US Economy 2nd Qtr Growth: 3.3%/yr

[Master of Ossus]

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".

And, yet, the entire point of the modern Social Security system is to allow people to retire early and to allow all or nearly all of society to retire. By your logic, we should do away with the entire Social Security system, altogether (which, actually, doesn't strike me as being a terrible idea, but clearly worse than the Privatized Social Security system).

Moreover, having people save money in order to retire is actually a goal that society should promote, both because it encourages responsible lifestyle planning but also because we as a society do not save and invest enough to reach our long-term output maximizing point.

You have also, frequently, bemoaned the consumer culture that pervades Western society and have instead promoted some responsible spending program, but here you promote a society in which people continue working until they die. And what are they going to do with this additional productivity? Spend it? Save it for... never?

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.

Right, because that's the point of Social Security.

The fact of the matter is, that the two requests are the same when viewed from the perspective of a worker early in life: if the person continues working for longer, they will be able to retire and not eat food made by a dog-food company in his old age. He may also retire early and take his chances. It is only made into a profound moral issue by the worker's decision to retire early, which in turn is promoted heavily by Social Security.

In short, you are taking a problem with Social Security (e.g., it makes people highly dependent on the government) and claiming it as a moral strength of the system.

[Illuminatus Primus]

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.

Yeah but how is the fact your life was hard for you the same thing as producing and contributing? Do you think that the simple fact that janitors and prison guards might have long hours and hard work means they're contributing as much as you? You were costing money while you were in college. Give me a break.

[Darth Wong]

And, yet, the entire point of the modern Social Security system is to allow people to retire early and to allow all or nearly all of society to retire.

Wrong. The point of social security is to keep people from a life of misery once they retire. At the time these programs were first devised, people simply couldn't work past a certain age; they were generally too infirm, and the work too demanding. Just how many jobs in the mid-20th century do you think involved a guy sitting on his ass all day, moving nothing but a mouse and two fingers on his left hand? People were forced to retire, whether they would be able to live decently or not. The point was not to let people retire a decade or two before they lost the ability to work, but to keep them in a reasonably human standard of living after they had to retire.

Where the fuck did you hear that the root concept of SS was to help people retire a decade before they were too old to work? The retirement age used to be set at a point where people simply figured you were useless after that point.

[Sikon]

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.

For all your concern about some foolish or unlucky individuals hypothetically having less income in retirement under a partially privatized program, I am concerned more with a very realistic, worse scenario already frequently happening, which is someone dying before being able to retire, or dying so soon after retirement for it barely to count as benefit.

After all, mortality rates are a curve. A certain fraction of the population already dies even before age 67, let alone how much further the retirement age may end up being raised further beyond the past 65 -> 67 year change if there is dogmatic opposition to a partially privatized solution.



You worry about some percentage of people losing the money they had in private savings accounts. Even in that imaginary scenario, they would still get some money from welfare and food stamps if so poor as to qualify, while Medicare covers the elderly in general, plus their income from any non-privatized base portion of social security. (For example, food stamps provide ~ $100 / month for food, sufficient for inexpensive bulk food purchases from supermarkets, costing ~ $1.2 billion a year per million people on it, put in perspective by $5200 billion total government spending during 2008).

More importantly, that hypothetical scenario wouldn't happen almost ever anyway under an appropriately designed partially privatized program as subsequently described. The main exception consists of those with little work history who wouldn't get much money back from current social security either.

It is a rather high expectation for the whole population to accept a higher retirement age for the sake of making better off a few who would hypothetically mismanage or lose money under a partially privatized program. After all, you, me, and about everybody else reading this isn't willing to literally save a life for a fraction as much money and time equivalent, with a few thousand dollars capable of preventing some people from really starving to death in some parts of the third world. (Some would no doubt do so given a particularly convenient opportunity like being rich, but this is talking about demonstrated willingness as judged objectively from actual past actions).

Besides, work has been done before on the issue of how to make a fairly idiot-proof and nearly risk-free savings account system to nearly eliminate any unfortunate few losing money. Let's use the federal Thrift Savings Program as an example. Social security withholdings aren't put into such currently, dependent on extra money that the individual chooses to contribute. Yet there's a lot of experience with the TSP as millions of U.S. government employees and military personnel have some money in it.

If given an opportunity to do something foolish and risky with retirement savings like put all of it into the stock of a single company, ordinarily a significant portion of the population would do it. But the TSP rather gives them a choice of five diversified funds ranging from government securities to various stock indexes.

There's also a lifecycle family which adjusts the combination of the five funds used. The money is first primarily in high average annual return but high fluctuation funds. Then it is moved to extra stable albeit lower average annual return funds appropriately as retirement approaches.

Although the highest average annual return funds sometimes lose as much as 20% in a single poor year, over a longer term period there is quite reliable net gain, up to 8% or more on average per year, up to more than doubling per decade. Other funds are "lower-risk" with no significant loss in any year albeit lesser gain like 5% or 6% per year. As the lifecycle family program implies, generally the best way is to have savings initially in the former since temporary fluctuations are no problem for long-term savings building up over a period of decades, then switch to the latter during the final few years before retirement for maximum stability then.

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.

Let's look at some of the details of one partially privatized proposal (which happens to use TSP as a model):

— People 55 years of age and older — those born in 1949 or earlier — will not be affected by the plan.

— The program is voluntary for those born in 1950 or later. [...]

— The federal government's Thrift Savings Plan is the model for the accounts. TSP is the retirement savings plan for civilians who are employed by the U.S. government and members of the uniformed services. [...]

