Cracking the social security code using private accounts

hmmmmm, here are some thoughts I'd wanted to spill on this board, please correct me ANYWHERE or make additions.

All western countries are struggling with their own form of social security, too many people getting old at the same time - causing social security to have insufficient funds etc. etc. The younger generation is incapable of paying up for the older generation all wanting to have social security at the same time (?!?!)

Now the obvious solution for this problem is (which actually is already implemented in some European countries)
- Raise the retirement age
- Tax increase

Now the joke with Private accounts the way I see it is that this is another hit on the lower to middle class.

Social security is taken out of your paycheck automatically. You cannot control it, it's just taken out for you and that's it - and when you retire there's a check send to you every month.

Now with Private accounts you will have the option to either put it into an account or collect it (true?), for most middle class / upper class this won't be a problem. Just like the 401k it will be nicely put into an account somewhere and that's it.........

BUT..........

Here comes the lower class and some middle class groups who will have access to money they did not have before. Now when you have the option for example to pay for a toy or some other thing for your kid / boy-girlfriend / husband / wife, NOW YOU CAN! - Throwing away the money for the future (since that is faaaar far away in the first place) forcing them to having to work longer since nothing was saved for retirement. So it doesn't give them more control, it gives them more buying power.

So a couple of problems are solved here, we have a group that will be forced to work to very old age AND they will inject their money DIRECTLY into the economy.

Some thoughts / corrections please.

the idea is that the money would be diverted to a select group of accounts that the Fed decides upon; so the money would still be taken out as it is now, just a portion of it, 3 or 4% could be diverted from the 'general social security' account into the 'private' account.

To help protect against bad investments(?), the Fed would limit where the money could be invested.

on edit: I haven't really paid that much attention to the schemes and rationales; my argument is simple, if it faces a shortfall, then the cap needs to be raised, or better still, eliminated. If that doesn't quite solve the problem, then add means testing for pay outs.

But will you have the option of putting it in, or taking the money yourself and putting it into some other fund?! - aka having it cashed out.

there is no option proposed that gives the individual complete control of the 3 or 4% portion; only a choice among x number of investment funds.

I'm not aware of any option where one could borrow from their fund - I think 401ks allow that; nor any option where one would be able to simply opt out and get the 3 or 4% added to their net pay.

Bush hasn't endorsed a specific plan for privatization, but based on what we've heard so far, you could reasonably expect something like this:

At the time of your retirement, you'll become entitled to a guaranteed benefit, which will be less than what you'd be entitled to under current law. It will be less even if you've declined the private account. If you've chosen a private account, the guaranteed benefit will be further reduced. The government will then compare your guaranteed benefit with the poverty line. If your guaranteed benefit doesn't keep you out of poverty, then whatever's accumulated in the private account will be applied to that purpose. The specific mechanism will be the purchase of an annuity. For example, if your guaranteed benefit is $200 per month less than the poverty line, then money will be taken from the private account to purchase an annuity that will pay you $200 per month for the rest of your life. (The guaranteed benefit is indexed to inflation, so I assume they'd have to use annuities that were also so indexed.)

Bush loves to talk about how the money in the private account is "yours", you can pass it on to your children, etc. His argument would apply only to whatever's left in the private account after the mandatory annuity purchase. For many people, that would be little or nothing.

Under Bush's plan, could a beneficiary, at the time of retirement, take out in cash whatever's left in the private account, blow it all in one wild week-long spree of extravagance, and then spend the rest of his or her days just at the poverty line? I'm not sure. The price for the dissolute week would be a reduction in the retiree's monthly benefit (as compared with someone who had the same earnings history but who never chose to establish a private account). I don't know whether Bush's plan would include any additional restraints on spendthrift beneficiaries, beyond the provision for mandatory annuities.

On edit: I overlooked your question about spendthrift conduct while the beneficiary is still working. As far as I know, there's no possibility of that under any plan currently being discussed. As under the present system, the money paid in as Social Security taxes would be completely unavailable to the worker during the period preceding his or her retirement.

