To those who want individual retirement accounts could you explain to me this...

[MonkeyK]

Originally posted by: alent1234
inflation peaked around 1981 at 6% and has been pretty low since. Even with kids we will save 15% per paycheck. A few times I stopped my 401k contributions for a month or so and the increase in my paycheck was very small. Since it's pre-tax most people don't realize how little maxing out your 401k affects your paycheck.

some people also don't realize the magic of compounding. They think 10% is not that much but when you look at the value growth of a 401k than the last 5-10 years it's almost a straight line up and the first 20 years is a gentle slope.

Vanguard's SP500 fund shows an annual return of 12% per year including dividends and capital gain distributions since 1976. That's a pretty good track record.

My wife and I made 130K until we had kids. Now she works part-time and we make 85K. Even at 15% that affects the rate of savings.

And regarding inflation, why would you comput based on recent inflation rates, but historic stock returns? I wish you the best of luck, but thinking like this will lead to dissapointment.

 

[Genx87]

Originally posted by: MonkeyK

Originally posted by: Genx87

Originally posted by: MonkeyK

Originally posted by: CSMRI don't know much about the proposed legislation but you can certainly get round this ver easily.

For example invest money in a pension company who will pay you a certain amount each year - perhaps even inflation adjusted - until you die. The company then takes the risk of your living a long time. It is insurance againt living a long time effectively. There are such options for private pensions in the UK and probably everywhere. In fact it is completely normal. They can be and often are more complex than this.

So overplanning is not necessary. Which is good to know if you are poor.

Your proposed solution (an annuity) sounds a lot like SS, just without the associated disability and survivor benefits...

And while it is true that you can add those benefits to an annuity (and probably should if you are counting on it for when you are no longer working for whatever reason), what do you think the effect will be on your return?

What survivor benefits?

SS survivor benefits
Please read that aquaint yourself with that site. Part of the frustration of discussing SS with people is that they just don't know what it is.
I'm not saying that things should not change, just that the system addresses needs that a personal savings account does not.

Savings accounts will pass 100% onto the survivors. The current system is at best 100% for a widow or widower or ~70-75% for children who are disabled or under 18.

Those survivor benefits arent even worth mentioning.

 

[Genx87]

Originally posted by: MonkeyK

Originally posted by: alent1234
inflation peaked around 1981 at 6% and has been pretty low since. Even with kids we will save 15% per paycheck. A few times I stopped my 401k contributions for a month or so and the increase in my paycheck was very small. Since it's pre-tax most people don't realize how little maxing out your 401k affects your paycheck.

some people also don't realize the magic of compounding. They think 10% is not that much but when you look at the value growth of a 401k than the last 5-10 years it's almost a straight line up and the first 20 years is a gentle slope.

Vanguard's SP500 fund shows an annual return of 12% per year including dividends and capital gain distributions since 1976. That's a pretty good track record.

My wife and I made 130K until we had kids. Now she works part-time and we make 85K. Even at 15% that affects the rate of savings.

And regarding inflation, why would you comput based on recent inflation rates, but historic stock returns? I wish you the best of luck, but thinking like this will lead to dissapointment.

Granted the stock market could dry up but history has shown it to be pretty stready on avg over the long term.

I dont think relying on the govt who is stealing the excess windfalls of SS to be there when you need them most is effective and will lead to disappointment.

One parallel we can draw from the private sector and SS is pension funds that seem to be failing left and right. Unsurprisingly the private sector is quickly getting out of pension funds and into 401Ks or individual retirement funds.

Why people continue to think the current form of SS is fine is beyond me.

 

[MonkeyK]

Originally posted by: Genx87

Originally posted by: MonkeyK

Originally posted by: Genx87

Originally posted by: MonkeyK

Originally posted by: CSMRI don't know much about the proposed legislation but you can certainly get round this ver easily.

For example invest money in a pension company who will pay you a certain amount each year - perhaps even inflation adjusted - until you die. The company then takes the risk of your living a long time. It is insurance againt living a long time effectively. There are such options for private pensions in the UK and probably everywhere. In fact it is completely normal. They can be and often are more complex than this.

