Bush Social Security Plan

[TarpleyG]

Is it just me or are the doom-and-gloomers really trying to run this thing off the rails?  I would like to discuss the pros and cons of this newly proposed program.  I for one like the idea of being in charge of my own money.  The naysayers are claiming that no one will get any more checks.  I thought this only affected people born after 1950 so my in-laws, for instance, keep getting the exact same benefits that they get now.  What's the problem?  Here is a blurb from the White House web site.  My comments in italics:

-Personal accounts would be entirely voluntary.  So if you are so nervous about it, the this is your out.
-The money would go into a conservative mix of bond and stock funds that would have the opportunity to earn a higher rate of return than anything the current system could provide.
-A young person who earns an average of $35,000 a year over his or her career would have nearly a quarter million dollars saved in his or her own account upon retirement.
-That savings would provide a nest egg to supplement that workers traditional Social Security check, or to pass on to his or her children.
Best of all, it would replace the empty promises of the current system with real assets of ownership.

Greg

[Cool Hand Luke 22:36]

Bush's Social Security plans include extending payments to Mexicans with little or no proof required that they have ever worked in the US.

Social Security is in bad shape, with reductions in benefits and an increase in the retirement age likely. And Bush proposes to send huge chunks of what's left south of the border.

"...but there's a lot of poor elderly folks in Mexico, and we can help with that.." Says Bush.

The man is  a boot licking toady to the Mexicans

[garyk/nm]

I haven't read all of the details, but it seems like a good idea to go individual accounts. I am having difficulty doing the savings thing (paycheck to paycheck, lack of discipline, choose one). I do hope that there is a provision that Congress can not, under any circumstances, under penalty of death or worse, touch that money! Otherwise, same old, same old.

[jefnvk]

I like the idea that I am in control of my own retirement.  That means, I should have the option of OPTING OUT of SS all together.  I also support that if you choose this path, the gov't won't bail you out if you are still working at 80 because you didn't plan ahead.

I have yet to enter the workforce (seriously, at least).  Keep the few hundred dollars that I sent you, and let me keep MY earnings from now on.  

Of course, I realize that this would never happen (unless the entire thing collapses), but it is nice to dream.  Private acounts would be the next best thing.

[client32]

I haven't looked into all the details, so I don't feel comfortable in stating an opinion.  

But I do have one question.
Are the "personalized accounts" still controlled?  Meaning, I only have a limited number of choices as what to do with money?  Or for those who like to slant to the negative -- Does the govt think I am too stupid to handle my own finances?

[Ben]

Meaning, I only have a limited number of choices as what to do with money?

Based on the last info I read, Bush wants to set it up to pretty much duplicate the Thrift Savings Plan (TSP) that the Senate and govt employees have the option of using.

As one of those said govt slugs, I can tell you that I take full advantage of that program, maxing out my TSP contributions. I think the choices are as good or better than most programs out there.

Think about it -- would the Senate ever vote themselves a program that wasn't a sweet deal for them?

Edited for crummy spelin

[Phantom Warrior]

The really frustrating thing is that if we do nothing SS is toast.  It is not as if SS is healthy and Bush is trying to destroy it.  SS is on it's last legs.  It is supposed to hit the red in 2019 or so and be completely tapped out by 2042.  That's before _I_ retire.

I think the only solution is to start a private account system where people are actually funding their own retirement by taking advantage of compound interest (what Einstein called "the most powerful force on Earth"), rather than simply redistributing money from young to old and hoping that the working force will still be big enough to continue the process when the young get old.  Social Security's obligations to current retired people will have to be met somehow, probably taxes.  But this system can't go on much longer.

[Monkeyleg]

The problem right now is that opponents of Bush's plan (or just plain opponents of Bush) and the media have succeeded in planting so much doubt in the public's mind about privatization that I don't think it's going to happen. If congress does anything, I suspect it will be to raise the FICA ceiling.

The very same people who've been campaigning on the problems of Social Security--Clinton, Gore, et al--are now denying a problem exists.

In all probability, I'll be dead by 2042, but my nieces and nephews won't be. And they're going to be screwed.

Opponents point to the $1.6 trillion cost for partial privatization, while not mentioning that the cost of doing nothing will be at the very least $3.7 trillion.

A privatization system works for government employees. It works for citizens of Galveston, TX.

But, for my nieces and nephews, it's a "risky scheme."

