If you let me know a week or so in advance of the move it won’t be a disaster. For me anyway.
At a time when governments are nearing bankruptcy around the world, state pension plans are underfunded by something like half a trillion dollars, social security is underfunded, and the U.S. has promised entitlements that it has no way of paying, it seems odd to claim that government retirement plans are the ‘safe’ option.
At the very least, the government is going to change the rules on you. All of you who have contributed to the government plan, thinking that you will be able to retire at 65, are probably mistaken. The government will change the rules on you. If you’re reasonably well off, there’s a good chance that the government will means-test its entitlement programs in the future to keep them solvent, which means that your contribution to what you thought was a retirement savings program will have a return approaching zero.
Those who rely on government are destined to discover that governments aren’t particularly reliable. Ask the people of Greece.
I would much rather take control of my own destiny, and manage my own retirement. In fact, that’s what I’ve been doing. My retirement strategy assumes that my government pension won’t exist when I retire, even though I live in a country that currently has a fully funded retirement program. I know that even if that’s the case today, a future government could respond to rising health care costs or some other crisis by raiding my retirement account. Actions that would get a private fund manager thrown in jail are routine for government officials.
Now, there’s one good argument for public retirement programs - the fact that we won’t let old people starve to death anyway. So if we didn’t provide any kind of retirement program, we’d still wind up having a retirement program for some people, except it would be run as welfare.
This is also the best argument for a level of public funding for health care - since we know we’re not going to let sick people die on the street anyway, if we don’t explicitly fund a public healthcare program we’ll wind up doing it anyway, but we won’t have raised the funds to pay for it.
That said, it’s also very important to promote private responsibility and private savings. So I think a good compromise is to make Social Security explicitly an insurance program, and means-test it. The amount you get should be basic subsistence level, to encourage you to save more for your own retirement. And if you’re wealthy, you don’t get it. Making those changes would make SS solvent overnight - and would actually probably allow you to reduce the FICA tax. What you could do is take the difference and make employers open a retirement savings account for the employee and put the money in there.
Everyone should have a private savings account into which they can put their own retirement funds. FICA deductions should be split between private savings and public insurance payments. The expectation should be that you will use your private savings for retirement, and you’ll only get public assistance if your retirement income falls below a basic subsistence level.
The people who want to privatize social security generally want to privatize it because it promotes their anti-public sector ideology and because investors who fund the privatize-SS movement love the idea of having a few trillion extra dollars that isn’t their principal to work with that they can charge 5-20% overhead for managing. It was never meant to be a tool to improve the standard of living of people who actually collect social security. That was just a marketing ploy. So it doesn’t matter if there is more risk than people may have thought. It won’t change most people’s minds either way.
nm
http://www.ssa.gov/policy/docs/ssb/v62n1/v62n1p47.pdf
Single people do better under a private plan, married people do worse. Higher income people do better than lower income people.
FWIW, a low income married couple will make about half in a private SS account than they will in the current system. A high income single person will make 50% more.
It is not some massive, across the board improvement. You do better in some areas, worse in others.
That’s a nice way to short-circuit the argument to ground.
51% of the voting public wants something. Therefore, they get it. That’s good.
Unless of course, they voted for George Bush or a Republican. Then, it’s bad.
The prosecution rests its case, your honor. Yet again.
This is the fault of the beast starvers. Of course, most of them are also the ones responsible for the housing bubble, so in order to both have a healthier free market and a healthier government safety net, the choice of candidates is clear. With the crazy people in charge you get the worst of both worlds, government changing the rules on those who had contributed their entire life AND those who saved by themselves losing everything.
Yes, it’s bad. To him. Just like Social Security is bad to you. The difference is that he sucked it up and moved on with his life, while you’re pretending not to understand the social contract.
Jas09:
Don’t blame him, he voted for King George III.
The government has already changed the rules on me. Back in 1982 the retirement age was actually 65, SS benefits didn’t count as taxable income and the self-employed paid a lower rate than the combined employee-employer coontribution, among other things. Congress changed all that in 1983 (not to mention a few pages of other things) to make SS sustainable for another generation. It’s been 28 years, and changes are needed to make it sustainable for another generation.
Of course, the private sector made a few changes, too. Just ask all those people whose companies promised them a pension, then underfunded their pension plans, then changed them to a 401K, then cut their matching contributions.
There’s one big difference. The government made their changes out in the open.
The nominal retirement age has been 66 for a while. Our system does not have a single age, though, it prorates the monthly return depending on retirement age, so everyone has a choice as far as SS goes.
In any case, Reagan changed the rules on us, as part of a bipartisan effort to solve a real problem. I don’t remember a lot of squawking. However many Republicans in those days had two brain cells to rub together and were interested in solving problems more than ideology.
I’m close enough to retirement age to have started moving some money into income returning investments away from riskier ones with higher appreciation. Given a desired income after retirement, ignoring the income from the public pension plan means you have to reduce your chance of growth more than you would if you considered it. If you are far away from retirement, it doesn’t matter much. As for me, I’ve been saving as much as I could, since more money is better, and the money I’m going to get from SS is a pleasant surprise - but it will affect my investment decisions as I get closer to retirement age. So, if you ignore your pension as you get closer to retirement age, you’ll be leaving money on the table.
I don’t understand Sam’s objection about the government changing the rules on Social Security recipients, especially regarding the implication that it would somehow be different for private investments. For example, where’s the guarantee that 401(k) disbursements will remain tax free?