— Social Security trustees estimate that two-thirds of the workforce will [voluntarily choose to] participate. [...]

— Investors can choose from a number of accounts. The accounts will parallel those available under TSP. The five current TSP funds can be reviewed at www.TSP.gov

— Because the program will be much larger than the TSP plan, more than five funds are likely to be available, a senior administration official said. Even if more funds are available, however, they will be limited in number. [...]

In this fund, the proportion of the money invested in stocks shrinks as an individual nears retirement in order to lower investment risks. [...]

— Contributions will be phased in. Officials would like to permit individuals to put 4 percent of their payroll taxes into a personal retirement account. Annual contributions will be capped at $1,000 per year in 2009. The cap will gradually rise over time, growing by $100 per year after that. The contribution grows with growth of wages. [...]

— Workers will not be permitted to take loans against these accounts.

— Wage inflation is generally 3 percent. The average rate of return on TSP funds ranges from 4.32 percent to 10.99 percent, according to a 10-year average taken from TSP. [...]

— Upon retirement, restrictions will be placed on withdrawals. Individuals will not be able to withdraw any amount from the personal accounts combined with the traditional Social Security benefit that would put them below the poverty level.

From here

Observe, for example, individuals are not permitted to take loans against those accounts.

If something somewhat similar to that was implemented with withdrawal restrictions against an individual withdrawing the funds early themselves, plus restrictions against such being treated as individual assets subject to being claimed by court order ... nothing prohibits a partially privatized system from having assets no more subject to early withdrawal and depletion than current social security.

For almost any plan, there would be some withdrawal restrictions as a pragmatic necessity. Otherwise it would have little effect to put a portion of the 13% social security payroll taxes into the private savings account only to have most individuals promptly withdraw and spend such on immediate expenses. The average American voluntarily saves only a far smaller 1% to 2% of their income.

It means you would've spent around half your life not contributing.

Years more leisure and retirement time are such a huge gain that the economy would have to really crash and burn before it wasn't worthwhile to many people. Besides, the preceding benefit for the rate of savings and investment is rather significant for the economy. Some investment and some R&D occurs with or without a portion of social security money going into private savings accounts. But a portion of the 13% withholdings getting saved and invested is a huge amount when the average American only voluntarily saves 1% to 2% of their income.

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.

To a greater degree than happens now?

Usually there are certain favored groups, such as a lot of government money being spent on helping those choosing to get hundreds of thousands of dollars into mortgage debts, paid partially by the taxes of those living more frugally in $500/month apartments instead of $250000 houses. Like homeowners, seniors are another relatively favored group.

Actually, for example, Obama's website gives a good illustration. There's a $500 universal mortgage credit for homeowners, and "Barack Obama will eliminate all income taxation of seniors making less than $50,000 per year." The latter would mean an unprecedented huge shifting of the tax burden for millions of the public, and a younger individual making $19000 a year would literally pay more income taxes than the zero paid by a senior making $49000 a year.

Yet a partially privatized social security program would reduce the degree to which people were voting themselves money from the government, with more of their retirement income coming from their own past savings, even though the government was what kept the average person making those savings thanks to involuntary withholdings.

The retirees in a partially privatized social security program would be subsisting off a society running on the nuclear power plants their past investment dollars helped build, the factories, etc. Although not quite as blatant in the short-term as the overall historical rise over millennia from a few stone tools per person to modern comparative wealth, economics is not a zero-sum game when it comes to the effect of investment on growth even over a period of decades.

------------------------------------------

Part of the power of a partially privatized social security plan is making a nation of consumers spending themselves into debt actually have significant savings, since they have no choice about whether social security money is deducted from their paycheck. For the average under 2% of income personal savings rate, in some cases, it is because people are genuinely short on total income. But it is also the case that most people will usually not voluntarily save more than very small portion of income, due to the natural human tendency to increase expenses whenever income increases.

For example, some people survive on $20000 a year and others on $50000 aftertax income a year, but, not only is it rare to see the latter put $30000 a year into savings while being as efficient as the former for meeting living expenses, it is atypical to see them put even a tenth of that or $3000 a year into savings. More likely, the latter individual may spend $40000 on a car instead of $8000 used vehicle about just as functional for practical purposes, getting a loan for the former, and continues racking up debt until most of his additional income is going to various loan payments and he seems to have no money left over to put into savings.

I once heard an advertisement paid for by a well-meaning organization encouraging Americans to spend less and save more. While a nice gesture, one knows that it is not going to much change what is typical for the public.

Yet, using the involuntary income withholdings of social security, a partially privatized social security plan can increase the savings of the average spend-happy consumer in a way that just about nothing else would otherwise do so in the real world.

[Broomstick]

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.

For all your concern about some foolish or unlucky individuals hypothetically having less income in retirement under a partially privatized program, I am concerned more with a very realistic, worse scenario already frequently happening, which is someone dying before being able to retire, or dying so soon after retirement for it barely to count as benefit.

Why, exactly, is this an issue?

As MoO says - you do not have a right to retire. Society back in the 1930's decided that people who lived to a certain, arbitrary age could retire and collect, for lack of a better word, a sort of pension or annuity from the government. This is after paying into the system during their working lives (certain groups actually do NOT get SS ever - railroad workers have a separate retirement system, and the Amish are exempt from both paying into the system and from collecting from it). That age was set high enough that many people died prior to it, and few lived much beyond it. What has changed is life expectancy - more people live longer, and that's part of why the system is strained. If we raised the age to 70 or 75 then the result would be more like the system was originally.

