US Economy 2nd Qtr Growth: 3.3%/yr

[Broomstick]

For example, the average non-disabled worker who suffers a medical expense at age 40 receives nothing from social security now, and, in the potential case of a private savings plan not setup to allow withdrawal before retirement age, he would receive nothing under a partially privatized program either.

Nothing = nothing, an equal situation for typical pre-retirement medical care expense coverage by social security.

A difference from the preceding would occur *if* the partially privatized social security plan differed from current social security by allowing cashing in at any age, such as if someone wants to argue that the current social security program should be changed to permit it, in which case funds required are increased either way.

Go back and re-read MoO's posts - that's exactly what he's proposing, allowing people 20% of SS to privatize and even tap as they wish (or are ordered to do so).

In other words, he's proposing making 20% of current benefits subject to being depleted before the worker retires.

It is noteworthy but rather questionable how popular raising the retirement age is as an alternative to partially privatizing the system. For example, if it was raised to a higher figure like age 70 instead of 65-67 for normal retirement age, that becomes significantly closer to a person merely dying soon after starting to get benefits, when the average life expectancy is 78 years.

Oh, I don't think it would be popular...just necessary. And, as you point out, more people would died shortly after receiving benefits, and they used to do before life expectancy went up.

[J]

Back on topic, the media is beginning to grow a few braincells. Shocking, I know.

Yahoo Finance link

Real GDP? Maybe not, critics say
Monday September 8, 12:38 pm ET
By Ellen Simon, AP Business Writer
Picking apart government economic data: Critics say infighting, inadequate funding mar stats


NEW YORK (AP) -- It was a rare bit of stellar economic news. The Commerce Department revised Gross Domestic Product upward last month, saying the broad measure of the economy grew at an annual rate of 3.3 percent for the second quarter, up from an initial estimate of 1.9 percent.

One problem: A vocal group of analysts and economists isn't buying it.

"Quite frankly, we do not think the report passes the economic commonsense sniff test," wrote economists John Ryding and Conrad DeQuadros at RDQ Economics.

GDP measures the market value of everything produced by labor, plants and properties in the U.S. -- a total of $14.3 trillion for the second quarter. The government agency charged with calculating the first estimate of each quarter's GDP has less time to do so than a ten-branch bank has to file an earnings report.

GDP is a crucial variable in setting monetary policy, such as short-term interest rates, but critics say the effort to gather and calculate the data is underfunded, hobbled by government agency infighting and overly reliant on assumptions.

Criticisms of second-quarter GDP were more granular. Disbelievers say it was skewed by some of the conventions that make it consistent from one quarter to the next and strip out foreign inflation.

The first problem with calculating GDP is how unwieldy it is.

GDP is supposed to be a summary of the domestic economy. So a $30 copay to a West Virginia internist, a $3,000 rental payment for a Cleveland office and a $30 million shipment of U.S.-built backhoes from the Port of Los Angeles are all supposed to be baked in.

So are haircuts, tuition payments, employer's payments for benefits, each shopping spree by a British tourist in New York City and every penny spent domestically by the government -- whether an Indiana dog catcher fills up a town truck with diesel or the Navy orders a U.S.-made aircraft carrier.

The next problem with government data is where it comes from.

Consider incomes. Because of privacy concerns and interagency tussles, it is illegal for the Internal Revenue Service to share personal income data with the Bureau of Economic Analysis, which calculates GDP, until that data is three years old. That's one reason the BEA estimates personal income.

Data that are estimated on the first read of GDP include important components --trade and inventories, said Diane Swonk chief economist at Mesirow Financial. Big swings, such as last month's revision, come as more reliable data arrives.

Still, some of those "more reliable" numbers remain questionable.

"I've never been convinced they're very good at measuring inventories," said David Wyss, chief economist at Standard & Poor's. "My father was treasurer of a small company and I asked him how he filled out the inventory forms. He said, 'I don't know. I just toss them over to my secretary.' Gives you great faith in the data."

Now add funding issues to the brew.

Half the government's spending on economic data is dedicated to agriculture, a quarter to manufacturing, and only a quarter to the service sector, even though services make up 80 percent of the U.S. economy, Wyss said.

The government simply needs to spend more, Swonk said.

Skeptics have extra criticisms for the most recent quarterly read, saying long-held methods of calculating the figure made the second quarter look much better than it was.

To make GDP reflect ongoing business, one-time write-downs are excluded. That makes good sense, except when an industry that comprises a huge sector of the economy is wracked by losses from billion-dollar write-downs, as the financial sector has been.

In the second quarter, Wachovia Corp. lost $9.11 billion, Citigroup Inc. lost $2.5 billion and the nation's thrift banks, which loan most of their money to consumers, lost $5.4 billion. After stripping out those and other write-downs, however, the GDP calculation for the second quarter computed financial companies' profits grew 24.7 percent.

