Social Security personal accounts

You do know that the system you just described in your post was put in place by a murderous dictator, right? I guess if you exclude mass smurder, Augusto Pinochet was not so bad...

Putting aise war crimes for a minute, let's look at the Chile system from a non-biased source:

"Chile created its first Social Security-style programs in the 1920s, a decade or so before the United States did. But the government under Pinochet made a big change in 1981, transitioning all new workers -- as well as beneficiaries of the old, defined-benefit system who were willing to make the switch -- to a pension plan based on individual accounts run by private-sector investment managers. By now, almost all Chileans are enrolled in the post-1981 system."

Hidden fees. High fees have been a longstanding concern about the Chilean system. Due to lack of competition among private-sector money managers that participate in the system, these management companies' profits have been much larger than profit margins in other sectors of Chile’s financial services industry, wrote U.S. Social Security Administration researcher Barbara E. Kritzer in one paper.

http://politifact.com/truth-o-meter/statements/2010/oct/04/patriot-majority-pac/patriot-majority-pac-conjures-chilean-dictator-att/

LICC thinks dictators have good ideas. We should all mark April 2, 2011 in our record books... the day LICC hit a new low.

lolumad?

Why can't a dictator have a good idea?

Well, slaughtering old people is a good way to fix Social Security.

No need to fix it. Just get rid of it.

that's a great idea bob. I'm coming over to your parents' house right now to take away their ocial Security checks. I'm sure they will be able to surivve without it and if they can't, then they will just have to live in the street.

The government is already coming over to my house and taking my money to give to others and soon they will be taking more of it.

People should save for their own retirement. Make it optional to pay into it and phase it out. I would be more than willing to give up my 15 years of paying into it, the right to collect in retirement for the option to stop paying into it.

Again Socialist has no substantive argument. The only substantive thing he said was that some managers got high fees because of lack of competition, which would not be the case in the U.S. Wow.

Taking control away from government and making the system work better and be affordable by allowing people to make their own decisions, while keeping the system safe through structural regulation is the way to go. But lessening government power and having fewer handouts goes against what Socialist wants.

From the above link:

"the Chilean system, at least if it's implemented without major differences, would likely be seen by most Americans as inferior to Social Security. The size of the coverage gaps in Chile's system, while understandable given Chile's economic situation, would be unacceptable to many, if not most, Americans."

"Taking control away from government and making the system work better and be affordable by allowing people to make their own decisions,"

People should not make their own decisions because tey are STUPID. Let's see:

25% of Americans think Obama was not born in the U.S.
10% believe in aliens
14% think Obama is the Anti Christ
33% think the govt. carried out the 9/11 attacks

These are ACTUAL poll numbers.

How can people make their own retirement decisions when just a few years ago they were buying houses they COULD NOT AFFORD?

401k plans work. If you start young and contribute the max it grows. If the company matches then it's on steroids. Best part is its your money and Congress can't change the rules or take it away.
----------------
And about this people should not be permitted to make their own decisions because they are STUPID.
If that's so , why allow them to vote in elections?

401ks don't work. There was a major WSJ article about them a month or so ago that I posted here. The article profiled peopel who had inadequate 401ks and had to work well into retirement. 401ks were originally meant to supplement pensions, not replace them.

>If Chile can fix social security through personal accounts, why can't we?

The comparison between the U.S. and CHile is as asinine as comparing NYC real estate to Wayne, NJ and New Jersey excess rain to California's earthquakes and forest fires.

I love how everyone here is talking about Social Security "private accounts" HELLO, private accounts is code word for PRIVATIZATION. You know the free market wacko crowd has widely unpopular ideas when they can't use the actual term to describe what they want.

>"As in Chile, workers would choose investments by picking a fund managed by a major private investment firm from a list officially approved and regulated by the federal government for safety and soundness.

- Who picks? Alan Hevesi? Steve Rattner?

>Maybe an outsourced firm like Moody's and S&P which rated MBSs as AAA.

>The Chilean personal account system that has been so successful for 30 years now includes a government guaranteed minimum benefit for the personal accounts that is roughly equal as a percent of income to the average benefit under the U.S. Social Security system. That is feasible because market investment returns are so much higher than what Social Security even promises, let alone what it can pay.

So you do want the government involved?

