A little bit of foreshadowing.
Despite extensive efforts to educate workers about saving for retirement, many employees are not doing a good job of managing their company-sponsored 401(k) accounts, a new study indicates.
The analysis of nearly 1 million retirement portfolios found that 69 percent have inappropriate risk or diversification of holdings and 36 percent have worrisome concentrations of company stock. In addition, one-third of savers aren’t putting enough aside to qualify for the full company matching contribution.
i’m a democrat that supports privatized social social security, with stipulations of course. i honestly trust private corporations with my money more than i do with my government. i’d rather let my money accumulate interest since i started working at 16 by putting my SS funds into an investment account instead of letting my money accumulate interest free with the government.
favian:
Why do you trust private corporations with your money? Is it because you read every statement and stuff you get from them closely? If so, do you think everyone has the same luxury or understanding of the risks and everything involved? Your money doesn’t accumulate interest free with the government, by the way.
Wow. Mebbe because I am a union man I see greedy Me,Me,Me all over the place. Favian’s comment on his money sitting in the gov’t. coffers interest-free definitely fits that bill. If you weren’t so enamored with yourself and to hell with everyone else, you’d know how SS really works.
The author is implying that Social Security is better than the private alternative because people aren’t contributing enough to the private alternative. What a shocker! Social Security is MANDATORY. Where are people supposed to come up with the money to invest in their private retirement accounts? The government confiscates 12% of your total compensation and gives you a horrible rate of return. Only the lucky few will have enough money left over to supplement that with a private retirement account.
Your money doesn’t accumulate interest free with the government, by the way.
That’s right. Your money doesn’t accumulate at all. It’s spent the instant the government gets its hands on it. But you CAN compute your overall rate of return by making assumptions on how long you work, how long you live and how much of your pre-retirement income Social Security is going to replace. For anyone who started working after the Social Security tax was increased to 12.4%, that rate of return is now negative.
The question is do you really trust the political party that believes regulation is a tool of the devil, to have a good plan to hand over your money to private corporations that are making the big donations to these politicians to buy this kind of legislation in the first place?
In other words, there would be no significant and reliable oversight or regulation for any plan passed. Then 15-20 years down the road we will have some catastrophic crash, similar to the subprime meltdown, that the government will have to bail out for trillions of dollars to save the retirement money of screwed seniors.
The question is do you really trust the political party that believes regulation is a tool of the devil, to have a good plan to hand over your money to private corporations that are making the big donations to these politicians to buy this kind of legislation in the first place?
No, I don’t. But it has nothing to do with regulation or Republicans. I don’t trust ANY politicians. Members of Congress have one overriding goal and that’s to get reelected. Everything else is secondary. And they will stop at NOTHING to achieve that goal, including using my tax dollars to buy votes. Why do you think the federal government treats seniors like royalty? It’s because they vote in droves and control who gets elected and who’s relegated to footnote status in a history book. There’s only one person on God’s green Earth that I trust with my money and he is not a Washington bureaucrat.
Then 15-20 years down the road we will have some catastrophic crash, similar to the subprime meltdown, that the government will have to bail out for trillions of dollars to save the retirement money of screwed seniors.
I wasn’t aware that an 11% drop in the stock market was “catastrophic”. Especially following a 5 year period of 16% PER YEAR increase. The public school system may have all but eliminated illiteracy, but it’s clear that innumeracy is still rife. Our tax dollars at work.
Innumeracy? Try concentrating on reading comprehension. I point to a singular crash (probably caused by deregulation at the behest of a specific industry), to drive home the point that crashes occur in specific industries (often spurred/brought on by industry sought-after deregulation). My example was finance related, dealt with funds and investment instruments, and had a very negative impact on various investment and retirement plans. But you want to repudiate a specific example by comparing it to the entire US economy for the last 5 years. OK.
I wasn’t aware that we had a 16% increase in the US stock market over the last five years. It’s more than doubled huh? Which stock market are we talking about? THe Dow which has seen roughly 50% increase over 5 years, the S&P has increased about 40% over that time, the NASDAQ roughly 30%. WHat are we looking at?
Do we need to factor in the falling dollar that has lost 50% of its value versus the Euro over that time which effectively wipes out all that gain?