As David Rosenberg, Merrill Lynch's North American economist, put it, "Are you kidding me?"

Then, there's the inflation picture.

To calculate growth, the government tries to strip out the illusion of growth that comes with higher prices. Nominal GDP, which includes inflation, can look great; but strip out that inflation and the picture can change markedly.

"If there's a lot of inflation, nominal GDP will go up," said Peter Schiff, president of Euro Pacific Capital. "The nominal GDP of Zimbabwe is going through the roof, but the economy isn't growing, inflation is just going up."

To strip inflation out of the data, the government devises a "deflator" that subtracts inflation from nominal GDP.

In the second quarter, that deflator was 1.3, a figure that was half what it was in the first quarter and tied with a 10-year low. Starting with nominal GDP of 4.6 and subtracting that 1.3 deflator, we get real GDP of 3.3.

If the government had used the same deflator as it did for the first quarter, 2.6, GDP would have only been 2.0.

Schiff and others say the deflator made inflation look much weaker than it was and the economy look much stronger.

"The irony is a low inflation number gives us the growth," Ryding said.

They have a point. Consumer inflation for July was the fastest it had been in a generation, moving up at a rate of 5 percent for the previous 12 months.

Had the deflator been that large, we would have seen negative growth for the second quarter.

"Whenever people are talking about the economy, they're trying to square the anecdotal evidence with the numbers," Schiff said. "It's not that the people are wrong, it's the numbers. It's not that there's a disconnect between the people and the numbers, there's a disconnect between the numbers and reality."

Pretty much exactly what I've said from the beginning, if you believe these GDP numbers, I have a bridge in NYC I'd like to sell to you.

[Master of Ossus]

I'm not talking here about "reading brochures" - I'm talking about situations where you read the brochure, made investments, and your costs exceed the total worth of those investments.

What costs? I don't know what you're talking about.

I have long-term care and disability insurance through my job

So, if you lose that job you also lose that insurance. How secure is your job?

Wow. If you cut out the following words, where I pointed out that I had private expenditures that also went towards such insurance, then you make me seem vulnerable. I should really buy into the whol "social safety net" angle, now.

If, like my current situation, you are laid off what then? COBRA is only good for 18 months, after which you're on your own. What if you're out of work for two years? If something happens when you're between policies you are fucked, aren't you?

Touche. If I lost my job, lost all my money, lost my insurance, lost all my assets, required long-term nursing care, but was not disabled, then I'd really be up a creek. And if this happened before I was 65 (and I'm currently not), Social Security would not help me in the slightest.

However, let's look at a few unpleasant facts. The drug Gleevic is used ot treat certain types of leukemia. Out of pocket costs - that is, what the patient pays - can frequently run $1,000-2,000 a month, $12-24k per year. Out of pocket. For just the drug, not for doctor fees, tests or any other health care costs. If it puts the leukemia into remission that's good - but you have to continue the drug for life (or get a bone marrow transplant, which isn't cheap either and also cost major dollars). Tell me, could YOU afford, right now, to pay $12,000-24,000 per year over and above the cost of everything else in your life? For the rest of your life? AND have money to invest for retirement on top of that?

Yes. I could. I wouldn't like to, but I could do it. And the Social Security system that we have now would not help me at all at any of this for another 20 years--in fact, it would hurt me by forcing me to pay for it through my taxes. On the other hand, the PSS account WOULD help me cover this expense, but would more realistically help with one-time medical expenditures like the burn thing you mentioned below and which I am snipping.

[snip]Hospitals and doctors don't give you "a couple months" - payment is typically due within 30 days of getting the bill. They've gotten much more aggressive in recent years in sending people to collections or dragging them into court. A court-ordered garnishment of wages - which can and does occur - means those who hold your debt get first crack at your paycheck and will most likely leave you with barely enough to live on, much less to save/invest for retirement.

And, again, how does any of this show that the current Social Security structure is better than the privatized one? Under the privatized one, even if they garnish your wages they can't garnish your taxes which go directly into your account--nor can they garnish the matching funds provided by your employer since those aren't even your money until they go into your account. What would Social Security do in this case? Assuming you're not of the minimum collecting age (which I'm not, and it doesn't seem that you are), then the two of us get NOTHING while we have all of these expenses going on.

Because that's one of the most common scenarios where someone is left financially destitute because of circumstances beyond their control. Sure, your proposed system allows them to tap into 20% of social security, but then such a person at retirement only receives 80% of what they would now AND has additional medical expenses on top of that. How is this a gain? Remember, this has nothing to do with whether or not someone read a brochure but rather whether or not some misfortune occurs to them.