>That is why over 30 years of personal accounts, even through the financial crisis, Chile has never had to make a payment on that guarantee. Through its regulation of the private investment firms among which personal account investors can choose, the government can limit and control the risks workers can take on with their personal accounts, preventing moral hazard from the guarantee."

Where are the Chilean investments made?
How would the U.S. equity market behave if we put nearly the entire social security funds into the stock market?

Republicans know they can nee privatize Social Security, so their goal is to raise the retirement age to a level where most people will be dead by the time they reach it.

*never privatize*

>And about this people should not be permitted to make their own decisions because they are STUPID.
If that's so , why allow them to vote in elections?

Because in elections, people pick leaders and legislators who make the ultimate decisions. There's a difference between electing people and directly investing. Take the number of lower income people who irrationally invest (i.e. "dream") in the lottery.

Socialist, you are absurd. There are so many good reasons against this idiotic plan to make the U.S. like Chile that you don't need to resort to your typical crap like how Pinochet was a murderer, Chris Christie is too fat, or comments about the so-called tea party or Sarah Palin or birthers. Try the merits - this one is an easy one.

>Republicans know they can nee privatize Social Security, so their goal is to raise the retirement age to a level where most people will be dead by the time they reach it.

Really? Which Republican has said that?

Some key phrases I picked out from the article:

"officially approved and regulated by the federal government"

AND

"government guaranteed minimum benefit"

AND

"regulation of the private investment"

AND

"government can limit and control the risks"

So essentially, LICC is advocating for a system that has massive government involvement. Wow LICC, I did not know you were a Socialist.

See, there you go, score one for Socialist.

GOP Senator Proposes Increasing Social Security Retirement Age 'Every Several Years'

http://www.huffingtonpost.com/2011/02/08/richard-shelby-retirement-age-increase_n_820271.html

You convince me Socialist. Take away the right to vote. To many people can't understand mutual funds, let alone political issues.

>GOP Senator Proposes Increasing Social Security Retirement Age 'Every Several Years'

which to you means that he wants to raise the age to a level at which people will be dead by the time they need it?

I don't want to take away the right to vote. The Tea Party does. Many teabaggers want return to the time when US Senators were chosen by state legislatures instead of through popular vote.

So explain why the same people who are too stupid to pick a mutual fund and save for retirement are smart enough to choose the direction of our nation.

Ok, I'm beginning to get the picture. Each nonsense position gets an opposing, equally nonsense position.

Carry on.

Come on Riversider, most people are too dumb to pick a mutual fund and save for retirement but they can certainly vote for someone willing to give them money.

Seriously, if you think people are too dumb to manage their own funds for retirement, how can they manage the funds given to them by the government? Sounds like a waste of money to me. If you can't save for retirement, keep working.

Free markets does carry some good benefits in all fairness to LICC. Here is an excpert of an IMF report put out February 15 about the economy of a foreign country. As you can see, capitalism greatly helped the economy of this country:

"Executive Directors agreed with the thrust of the staff appraisal. They welcomed ****'s strong macroeconomic performance and the progress on enhancing the role of the private sector and supporting growth in the non-oil economy. The fiscal and external balances remain in substantial surplus and are expected to strengthen further over the medium term, and the outlook for ****'s economy remains favorable"

Now, as you see, I redacted the name of he country. Does anyone wnat to guess which country the report was talking about? What if I told you it was LIBYA? Uh-oh.

Here is another great example of privatization. Hopefully we can use it as an example in the U.S.:

WB, IMF and AfDB-backed program to privatize Egyptian banks arouses controversy

The Egyptian government is facing criticism from members of its parliament over plans to sell off the country’s publicly owned banks. The plan to privatize several national banks within the framework of an $8.7 billion financial sector reform program has the backing of the World Bank, the International Monetary Fund, the African Development Bank and US Agency for International Development.

http://www.bicusa.org/en/Article.3455.aspx

Oops, didn't their govt. just collapse? Bad example of privatization I guess....

It looks like columbiacounty was #43 out of 62 on the obesity rankings of counties in New York State. Manhattan was 25. http://www.countyhealthrankings.org/new-york

Too dumb to manage their own money but smart enough to vote for people to manage everyone's money. Brilliant.

