The myth that social security only return 2-3%

Refman, keeps claiming that social security is nothing. I got news for you. Two well employed individuals can now draw about $3400 per month adjusted for inflation.
Call 1-800-772-1213 and order some pamplets so you can start to educate yourself about the full beneits your fica taxes bring or try ssa.gov

I know $3400 per month adjusted for inflation is nothing for a higher roller wannabee like yourself. However, why don't you call your friendly AAA rated insurance company and ask them what they would sell you an inflation adjusted fixed income annuity for, if you can even find one. BTW did you have any money invested in the market lately or are you just approaching all of this from a nonexperiential basis?

Once you have some facts, come back to the argument.

Also price the guaranteed disability coverage for people with previous cancer, heart attacks and other problems. Interestingly you try to solve the disability problem by proposing another bureaucracy like the worker's comp law. As an attorney (unlikely) an individual ( unlikely, you do desk work) or perhaps as a neighbor have you ever had some sort knowlege about the worker's comp system?

So you want to strip the dollars from the SS system and then fund through tax dollars a government run disability system. At least you are on the right track here. It will cost government money to protect people once you funnel the fica money to the mutual fund and investment industry.

Actually Gore had it right on this one. "Social security plus". Keep social security and then allow some more individual accounts. If you are so concerned about the poor not having enough money to fund these individual accounts, (doubtful) why don't you spend some of the government money you want to use in creating a government backed disability system to repalce social security disability.

Sorry, if the issue is more complex than the mutual fund industry would like you to believe.

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The Biggest Deal: Lobbying to Take
Social Security Private
By: Robert Dreyfuss
The American Prospect, May-June 1996

Not long ago, the Wall Street Journal called privatizing Social Security "the biggest bonanza in the history of the mutual fund industry." No wonder: By diverting 2 percent of payroll from Social Security into private accounts, the government could shunt $60 billion a year into the coffers of investment firms, banks, and insurance companies. And some advocates of privatization, such as the libertarian Cato Institute, want to replace Social Security entirely with individual, IRA-like accounts that would end the government's role once and for all in providing for the security of retirees.

Proposals for privatizing Social Security have circulated on the right-wing margins of American politics for decades. Not even the Reagan administration would embrace the idea. For years, tampering with Social Security was considered politically untouchable. The 43 million people who typically receive 30 to 40 percent of their income from the program—many of them members of the American Association of Retired Persons (AARP)—represent one of the most formidable forces in American politics. Advocates of privatization could also never get past one basic problem: How could Social Security taxes go into individual investment accounts when the money was immediately being used to pay benefits to retirees?

Now two things have changed. A projected long-term deficit in Social Security accounts is opening the door to more radical remedy. And a new coalition in support of privatization is taking shape, backed by financial interests that see an unprecedented opportunity in the diversion of Social Security trust funds. These business and finance groups are now pouring money into right wing think tank efforts, lobbying efforts, and publicity aimed at putting privatization on the national agenda. When they are finished, expect the privatization bandwagon to start rolling down your street.

Bankable Ideas

It is not surprising to find the Cato Institute in the midst of the swirl to privatize Social Security; there aren't many things government does that Cato doesn't think private markets can do better. In 1995, for Social Security's 60th anniversary, the Cato Institute began its "Project on Social Security Privatization," with a goal of raising $2 million to support a nationwide effort to raise public awareness of a crisis in the system, focusing on the Hill, the media, and public opinion. "We've already raised about half of what we expected to raise," says Michael Tanner, director of health and welfare studies at Cato. "We're receiving support from the financial community, from the investment community, from the insurance community. We're receiving support from large employers concerned about payroll tax increases. And from foundations."

Cato's project is co-chaired by Jose Pinera, the former labor minister of Chile who privatized that country's pension system, and William Shipman of State Street Global Advisors, an investment company. State Street itself is taking "a bold stance in favor of private investment options for Social Security revenues," according to its director for industry affairs, Lenny Glynn. To provide political advice, the bank has hired John Sasso, a Democratic consultant who used to be Michael Dukakis's top strategist. Cato's chief backers also include other banks, such as Bank of America, Citicorp, and Chase, as well as insurers and securities firms like Salomon Brothers

from

financial froms bankroll privatization of ss

 

Paultz, thanks for some factual input. Can you justify your figures? Don't avoid the issue just because it is volatile. Otherwise you do leave the issue to the financial products salesmen and the readers of Readers Digest.

You do realize that fica taxes are progressive in that the minimum wage worker gets darn near a social security check that is equal to their take home pay? There are those of course who hate this aspect of any social insurance system.

Don't forget the additional disability benefits for dependents and spouses, that are included. Also where do you purchase disability policies for cancer survivors who might not even be totally in remission? I would like to know as I am sometimes asked for such information at my job. As I understand it even the largest insurance companies are reluctant to issue annuities many years in the future that they guarantee to be inflation adjusted? Have you factored in all the administrative fees for the private company with all its advetising and need for profits?

When I worked for the State of Wisconsin, they offered a state run life insurance program. It paid better benefits with lower premiums than any private insurance company. All the premiums are paid out without the major deductions of corporate profits, advertising and other "cost". Unfortunately the insurance is by law only available to Wisconsin residents. Mostly only state employees are aware of the program.

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Could you try to rebut the following article.

Opinion pieces and speeches by EPI staff and associates.