First of all, the PSS plan that I proposed has 80% of current Social Security funds going into a private account, so assuming that a proposal was passed that allowed access to this for medical expenses, then someone could tap into the account now to pay for immediate medical costs. That IS an advantage over someone going bankrupt for one-time costs like burn victims. It's not as much of a benefit for people who face ongoing expenses, but even then it could presumably help them until they're able to resume whatever work they're doing (e.g., get out of the hospital).

The privatized system is simply better for handling people with unexpected illnesses or other expenses. Social Security would pay neither the burn victim nor the leukemia patient ANYTHING until they're 65--assuming that they're middle-aged or younger, they cannot really use Social Security funds to pay for their one-time costs, so the liquidity constraint for such people becomes extremely onerous as they try to readjust their spending.

In either case, the privatized Social Security system is no worse than current system, since if they don't want to withdraw their funds they don't have to. But, depending on the plan, they might have that option if it makes sense to them.

[Master of Ossus]

Go back and re-read MoO's posts - that's exactly what he's proposing, allowing people 20% of SS to privatize and even tap as they wish (or are ordered to do so).

In other words, he's proposing making 20% of current benefits subject to being depleted before the worker retires.

The most radical privatized Social Security plan would allow up to 100% withdrawals before they retirement (e.g., you have 80% of the current SS money going to your private account and can withdraw all of that, with the remaining 20% going to pay for disability coverage), if a privatized SS plan is adopted that allows for early withdrawals for things like medical expenses. That aspect of the plan is not necessary to the privatized Social Security structure, though, which consists only of allowing for private accounts.

Oh, I don't think it would be popular...just necessary. And, as you point out, more people would died shortly after receiving benefits, and they used to do before life expectancy went up.

But unless you also reduce payments, you're realistically not saving that much money through your plan. Moreover, your plan destroys any semblance of being a "safety net" for people who really, really need it (unless you define the population of people who need it to be over 70, instead of the already under-inclusive categorization of people 65 and over).

My plan uses the existing funding, with greater potential growth because of the benefits of allowing individual investors, so even though the input is the same the potential output is much greater. Your argument that the current system is a great safety net is destroyed by the fact that it doesn't pay people who are under 65, regardless of financial need. The privatized plan, though, provides at least some sort of a safety net for anyone who's ever paid taxes, such that if they face one-time expenditures like medical bills that would otherwise destroy them, they at least have the option of tapping into their retirement fund early.

[Darth Wong]

Of course the "potential" reward is much greater. The risk is also much greater, particularly for people who don't know what they're doing, which is most people.

Why does it not bother you that the people most likely to need a safety net will probably waste it if you give them free rein over it?

[Master of Ossus]

Of course the "potential" reward is much greater. The risk is also much greater, particularly for people who don't know what they're doing, which is most people.

Why does it not bother you that the people most likely to need a safety net will probably waste it if you give them free rein over it?

Uh... because that's their choice? I do not find it good policy to assume that people are too irresponsible to handle their own financial affairs, unless they prove otherwise. Moreover, even radical privatized Social Security policies that I've seen have instituted some checks to prevent people from accessing the money in their accounts outside of very specific situations.

But also, I don't see that the risk is that great--it's certainly manageable for most people, particularly since earning market returns is very easy (in fact, it's hard NOT to earn market returns), and because the market doesn't have disasters that result in people losing a substantial fraction of their net worth very often, if ever.

[Darth Wong]

Of course the "potential" reward is much greater. The risk is also much greater, particularly for people who don't know what they're doing, which is most people.

Why does it not bother you that the people most likely to need a safety net will probably waste it if you give them free rein over it?

Uh... because that's their choice?

How does that change the fact that greater suffering will result?

I do not find it good policy to assume that people are too irresponsible to handle their own financial affairs, unless they prove otherwise.

People as a whole have proven otherwise. More than half of credit card users don't even pay their bills. A social policy which is willfully ignorant of actual conditions on the ground is nothing more than ideology.

Moreover, even radical privatized Social Security policies that I've seen have instituted some checks to prevent people from accessing the money in their accounts outside of very specific situations.

But none to prevent them from investing the entire quantity in something they don't even understand, which is what a huge number of them will do when they attempt to increase their returns. It's what a lot of bankers did too.

But also, I don't see that the risk is that great--it's certainly manageable for most people, particularly since earning market returns is very easy (in fact, it's hard NOT to earn market returns), and because the market doesn't have disasters that result in people losing a substantial fraction of their net worth very often, if ever.

Do you have any sources on what percentage of private investors beat inflation with their investments? And what makes you think that most of the people who currently don't invest at all would do so with any mentality other than a gambler's mentality?

[J]

With regards to mutual funds. 25 largest US mutual funds Note that all of them are anywhere from 15-20% down year to date. And from here, average performance of mutual funds in the past year is a loss of 9.44%. Also note that all the top performers are inverse index funds, in otherwords, funds which go up when the market goes kablooie. I suspect the loss would be well into the double digits if the inverse index funds were removed from the pool.