"People should not make their own decisions because tey are STUPID. Let's see:

25% of Americans think Obama was not born in the U.S.
10% believe in aliens
14% think Obama is the Anti Christ
33% think the govt. carried out the 9/11 attacks

These are ACTUAL poll numbers.

How can people make their own retirement decisions when just a few years ago they were buying houses they COULD NOT AFFORD?"

Absolutely TRUE, every word of it.

As for voting, I think there should be an IQ test. That would neatly eliminate the Republican party and Rand Paul.

"No need to fix it. Just get rid of it." Bob420, who apparently thinks he will never get old, can stay home on election day.

Regulating and enforcing rules is a proper function of government. Controlling business and people's investments should not be. You can argue the proper level of regulation, and it should be as minimal as possible to ensure against fraud and abuse.

Socialist must think that Chileans are all geniuses.

The system can be set up with a limited set of investment options that must all meet safety and risk standards.

Socialist now seems to be advocating dictatorship over democracy as a form of government. I guess it would be easier for him to get his handouts that way.

Well, LIC, I have some personal experience with a personal account as administered to state employees as a social security substitute.

They offered "your choice" of four pitiful funds (average return 1-3%), you choose one, and a portion of your salary is sucked out of your paycheck. All of the choices were administered by a division of AIG. Socialist is right, the fees were high, after 5 years the annual return was less than 2% annually. But lucky us, it wasn't administered by the big, bad government. It is "portable", personal, and can follow us anywhere. Oh, joy!

I have been trying to get my pitiful money, only a couple of thousand, out of that fund and transferred to my personal account for 2 years now. I have filled out paperwork three times. I have gotten numerous form letters saying my paperwork is incorrect, and my funds are on hold (no longer drawing that glorious 2%). I have spoken to numerous reps, from both financial companies, and they just can't figure out what the issue is. This is IF I can get the AIG guy to return a call. The employer rep says they haven't had much luck transferring these funds in the past.

So, before you jump into endorsing these, realize that several state governments have put these into place and they suck. The draw for the employer is that THERE IS NO EMPLOYER MATCH. Well, guess what? There is no employee return either.

Sounds great, LIC.

I would rather invest my own account than let the government do it. I would get better returns. I would be happy to sign a release and be on my own than letting uncle sam invest on my behalf. I would choose privatization over public 24/7/365.

No. I know I will get old but I am saving for my retirement. Everyone is too dumb to make any decisions. Let's make all decisions for them. Wasn't someone talking about dictators having no good ideas? If these people are too dumb to actively save and manage their own money, wouldn't they be too dumb to manage the money given to them? I see where you are going with this... Government tells everyone they are dumb, taxes the crap out of the country, redistributes the money to everyone and sets up a system to monitor their spending. It actually sounds like a great system if you are in fact dumb.

@BOB The government has done all it can do to help people save for retirement. It's made the contributions tax deductible. If you are smart, you would set up a SEP-IRA and save up to $40K per year. The choice is already there and many people are doing it. But here's the stats; the average 60 year old dork (making $40-60K) has less than $100,000 in their retirement account. I guess they're going to live, what, 2 or 3 years?

Read through this: http://www.usnews.com/usnews/biztech/articles/070810/10roth401k.age.htm

Before Social Security, old people went to live with one of the kids. Take the pitiful monthly SS stipend away from these people and guess what BOB?

Grandma is coming to live at YOUR house.

needsadvice, what you described is not what is being proposed.

I hope you have an extra bedroom in your LIC apt. LICC because mom and dad are coming to live with you after you transition to a private Social Security system that has measley returns. Yeah, that should be fun.

> No need to fix it. Just get rid of it.

second that! i'll join the labor market once the big ponzi is fixed on behalf of the young and the burden of health care cost are put somewhere else (like tax on consumption or inheritances). bring it on!

The good news about Social Security privatization is that our favorite Hooters waitresses will still be in their jobs when they're 93.

> Before Social Security, old people went to live with one of the kids

and they cooked, cleaned, helped taking care of kids. not a bad arrangement imho.

LICC, polls show that Chileans do NOT like the plan nearly as much now as they did back then - and over a third of retired or elderly Chileans have acccounts so small that they STILL rely on the government for more than half their income.

....and Frankly it IS because most people, even most well-educated people, do not know enough about investing.

