SS vs. Private Savings

[glenn1]

But if markets were a guaranteed 10% return over long term, people would keep all their cash in the stock market, and banks would have to pay clost to 10% interest rate to get people to keep their cash in the bank. Again, someone please explain to me why they are expecting 10% or even 5% returns when the US GDP is growing at 3.5%, aside from it happening the last 80 years?

There are two basic reasons people don't keep all their cash in the markets 100% of the time. Firstly, because the market doesn't offer the kind of instant liquidity that a checking/savings or other type of "operating" account does. You have your checking account to pay bills and your investment account to save for the future. Would you want to place a call to your broker to do a small sell every time you needed to pay your phone or electric bill?

The second reason is because a lot of people are net cash flow even (and often negative) on a monthly basis. Sure, they have net worth in their home, investment and retirement accounts, and possessions, but that's a far cry from having a ton of undeployed cash ready to commit to the market. Even for the people who do have money, they have some liquid cash in demand accounts like checking, generally a few thousand or 6 months expenses, and the remainder already is invested. Anyone sitting around with five,six, or more figures in a passbook savings account is a bloody moron.

 

[Train]

Originally posted by: SuperTool
...So what? Even if every 40 years, it still doesn't mean that the next 40 years will be like every other 40 years. Otherwise banks would be paying 10% interest,since they could just invest that money in the stock market and get more than 10% average return and thus profit. Now if the banks don't believe they can get 10% annual return on their money, why do you think average American will?

because a liquid account is just that, liquid. however notice that when you put your money in an account that does not allow you to touch your money for a fixed amount of time, the % return gets larger as the length of time increases.

 

[Train]

Sorry for hacking your post apart but I think its all summed up when you said:

Originally posted by: Rainsford
...The problem isn't the idea, the problem is that I don't have a lot of confidence in our culture where many people have tens of thousands of dollars worth of debt...

I totally agree, everyone knows the majority of americans are stupid, but where do you draw the line? If they cant manage thier own money, you think the govt should do it.

Tens of Millions of americans are also overweight, do you think the govt should set up mess halls in every neighborhood in america and serve a USDA approved regimen based on the food pyramid? It sure would fix the problem, but id rather take care of that myself. If someone wants to eat irresponsibly, thats thier problem.

Millions of americans also smoke, which causes countless health problems. Should the govt ban the right to smoke a cigarette?

Should we ban the right to drink more than a few alcoholic beverages in a day? Should we make it illegal to not use condoms or birth control to prevent both the spread of disease and unwanted pregnancies? Should we outlaw gas guzzling trucks for people who dont need them? Should we outlaw people wasting thier money on an astrologist?

Reminds me of the movie 'Demolition Man' -- "XXXX is bad for you, hence illegal"

 

[SuperTool]

Originally posted by: Train

Originally posted by: SuperTool
...So what? Even if every 40 years, it still doesn't mean that the next 40 years will be like every other 40 years. Otherwise banks would be paying 10% interest,since they could just invest that money in the stock market and get more than 10% average return and thus profit. Now if the banks don't believe they can get 10% annual return on their money, why do you think average American will?

because a liquid account is just that, liquid. however notice that when you put your money in an account that does not allow you to touch your money for a fixed amount of time, the % return gets larger as the length of time increases.

You can sell stocks at any time last time I checked. How is that not liquid?

 

[Genx87]

You can sell stocks at any time last time I checked. How is that not liquid?

Can you go get it at anytime? Meaning if I wanted can I got to the brokerage house and get my money like I could a bank?

 

[Engineer]

Originally posted by: Genx87

You can sell stocks at any time last time I checked. How is that not liquid?

Can you go get it at anytime? Meaning if I wanted can I got to the brokerage house and get my money like I could a bank?

Using online brokers, you could almost be on par with banks. You couldn't necessarily get money ala ATM but you could, for the most part, sell your equities and transfer the money (online usually) very quickly to a bank. Also, some brokerage accounts have bank like features, including checks that draw on the account.

 

[Genx87]

Checks provided you have cash in the account.
While you may beable to sell your shares it doesnt mean there is always a buyer.

 

[BBond]

Originally posted by: Genx87

Now if the banks don't believe they can get 10% annual return on their money, why do you think average American will?

Even if it was only 5%, that is more than what you will get out of SS.

But historically the stock market has gone up 10% over the past 80 years. While it certainly doesnt gurantee it will go up on avg 10% over the next 80. I am a betting man that it will and putting my money where my mouth is.

So what would you do with them if they didn't have SS? let them be homeless?

Probably have them signup for welfare like everybody else.

Who is this "everybody" else that is signing up for welfare?

Haven't you heard? Welfare was reformed under President Clinton's leadership.

But your comment is a good barometer of your mindset.