So overplanning is not necessary. Which is good to know if you are poor.

Your proposed solution (an annuity) sounds a lot like SS, just without the associated disability and survivor benefits...

And while it is true that you can add those benefits to an annuity (and probably should if you are counting on it for when you are no longer working for whatever reason), what do you think the effect will be on your return?

What survivor benefits?

SS survivor benefits
Please read that aquaint yourself with that site. Part of the frustration of discussing SS with people is that they just don't know what it is.
I'm not saying that things should not change, just that the system addresses needs that a personal savings account does not.

Savings accounts will pass 100% onto the survivors. The current system is at best 100% for a widow or widower or ~70-75% for children who are disabled or under 18.

Those survivor benefits arent even worth mentioning.

I'm not sure it is worth trying to explain things to you. First you deny that they exist, then you say that because the survivor may not get 100% that the benefits are not even worth mentioning.

In any case if you aim to replace something, your arguments will have more force if you know what you are talking about. I suggest that you learn about just what SS does, and then compare those benefits to a similar investment (if you can find one). Private accounts do not address the same things that SS does.

 

[Genx87]

Originally posted by: MonkeyK

Originally posted by: Genx87

Originally posted by: MonkeyK

Originally posted by: Genx87

Originally posted by: MonkeyK

Originally posted by: CSMRI don't know much about the proposed legislation but you can certainly get round this ver easily.

For example invest money in a pension company who will pay you a certain amount each year - perhaps even inflation adjusted - until you die. The company then takes the risk of your living a long time. It is insurance againt living a long time effectively. There are such options for private pensions in the UK and probably everywhere. In fact it is completely normal. They can be and often are more complex than this.

So overplanning is not necessary. Which is good to know if you are poor.

Your proposed solution (an annuity) sounds a lot like SS, just without the associated disability and survivor benefits...

And while it is true that you can add those benefits to an annuity (and probably should if you are counting on it for when you are no longer working for whatever reason), what do you think the effect will be on your return?

What survivor benefits?

SS survivor benefits
Please read that aquaint yourself with that site. Part of the frustration of discussing SS with people is that they just don't know what it is.
I'm not saying that things should not change, just that the system addresses needs that a personal savings account does not.

Savings accounts will pass 100% onto the survivors. The current system is at best 100% for a widow or widower or ~70-75% for children who are disabled or under 18.

Those survivor benefits arent even worth mentioning.

I'm not sure it is worth trying to explain things to you. First you deny that they exist, then you say that because the survivor may not get 100% that the benefits are not even worth mentioning.

In any case if you aim to replace something, your arguments will have more force if you know what you are talking about. I suggest that you learn about just what SS does, and then compare those benefits to a similar investment (if you can find one). Private accounts do not address the same things that SS does.

Uh where did I say they didnt "exist"?
Secondly taking a 30% hit and not being able to even qualify unless you are disabled or under 18 is not worth mentioning as a legitimate "benefit".

Personal accounts will be passed on 100%, this isnt complicated.

 

[MonkeyK]

Originally posted by: Genx87

Originally posted by: MonkeyK

Originally posted by: Genx87
What survivor benefits?

SS survivor benefits
Please read that aquaint yourself with that site. Part of the frustration of discussing SS with people is that they just don't know what it is.
I'm not saying that things should not change, just that the system addresses needs that a personal savings account does not.

Savings accounts will pass 100% onto the survivors. The current system is at best 100% for a widow or widower or ~70-75% for children who are disabled or under 18.

Those survivor benefits arent even worth mentioning.

I'm not sure it is worth trying to explain things to you. First you deny that they exist, then you say that because the survivor may not get 100% that the benefits are not even worth mentioning.

In any case if you aim to replace something, your arguments will have more force if you know what you are talking about. I suggest that you learn about just what SS does, and then compare those benefits to a similar investment (if you can find one). Private accounts do not address the same things that SS does.
[/quote]

Uh where did I say they didnt "exist"?
Secondly taking a 30% hit and not being able to even qualify unless you are disabled or under 18 is not worth mentioning as a legitimate "benefit".