> over a third of retired or elderly Chileans have acccounts so small that they STILL rely on the government for more than half their income.

sure, more than 1/3 of old baby boomers managed not to save anything. given that i've met savers at all income levels (including the poorest latin immigrants and graduate students) i'd say there has to be bad consequences for not saving. socializing the risk of not saving at all during a lifetime is not necessarily a desirable feature. what's the point of being responsible and make the effort of accumulating precautionary savings if at hte end of the day it ends up being hte same (gov steps in)?

> most people, even most well-educated people, do not know enough about investing

and in USA (this is not the case in Chile) it's also because people confuse discretionary and non-discretionary. they see credit as a way to "maintain their lifestyle" that obviously has to be adjusted downwards if the income is just not there. we could call this the "stickiness of lifestyles".

"...and Frankly it IS because most people, even most well-educated people, do not know enough about investing."

It is also because Wall Street is so damn predatory that unless you're among the savviest of investors, the deck is ALWAYS pretty much stacked against you.

Matt, stop being clueless. You really think that people who have invested long-term in mutual funds have had the deck "stacked against" them?

The system can be set up so that only the least riskiest private investment vehicles are available. Over time, even modest gains in these vehicles will far outperform whatever people would get in social security payments.

"The system can be set up so that only the least riskiest private investment vehicles are available."

So your basically admitting that your free market idea of private accounts will only work with govt. intervention?

liccomment -- what are you implying? that individual's contributions will be less than what they get back?

I doubt it, when adjusted for inflation. It certainly is the case for those collecting now -- but the system is not growing to self-sustain. It really is problematic. I have been contributing for 20 years and I doubt there will be anything left for me on the back end. Anybody who started working after 1990 cannot possibly expect the government to bail them out. We have been warned again and again -- our aging population will drain young workers for generations to come.

The risk of private accounts is that the rates of return or the elected contributions might not be sufficient. The risk of the gov't option is that the country realizes the system is insolvent, reduces benefits, or increases the retirement age.

Pick your poison.

Social Security can be fixed simply by raising the cap on the payroll tax. There is no crisis, except the pretend one being spread by those who want to privatize Social Security.

Social Security can be fixed simply by raising the retirement age. There is no crisis, except the pretend one being spread by those who won't rationalize benefits.

Silly Socialist, they don't REALLY want to privatize Social Security. What they REALLY want to do, and what they've REALLY wanted to do since the 1930s, is eliminate it altogether. Privatization is merely a tactic, and "personal accounts" a mere costume.

Self-reliant personal-responsibility up-by-your-bootstraps retirement funding has been implemented perfectly in Liberteria and many other third world countries (no worries for wealthy warlords whatsoever), so it's quite logically time to implement it here.

Is this a Democrat or Republican question?: http://streeteasy.com/nyc/talk/discussion/26026-the-difference-between-democrats-republicans

Raising the age to 70 and indexing it for life expectancy for those born after 2011 would put it in surplus. If you ALSO eliminated the income cap, it would wildly be in surplus.

If you eliminate the income cap, then it is a tax plain and simple.

What if they merely eliminated the income cap for the FICA tax ... http://en.wikipedia.org/wiki/FICA ?

Socialist's answer to everything- take more and more of other people's money and hand it out to him and those he wants to give it to.

LICcomm, aren't you in favor of flat taxes? FICA should be made a simple flat tax, extending its welcoming arms out to people of all incomes, races and denominations, even the criminal classes. Problem solved, LICcomm.

First alan, you are saying that FICA should be a tax. Right now it isn't, or is it?

Socialist isn't really all he's cracked up to be. He talks about socialism in the U.S., then throws that socialism should be in Europe. But ask him if he thinks we should be opening up our borders and extend socialism to the south.

WHy do you want to raise the retirmenet ago so much Riversider? Most people are NOT living longer. The big gains in average lifespan are heavily biased towards upper income people. Minorities and poor people have barely seen their life expectancy increase. And with obestiy skyrocketing, average lifespan has actually started to DECLINE.

I think the Republicans in Congres should hae a vote to rasie the social security retirmenet age to 70 right before the 2012 election. Let's see how they fare in that election. I would be shocked if the Republican presidental nominee gets more than 10% of the vote.

>And with obestiy skyrocketing, average lifespan has actually started to DECLINE.

