Posted on 02/03/2005 5:37:53 AM PST by paudio
In effect, the accounts would work more like a loan from the government, to be paid back upon retirement at an inflation-adjusted 3 percent interest rate — the interest the money would have earned if it had been invested in Treasury bonds, said Peter R. Orszag, a Social Security analyst at the Brookings Institution and a former Clinton White House economist.
.....
But critics of the Bush plan said the proposed "claw back" renders the whole idea of "personal retirement accounts" virtually meaningless. Indeed, the system would ultimately look something like a proposal made by President Bill Clinton, in which the government would have invested Social Security taxes in the stock market.
That idea was criticized by conservatives because the federal government could end up choosing winners and losers in the financial markets. But under the Bush system, the government is still choosing the stocks and bonds to be bought with Social Security money, said Jason Furman, a former Clinton administration economist. Individuals would get a limited choice, and the government would still keep most of the returns.
(Excerpt) Read more at msnbc.msn.com ...
I have a question, why isnt ALL of social security funds invested right now for everyone?
Because if it was then they couldn't put it in the general revenue account, spend it and put IOU's in the "Trust Fund".
Because that would require that this money cease to be dumped into the black hole that is the general fund, as it is now, and be placed into accounts that can be audited and tracked.
Let me get this straight. If I contribute 2k a year into this pension fund and after 40 years my account balloons to 300k I would not get to keep the 300K ? What kind of a plan is that ?? I hope I read the article incorrectly because this plan sounds more like a tax that I pay for 40 years and then when I retire I get maybe 20% of what I put in !!! And if that is the case politicians BE DAMNED !!! ALL OF EM
After reading, I still don't understand the whole thing.
BUT I DO UNDERSTAND THIS.....
If the Payroll Tax stays the same, and this plan "costs" the government money, then that's the same as a tax cut to the spending monster, and whether or not I get higher returns on that money, I'm for it!
what you are describing is todays social security plan.Under the proposed plan any monies you did not recoup before your death could be willed to your wife or kids.under the present system if you die before recieving any benifits all the social security tax money and intrest accured goes straight into the general fund and your estate gets NONE of it.But you are right you will not be able to withdraw a lump sum--this is to keep people from spending all their savings at once.
Well, legislation and sausage..... This is going to get more muddled before it gets better. And it's because the public has to be convinced to turn away from the "third rail".
REALITIES:
* Americans don't know how much the payroll tax steals from them
* Americans believe that a limit on increases is a cut
* Americans believe that paying more taxes equals getting more services or benefits
-----
Given that, any real plan has to be contorted to fit those constraints. And that means you're not gonna like it much, even if it's a step in the right direction.
Because there are no funds to invest - our government has spent it all and any revenues that come in are already slated to be paid out. It's hard to invest an IOU...
Corzime(sp) was on Fox this morning talking about this, and it was news to me too. But what he said was: that whatever amount you invest has to be paid back to SS upon retirement, you only get to keep the amount that is made off of the investment. What I wanted to scream at him was that it was our money to start with, it was a loan to them, not the other way around.
Everything is a gamble. You either gamble by placing your money with the government or you gamble by putting it into American businesses on Wall Street. The higher the returns, the greater the risk, that's the way the game is played.
Here's an idea save yourself for your retirement and eliminate the government.
"Under the proposed plan any monies you did not recoup before your death could be willed to your wife or kids.under the present system if you die before recieving any benifits all the social security tax money and intrest accured goes straight into the general fund and your estate gets NONE of it".
I understand the the current system is a scam. I like the fact that if I die I can pass the money to my future family. But it is just so depressing to know that with all of the money that I potentially can be placed into a private account that I would only be given any money that exceeded inflation-adjusted gains over 3 percent. SO the original amount that is placed in the fund goes to the government as well as interest on that money of 3%. I pretty much get leftovers of what I originally put in. I would be all for letting the government tax the money by 3% annually but let me keep the principal balance plus any interest above 3%. I am very thankful that I have an internship with a company that allows me to take part in their 401k plan and I try to invest 15% of my current income now. Lets say that the account balance accumalates to 200k and when it is time to collect the benefits you find out that the amount that is actaully yours to keep is 45K which you may use to purchase an annuity. It does not seem like much to get excited about.
