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http://democrats.senate.gov/ss/calc.html

E

ExpertNovice

Senior member
http://democrats.senate.gov/ss/calc.html
http://reid.senate.gov/ss/images/ss-calculator_assumptions.pdf


The second link shows that the calculator uses an estimated rate of return of 3% where historically the stock market has returned about 7%.

http://www.econlib.org/library/Enc/StockPrices.html (indicates that it was 7.7% from 1802 through 1991 and 10% from 1926 through 1991. The latter period includes the stock market crash and that significantly hurt the rate of return.

So, why 3%? Well, the second link says it is "the same assumption used by the CBO for its Social Security analysis." At first I thought they might be being extraordinarily conservative in their estimate but a cut from 10% to 3% is more than merely conservative.

Then I found this quote at the Heritage Foundation.
"But CBO Director Douglas Holtz-Eakin told FactCheck.org that the 3% assumption was flat-out "wrong" and that "we assume that equities will return 6.8% in the future." http://www.heritage.org/Press/Commentary/ed041805a.cfm


So, why the deception? Well, here is one difference.
$1,000 compounded over a 40 year period at a simple annual interest of 3% results in a future value of $3,262. At 10% the future value is 45,259 or about 14 times as much.

Using the 6.8% figure results in a future value of $13,895. About 4 times what the "calculator" uses.

Here is a thought. The "fix" that was instituted by President Clinton was to (1) tax social security benefits, (2) cut benefits, (3) postpone receipt.

They have said that future fixes would be necessary and I submit that the fixes would be to (1) raise taxes, (2) tax social security benefits even more, (3) cut benefits aagin, and (4) postpone receipt of benefits.


Besides, if the plan submitted by President Bush was so bad why have the Democrats only proposed that either nothing be done under a Republican President or the same plan as President Bush. Well, the plan wasn't the same. It forced, rather than allow, the choice of personal accounts and it forced a higher percentage to be used in the personal account. So, it was basically the same with the exception that freedom of choice was removed.

I ask again, why the deception? Could this be another fake but true story?

 
Don't Congressmen not pay into social security at all? Put them into the Social Security plan with the rest of us ... then sit back and watch how fast they would fix it.
 
Originally posted by: ExpertNoviceThey have said that future fixes would be necessary and I submit that the fixes would be to (1) raise taxes, (2) tax social security benefits even more, (3) cut benefits aagin, and (4) postpone receipt of benefits.
Click to expand...
Private accounts do nothing for solvency so one of those things is going to have to happen anyway.

 
Originally posted by: zendari
Don't Congressmen not pay into social security at all? Put them into the Social Security plan with the rest of us ... then sit back and watch how fast they would fix it.
Click to expand...

They have the federal thrift program which I believe all federal employees can opt out of SS for.

btw the rates of return on the federal thrift program are between 5 and 11% and money is untouchable by the congress.

I agree, start making congress pay income taxes and pay SS and watch how fast this thing gets fixed.
 
The second link shows that the calculator uses an estimated rate of return of 3% where historically the stock market has returned about 7%.
Click to expand...

The stock markets historical return is 11%. If you are going to adjust one for inflation, you need to do both. SS technically loses money after adjusted for average inflation. It is about as good as a simple savings account. A CD or low risk bond would get you twice the return or SS, for almost no risk.

What pisses me off is that the Dems always manage to talk about how risky the stock market is. Are they forgetting the other investment vehicles? I suspect that they are, since theoretically there are investments with lower risk than even SS and much higher returns. People need to start comparing SS to bonds, T-bills, CDs, REITs, Index Funds, etc... to get a good idea of what your money can do, without this false sense of risk that the Dems are pushing.

Yes, it is a fact, you can greatly out earn your SS account without spending a penny in the stock market.

Smoke and mirrors, the Dems are at their best when it comes to scaring common sense out of people.

Private accounts do nothing for solvency so one of those things is going to have to happen anyway.
Click to expand...