Personal accounts will be passed on 100%, this isnt complicated.

[/quote]

How about:

What survivor benefits?

SS is not a wealth accumulation tool, it is a risk management tool. You continue to demand that I argue against points that only emphasise your ignorance of SS. Learn what you are talking about and then I will continue a discussion with you.

 

[alent1234]

Originally posted by: MonkeyK

Originally posted by: alent1234By that time you have a ton of equity in RE and if buy vehicles that keep their value like toyotas or Hondas you have nice equity built up in your auto where you can trade it in for a luxury car and put a nice down payment on it. I actually did some make belive math once where I "bought" a civic at 20, traded up to slightly better cars every 4 years or so and by the mid 40's I have 1/2 the down payment for a Lexus RX300. And my car payment stayed the same for the entire time.

OK joker, I don't know if you are confused easily, or going for a very dry sarcasm. Unless you are investing in clasic cars, you do not build up equity in your car. There is value remaining in your car, but it's nothing you didn't spend.

same thing

over 20 years of buying cars that hold their value you can store enough value or equity or whatever you want to call it to put a 50% downpayment on a Lexus and drive it with Camry payments. And the best thing is that once you buy the lexus it will be easier to buy a new one every few years since they hold value very well.

 

[Zambien]

As others have said, if you start early enough a 401K will be all you need. I started contributing at age 25 and I'm 28 now. I have half a years salary vested so far... if I continue as I have been, I will be very comfortable at age 65 and will have enough to live until I am 95. This is assuming some VERY pessimistic returns and inflation rates.

That being said, with everything happening these days with pensions being taken away and the SS scare I worry that big business and/or the government will figure out a way to screw me out of my money. It shouldn't happen because I own the account that my money is in, but you have to wonder. :/

 

[alent1234]

Originally posted by: MonkeyK

Originally posted by: alent1234
inflation peaked around 1981 at 6% and has been pretty low since. Even with kids we will save 15% per paycheck. A few times I stopped my 401k contributions for a month or so and the increase in my paycheck was very small. Since it's pre-tax most people don't realize how little maxing out your 401k affects your paycheck.

some people also don't realize the magic of compounding. They think 10% is not that much but when you look at the value growth of a 401k than the last 5-10 years it's almost a straight line up and the first 20 years is a gentle slope.

Vanguard's SP500 fund shows an annual return of 12% per year including dividends and capital gain distributions since 1976. That's a pretty good track record.

My wife and I made 130K until we had kids. Now she works part-time and we make 85K. Even at 15% that affects the rate of savings.

And regarding inflation, why would you comput based on recent inflation rates, but historic stock returns? I wish you the best of luck, but thinking like this will lead to dissapointment.

Vanguard has a SP500 index fund. Two weeks ago it reported an annual return of 12.12% per year on average since 1976 which is the inception date. Better guide than general market return reports since it includes dividends and capital gains which are reinvested.

This return includes good and bad times and the SP500's current level which is 20% off it's high. So it's a good number to look at averages over a long time. I did my math based on 11% growth.

I have $35,000 in my 401k and $8000 in my IRA which I don't count since it's my play money that I use to trade with. I did make 80% on it last year though.

Anyway take my $35,000, 11% return, 17% contributions and go out to 35 years. It's almost $6,000,000 and this doesn't include the effect of pay raises. Call it $10,000,000 after 35 years if you include my wife's pension plan. At the end I can cash it out and put the whole thing in 10 year T-Bills which currently yield 4.3%. That's $400,000 in interest income a year.

Couldn't find an inflation calculator, but a 401k calculator of $10,000, 35 years, and 4% return shows $40,000. Which means that my hypothetical $400,000 income is really around $100,000 in today's dollars. Of course by then a lot of the big expenses are paid off like a home or they aren't a big part of a paycheck so that is a lot of discretionary income. And a lot of discretionary expenses have fallen or risen less than the rate of inflation.

 

[abc]

Originally posted by: Future Shock

Originally posted by: Engineer
Definitely overplan.