Anyone wanting to retire before that age is free to do so - but can't collect SS until that designated age. So, under either system a person can retire at 50, but they are on their own until SS age. It's just that in a revised system they'll be on their own a greater length of time. They will have to plan accordingly.

Anyone disabled prior to retirement age should be covered by the appropriate part of SS, which kicks in regardless of age.

You worry about some percentage of people losing the money they had in private savings accounts. Even in that imaginary scenario, they would still get some money from welfare and food stamps if so poor as to qualify, while Medicare covers the elderly in general, plus their income from any non-privatized base portion of social security. (For example, food stamps provide ~ $100 / month for food, sufficient for inexpensive bulk food purchases from supermarkets

Holy hell! $100 a month? $25 a week? Have you tried to eat on that little?

I'd say not, if you think that is somehow adequate.

Oh, yes - a diet of potatoes, beans and white rice. There will be few fresh fruits or vegetables. You won't be able to afford much in the way of condiments either so it will be boring as fuck.

It will make NO allowances for medically needed special diets.

The reality is that most people on food stamps ALSO have to make use of food pantries and soup kitchens.

This is, of course, assuming the elderly person in question can physically manage "bulk purchases". I can lift a 25 or 50 pound sack of potatoes, my 76 year old mother can't.

The only people who think $25/week would result in an adequate diet are those who have never tried to live on it.

More importantly, that hypothetical scenario wouldn't happen almost ever anyway under an appropriately designed partially privatized program as subsequently described.

"almost ever" is not never, and under the privatized program those who fall in the "worst scenario" crack - and it WILL happen to some percentage of people - will have only 4/5's as much to live on as they would under the present system. In other words, those who are the worst off, the ones who need the most protection, would be even worse off than under the present system.

The main exception consists of those with little work history who wouldn't get much money back from current social security either.

You mean like stay-at-home housewives with no work history outside the home? If the main breadwinner dies they get survivor's benefits until they remarry or die. They aren't left in the cold.

It is a rather high expectation for the whole population to accept a higher retirement age for the sake of making better off a few who would hypothetically mismanage or lose money under a partially privatized program.

No, it makes sense to raise the retirement age to provide adequate funding for the program to continue for everyone. Or a higher retirement age, but larger benefits for everyone.

After all, you, me, and about everybody else reading this isn't willing to literally save a life for a fraction as much money and time equivalent, with a few thousand dollars capable of preventing some people from really starving to death in some parts of the third world.

Let's be honest here - I will save a member of my family before I save my life. I will save my neighbor before I worry about someone on the other side of the country. I will save my fellow countryman before I worry about someone on the other side of the planet. That doesn't mean I won't give to charities helping other folks, just that my priorities have a certain hierarchy.

If given an opportunity to do something foolish and risky with retirement savings like put all of it into the stock of a single company, ordinarily a significant portion of the population would do it. But the TSP rather gives them a choice of five diversified funds ranging from government securities to various stock indexes.

Uh-huh. Tell me, how are those "stock indexes" doing right now? If someone invested in them are they in a good position to retire or in a "sucks to be you" place?

Although the highest average annual return funds sometimes lose as much as 20% in a single poor year

And if that's the year you were planning to retire, just sucks to be you, right? Should have been born earlier or later.

At some point you no longer have time for "long term", you only have short term left.

It means you would've spent around half your life not contributing.

Years more leisure and retirement time are such a huge gain that the economy would have to really crash and burn before it wasn't worthwhile to many people.

Sure, lounging around would be worth it to most people but you aren't entitled to it. IF you want to retire early then YOU must fund it. Society only funds retirement past a certain age, and then only minimally. If you want more than the minimum YOU have to earn it, either while young or while working during "retirement".

SS is a floor you can't fall below That's why it's actually called social security insurance - it's insuring you aren't completely destitute in retirement.

Besides, the preceding benefit for the rate of savings and investment is rather significant for the economy. Some investment and some R&D occurs with or without a portion of social security money going into private savings accounts. But a portion of the 13% withholdings getting saved and invested is a huge amount when the average American only voluntarily saves 1% to 2% of their income.

Well, sure, that sounds good... until you have a month like the last one. If you invest money you also risk losing it.

Actually, for example, Obama's website gives a good illustration. There's a $500 universal mortgage credit for homeowners, and "Barack Obama will eliminate all income taxation of seniors making less than $50,000 per year." The latter would mean an unprecedented huge shifting of the tax burden for millions of the public, and a younger individual making $19000 a year would literally pay more income taxes than the zero paid by a senior making $49000 a year.

On the other hand, a geezer on SS probably has more fixed expenses than that 19 year old, who is presumably healthy and doesn't, for example, need to purchase multiple prescription drugs on his own; and the 19 year old can probably shovel the snow on his own walk whereas an 80 year old woman risks death by heart attack if she does so and thus must pay someone to clear her walk for her. Even with insurance coverage, my mother's medications cost $800 a month, that's $9,600 a year the 19 year old probably doesn't have to pay out of pocket. Yeah, that will take a bite out of your income. My mother requires a gluten-free diet - that also is more expensive than a minimum cost diet. She is prone to gout as well, which further adds to her dietary restrictions. No insurance covers the cost of food, even when a special diet is medically necessary, and again it's an additional cost to being old.

Not that I think that is an ideal position to take, or that 50k should be the cut off, but it can be expensive to be old.

The retirees in a partially privatized social security program would be subsisting off a society running on the nuclear power plants their past investment dollars helped build, the factories, etc.