Just going by what President Bush said in his speech last night, he advocates allowing each person to allocate up to 4% of their Social Security payroll taxes to a Personal Savings Account. The mutual funds and bond funds available in the PSAs will be governmentally approved. The accruals realized in the PSAs will be drawn down by the owners upon their retirement in a gradual manner, supplementing the main Social Security benefit that is collected over time. If there are any assets left upon the owner's death, the remainder may be willed to any survivors.
What is so complicated about this? This plan is similar to the manner in which money is raised and distributed all over the country every day in State Lotteries. After the State Lotteries amass a sum from ticket sales, the money is distributed over time to any winners, during which time the money remains in the bank accruing value from interest. By the time the payouts occur, the State has made enough in interest to cover its commitments. In Bush's plan, each person would, in effect, be financing his own lottery fund. The Social Security system would be making enough off of each person's contribution over the years to cover their benefits.
In theory, this approach is a whole lot better than the current pathetic Social Security system. And, anyways, he's only talking about putting aside a measly 4%! Yet, with the disastrous structure of our current Social Security system, this measly 4% will accrue a better benefit than is currently provided!
There's risk in that, too.
And you mean eliminate the government from the SS business and not eliminate the entire government, right?
What Bush is trying to do is emulate the USG Thrift Plan, which is available for all USG employees. In essence, you would be contributing 2% of your contribution and 2% of the employer's contribution to a private account owned by you. The money would be invested, as you so choose, in USG Treasury bonds, the stock markert (via several index funds administered by a third party, e.g., the USG Thrift fund is run by Wells Fargo), or a bank account.
The Dems say that SS is not in a crisis. This sounds like the difference between an immediate threat and a gathering one. The time to take action is now. SS, a pay as you go system, will start spending more than it is taking in by 2018-2020. To make up the shortfall, the USG will have to dip into general revenue by either borrowing more money or taking money from other discretionary programs including defense. Or benefits will have to be reduced. The SS Trust Funds is full of IOUs, which must be paid eventually by the USG. Medicare is in worse shape.
Approximately 80% of working Americans contribute more in FICA taxes than income taxes. 40% of the total USG tax revenue comes from SS and Medicare taxes, which are used as general revenue. There is no SS lock box, which means that Congress can change they system and benefits at any time. They did in 1983 when they changed the retirement age from 65 to 67. At least under the partial privatization plan, the USG won't be able to touch your personal accounts.
The Dems like to say that the SS system won't go broke until 2042, but they are basing that on the IOUs in the SS Trust Fund. The actual tipping point is when the annual SS revenues cannot meet the annual payouts, i.e, 2018 to 2020. When that happens, the money must come from elsewhere or benefits are reduced. We already pay 25% of the budget to service the national debt, which has been increasing every year, including during the period of Clinton's so called budget surplus. Those two years only slowed the rate of growth of the national debt. If you take away the excess revenue from SS (revenue minus payouts), there never was a surplus under Clinton. The Dems will demigog the issue and try to frighten seniors. Hopefully, Bush will make a major effort to educate the public. We can't wait until SS becomes a full-blown crisis. The sooner we do something, the less painful the solution.
Your right. although i'm in the old fed retirements system, i chose to also contribute 5% of my pay to the TSP. I've got a nest egg growing for my retirement and it is mine, not the governments. Bush is 100% right and as usual the democrats are 100% wrong.
The AFSCME pension plan has 40% invested in the Stock Market.
Also check out the Corpus Christi plan.
Right. LOL
since you would have paid as much in.=since you would NOT have paid as much in.