This is also Republicans fault?

Of course, the correct answer is that FICA should not be a flat (regressive) tax, but rather an exuberantly progressive tax, extending beyond income at its apex to embrace wealth as well, and generously empowered to pierce trusts and tax shelters of every sort for every sot and every snot.

For more on the FICA tax, kindly please see http://en.wikipedia.org/wiki/FICA

Of course alan believes in begging for handouts by having the government take more of other people's money to give to him.

Not more, LICcomm ... more and more.

I don't see how people can say there is no problem with Social Security when the only answers to "fix" it are to raise tax rates or get rid of the cap. Of course a program will stay afloat if you continually pump more and more money into it. That is not a solution.

The point, bob420, is that there's absolutely nothing wrong with Social Security except that there's an artificial cap on revenue ... would you go for a law limiting all prescription drug prices to $2 per 30-day supply, and then say there's no problem with the pharmaceutical industry?

Why do you set up a question that simply takes the obvious solutions off the table ... thus identifying the problems and solutions in one fell swoop?

The problem is that there wasn't a problem with Social Security in the past with the cap on revenue. There is now. I am sure there will be a problem down the road even if the cap is lifted. What will the answer be then? Raise the rates.

Starve the beast.

alanhart: "there's absolutely nothing wrong with Social Security except that there's an artificial cap on revenue..."

That cap is also used to determine the maximum benefit that person can receive in the future. Raising that cap significantly faster than inflation will only result in larger payouts in the future. In other words, it solves nothing. The best solution IMO is to raise the retirement age slowly relative to life expectancy.

For the record, I am against privatizing social security. I think it is relatively perfect as is. It just need to be tweaked to account for higher life expectancy. Better to spend the energy working on fixing Medicare and Medicaid. Privatizing social security will not fix the problem; it will only benefit people who generally have a lot of money in the stock market now (the rich) since it will just artificially inflate the stock market and keep it inflated as more people select a riskier mix. In other words, yes, the retirees might have higher returns and nominal payments, but the rich will get richer even faster and the people who really depend on social security for the basic necessities will just end up getting killed by inflation.

Wow alan is clueless. Funding retirement is nothing like price caps on medical drugs. The concepts of individual responsibility and earning what you have don't compute in alan's mind.

LIC, what part of low interest rates are hurting retirees do you not get?

Retirees who did precisely what you're advocating are now taking it up the a$$ because their nest eggs aren't generating enough interest to keep up with inflation.

Sunday, points well taken, but that cap doesn't NEED to be used to determine the maximum benefit that person can receive in the future. Whatever amount is determined to be the national benefit max per person can continue; the FICA tax can lose its cap and apply to infinite incomes, and even an AMT-like formula if we fail to get rid of weasly tax shelters, and even a tax on wealth when its proportion doesn't jibe with manifest income (by which I mean, of course, salary/wage/gains/interest/dividends).

Really Matt?? Show me all these retiree who saved adequately all their lives and who now cannot afford to live.

I agree with Riversider that the Fed is currently following the wrong policy, and that one result of that bad policy is reduced interest income which adversely affects seniors on fixed income. But that is a different issue than a person who did not save enough during their working life.

LICcomm, the entire point to pensions, from their earliest inception, has always been that people (in the aggregate) tend not to save enough for retirement, and tend not to know just when they will die (let alone when they'll be unemployed or have huge emergency expenses or be in the wrong investment/savings vehicle at the wrong time). So you make the perfect argument for defined-benefit pensions, and for subsistence safety-net programs like SS. You are a communist, comrade.

Sign the petition.

"Whatever amount is determined to be the national benefit max per person can continue; the FICA tax can lose its cap and apply to infinite incomes."

Sorry Alan, but that's bullshit.

If you're going to tax my income into infinity, then there should be no limit on my payout after retirement.

alan, you can't make up your own facts. It has been argued that social security has caused people to save less privately:

"Research by Harvard economist Martin Feldstein, published in 1974 (and in a follow-up article in 1982 correcting a programming error in the original study), suggested that the pay-as-you-go method of financing Social Security had depressed private saving in 1971 by a whopping one-third. His argument was simple but compelling: to the extent people view the government's promises to provide retirement benefits as a substitute for their own retirement savings, they will tend to save less. Less private saving, when not offset by increased government saving, means less new capital and ultimately lower real incomes." (econlib.com)

I believe that government should be there temporarily to help the very small percentage of people who are unable to help themselves. You seem to think this includes the majority of the country.