How about inflation? Do we factor in inflation, which if we calculated it in the same way they did in the 70’s would be over 10% right now? How about unemployment? Figured the way they did in the 70’s it would be over 12%.
OMG! It’s the return of stagflation.
The people who want to dismantle social security misstate its purpose. It is not an investment scheme, it is an insurance scheme. It provides a minimum level of sustenance for anyone who is 62 and over and has enough “credits” by lifetime work.
I don’t understand why some of these people would rather trust Wall Street than the government. The government has an unblemished 70 year record of paying its promised Social Security benefits. Wall Street? Not so much.
The federal government has far more likelihood of being solvent longer than most corporations. I may not trust them explicitly, but I trust the government with social security more than I would trust some Wall Street funding for my retirement.
And they will stop at NOTHING to achieve that goal, including using my tax dollars to buy votes.
Pretty sure that’s illegal.
My point exactly, EL.
But you want to repudiate a specific example by comparing it to the entire US economy for the last 5 years.
I’m not saying you’re lying. I’m saying you’re manipulation and sensationalizing what has happened for political purposes. Investing for retirement is, by definition, a long-term investment. Pointing to a specific example and claiming the sky is falling is just intellectually dishonest.
I wasn’t aware that we had a 16% increase in the US stock market over the last five years. It’s more than doubled huh?
Yes. On 10/9/2002, the S&P 500 stood at 776.76. On 10/9/2007, it was at 1565.15. Double. That doesn’t include the dividends those stocks paid over that same 5 year period. I don’t know where you’re getting your numbers from. I suspect you’re making them up. Try going to Yahoo and pulling up actual data for ^GSPC. Or, better yet, look up VFINX so it includes dividends.
The people who want to dismantle social security misstate its purpose. It is not an investment scheme, it is an insurance scheme.
What does Social Security insure against? Getting old? That’s ridiculous. There is no actuarial risk involved in getting old because it happens to just about everyone. Is it insurance against poverty? Clearly not, since it’s paid to the wealthiest man in the world. If there’s one person on this planet who does not need Social Security, it’s Warren Buffett. Social Security is only insurance in the same way that a variable annuity is insurance: in name only. You pay in, you get paid out. Period. End of story.
The federal government has far more likelihood of being solvent longer than most corporations. I may not trust them explicitly, but I trust the government with social security more than I would trust some Wall Street funding for my retirement.
Well that’s your decision. And if Social Security were privatized, you could continue to do that by simply buying treasury bonds. You’d actually come out ahead, since Social Security now guarantees a negative rate of return. But there are many Americans who want to make their own decisions. Unfortunately, the federal government has decided that we’re too stupid to do so. Welcome to the land of the free.
But there are many Americans who want to make their own decisions.
I suspect this part is what causes many Democrats to tense up when the subject of SS privatization comes up. The government knows how to spend our money better than we do, etc. And trust those evil fatcats on Wall Street? Forget it!
And if Social Security were privatized, you could continue to do that by simply buying treasury bonds. You’d actually come out ahead, since Social Security now guarantees a negative rate of return.
This is a good compromise solution for those worried about Wall Street solvency 20 years down the road or about people making stupid decisions with their SS funds and being left broke with no SS to bail them out. Hell, make this the default scenario for everyone, unless people manually opt out and choose to manage it themselves.
1. Apparently you don’t get my point. I am not saying that something like the SubPrime mortgage meltdown is going to reduce the returns. What I am saying is that at some point these companies will lobby and get some kind of deregulation that will open these funds to looting, mismanagement, or fraud and that the government will have to bail them out at an immense cost.
2. I have to admit I eyeballed the charts. But unlike you I based my assessment on current numbers. In my book, cherry picking a favorable number and then accusing others of lying is well, a bit dishonest.
3. Nothing to say.
4. It isn’t exactly Wall Street’s solvency people are worried about, it’s Wall Street’s honesty. Do you trust a corporation to act in your best interest vs. the interest of the bottom line. Check the Pension Guaranty shortfall for an example. At the first sign of trouble, company after company dumps their severely underfunded pension plans into the lap of the government, screwing retirees out of 2/3s or more of their retirement income.