[The Rabbi]

One of the issues right now is what happens to the money people pay into Social Security.  Gore scaliwagged this issue by talking about a "trust fund" like the money was set aside somewhere.  Guess what.  It isnt.  The money paid into the fund is "invested" in US government bonds, i.e. turned over to the government in exchange for IOUs.  The government then spends that money.  This is an off-budget arrangement so it does not figure into the Federal deficit.
With the accounts proposed, the money would go towards ownership in stocks primarily.  Stock represents ownership in a company, which has assets and usually earns money.  Would you rather put your retirement into government promises or into the US economy, the strongest most resilient economy in the world?  Choice seems easy to me.

[stevelyn]

Socialist inSecurity is a sinking ship and it's time to man the lifeboats.
I'm would like to pull my "contributions" out and invest them myself.

[S_O_Laban]

I would love to have the money I have stolen for SS to invest in my TSP savings program.  We can only hope.....

[Myself]

I decided long ago that by the time I hit 65 there would be almost nothing left.  I started planning accordingly 20 years ago.  If you don't do the same you are being foolish.

If you follow this path it dosn't matter what the Gov. does.  You can control your own destiny.

Save now, times a wasteing.

[Waitone]

So far Bush has proposed nothing concrete, only concepts.  I'll wait until I see something definitive before I sign on.  I agree with the principal of private accounts but what the gov't says and what it does is determinative.

Regarding the principal of private SS, I am concerned with the transfer costs.  Yes, they are high, but while Bush is pushing the SS angle, we are sitting on a bomb 5 times as large and a whole lot more unstable.  Is called Medicare.  So here we are fretting about a future problem and doing nothing to address the real problem.

Now why would we concern ourselves with the distant future and not something that will hurt here and now?  The US is actively transferring its ability to produce wealth to foreign countries.  Inability to produce wealth means less savings in the US for the US government to borrow to fund its liabilities (such as Medicare).  The only place to get those savings is sell our debt to foreigners who run a trade surpluse with us (those countries who now have our manufacturing base and sell their products back to us).  The more debt we buy combined with declining ability to pay for that debt means a weakening dollar.  A weak dollar will eventually force those who buy our debt to go somewhere else to invest their trade surplus with us.  At some point (and it may have already happened) our debt holders will quit buying our paper.  So there we are standing on the street corner trying to sell a product no one will buy.  Presto chango, the world just changed.  The US dollar is no longer the reserve currency and we are some seriously deep yogurt.  

How do you head it off?  By producing more wealth (done only by making it, digging it, or growing it) which I don't think the elites prefer, or by increasing savings (and decreasing spending).  Summary?  Bush is focusing on SS because it is the most surefire way to inject capital into the US economy in the short term.  The world has made it clear it will not continue to support of compulsive spending.  Notice the number of articles devoted to how Russians, or Chinese, or. . . . .are cutting back on US instruments?  For all we know world financial decision trigger has been pulled and the hammer is on the way down.

[Phantom Warrior]

I decided long ago that by the time I hit 65 there would be almost nothing left.  I started planning accordingly 20 years ago.  If you don't do the same you are being foolish.

I'm 22 and that's already my operating principle.

[atek3]

I love the scaremongering regarding "privatization" of social security.  

You can't "privatize" what is essentially stealing from one group and giving to another.

 If "social security inc." came to my door and said, "give us 14% of your lifetime earnings and we'll kick you back some bux when you are old", I'd tell them to get bent.  

So whatever scheme washington is cooking up, I guarantee, it won't be "privatization".  I prefer to call their proposals, "forced savings."

atek3

[The Rabbi]

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Huh??  There are about 5 economic fallacies right off.  The US is not transferring its ability to produce wealth to other countries.  It is transferring low-margin mostly commodity manufacturing to other countries with lower unit costs of labor.  If the American factory worker would like to work for $10 a day then I guarantee we could have all those jobs back.

[RevDisk]

I like the idea that I am in control of my own retirement.  That means, I should have the option of OPTING OUT of SS all together.  I also support that if you choose this path, the gov't won't bail you out if you are still working at 80 because you didn't plan ahead.

I have yet to enter the workforce (seriously, at least).  Keep the few hundred dollars that I sent you, and let me keep MY earnings from now on.  

Of course, I realize that this would never happen (unless the entire thing collapses), but it is nice to dream.  Private acounts would be the next best thing.

Bush's plan only allows you to put a very small amount in the "private accounts".  You don't have direct control over this money, you have a couple of choices supposedly.  (It's all still in the planning stage, so you have to take Bush's word for what the options will be and assume Congress doesn't change them.)

It's not like the Thrift Savings Plan whatsoever.  The TSP is voluntary.  Plus, you can get your money back if you want it.  (Yes, early withdraw fees and taxes are insane, but it is still allowed.)


