Lets talk SS private accounts

[serryjw]

Having one of my hour conversations with a kid on campus concerning SS private accounts.......HE IS A BUSHIT SUPPORTER..

My argument....America have no clue how to invest. I heard about 67% of Americans are invested in the Stock Market thru Company retirements or Mutuals funds.........My question(I know the answer..I think!)..... How many people have self-directed investments? I would guess much less than 3%

If this were to pass and become law that young people could take a portion of their SS and invest it; it would be like flushing it down the toilet.Investment people would be just like ambulence chasers. we don't have enough problem in the insurance field?

[IronLionZion]

1. exactly, and with people like Ken Lay out there

you won't always pick good investments even if you do know something about stocks.

The Kennedys made part of their fortune by artificially inflating stocks and selling them. I think the Bushes did something like that too.

[goddess40]

4. Stock market losses

This is Goddess40's mom. I retired in 2000. 6 months later I lost $40,000 in my deferred comp account that was invested in the stock market. I have since gone to a financial planner who has helped me put my money in safe areas. I would like to ask Bush if the government is going to help those who put their SS in stocks and then lose it?

[R3dD0g]

2. I don't have the expertise or time to run my own investments.

I turn that over to someone who will spend all their time worrying about the best way.

If we privatize SS there are 2 things that will happen.

1. The gov't will decide which stocks are 'safe' and those companies will recieve the blessings. Who doubts that Enron and Arthur Andersen would have recieved the blessing? This will happen within 10 yrs of implementation.

2. The accounts that aren't ravaged by the future Enrons will grow and the owners will start clamoring for access to it for certain things, home purchases, college expenses, catatrosphic medical, etc, etc. And the gov't will have to allow it, it is after all 'their' money. And when the accounts are all empty and the owners start looking to retire, we will have to make a hard decision, let 'em starve cold and homeless or pick up the tab for their spendthrift ways. This will happend after 25 yrs.

[DianeG5385]

3. This is a ploy to dump money into the stock market

for the big boys to play with. You think they're going to invest our money for free? Why do you think the advent of the 401(k) plan pumped up the market?? There was a surplus of money with nowhere to go which caused an artificial inflation of the market. Once the flow of funds stabilized (or decreased due to the decrease of high-paying jobs which offered 401(k) deferrals,) the market tanked and has now stabilized at an essentially zero growth rate. The market and investment banks and mutual funds desperately want those SS funds to do a repeat of what 401(k) did for their bottom lines. You are better off putting your money in bonds with a stable return. Capital preservation, my friends. This is why we must fight ANY form of privatization tooth and nail. This has ABSOLUTELY NOTHING to do with salvaging Social Security and has EVERYTHING to do with lining the pockets of investment banks, et al.

[The empressof all]

5. Hypothetical Question

Just how much are we talking about supposedly being able to invest on a monthly basis -based on a $50,000 per year income. Are we talking about $100 per month? I'm not employed right now and I forget what the monthly deduction for Social Security is. I don't remember it to be a significant amount but I could be wrong.

I just think anyone's unwillingness to support our elders and disabled is just absolutely disgraceful.

[punpirate]

6. When one looks at how the details would...

... play out, the real issue isn't whether or not individuals would be good investors--the only real issue in this is what it is intended to do to Social Security, period.

Removing money from the fund destroys it. That is the sole modus operandi of the proposal. It will benefit Wall Street investment firms since they will be able to charge management fees for the money leaving the fund and going to them. For the amounts proposed, even initially, that will mean additional billions per year in profits.

What is not being discussed at all in this country is the experience of the British attempt to privatize retirement which began in the Thatcher years. British workers were given a cash incentive to opt out of the government retirement plan and enter a privatized retirement fund. That fund manager has recently gone bust.

The only way a worker can return to the government plan is to cough up the cash incentive, which, in most cases, is now gone, and they will still lose some benefits because they were not paying into the government plan for fifteen years or so.

The only way to avoid a coming retirement disaster is to prevent it from happening. If even partial privatization is implemented, that disaster will happen.

[BillZBubb]

7. During the gold rush, the ones who made money sold supplies.

In Vegas, the house wins. Who will win when young people open very small accounts with investment firms? Hmmm.