Yes, but they are a good long term solution. There is no point in simply fixing the problem and then waiting for the next problem. SS will never be solvent because it will always need more and more taxes. Increasing taxes at some point will not be a reasonable solution - it is already almost there.

Yes, the current shortcomings need to be addressed, but we must also look beyond another quick fix (ala Reagan) and to a permanent solution. Weening people off of the need for government is the best solution to reducing the long term costs of the program. As more and more people move small (would be limited to less than 5%) portions of their money into their own accounts the top end of the upside down pyramid shrinks.

The fact of the matter is, if it is not done now, it never will be. We will simply always be waiting for SS to pay us a negative return at an increasing tax rate.
 
Originally posted by: ExpertNovice
http://democrats.senate.gov/ss/calc.html
http://reid.senate.gov/ss/images/ss-calculator_assumptions.pdf


The second link shows that the calculator uses an estimated rate of return of 3% where historically the stock market has returned about 7%.

http://www.econlib.org/library/Enc/StockPrices.html (indicates that it was 7.7% from 1802 through 1991 and 10% from 1926 through 1991. The latter period includes the stock market crash and that significantly hurt the rate of return.

So, why 3%? Well, the second link says it is "the same assumption used by the CBO for its Social Security analysis." At first I thought they might be being extraordinarily conservative in their estimate but a cut from 10% to 3% is more than merely conservative.

Then I found this quote at the Heritage Foundation.
"But CBO Director Douglas Holtz-Eakin told FactCheck.org that the 3% assumption was flat-out "wrong" and that "we assume that equities will return 6.8% in the future." http://www.heritage.org/Press/Commentary/ed041805a.cfm


So, why the deception? Well, here is one difference.
$1,000 compounded over a 40 year period at a simple annual interest of 3% results in a future value of $3,262. At 10% the future value is 45,259 or about 14 times as much.

Using the 6.8% figure results in a future value of $13,895. About 4 times what the "calculator" uses.

Here is a thought. The "fix" that was instituted by President Clinton was to (1) tax social security benefits, (2) cut benefits, (3) postpone receipt.

They have said that future fixes would be necessary and I submit that the fixes would be to (1) raise taxes, (2) tax social security benefits even more, (3) cut benefits aagin, and (4) postpone receipt of benefits.


Besides, if the plan submitted by President Bush was so bad why have the Democrats only proposed that either nothing be done under a Republican President or the same plan as President Bush. Well, the plan wasn't the same. It forced, rather than allow, the choice of personal accounts and it forced a higher percentage to be used in the personal account. So, it was basically the same with the exception that freedom of choice was removed.

I ask again, why the deception? Could this be another fake but true story?
Click to expand...

I'll certainly agree its conservative, but your misunderstading what it said. It said it assumed 3% above the average rate of inflation. Inflation is about 3%, so its assuming about 6%, annual return. Very low, I agree, but not unusually low for a conservative investment. Of course, their spinning this to thier advantage but its not quite as misrepresented as you initially propose.

Just for comparison, the 10% number is WITHOUT adjusting for infaltion, that's why poeple often say the stock market return is about 7% (after inlfation). Of course that's a much riskier investment (indexing the whole thing).

Look, its quite obvious, that your for private accounts (for that matter, I am too), but unfortunately the general public is not. You cant really blame that on the deomcrats. People (including the majority of those voting republican) are against private accounts (especailly the more they understand them). If the general populace for was supportive of private accounts, the democrats couldn't do a damn thing to stop bush.
 
Wow - I earn 3.25% at emigrant-direct! Much less tax free bond funds that I can get 6.5% on (about 10% post tax) with a bit more risk.
 
Originally posted by: SViscusi
Originally posted by: ExpertNoviceThey have said that future fixes would be necessary and I submit that the fixes would be to (1) raise taxes, (2) tax social security benefits even more, (3) cut benefits aagin, and (4) postpone receipt of benefits.
Click to expand...
Private accounts do nothing for solvency so one of those things is going to have to happen anyway.
Click to expand...