The transition costs for his proposed plan will be expensive.  Really expensive.  Plus, I want to know what the fund management fees will be.  I'm suspicious by the lack of anyone meantioning them.   This will NOT do anything to fix the long-term funding problems in the system.  It's only diverting part of the funding to a private account, and balancing the books by subtracting it from your benefits.    

Better hope you make more than inflation in compound interest after the transition costs, management fees, etc elsewise you lose money.  This wouldn't be a problem if the economy was guarenteed to work perfectly, but that's the tricky aspect.  You don't have complete control over these private accounts, you have a limited number of gov't sponsored options.   If the economy tanks, you have no way of directly managing your money or trying to minimize the damage.


SS is a failing system.  I dislike being forced to give up a large percentage of my paycheck that I know I'll never likely see again.  Bush's proposed private accounts will not fix the situation.  Gods know what Congress would do to Bush's proposed strategy anyways.

[Ben]

I think the similarities / dissimilarities between Bush's plan and TSP depend on the news source. Here's a random few I found:

http://www.google.com/search?hl=en&q=social+security+thrift+savings+plan+bush&btnG=Google+Search

Most of the complaints seem to highlight the "three-legged stool" Federal employees have (SSI, retirement, TSP). Personally, I've never counted on SSI, so that's never been in my retirement equation (if I get it, I'll buy guns and stuff with it). I'm not going to put in a full twenty with the feds, so my fed  retirement benefits will be miniscule. I AM maxing out TSP, and that, along with real estate and other investments I've made over the years, is what will keep me in a comfortable retirement.

Most of this "bad plan" stuff regarding private accounts all seems to center on the fact that for the plan to work, personal responsibility is required. The retirement investor can't just sit back, do nothing, and have $3000 a month magically appear at age 62.

[RevDisk]

Most of this "bad plan" stuff regarding private accounts all seems to center on the fact that for the plan to work, personal responsibility is required. The retirement investor can't just sit back, do nothing, and have $3000 a month magically appear at age 62.

Actually, my part of the "bad plan" stuff is regarding the LACK of work or personal responsibility required.  From what I gathered, and nothing concrete has really been put forth, is that you will be given a few options to choose from.  

I'm concerned with the lack of details being announced.  My mutual fund gave me a booklet as thick as a small town phonebook with all the details I could concieve.  It was very upfront about all fees, options, etc.   When I'm told that something from the government will benefit me but no meantion of any costs....  I get suspicious.

I want to see the fine print.  Once enrolled, can you switch options?  If the economy starts tanking or the funds are incompetently managed, can you opt out of this voluntary program?  What are the fund management fees?  Who exactly will be getting these fees?  What are some estimates on the expense of setting up this process, and can we see the numbers behind said estimates?

[Ben]

I want to see the fine print.

Hey, I'm 100% with ya there.

[The Rabbi]

The details is right.  there is a proposal floating around that would have the Feds match contributions or something. That wont help SS.  It will just create another big entitlement.  Needless to say the Dems might back that one.
Remember the rule:
Tax and Tax.  Spend and Spend.  Elect and Elect.

[jefnvk]

I realize that, RevDisk.  I want out all together.  Being forced to save for retirement is not something I want to do.

[RevDisk]

I realize that, RevDisk.  I want out all together.  Being forced to save for retirement is not something I want to do.

Ah.  But, Jefnvk, if you are allowed to opt out, why can't others?  If others opt out, what about the benefits of people who paid into the system their entire lives?  Money doesn't grow out of thin air.

[doczinn]

what about the benefits of people who paid into the system their entire lives?

Not my problem. You can't correct a past wrong (confiscation of their incomes) by committing another (confiscation of my income).

[Phantom Warrior]

Not my problem. You can't correct a past wrong (confiscation of their incomes) by committing another (confiscation of my income).

Ok, don't get me wrong.  I want Social Security GONE.  Dead and buried.  Preferably at midnight with a wooden stake through it's heart.  And garnished with garlic and holy water.

But there are still a lot of people that are owed Social Security benefits.  I don't think it's necessarily the right thing to do to kick them out on their bum.  They paid into Social Security and should reasonably expect to get their money back.

More pragmatically, can you see a Social Security bill passing that eliminated current benefits?  AARP has been up in arms at the mere idea of any changes to Social Security (except increasing benefits).  But that would be nothing next to the firestorm of protest if someone suggested completely eliminating benefits.

I think Social Security has to go.  Go gone, all the way away.  But until we have people starting out in the new (preferably private) system who haven't paid into the old system at all, the government is going to have to fund it's current obligations.  Which is probably going to mean continuing to confiscate our income, whether through a specific SS tax or general federal funds, until everyone currently on SS has passed away (or opted out).