Or maybe just funding the multi-million salaries and golden parachutes of financial "experts" who run formerly stable and respected businesses into the ground then walk away and ask the taxpayers for more money.

[aerius]

Let's say you're doing your retirement investments and you choose a nice big company, like, I don't know, AIG. They're the biggest one so they could never go under right? But what if the government decided to make an example of them like they did with Lehman's, and like Lehman's, they end up deader than a dodo? AIG had their bankruptcy papers ready to go last Wednesday if they weren't bailed out. If they went under, as they certainly would have if not for the bailout, you would get skullfucked in both eye sockets and assraped for good measure.

[Darth Wong]

You can boil down the pro-privatization arguments like this:

"If the people use it to invest their money wisely, then everyone will be much better off. Now I know that some people end up getting fucked on their investments, but they must have made some bad choices in life so it's their own fault, so I say fuck 'em".

A lot of conservative politics boils down to "they made bad choices, so fuck 'em", which has two major problems:

1) It's not always true. Some people don't make bad choices; they just have bad luck. The people who promote this mindset assume that such people are so rare that they can be ignored.

2) Even in cases where it's true, one must question why the world's wealthiest nation cannot help these people, especially when it is perfectly willing to fork over a trillion dollars for a pointless ideological exercise in the Middle East or $700 billion to bail out multi-millionaire Wall Street bankers.

[Sikon]

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.

For all your concern about some foolish or unlucky individuals hypothetically having less income in retirement under a partially privatized program, I am concerned more with a very realistic, worse scenario already frequently happening, which is someone dying before being able to retire, or dying so soon after retirement for it barely to count as benefit.

Why, exactly, is this an issue?

As MoO says - you do not have a right to retire. Society back in the 1930's decided that people who lived to a certain, arbitrary age could retire and collect, for lack of a better word, a sort of pension or annuity from the government. This is after paying into the system during their working lives (certain groups actually do NOT get SS ever - railroad workers have a separate retirement system, and the Amish are exempt from both paying into the system and from collecting from it). That age was set high enough that many people died prior to it, and few lived much beyond it. What has changed is life expectancy - more people live longer, and that's part of why the system is strained. If we raised the age to 70 or 75 then the result would be more like the system was originally.

Thank you for repeatedly illustrating a common tendency of opponents to partial privatization of social security:

You consider a substantial fraction of people dying without getting any retirement to not even be an issue, an aspect of your preferred system that ends up raising the retirement age, so far from 65 to 67 years while being headed towards 70 or beyond.

For any readers not so blinded by ideology as to be incapable of thinking straight, ask oneself this:

If a program takes cumulatively hundreds of thousands of dollars of your income over your working lifetime, would you prefer a program that in return gave you as many years as possible of retirement? Death is the worst fate, and dying without retirement is not the best return for investing all that money, to say the least.

Although the highest average annual return funds sometimes lose as much as 20% in a single poor year, over a longer term period there is quite reliable net gain, up to 8% or more on average per year, up to more than doubling per decade. Other funds are "lower-risk" with no significant loss in any year albeit lesser gain like 5% or 6% per year. As the lifecycle family program implies, generally the best way is to have savings initially in the former since temporary fluctuations are no problem for long-term savings building up over a period of decades, then switch to the latter during the final few years before retirement for maximum stability then.

And if that's the year you were planning to retire, just sucks to be you, right? Should have been born earlier or later.

At some point you no longer have time for "long term", you only have short term left.

You snipped mid-sentence when quoting me, so the rest has been restored in colored text in the nestled quotes above, to help readers judge your reading comprehension or your standard of accuracy in a debate.

As previously pointed out, under the lifecycle program of the TSP (Thrift Savings Plan) and under savings accounts modeled after it, the individual's savings are progressively shifted into the G and F funds as planned retirement age approaches. As a result, even if their retirement year was a bad year, those funds don't lose money then. The prior table illustrates. Meanwhile, benefit was gained in prior decades from the other, higher average return-rate funds.

If given an opportunity to do something foolish and risky with retirement savings like put all of it into the stock of a single company, ordinarily a significant portion of the population would do it. But the TSP rather gives them a choice of five diversified funds ranging from government securities to various stock indexes.

Uh-huh. Tell me, how are those "stock indexes" doing right now? If someone invested in them are they in a good position to retire or in a "sucks to be you" place?

They would be an excellent position to retire, being rich if a large portion of 13% of their income had been invested in such for many years during their working lifetime.

An illustration with historical data, based on the S&P 500, which corresponds to the C fund of the TSP plan:



Of course, one doesn't save for retirement simply by having $10000 as a lump sum deposited 50 years in advance, rather by having a fraction of that saved per year, decade after decade. Yet the preceding example shows how short-term fluctuations of up or down tens of percent in a single year matter less than the overall result over the decades. Besides, at the end, when about to retire, the lifecycle program would imply switching the money from the C fund to the ones which never lose money in any year.

You worry about some percentage of people losing the money they had in private savings accounts. Even in that imaginary scenario, they would still get some money from welfare and food stamps if so poor as to qualify, while Medicare covers the elderly in general, plus their income from any non-privatized base portion of social security. (For example, food stamps provide ~ $100 / month for food, sufficient for inexpensive bulk food purchases from supermarkets

Holy hell! $100 a month? $25 a week? Have you tried to eat on that little?