One question that I would need answered is would these personal retirement accounts be protected from creditors such as hospitals, etc. in case of huge medical bills? One could be completely wiped out from all of their savings in such a case. I don't think that the accounts should be allowed to be wiped out for such purposes. Sure, you have to make payments, etc., but to take your livelihood that was to be used for the rest of your life doesn't cut the mustard.

Other questions above...I guess "to each is own"....

Heck, my ex-wife went after my pre-marriage IRA accounts as part of our DIVORCE, let alone medical bills...there needs to be some sanctity of that resource if we are going to be planning on eliminating social security's security...

Future Shock

oh man, in a divorce she tapped (successfully?) your retirement standard of living? that's foul. i'm sorry to know that.
I think 401k's are safe... but many people with old 401ks from previous employers, convert the 401ks into Rollover IRAs... which i think are open to 'attack'.

 

[Zambien]

Originally posted by: abc

Originally posted by: Future Shock

Originally posted by: Engineer
Definitely overplan.

One question that I would need answered is would these personal retirement accounts be protected from creditors such as hospitals, etc. in case of huge medical bills? One could be completely wiped out from all of their savings in such a case. I don't think that the accounts should be allowed to be wiped out for such purposes. Sure, you have to make payments, etc., but to take your livelihood that was to be used for the rest of your life doesn't cut the mustard.

Other questions above...I guess "to each is own"....

Heck, my ex-wife went after my pre-marriage IRA accounts as part of our DIVORCE, let alone medical bills...there needs to be some sanctity of that resource if we are going to be planning on eliminating social security's security...

Future Shock

oh man, in a divorce she tapped (successfully?) your retirement standard of living? that's foul. i'm sorry to know that.
I think 401k's are safe... but many people with old 401ks from previous employers, convert the 401ks into Rollover IRAs... which i think are open to 'attack'.

I used to work for a pretty big investment company (T. Rowe Price). In the event of a divorce, all 401K assets are frozen. Those assets can be (and are) divyed up just as a house would be (even if you owned it before the marriage).

Prenups are really important if you have ANY savings/equity at all.

 

[MonkeyK]

Originally posted by: alent1234

Originally posted by: MonkeyK

And regarding inflation, why would you comput based on recent inflation rates, but historic stock returns? I wish you the best of luck, but thinking like this will lead to dissapointment.

Vanguard has a SP500 index fund. Two weeks ago it reported an annual return of 12.12% per year on average since 1976 which is the inception date. Better guide than general market return reports since it includes dividends and capital gains which are reinvested.

This return includes good and bad times and the SP500's current level which is 20% off it's high. So it's a good number to look at averages over a long time. I did my math based on 11% growth.

I'm not suggesting that taking an average on stock returns is bad. All that I said was to look at average stock returns and spot inflation is not a consistent outlook.

Really, I am happy for your success. When I was younger, I had made some similar calculations, which turned out to be not so accurate. I just wanted to point out where you may see a correction.

 

[Uhtrinity]

[/quote]

SS survivor benefits
Please read that aquaint yourself with that site. Part of the frustration of discussing SS with people is that they just don't know what it is.
I'm not saying that things should not change, just that the system addresses needs that a personal savings account does not.[/quote]

Savings accounts will pass 100% onto the survivors. The current system is at best 100% for a widow or widower or ~70-75% for children who are disabled or under 18.

Those survivor benefits arent even worth mentioning.[/quote]

Offtopic from op, but here is my take. First of all survivors benefits can be collected by anyone from age 0 - 65 who has had a parent or spouse die. Yes, they only get 75% of the SS of the deceased parent / spouse, but it is far from trivial. In the case of my son, as of this year he recives $600 / mo and is 3, and he can continue collecting until he is 18 or is adopted.

That amounts to $108,000 remaining on his benefits, and that isn't including interest (currently @ 2.5% in a super saver account). He has been recieving this since the end of 2003 and not a dime has been spent. It is strictly a college fund, unless of course something catestrpohic happens, then it is emergency savings. Even at 2.5% over 17 years his account is worth $150,000. Of course once the market starts looking more stable I plan on investing some of his savings. Now if something happens to me (god forbid), he will collect more as I put more into SS than my wife had.