First post, hope it doens't indicate how the day goes.
Beats a poke in the eye with a sharp stick.
"In effect, the accounts would work more like a loan from the government,..."
No need to read further. Why would I have to borrow my own money?
I don't want the government determining into what stocks and bonds my money goes. I already have a state teacher's retirement plan that does just that and the return so far is not good. I get a much better return on my own investment portfolio that is handled by an investment firm. Prior to that, I did pretty well investing my money on my own. It all comes down choices. People need to be responsible for themselves. Maybe if Social Security was eliminated, people would learn to save, invest and secure their own retirement. There would no doubt be some problems with this plan for some years, but they would diminish over time.
I don't mean to sound crude but I really hope that we do not decide to go into Iran, Syria, North Korea or Sudan to liberate any more people at the cost of US tax payers. Government spending seems to be clearly out of control. On a side note my best friend works for the Dept of Homeland Defense. I mentioned that I would be interested to work for the government after I graduate. He told me that one of the executive assitants is a GS12 and basically what she does is reconcile credit card statements and order supplies for her boss . Job Security ! 74k a year ! Retirement benefits ! 3 Hours of work daily ! It is tempting..
" and that bureaucracy skims off a significant chunk, why am I better off? "
We may not really be better off. This sounds like another way to pay off the deficit as well as keep SS alive. Does not mean that we will be better off. Yes we will be able to give some money to our family if we pass but it may be possible that we will not recieve the same amount of benefits that retirees today recieve.
I don't think you have to worry about us "invading" another country, I think those will be taken care of without arms.
From the sound of that job, I'd sure be looking in to it, sounds great. Good luck
I just performed some simple research that will probably upset some Freepers. These calculations were made back to 1968 and assume an annual rate of return of 6.9% after taxes (conservative). These figures approximate what a 58 year old worker would have paid into Social Security over 36 years. Then, assume the worker has a heart attack and is totally physicaly disabled after 1-1-2004.
But here goes:
Savings start date: 1-01-68
Balance on start date: $ 1,000
Deposit amount: $ 150
Deposit frequency: monthly
Number of years: 36
Rate of return: 6.9 %
Total Value Paid Into Social Security Investment Account: $ 296,359.81
Compare
Total Monthly Disability Benefits in 2004: $ 1,450
Amount of Savings at todays interest rates (about 1.5%) to generate guaranteed monthy benefit: $ 1,000,000
How much would the average worker receive in disability benefits if he was diverting $ 1000 a year to an investment account? That question begs for an answer. The typical worker does much better with Social Security.
You decide what is better for you.
Actually, it's more akin to NOT MAKING A LOAN. Currently, we are loaning social security money to the federal government to fund the budget deficit, which we will never be able to repay. Not a good investment.
Of course, if we stop making those loans by requiring that the money be put in private accounts, then we'll have to find some other means of funding social security benefits, which may or may not take the form of federal borrowing. In the long run, we hope that social security taxes will cover it.
It's misleading to call that a defect in Bush's plan, though, because there is no alternative. The same thing will happen whether we privatize or not. The issue is not whether we are going to raise taxes or borrow more money to pay these benefits, or perhaps cut benefits. The issue is whether we are going to start now to put away more money to fund the social security deficit when the times comes, or whether we are going to wait until the last moment and tell the workers of America to cough up a couple trillion dollars because our politicians did not have the foresight to plan ahead.
"Maybe if Social Security was eliminated, people would learn to save, invest and secure their own retirement."
Interesting idea but could you imagine what the homeless population and crime rate would be if that were to happen. We would see alot more 70 year old bankrobbers than we currently do now. Naw government would not let that happen they would just come up with some other program and our taxes would probably skyrocket.
Corzine is a misleader, sent out on a mission to muddle the waters. IMO, there are at least two reasons the Dems are screaming bloody murder about revamping SS.
