Will Social Security be Secure Anymore?

[Joesitz (RIP)]

Bush has set the wheels in motion for change and Social Security is of primary concern to him (much more than Tair ism). He really needs a new name because secure it will not be.

Apparently he plans to enact legislation to change social security to a partial contribution to the Stock Market. That means your contribution! The rest of your contribution will be matched by your employer (I believe). So you will be paying more and depending repeat depending on the stockk market to make ends meet. I feel for you yunguns because apparently the older ones will continue in the same vane. Not sure about this.

Joe

 

[rtureck]

Bush has set the wheels in motion for change and Social Security is of primary concern to him (much more than Tair ism). He really needs a new name because secure it will not be.

Apparently he plans to enact legislation to change social security to a partial contribution to the Stock Market. That means your contribution! The rest of your contribution will be matched by your employer (I believe). So you will be paying more and depending repeat depending on the stockk market to make ends meet. I feel for you yunguns because apparently the older ones will continue in the same vane. Not sure about this.

Joe

To answer your question of "will social security be secure" I have never consider social security as secure old system or privatization.

Joesitz, honestly do you plan / count on social security as a significant part of your retirment budget?

 

[euterpe]

You wouldn't be obliged to put your money into stocks. There are lots of other investments (government bonds, for example) you could make with the money which would make it grow a lot faster than it does in the Social Security system.

 

[Ptichka]

You wouldn't be obliged to put your money into stocks. There are lots of other investments (government bonds, for example) you could make with the money which would make it grow a lot faster than it does in the Social Security system.

How exactly is it supposed to work?!!! SS is not an entitlement program. The money I put in goes to pay my grandparents. Now, if I were to be allowed to invest my money, who exactly would pay them?

 

[anya_angie]

This is not good, considering yeah I depend on SSI for my income.

My mom is now unable to work for who knows how long, if she'll ever get back to work. We're paying that she can get some sort of income, because if not, with only my stepfather's income I don't know how we'll manage the next 4 years.

 

[Mathman]

I am against privatization of social security, not so much because of the influence of the marketplace on social security but because of the influence of social security on the marketplace. If the government were allowed to invest social security funds in the stock market (or in the bond market, or in mutual funds, real estate, or anything else), it would immediately become the 800 pound gorilla. The government would dominate the market and be in a position to manipulate it for political reasons rather than fiscal ones. Politicians absolutely would not be able to resist the temptation of tailoring social security investment strategies in such a way as to bring about political goals, to play partisan politics, and to reward their friends and punish their enemies.

Historians are fond of comparing England with France during the years leading up to the French revolution. How did it happen that in France the poor kept on getting poorer, while the nobility got more and more tyrannical, until finally there was nothing left except to have a bloody uprising? While across the channel the people were able to maintain a certain degree of freedom from oppressive government, and at the same time saw a rise in the fortunes of a growing middle class?

One factor (the historians say) is that in England the seat of government was held completely separate from the financial centers. This separation was even physical. The palace of the king was way up the river from the commercial centers of London. The consequence was that the king did not control the wealth of the nation. This allowed the nation to build capital (so claim the capitalist economists who admire Adam Smith's ideas), and gave the people some means with which to resist the power of government. London became the richest and most vigorous (economically speaking) city in the world.

As for the future of Social Security here, it's broke. The baby boomers are out of luck when they get old. (But I'll be dead, so I won't care, LOL.)

There is only one thing that will save it, IMHO. The children of the old people will not permit social security to go out of business because then they would have to take care of their aging parents themselves.

Just my two cents.

Mathman

 

[bronxgirl]

And if you don;t have children to take care of you in your old age, or found a sugar daddy when you were younger, you are plain out of luck. W isn't worried. Our tax dollars will go to always give him a comfortable pension at baseline. (Not including what his"friends" will add to the pot)

 

[Joesitz (RIP)]

To answer your question of "will social security be secure" I have never consider social security as secure old system or privatization.

Joesitz, honestly do you plan / count on social security as a significant part of your retirment budget?

It will bring me about $1500 more a month without doing anything further. I'm already well pensioned and I have enough securities to be free of financial worries. The $1500 helps to defray the costs of trips to Moscow, and other venues of figure skating.