THIS PIECE ORIGINALLY APPEARED IN THE WASHINGTON POST ON DECEMBER 23, 1998



A Deal Privitization Can't Beat


By Dean Baker

The most common argument for privatizing Social Security is that workers would enjoy a higher rate of return on their money if they could invest it in the stock market. Privatizers argue that Social Security gives workers a low, or even negative, rate of return. They assert that the stock market, on the other hand, would give workers a 7 percent annual rate of return even after adjusting for the effect of inflation. These claims fundamentally misrepresent the facts by exaggeration privatization's return and discounting the return Americans receive from Social Security.

Privatizes, understate Social Security's return because they base their calculations exclusively on the retirement benefits that individual workers receive. They ignore the other aspects of the program, such as disability benefits and survivors' benefits for dependent children and spouses. Social Security is more than an investment vehicle. It is an insurance policy against disability, premature death and an impoverished old age after a lifetime of low earnings. Any insurance company that charged its customers, on average, a dollar for each dollar in benefits it paid out would quickly go out of business. In the real world, insurers actually charge customers approximately $1.18 for each dollar in benefits they pay out. Any fair comparison of Social Security to the private sector must include this premium in its calculations.

But Social Security is an insurance policy against something else: inflation. Its retirement payments take the form of a real valued annuity: a payment that continues as long as the worker (and/or spouse) lives, and is adjusted for inflation. It is difficult if not prohibitively expensive to buy in the private market an annuity that is protected against inflation, and workers typically pay premiums of 15 percent to 20 percent to purchase an annuity that is not indexed to the cost of living.

When you factor in these four insurance features of Social Security - its protection against disability, premature death, an impoverished old age and inflation - its return increases significantly. No private substitute can offer nearly as good a financial deal.

While the conventional calculations understate the returns from Social Security, they inflate those of private accounts. The most important source of exaggeration is the projected returns in the stock market. Although those returns have averaged 7 percent over the past 75 years, they are unlikely to continue to be that high. The Social Security Trustees' projections of slowed economic growth suggest that stock market return will range from 3.5 percent to 4 percent during the next 75 years. It is also important to note that most people will not keep all their money in stocks all the time. The conventional assumption is that over a worker's life he or she will invest 50 percent of savings in stocks and 50 percent in lower-yielding bonds or money-market funds.

Next, it is necessary to count the administrative costs. In privatized retirement systems in Chile and Great Britain, these costs have run between one percent and 2 percent annually. Finally, one has to include the taxes needed to finance the transition to a privatized system. These taxes could be as high as 1.6 percentage points of a worker's wage. Zero return is paid on transition taxes.

When the returns on private accounts are accurately tallied, they fall below 2 percent and may even dip below one percent. That's far worse than most workers fare with Social Security. A two-earner" couple, for example, for example, in which the husband's annual wage averages $27,500 and the wife's wage averages $13,200 will reap a return of 3.2 percent when all the benefits of the Social Security program are assessed on the basis of their insurance value

Social Security's benefit structure is progressive, so that poorer families receive a better return than higher-income families. A couple in which both spouses earn annual wages averaging $13,200 will get a return of 3.5 percent, when all the benefits of the Social Security program are taken into account, while a couple in which one member averages $44,000 and the other averages $27,500 will get a return of 2.4 percent. Still, an honest and thorough appraisal raises Social Security's rate of return a full percentage point or more above what any privatization plan can deliver to most Americans.

Social Security will not make anyone rich, but it's been a good deal for 60 years, and there's no reason it can't be a good deal for another 60.

 

Madmax, would you please stop playing the popular little wounded good guy. It is tiring. If you can't stand arguing politics and religion and other volatile issues without getting your feelings hurt,. why don't you stop. If you can onlly give it out, but can't take it, why participate?

After all, conventional wisdom is that you should never talk politics, religion and I think money in polite conversation.

 

P.S. note that Madmax often times doesn't do much research on a topic. After he has exhausted his platitudes and gets put in a hard spot by the responses, he resorts to calling foul and tries to distract by trying to turn it into a purely personal pissing match.

Madmax, why don't you just put me on your ignore list, if your feelings get hurt so easily by my posts?

 

Now, that I've dealt with the nuisance of another purely personal attack, a quote from Refman.

Low wage earners come out the best under the social security system. Their check is much closer to their actual take home during their earning years. Do you think that low wage earners are going to have as much in their old age as higher wage earners under any system? How are they going to save enough to max out their IRA's? If you take the same percentage out of their fica and send it to an IRA they still will fall way behind the higher wage earner?

I sympathize with the plight of your grandmother and father, after all I work in the broad social service field , and hear these types of stories constantly. We both can agree that this is horrible. If you read the excellent quote from FDR, so did he. The question is what to do about it.

Gore proposedto use the huge surplus in part to fund adiditional retirement accounts for the lower income folks.
He called this "social security plus". If you make nothing or next to nothing putting 2% meager wages will still not amount to much.

Any retirement specialist will tell you that you should have at least a significant part of your retirement portfolio,after the age 65, in an ultra safe investment. You should think of your ss check as being that portion. If you want to invest or even speculate with some of the other money, ok.

The ss system essentially requires this because society does not want to have to 1) watch old people who failed to save or made wrong investment decisions suffer or 2) more likely provide general tax dollars to bail them out after they are in that predicament.

Getting back to the grandmother. What would have been better to have given her $300 tax refund when she was younger (while giving a many times bigger refund to the wealthy per the Bush tax cut) or to have put some money in an IRA type account for a supplement to her safe money ss check?