Privatized Social Security

[Corey]

OK, I started a new thread. Now tell me why the idea is "ludicrous".

[nelison]

Corey, maybe you or someone could explain what exactly they want to do with the social security? My dad's American and around 45 years old, so this is going to affect him as well, and really I haven't put a lot of effort into understanding the problem. I know there isn't enough money to sustain it, so I'm guessing what people want is to be able to save their own money and put it in an investment account for when they retire.

[nikki4982]

First off, the problem isn't as massive as Bush has made it seem. It's no "crisis", it's more of a problem that needs some tweaking. Social security money isn't going to run out any time in the near future, and even when it slows down, the shortage isn't going to be so much that people get nothing.

Bush's camp is using estimates not including the longer life expectancy of the future, which will in turn mean longer working lives, and more money pumped into social security. They're also using "infinity" years as a real figure. The amount of $10.4 trillion that they've been throwing around is an estimate of how much money would need to be added to social security over INFINITY years to fix it. Using a figure like infinity is VERY deceiving.

Secondly, putting people's entire retirement into the stock market is irresponsible. The market is not a sound investment, it's a gamble... many people could lose out and be broke when they're too old to work.

There are other ways to try to fix social security that aren't such a big risk.

Here's a really good Q&A with the director of economic issues for the AARP Federal Affairs Department that I found just now when checking my statistics:

http://www.aarp.org/money/social_securi ... ssion.html

[nelison]

Wouldn't some sort of Investment fund be the best way to go? One that's built on stocks, bonds, assets, etc? That way the person has a diversified portfolio so they're basically guarenteed a return that corresponds with the investment risk.

I know here in Canada you can do that through your bank, but I dreally don't know what the US market is like beyond stocks.

[Corey]

Yes, life expency will increase, but that doesn't equate longer working lives. People are still going to want to retire at 65 so if anything we'll have even more people SUCKING money from social security as opposed to PUMPING money into it as you claim. Also if they live longer that means that they will require this money for a LONGER period of time. So that argument only works if we increase the retirement age. I don't know about you but I don't like the idea of waiting until I'm 80 to retire.

[Corey]

As for claiming that putting money into the stock market is irresponsible, I will have to heartily disagree. The richest people in the country deal with stock. There are also varying levels of stock with different risks associated with them. Both my wife and I have 401k plans at work. When you sign up you get several options (much like the ones Bush proposes). It is up to you to pick the ones you want. Some are not risky at all but you can't expect much of a return other than what you put in. Some are more aggressive and could result in a big return. Yes, the market goes up and down. I've taken looks at my 401k when I'm way up and I've seen my account way down. It fluctuates to a degree, nothing serious. I chose a mosty aggressive path with a small percentage invested in more conservative stock just in case. The point of the matter is that I'm taking the responsibility to invest in my OWN future. Let me remind you that this money is also TAX FREE. There, I've laid out my experience with stock. Now explain to me your experience that has lead you to believe it to be a bad investment.

[nikki4982]

People go bankrupt on the stock market all the time. You haven't, good for you. But, it's not a good place to keep your entire nest egg for retirement. Social security is there for (yes) security when you can no longer work. It shouldn't be put into something as risky and volatile as the stock market.

Also, if life expectancy (say) doubles, you really don't think people will be working longer? People will still be retiring at 65, even when they live to be 140? That's a 75 year retirement. Retirement age goes up gradually as life expectancy gets longer.

[xjsb125]

Seems like I saw an article the other day on upping the retirement age in the US. I'm on the fence on this whole issue.

[nelison]

Nikki... the life expectancy might never be that high, and actually in Britain this year is the first year that kids who are born this year will not outlive their parents.

Secondly, it's incredibly easy to lose money if you're not smart with it. If you diversify you'll be fine in the stock market.

[Corey]

People go bankrupt on the stock market all the time. You haven't, good for you. But, it's not a good place to keep your entire nest egg for retirement. Social security is there for (yes) security when you can no longer work. It shouldn't be put into something as risky and volatile as the stock market.