The welfare system in the USA now is the tax redistribution system that takes tax dollarsfrom states like NJ and redistributes them to states that get more than they are paying in.

We get 62 cents back on the dollar from the federal government while other states are getting up to and over $2 back for every dollar the pay in. If that's what you're referring to when you say "everybody" -- those people in the "red" states spending other people's money -- then you're right.

Now, that's welfare.

 

[Jhhnn]

The first thing that anti-SS zealots want us all to overlook is that SS is also a along term disability and survivors' benefit insurance program. So any calculations wrt potential gains in a privatization scenario should figure in the cost of such insurance, too, something I've yet to see...

The next thing is that privatization now will involve borrowing trillions over the next 20 years or so, and won't show any benefit for ~30-40 years, if ever. It in no way avoids the need for the general fund to begin paying back the SS trust ~2018 or so, 13 years from now. So, in addition to having to pay back the trust, the govt and the taxpayers will also be paying interest on the money borrowed... Even if it works out as claimed, it still costs a lot more between now and that far off date in the future when privatized accounts will begin to bear fruit for the recipients.

And the fact remains that nobody wants to talk about what forcing taxpayers to subsidized Wall Street will actually accomplish other than inflating stock values. What is it that America's multinationals have done to deserve this rapid and massive increase in valuation, other than pay for political campaigns? What does it mean 20 years down the road, when much of the alleged value has been achieved through forced participation?

The 10% annual gains figure bandied around here and elsewhere wrt market gains isn't really accurate. The figure is actually ~7%, when the effects of inflation are figured in. Nor, as any stockbroker will tell you, is past performance indicative of future earnings...

Graph & analysis here-

http://biz.yahoo.com/funds/cs6.html

Handy retirement calculator here-

http://www.banksite.com/calc/retire

Given that we're sailing into uncharted waters wrt trade balance and federal borrowing, I wouldn't count on low inflation, at all...

 

[CADsortaGUY]

Originally posted by: Jhhnn
The first thing that anti-SS zealots want us all to overlook is that SS is also a along term disability and survivors' benefit insurance program. So any calculations wrt potential gains in a privatization scenario should figure in the cost of such insurance, too, something I've yet to see...

And the thing the socialist welfare zealots want to overlook is grouping these types of programs together is wrong. The old people "insurance" sucks the time-value of money out of the individual's contributions - whereas the disability and survivors is atleast somewhat more "real-time". Thus, the concepts need to be split. Move the disability and survivors into the general welfare type systems we have and restructure the old people one better so it doesn't destroy the value of contributor's money.

CsG

 

[alent1234]

Originally posted by: Genx87

You can sell stocks at any time last time I checked. How is that not liquid?

Can you go get it at anytime? Meaning if I wanted can I got to the brokerage house and get my money like I could a bank?

yes

i can wire money in and out of etrade through a website. I can sell some stock, wait a few days for the account to settle and then wire the money into my bank account.

 

[halik]

Originally posted by: Train
Sorry for hacking your post apart but I think its all summed up when you said:

Originally posted by: Rainsford
...The problem isn't the idea, the problem is that I don't have a lot of confidence in our culture where many people have tens of thousands of dollars worth of debt...

I totally agree, everyone knows the majority of americans are stupid, but where do you draw the line? If they cant manage thier own money, you think the govt should do it.

Tens of Millions of americans are also overweight, do you think the govt should set up mess halls in every neighborhood in america and serve a USDA approved regimen based on the food pyramid? It sure would fix the problem, but id rather take care of that myself. If someone wants to eat irresponsibly, thats thier problem.

Millions of americans also smoke, which causes countless health problems. Should the govt ban the right to smoke a cigarette?

Should we ban the right to drink more than a few alcoholic beverages in a day? Should we make it illegal to not use condoms or birth control to prevent both the spread of disease and unwanted pregnancies? Should we outlaw gas guzzling trucks for people who dont need them? Should we outlaw people wasting thier money on an astrologist?

Reminds me of the movie 'Demolition Man' -- "XXXX is bad for you, hence illegal"

the thing is,
we will have to pay in the long run for the people that screw up. If you have a big number of people looking for work/working past their SS entitlement age, the intention of SS has failed. It will create problems (drive real wage down - making the labor market even worse off). Plus the elderly are the biggest demographic in terms of voter turnout, so it wouldn't take long till they put someone favorable in the office.

It's the same idea as with welfare - by your argument we should have no social nets what so ever and just have people deal with everything on their own. This country as actually had the hands-off policy in effect before the 1930s and we all know what came of that. It's good to learn from the mistakes of the past.

 

[charrison]

Originally posted by: miketheidiot

Originally posted by: irwincur


I've done the math, and not only is the math irrelivant, but it distracts from the real purpose of social security. Social security is INSURANCE in case you get old, disabled, or a family wage earner dies. IT IS NOT, WAS NEVER, AND SHOULD NEVER BE AN INVESTMENT ACCOUNT. It is meant as the income of last resort, not a fund for a person to gamble away in the market. Subjecting it to risk is against its vary nature.