However as fortunate as I am, there are millions of Americans who rely on social security as a principal part of their income. My mother was one of them, so I am aware of the concern of those milliions. Not everyone knows how to play the Big Board.

Joe

 

[attyfan]

Social Security

As I understand it, it won't so much be Congress investing Social Security in the stock market as it will be me directing where the money currently withheld for Social Security will be invested. Since my contributions will no longer go into the Social Security trust fund, the government will have to borrow to pay the current recipients. This means that my nieces and nephews will not only have to secure their own retirement, but they will also have to pay a deficit that is even bigger than it would be if Social Security was not "privatized".

 

[Ptichka]

Just wanted to add to this discussion. It is often said that Democrats think people are stupid, whereas Republicans think people know best. The truth is that there are many decisions people should not make. Imagine if SS money was invested in Enron stocks At the end of the day, poor would just get poorer, and the society would either have to accept tousands of poverty stricken elderly, or find the money to pay them to make ends meet anyway. Neither of which is too good.

 

[Piel]

Look at how many folks don't have any kind of savings plan. All of the people who live paycheck to paycheck and think "next year I'll begin saving" and never get around to it. Call them irrersponsible, poor money managers or whatever the result is the same... nothing to fall back on in tough times much less to live on after retirement. Social Security as we know it now is far from perfect but is way better than nothing.

 

[rtureck]

It will bring me about $1500 more a month without doing anything further. I'm already well pensioned and I have enough securities to be free of financial worries. The $1500 helps to defray the costs of trips to Moscow, and other venues of figure skating. :

However as fortunate as I am, there are millions of Americans who rely on social security as a principal part of their income. My mother was one of them, so I am aware of the concern of those milliions. Not everyone knows how to play the Big Board.

Joe

You have a good point. Nice you don't have worries, I worry all the time, that's why I do not factor social security into my retirment equation. I agree whatever they are supposed to give us, is a nice icing on the cake, i.e. your Moscow figure skating trip money. I also agree there are people who really have to count on social security. Hopefully by the time I retire, I will receive the Moscow skating trips $ from social security, if not I will have to do without skating trips, I don't spend $$ for world championship outside of USA currently, it won't be a lifestyle adjustment for me . I am very frugal, I do not pay $200 a ticket for Wagner operas, I attend Cosi Fan Tutte free performance from the local university music department. :laugh

As for the future of Social Security here, it's broke. The baby boomers are out of luck when they get old. (But I'll be dead, so I won't care, LOL.)

Yup, the old system is broke, and the proposed new systerm does not sound much better, or maybe worse. Poor baby boomers, they worked so hard to pay into the system. BTW, I don't think you will be dead, by then. Without being too speulative, I bet you have many retirement golden eggs nested away. So the bottom line is, for people to take financial responsibility and do their own plan.

Look at how many folks don't have any kind of savings plan. All of the people who live paycheck to paycheck and think "next year I'll begin saving" and never get around to it. Call them irrersponsible, poor money managers or whatever the result is the same... nothing to fall back on in tough times much less to live on after retirement.

I think they should start saving today, and now, not next year. I am very aware some people don't even make enough to pay for food, but for others who live from paycheck to paycheck, if they can even save $1.75 cents a day, e.g. cut out the cans of soda, that amounts to about $50 a month, good enough to put into a savings account or into a monthly mutual fund deposit.

I really don't think Bush proposal will pass without a HUGE fight, and without modification. Social Security is a core issue with the democrats.

 

[Mathman]

I think they should start saving today, and now, not next year. I am very aware some people don't even make enough to pay for food, but for others who live from paycheck to paycheck, if they can even save $1.75 cents a day, e.g. cut out the cans of soda, that amounts to about $50 a month, good enough to put into a savings account or into a monthly mutual fund deposit.

Young people, start today! To continue with Rtureck's example, suppose you are 18 now and plan to retire at 68. That's 600 months. If you invest $1.75 a day, or $52.50 in a 30-day month, here is how to figure out how much money you will have. The Future Value of an ordinary annuity is given by the formula

FV = C*{[(1+i)^n - 1] / i}

where C is the amount of the monthly investment, i is the monthly interest rate and n is the number of months. ("*" means multiply, "/" means divide, and "^" means "raise to a power." -- Did I do those nested parentheses right, RT? ). Let's say you can get a 7% annual rate on your investment. (You probably can't get that much right now, but over the whole course of your working life, that's a reasonable average to aim for.) So that is .07 / 12 = .0058333333 interest rate per month. The value of your investment when you retire is

FV = $52.50 * [ (1.0058333333^600 - 1 ) / .0058333333 ] = $52.50 * 5619.50 = $295,023.