Of course, your concern about people being effectively compelled to continue working longer than they wanted to is a valid one. As I explained above, everyone contemplating retirement at, say, 65 will find their guaranteed benefits to be less under the Bush plan than under current law. Some of those people will presumably conclude that the available benefit isn't good enough. Therefore, they will reluctantly keep working a while longer.

I have belonged to a pension plan who invested under the "prudent man" rules. Upon retirement I can expect a retirement of $2,100.00 a month. They collected a mandatory 6% of my salary for this return. Why we don't expect the same from SS is insane. I have also paid into SS. and can expect half that amount upon retirement. The SS funds I've paid to the government has gone into neverland.

Please read post number 7.

and Social Security, the social security income has been the most consistent and now major part of my income. You people need to fight any changes that they are trying to do because privatizing will not preserve your right to a decent Social Security pension. Remember that bankruptcy and illness can wipe out your savings in an instance. With Social Security, you will still get a check every month that the bankruptcy courts can't touch.

"Bush says that they don't have a solution for Social Security yet because they are still busy inventing the problem."

Nuf said! Thank you Cleita!

Congress increased the SS rates under Bush Sr., to supposedly take care of the baby boomers. That was given as the reason for the rate increase. I have confronted my GOP D.C. reps and are still waiting their responses.

rep. Bill Thomas, chair of the Ways and Means Committee and the person who is pushing this to the front of the calendar. It's too long to post right now because I have to retype it, but it pushes the crisis propaganda and the lies. I found it a heartless reply, yet other people have told me that I was lucky even to get a reply because Congressman Thomas doesn't talk to Democrats. But it's easy enough to point out the errors in his logic and outright prevarications.

You guys are going to have to fight them tooth and nail to preserve your rights.

SS is meant as a social responsibility to pay for retirement and for those retiring that will need it cause they have been ill / been in war or for whatever reason. Carrying the burden, private accounts as I have seen it till now is a selfish act by and for those that in most cases wouldn't really have to care in the first place, those affected will be those that are invalids / lower and groups of the middle class etc. etc.

SS is not "how well will I be off" but a "how well will we ALL be off" in the long run.

SS has been raised, but that wouldn't have filled the gap, everyone knows that.

you are buying into the white house propaganda. See Paul Krugman, a prize-winning
professor of economics at Princeton University-
http://www.rollingstone.com/politics/story/_/id/6822964?rnd=1110004750851&has-player=true
RS: So if there's no crisis in Social Security, why is President Bush pushing so hard to privatize it?

Paul Krugman: It's politics. Since the days of Barry Goldwater, the Republican right has really wanted to dismantle Social Security. And now they have a degree of political dominance that lets them push it to the top of the agenda -- even though no rational analysis of the actual problems facing the U.S. government would say that it belongs there.

my dad paid in in 1930 40 50 60 70 dollars and the cost of living when a house was 20k the original plan was to be a bridge to private self funded plans that didn't happen he now needs to live in 2005 dollars when the same house is 1.5 mill and a gallon of milk is $5 i am paying in in 2005 dollars to support him unfortunately their are fewer of us than there are of them and the plan is not self funded as originally designed nor was it designed to be the sole means of support in retirement but it has been deemed as such and people seem to count on it as such thus people will be well and truely fucked

The president’s strategy is familiar from the run-up to his invasion of Iraq: Manufacture a sense of crisis and then accuse critics of irresponsibly exposing Americans to danger, this time not weapons of mass destruction but the equally mythical claim that Social Security will soon “go bankrupt.” Once the crisis atmosphere is established, doubters can be intimidated, and extreme measures, like cutting guaranteed benefits, can be justified because they can’t be guaranteed any longer anyway http://www.ourfuture.org//issues_and_campaigns/socialsecurity/resources/op_eds/05_2_1_tap_rh_win.cfm

Social Security is America's promise that those who work hard and play by the rules will retire with dignity. Even the most pessimistic of economists agree Social Security will remain solvent for decades. There is no crisis. http://www.thereisnocrisis.com/


According to a study by the non-partisan Congressional Budget Office, people could expect higher benefits from Social Security with no changes to the system than from a privatized system http://www.americanprogress.org/site/pp.asp?c=biJRJ8OVF&b=309712