Sucks to be you if you planned on retiring this year or anytime in the near future, you've just had 10% of your savings wiped out, on average. Since you're likely an average Joe investor who plunked all his savings into a Vanguard, Fidelity or one of the other top 10 funds, you just had 15-20% of your retirement money go poof.

By the way, the fun's just started, we haven't even had our inevitable market crash yet. When, not if, when that takes place I wouldn't be surprised to see those funds lose half their value overnight. Think you can still recover from that?

[Master of Ossus]

How does that change the fact that greater suffering will result?

How is it a "fact" that greater suffering will result? Privatized Social Security means that we get more money for the same money we're putting in. Moreover, distributionally it's more fair because the people who screw it up will almost always have no one but themselves to blame.

People as a whole have proven otherwise. More than half of credit card users don't even pay their bills. A social policy which is willfully ignorant of actual conditions on the ground is nothing more than ideology.

Well, if they can't manage their own funds then why do they have a right to retire? Why should my ability to retire be compromised so completely because of them?

But none to prevent them from investing the entire quantity in something they don't even understand, which is what a huge number of them will do when they attempt to increase their returns. It's what a lot of bankers did too.

And, over time, investing in something that "they don't even understand" is dramatically better than what Social Security does.

Do you have any sources on what percentage of private investors beat inflation with their investments? And what makes you think that most of the people who currently don't invest at all would do so with any mentality other than a gambler's mentality?

I don't know what percentage of private investors beat inflation with their investments, but I do know that over a 50 year period a buy-and-hold strategy beats inflation even in a worst-case scenario.

Indeed, since 1975 (about when someone who's just retiring now would've started), the S&P 500 has generated returns of over 10.7%--well higher than inflation.

[Master of Ossus]

With regards to mutual funds. 25 largest US mutual funds Note that all of them are anywhere from 15-20% down year to date. And from here, average performance of mutual funds in the past year is a loss of 9.44%. Also note that all the top performers are inverse index funds, in otherwords, funds which go up when the market goes kablooie. I suspect the loss would be well into the double digits if the inverse index funds were removed from the pool.

Fascinating. You mean that market indices decline when the market does? And why do you think people buy inverse index funds?

Sucks to be you if you planned on retiring this year or anytime in the near future, you've just had 10% of your savings wiped out, on average. Since you're likely an average Joe investor who plunked all his savings into a Vanguard, Fidelity or one of the other top 10 funds, you just had 15-20% of your retirement money go poof.

Which is why the brochures tell people not to invest in stocks when they're very close to retirement.

Moreover, over the last five years, those same funds have returned over 6% annually (even counting the recent bad spell). 6% annually beats inflation.

Again, if someone doesn't bother to read the brochure, who do they have to blame? And why should I feel sorry for them?

By the way, the fun's just started, we haven't even had our inevitable market crash yet. When, not if, when that takes place I wouldn't be surprised to see those funds lose half their value overnight. Think you can still recover from that?

Yes. I still have plenty of time until retirement, and even historically bad markets have not wiped out 50% of the market's value (moreover, since I'm really investing for the cash flow, I really couldn't care less--when the market goes down I buy more because I'm trying to evaluate the cash flows of what I'm getting). But moreover, I'd like to see your explanation for describing a 50% overnight market crash as being "inevitable."

[J]

So in other words, you got yours and screw everyone else. They should've read their brochures and educated themselves or obtained the services of an competant investment advisor.

[Master of Ossus]

So in other words, you got yours and screw everyone else. They should've read their brochures and educated themselves or obtained the services of an competant investment advisor.

Right, because asking people to read a brochure or hire someone to read it for you is morally equivalent to telling people to work for years of their lives to make sure that people who are too lazy to take either step above and THEN get massively unlucky get to retire on something.

It's hardly "screw[ing] everyone else," given that the vast majority of people will benefit immensely from the higher returns afforded by privatized accounts. It allows a tiny fraction of people to screw themselves if they make serious investment errors, disregard all advice, and THEN get hugely unlucky.

[Darth Wong]

How is it a "fact" that greater suffering will result?

People are morons; I thought we had established this.

Well, if they can't manage their own funds then why do they have a right to retire? Why should my ability to retire be compromised so completely because of them?

Well frankly, most people (including you) should not be able to retire very early, at least not if we're looking at what's best for society in general. Very early retirement basically means that a huge portion of your life is spent idle, not contributing anything.

And, over time, investing in something that "they don't even understand" is dramatically better than what Social Security does.

Sure, if we accept your assumption that everyone will get 8% consistently. I don't see any reason to assume that.

I don't know what percentage of private investors beat inflation with their investments, but I do know that over a 50 year period a buy-and-hold strategy beats inflation even in a worst-case scenario.