Another example, a few years ago a man from the small town I am from lost her husband (volunteer firefighter) in a firefighting accident. They got zero benefits since he was volunteer status, and was also under employed at the time (zero benefits). However she was able to collect about $600 for herself per month, and the same for her 4 kids, that amounts to $30,000 a year for her family, plus she can make upto an additional $12k without any penalties. Since then she has taken the oppurtunity to go back to school, they haven't lost their home, and are doing relatively well.

Just a few examples at how the system works.

 

[MonkeyK]

Originally posted by: Zambien

Originally posted by: abc

Originally posted by: Future Shock

Originally posted by: Engineer
Definitely overplan.

One question that I would need answered is would these personal retirement accounts be protected from creditors such as hospitals, etc. in case of huge medical bills? One could be completely wiped out from all of their savings in such a case. I don't think that the accounts should be allowed to be wiped out for such purposes. Sure, you have to make payments, etc., but to take your livelihood that was to be used for the rest of your life doesn't cut the mustard.

Other questions above...I guess "to each is own"....

Heck, my ex-wife went after my pre-marriage IRA accounts as part of our DIVORCE, let alone medical bills...there needs to be some sanctity of that resource if we are going to be planning on eliminating social security's security...

Future Shock

oh man, in a divorce she tapped (successfully?) your retirement standard of living? that's foul. i'm sorry to know that.
I think 401k's are safe... but many people with old 401ks from previous employers, convert the 401ks into Rollover IRAs... which i think are open to 'attack'.

I used to work for a pretty big investment company (T. Rowe Price). In the event of a divorce, all 401K assets are frozen. Those assets can be (and are) divyed up just as a house would be (even if you owned it before the marriage).

Prenups are really important if you have ANY savings/equity at all.

State by state deal. Some states say that only things accumulated as a married couple can be split up, others say that it's all fair game.

 

[Genx87]

Originally posted by: MonkeyK

Originally posted by: Genx87

Originally posted by: MonkeyK

Originally posted by: Genx87
What survivor benefits?

SS survivor benefits
Please read that aquaint yourself with that site. Part of the frustration of discussing SS with people is that they just don't know what it is.
I'm not saying that things should not change, just that the system addresses needs that a personal savings account does not.

Savings accounts will pass 100% onto the survivors. The current system is at best 100% for a widow or widower or ~70-75% for children who are disabled or under 18.

Those survivor benefits arent even worth mentioning.

I'm not sure it is worth trying to explain things to you. First you deny that they exist, then you say that because the survivor may not get 100% that the benefits are not even worth mentioning.

In any case if you aim to replace something, your arguments will have more force if you know what you are talking about. I suggest that you learn about just what SS does, and then compare those benefits to a similar investment (if you can find one). Private accounts do not address the same things that SS does.

Uh where did I say they didnt "exist"?
Secondly taking a 30% hit and not being able to even qualify unless you are disabled or under 18 is not worth mentioning as a legitimate "benefit".

Personal accounts will be passed on 100%, this isnt complicated.

[/quote]

How about:

What survivor benefits?

SS is not a wealth accumulation tool, it is a risk management tool. You continue to demand that I argue against points that only emphasise your ignorance of SS. Learn what you are talking about and then I will continue a discussion with you.
[/quote]

You took that response as me saying they didnt exist?

ok

 

[Genx87]

Originally posted by: Uhtrinity

SS survivor benefits
Please read that aquaint yourself with that site. Part of the frustration of discussing SS with people is that they just don't know what it is.
I'm not saying that things should not change, just that the system addresses needs that a personal savings account does not.[/quote]

Savings accounts will pass 100% onto the survivors. The current system is at best 100% for a widow or widower or ~70-75% for children who are disabled or under 18.

Those survivor benefits arent even worth mentioning.[/quote]

Offtopic from op, but here is my take. First of all survivors benefits can be collected by anyone from age 0 - 65 who has had a parent or spouse die. Yes, they only get 75% of the SS of the deceased parent / spouse, but it is far from trivial. In the case of my son, as of this year he recives $600 / mo and is 3, and he can continue collecting until he is 18 or is adopted.