I agree that SS is supposed to be insurance and not a retirement plan. If it is going to be insurance, then its rates are way too high. 12.5% of your income is more than adequate to fund a retirment plan and this fact makes it far to expensive for income insurance.

 

[ciba]

Originally posted by: BBond

I really would like an explanation of the hatred and contempt you express for them.

Their generation certainly had the opportunity to fix the problem, but didn't. Now they expect my generation to foot the bill for it. I think that is just cause for the contempt towards SS recipients.

 

[SuperTool]

Originally posted by: charrison

Originally posted by: miketheidiot

Originally posted by: irwincur


I've done the math, and not only is the math irrelivant, but it distracts from the real purpose of social security. Social security is INSURANCE in case you get old, disabled, or a family wage earner dies. IT IS NOT, WAS NEVER, AND SHOULD NEVER BE AN INVESTMENT ACCOUNT. It is meant as the income of last resort, not a fund for a person to gamble away in the market. Subjecting it to risk is against its vary nature.

I agree that SS is supposed to be insurance and not a retirement plan. If it is going to be insurance, then its rates are way too high. 12.5% of your income is more than adequate to fund a retirment plan and this fact makes it far to expensive for income insurance.

I agree the payroll tax rates are too high. It creates surpluses for the federal government to steal for other programs. It should be flat pay as you go tax that produces a balanced SS budget with no surplus going to the federal government.

 

[mwtgg]

Originally posted by: SuperTool

Originally posted by: charrison

Originally posted by: miketheidiot

Originally posted by: irwincur


I've done the math, and not only is the math irrelivant, but it distracts from the real purpose of social security. Social security is INSURANCE in case you get old, disabled, or a family wage earner dies. IT IS NOT, WAS NEVER, AND SHOULD NEVER BE AN INVESTMENT ACCOUNT. It is meant as the income of last resort, not a fund for a person to gamble away in the market. Subjecting it to risk is against its vary nature.

I agree that SS is supposed to be insurance and not a retirement plan. If it is going to be insurance, then its rates are way too high. 12.5% of your income is more than adequate to fund a retirment plan and this fact makes it far to expensive for income insurance.

I agree the payroll tax rates are too high. It creates surpluses for the federal government to steal for other programs. It should be flat pay as you go tax that produces a balanced SS budget with no surplus going to the federal government.

Not only is the 'surplus' stolen, the whole thing is stolen. It's a scam.

 

[ciba]

Originally posted by: SuperTool

Originally posted by: Jadow
I don't feel bad for the Enron employees who lost everything at all. Enron required them to invest 0% of their 401k money into enron stock. If they decided to get greedy and throw all their money into Enron, they were just plain stupid.

So what would you do with them if they didn't have SS? let them be homeless?

So social security it a fee I pay to support the financially inept?

I don't know much about cars. Where is my government sponsored mechanic program to fix mine?

 

[Train]

Originally posted by: halik

Originally posted by: Train
Sorry for hacking your post apart but I think its all summed up when you said:

Originally posted by: Rainsford
...The problem isn't the idea, the problem is that I don't have a lot of confidence in our culture where many people have tens of thousands of dollars worth of debt...

I totally agree, everyone knows the majority of americans are stupid, but where do you draw the line? If they cant manage thier own money, you think the govt should do it.

Tens of Millions of americans are also overweight, do you think the govt should set up mess halls in every neighborhood in america and serve a USDA approved regimen based on the food pyramid? It sure would fix the problem, but id rather take care of that myself. If someone wants to eat irresponsibly, thats thier problem.

Millions of americans also smoke, which causes countless health problems. Should the govt ban the right to smoke a cigarette?

Should we ban the right to drink more than a few alcoholic beverages in a day? Should we make it illegal to not use condoms or birth control to prevent both the spread of disease and unwanted pregnancies? Should we outlaw gas guzzling trucks for people who dont need them? Should we outlaw people wasting thier money on an astrologist?

Reminds me of the movie 'Demolition Man' -- "XXXX is bad for you, hence illegal"

the thing is,
we will have to pay in the long run for the people that screw up. If you have a big number of people looking for work/working past their SS entitlement age, the intention of SS has failed. It will create problems (drive real wage down - making the labor market even worse off). Plus the elderly are the biggest demographic in terms of voter turnout, so it wouldn't take long till they put someone favorable in the office.