Did you not notice the part where the person would be underwater for the first 32 years? As you say, it's a worst-case scenario. But you're the one claiming that everyone will make 8%; I see no justification for it.

Indeed, since 1975 (about when someone who's just retiring now would've started), the S&P 500 has generated returns of over 10.7%--well higher than inflation.

I guess all of those investment bankers should have just put their money in the S&P 500 instead of all those risky papers, right? The problem is that people won't do that, for various reasons.

[apocolypse]

Which is why the brochures tell people not to invest in stocks when they're very close to retirement.

You beat me to it. The job I work at doesn't put money into Social Security, but rather a 401A, with the option of investing additional money (on your own) into a 457. ICMA manages the accounts, and one of the first things they tell you is to make sure you don't go aggressive (i.e. start throwing all you money into stocks etc) the last ten years or so before you retire. That way, if the market gets completely fucked at the time, you won't be hit as hard.

[Master of Ossus]

People are morons; I thought we had established this.

But the fact that people are idiots does not mean that they will suffer, under this plan.

Only a tiny fraction of idiots will make the dumb decisions required to even become vulnerable, and not all of them will actually realize losses on their portfolios because they would then have to get unlucky to see poor returns.

Well frankly, most people (including you) should not be able to retire very early, at least not if we're looking at what's best for society in general. Very early retirement basically means that a huge portion of your life is spent idle, not contributing anything.

That's fair enough, but I'm realistically already working until I'm in my late 50's or early 60's, which seems reasonable to me. I don't feel as if I would be spending most of my life idly.

Sure, if we accept your assumption that everyone will get 8% consistently. I don't see any reason to assume that.

Social Security has, historically, returned 1-2%; the S&P 500 has returned between 6 and 10%.

Did you not notice the part where the person would be underwater for the first 32 years? As you say, it's a worst-case scenario. But you're the one claiming that everyone will make 8%; I see no justification for it.

Even in a worst-case scenario they're making money over the course of their working lives. Under more realistic historical projections, they're making 6-10%.

I guess all of those investment bankers should have just put their money in the S&P 500 instead of all those risky papers, right? The problem is that people won't do that, for various reasons.

The S&P 500 returns gains that are fairly predictable. Many investment bankers are looking for riskier but potentially more lucrative investment options. The fact is, though, that the S&P 500 remains a viable investment option for people who are planning for retirement, and can be reasonably used to benchmark what a privatized Social Security fund would be expected to generate.

[Broomstick]

Even in a worst-case scenario they're making money over the course of their working lives. Under more realistic historical projections, they're making 6-10%.

Past performance is no guarantee of future results - don't all those brochures and pieces of paper have that disclaimer on them?

If a major loss is early in life the working stiff can recover, but what if it's right before retirement? What if an accident leaves you maimed so you can never generate sufficient income above that needed for you most basic needs and nothing is left for investing?

Or are you someone immune to accidents?

Your problem MoO, is that you absolutely believe that if you take certain actions you will be magically protected from financial misfortune. And that's just not true. Yes, properly done investments do increase the chances you will live out your life in financial security but there is no guarantee. You can do all the right things in, say, your 20's, get in a disabling accident in your 30's that wipes out your reserves, leaves you maimed enough to diminish your income but NOT disabled enough to qualify for disability coverage... and you will never be able to afford to retire nevermind how prudent you were in making choices.

Or, let's say you retire and a year later you suffer a natural disaster or fire and lose every single material possession you own, leaving you standing in a shelter wrapped in nothing but a blanket. Sucks to be you, right? Do you really have the means to replace your abode? (Insurance does not cover all forms of damage, as some of my neighbors are discovering the hard way). Oh, and add some medical bills on top of that, because maybe you were burned in the fire, or hurt during the hurricane or flood or tornado or earthquake.

Unless your nestegg is some multiple of ten million you are not safe. Most people, even with prudent investing, will never be able to amass that level of wealth.

[Illuminatus Primus]

That's fair enough, but I'm realistically already working until I'm in my late 50's or early 60's, which seems reasonable to me. I don't feel as if I would be spending most of my life idly.

It means you would've spent around half your life not contributing. Life expectancy is in the 80s, and you didn't really contribute until probably well into your 20s, and you're talking about stopping in your 50's. Not to mention the deleterious effect this has on electoral politics, where huge swathes of the population will vote purely to secure their retirement age and idleness, supported by the working economy of others.

[Master of Ossus]

That's fair enough, but I'm realistically already working until I'm in my late 50's or early 60's, which seems reasonable to me. I don't feel as if I would be spending most of my life idly.

It means you would've spent around half your life not contributing. Life expectancy is in the 80s, and you didn't really contribute until probably well into your 20s, and you're talking about stopping in your 50's. Not to mention the deleterious effect this has on electoral politics, where huge swathes of the population will vote purely to secure their retirement age and idleness, supported by the working economy of others.