That amounts to $108,000 remaining on his benefits, and that isn't including interest (currently @ 2.5% in a super saver account). He has been recieving this since the end of 2003 and not a dime has been spent. It is strictly a college fund, unless of course something catestrpohic happens, then it is emergency savings. Even at 2.5% over 17 years his account is worth $150,000. Of course once the market starts looking more stable I plan on investing some of his savings. Now if something happens to me (god forbid), he will collect more as I put more into SS than my wife had.

Another example, a few years ago a man from the small town I am from lost her husband (volunteer firefighter) in a firefighting accident. They got zero benefits since he was volunteer status, and was also under employed at the time (zero benefits). However she was able to collect about $600 for herself per month, and the same for her 4 kids, that amounts to $30,000 a year for her family, plus she can make upto an additional $12k without any penalties. Since then she has taken the oppurtunity to go back to school, they haven't lost their home, and are doing relatively well.

Just a few examples at how the system works.

[/quote]

http://www.ssa.gov/survivorplan/ifyou5.htm

 

[alent1234]

Originally posted by: MonkeyK

Originally posted by: alent1234

Originally posted by: MonkeyK

And regarding inflation, why would you comput based on recent inflation rates, but historic stock returns? I wish you the best of luck, but thinking like this will lead to dissapointment.

Vanguard has a SP500 index fund. Two weeks ago it reported an annual return of 12.12% per year on average since 1976 which is the inception date. Better guide than general market return reports since it includes dividends and capital gains which are reinvested.

This return includes good and bad times and the SP500's current level which is 20% off it's high. So it's a good number to look at averages over a long time. I did my math based on 11% growth.

I'm not suggesting that taking an average on stock returns is bad. All that I said was to look at average stock returns and spot inflation is not a consistent outlook.

Really, I am happy for your success. When I was younger, I had made some similar calculations, which turned out to be not so accurate. I just wanted to point out where you may see a correction.

if you started investing 20 years ago and bought a home back then than you should be swimming in money unless home prices didn't go up in your area. This is why I will probably spend the next few decades in the NYC area or the suburbs and then cash out the equity and move to a lower cost area.

 

[Uhtrinity]

[/quote]
SS is not a , it is a risk management tool. You continue to demand that I argue against points that only emphasise your ignorance of SS. Learn what you are talking about and then I will continue a discussion with you.
[/quote]

You took that response as me saying they didnt exist?

ok[/quote]

Your right, it isn't a wealth accumulation tool, Survivors benefits works as intended, SS retirement needs some work. IMHO the whole system needs to be revamped, but I'm not so sure private accounts are the way to go. I consider myself to be financially conservative (on my personal expenses), but I suck at the stock market and at the moment my own confidence in the market is low. How can I expect somone of lower education to take part in personal accounts when I won't do it myself. Granted some people (some on this board also) are good at it, but they / you don't neccesarily represent the average population.

Edit - I have no 401k and I am 35, the best I have been able to do is invest in a duplex (rental property), and hope to continue by aquiring more properties as I can. Better than nothing.

 

[Genx87]

Your right, it isn't a wealth accumulation tool, Survivors benefits works as intended, SS retirement needs some work. IMHO the whole system needs to be revamped, but I'm not so sure private accounts are the way to go. I consider myself to be financially conservative (on my personal expenses), but I suck at the stock market and at the moment my own confidence in the market is low. How can I expect somone of lower education to take part in personal accounts when I won't do it myself. Granted some people (some on this board also) are good at it, but they / you don't neccesarily represent the average population.

The thing about it is the federal govt aleady has a program setup for senators and federal workers that works, is privatised, and has provided anywhere from 5.5-11% returns since inception.

If that program is good enough for the dear old senators, why isnt it good enough for avg citizens?

Now imagine putting your SS into this since inception. What kind of money can you expect to have vs what SS will give you?

http://www.tsp.gov/rates/monthly-history.html


Taking an avg wage of 36000 and putting in the 12.5% total contribution. using the 12% return on the one fund after 40 years one has 3.885Million dollars.
On the low side you have 640,000 on the 5.45% fund.