Although never on food stamps, I had an equivalent around $3/day food budget some years back once for a few months: mostly Maruchan ramen noodles plus some beans, meat, rice, bananas (20 cents per individual banana for the cost in a bunch), etc. One actually can add some variety and deserts like the high calorie to cost ratio of one cheap brand of potato chips costing $1.30 at Walmart for a 2000 calorie bag or some containers of sherbet, although obviously such are unhealthy if not taken in moderation. It's undesirable but acceptable in an emergency. However, of course, while the point here is that someone in such circumstances would not be starving to death or eating dog food, my post went on to illustrate how a program like the TSP gives reliable return on investment, preventing someone from being that impoverished anyway at the end of a working lifetime.

More importantly, that hypothetical scenario wouldn't happen almost ever anyway under an appropriately designed partially privatized program as subsequently described.

"almost ever" is not never, and under the privatized program those who fall in the "worst scenario" crack - and it WILL happen to some percentage of people - will have only 4/5's as much to live on as they would under the present system.

Under the TSP or a partially privatized social security program modeled after such, no matter which one of the five index funds a given individual chooses for most of their money, they all have reliable net gain.

For example, like the table in my prior post illustrates, putting $1 into the G fund in 1998 resulted in no loss in any single year but would result in having $1.65 by now. Putting $1 into the I fund in 1998 would have resulted in more fluctuation such as a 22% loss in 2001, but, over a longer period of time, the net result was $1 becoming $2.27, the first of multiple doublings about once per decade on average.

Never did $1 become less than $1 after a decade of investment in such a program.

Even if an individual is a fool at making financial decisions, every one of the five choices offered to them under TSP is a good "idiot-proof" investment program.

For example, they can't risk all that money on a single company's stocks since they aren't permitted the option.

The majority of the total millionaires in the U.S. today are elderly people who saved up a limited number of thousands of dollars per year over their lifetime and became rich primarily through the power of compound interest over the decades.

There is ordinarily no way to make the average spend-happy consumer save remotely like that, as opposed to the previously-mentioned American average of under 2% of income. However, social security takes 13% of everyone's pay, and reallocating some of those involuntary withholdings can make a nation of spenders become investors.

Instead of just the high-income and the prudent having savings benefiting from the power of compound interest over decades, even individuals ordinarily not having any savings today would end up with such. That's a more fair and better system than raising the retirement age further and letting people often die before even collecting any retirement.

It is the point of an ownership society, making not just the few but the many benefit from what long-term savings and investment can accomplish. While the average individual wouldn't become a millionaire (aside from inflation), the amount in their private savings accounts would gain a substantial fraction as much, allowing earlier retirement.

[Sikon]

Let's say you're doing your retirement investments and you choose a nice big company, like, I don't know, AIG. They're the biggest one so they could never go under right? But what if the government decided to make an example of them like they did with Lehman's, and like Lehman's, they end up deader than a dodo? AIG had their bankruptcy papers ready to go last Wednesday if they weren't bailed out. If they went under, as they certainly would have if not for the bailout, you would get skullfucked in both eye sockets and assraped for good measure.

You illustrate the lack of reading comprehension common to many. In my past post, it was repeatedly pointed out how a private savings account program such as the TSP model prevents fools from even having the choice of risking all the money in a single company.

The most narrow selection they can make is something like the C fund corresponding to the S&P 500, which has averaged 10+% annual returns overall in the 1928 to 2007 period even though there were tens of percent drops in some individual years (the Great Depression of 1929 among other years including 2001/2 later). It works for a long-term investment, combined with shifting money into the less volatile funds during the final few years before retirement.

[Sikon]

You can boil down the pro-privatization arguments like this:

"If the people use it to invest their money wisely, then everyone will be much better off. Now I know that some people end up getting fucked on their investments, but they must have made some bad choices in life so it's their own fault, so I say fuck 'em".

I bolded segments of my post to help readers judge for themselves whether you make accurate summaries of this topic or whether bias has clouded your usually better abilities.

[Broomstick]

Oh, I don't think it would be popular...just necessary.

For all your concern about some foolish or unlucky individuals hypothetically having less income in retirement under a partially privatized program, I am concerned more with a very realistic, worse scenario already frequently happening, which is someone dying before being able to retire, or dying so soon after retirement for it barely to count as benefit.

Why, exactly, is this an issue?

As MoO says - you do not have a right to retire. Society back in the 1930's decided that people who lived to a certain, arbitrary age could retire and collect, for lack of a better word, a sort of pension or annuity from the government. This is after paying into the system during their working lives (certain groups actually do NOT get SS ever - railroad workers have a separate retirement system, and the Amish are exempt from both paying into the system and from collecting from it). That age was set high enough that many people died prior to it, and few lived much beyond it. What has changed is life expectancy - more people live longer, and that's part of why the system is strained. If we raised the age to 70 or 75 then the result would be more like the system was originally.

Thank you for repeatedly illustrating a common tendency of opponents to partial privatization of social security:

You consider a substantial fraction of people dying without getting any retirement to not even be an issue, an aspect of your preferred system that ends up raising the retirement age, so far from 65 to 67 years while being headed towards 70 or beyond.

For any readers not so blinded by ideology as to be incapable of thinking straight, ask oneself this:

If a program takes cumulatively hundreds of thousands of dollars of your income over your working lifetime, would you prefer a program that in return gave you as many years as possible of retirement? Death is the worst fate, and dying without retirement is not the best return for investing all that money, to say the least.

But what about all the people who die before 65 NOW?

Or those who die before 60? Or 55?

I don't care WHAT age you set retirement at, a certain percentage of people are going to die before reaching it.

And if you die, your SS money doesn't simply evaporate - a substantial percentage of SS benefits are paid to widows and dependents.

"As many years as possible of retirement" might, when appropriately adjusted for life expectancy and cost, might mean fewer years for a more sustainable program.