2. I have to admit I eyeballed the charts. But unlike you I based my assessment on current numbers. In my book, cherry picking a favorable number and then accusing others of lying is well, a bit dishonest.
You accuse ME of cherry picking? That’s a serious case of the pot calling the kettle black. Actually, it’s more like the pot calling the stainless steel cookware black. You’re the one who called the recent downturn “catastrophic” and used it to claim the sky is falling. All I pointed out is that it is only an 11% loss which was preceded by FIVE SOLID YEARS of 16% annualized gain.
Furthermore, I have no need to cherry pick numbers from the stock market. The long-term return of the S&P 500 is still 9.5% (6.5% real return), even given the recent downturn in the market. The stock market remains a solid long-term investment. Social Security, on the other hand, is a guaranteed losing proposition. At least for those of us who started work after 1990.
Excuse me. What is today’s date? It certainly isn’t October. You deliberately picked numbers at peak as they compared to numbers in a trough. Excuse me for pointing that out. What is the 8 year return?
On top of that I pointed out some other numbers. The falling value of the dollar that undermines your gains, rising unemployment, rising inflation. Let’s add falling wages. Rising debt. It isn’t a pretty picture.
I am not pointing to the subprime mess as an example of the dangers of the stock market. I am pointing at it as an example of the dangers of what can happen when you place money in the hands of private companies. These companies lobbied for deregulation of safeguards put in place to help prevent another great depression. WHen they finally got them removed they opened up a whole can of abuse and fraud and naked profiteering and recklessness that led to the current credit crunch. It didn’t happen overnight. They chipped away for 30 years.
Look at how companies handle their pensions. They lobbied for years and chipped away, until now they can seriously underfund them. Then when they have some trouble they declare bankruptcy and reorganize. When that happens the first liability they dump is their pension fund obligations which then get turned over to the government run Pension Benefit Guaranty Corporation. That is your tax money now going to cover the responsibilities of greedy corporations. As far as the retirees relying on the pensions, they may get less than half of the income they were promised.
Look at Wall Street itself. How many scandals have we had over the last ten years where a manager stole investor’s money? Gambled it away in some options leverage scheme? Acted in their own interest over the interest of their investors. I seem to recall some of the biggest brokerages getting fines not too long ago.
The point I’m trying to make is, at some point the private companies invested with Social Security money will chip away at any oversight and regulations put in place to protect investors. Then there could be some kind of catastrophic loss that the government will have to bail out at taxpayer expense.
Excuse me. What is today’s date? It certainly isn’t October. You deliberately picked numbers at peak as they compared to numbers in a trough.
Actually, I picked October 9th because that was the recent peak of the S&P 500. So picking that date actually maximized the recent loss endured by the index. Yes, I deliberately picked it, not to maximize the previous return, but to demonstrate how ridiculous your use of the word “catastrophic” was.
Excuse me for pointing that out.
No problem. You’re welcome to point out your own hypocrisy any time.
I guess I can explain over and over what I meant, but if you don’t actually read what I write and focus in on KEY words, it does no good. It makes me wonder if you are a tech support guy from India.
But to continue to argue on your ridiculous tangent, you just admitted my point. Furthermore, picking that date does not maximize the recent reversal, it ignores it.
It makes me wonder if you are a tech support guy from India.
Actually, I’m a PhD in math from Washington, DC. But that’s neither here nor there.
Furthermore, picking that date does not maximize the recent reversal, it ignores it.
Then you’re using a non-standard definition of “maximize”. That’s not so hard to believe, since you’re just making everything else up as you go.
Let’s see, you pick a five year period that begins on a certain date and ends on a certain date of your choosing. Then you make the claim that somehow that range includes dates that fall outside of it. And you claim to be a math PhD?
Please find a date such that the decline in the S&P 500 between that date and today is greater than what I stated. If, as you claim, I didn’t hit the maximum, then you must be able to pick a date with a greater decline. Please, by all means, show me up.
You can’t. If you think about it, it’s pretty obvious why. The S&P 500 hit its peak on October 9th, 2007. It doesn’t take a PhD in math to understand why that date is going to yield the maximum decline. If you still don’t believe me, I encourage you to download some actual data and play with it. Yahoo will supply you with historical prices for the S&P 500 going back to 1950 or so.
