Posted on 08/27/2002 3:21:15 PM PDT by BlackJack
Hmm, are you a robot or a computer program?
Actually, I would the put blame on government regulation and communist-soak-the-rich tax policy. Pump and Dump Billoniars, usually liberals, are a product of social engineering through taxation.
Whichever one will get me through my retirement.
Which can take open or disguised form.
So, how is the government making my retirement more secure?
Without government your money, retirement and investments become worthless pieces of paper. I know many people who experienced it a NUMBER of times. America is lucky to be a strong state and protected by the oceans so many things are taken here for granted.
I must have missed it when they repealed those tens of thousands of pages of regulations.
Sure, no government equals anarchy. So, I should be happy the government doesn't screw me even more? Can't we have good government and private investment for retirement?
Strong government is what made market economy and long term investment possible in the first place. Just review the history of the last thousand years and you will see. We are cutting the coupons out of cultural, social capital accumulated over the centuries. Think twice before you start to dismantle the layers of civilisation. Probably you will experience the defensive reaction from the system first and you utopian scheme will evaporate.
Yes. You got it.
Can't we have good government and private investment for retirement?
Nothing is perfect in this world and there are many tradeoff , subtle traps and unforseen consequences.
My ENTIRE point is made above this point. Everything that followed was an attempt to get you to recognize the INDISPUTABLE issues involved. You mis-interpreted my analysis by attributing my comment about the non TIPS bond to a TIPS bond.
In any event, if you are in the brokerage industry, either you or someone knowledgeable to whom you have access should confirm that since a TIPS has less risk that an identical non TIPS bond it will be priced to have a lower EXPECTED return. This is ABCs of investing.
Your comment that AFTER the FACT a TIPS could be higher or lower is IMMATERIAL.
SS puts 100% in treasuries. How do you figure putting 30% in stocks triples your return.
Fine, Social Security puts 100% in Treasuries and I'll get less than 2% return. Someone born in the 1970's will get a zero return and any one born later than 1980's will get a negative return.
My post (26) said :
By comparison, the real yield on a 30-year inflation-indexed Treasury Bond in todays Wall Street Journal was 2.729%.
So, even if I put 100% in TIPS I earn more than 36% more than I'd get from Social Security. (2.729% vs less than 2%)
Your post 33 said this :
The very purpose of the system (whether you agree with it or not) is to transfer funds, inter-generationally, from workers to retirees. It is not now, nor has it ever been intended to be a plan for current workers to provide for their own retirement.
I still think you're wrong as far as the original purpose of Social Security. The only way to achieve the purpose was to transfer from the next generation. Now I think we can self fund our retirements more efficiently.
My question about risk was to see if you understood risk/return. Most people don't. We both do.
We both know how TIPS work, fine. As far as risk reward goes, zero risk TIPS would be better, for someone my age or younger, than Social Security. We both know that stocks are much riskier than TIPS and would (over a long enough time frame) give a much higher real rate of return than TIPS. Maybe the ratio needed to triple Social Security is 60/40 or 50/50 instead of my original 70/30 comment. Maybe I exaggerated slightly.
I maintain that those who argue for private accounts fail to understand the purpose of social security (which I describe as a program to transfer income from youthful producers to formerly productive non-producers). You introduced the following quote from FDR, apparently, interpreting it to support your vision of the reason for social security (a program to assist people to provide for their own retirement):
The civilization of the past 100 years with it's startling industrial changes has tended more and more to make life insecure. Young people have come to wonder what would be their lot when they came to old age. ... We have tried to frame a law which will give some measure of protection to the average citizen and to his family against the loss of a job and against poverty stricken old age.
This quote, by itself, neither supports your view or mine on the purpose of SS. However, the actual operation of the system to date has NOT been to provide some rate of return to people's investment. NO EFFORT, WHATSOEVER, connects contributions to benefits. This, clearly, supports my view that SS is an intergenerational transfer. Therefore, the concept of privitizing makes no sense whatsoever.
Yes, the operation has not tied contributions to benefits. That's why it has structural problems and will collapse unless we raise taxes, cut benefits or import more workers to slow down the demographic shift which is occuring. When FDR signed the bill, the life expectancy was 65 years. Most people didn't collect, or else died soon after retiring.
You have to agree that the purpose was not just to transfer money between generations. If the retired generation was wealthy enough to provide for their own retirement what is the need for a transfer?
FDR's quote talked about protecting against a poverty stricken old age. Happened all the time in the 30's especially because of the Depression. I'm not saying we shouldn't protect people against poverty. Just that government does a crappy job of it.