1. It's their plan - the crown jewel of FDR's domestic agenda. They shutter at the thought of a Republican resetting their stone.
2. If part of SS is held in personal accounts, they cannot dip into it to finance their pet programs. It would be like they were taking a pay cut.
I can count the Dems I trust on one hand. John Corzine is not one of them.
Actually someone who was a financial investment person gave the figures this way:
Someone age 30 who saves $100,000 over 35 years would have an approximate ....get this......$30,000 for their ss account when they retire. OUCH!
They need too come up with a better idea! OR invest yourself.
Sounds like this plan would result in a very minimal gain for young workers like me, at the expense of giving government a huge amount of control over the economy (deciding where to invest the money). If this is Bush's plan, I'm upset and against it.
"How much would the average worker receive in disability benefits if he was diverting $ 1000 a year to an investment account? That question begs for an answer. The typical worker does much better with Social Security."
Interesting, thanks for the post. I was very excited about what I thought the plan was proposing. After reading this article and speaking with some of the other students here on campus not one person is excited about this proposal. I do not speak for my entire age group but this does directly impact my generations future and it seems as though it will be very hard to drub up any excitement about this proposal. Guess I just have to live with government corruption and things really will never change (for the better)
This is from a WAshington Post article. I'll try to get it up if it isn't already up. "The administration official explained that the "benefit offset" merely ensures that those who choose personal accounts are not given an unfair advantage over the traditional system."
That statement says it all !
I am just waking up to the reality that More Money For ME will never be the case when it comes to dealing with the government. They lose any concerns you had when they get into office !!!
Also, your 1.5% rate is way too low for now. Are you still stuck in 2004? :-). Bankrate.com lists 2 year CDs at 3.12%.
Unfortunately, old Joe Kennedy salted the stock market with his crime money then ripped off the little guy.
We see again a big Dem Terry M ripping off the latest savings by the little guy.
So, how do you balance anything for the common person to invest and save.
The problem was/is the same: how do you keep the fat cats and the politicians from stealing from you.
If the politicians hadn't oinked our money away then SS would be okay. Now the battle is between the young and the old, while the big boys sit back an laugh (planning how to rip us off again).
One more question. If I am placing 4% in this private fund what happens to the other 6% that I would still have to pay?
Not only that, but there is persistant talk from Republicans in Congress that they will raise taxes to implement this program.
Under the Bush plan, the worker would still receive SS disabillity payments based on the approximately 10% paid into SS (5% each from the individual and employer). The remaining 4% invested in a private account would be added to the benefit package. At least, the worker would have the ability for wealth creation and passing the contributions on to his family. SS is a Ponzi scheme. Many of today's retirees are taking much more out of the system than they contributed. In the future, the opposite will be true as the numbers of workers supporting the system goes down and the cap on SS contributions goes up. Today, workers pay FICA on $90,000 and this anmount will increase annually. Increase contribution translate into increase retirement benefits, except there will only be two workers for every retiree.
Because socialism is bad.
If it's "owned by you", then you get it -- all of it -- when you start drawing upon it for retirement.
If the government gets to skim off a chunk of it, then it isn't "owned by you", and the administration is peddling a scam worthy of clinton.
They need to clarify this pronto (if the reports about the plan are inaccurate) or go back to the drawing board (if in fact they are proposing PINO accounts).
Anyone know where the actual proposal this article is based on can be found so we can tell if it's accurate?
The fallacy of your argument is that your calculations, insofar as I can follow them, are based on a deposit of $150/month in nominal (i.e. not adjusted for current value) dollars over the entire period.
A worker who could afford to deposit $150/month toward retirement in 1968 (the beginning of your 36-year period) is unlikely to have any financial worries unless he massively screwed up his career after such a gloriously successful start. (Admittedly, not increasing that $150 as his income rose would be a bit of a screwup in itself.)
WTF is wrong with this jackass? There's nothing unfair about the ant ending up with an advantage over the grasshopper.
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