Also, if life expectancy (say) doubles, you really don't think people will be working longer? People will still be retiring at 65, even when they live to be 140? That's a 75 year retirement. Retirement age goes up gradually as life expectancy gets longer.

Just because they live longer, doesn't mean they can still work when they get up there in age. It is very difficult for older citizens to retain work with younger individuals taking the work from them. (Hint: this is one of the reasons why Social Security was set up in the first place). For every older indivual, there will be hundreds of individuals ready to take their place. (No, I don't know the actual figures). I can't see a 100 year old person being very productive. But hey, I guess we'll never know until people start living that long.

And on the contrary, my 401k is an excellent place to keep my retirement. Noone can ever take it from me and it will always be there and no taxes are being taken from it.

You also use the term "nestegg" like people are saving up their retirement in Social Security. NO THEY ARE NOT. That money immediately goes to pay CURRENT retirees. It is no longer your money. Nothing guarantees you'll get that money back no matter how much you pay in.

[nikki4982]

Secondly, it's incredibly easy to lose money if you're not smart with it. If you diversify you'll be fine in the stock market.

And that's the point... the entire population ISN'T smart with these things. It's unfair to assume everyone is or should be.

Just because they live longer, doesn't mean they can still work when they get up there in age. It is very difficult for older citizens to retain work with younger individuals taking the work from them. (Hint: this is one of the reasons why Social Security was set up in the first place). For every older indivual, there will be hundreds of individuals ready to take their place. (No, I don't know the actual figures). I can't see a 100 year old person being very productive. But hey, I guess we'll never know until people start living that long.

The end of that paragraph is all that needs to be said. We won't know until it happens. But, that being said, looking at history, I'm going to have to assume people will be working longer. As recently as the beginning of the 20th century, life expectancy was around 46 years old. People don't stop working at 46 or even near it anymore.

And on the contrary, my 401k is an excellent place to keep my retirement. Noone can ever take it from me and it will always be there and no taxes are being taken from it.

We aren't talking about 401ks. People can still have them (clearly), and they're an entirely different subject. Social Security is most important for those people who aren't good with money and don't have 401ks or anything similar.

You also use the term "nestegg" like people are saving up their retirement in Social Security. NO THEY ARE NOT. That money immediately goes to pay CURRENT retirees. It is no longer your money. Nothing guarantees you'll get that money back no matter how much you pay in.

And there will TRULY be nothing to guarantee you get ANY money back if the system changes entirely. The system has worked wonderfully for years, and as I've already said, there's no looming crisis on the horizon like Bush wants people to think. It needs some tweaking for the future, yes, but a complete overhaul is drastic.

Oh yeah, and I know how Social Security works, Corey. Don't patronize me.

[Henrietta]

Just because they live longer, doesn't mean they can still work when they get up there in age. It is very difficult for older citizens to retain work with younger individuals taking the work from them.

If we are lengthening peoples' lives, then is it unreasonable to expect that we are also making quality of life better until later in life? If so, then you will be able to work longer. I don't know about you, but I don't want to be retired for seventy years. Ten maybe. People are working later and later into life. In fact, retirement is a word that isn't even spoken of in my family. We just work till we die, which is how it should be if possible. My Grandpa is in his seventies and he still runs his ranch. My other Grandpa still does engineering projects even though he is "retired". You can't just stop living. Which is off topic, I suppose. I am all for raising retirement age a few years. I don't know about privatizing it though. I think we may be panicking, but I don't know enough about it to make an assumption.

[Bandalero]

i actually think that once the baby boomers numbers dwindle down enough, social security will be in a better situation.

in the 80's it was thought that social security was going to run out in the earlt 2000's. it still hasn't and there was even a shaky report from a Mexico reporter saying that the money was there and that several past administrations simply use social security as a scare tactic to lengthen political careers.

i dunno though,

[Corey]

Oh yeah, and I know how Social Security works, Corey. Don't patronize me.

Get a grip. I wasn't patronizing you.

[thirdhour]

so i know zip about social security, seeing as how i'm a canadian. can anyone tell me how the american system works compared to canadian RRSPs?