Do you have any information that would persuade me?
Persuade you to do what?
I like the idea, and it should have been done long ago.
There are two big problems I can see, though. First, it won’t help the cash flow problems for several years, and in fact will make it worse from the time the babyboomers retire and the time they die. While the present workers are pumping money into stocks and bonds, the system still has to pay the retirees.
The other worry I have is that the SSA will be the world’s largest mutual fund. Some companies will live and die by the whims of the SSA. Then there’s the question of “who votes all those shares?” If it’s the individual workers, I’m not worried. If one appointed governmental bureaucrat, that could be very troublesome.
SS has been historically run very well and the management costs are very low. It is a huge pot of money and the guys who want to run it will like to take a cut for management. Private corporations are after it to make profits. They will drain a ton of money out of it.
It seems to me that the only people who are for privatizing Social Security are those young enough not to need it in the foreseeable future. If you want a private pension system start saving money and making your own investments. Leave us old folks alone! And before you object that you are currently paying for “our” SS payments, let me remind you that people of my age have been paying into the system for an average of forty years. The change you would like would literally rob us of what we’ve worked and paid for over that time. Not enough, you say? Our FICA payments have often been greater than our income taxes. You want to take that, you’ve gotta rassle me for it!
And those old enough but wealthy enough not to need it, who will get much wealthier with a huge influx of cash into the stock market.
I think privatizing SS is a really bad idea, mainly because I know several people who were "about to retire comfortably and young " in 2000, SSI was going to be “extra” income later - and are still working in 2007 having just recently made up their losses - or retired much more dependant on SSI than they ever intended to be. Seven years when you are 40 or even 55 and looking to early retirement, not horrible. Seven years if the stock market goes out from under you at 65 and there is no SSI…
Yeah, yeah, those people didn’t diversify - why weren’t they in bonds! Its their own darn fault that they bought into the “new economy” hype.
As long as they kept the badass uniforms, I’m all for it.
Moving thread from IMHO to Great Debates.
It IS my own money. Money they’ve taken forcefully from me and don’t pay me back the interest they’ve earned on it. I have no moral qualms collecting my Social Security. It’s more like getting paid back the money they took, without interest.
On the other hand, in a way I’m glad they did take it. I’d be homeless without it.
Privatization will be a free-marketer’s worst nightmare.
Right now there are 162 million people paying into SS. Let’s put them all into private accounts, investing in some combination of mutual funds, bonds and money market accounts.
Now you have 162 million people actively managing their funds. Wait for the market to drop 300 or 400 points in one day. What do you get? Probably 10 percent (16 million) who panic and decide to put their money into more stable bonds. Which turns a one-day dip into a bear market, causing the other 150 million to watch their retirement nest eggs shrink.
Meanwhile, the bond market has declined, since the 16 million who put their money in there have caused such a rush on bonds that interest rates drop. Which worries the other 150 million even MORE, so they pull their money out of a declining stock market to put it in a declining bond market.
Within – oh, let’s say a year – both the stock and bond markets have bottomed out. But people don’t want to move their money around, since they’ve already been burned. The market bounces along for a few years like that before finally recovering. But in those few years, everyone’s projected retirement funds have taken a serious hit and people demand that the government do something to gurantee a certain return on retirement accounts.
And they can call it Social Security.
It’s a deal! Stop taking FICA out of my pay and I will gladly invest that money myself.
If I might ask, what kind of returns are you getting on your current investments?
Yeah. I want in, too.
Czarcasm, I’m getting great returns the past couple of years. Since I’m invested in 75% US stocks and 25% international stocks I expect my long term rate of return to be about 12%. (My funds are low fee unmanaged index funds.)
kunilou, your post cuts right to the heart of the matter. Many people insist that folks are too stupid to be trusted with their own retirements. I think the opposite is true. Nobody but YOU should be trusted to take care of your retirement. People who are educated about the stock market and how it works don’t panic and sell at the first downswing, because it’s the wrong thing to do.
I keep hearing about how even most mutual fund managers do worse than index funds. And you’re saying that every Tom, Dick, and Harriet has the skillz to manage his/her own retirement funds.
I’m thinking that’s a great idea in theory, but completely disproven by the facts.
And then there’s the 50-year gap that any privatization plan has to somehow paper over.
The way the system works overall, as we know, is that current workers pay in, and their payments aren’t saved; they get spent on benefits for today’s retirees. (We’re temporarily generating a surplus to be saved for a portion of the boomer retirements, but that’s not a permanent feature.)
Let’s say everyone’s Social Security gets turned into an individual investment account tomorrow. I’ve been paying in for the past 37 years, since my first summer job. Where has that money gone? To past and present retirees. It’s gone. So I’m left with 14 years, say, of paying into my individual account, to come up with a Social Security substitute. It’s a bit late to get started, isn’t it? And I did start early, but that money’s been spent, and nobody’s giving me that money back, with or without appropriate compounding.
Those that have already retired, of course, suddenly and simply don’t have Social Security.
People in between my age and retirement age have no Social Security coming, and even less time to save.
People in their 40s have ‘only’ lost 2-3 decades’ worth of pay-ins, and have 2-3 decades to save up. Their investments had better do pretty well.
Maybe those in their 20s and 30s come out OK, but everyone else really gets pounded. Unless someone coughs up trillions upon trillions of dollars to make everyone whole who’s been paying into the system all these years.
Every year in Detroit a TV station started the year with a respected stock broker and a dart board picking stocks. The dart board won so often they quit having it.
I realize this is drifting even further off topic, but you know those high-school contests where kids pick stocks over a period of several weeks, and see who wins? I’ve never had a clue what the kids are supposed to learn from them.
That paying heft percentages to a financial consultant who supposedly can do better than tossing slips of paper with stock symbols into the air and catching them in a hat is a waste of money. Why you need to know that in high school, I don’t know.
And word on the fact that the privatizers have no plan to compensate those of us who’ve paid thousands of dollars into the system already. I’m not quite 40 and I’ve already got over 20 years of SS payments given away. If you’re telling me the next generation can’t be bothered to help me the way I helped the generations that came before me, I want every penny of it back.
Now.
Privatisation works great for middle class and above who have time to clean it up. It will fail for the poor, and we will be left once again trying to figure out how to protect the mythical dog-food eating grandma.
What we SHOULD do (IMHO) is admit that SS is a welfare program for the elderly and infirm, and quit pretending that it is some sort of an investment program. It is a wealth redistribution program that pretends to pay attention to your taxable income.
You pay a tax that then goes to pay benefits for retirees. Period. That is how it started working from day 1. The fact that we had a surplus for a long time simply gave our government extra cash to spend in various ways.
Huh? I’m not saying that every Tom, Dick and Harriet become a mutual fund manager. I’m confused as to where you came up with this.
I’m saying that they should buy index funds and hold them for the long term. They’ll make money without doing any active management at all, and as you said, it’s quite possible they will do better than actively managed funds.