Fat lot of good it will do to those who get their retirements punctured by a crash just before they are ready to retire. This approach has zero credibility. The stock market is a gambling game. No one wants to gamble the retirement money.
[QUOTE=Evil Captor]
Fat lot of good it will do to those who get their retirements punctured by a crash just before they are ready to retire. This approach has zero credibility. The stock market is a gambling game. No one wants to gamble the retirement money.
[/QUOTE]
Again, when you say ‘no one’, you should be aware that the ‘no one’ actually includes the majority of working class people in the US, who have IRA’s, 401K and mutual funds. All of which have ties into the stock market, which, contrary to seemingly popular belief, isn’t gambling.
Me, I’m not planning to even get Social Security, as I have large doubts it will be around by the time I retire, and even if it is how much I’ll actually get out of it. My real investments (what you would call ‘gambling’) are in stocks, bonds, mutual funds, maxed 401 and IRAs and some other investments (mostly real estate)…and unless the entire US financial system goes tits up in the next 25 years I’ll be just fine. YMMV, but if you are relying on social security as your only retirement option, all I can say is…good luck with that. You will need it.
-XT
Don’t forget that there are a lot of other ways to invest your money - Real estate, business capital, etc. And, if SS were privatized, many new mechanisms for investing in those things would be developed.
For example, with real estate, the average investor doesn’t have to buy a rental property and plunge toilets. There is an excellent program for investment into REITs that pool smaller investments into large real estate investments. You can also have investments in real estate tax certificates. I can easily see how, if SS loses its stranglehold, not only will investment pools like this develop, so will organizations to manage those investments, along with critical investment review companies.
And absolutely none of these vehicles of investments are in any way safe from collapse. All of the investments you just mentioned took a catastrophic hit in 2008.
Investments, by nature, are prone to that.
Worse yet, after that, you have retirees doing withdrawals to fund their retirement. This means millions of people taking money out of the stock market - rapidly increasing the number of sellers without any guarantee of an increase in buyers. We’re looking at that problem very soon with the Baby Boomers.
Are you implying that SS is safe from collapse?
As people have mentioned though, there is a major timing issue here. Looking at it, you can argue that SS is good forthe stock market. Although it reduces the amount of privately investable funds, it increases the ability of investors to take risks with the rest of their investments. If people feel that they are guaranteed a certain level of income after retirement, and that this will carry the governments credibility, it increases their ability to weigh ttheir portfolio towards riskier investments.
So I’d say SS has been good for the small cap market, for example.
I have lots of money in IRAs, 401ks, etc., in the stock market. But I also have Social Security. They serve two completely different purposes. SS is there so that I don’t go into poverty just in case the stock market crashes just as I retire. It is insurance, not investment.
It’s not a matter of relying only on one versus the other. It’s a matter of having both, so you don’t keep all your eggs in one basket.
Safer than the stock market. The Government backs SS; who’s backing your stocks?
The stock market lost 50% of its value in the 2008-2009 crash. What condition was Social Security in after that? I bet you no one’s Social Security retirement or SSI disability checks got held up. On the other hand if Social Security collapses, I promise you that the real estate and stock market will do a 2012.
Had investments in stocks and residential/commercial real estate been used in place of Social Security it would have been a bloodbath for retirees in 2008. As if we don’t already have enough people delaying retirement and competing with younger people in the workforce as it is. Then there would also be the disabled who now rely on SSI, most of whom would have never acquired the money to buy investments and who would simply add to America’s homeless.
But then that’s the way plutocratic mindsets work - those who can afford to invest can live and the rest can go starve because it’s all their fault. At least that’s the world you live in when you don’t have a Social Security-type system.
But all you really need is a balanced portfolio that becomes more risk averse as you age. That can easily make up for the SS portion, and at a better rat of return. Anyone who is even 50% invested in stocks when they’re near retirement age is crazy. It would be easy to construct a retirement plan that mandated that x% of funds be held in very low risk investments, where “x” increases as the person ages. Having the government implement a generational transfer of funds runs to the risk of hitting a demographic time bomb.
I want to riot because 40 million people are sponging off my tax dollars. Let them eat cake! (maybe that’s not the best historical precedent…pizza and Jersey Shore instead of bread and circuses might be a better plan).
I’ve lived in Germany and while for most Germans life is roughly equivalent to Americans they don’t have it easier. Germany may currently have slightly lower unemployment but they’ve traditionally had higher unemployment. (We can have a long drawn-out debate and compare different segments of each country and try to determine who’s got it better. I’m comfortable with declaring them equal.)
Well it would be stupid to leave your money in the market if retirement was approaching. I plan to start shifting my savings to bonds 10 years before I retire, I expect the last five I’ll have all my money there.
But that isn’t for a good 20 years.
Let me whip out the world’s tiniest violin to accompany you on your riot!
In addition, if you`re making regular investments you benefit from dollar cost averaging.
I had about $10,000 in a blue chip stock that had reached a high of $42 per share. My average purchase price up until it crashed was around $30. Then it collapsed to a low of under $10 per share and stayed there for three years. Now it is back over $20. I`m still down from my original investment, but three years of buying at sub-$10 prices has resulted in my overall holding in that stock being back to breakeven already.
Once you get past the extremely short term (a few years), the volatility of stock prices in general is much overblown. For example, lets say you put all your money in DJIA index funds. No safe money markets or cash accounts - all in an index mutual fund that tracks the Dow. Lets say you were planning to retire today.
If that were the case, you would have made money for every year except for 2008. Your investments in the Dow from 1972 to about 85 would be worth 12X their value today, your investments from 85 to 95 would be worth about 3-4 times their value today, you`d even have made money on your investments from 2000 to today. The Dow today is already back to where it was in 2006 and is only about 2,000 points off its all-time high.
Had you cashed out your entire retirement portfolio on the day of the Dow`s absolute minimum, you would still be making money on your retirement portfolio. Just not as much.
Returning to the OP: Look, let’s just start rioting. Like, we need a reason?!
How about the Thundersnow!
Some arguments, such as putting money into bonds as retirement nears, are a good rebuttal to what I said. But not this one. Because no matter how unlikely it is, if your money is in the stock market there is chance that there won’t be enough when the time comes that you need it. That’s why you need some sort of “retirement insurance”. Just like fire insurance for your house. It’s very unlikely that your house will burn down. But if it does, you want to be prepared.
And you assign 0% probability to the possibility that trusting in the government might work out poorly? You might want to ask the people of Greece that question - or the people of California in another couple of years, or all those public employees who will soon find out that their ‘safe’ government retirement funds are woefully under capitalized.
While I understand your point, if the US were to default, your stocks would probably be worth less than nothing anyway.
More importantly, I think the problems with comparing investment returns with social security are twofold:
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Social security is more an insurance policy than in investment, so comparing to an investment vehicle with far greater risk is unfair.
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Most people who rely solely on social security in old age would not invest their money well absent being taxed. A great deal of that money would either be consumed, or frittered away on nonsense, leaving you with a bunch of starving old people.
[QUOTE=BrainGlutton]
Returning to the OP: Look, let’s just start rioting. Like, we need a reason?!
[/QUOTE]
Well, go for it man. No one is stopping you. Based on the thread you did about the left wing needing to take the gloves off and stop pussyfooting around, why don’t you guys see how it plays out if the left wing starts major riots. I’m sure that’s exactly what you guys need…more heated rhetoric and riots to boot! 
I will be awaiting the outcome with bated (or baited) breath…
-XT