At worst, we would have to repay the money "stolen" from the funds. So yes, there would be a period of "pain."

However, if those fixes are preferred by the majority then I propose the following.
(1) reduce SSN taxes to 0%
(2) reduces taxation of benefits to 0%
(3) cut benefits by a mere 50%
(4) postpone benefit withdrawal until the age 150

Then, we would only have to fund a few tens of millions of dollars for the paperwork and laws which the politicians would never allow to be elminimated.

I would prefer to actually fix the problem. But, you are right, eventually we will pay for SSN but receive nothing.
 
Not fair that the Dems charge inflation to the Stock Market returns yet do not charge it to SS. With inflation, SS is near zero in terms of return. Also not fair that they are not representing other more sound investment vehicles. Their scare tactics are old and worn out. They have been using the same ones for sixty years now.
 
Originally posted by: Genx87
Originally posted by: zendari
Don't Congressmen not pay into social security at all? Put them into the Social Security plan with the rest of us ... then sit back and watch how fast they would fix it.
Click to expand...

They have the federal thrift program which I believe all federal employees can opt out of SS for.

btw the rates of return on the federal thrift program are between 5 and 11% and money is untouchable by the congress.

I agree, start making congress pay income taxes and pay SS and watch how fast this thing gets fixed.
Click to expand...


Need to correct a few points. TSP is in ADDITION to SS for federal emplyees (or at least all employess hired in the last 20 years. Old employees were under a different system). TSP is essentially the government's version of private sector 401k plans. So, there is very little difference between the government employee and a private sector employee that gets access to investing in a 401k. The TSP matches the first 5% that the employee invests in the fund.

I doubt making congress pay SS tax would bother them much at all since most of them make lots of monet and only about the first 100k are taxed for SS.
 
Originally posted by: irwincurIf you are going to adjust one for inflation, you need to do both.
Click to expand...

I didn't take into consideration inflation because of the additional complexities and how much inflation depends on world economy and the politicians. (See President Carters double digit inflation economy vs President Reagan's attempt, and near success, to reduce inflation to 0%)

However, you are right. Inflation will narrow the gap between the low and high values and it also serves to increase taxes more for the higher income which in turn narrows the gap even more so.

 
Originally posted by: irwincur
Not fair that the Dems charge inflation to the Stock Market returns yet do not charge it to SS. With inflation, SS is near zero in terms of return. Also not fair that they are not representing other more sound investment vehicles. Their scare tactics are old and worn out. They have been using the same ones for sixty years now.
Click to expand...

But apparently, very effective since even most republicans are against private accounts.
 
they should program a better page since the calc does'nt even work on two comps I've tried it..

somebody put in 123,000 and After
 
Wow, over the last 3 years i have earned -3% in my TSA. And these were supposed to be high yield stocks. If CitiGroup cant handle this how is the average citizen supposed to?
 
You can't read? "all numbers are adjusted for inflation"
Click to expand...

Please show me where SS makes approx. 6 - 7% before inflation... What a joke. SS, is lucky to pull in 3% - WHICH WOULD BE 0% WHEN THE NORMAL 3% IS FIGURED FOR INFLATION. The Stock Market averaged 11% without inflation or 7% with.

The Dems are not being honest here. If SS made anything near 3% adjusted there would not be a problem with it. Why does a standard 2.5% Money Market account beat the real world returns of SS if SS is making more?

Complete BS.
 
Originally posted by: Zebo
they should program a better page since the calc does'nt even work on two comps I've tried it..

somebody put in 123,000 and After
Click to expand...
You have to actually type in the year you were born, typing "After" doesn't work.

For example, I used 1977 for you and got 33,507 from todays system and a total of 23795 under Bush's plan (which I find hard to believe).
 
Wow, over the last 3 years i have earned -3% in my TSA. And these were supposed to be high yield stocks. If CitiGroup cant handle this how is the average citizen supposed to?
Click to expand...

Odd, I have made almost 15%. Perhaps you should fire CitiGroup.