Chile has a forced savings plan that protects people from poverty in old age without screwing the current workers. You have to agree that a self funded plan that could give retirees the same or higher benefits would be better for retirees and current workers.
Its just a question of what can we do, what would work to get us there.
Now you are on to something! If, for example, for every $5 of income, a potential recipient would lose $1 of benefit, that might completely eliminate the upcoming problems related to demographic shifts. Privatizing does not solve the problem and could potentially create a much worse problem. For example, one nightmare scenario involves going to a privatized system, creating an unsustainable stock market bubble making the recently burst NASDAQ bubble look like a walk in the park and creating a feast for a new breed of sharpies to feed the hype and feast on the spoils. When the inevitable burst occurs (1929 or worse) we will have a big problem.
Underlying your faith in privitization is your belief that the future average gains in the stock market will match past gains. You also fail to consider the uneveness of past gains (periods of windfall profits followed by periods of substandard/negative returns. Based on the luck of timing, even if the past returns hold up on average, privatization could lead to entire generations with windfall returns and others requiring welfare support to maintain subsistence. As another poster (A. Pole) pointed out to you back in #44, the ultimate viability would, therefore, still be the implicit government guarantee.
Underlying your faith in privitization is your belief that the future average gains in the stock market will match past gains. You also fail to consider the uneveness of past gains (periods of windfall profits followed by periods of substandard/negative returns. Based on the luck of timing, even if the past returns hold up on average, privatization could lead to entire generations with windfall returns and others requiring welfare support to maintain subsistence. As another poster (A. Pole) pointed out to you back in #44, the ultimate viability would, therefore, still be the implicit government guarantee.
I don't believe future gains will match past gains. That's why I recommended 70/30 in my earlier post. I do know that TIPS pay a higher return than Social Security and that stocks will too. Again, over a long enough time frame. I know there are scary fluctuations. Again, thats greatly reduced by a 70/30 or 60/40 split.
I'm more scared at what will happen in 30 years when the government raises taxes or sharply cuts benefits. That will make losses in the market lately look like small potatoes.
Here's my idea, the gov can keep all my employers contributions past and future, I invest my portion (7.65%) and the government doesn't owe me any benefits when I retire. That makes me happy. It should also help pay for current retirees. What do you think?
I think the bubble fear is what A. Pole was addressing. I have a suggestion for that. If all retirees start dumping their stock to get spending money, that could cause a problem. My idea is that if the gov stops double taxation of dividends then companies can give their profits to shareholders via dividends rather than capital gains. If dividends are large enough, there is no need to sell to fund your retirement. If retirees do sell, the lower prices would make current workers more likely to buy the stock to capture the higher return. What do you think?
Carolyn
Again, you fails to address the purpose of SS: to make inter-generational payments from producers to former producers. Since the ultimate purpose of the program is to assure a minimal subsistence to all those in old age, making the program needs-based addresses the issue. Your suggestions do not address this issue.
Some people like my father and mother benefited substantially from the system (If you compare their contributions to benefits). Greenspan "projects" (based on some set of assumptions of which I am unsure but you are accepting as gospel) that someone your age will receive a 2% return. These facts, first of all are immaterial to the purpose. But to give you an idea of Greenspan's ability to project anything, 20 months ago he projected the national debt would be paid off "under any credible scenario" within a decade. Nobody expects even a penny of that amount to be paid off today. I would bet $ to donuts Greenspan didn't believe his lie when he said it. He is a shameless POLITICIAN that has done injustice to every principle he has written eloquently about in the past. He will say whatever he needs to to make whatever political point he wants to make.
This is what I said, the purpose is to stop seniors from starving, the purpose is not to transfer between generations. The only way to do it originally was to make those transfers.
My point is that we can get to the point where we can provide without transferring between generations. If I can take only my 7.65% and invest it, I am comfortable that I will, when combined with my other savings, be able to survive with zero from Social Security. My need will be zero.
Now the government won't have the huge liabilty involved in paying me til I die. As current recipients die, and no new recipients are created, the unfunded liability and the need for huge transfers disappears. I know that people who have contributed more than the 18 yrs that I have should be able to still collect some portion of Social Security, but if they likewise invested their 7.65%, they wouldn't need the full Soc Sec benefits to survive.
In the end, everyone will have a fully funded pension of there own because as the liability of paying recipients drops, some more of the other 7.65% contribution can be shifted into that private account. With restrictions on risk of investments allowed we shouldn't have to worry about drops in the market causing these private accounts to drop to zero.
Just as I am not assuming future market returns will match historical returns, I am not assuming that I will receive a 2% return. I assume I will receive a zero or negative return. I already showed you how I can get 2.7% from TIPS. I know that is more than I'll ever get from Social Security.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.