a forced savings acct.
AS such, it helps keep some folks fed in their 'golden years'.
Could those folks have done better if the gov't had let them take home their 25%? Probably.
Would they? Some yes, some no.

In the last 20 years, personal debt in the US has skyrocketed, tho I think its starting to come down again. People WITH GOOD SALARIES were living on their credit cards. Many many people. Especially younger people. You know, those who "dont need" the government to save for them.

Perhaps we should take the money we pay into SS, put 1/10th of it into federally mandated school programs, taught from kindergarten to 8th grade, on savings and investing. How it works, how to do it, saving $X as a class project each year. Field trips to banks to open up savings accts, etc.
Kindergarteners could build piggy banks, and save pennies. 8th graders could each follow 5 stocks or mutual funds for a year, and present a math project on how they did.
These kids might learn enough to invest like mad fiends for the first 5 years of their workign lives, thus setting themselves at good odds for a comfortable retirement.

Without such training it aint gonna happen. As we discussed re healthcare: if you barely make enough to pay the rent, you are not getting employer health coverage or just minimal, and you dont get enough to invest.
At least when we are right fresh from highschool or college, we are relatively used to being strapped for cash and could be trained ('brainwashed'?) insto investing conservatively and well with every extra cent for those first 5 years.

(Analysis shows that
a) at a fixed rate of investment
b) at a fixed return
someone who invests from ages 20-25 and STOPS will have more at age 65 than someone who invests from age 25 to 65. Compounding rocks. Scary. I must find link so you dont all beat me up).

[shostakovich]

This morning on TV someone was explaining some of the details of SS reform. He said up to 65% of what is withheld can be shifted into another account, one that will be invested by the government for you. If true, it's not as bad as I imagined for the investment challenged. But 65% means the death of SS, which is Bush's intention.

There may have been a time when SS was sold as the total nest-egg. When it was seen that it was woefully inadequate, 401Ks were developed to supplement SS. Your SS initial income is based on some (unknown to me) percentage of an average of your best 35 years of earning (not adjusted for inflation, I think). In today's dollars (and possible flexible percentage), it does not amount to very much. It was just over 20% of my last salary. Luckily I was also investing in TIAA-CREF. That amount plus my wife's SS brought us up to about 80% of my last salary. It's liveable, but the amounts don't increase with inflation (the TIAA part did, but the others didn't). In fact, the CREF payment (tied to the stock market) in 2001 went down $400/mo. It has not yet recovered, so I moved to the more conservative TIAA. Such volatility makes me "pessimistic" about the portion of SS withholding that will become invested.


From Selma: "Your museum is being fluffed up, at the moment, isn't it? Docenting at a lull? Interested in a challenge? There's a real need. <more grinning> <followed by a thoughtful Hmmm>"

There's some cleaning up, the purchase of a new building, and some inconveniences. There was SUPPOSED to be a major overhaul and a 2-yr closing, which caused several of our best collections to go out on the road. That fell through, yet some people are under the impression we have closed. That caused a lull in the number of tours we were doing, but that's picking up again. Now we need to beef up the docent corps. If only you lived closer ------


Also from Selma, about writers for democrats: "Perhaps they should consider retaining the services of smarter writers, with larger vocabularies and quicker wits. I would be available were I not occupied with the translation of Engineer into Mechanic, but I think I know where they could find a retired math prof with a fine vocabulary and political interests. <grin>"

Well, since you're not available, I hope they'll consider me, but my one condition would be straight talk, plans with explanations, and basically a desire to inform. Unfortunately, the democrats aren't into that, either.
Shos

[deathstalker82]

Thanks analog,

I guess the point I am trying to make is that certain people deserve it more than others, especially people that are retired and have no pensions, like my grandma. When my mom turns 59 1/2 she will recieve the retirenment that my dad built up when he worked for GE. I am sure that she will get her SS when the time comes, but she will not really need it. Personally I would rather them use my money for something better like education. Hopefully after I finish my ChE degree, I will get a job with someone like GE, so that when I retire I won't need SS. Also what about the people who have never paid into it that get it. Same situtation with food stamps, I am a full-time student and I work, yet I can get no assistance, I already tried and got $10/month and was kicked off after 2 months, and people that don't work get plenty, especially women whether or not they have children, which I think is totally wrong. If they have children that is one thing, but to not have anyone but yourself and to get money when you can work is abusing the system. Some people just have kids so they do not have to work, which I think is wrong also. I don't know, I plan on working overseas for a few years to make a nice tax-free nestegg.

[Trumpetmaster]

QUOTE "Some people just have kids so they do not have to work,"

deathstalker82 - the system need big reforms.
We have alot of LAZY people hear who abuse the system.

