How you would fare under Social Security.

[Rex Kickass]

http://money.cnn.com/2005/03/07/retirement...dex.htm?cnn=yes

[EvilJester99]

Relying on Social security, I would be a poor lil starving white boy....

[Soxy]

I think there's a better solution for this... As my mother always told me: I married for love and look where it got me. Marry for money.

[JUGGERNAUT]

There are two issues with this that the democrats do not seem to understand or choose to ignore. The one is that the current growth rate of SS funds is abysmal. Thus the interest earned is not helping to pay for the cost. The second is that the government can not hire a fund manager who will manage these funds to seek the greatest rate of return. There is no way to do this without providing a major competitive advantage to that fund manager. That's illegal & would open up govt to lawsuits by other fund managers. We are talking trillions.

 

So the only alternative is to allow individuals the ability to seek fund managers to manage that money. This is simply an extension of what is happening in 401K's today where the majority of the funds are invested in stocks & funds that carry some element of risk.

 

The problem of course is how to pay for that transition. Hiking the salary cap for paying ss taxes is not a long term solution to this problem. It simply helps ease the pain on the system. Increasing the retirement age to reflect modern life expectancy is a better long term solution but won't address the baby boomers.

 

The general principle behind SS is that those paying in outnumber those paying out & as a result the SS reserve is always in a surplus. Its the surplus that allows young workers the ability to divert some of their funds to higher interest managed accounts. The problem with this is that the US govt has been borrowing from the SS reserve for years & so no one wants to admit to just how much cash exist in that reserve.

 

Yet there is a solution to this dilemma in either case if the government just uses it's head. Bush is focusing on these managed accounts for young workers. He should focus them on those who are soon to exit. Why?

Because those workers will begin drawing out of the system soon. Instead of affecting new accounts & future accounts you narrow the scope to near term accounts. That makes more sense. If you are expect to payout 2K a yr for account A in 5 yrs then allowing that person to divest that 2K now to a higher yld places less burden on the system. The person of course assumes the risk assoc with the higher yld'g account. The surplus should be sufficient to handle this kind of divestiture from a narrower scope.

 

As more of these accounts create higher ylds for the near term workers the government can then begin to control costs in the SS payout. The goal is for the yld to exceed the COL increase built into the SS system today. If that's the case the govt would save on the COL increase for each of these accounts. That helps to slow growth of the SS debt burden. As that growth is slowed the surplus should rise allowing the scope to be expanded.

 

That is the free-market shift the burden to the individual option.

There is another. I'll explain that seperately.

[JUGGERNAUT]

This is the shift the burden to the fund managers/banks/investment houses option which I favor.

 

Under this option the govt takes the SS reserve & splits it up into chunks which it then offers into bid contracts for the nation's & the world's fund managers. This is equivalent to the govt investing the SS reserve into CD accounts. The bid process allows these companies to offer their best rate of return on the CD's. We are probably looking at each contract having a value in 10's of billions for a reserve in the trillions.

 

Obviously the bid process would weed out those companies who are not

cash strong enough to greatly reduce the risk to the govt. Since this $ would not be protected by the FDIC there would be severe regulation

associated with the contracts. Essentially if a company could not meet it's cash requirement for the CD when the term expires all assets of the company & it's directors would be surrendered to the government. No room for foul play or cooking of books.

 

The banks don't like this option because it puts them against one another

to provide the government the best rate of return. They absorb the risk of investing that $ over the term of the contract to insure their profitability.

Without question the bidding process will impact the financial markets.

We are talking a huge amount of money. But I am willing to accept the govts visual hand in manipulating those markets in exchange for the govt earning far greater interest on the SS reserve.

 

That interest can then be used to keep up with COL increases to SS.

I likewise like the idea of rich people being able to opt out of SS. This is easy to vacilitate. Allow the government to keep their SS checks in exchange for a 2 for 1 write off on their taxes. If you give back the 2K you expect to get from SS, you can then use that as a 4K write off on your taxes.

 

For those who say the money is too large to manage that way again you

can grow the bid contracts to scale over time. For example. We now receive a yearly update as to what we have paid into SS & what we can expect to get out. Allow SS contributors the right to elect to choose a % of their funds to higher interest options. The govt can then size the bid contracts based on the size of the pot Americans choose.

 

It goes w/out saying that the government would need to pass laws preventing fund managers from suing it over unfair bid processes. With 10's of billions at stake per contract this would be an inevitable consequence & the government would need to protect itself before hand.

This is the biggest argument against this option. You essentially accept the government's ability to make use of a visible hand to manipulate financial markets while giving up most recourses to challenge that.

 

In face of the global economy where all things scale to cheapest labor, minimal service, highest cost to sustain best profits, I'm not as big a fan of free-markets as I once was. I'm even favor of greater distribution of wealth at the expense of fm principles.

[TheBigHurt35]

Anybody who is relying on Social Security, either in its current incarnation or Bush's proposed plan, to float them through retirement is massively screwed.

[southsider2k5]

Some interesting omissions from by the Clinton News Network (I usually don't go there, but the slant was interesting to say the least)

 

NO ONE under the age of 50 is going to make what their grandparents are making now. When (not if) a solution happens, there are going to be some mix of things that are going to happen.

 

Either #1, payroll taxes are going to get raised

 

#2 benefits are going to get cut (one plan has increases indexed to inflation instead of wages, which would cut benefits long term)

 

#3 the retirement age is going to be raised.

 

#4 Some portion of the system will be voluntarily privatized.

 

The volunteer part doesn't get mentioned much by the Dems during their critisisms of the plan. If you truely believe their is no crisis, and you will lose money from the Bush plan, YOU DON'T HAVE TO DO THIS. It is strictly optional. Take your chances on what the government is promising you being there, that is your prerogative and more power to you.

[Rex Kickass]

You forgot the fifth possibility. The government borrows to fund the program.

[southsider2k5]

You forgot the fifth possibility. The government borrows to fund the program.

 

Which doesn't make much sense at all. I discounted that, but maybe I shouldn't have. In essense it would be a guarenteed money losing scheme as the interest paid on the debt would be more than the money that they social security bearers bonds would pay.