The big difference, besides you cherrypicking your dates, is that I actually understand your point. You, on the other hand, have completely missed mine.
Your point is essentially: historically the stock market, by far and hands down, outperforms Social Security, even if you take temporary setbacks into account. Hell, even my numbers concede and affirm this point.
My point has absolutely nothing to do with the stock market. It never did. I guess I made a mistake by pointing out that you cherrypicked your stock market numbers, thus further derailing the debate into a series of finger pointing garbage.
The subprime meltdown was an example, maybe you would like the Savings & Loan scandals as a better example. Deregulation, abuse, and fraud leading to a crisis ultimately bailed out be the US government. The crisis wouldn’t be in the stock market. It would be in the administration or management of the retirement accounts. You can’t put effective protections and regulations in place while privatizing social security that wouldn’t eventually be chipped away by industry lobbyists, leading ultimately to a crisis that the US taxpayer money will have to bail out.
When I have time I might actually take your challenge and provide a better peak for the S&P.
There is a system already in place that performs better than Social Security AND has the protections you want. All you have to do to beat Social Security it is stick your FICA dollars in to a high-yield, FDIC-insured savings account (CDs, if you prefer). As long as your savings account keeps pace with inflation, you’ll be doing better than Social Security. Admittedly, current rates are slightly below inflation, but that’s an anomaly caused by the Fed lowering interest rates to absurd levels.
Actually, there’s a second system that also performs better than Social Security and has the safeguards you’re demanding. You could just buy treasury bonds. Admittedly, this is a lot like Social Security. However, instead of financing 100% of retirement benefits with tax dollars, you’d only be financing the interest portion.
Both of these approaches have the benefit that your FICA dollars are going in to an account with your name on it. Congress can’t unilaterally swoop in and lower your benefits, either directly or by raising the retirement age.
Ultimately, though, the best solution is to just give people a choice. Some people will invest in stocks. Some people will invest in real estate. Some people will invest in treasury bonds. Some people will invest in CDs. Some people will stuff the money in their mattress. And, yes, some people will make poor choices and will get burned. For them, we should have a REAL safety net (i.e. not one you have to pay for like Social Security).
Midderpidge, if you don’t trust your money while it is invested in the stock market, then by all means, invest your money in government bonds or other safer investments.
The problem for you, like too many liberals is that all you ever do is ask, “Well what about….?” and put the worst case scenario afterwards and say, “That’s why we shouldn’t do it!” It’s pretty mind numbing after awhile. If we all lived risk averse lives, we’d never leave the house.
How about allowing people to make the choice on their own? If you want to stay with the current system, fine. But your irrational fears shouldn’t prevent me from being able to choose my own destiny when it comes to my retirement.
In addition, the subprime meltdown was not caused by deregulation, abuse and fraud. The overwhelming majority of people knew exactly what they were getting into. They bought houses they couldn’t afford, investment properties they wanted to flip and made panic buys thinking the market was going to just keep going up, up, up.
“How about allowing people to make the choice on their own? If you want to stay with the current system, fine. But your irrational fears shouldn’t prevent me from being able to choose my own destiny when it comes to my retirement.”
And when you make the wrong ones or your investment counselor took your retirement funds to Rio, you’re ok with us leaving you in the gutter in your old age, right? Thought so.
Social SECURITY. Think about it.
So why is it OK to leave someone who’s 61 years, 364 days old in the gutter, but not OK to leave someone who’s 62 years old in the gutter? Is that some part of the “enlightened liberal” philosophy?
For what we pay for Social Security ($557B in 2005), we could completely eliminate poverty in the United States. How, you ask? Simple? Take the 55 million people who would be in poverty without any government assistance and give them $10K each. That costs $7B less than Social Security and is 100% effective.
Oh, but wait. We can’t do that. We don’t really want to help the poor. Social Security isn’t about helping the poor. It’s about buying the senior vote. Well, we could restrict ourselves to just solving senior poverty. Without Social Security, there would be 14 million seniors living in poverty. Give them $10K each. Total cost: $140B.
No, that still wouldn’t work. Because seniors “paid for” their Social Security. They’re “entitled” to those payments, regardless of whether they need them or not. Heaven forbid Warren Buffett should forego his Social Security check. There’s a name for this type of system and it’s NOT “insurance”.