Even on the low side you can live for 20 years beyond retirement on 3x the income SS provides.

 

[alent1234]

i love the stock market, but in the end to make money in stocks someone has to buy the stock at a higher price than you paid for it. this means that except for a few things, it's like a ponzi scheme since you have to have more money chasing after the assets in the future than at present. If there is money flowing into the stock market from SS, than in the future there has to be enough payers into the system to buy that stock at a higher price.

Of course this doesn't include dividends and mergers, but if SS money flowed into the system the dividend payout ratio would plummet.

 

[MonkeyK]

Originally posted by: Uhtrinity

SS survivor benefits
Please read that aquaint yourself with that site. Part of the frustration of discussing SS with people is that they just don't know what it is.
I'm not saying that things should not change, just that the system addresses needs that a personal savings account does not.[/quote]

Savings accounts will pass 100% onto the survivors. The current system is at best 100% for a widow or widower or ~70-75% for children who are disabled or under 18.

Those survivor benefits arent even worth mentioning.[/quote]

Offtopic from op, but here is my take. First of all survivors benefits can be collected by anyone from age 0 - 65 who has had a parent or spouse die. Yes, they only get 75% of the SS of the deceased parent / spouse, but it is far from trivial. In the case of my son, as of this year he recives $600 / mo and is 3, and he can continue collecting until he is 18 or is adopted.

That amounts to $108,000 remaining on his benefits, and that isn't including interest (currently @ 2.5% in a super saver account). He has been recieving this since the end of 2003 and not a dime has been spent. It is strictly a college fund, unless of course something catestrpohic happens, then it is emergency savings. Even at 2.5% over 17 years his account is worth $150,000. Of course once the market starts looking more stable I plan on investing some of his savings. Now if something happens to me (god forbid), he will collect more as I put more into SS than my wife had.

Another example, a few years ago a man from the small town I am from lost her husband (volunteer firefighter) in a firefighting accident. They got zero benefits since he was volunteer status, and was also under employed at the time (zero benefits). However she was able to collect about $600 for herself per month, and the same for her 4 kids, that amounts to $30,000 a year for her family, plus she can make upto an additional $12k without any penalties. Since then she has taken the oppurtunity to go back to school, they haven't lost their home, and are doing relatively well.

Just a few examples at how the system works.

[/quote]


Thanks for the example. Hopefully some real numbers will help people begin to understand.

 

[MonkeyK]

Originally posted by: alent1234
i love the stock market, but in the end to make money in stocks someone has to buy the stock at a higher price than you paid for it. this means that except for a few things, it's like a ponzi scheme since you have to have more money chasing after the assets in the future than at present. If there is money flowing into the stock market from SS, than in the future there has to be enough payers into the system to buy that stock at a higher price.

Of course this doesn't include dividends and mergers, but if SS money flowed into the system the dividend payout ratio would plummet.

OT and just wrong.

 

[Uhtrinity]

Originally posted by: Genx87

Your right, it isn't a wealth accumulation tool, Survivors benefits works as intended, SS retirement needs some work. IMHO the whole system needs to be revamped, but I'm not so sure private accounts are the way to go. I consider myself to be financially conservative (on my personal expenses), but I suck at the stock market and at the moment my own confidence in the market is low. How can I expect somone of lower education to take part in personal accounts when I won't do it myself. Granted some people (some on this board also) are good at it, but they / you don't neccesarily represent the average population.

The thing about it is the federal govt aleady has a program setup for senators and federal workers that works, is privatised, and has provided anywhere from 5.5-11% returns since inception.

If that program is good enough for the dear old senators, why isnt it good enough for avg citizens?

Now imagine putting your SS into this since inception. What kind of money can you expect to have vs what SS will give you?

http://www.tsp.gov/rates/monthly-history.html

But is that the same system Bush was pushing? For as many positve articles you provide I can provide just as many that have negative findings. Honestly I don't have a good enough understanding of personal accounts in SS, so am hesitent to support it.