Another issue that needs reform is the illegal immigrants who call 911 to get a ride to the hospital ER. Oh man does that get me pissed.
The reason they do this is because they have no insurance and the EMTs have to transport a non emergency patient to the hospital. Your tax dollars and mine wind up paying for this as well as these people who can't even pay the hospital.

A while ago I found out how hospitals charge insurance companies higher rates for a procedures to assist covering people without insurance.
Again - were paying for these LAZY people and I wonder when true reform to all these systems will occur.

[piqaboo]

Stereotype checking time.

Not everyone with no or inadequate health insurance is lazy. Some (more than a few) are just earning too little to pay for it, and then they get unlucky and are in an accident or get ill.

Article in paper today - most americans are one catastrophic illness away from bankruptcy. M O S T.
I think we can not classify most americans as lazy.

DS82, are you lazy? Working and a student. Do you have adequate health coverage? Retirement savings?
How about you, *naf?
If my company didnt pay for coverage, we'd have to move to where I'dhave a 90 min commute each way,so I could pay for health insurance for OT, Altoid and myself. Thus increasing my chances of a nasty auto accident. Or, we'd stay here and gamble on being underinsured, in which case I must be lazy.

[analog]

Indeed PB, compounding rocks. I think it could support social security. Surely there's a mathmetician (or a spreadsheet jedi) in the house? I churned this out in Qbasic ..... think it's accurate.....

If a 20 year old starts at annual salary of X dollars per year, gets 3% annual cost of living raises, and he (or SS admin) stashes away 6% of his salary in something modest like US savings bonds at 4% compounded quarterly , he'll have at age 60 acumulated $10.2X , and at age 65 $13.6X . That's ten to thirteen years worth of his original salary. Over the same time his salary will have about tripled, so he'll have 3&1/2 years or so of his final salary stashed. As Shos pointed out, that's probably ten or fifteen years of SS benefits ..

Up the interest rate to 6% and those accumulations become $16X at age 60, $23X at age 65. That's probably over 25 years of benefits if the account contunues to draw 6%...

Note these numbers assumed a 6% contribution - only our half of the present SS tax (other half is paid by employer.) Gov't would have other half to spend on hardship cases.

SS is supposed to be a safety net for the needy, not a golden parachute or a cash cow for government porkchopping. I think there's enough inflow to make it work, honestly.

<small>[ 02-04-2005, 03:05 AM: Message edited by: analog ]</small>

[Trumpetmaster]

piqaboo,
OK - u r correct. I played the stereo type game here. Just frustrated over what I see going on. There are alot of illegal immigrants in an area here. Claim not to speak English,(they can) who abuse the systems that our tax dollars pay for.
tks for pointing that out.

[Marye]

Interesting, now I am off Social Security topic and back to Health Care, but just for the moment, a recent study done by Harvard University Researchers (and it sounds to me like Piq knows about it) that illness and medical bills account for about half of all U.S. bankruptcies. Ironically, most of those bankrupted by medical problems started off with private health insurance. But the health insurance did not cover a lot of costs, like physical therapy (what say you OT?) or the illness led to job loss and that led to loss of health insurance.

And I think Piq may have read this quote ... "unless you are Bill Gates, you're just one serious illness away from bankruptcy".

[haggis]

"Also what about the people who have never paid into it that get it"

It was my impression that if you do not pay SS taxes, then you're not eligible to receive SS.

I may be wrong and I'm too lazy (actually too busy!) to research it.

Maybe some lazy person here could do the research; if you're not too lazy.

Are illegal aliens allowed to use the internet? hmmm

[Selma in Sandy Eggo]

"Maybe some lazy person here could do the research; if you're not too lazy."

No research necessary. I am CSRS; do not pay Social Security, will not qualify for Social Security. If you have a minimum of 40 quarters of employment in SocSec-taxed jobs, you should qualify for minimum benefits at retirement age. I have, maybe, 10 quarters, all in kid-jobs. I do pay Medicare taxes, and will qualify for Medicare whenever I get old enough.

There may be some way to receive disability benefits from Social Security without paying into it first, but I don't know about that.

[mmichaelson]

Yeah, serious illnesses and car wrecks are expensive. When my father in law was in a serious accident, they used up supplies from three ambulances to try and stabilize him for the ride in the life flight copter. Each ambulance charged about $100,000 worth of expenses, and the life flight copter was really expensive. Not to mention the charges for being in neurological ICU for three weeks and then a rehab center for two months. The costs were amazing! I had no idea how much they charged for those kinds of extensive stays or surgeries. I am certain that OT can relate.
In fact, my FIL just had another piece of glass removed from his wrist, 3 1/2 years after the accident. Amazing no?