[K. A. Pital]

Um... will Sikon's privatized system be more accessible to people than Social Security?

That's the key question. Number of people fucked due to raising of retirement age say 1 year could be less than the number of people fucked in Sikon's scheme.

[Broomstick]

You worry about some percentage of people losing the money they had in private savings accounts. Even in that imaginary scenario, they would still get some money from welfare and food stamps if so poor as to qualify, while Medicare covers the elderly in general, plus their income from any non-privatized base portion of social security. (For example, food stamps provide ~ $100 / month for food, sufficient for inexpensive bulk food purchases from supermarkets

Holy hell! $100 a month? $25 a week? Have you tried to eat on that little?

Although never on food stamps, I had an equivalent around $3/day food budget some years back once for a few months: mostly Maruchan ramen noodles plus some beans, meat, rice, bananas (20 cents per individual banana for the cost in a bunch), etc. One actually can add some variety and deserts like the high calorie to cost ratio of one cheap brand of potato chips costing $1.30 at Walmart for a 2000 calorie bag or some containers of sherbet, although obviously such are unhealthy if not taken in moderation. It's undesirable but acceptable in an emergency.

It's also unhealthy - where are the vegetables? Bananas alone are not adequate for the fruit and vegetable portion of a healthy diet, and potato chips no healthy means to get potatoes. It's not just a matter of calories. The diet you say you ate is deplorably unhealthy for the long term although obviously it will sustain life for the short term. It's deplorably deficient in calcium and vitamin A and E just for starters, and depending on how much/little of certain items could also be quite low in folic acid, iron, and vitamin C.

You food choices were, to be blunt, bordering on the stupid. You could have at least gone somewhere like Aldi and purchased a couple cans of mixed vegetables rather than those potato chips - $0.49 for a 12 ounce can last time I was there - drain the water off you have a half pound of mixed vegetables, for the price of your bag of chips you could have had a a pound and a half of vegetables with FAR less fat and, with the low-sodium cans, far less salt, too.

Then consider my mother, who can't eat ramen because she can't physically digest it and it can maker her very, very ill due to the wheat in it, and you're screwed. Sure, you can buy rice, but it will have to be white rice because brown costs so much, although white rice doesn't have the nutrition of brown. My mother can't eat wheat or rye bread. Quinoa is alternate grain, and can be made into things like noodles but it's MUCH more expensive than wheat based noodles.

While a healthy young adult can survive on starches and a little protein the elderly need better food than that. Many of them have trouble absorbing nutrients, and malnutrition is all too common among them. Digestive disorders like gluten and lactose intolerance increase with age. Starch-heavy diets aren't nearly as healthy for diabetics (another disease that increase with age) as one based on vegetables and fruit which are, sadly, more expensive than processed grains. Rice and beans alone is not an adequate diet for anyone and a few bananas won't make it complete.

At least in my state the authorities are enlightened enough to allow food stamps to be used to purchase vegetable seeds so the poor who are willing and able can grow some vegetables to eat!

It's disgusting that this country is willing to bail out Wall Street millionaires but won't provide adequate food stamp programs to allow people to eat a healthy diet! $100 a month - an amount established years ago - is NOT adequate, particularly with food prices skyrocketing as they have this past year.

[Admiral Valdemar]

Given the inflationary and deflationary pressures mounting on the global economy, I wouldn't want to come in with only the bare minimum in payments out of any pension scheme. The cost of living has exploded there last few months and will only accelerate in future. If you're just able to afford to eat today without developing rickets or scurvy, then how on Earth can you hope to survive the failure of the financial system unfolding now, on top of other factors that will lead to harsher times?

Not everyone has a garden or allotment, so much as I like the grow your own plan, I'd be shit out of luck with my patch of grass, just as most pensioners would be today.

[Broomstick]

Yes, I understand that - and many elderly don't have the physical strength to garden, either, which only further complicates the problem. My mentioning of gardening was that it was at least an option which would work for some, if not all.

[aerius]

The most narrow selection they can make is something like the C fund corresponding to the S&P 500, which has averaged 10+% annual returns overall in the 1928 to 2007 period even though there were tens of percent drops in some individual years (the Great Depression of 1929 among other years including 2001/2 later). It works for a long-term investment, combined with shifting money into the less volatile funds during the final few years before retirement.

Fine, let's give them an index fund. So instead of being wiped out, they only lose 20% in a single day. 500 trades and everything would've unwound and imploded, the Dow, S&P 500, and all the other major indices get a 20% haircut in one day. It almost happened, and would've happened if the Fed hadn't thrown in $100 billion in slosh. And when, not if we get a nice long recession or depression out of it, that fund ain't coming back for a good 10 years.

[Sikon]

Um... will Sikon's privatized system be more accessible to people than Social Security?

That's the key question. Number of people fucked due to raising of retirement age say 1 year could be less than the number of people fucked in Sikon's scheme.

That'd be more than 1 year, having been adjusted already 2 years (65->67) before more than a small fraction of coming demographic changes as the baby boomer generation ages.

Also, this isn't solely "Sikon's scheme" or something only suggested by me. Rather, a partially privatized system modeled after the TSP has been a real-world proposal like the news article of a prior post illustrates.

The federal Thrift Savings Plan is used without problem by several million people today. Each of the five fund choices allowed to individuals is diversified and secure enough that *all* of those limited choices have historically always given large net gain for long-term investment. There's not some additional bunch of unlucky individuals appearing.

The set of people benefiting from a suitable partially privatized system fully includes the set of people otherwise receiving the current program alone. The funds come from the same source, the current pay withholdings.