It's the same idea as with welfare - by your argument we should have no social nets what so ever and just have people deal with everything on their own. This country as actually had the hands-off policy in effect before the 1930s and we all know what came of that. It's good to learn from the mistakes of the past.

the same argument can be made for obesity, oh wait we are already paying for that, all the increased medicare costs becase Joe Schmoe ate himself into a multitude of health problems. Or Jane smoked too many cigarettes and needs an operation to remove the tumors on her lungs. We pay for the guy who drank so much his liver is failing. Its like all my tax money is just fixing other peoples problems, and by the time I'll need any help, there will be no money left. I'd rather put the money away for when that day comes myself.

 

[Genx87]

Who is this "everybody" else that is signing up for welfare?

Anybody who needs to qualify for welfare. Do we need to spoonfeed you everything?

The welfare system in the USA now is the tax redistribution system that takes tax dollarsfrom states like NJ and redistributes them to states that get more than they are paying in.

We get 62 cents back on the dollar from the federal government while other states are getting up to and over $2 back for every dollar the pay in. If that's what you're referring to when you say "everybody" -- those people in the "red" states spending other people's money -- then you're right.

Now, that's welfare.

/yawn and this has what to do with SS reform?

Changing subject is not a good sign for you in this argument.

yes

i can wire money in and out of etrade through a website. I can sell some stock, wait a few days for the account to settle and then wire the money into my bank account.

You contradict yourself here.

 

[imported_Condor]

That is totally ignoring the history. SS was the result of all of the other systems failing.

 

[charrison]

Originally posted by: Condor
That is totally ignoring the history. SS was the result of all of the other systems failing.

There was no system before SS.

 

[BBond]

Originally posted by: Genx87

Who is this "everybody" else that is signing up for welfare?

Anybody who needs to qualify for welfare. Do we need to spoonfeed you everything?

The welfare system in the USA now is the tax redistribution system that takes tax dollarsfrom states like NJ and redistributes them to states that get more than they are paying in.

We get 62 cents back on the dollar from the federal government while other states are getting up to and over $2 back for every dollar the pay in. If that's what you're referring to when you say "everybody" -- those people in the "red" states spending other people's money -- then you're right.

Now, that's welfare.

/yawn and this has what to do with SS reform?

Changing subject is not a good sign for you in this argument.

The "everybody else" in the context of your statement didn't mean that at all:

quote:
So what would you do with them if they didn't have SS? let them be homeless?



Probably have them signup for welfare like everybody else.

You were clearly suggesting that there everybody else is on welfare. Who are those "everybody else"?

And now you're trying to tell me changing the subject isn't a good sign for your argument when it was you who changed the subject and brought welfare into this thread. So I pointed out to you that the only real welfare program left is the welfare program that takes federal tax dollars from what are, with few exceptions, the "blue" states and redistributes those tax dollars to, with few exceptions, what are the "red" states.

If you don't want to talk about welfare and you don't want to face the truth about the welfare system in America...then don't bring it up.

 

[Jhhnn]

You surprise me, Condor-

" That is totally ignoring the history. SS was the result of all of the other systems failing."

Precisely correct, and an observation that cuts to the heart of the matter.

Couple that with the idea that history repeats itself, and it's easy to see why many folks aren't ready for any kind of radical changes in that highly successful program...

 

[charrison]

Originally posted by: Jhhnn
You surprise me, Condor-

" That is totally ignoring the history. SS was the result of all of the other systems failing."

Precisely correct, and an observation that cuts to the heart of the matter.

Couple that with the idea that history repeats itself, and it's easy to see why many folks aren't ready for any kind of radical changes in that highly successful program...

No doubt successful, but it also needs work to fit todays demographics.

 

[BBond]

Originally posted by: ciba

Originally posted by: BBond

I really would like an explanation of the hatred and contempt you express for them.

Their generation certainly had the opportunity to fix the problem, but didn't. Now they expect my generation to foot the bill for it. I think that is just cause for the contempt towards SS recipients.

But you forget that during the Reagan/Bush administration the "problem" was supposedly "fixed". Our Social Security taxes skyrocketed and we were told the system would be solvent. The baby boomers retirement benefits would be there. Now, twenty years later, the baby boomer are told, on the eve of their retirement, that the money isn't there.

Just what do you expect people who paid into a system all their working live to do when they're told what should be the most stable leg of their "three legged stool" is gone?

Why do you hold the people who were forced to pay the highest amount of their earnings into the system accountable instead of the politicians who frittered away their retirement income? And if this "crisis" is so imminent then it was imminent in 2001 as well.

Why didn't the people who are complaining about having to pay their share now complain when Bush set about emptying the treasury with his irresponsible millionaire enrichment program disguised as a tax cut ? Why didn't anyone insist the federal government pay back some of the billions it owes to the Social Security fund? Instead, after the money is gone, the system is declared "in crisis" and "fixes" are proposed that will destroy the program.

One of the ways in which America has changed is her new found hatred of and her desire to abandon the elderly. Well, let me clue you in. If yo don't plan on aging you only have one other alternative.