High yield equals high risk - someone should have told you. You may lose 3% this year and bust out for 30% next. You don't look at the numbers every year, you look at the trends.


Plus, they will do it the same way you do - unless of course you are better than the 'average' citizen. Over the life of your investment you can expect about 11%. It is not like people will be buying individule stocks. There are funds, bonds, CDs, MMs, REITs, etc... You are being way to shallow - which is expected since you are eating the Dem. BS hand over fist.
 
On my 403b, i've only stayed even in the last 5 years dispite continued investment every month. Meaning it's loosing money. But I don't pay SS taxes so that's a bonus. In general the stock market is overvalued still. I think we're into another lull which was experianced 1965-1980 over 15 years until Reagan infused the market w/ 401(k)tax code that was enacted in 1981.. and equilibrium was reached, five/six years ago we are leveling out again like back in the 60-80's. When no ones buying stock stock does'nt move up... Where's that NEW money gonna come from to percipitate a rise in share price? SS funds.
 
If you are in the program (SS) for 45 years (20 - 65) and you make $35,000 your entire life, the payout (adjusted for inflation) is... $13,195 per year in today's money. WOW.

If you are in the program (SS) for 45 years (20 - 65) and you make $60,000 your entire life, the payout (adjusted for inflation) is... $18,720 per year in today's money. WOW.


If you invest in the Stock Market (11%) for 45 years and you contribute 5% of your income (make $35,000 per year) (similar to Bush plan), the payout adjusted for inflation is... $1.55 million on the day of your retirement and $11.63 million twenty years after you retire (when you are 85).

If you invest in the Bond Market (7%) for 45 years and you contribute 5% of your income (make $35,000 per year) (similar to Bush plan), the payout adjusted for inflation is... $465,000 on the day of your retirement and $515,000 twenty years after you retire (when you are 85).

If you invest in a Saving Account (same return as SS) for 45 years and you contribute 5% of your income (make $35,000 per year) (similar to Bush plan), the payout adjusted for inflation is... $121,000 on the day of your retirement and you will be broke at 69.

Why is SS failing? Well, because everyone that retires at 65 is drawing from the surplus at age 69. Look at the last example, does not get more clear than this. These normal investments are better than SS even when the person makes nearly twice as much.
 
On my 403b, i've only stayed even in the last 5 years dispite continued investment every month. Meaning it's loosing money.
Click to expand...

It may be time to look at a different fund...

Technically there is no reason why you should have not made money in the time being. There have been numerous strong growth sectors that you could have earned a lot on. There are also many foreign funds.
 
Originally posted by: irwincur
If you are in the program (SS) for 45 years (20 - 65) and you make $35,000 your entire life, the payout (adjusted for inflation) is... $13,195 per year in today's money. WOW.

If you are in the program (SS) for 45 years (20 - 65) and you make $60,000 your entire life, the payout (adjusted for inflation) is... $18,720 per year in today's money. WOW.


If you invest in the Stock Market (11%) for 45 years and you contribute 5% of your income (make $35,000 per year) (similar to Bush plan), the payout adjusted for inflation is... $1.55 million on the day of your retirement and $11.63 million twenty years after you retire (when you are 85).

If you invest in the Bond Market (7%) for 45 years and you contribute 5% of your income (make $35,000 per year) (similar to Bush plan), the payout adjusted for inflation is... $465,000 on the day of your retirement and $515,000 twenty years after you retire (when you are 85).

If you invest in a Saving Account (same return as SS) for 45 years and you contribute 5% of your income (make $35,000 per year) (similar to Bush plan), the payout adjusted for inflation is... $121,000 on the day of your retirement and you will be broke at 69.

Why is SS failing? Well, because everyone that retires at 65 is drawing from the surplus at age 69. Look at the last example, does not get more clear than this. These normal investments are better than SS even when the person makes nearly twice as much.
Click to expand...

It blows my mind that people cant grasp this and somehow think the Govt who cant even balance its budget will somehow do a better job.

 
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