401k disbursements aren’t tax free. They never have been. Your contributions are not taxed, but when you take them out they are. The idea is that you contribute while you are in tax bracket X and withdraw such that you are in tax bracket X - Y, so you get a better deal.
Anyway, furt got it right in the first reply to the OP. The Bush plan would have allowed only a percent of your SS withholdings to go into one of 5 fairly conservative funds, and you would have to move all your funds into super conservative funds at a certain age. No one would have stock in PetRock.com when they were 64 years old unless it was with their own non-SS money.
Yeah, I misspoke in my hurry - my bad. Regardless, the point still stands - the government has as much right/power to change the rules on private investments as they do Social Security.
There’s another big difference. Where you choose to work, and where to invest your money, is your choice. You can make whatever choice you want, and live with the consequences of your decision.
The government chooses for you, and then enforces their choice at the point of a gun - if you don’t care to go along.
Idaho, your problem is that you think Social Security is a retirement plan. Yes, it is presented that way to make it palatable. But of course it is really a welfare program for old people. We don’t want to see old people who can’t work lying in the gutter, so we send them a check.
So of course you’d rather have the money for social security for yourself. But that’s just because everyone would rather pay lower taxes. There is no chance that we’re going to repeal welfare for old folks in this decade, so complaining that you’re forced to contribute when you’d rather save the money yourself is disingenous. You aren’t contributing Social Security money now so the government can save it for you and give it back to you when you retire. You’re contributing Social Security money now to pay for people who are old now, and when you retire you won’t be getting “your” money back, you’ll be getting money contributed by workers then.
Or not, if workers then are tired of paying for welfare for old people and would rather see them lying in the gutter. But how is your private pension plan safe, if looters and moochers in the future decide they need “your” private savings, they’ll take it. And you’ll be an old man in a nursing home, how are you going to stop them?
You can contribute pre- or post-tax income to a 401(k). People who contribute post-tax income (I contribute 30% after taxes, the rest before) are at risk of being taxed twice, exactly as JohnT suggested (though I suspect a relatively low portion of people with 401(k)s actually do so).
Yeah, unless your employer happened to execrcise his choice to sell the business, and the new owner says “That pension you were promised after 30 years? We don’t do that.” Or your employer goes bankrupt and it turns out their matching contribution to your 401K weren’t in cash, but in company stock.
Having the force of law (or as you put it, “the point of a gun”) on your side actually sounds like a better idea.
Why does everyone make Social Security about them? It’s not. If you are the type of person who can afford retirement, then Social Security is not actually for you. The entire point, from its creation, was to provide for the people who cannot afford retirement.
The part about giving you some money, too, is just because helping old people not starve to death was not sufficient motivation, and because of the rich’s notorious dislike of tax increases.
But you should have seen that matching stock show up in your 401k statement. It’s not as if it was hidden from your view. Neither was the “pension liability” side of the balance sheet in your mythical company noted above, if it was publicly traded.
You have lots of choices. If you are choosing to spend 30 years of your life with the same employer, and are counting on them having the assets to support you in a defined-benefit retirement when they are clearly going bankrupt, that’s a hell of a risk to take. GM and Chrysler’s and Delphi’s balance sheet and pension obligations were obvious to everyone. They weren’t hidden. They weren’t a surprise. There were many shareholders screaming at Rick Wagoner for years to take more drastic action to avoid the crushing, oncoming burden of pension obligations, and he didn’t. Then a recession came along, the poop hit the fan, and you and I ended up bailing out the UAW. Nice. That’s what happens when you stick your head in the sand, in the face of an oncoming freight train. Sorry to mix metaphors.
You act like all of these things are out of your control, when they aren’t.
Hell, in a private SS plan you could take your SS deductions and invest them in US treasury bonds if you want. That is a nice way to make your retirement investments your own decision, and tether you to the government’s behavior if you are so inclined. And you appear to be so inclined, from your posts.
Or use the SS deductions to buy gold bullion or barrels of oil or pig-iron and bury them in your back yard. That’s also a true asset, that is portable and can be transferred around if you move or take a new job.
Your arguments are complete strawmen and disingenious. Most companies with defined-benefit plans have “lump sum” cashout options that are available for choice. The company gets a break because they get a discount to the future liability of their defined-benefit plan (usually somewhere between 5-25%) and the employee now has a true, portable asset that belongs to them. The company also gets the future liability off their balance sheet. Some of the employees take those choices. Some don’t.
But by all means…keep painting yourself as a helpless, flailing victim in need of the warm government blanket to protect you from your own decisions. It’s fairly common practice around here. Voyager needs the government to protect him from his own mortgage decisions. Der Trihs needs the government to protect him from evil lawnmower companies, who would otherwise expend energy and resources to deliberately loosen their blades and kill their customers. If you think I’m making these comments up, I’m not.
Go back and read the “Libertarian/fringe” thread and Sam Stone’s “FDA” thread and marvel at the number of people on this board who are terrified of having to accept responsibility for their own decisions. But somehow, they think signing over their decision-making authority, and their money, to a government bureaucracy will make everything all right. I suppose that is the psychological “high” that comes from trading liberty for (the promise of) security. The unfortunate thing is that once you sign over that authority, you ain’t getting it back.
Or you could empower yourself, and demand that you should be allowed to keep your own resources and make your own decisions. That would be nice, since then the rest of us wouldn’t have to pay for it.