Originally posted by: Genx87
>>> Huh? How is that a strawman. It's common sense. The more time you spread over your money, the less money per unit time there is. Private accounts aren't going to change that. If you have more time to spread your private account over, you are going to have less money per month. It's something a 2 year old should know.
So why dont they lower payments by 99% and string it out over 50 years?!?!?!?!?
That is why it is a strawman. You lower the payment of people and expect them to live longer to make up for it. And private accounts will change that because
>>>> Still not a strawman. You don't adjust life expectancy based on the benefit. You adjust the benefit based on life expectancy.
A. It is your account, the govt cant touch it
B. You will get a higher return and thus a higher payment per month.
>>>> You may or may not get a higher return. To get a higher return you need to invest in more risky securities, which means there is a higher chance you will lose money.
Have you ever looked at a compounding calculation?
Take for instance somebody who makes 50,000 a year. For the sake of simplicity I am going to assume they never get a pay raise over the next 40 years. If they are allowed to put 4% of their income into a private account and retire in 2045.
With a rate of 8% return and an annual contribution of 2000. They can live for 20 years after retirement with an annual income of 53,000 a year.
>>>> and who is stopping them from putting 4% of their account away now? Then they will have 53K/year in addition to their social security. Also, 8%annual return is a strawman, and is by no means a safe assumption. If it was, banks would be paying 7% interest and investing the money to keep the extra 1% return.
Over the same timespan with the current system that person will have contributed more(6.5% or 3250) a year and will have an income of an estimated 24-28,000 a year after the benefit cut.
>>>> Another strawman. You don't know what the benefit will be after the cut.
Even if you extend the lifespan of the retiree out to 30 years their annual income will only drop to 47,000 a year.
>>>> If all your optimistic assumptions fan out. And what if they don't? We are going to build a social safety net on the assumption of 8% stock market return while the economy is growing at 3%?
>>> Well, that means the government will have to default on its bonds. More financially astute minds at Moody's and S&P have the same if not more data than you have, and they are keeping their highest ratings for US federal government bonds, meaning they have almost 100% confidence in the government's ability to repay them. Do you know something they don't?
What are the length of the bonds they are selling? 10,20,30 year bonds? When doe the shat hit the fan again?!?!?!?
Ask Greenspan why he feels the current system is not suited well for an aging demographic and why he feels private accounts are a long term solution and fix for the SS system.
>>>> Well, you claim we are going to start having to pay half a trillion dollars in bonds per year back within 30 year time frame. I don't remember government's long term credit rating being cut, do you?
>>> Stop worshipping Greenspan. Greenspan also let the economy overheat in the 90's, and then overcorrected.
He brough interest rates up when he had to. The dotcom boom broke the rules of finacials.
He did what he could. Certainly has more credibility than you or I.
>>>> OK, you can keep worshipping him all you want. But keep in mind that he has been against deficit spending, as well, so if you take his advice on SS, you need to also take his advice on deficits, which the GOP is running like crazy.
>>> Demographics don't fit the privatized plan well either. People living longer will have to spread their private accounts thinner over a longer period of time. Same as SS. And someone will have to buy the stocks in order for seniors to take money out of their retirements. It's a pay as you go system, just like SS. If baby boomers are all selling their stocks to retire on, and there are fewer young people buying stocks due to demographics, the value of those stocks will go down.
See above, the current system just doesnt compete.
>>>> And neither does your system. Where are these 8% returns going to come from when baby boomers are selling stocks to pay for retirement, and there are fewer younger workers buying them?
>>> And the way out of that disaster is to prepare for it by stopping borrowing now, and paying off loans by running surpluses now, not borrowing like drunken sailors. Any system you pick, the workers and investors are going to have to pay for the retirement of older people, either by buying their stocks or by paying into SS, or through other taxes. Privatization won't fix anything at all.
Private accounts if done right will be solvent and untouchable by the govt. Each person will have their own account from which to draw upon. When it is time to retire they will be allowed to draw from that fund. Their fund, not a general fund that isnt funded correctly and hasnt been raped by congress. Above all it wont be funded by tax payers either to the tune of trillions.
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