As I approach the age of 55, I've been looking at whether I've been doing the right things to avoid having to eat dog food in my golden years.

It's no secret that our Social Security system is running on borrowed time and we've all heard a wide range of proposals, from means-testing to upping the eligibility age to permitting investment in private Social Security accounts. While subject to some variability due to the rate of inflation, levels of unemployment, etc., there are certain things that are fairly predictable, including life expectancies and birth rates. So, it seems to me that there must be some fairly concrete answers to what it would take to "save" Social Security--i.e. raising the minimum eligibility to "X" years, increasing the maximum withholding to income on "Y" dollars, or the like.

I'd be interested in knowing exactly what some of these proposed adjustments are and what they would accomplish. As an example, would raising the minimum retirement age by one year do it? If not, how about three years? Can anyone point me in the direction of some relatively reliable information on this subject?

Logan's Run

I don't know for certain what effect raising the age limit would have, but it seems the right thing to do. SS was passed back in 1935; according to this, if you were a white male about 60 at that time, you could expect to probably live another 15 years, so SS was designed to cover the final (expected) ten years of your life. According to that same table, since then, life expectancy has increased by about six years. Moreover, the elderly nowadays are typically in better health than they were way back then: less smoking, better diet, safer working/living conditions during their careers, and so on. In light of that, it seems reasonable to jack up the age limit to at least 70. People can retire earlier if they want to, but it'll be on their own dime; can't draw SS until you're 70. If SS is only expected to cover retirees for an average of ten years instead of 15, then I would guess that should reduce the cost by about 1/3.

That's a start.

I don't know how we do this, but getting back to the original concept that social security was a safety net and not anyone's sole means of retirement income would enable a means test for eligibility for that safety net..

I agree, rasing the age would help the issue. Keep in mind, SS never compeltely runs out of funds because those currently employeed are constantly paying into the system. But, the ability of the system to maintain a certain level of compensation is compromised.

People seem to think that it's a savings plan, but it never was. Because it began paying benefits immediately when it was created, it is essentially a tax program. SO I never understood why people acted like it would run ou of money like a 401k.

Darn. Now I wanna go home and watch that again.

That would jsut turn it into a traditional welfare program that taxes the the upper percentile to compensate the lower precentile without any incentive to contribute to society by working. I guess I sort of liked the idea that everyoen that pays into it is entitled to some level of benefit. Of course I also think the tax rates on the upper class are too low and minimum wage is too low as well. Adjsut thsoe 2 and you cna balance the budget by increasing revenues while cutting entitlement programs. You minim wage should always be more than unemployment or other welfare benefits so there's an incentive to work. OF coruse, I'll admit, there are other potental negative impacts of raising taxes and minimum wage.

Increase taxes on the people who already pay a disproportionate % of taxes? "...data show that a big portion of the federal income tax burden is shoul­dered by a small group of the very richest Americans. The wealthiest 1 percent of the population earn 19 per­cent of the income but pay 37 percent of the income tax. The top 10 percent pay 68 percent of the tab. Meanwhile, the bottom 50 percent—those below the median income level—now earn 13 percent of the income but pay just 3 percent of the taxes. These are proportions of the income tax alone and don’t include payroll taxes for Social Security and Medicare."

People already don't save for retirement and simply rely on social security. There is already a large population that finds it more beneficial to rely on entitlement payments to live...retired or not.

Since the demise of defined benefit plans, most people have done a disastrous job of providing for their retirements through 401(k)'s and the like. Stock market fluctuations that have robbed the plans of a significant part of their value haven't helped. Some people planned to sell their houses at inflated prices, buy down, and use the difference as a part of their retirement (Oh well!). I don't believe that the average worker has the discipline to provide more than a modest part of his retirement needs through saving over his working life.

In the absence of resurecting defined benefit plans, which isn't going to happen, the government is going to have to continue to provide the basic amount needed to retire through Social Security. The alternative would be a lot of competition in the dumpster-diving industry, once all the Walmart greeter jobs, and any other jobs that can be handled by old folks who don't move or think very fast anymore, are filled.

People wear out at different rates, some at 50, some at 90, so it's hard to put a definite age on eligibility to draw Social Security.

It's easier to means test Social Security, which we already do to some extent by taxing Social Security benefits that exceed a floor amount. There is now a similar means testing for Medicare coverage. I just had to send in an additional $700 for Medicare coverage because of my income level. "Means testing" at the moment means income testing, as there is no convenient way to determine how much assets a person has. Means testing based solely on income is inequitable, as a person who has a large amount of assets he lives off of would not suffer any reduction in his Social Security or increased payment for Medicare. If a way were found to extend means testing to assets, a significant amount of additional funds could be generated. Clearly there would be a lot of resistance to that, as the government doesn't currently know how much assets you have (unless you die and file an estate tax return), and people with assets would no doubt like to keep it that way.