Are you and Mike seriously arguing that it hurts society if we were to implement a magical program that, at no cost, would allow (not force) everyone to retire 5 years earlier and maintain whatever lifestyle they would try to lead, otherwise? If not, then what is the point of your contention?

Moreover, I find your inability to find the irony in saying that "huge swathes of the population will vote purely to secure their retirement age and idleness, supported by the working economy of others" as a criticism of Privatized Social Security: you have precisely defined the existing system without, apparently, recognizing the fact that I've been criticizing it on precisely this ground throughout the thread.

[Master of Ossus]

Past performance is no guarantee of future results - don't all those brochures and pieces of paper have that disclaimer on them?

True, but it is nonetheless a reasonable indicator, and moreover good luck trying to plan for something without taking historical information into account.

If a major loss is early in life the working stiff can recover, but what if it's right before retirement? What if an accident leaves you maimed so you can never generate sufficient income above that needed for you most basic needs and nothing is left for investing?

Or are you someone immune to accidents?

To the extent that it is possible to protect oneself from accidents, I have that angled covered through insurance.

Moreover, if you suffer a major loss right before retirement then that is really unfortunate, but there are investment strategies that are designed to immunize people from risks such as that one.

Your problem MoO, is that you absolutely believe that if you take certain actions you will be magically protected from financial misfortune. And that's just not true. Yes, properly done investments do increase the chances you will live out your life in financial security but there is no guarantee. You can do all the right things in, say, your 20's, get in a disabling accident in your 30's that wipes out your reserves, leaves you maimed enough to diminish your income but NOT disabled enough to qualify for disability coverage... and you will never be able to afford to retire nevermind how prudent you were in making choices.

Discounting insurance. But go on.

Or, let's say you retire and a year later you suffer a natural disaster or fire and lose every single material possession you own, leaving you standing in a shelter wrapped in nothing but a blanket. Sucks to be you, right?

Discounting insurance. But go on.

Do you really have the means to replace your abode? (Insurance does not cover all forms of damage, as some of my neighbors are discovering the hard way). Oh, and add some medical bills on top of that, because maybe you were burned in the fire, or hurt during the hurricane or flood or tornado or earthquake.

The land that my house is on is worth enough for me to retire in some podunk village in Oregon, in that case, and still contribute substantially to my upkeep during that time. But, moreover, the likelihood of any of the events that you've been desperately trying to describe since the start of this thread makes it almost absurd to plan for them. Yes, if I lost my job, suffered serious injuries (but not enough to be disabled), my insurance evaporated, my entire family disowned me, and I had tremendous legal expenses litigating various matters, lost my assets, had my house burn down, lost all my money to a bank error, lost my financial assets to some belated Y2K bug, etc., then I'd be screwed: that's no excuse to argue against policies that will be extraordinarily helpful in the vast majority of cases, for the vast majority of people. Particularly given that privatized Social Security provides significant benefits for people who are seriously harmed by the current Social Security regime (something that you have consistently discounted).

Unless your nestegg is some multiple of ten million you are not safe. Most people, even with prudent investing, will never be able to amass that level of wealth.

And, therefore, we should take privatized Social Security off the table... why?

[J]

In light of the AIG fiasco (they had their bankruptcy papers ready to go, today, if the bailout didn't go through last night), I think the better question is "what happens when the company holding your retirement investments and insurance policies goes kablooie?" Hmmm...that's a bit of a problem isn't it?

If you're fortunate another company will pick up your investment & insurance plans during the bankruptcy liquidation and honour them, life goes on as usual with maybe some new fees and a different company's letterhead. Great, you're saved.

But maybe you're not so lucky, maybe the buyer at the liquidation sale decides to pick over the policies & plans, skim the cream off the top and toss the rest down the sewer. This happens all the time, in fact it's being done to Lehman's as I type this. If your policy isn't one of the chosen few, you're in a bit of trouble aren't you? That's gonna be a bit of a problem.

[Broomstick]

To the extent that it is possible to protect oneself from accidents, I have that angled covered through insurance.

Moreover, if you suffer a major loss right before retirement then that is really unfortunate, but there are investment strategies that are designed to immunize people from risks such as that one.

But you can not guarantee safety from such occurrences - you will always have some vulnerability to them, which is why a social safety net is a good idea for everyone/

Your problem MoO, is that you absolutely believe that if you take certain actions you will be magically protected from financial misfortune. And that's just not true. Yes, properly done investments do increase the chances you will live out your life in financial security but there is no guarantee. You can do all the right things in, say, your 20's, get in a disabling accident in your 30's that wipes out your reserves, leaves you maimed enough to diminish your income but NOT disabled enough to qualify for disability coverage... and you will never be able to afford to retire nevermind how prudent you were in making choices.

