Posted on 09/15/2011 9:47:10 AM PDT by shield
The current debate over Social Security reform is reminiscent of the discussions that occurred in Galveston County, Texas, in 1980, when county workers were offered a retirement alternative to Social Security: At the time they reacted with keen interest and some knee-jerk fear of the unknown. But after 24 years, folks here can say unequivocally that when Galveston County pulled out of the Social Security system in 1981, we were on the road to providing our workers with a better deal than Franklin Roosevelt's New Deal.
The Problem with Social Security. Social Security is a pay-as-you-go system under which taxes collected from today's workers are used to pay today's retirees. That was sustainable in the past; for example, in 1950 there were 16 workers providing benefits for each retiree. However, today the ratio has dropped to 3 workers for each retiree, and by the year 2030 the ratio will be 2 to 1.
America's demographic changes and the program's expansion have driven the initial Social Security tax rate from 2 percent (1 percent each from employer and employee) to 12.4 percent today, and threaten to drive it even higher. This unsustainable trend is why policy makers are looking for ways to reform the system.
One of the most prominent proposed reforms would allow younger workers to divert some of the payroll taxes they already pay to create personal retirement accounts. The burden on future taxpayers would decline as retirees draw retirement benefits from their personal accounts, reducing the demand for taxpayer-funded benefits. Current and near-retirees would be unaffected and would continue to receive currently scheduled benefits. But how should the new accounts be structured? Some point to Chile, Britain, Australia or one of almost 30 countries that have incorporated personal investments into their public pension programs.....
(Excerpt) Read more at ncpa.org ...
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Their system realized the gains for the 80’s and 90’s and those were above average. I’m not sure folks would be near as happy with account performance like the last 12 years. Be nice to have the option though.
Nov 4, 2010: CNN - Spitzer and Parker drill Perry on Social Security
More here:
How Three Texas Counties Created Personal Social Security Accounts and Prospered Across the country, state and local governments are facing huge unfunded liabilities for their employee pension plans. And then there’s Social Security.
But three neighboring Texas counties, which opted out of Social Security 30 years ago by creating personal retirement accounts, have avoided a fiscal train wreck while providing retirees with even more retirement income.
Galveston, Matagorda and Brazoria County employees, many of them union members, have seen their retirement savings grow every year, even during the Great Recession. If state and local governments—and Congress—are really looking for a path to long-term sustainable entitlement reform, they might start with what is referred to as the “Alternate Plan.”
[snip]
More importantly, if a worker participating in Social Security dies before retirement, he loses his contribution (though part of that money might go to surviving children, if any, or a spouse who didn’t work and therefore didn’t establish his or her own benefits). But a worker in the Alternate Plan owns his account, so the entire account belongs to the estate. There is also, among other benefits, a disability benefit that pays immediately upon injury, rather than waiting six months, plus other restrictions, as under Social Security.
And those who retire under the Galveston model do much better than Social Security. For example:
A lower-middle income worker making about $26,000 at retirement would get about $1,007 a month under Social Security, but $1,826 under the Alternate Plan, according to First Financial’s calculations.
A middle-income worker making $51,200 would get about $1,540 monthly from Social Security, but $3,600 from the banking model.
And a high-income worker who maxed out on his Social Security contribution every year would receive about $2,500 a month from Social Security vs. $5,000 to $6,000 a month from the Alternate Plan……………….[more at link]
The Galveston model covered only County of Galveston employees. Which means that out of the 300,000 people in the county, the program covered a fraction of 1 percent. That’s the solution?
What do they invest in - oil wells?
Yes, that’s the solution...
It was a test program that was limited to government workers and as soon as the Feds saw that it was going to become popular, it was withdrawn from further participation.
Had the entire country been allowed to voluntarily enter, we would not be in this bucket of crap.
So long as you spent your entire life working only in the County of Galveston.
The $10 per hour millionaire.
Do the math:
Fact – the stock market has returned an annual return of 8% since its inception. This includes the depression, world wars and Jimmy Carter.
If we allowed someone earning $10/hour to keep their Social Security deductions – 7.65 %, plus the employer match – after 26 years or working, investing it in an index fund yielding 7.5% annually, they would retire with an account of over $1,000,000. They could easily fund their own healthcare, and receive an income in excess of their annual income.
bump.
Still puzzled though - article says it’s based on earned interest. But on what - interest rates are low now. Maybe it is just wouldn’t work if started today. Thanks for link.
The contributions are pooled, like bank deposits, and top-rated financial institutions bid on the money. Those institutions guarantee an interest rate that won’t go below a base level, and could go higher if the market does well. Over the last decade, the accounts have earned between 3.75 percent and 5.75 percent every year, with an average of around 5 percent. The 1990s often saw even higher interest rates, 6.5 to 7 percent. Thus, when the market goes up, employees make more; and when the market goes down, employees still make something.
This should be repeated at every opportunity until it FINALLY sinks in!
GREAT post!
You know, I can see Wolf Blitzer now with his follow-up question to that 30-something who had made a good income but had decided not to buy health insurance. What if the same guy had decided not to participate in the retirement plan? What safety net would take care of him and his family during his disabling coma? If we can't let him die just because he didn't buy his own health insurance, can we force him to live on the street because he wasn't insightful enough to join the county retirement plan?
Are you in favor of individual liberty or not?
Along with freedom come responsibility! Like it or not, those two things are inextricably linked together!
FREE men understand that they will suffer the consequences of their on stupidity! I want to be a FREE man again!
Socialists at the county level would steal the money out of the account by “investing” in all degrees of failures and corruption.
Like the banksters making a deal with the devil Bill Clinton to make loans to people with no money in the name of race and hence crashing the real estate market, local democrats would come up with equally corrupt and evil plans for investment of these funds.
No money is safe with rinos and democrats around to steal it.
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