After the annual account maintenance fees and trading commissions, those young people will have to earn unrealistic annual returns just to keep up with what the current Social Security system would GUARANTEE them risk free. A few will be lucky and do so. Most will lose big.

Let's say the average young worker gets to invest 10% of his Social Security contribution. That's about $500/year on average. If the maintenance fee for the account is $25/year, that leaves $475. Then that is invested in something with a commission of 5% (either outright or hidden). That leaves about $450 invested. Right off the top, he is starting from a 10% hole. From that he has to find an investment that will gain that back plus beat inflation plus beat the 3% return Social Security would give. Not likely for most people.

It's a typical Republican scam to get tax money into the hands of the business concerns.

[neebob]

9. Exactly!

[serryjw]

10. All great responces..........

Historically, Stock Market does return the best investment of about 10% over 40 years....BUT which stocks...the opportunity for market manipulation is huge.America does not have the time or inclination to educate themselves, so they are going to get ripped off. Investment houses will start hiring Ken & Barbie to sell this stuff..and kids will be hoodwinked into signing on the bottom line with no recourse.


......All this is AFTER we figure out how to cover the $2 TRILLION short fall to start it!

I had a friend ( a moron!) who took the profits from her house 5 years ago and started day trading....It took about 6 months and she lost $150K!!!!!

[Lydia Leftcoast]

8. The math doesn't work

The proposal has workers investing a small portion of their contribution in the stock market. This is a minuscule amount per year for an individual low-wage worker (about $27 for someone earning minimum wage), and the results are not guaranteed, plus, multiplied by millions of workers, it reduces the pool of money available for current retirees.

[murdoch]

21. I agree

All of the money paid into Social Security now goes directly to retirees. It's a LIFO system - Last In, First Out. So where is the money for these private accounts going to come from, all the money collected from social security this year was spent this year. It's just a trick to eradicate Social Security - they'll just cut benefits more and more and raise the age more and more until it's to where you start getting $5 a week at the age of 92, or do away with it completely. The Republicans have already destroyed everything workers fought for, Social Security is their last mountain to conquer - they already got their fingers in the door with Medicaid last year (with the support of the AARP). I guess once we are going to corporate elementary schools and they've done away with Social Security, they'll do away with the corporate elementary schools as they repeal child labor laws, since children should have the "freedom" to work.

If you look at the US GDP from when Social Security was implemented until now, it has grown enormously. The ratio of workers to retired workers is a false ratio, the real ratio is the number of retired workers to the US GDP. This number has not grown dramatically compared to GDP, the US is as perfectly able to support retirees now as it has always been. The only "crisis" with Social Security is that organzied labor has been demolished over the decades, and even the AARP is capitualting nowadays to the Republicans.

[rogerashton]

11. Here's the problem:

The social security system is only about 3/4 funded, roughly speaking. If it were 100% funded there would be enough in the fund (with interest) to pay 100% of future obligations. Current payments (at a lower level than today) would then be enough to keep it topped up for the forseeable future. Until about 1980 it was funded at roughly 0%, and European pension funds still are -- a nasty problem for our brothers and sisters across the pond -- but we are in much better shape thanks to the late Sen D. Moynihan (D, NY). Since 1980 we have been overpaying to build the fund up toward the 100% level.

The reserve is enough to pay 100% of the obligations for some number of years -- probably roughly until the 2030's -- and then there is nothing left but the income from current contributions, which, at current rates, would not be nearly enough. That doesn't mean the SS pensions get cancelled right away, but there probably will be cutbacks, coupled with higher taxes. As time goes on, my guess is, the cutbacks will be more and more until the system will gradually disappear. Most likely the cost-of-living increases will be eliminated and soon thereafter (by coincidence, of course) a major inflation will reduce the purchasing power of social security pensions to about zippo.

Why would I care? I'm 62. If I am still alive and collecting social security in the 2030's, I, for one, will be astonished. The people who will really be stuck are the ones who start to collect social security about 2035 or after -- which means they are now 34 or younger. The younger, the less they will collect from social security (unless we find a way to top the fund up to 100%).

If some of the money is siphoned off for "private accounts," that just means that the system will run out of money that much sooner, so that people who retire in 2030 or 2025 will face cutbacks, and those who retire in 2035-2100 will probably get next to nothing.

