This is how the Dutch do pensions

[MillCreek]

http://www.nytimes.com/2014/10/12/business/no-smoke-no-mirrors-the-dutch-pension-plan.html?hp&action=click&pgtype=Homepage&version=HpSumSmallMediaHigh&module=second-column-region&region=top-news&WT.nav=top-news

A lot to admire with how the Dutch do retirement pensions.

[Ben]

And the money statement for me is:

Accomplishing this feat — solid workplace pensions for most citizens — isn’t easy. For one thing, it’s expensive. Dutch workers typically sock away nearly 18 percent of their pay, most of it in diversified, professionally run pension funds. That compares with 16.4 percent for American workers, but most of that is for Social Security, which is intended to provide just 40 percent of a middle-class worker’s income in retirement.

If I could have diverted that 16.4% from social security to my TSP or other professionally run retirement vehicle, or even just had it sitting in Costco stock for the last twenty years, I'd be out looking for a 20,000 acre retirement compound right now.

[lupinus]

And the money statement for me is:

If I could have diverted that 16.4% from social security to my TSP or other professionally run retirement vehicle, or even just had it sitting in Costco stock for the last twenty years, I'd be out looking for a 20,000 acre retirement compound right now.

Yep.

I remember reading in multiple places that the average middle class worker if they could invest their SS money into their 401k along with their standard contribution at even just a modest average return over the course of their lives they'd retire with several million in their accounts. That may be minus a poorly timed big financial down turn but the concept is there, and over the average length of retirement before kicking the bucket it has time to recover.

I think the biggest difference, and anyone more familiar with Dutch politics is free to correct me, is that they're system isn't a thinly veiled straight up shell game designed to buy votes. And their companies/public sector isn't looking for or able to use every trick in the book to raid a pension fund to supposedly pay it back later.

[SADShooter]

And the money statement for me is:

If I could have diverted that 16.4% from social security to my TSP or other professionally run retirement vehicle, or even just had it sitting in Costco stock for the last twenty years, I'd be out looking for a 20,000 acre retirement compound right now.

Right. Thank you, President Ponz...er...Roosevelt.

[Perd Hapley]

A Dutch pension? Sounds like a euphemism. 

[lee n. field]

A Dutch pension? Sounds like a euphemism. 

When I saw the thread title, I thought "euthanasia".

[Perd Hapley]

New avatar - Strangelove?

[MechAg94]

The article sort of assumes the purpose of SS is to provide retirement funding.  That isn't really true.

[lee n. field]

New avatar - Strangelove?

The old one had served for a long time, time to put something else up.

[Northwoods]

I fully expect to have a negative "return on investment" for all the SS taxes I pay (directly through payroll withholding and indirectly in the form of employer paid taxes).  Not that it's an "investment" but rather a Ponzi scheme.

The very first SS beneficiary made something $3000 in benefits against about $30 of taxes paid.  I'll probably put in around $600-700k over the course of my working life.  If you allow for about a 3% annual inflation rate, if I start drawing bennies at 67 (assuming they still exist, and in similar form to now - highly unlikely, but bear with me), I'd get around $4500/month.  Assume average life span of 78 and I'd rake in a little under $600k.  So, best case I'd see about a 1% loss, perhaps a 14% loss.  So I would literally be better off sticking that money as cash under my mattress.  Even putting it in a savings account at the local bank at 0.25% APY would put me ahead of SS by $35,000 by the time I retire.  A crappy investment that returns 2% (most bond funds will handily beat that) and I'd be ahead by $350,000.  Go with a modest/conservative portfolio of mutual funds averaging only 5% and I'd be ahead by almost $1.5million compared to SS.  My IRA/401k has averaged about 10% since 2001.  With that kind of return, I'd beat SS by a whopping $8.1million.

[HankB]

If I were 65 and had invested my SS contributions privately and made the same average rate of return as my 401(k) has over the last 12 years, I could buy a lifetime annuity paying well over $10,000/month.

This does not include investing my Medicare contributions . . . and by the way, today's annuity rates suck.

In 2014, if you retire at age 66, the maximum amount you'll receive from Social Security each month is $2,642.

Tell me how SS is a good deal.      

[Boomhauer]

Tell me how SS is a good deal.   angry   

Oh, it's a good deal alright...for the leaches and the politicians whom they vote for.

For the contributing member to society, not so much of course.

[charby]

I'm on a 403b at work, I put in 5% of my salary and my employer puts in 10%, plus FICA on top of that. So I'm currently close to what the Dutch have.

[lupinus]

Oh, it's a good deal alright...for the leaches and the politicians whom they vote for.

For the contributing member to society, not so much of course.

It's a ponzi scheme to buy votes and not a damn thing more. Until it blows up it will never go away. And even then it'll be a bunch of BS, be rebranded, and be brought back from the dead and we'll get to pay for SS 2.0 along with the dead SS 1.0.