Discounting insurance. But go on.

Yes, I discount insurance. I do so because I have worked in the insurance industry and I know that it is far easier to exceed what you are covered for than most people realize.

Medical insurance as it stands in the US will not [pay the full costs of cancer treatment, burn treatment, organ transplant, or on-going serious chronic care for, say, a quadriplegic. Most homeowners policies won't cover flood damage - and millions of people are facing that problem right now from Texas all the way to the Wisconsin border.

The problem is that you can make all the "right" decisions and take the "correct" actions and still be left in the cold. You may continue to believe that your intelligence and savvy protect you but that is an illusion.

Or, let's say you retire and a year later you suffer a natural disaster or fire and lose every single material possession you own, leaving you standing in a shelter wrapped in nothing but a blanket. Sucks to be you, right?

Discounting insurance. But go on.

Again, it would be extraordinary if you had insurance that would truly cover such a catastrophe.

And insurance companies DO get into financial trouble - AIG being the most recent example but it certainly has happened to others. If your insurer goes bankrupt the policy holders are shit out of luck.

Do you really have the means to replace your abode? (Insurance does not cover all forms of damage, as some of my neighbors are discovering the hard way). Oh, and add some medical bills on top of that, because maybe you were burned in the fire, or hurt during the hurricane or flood or tornado or earthquake.

The land that my house is on is worth enough for me to retire in some podunk village in Oregon, in that case, and still contribute substantially to my upkeep during that time.

If your land is underwater it will not be sellable. If your land is contaminated by hazardous waste it will not be sellable and indeed YOU may held liable for the clean-up. Real estate is not a sure bet, either. Entire towns have been wiped out, such as Centralia, Pennsylvania. due to no fault of the people who subsequently lost their property.

But, moreover, the likelihood of any of the events that you've been desperately trying to describe since the start of this thread makes it almost absurd to plan for them.

And yet, they DO happen to people. And you are correct, the odds of them happening to a particular individual and their scope make it "absurd" to plan for them - because almost no one COULD "plan" for them in the sense you mean. THAT's why we need a social safety net, to cover such catastrophes that, while unlikely, are still very much a possibility.

Particularly given that privatized Social Security provides significant benefits for people who are seriously harmed by the current Social Security regime (something that you have consistently discounted).

Unless your nestegg is some multiple of ten million you are not safe. Most people, even with prudent investing, will never be able to amass that level of wealth.

And, therefore, we should take privatized Social Security off the table... why?

Because:

1) The average person has neither the education nor the inclination to make the sort of investment decisions required.

2) It would make the situation even worse for those unfortunates who suffer catastrophe because they would be left with diminished payments

3) Given the way the financial system is going down the shitter I can't fathom your arguments that private investment is inherently and always superior to government safety net program - if the big guys on Wall Street who are highly educated and do this for a living are drowning what hope is there for the amateur investor?

I would think that, given the current situation in the financial world, this is the WORST possible time to move to "privatized" social security.

But, you know, MoO, your argument has boiled down to constant repetition of "it's unlikely and it won't happen to me so fuck the unfortunate, I got mine". I'm tired of going round and round with someone totally incapable of empathy towards his fellow citizens who are less privileged than he is. Unless you can come up with something more novel than "it won't happen to me" I'm done arguing with you.

[Illuminatus Primus]

Are you and Mike seriously arguing that it hurts society if we were to implement a magical program that, at no cost, would allow (not force) everyone to retire 5 years earlier and maintain whatever lifestyle they would try to lead, otherwise? If not, then what is the point of your contention?

Moreover, I find your inability to find the irony in saying that "huge swathes of the population will vote purely to secure their retirement age and idleness, supported by the working economy of others" as a criticism of Privatized Social Security: you have precisely defined the existing system without, apparently, recognizing the fact that I've been criticizing it on precisely this ground throughout the thread.

You said you didn't think you'd not be contributing for most of your life. I clearly showed how you could very well end up spending 50+% of your life not contributing. I think that's called a majority.

[Darth Wong]

Are you and Mike seriously arguing that it hurts society if we were to implement a magical program that, at no cost, would allow (not force) everyone to retire 5 years earlier and maintain whatever lifestyle they would try to lead, otherwise?

Uhh ... because magical programs aren't real?

You stated earlier that if other peoples' old-age security impacts your ability to retire early, then the system should be changed so that you can retire earlier and people who make bad decisions can be fucked. You defended the morality of this choice by arguing that it's their own fault anyway, and that other people should not be able to impact your personal ability to retire early. You even argued that virtually all of society would be able to retire early under this scheme.

The point I made was that early retirement for all of society is not a realistic or even socially desirable goal. Think about this: let's suppose 100% of people actually retired 5 years earlier, thanks to your magical plan. Now let's say that the workforce is 200 million people. That's 1 billion man-years of productivity, removed from the economy. And yet, you figure that this will have "no cost". How the fuck does that work? Oh yeah, "magic".