The Republican teaser to young people is to give them 25% of their contributions back to play with. It is true that they have a chance to get better returns on their private accounts -- and a chance to lose it all, of course -- but the fact is the SS fund cannot yield returns equal to private funds and build up toward 100% funding at the same time. Just can't. So the young people might be temted to take the private accounts and to heck with the system. But here's the catch: if young adults do get sold that pig in the poke, it makes it pretty certain that they will get roughly nothing for the 75% of their contributions that go into the system, since it becomes all the more certain that the fund will collapse before their turn to collect comes.

So here's the proposition. Vote Republican, and you will get 25% of your SSI contributions back (but that's all you will ever get, sucker!)

Their are three honest ways out of this problem, but all are costly. One is to keep overfunding social security until it is topped off to 100%. Everybody in the system will share in the cost of this, including young people. Since I have been sharing this cost for 20 years now, I do kind of feel it is their turn. The second is to close the system out, shift young people into a new system that will be fully funded from the start. That would mean that money will have to be found somewhere to pay the pensions of people now in the system who retire in the next few years or who are now retired. That means higher taxes on somebody. The third is to tell people who have paid into the system over their lives: too bad, sucker, you're not getting what you were promised. In short, there are going to be costs, and someone will pay them. I think it is reasonable to share them widely.

[whistle]

12. Social Security set up as private investment accounts would....

...not be social security! The idea behind Social Security is to have available for every working individual a guaranteed supplemental income after they retire and/or are unable to work any longer. That comes along with a shared responsibility of funding and contributions of an equitable amount when these persons were in fact able to work and contribute. The same responsibility has been expected for the companies, businesses and organizations who have employed workers and benefited from their labors. Thus we have evolved to the present system of shared contributions from when there was no such system in place in the 1930's. That was the idea behind the social security safety net. That guarantee can only come from the federal government, period.

Look at what is happening to private investment pension funds today. They are being raided by the very companies who set them up. Now that their workers are most vulnerable, in, at or near retirement, these companies want to renege on their obligations and agreements. Trillions of dollars are being looted. The workers their unions are powerless over this happening and neither the U.S. congress nor the Bush administration is doing a thing about it. Who in their right minds would wish to work for 35 to 40 years and face the prospects of something like that?

In the past, most retirement investment accounts by private individuals took the form of insurance annuities, which were discovered to be a totally bad return on investment because: A) the insurance companies pocketed most of the returns in the way of profits; B) inflation became the hidden new middle class tax of the 1960's, 70's and 80's; and C) whatever was left after that 30 year assault on private pension accounts, by the middle of Reagan's 2nd term were stolen through the great pension fund raids and the October 17, 1987 stock market crash.

Jesus people, wake the fuck up! No republican, fat-cat, right wing, neo-conservative banker or capitalist is ever going to allow an impartial investor to recover anything they have trusted to them, period. They will loot, steal, pillage and remove all said capital with the help of corrupt politicians, judges, bankers, lawyers, the military, their own private armies and the right to buy and sell their companies without the least concern for those who have spent their lives working for those companies, to preserve their claim to the capital they have invested at the expense of whoever stands in their way of making money.

Has history ever shown any time that this has not been the case? Perhaps during short intervals of time when again, the idea of sharing wealth was only in the survival interests of the private capitalistic. Other then that, capitalists never have and never will give a rat's ass for what happens to working people or for the society as a whole. The only way our long run interests are kept in tact is when we stand up united for them. :kick:

[serryjw]

19. Excellent review.......

on top of all of that, we have the problem of the economy slowing down. If working class people make 65% of what they DID make that is less SS. The generation behind the boomers are smaller than we are...and everyone is living longer. We may get some SS but I'ave all intentions of working into my 70's..becuase i won't have a choice.....Shall we all now talk about how PEAK OIL is going to effect all this?

[TahitiNut]

13. There's NOTHING to stop them from investing in an IRA!

All this is is a way to bankrupt the Social Secuirty system by reducing the insurance premiums for people who choose to open SS-IRA's!

[Hello_Kitty]

14. Oh gee, and guess who are huge proponents of privatized SS?

None other than the financial services industries, who stand to make $$BILLIONS$$ from privatization.