Like the article describes, it would be entirely voluntary. A minority would choose to continue with the current social security program alone,
while an initial two-thirds of the population is anticipated to see the benefit in joining.

It turns a nation of spend-happy consumers into having not just the current 1% to 2% of their income in savings but rather a large portion of the 13% withholdings becoming invested.

[Sikon]

Why, exactly, is this an issue?

As MoO says - you do not have a right to retire. Society back in the 1930's decided that people who lived to a certain, arbitrary age could retire and collect, for lack of a better word, a sort of pension or annuity from the government. This is after paying into the system during their working lives (certain groups actually do NOT get SS ever - railroad workers have a separate retirement system, and the Amish are exempt from both paying into the system and from collecting from it). That age was set high enough that many people died prior to it, and few lived much beyond it. What has changed is life expectancy - more people live longer, and that's part of why the system is strained. If we raised the age to 70 or 75 then the result would be more like the system was originally.

Thank you for repeatedly illustrating a common tendency of opponents to partial privatization of social security:

You consider a substantial fraction of people dying without getting any retirement to not even be an issue, an aspect of your preferred system that ends up raising the retirement age, so far from 65 to 67 years while being headed towards 70 or beyond.

For any readers not so blinded by ideology as to be incapable of thinking straight, ask oneself this:

If a program takes cumulatively hundreds of thousands of dollars of your income over your working lifetime, would you prefer a program that in return gave you as many years as possible of retirement? Death is the worst fate, and dying without retirement is not the best return for investing all that money, to say the least.

But what about all the people who die before 65 NOW?

Or those who die before 60? Or 55?

I don't care WHAT age you set retirement at, a certain percentage of people are going to die before reaching it.

About a quarter of the population dies by age 70, versus a substantially lesser portion by a time such as the early 60s. A goal of a responsible system is to minimize the number of unlucky individuals suffering, providing benefits for as close to everyone as practical, not missing tens of percent of the population.

Although never on food stamps, I had an equivalent around $3/day food budget some years back once for a few months: mostly Maruchan ramen noodles plus some beans, meat, rice, bananas (20 cents per individual banana for the cost in a bunch), etc. One actually can add some variety and deserts like the high calorie to cost ratio of one cheap brand of potato chips costing $1.30 at Walmart for a 2000 calorie bag or some containers of sherbet, although obviously such are unhealthy if not taken in moderation. It's undesirable but acceptable in an emergency. However, of course, while the point here is that someone in such circumstances would not be starving to death or eating dog food, my post went on to illustrate how a program like the TSP gives reliable return on investment, preventing someone from being that impoverished anyway at the end of a working lifetime.

It's also unhealthy - where are the vegetables? Bananas alone are not adequate for the fruit and vegetable portion of a healthy diet, and potato chips no healthy means to get potatoes. It's not just a matter of calories. The diet you say you ate is deplorably unhealthy for the long term although obviously it will sustain life for the short term. It's deplorably deficient in calcium and vitamin A and E just for starters, and depending on how much/little of certain items could also be quite low in folic acid, iron, and vitamin C. [...]

I didn't list every last item (which varied from day to day anyway) as this is a social security debate, not a comprehensive grocery list. I replied indirectly in passing to the starving to death and eating dog food references previously in this thread. However, this is a case where a multi-page tangential discussion of the food stamp program would distract, whether you really believe that minimal obtainable grocery budget is $200/month instead of $100/month or whatever. More to the point, it is noteworthy that you quoted all the paragraph except the final sentence, restored in the nestled quotes in colored text. The rest of the post pointed out that no more people would end up impoverished and on food stamps anyway under a TSP-like system than under the current system.

People would end up with *more* retirement income than now and/or retiring earlier.

[Sikon]

The most narrow selection they can make is something like the C fund corresponding to the S&P 500, which has averaged 10+% annual returns overall in the 1928 to 2007 period even though there were tens of percent drops in some individual years (the Great Depression of 1929 among other years including 2001/2 later). It works for a long-term investment, combined with shifting money into the less volatile funds during the final few years before retirement.

Fine, let's give them an index fund. So instead of being wiped out, they only lose 20% in a single day. 500 trades and everything would've unwound and imploded, the Dow, S&P 500, and all the other major indices get a 20% haircut in one day. It almost happened, and would've happened if the Fed hadn't thrown in $100 billion in slosh. And when, not if we get a nice long recession or depression out of it, that fund ain't coming back for a good 10 years.

My very graph in my prior post of real historical returns shows more than 20% drop during part of the 1957 to 2007 period in the illustration, yet the overall change is positive in each decade. At one point, the $10000 invested in 1957 in the S&P 500 index, after becoming $1.5 million over decades, suffers a terrible drop losing about a third of its value.

Yet the $945000 in 2002 is still worth more than the original $10000. And it goes back up again within a few years, climbing to $1.7 million in 2007 compared to the $73000 in year-2007 dollars originally invested. It'd have to suffer well above a 90% decrease and sustain such to have net loss in the overall long-term timeframe, something which has never historically happened.

Also, as previously described, under the lifecycle program of a TSP model, one's savings get shifted during the final few years before retirement from the stock indexes to the F fund (bond index) and G fund (government securities) to prevent volatility then, but one keeps the benefit of exponential growth over past decades.

Besides, if there was an economic doomsday, the government would presumably be cutting retirement benefits in that imaginary scenario anyway.