The 5619.50 is the amount of return per dollar in your monthly payment. So if you want a million, you have to up the ante to $178 per month.

Mathman

 

[gezando]

PV = C*{[(1+i)^n - 1] / i}

where C is the amount of the monthly investment, i is the monthly interest rate and n is the number of months. ("*" means multiply, "/" means divide, and "^" means "raise to a power." let's say you can get a 7% annual rate on your investment. (You probably can't get that much right now, but over the whole course of your working life, that's a reasonable average to aim for.) So that is .07 / 12 = .0058333333 interest rate per month. The value of your investment when you retire is

FV = $52.50 * [ (1.0058333333^600 - 1 ) / .0058333333 ] = $52.50 * 5619.50 = $295,023.

The 5619.50 is the amount of return per dollar in your monthly payment. So if you want a million, you have to up the ante to $178 per month.

Mathman

OK professor Mathman, since I had a tough time trying to pass 6th grade math, but I am motivated. So I am struggling to understand, I am slow.

The ante is raised to $178 / month. How can I find the $178 a month. I can use net zero instead of high speed dsl, = $30
If I cancel the cable, comcast services = $60
No snacks or soft drinks = $75

That is $165 a month. So instead of a million how much will I have, at time of retirement?

GEZ the math challenged one

 

[Mathman]

About $927,000. But wait. Since you are only 18 now, you can do even better...

BTW, (Mathman,) I don't think you will be dead, by then. Without being too speulative, I bet you have many retirement golden eggs nested away.

No, I don't. I have been living like the grasshopper, not the ant. But your post inspired me to go to the payroll office today and arrange for a payroll deduction for an IRA. They will be taking $648.72 out of each biweekly paycheck. Assuming that I work until age 68, this means I will be receiving 208 such pay checks, and if I can get 7% return on my investment then when I retire I will have

FV = 648.72*{[(1+.07/26)^208 - 1]/(.07/26)} = $180,000.

I'll be in clover.

But if you start at age 18 and work until 68, your nest egg will be (use the same formula but with n = 1300 paychecks instead of 208)...

$7,700,000!

If you get lucky and, get, say a 9% interest rate (many investments did better than that during the 1990s), the total value of your investment rises to

$16,500,000.

Of this, you put in $843,000 and the rest -- almost $15 million dollars -- is interest -- money for free! What a country!

So...to all the young people out there...don't do what I did. It's too late for me to get rich, but not for you.

Mathman

 

[show 42]

.........But, how far will that money go 50 years from now? What will it be worth in 2055? It may be worth only a fraction of that at face value......42

 

[JOHIO2]

Ptichka is right about Enron. Most people don't have big amounts to invest and thus have no way to diversify and hedge their investment bets. Individual investers, including those investing their IRA and 401 K funds, try to maximize their returns. They tend to invest where they see the biggest gains. Unfortunately, those high-flying stocks are also the biggest risk. So, what are your choices? Safety or a chance for a larger return? Thus millions lost in the Enron debacle.

And the 800 pound gorilla WILL change the way stocks are valued. For good or bad? I don't know, but let's face it, how many of us have the time or energy or sheer luck to make out big on the stock market? If it was easy, don't you think we would already have done it?

As for saving: without health care coverage, I don't see most of us ever having enough to invest large amounts. With the ever-decreasing availability of health care coverage and its' increasing cost, any personal or family member's illness can wipe out any potential savings for years, perhaps decades at a time. Health care coverage reform must be addressed. We are the only major industrialized country in the world without a comprehensive health care system available to all. So the British don't have picture perfect teeth? At least they HAVE dental care. And who really loses when some people have to wait or do without? Sacrifices and shortfalls and gaps exist in any system. Our system, if you can really use that term, has gaps big enough for most people to fall through at some point in their lives.

No, I don't think Bush's privatization scheme will work and I don't see him as a visionary coming up with plans that address the real issues involved.