"You seem to think this includes the majority of the country."

With the Wall Street deck stacked against all non-insiders, it IS the majority of the country.

LICcomm, you're a moron ... employer-provided pensions (rightly and appropriately) suppressed retirement savings. Duh.

"If you're going to tax my income into infinity, then there should be no limit on my payout after retirement." ... if you're going to tax MY income into infinity, there should be no limit on my payout in military spending to defend ME before or after retirement. Social Security, you see, is not a personal bank account, nor should it be.

alan, I should have known that you couldn't understand how to read. This whole thread has been about social security, not employer-provided pensions. Those have largely disappeared because they are not affordable. Governments can't afford defined benefit pensions either, but unions have manipulated the political process so it is harder to reform them.

"Those have largely disappeared because they are not affordable."

No. They have largely disappeared for the rank-and-file because the guys at the top are greedy.

Defined benefit pension plans are still very much alive and well for the executive ranks ... the very people who DON'T need them.

"Social Security, you see, is not a personal bank account, nor should it be."

Actually, it is.

It's a forced retirement plan.

No, LIC is right, they disappeared because they are not affordable.

Small and medium-sized companies without crook CEOs don't do them either. They are very, very expensive.

alanhart, I actually do look at Social Security as sort of a personal bank account.
I like the fact that:
- The government force every worker to put money in it.
- The withholding is a minimal amount to ensure the worker can afford basic necessities when they retire. That is where the cap on the amount withheld and the cap on benefit is important. This minimal amount provides for basic social stability and fairness so that the savers don't end up overly burdened in supporting those who chose not to save for retirement.

As for defense spending, it is paid with a separate tax than social security. There is no cap on that tax. The more you earn, the more you pay, no cap. The more you earn, the richer you are; the richer you are, the more you have to lose if the country's military fail to defend this country's interest. Most of the defense spending money is in fact paid for by the rich, as it should be. Most of the people complaining about defense spending probably do no pay a cent into it. I am not saying no defense spending cuts, but the savings from defense spending cuts does not necessarily have to be spent on something else.

But in fact it's a social insurance program, a safety net like life insurance, so it's perfectly logical that if you don't wind up needing to draw from it, you shouldn't. But if you do need to, you should be able to derive a decent eke-by existence from it without worry.

Similarly, it is in fact a tax, although an entirely separate one from the general income tax.

It's not an investment plan, so there's no reason to expect to extract returns on a proportional basis from the other shareholders or investors. It's a mutual insurance company, and yes, one that you're forced to join. Appropriately, because by the very nature of safety nets and insurance, even the most well-off should expect the unexpected. Look at Huntington Hartford's old age. Barbara Hutton if she had lived three more months. The third little pig's brick house when the expected unexpected earthquake hits.

Pensions, retirement savings programs, having 19 children to take care of you in your old age, etc. are something else altogether ... not a safety net program.

We can afford it.

"alan, you can't make up your own facts. It has been argued that social security has caused people to save less privately:"

I disagree. People did not save because of the housing bubble. Why save money when your house is appreciating 20% a year? Double digit home appreciation yields far better returns than saving money does.

I'm so glad my father has a govt. pension check he recieves every month. If he had a 401k instead of a pension, he would be living in a cardboard box now or on my couch.

If they forcibly convert his pension, he's more than welcome to stay on LICcomm's couch.

Socialist thinks people in the 1970s didn't save because of the housing bubble. And this is the best liberals can come up with.

> i'll join the labor market once the big ponzi is fixed on behalf of the young and the burden of health care cost are put somewhere else (like tax on consumption or inheritances). bring it on!

Really, right now you are out of the labor market? How nice for you.

Now this consumption tax, that's of course to impact the poor. You intended that, right? Tax the poor?

>the FICA tax can lose its cap and apply to infinite incomes, and even an AMT-like formula if we fail to get rid of weasly tax shelters, and even a tax on wealth when its proportion doesn't jibe with manifest income (by which I mean, of course, salary/wage/gains/interest/dividends).

John Edwards for President!