Moreover, I find your inability to find the irony in saying that "huge swathes of the population will vote purely to secure their retirement age and idleness, supported by the working economy of others" as a criticism of Privatized Social Security: you have precisely defined the existing system without, apparently, recognizing the fact that I've been criticizing it on precisely this ground throughout the thread.

There is a profound moral difference between asking society to help you retire early and asking society to help you eat food in your old age that isn't made by a dog-food company.

[Master of Ossus]

You said you didn't think you'd not be contributing for most of your life. I clearly showed how you could very well end up spending 50+% of your life not contributing. I think that's called a majority.

I said I wouldn't be spending most of my life idly, which is true if you take into account the fact that I was pulling 70+ hour weeks through college and grad school to get where I am, today, not to mention all of my work (both school and otherwise) in HS and before that, and moreover because I intend to continue working, albeit in a reduced capacity, after I retire.

[Master of Ossus]

But you can not guarantee safety from such occurrences - you will always have some vulnerability to them, which is why a social safety net is a good idea for everyone/

Then why doesn't it cover everyone? If your objective is to provide some social safety net, then social security remains a piss-poor way to do it, because it leaves many people who are desperately needy without any protection and provides funds for people who have no legitimate need for the funds.

Yes, I discount insurance. I do so because I have worked in the insurance industry and I know that it is far easier to exceed what you are covered for than most people realize.

Medical insurance as it stands in the US will not [pay the full costs of cancer treatment, burn treatment, organ transplant, or on-going serious chronic care for, say, a quadriplegic. Most homeowners policies won't cover flood damage - and millions of people are facing that problem right now from Texas all the way to the Wisconsin border.

The problem is that you can make all the "right" decisions and take the "correct" actions and still be left in the cold. You may continue to believe that your intelligence and savvy protect you but that is an illusion.

Look, I acknowledge that I cannot provide 100% certainty that I will turn out okay, but realistically the odds of such occurrences happening are miniscule, and I don't deal with certainties: I deal with realistic scenarios.

If your land is underwater it will not be sellable. If your land is contaminated by hazardous waste it will not be sellable and indeed YOU may held liable for the clean-up. Real estate is not a sure bet, either. Entire towns have been wiped out, such as Centralia, Pennsylvania. due to no fault of the people who subsequently lost their property.

My main house is located on a frickin' hillside overlooking a small town. It is not in any way endangered by flooding. Your insistence that we account for farcically improbable scenarios as an effort to discredit a privatized social security program that would provide substantial benefits to many, many people in the vast majority of circumstances verges on dishonesty.

And yet, they DO happen to people. And you are correct, the odds of them happening to a particular individual and their scope make it "absurd" to plan for them - because almost no one COULD "plan" for them in the sense you mean. THAT's why we need a social safety net, to cover such catastrophes that, while unlikely, are still very much a possibility.

And you honestly think that Social Security makes for an acceptable safety net for handling these disasters? Come on. Show me the provision where social security funds are disbursed to people who have lost property because of such issues. Show me the provision that allows people who suffer serious injuries, but are less than 60, to receive funds from Social Security without being technically disabled.

Because:

1) The average person has neither the education nor the inclination to make the sort of investment decisions required.

2) It would make the situation even worse for those unfortunates who suffer catastrophe because they would be left with diminished payments

3) Given the way the financial system is going down the shitter I can't fathom your arguments that private investment is inherently and always superior to government safety net program - if the big guys on Wall Street who are highly educated and do this for a living are drowning what hope is there for the amateur investor?

I would think that, given the current situation in the financial world, this is the WORST possible time to move to "privatized" social security.

Actually, it's the BEST time to move into this system, since it provides benefits for taxpayers instead of a bail-out. Your entire argument is based on your own profound inability to understand financial markets, and the ease with which responsible investment decisions can be made.

But, you know, MoO, your argument has boiled down to constant repetition of "it's unlikely and it won't happen to me so fuck the unfortunate, I got mine". I'm tired of going round and round with someone totally incapable of empathy towards his fellow citizens who are less privileged than he is. Unless you can come up with something more novel than "it won't happen to me" I'm done arguing with you.

Your entire argument boils down to "Woe is... uh... someone... I met once. Yeah." This totally ignores the fact that privatized social security provides immense benefits for the average taxpayer. Your insistence on viewing Social Security as a safety net (despite the fact that it covers only a very small segment of the population and the fact that it is chronically inflexible) apparently do nothing to dissuade you from the belief that Social Security will always be there to protect you. Indeed, your response to these problems is to make Social Security MORE restrictive and LESS able to cover people who are affected by serious problems such as the ones that you claim to be disturbed by.