Just a few I have found:

Children, Social Security, and Private Accounts: 10 Questions for Policymakers

Undermining Social Security with private accounts

But I will admit most of my concern atm is with the survivior side of SS. Infact I have joked with friends and family that my son should collect now, because I will never see anything when I retire. I take care of him his first 18 years, he takes care of me my last 18

 

[Genx87]

Originally posted by: Uhtrinity

Originally posted by: Genx87

Your right, it isn't a wealth accumulation tool, Survivors benefits works as intended, SS retirement needs some work. IMHO the whole system needs to be revamped, but I'm not so sure private accounts are the way to go. I consider myself to be financially conservative (on my personal expenses), but I suck at the stock market and at the moment my own confidence in the market is low. How can I expect somone of lower education to take part in personal accounts when I won't do it myself. Granted some people (some on this board also) are good at it, but they / you don't neccesarily represent the average population.

The thing about it is the federal govt aleady has a program setup for senators and federal workers that works, is privatised, and has provided anywhere from 5.5-11% returns since inception.

If that program is good enough for the dear old senators, why isnt it good enough for avg citizens?

Now imagine putting your SS into this since inception. What kind of money can you expect to have vs what SS will give you?

http://www.tsp.gov/rates/monthly-history.html

But is that the same system Bush was pushing? For as many positve articles you provide I can provide just as many that have negative findings. Honestly I don't have a good enough understanding of personal accounts in SS, so am hesitent to support it.

Just a few I have found:

Children, Social Security, and Private Accounts: 10 Questions for Policymakers
Undermining Social Security with private accounts

But I will admit most of my concern atm is with the survivior side of SS. Infact I have joked with friends and family that my son should collect now, because I will never see anything when I retire. I take care of him his first 18 years, he takes care of me my last 18

Honestly I dont think his was completely 100% invested in private accounts. I believe he made a mention of initially letting people who want to they can divert 2% of their payroll into a private account but lose all benefits from the current system. Down the road the limit would be raised to about 5-6%. Basically he was getting people off the old system while trying to fund the current system by making people now forfeit any future right to the benefits from the old system.

Anybody over 55 was ineligible for the program and would remain on the current system.

The only place where SS may be better than private accounts is with children. I dont think private accounts will have high enough balances to effectively deal with the loss of a parent at a young age. But to that I say, this is why there is a private sector tool called "Life Insurance". Besides it appears unless the child is disabled their benefits run out at aged 19 anyways if their parents die.

I just like private accounts because it takes the burden of retirement off the taxpayers hands and it doesnt allow politicians to steal from a social program to make a budget.
It also in the end will generate more wealth for retiree's and allow them a more comfortable lifestyle.

No way will the change be easy if they do go ahead with a plan like this. But I would rather we do it now when we are still running surplus's than in 2040 when we are running 1 trillion SS deficits.

 

[alent1234]

Originally posted by: MonkeyK

Originally posted by: alent1234
i love the stock market, but in the end to make money in stocks someone has to buy the stock at a higher price than you paid for it. this means that except for a few things, it's like a ponzi scheme since you have to have more money chasing after the assets in the future than at present. If there is money flowing into the stock market from SS, than in the future there has to be enough payers into the system to buy that stock at a higher price.

Of course this doesn't include dividends and mergers, but if SS money flowed into the system the dividend payout ratio would plummet.

OT and just wrong.

how is it wrong? The value of a stock just doesn't magically go up. It goes up because someone is willing to pay more for the shares. If you bought Microsoft at IPO and held it, than your dividends would be more than what you paid for it back then. Since we are talking about the SP500, we are talking about established companies. When I buy stock through E-Trade or via my 401k mutual fund I'm not giving any money to the company to build their business. I'm buying the shares from someone locking in a profit, a baby boomer selling stock or one of the wall street traders.

There are even theories about this like in the book TrimTabs. The author even runs a service and sells his calculations to institutional investors. he tracks liquidity in the stock market which is companies buying back stock, mutual fund inflows, etc.

you can do capital asset price model and other calculations all day long, but you make money in stocks buy selling the shares to someone who is willing to pay more for them than what you paid.