The problem with Jay, and all his conservative think-alikers is that all they ever plan for is the rosisest of outcomes for their pet fantasies. Reality never gets in the way. Example: Iraq. Now you want to tinker with social security and you can’t imagine any scenario where your hazy plans will be anything less than total success.
Look at Jay’s total incomprehension of the subprime meltdown. People bought houses they couldn’t afford!!! Their fault!!! Meanwhile banks lent them money, when the banks knew these people couldn’t afford them. Then they packaged the loans into various investment instruments and pretended they were rock solid. All thanks to deregulation. Now the US government has to step in to bail out the banks, and the homebuyers are just screwed. Wait until the various pension and government retirement accounts that have huge shortfalls because they bought these instruments begin to have trouble making their payouts.
Now you’re thinking Bill. Find ways to protect that money and you might be in business. If we just dumped the money in the stock market, we can assume that eventually most of the protections put in place to protect the money will disappear. Then when something happens it will cost trillions to fix.
Lastly, if you give people a free choice, the way Americans are trained, most will choose to buy a big screen TV for their retirement plan.
If we just dumped the money in the stock market, we can assume that eventually most of the protections put in place to protect the money will disappear.
YOU can assume that. I certainly don’t accept that as a foregone conclusion. If you want to espouse conspiracy theories, that’s certainly you’re right. But please don’t go trying to pass them off as fact.
Lastly, if you give people a free choice, the way Americans are trained, most will choose to buy a big screen TV for their retirement plan.
As is their right. The government should not be in the business of legislating personal responsibility. That’s the ultimate in slippery slopes. Once you start down that path, what’s to stop you from legislating the consumption of Twinkies?
Don’t accept it. I laid out examples to establish historical precedence, showing numerous times that what I have concerns about has come to pass. We have a government that is unduly influenced by lobbyists. Dispute it all you like. And the candidate that is espousing social security reform has a campaign run by lobbyists.
Why social security reform won’t happen or shouldn’t happen: the democrats have no interest in it, and the republicans don’t believe in regulation or oversight. For one party, its not on the agenda, and the party with interest in it can’t be trusted to do it.
It sounds to me that you believe that Social Security should just be abolished with nothing put in its place, and everyone should be on their own. That’ll work.
It sounds to me that you believe that Social Security should just be abolished with nothing put in its place, and everyone should be on their own. That’ll work.
You’re right that I want to abolish Social Securtiy. But I’d much rather replace it with a true safety net (i.e. one you don’t have to pay dearly for). I think we should take care of people who need it and leave everyone else alone. Like I said in a previous post, it would cost less than we spend on Social Security to completely eliminate poverty in the United States. Actually, it would cost a lot less. The $550B figure is an absolute maximum. The real number is probably half as much.
Compare that to our current anti-poverty programs. The United States spends about $1.5T (yes TRILLION) on social spending every year. That includes everything from Social Security to TANF to Medicare/Medicaid to Section 8. And what does that buy us? It reduces the poverty rolls from 55 million to 30 million. Well that should cost AT MOST $250B, assuming the poverty line is $10K. Where is the rest of the money going? Tough to say. But I know Warren Buffett is sure taking his slice.
Politicians are not in the business of helping the poor. The poor, by and large, don’t vote. As such, politicians have no incentive to help them. Seniors, on the other hand, vote in droves. So politicians treat them like royalty. If you actually look at the numbers and try to figure out where all the money is going, you’ll realize this. Politicians don’t view Social Security as a tool for keeping seniors out of poverty. They see it as tool to buy their vote.
I have no problem with helping those in need. What I don’t want to do is line the pockets of wealthy retirees, which is currently going on. Furthermore, I don’t believe that spending more money means to better results. I hold the radical view that better results means better results. Help those who need it. I’m glad to help pay for it. But I’m fed up with paying exorbitant FICA taxes just so politicians can secure the senior vote. That’s simply repugnant.
Fine and well, but in America, when you take the mandatory for everyone off a program, people start thinking about why should they have to contribute. And one thing I think we can agree on is that the wealthiest people in America have a larger voice in our government. If they aren’t receiving a benefit from it, after awhile, they aren’t going to want to pay into it.