[kohodog]

15. Think about the effect on independent businesses

The money would flow into the stock market, mostly through a couple of Mutual Fund type choices. The fees will kill much of the growth, and the money will go to the Wallmarts, Home Depots and GE's of the world. With more capital they expand and put more small businesses out.

But that's what the neocons want to do. We must get them out.

[amazona]

16. i have a self-directed account...

...and, yeah, it is definitely like flushing a certain amount of money. :-( One of my friends lost his entire account -- he was into WorldCom. I just lost a huge percentage, and this on a blue chip stock, AT&T.

The math has shown that the stock market is a random walk. Random means random. You can't have enough information to make the right decision, even if you make a full-time job of it, which most of us don't have time to do. This is why economics professors are not millionaires. This is why stock brokers earn their money in sales (commissions) rather than investing their own money and keeping all the profit!


It has nothing to do with the intelligence of any American. We could be a nation of Einsteins, and we would still not be able to beat the market, except occasionally by chance. You will have one Warren Buffet in a society and looking back he will appear a genius, just from "survivor bias." But you can't predict who will be Buffet and your hard work and intelligence won't make you the next Warren Buffet.

Random means random. Out of human control.

Unfortunately, the human ego is very stubborn. We cannot accept mathematical reality and all of us who are "serious" about investing at some point are called upon to lose money trying to time and predict the markets.

Even a relative who made tens of millions in real estate lost a fortune on Enron.

Retirement should not be a gambling game. Gambling is fun, and I'm all for it...but not in the context of a tax-subsidized retirement account.

If any man or woman believes they can beat the market, they do not need to wait for Social Security to be privatized. They can take one percent, or two percent, or some other small amount out of their own savings today and start investing. No need to set up a welfare system or subsidy for stock brokerages. Start investing today. You will learn after a couple decades of doing this that it's fine for putting away $100K for a kid's education or a year long tour of Europe. Not so fine for putting away millions for a retirement account, for the simple reason you simply can't accumulate so much by honest work combined with investing.

All those fairy tales about how if you save $2K a year in your IRA from age 18 to age 24, then you will have a million dollars when you're 65? No one has ever done this in all of human history. No one. The example depends on your being able to get 10 percent a year return on your tax-free investment. Try it with a more likely rate of return, such as 4 percent, and suddenly you're barely keeping up with inflation.

[serryjw]

20. Exactly my point........

I make no money, have no investments and I know your should be diversified.....WHY would anyone put all their eggs in one basket?

[amazona]

22. well no you should NOT be diversified

The mathematics makes it clear that if you want an "average" result, then you should be diversified.

The problem with an "average" result is that you cannot earn enough for retirement without seeing a drop in your standard of living in retirement. (Unless you are lucky enough to start your investment in 1987 and to cash out in December of 1999 or so -- in other words, unless you can "time" the market, which it is already established that you can't do except by chance.)

Another word for "diversification" is "hedging." By hedging your bets, you can guarantee that you can't lose so much -- but ONLY at a cost of guaranteeing that you cannot gain so much.

Diversification is a great sales word for the industry to encourage people to buy more and different products but it is mathematically proven to be a non-starter if you hope to accumulate a big return.

Unfortunately, your best chance of winning big is to take risk and to concentrate in one area where you have a potential of winning big -- and also a potential of losing big. Most people have to believe that Fortune 10 companies, approved by the SEC, are sound ones...and then along comes Enron to prove that our SEC -- our referree system -- is broken.

If you wait to accumulate enough money to be able to diversify your investments, you're lost before you begin if you have a low income, as I do. You have to pick something and give it your best shot. You may lose, but if you never try at all, you've definitely lost.

[serryjw]

26. No question........

if you don't have 10% available annually to invest and let it compound over 30 years you are screwed.

[whistle]

25. This makes my point exactly, not because stocks are a bad...

...investment or high risk, but because the price/value of stocks and investments are wide open to manipulation, fraud, insider trading and tricks that most investors have not even thought about yet. This is even with the regulatory agency of the SEC which is mandated by law to protect ALL investors against such practices. Big money wins, that's the name of the investment game. To be a player you must be prepared to loose all that you've invested, regroup, re-finance and invest again. That is not what the small or even medium investors are capable of doing. Only the very rich can afford to play in such an arena.