Speaking of risks, the current social security program is rather limited for retirement planning. I can't much count on benefits being available in a given year when the retirement age could be changed by then to 70 or 72 or who knows what, depending on unpredictable politics over coming decades. Not having all my eggs in one basket is preferable. Having some separate savings is desirable. Such would be larger if I had the option of voluntarily having a portion of the major 13% withholdings put into a regulated private savings account.

[K. A. Pital]

That'd be more than 1 year, having been adjusted already 2 years (65->67) before more than a small fraction of coming demographic changes as the baby boomer generation ages.

Sikon, please, spare me the details. I want to understand if there's a possibility to quantify the number of people dying in Broomstick's variant versus the people living without a retirement pension in yours.

Also, this isn't solely "Sikon's scheme" or something only suggested by me. Rather, a partially privatized system modeled after the TSP has been a real-world proposal like the news article of a prior post illustrates.

That wasn't even a part of my point. I'm sure such plans exist in the real world. That does not answer my question.

Like the article describes, it would be entirely voluntary. A minority would choose to continue with the current social security program alone, while an initial two-thirds of the population is anticipated to see the benefit in joining.

Ah, so you maintain the basic safety net for everyone? In that case, what is the issue?

[Darth Wong]

You can boil down the pro-privatization arguments like this:

"If the people use it to invest their money wisely, then everyone will be much better off. Now I know that some people end up getting fucked on their investments, but they must have made some bad choices in life so it's their own fault, so I say fuck 'em".

I bolded segments of my post to help readers judge for themselves whether you make accurate summaries of this topic or whether bias has clouded your usually better abilities.

Or maybe, just maybe, I don't buy your declaration that these investments would be as "idiot-proof" as you say.

Wall Street is not magic; just as MoO earlier ignored the macroeconomic effect of taking a billion man-years of productivity out of the economy, it seems to me that any projected earnings assume that if you pour all of this money into the market, there will be no negative consequences. However, that does not seem to be the case; when you have a lot of investment dollars chasing assets, you get a bubble. As money pours into the sector, they start inventing ways to spend it. And it would be even worse if the permissible asset list is narrowly restricted as you suggest.

PS. None of this is to say I'm a huge fan of the Social Security system (or the Canada Pension Plan where I live). It seems to me that it would be simpler to scrap the whole system and replace it with a welfare boost for elderly people, so that those who find themselves destitute in old age can collect a fatter welfare cheque than younger, able-bodied people who could theoretically find work, and hence live out the rest of their lives in some modicum of dignity. The taxes necessary to pay for this increased welfare largesse would partially replace the existing SS payments, but an entire bureaucracy would be eliminated. But "welfare" is a big no-no in many circles.

[aerius]

My very graph in my prior post of real historical returns shows more than 20% drop during part of the 1957 to 2007 period in the illustration, yet the overall change is positive in each decade. At one point, the $10000 invested in 1957 in the S&P 500 index, after becoming $1.5 million over decades, suffers a terrible drop losing about a third of its value.

Historical returns for an America which is very different from what it is now. The US no longer has a rich resource base and a lot of its manufacturing base is also gone. Barring some kind of wholesale policy shift such as building nuke plants by the hundreds or someone discovering the key to nuclear fusion, there isn't anything left in the US to support long term market gains.

A much more accurate historical situation would be Japan in the late 80's and 90's. Like the US at present, they're highly reliant on energy imports, and they'd gotten into a big bubble economy. The Nikkei index was well over 30,000 during this time, after the big kaboom it never saw those heights again. 20 years after the crash and the index is sitting around 12,000. It's still down over 60% after 20 fucking years. That's what the US has ahead of it unless its government shapes up and stops the bullshit that's going on right now.

[ray245]

You can boil down the pro-privatization arguments like this:

"If the people use it to invest their money wisely, then everyone will be much better off. Now I know that some people end up getting fucked on their investments, but they must have made some bad choices in life so it's their own fault, so I say fuck 'em".

I bolded segments of my post to help readers judge for themselves whether you make accurate summaries of this topic or whether bias has clouded your usually better abilities.

Or maybe, just maybe, I don't buy your declaration that these investments would be as "idiot-proof" as you say.

Wall Street is not magic; just as MoO earlier ignored the macroeconomic effect of taking a billion man-years of productivity out of the economy, it seems to me that any projected earnings assume that if you pour all of this money into the market, there will be no negative consequences. However, that does not seem to be the case; when you have a lot of investment dollars chasing assets, you get a bubble. As money pours into the sector, they start inventing ways to spend it. And it would be even worse if the permissible asset list is narrowly restricted as you suggest.

PS. None of this is to say I'm a huge fan of the Social Security system (or the Canada Pension Plan where I live). It seems to me that it would be simpler to scrap the whole system and replace it with a welfare boost for elderly people, so that those who find themselves destitute in old age can collect a fatter welfare cheque than younger, able-bodied people who could theoretically find work, and hence live out the rest of their lives in some modicum of dignity. The taxes necessary to pay for this increased welfare largesse would partially replace the existing SS payments, but an entire bureaucracy would be eliminated. But "welfare" is a big no-no in many circles.

Wong...that does not elimate the problem in an ageing society...when the society in general becomes something like Japan for instace, how are you going to find enough money for the eldery?

[Darth Wong]

Wong...that does not elimate the problem in an ageing society...

Moron ... there is no way to "eliminate" the problem of an aging society.

[aerius]

Wong...that does not elimate the problem in an ageing society...

Moron ... there is no way to "eliminate" the problem of an aging society.

Hey Mike, remember that Star Trek TNG episode where everyone on some alien planet who was over 60 years old would have to commit ritual suicide?