I guess one way to extend means testing to assets would be to tack on a Social Security tax to the estate tax. Since estate tax returns are already required, no additional paperwork would be required.

I also think that workers should be required to pay into a retirement fund in addition to Social Security; it should be a payroll deduction over which the worker has no control. Private companies could administer the funds, and workers could choose which company to invest with, but the funds invested would not be available for anything other than a retirement annuity. This fund could reduce the reliance on Social Security over time, but I don't see it replacing Social Security, as the fund would never guarantee a certain payment. It would be sort of like a forced 401(k), with no early withdrawal provisions.

Read the books. Lastday was your 21st birthday.

I would go for lastday on your 75th. By that time most people are worn out. Or thats when SS stops.

Otto von Bismarck and Social Security

Note the original concept was to provide benefits for ". . .those who are disabled from work by age and invalidity"

The original retirement age to qualify for benefits was 70.....

At the time average life expectancy at birth was about 45....

Boomsday

I agree with every word Dave said there. Wise man he must be, hope I could have put together as intelligent response to the the question OP presented.

--
Mikko

Social Security will survive if young workers and employers contribute through payroll deductions.

No thanks. I don't need to be forced into saving money in an account run by someone over whom I have no control. Forget it. Remember Enron? Same thing- No control= all gone at the whim of unscrupulous people.

I believe that in this day and age, if someone wants to retire, they had better saved enough to do it. Relying on a government Ponzi scheme as a means to support my final years is not what I'd call a good idea.

A quick note on this... SS is an insurance scheme - always has been, always will be. Premiums are collected on those who are currently working in order to pay the benefits of those that have earned their way in to the scheme (not counting the original receipients when SS was created). When SS was created the average length of benefits was calculated to something a little over 3 years net. Obviously this has changed quite a bit.

But this is not the first time that SS was a bit upside down. Because of the political constituencies involved, there really is no chance that benefits will be reduced even though we have a glut of payees and a dearth of payors fast approaching (can you say baby-boomers?). Unfortuantely young workers (as a whole) don't vote and are becomeing less % numerous. Also unfortunately, retirees vote in very large %, so any kind of measured, balanced approach to securing the scheme will not fly.

The bottom line is that SS will be "saved" as it always has been: higher payrol taxes. Period. Whether this means that the ceiling will get extended (likely), or the tax rate will rise probably depends on which party controls congress at the time of the change.

The argument about "fairness" has little to do with SS policy, IMHO. This third-rail of politics means that the smallest and least powerful constituency is likely to get screwed, i.e. young, rich workers. Nothing unusual here.

JT

If I were a fireman with a defined benefit pension plan, I would probably agree with you. Unfortunately, there aren't too many of those left outside of the public sector.

Mike, I can't find it at the moment, but I read a proposal to extend the eligibility date for retirees by one month for each remaining year of work, e.g. a 55 y/o born on 1/1, who today qualifies for early at 1/1/2017, would not become eligible until 8/1/2017, adding 1 month for each of the 7 years. I read that doing something this small would have a very significant effect given the number of babyboomers in queue.

Having been involved in the financial services industry for almost 25 years now I should know better. But, as I approach the age of 54, I am now hoping that I see at least some return on the contributions I have been making into SS since the age of sixteen.

To address your question directly, you will not find any EXACT figures because all projections must contain too many variables/assumptions. Incremental changes to starting dates, tax rates, benefit amounts, etc. can make a huge difference when extrapolated over many years. That said, I suggest you go to www.heritage.org and read some of their recent writings.

Also, there have been some good threads posted here recently about retirement income, using bonds versus annuities, retirement planning software, etc. As I have posted elsewhere, creating sustainable streams of income will be the holy grail for investment advisors, financial planners, etc. Be careful if you plan to use a professional though. There are many who sound intelligent and may appear competent who are simply sales people at heart.

Thanks for that info; this is actually what I was looking for. I've heard these projections before--that some incremental changes made now could sustain the viability of the program through the magic of compounding returns. Nonetheless, as Tom suggests, there are a significant number of variables that could effect the outcome. It's kind of disturbing that no one in a position to do so actually seems willing to tackle this with even an incremental approach.

As I recall, when SS was created there were about 16 wage earners supporting each retired beneficiary. That number is now down below four and will drop to about two in the years to come. Either we need to start making a lot more babies or change our expectations.

I've already started my son, who's 23, along the path of self-sufficiency in retirement; I've told him not to expect that he'll have a pension or Social Security to rely on in 40 years.

SS has always been a pyramid scheme...

Best thing to do is copy the current system, paste it to MS Paint, click "rotate 90 degrees" twice, and the pyramid will be reset...

All other options (along with the money) will be lost in political churn...