Fully funding Social Security can happen and is in fact feasible within a very short time frame. Look at who is exempt from paying into social security, dividend earners, unearned income earners and people who can shelter their earnings as something other than income, plus people who earn over the SS income cap which I believe is now about $80K per year. Remove their exemption status and make them pay into the fund according to their proportional level and SS with be fully funded before Kerry finishes his first term. Then, invest in human capital, the real creators of wealth in this country, not the investment class, educate, re-train, seek full employment and steady GDP growth and believe you me, the United States will have an abundance of capital to accomplish all that it needs to accomplish for it's citizens and to be a world leader and example of social democracy and economic freedom.

Boot the do-nothing social capitalists and their cronies out of their positions of power and influence. Let them stand on their own two feet and watch who gets ahead in the race for value and ideas in that kind of new America. It won't be the likes of the George Bush's and the Rush Limbaughs and the O'Reilly's and all of their ilk. Real Americans would not stand for them and their kind. I think we would see them vanish into the muck from which their wretched, envious, hate-filled evil souls first vomited forth.:kick:

[oneighty]

17. Put the money where their mouth is.

The present government in their great confidence in the stock market should invest all the SS funds in the stock market, while still guaranteeing SS benefits.

We will all be rich. How can we lose? Excess profits can be used to replace income taxes.

180

[fwiff]

18. And what happens to the old people who don't 'succeed'?

I would also throw in there that SS was created as a safety net, not a pension- that there are millions of old people who will, despite their best intentions, be left without anything for all the reasons everyone's been mentioning.

What would we, as a humane nation, be able to do to keep the elderly out of poverty and eating cat food? What would we do once they were there? It would be a social disaster,by regressing millions of people into poverty, out of the liquid economy and burden the current generation with less *spendable* money- they'd be spending it on their parents- what would that do to the economy at large?

For those who wish to personally invest, there are plenty of incentives right now-
And also, why would we want to put any of our tax dollars into the service fees to the profit of the private sector? That's like paying your boss to give you your paycheck.

[retread]

23. The choices of where to invest will be very limited and few.

Only a few big contributors to the repigs will be selected. You can bet they are bidding on who gets to stick their snouts in the slop as we speak!!

[Cleita]

24. It's a Gingrich doctrine to eventually dismantle Social Security.

The fact is that everyone can save up to $2,000 a year and put it in an IRA tax deferred and invest it as they see fit. No one has any business messing with Social Security and shoving it into the private sector where it will eventually be swept away legally.

My husband's employer did what they call a SEP IRA. They gave their employees a yearly bonus that was put into an tax deferred IRA for their retirement. My husband couldn't take it out, but he could direct how he wanted it invested. No Social Security funds are needed.

LEAVE SOCIAL SECURITY ALONE!!! DON'T FIX WHAT ISN'T BROKEN!!!

[whistle]

27. What guarantee will your husband have that his SEP-IRA will be...

...fully available when you are both ready to retire? If it fails to yield what you expect, whenever that time comes, what will you both rely upon to exist? I know that most of my funds lost in direct proportion to the stock market declines when Bush allowed the recession to go unchecked and the economy to go through the slow recovery it has under his watch.

Nearly 40 years in the workplace has shown me that the least reliable source of retirement security would be private pension programs. The best pension systems all work much like the Federal Social Security program, those associated with companies which grow, prosper add to their workforce and pay their retirees from funds that are being replenished by internal growth. All of the rest of the pension programs are like playing the lotto.

[Cleita]

28. Well, we have already been retired for ten years now.

Since my husband was very conservative in investing it, we didn't lose it down a sink hole of bad stock choices. (Playing the stock market is like gambling. You should only "invest" what you are prepared to lose and it shouldn't be your retirement money.) It has made a contribution to our income, supplementing our Social Security not replacing it.

What I am saying is for those people who feel that they want to invest some of their retirement money themselves, then they can do it through IRA's or other programs.

LEAVE SOCIAL SECURITY ALONE. I can vouch for the fact that SS has been our steady income resource, not the money we saved to retire on.