Sadly, yes it is a pyramid, but all of us paycheck earning Americans pay into it fully, and we would like our fair share back. I don't approve of the basic concept as I could do much better keeping my own $$$. Greedy politicians have robbed it without so much as an IOU, of course with no intention of ever paying it back. Sux to be us doesn't it?

Right, and when I retire it will be my money that I saved that will be paid back to me. That and the additional percentage that I put away separately anyway.

The recent bais against defined benefit plans is because most companies and quite a few public agencies misused the money they were supposed to be safeguarding for their employees. What you suggested is a defined benefit plan run by someone else that we can't control. It is precisely what was in place in many of these instances, and they were run into the ground by poor management.

Social Security really isn't in particularly bad shape. It usually gets lumped in with medicare , since medicare is in much more dire straits, but SS has plenty of money for people of your generation and it would only take fairly minor modifications to its current funding, by way of slight changes to the tax or a change to the age limits, to push its funding health very far out into the future. Those who claim that SS is in dire straits are those who claim that the SS trust fund doesn't exist, that social security hasn't been loaning money to the general fund, and that it has no reserves to accommodate the retirement of the baby boomers. But if any of that is 'true,' it would require the federal govt to default on its debt to SS, which would cause our country's credit rating to be massively downgraded - in which case, your social security money will be the least of your concerns.

That's all well and good until you talk about a generation like mine, which has had 100% of investment gains of our working careers eradicated. It's one thing to have that happen at the end of your career, so that money that wouldn't have long to mature experiences no gain. For folks in my age group, however, the most important money in our retirement accounts - the stuff that will sit there the longest and should have matured the most - might as well have been stuck under a mattress. If a 40 year old finds himself disabled tomorrow, there's almost no chance he can afford to support himself without the insurance social security provides, because much of what he saved in recent years has probably been eradicated entirely and the small amount he was likely saving in the first years of his career likely hasn't grown much at all. Could you support yourself for 30-40 years on the cash you could stick under your mattress in 10 years? Not likely.

Social Security is an insurance program. It isn't intended to be a retirement account. It is there to provide a guaranteed baseline income level in retirement.

Imagine if you had changed your SS contributions to be based on the stock market, as was suggested 6 years ago. Putting SS contributions into stocks is not much different from borrowing against your life insurance to buy stocks on margin.

A small minority of people are capable of managing direct retirement investing effectively, and to a large degree, they benefit from the mistakes of the majority (buy high/sell low). I'm not saying it's a zero-sum game, but there is an aspect of that, and many people simply do not have -- and will never obtain -- the financial savvy to avoid being prey.

Must be one of those age things...

I could not agree more Tom.

Why don't we get the government out of the business of robbing Peter to pay Paul? This desire that everyone have an equal outcome ("some" level of retirement in this case) is a load of rubbish. How about we get government back in the business of protecting people's opportunities so that they can do what they wish with their monies?

Or has everyone just given up taking care of themselves out there?





Ok Selden, but who's problem is this really? It damn sure isn't Washington's fault. I believe that the powers that be over in Foggy Bottom have had enough of a hand in rendering "We the People" incapable of fulfilling many of our proper duties to our selves and to our society.

"The ultimate result of shielding men from the effects of folly is to fill the world with fools."

The most comprehensive look at SS I've seen.

http://finance.yahoo.com/focus-retiremen...y-readytoretire

But this year's Social Security cash shortfall is a watershed event. Until this year, Social Security was a problem for the future. Now it's a problem for the present.

It would have been a lot simpler to fix the system years ago, when we could have used Social Security's cash surpluses to buy non-Treasury securities, such as government-backed mortgage bonds or high-grade corporates that would have helped cover future cash shortfalls. Now it's too late.

IMHO - The SS system appears to be pretty much "upside down" right now and is, to all intents and purposes, a Ponzi scheme!

Not a pyramid, a Ponzi !

Perhaps those that were not properly invested and diversified should look no father than their own bathroom mirror as to why their investments were "eradicated." For the individual investor, it didn't take much knowledge or experience to see what was coming.

Like you said, Social Security is an insurance program. It is not a retirement program. If you are too old or too ill or disabled, it is there for you. If you simply "don't want to work any more" or want to retire, you are abusing it.



An important distinction.

I'm going to expand on this, as it appears as a particularly callous statement;

We, as Americans, are being forced into alternate retirement systems by forces we cannot control. Mostly it is because of poor management of past retirement systems that is doing it. The Defined Benefit Retirement is a thing of the past because of popular exploitations by the agencies that controlled them. The demonized plan, that worked when it was properly managed, has seen it's heyday.

Instead, we are all now expected to save our retirement money ourselves. If we're lucky the company we work for will kick in some extra. What this means is that we must be our own investment advisor, or hire one, to ensure the safety of our money and investments. It has become a necessity that we all pay attention to our retirement accounts, the market conditions, and fluctuations that occur within them. We must then choose the best options that fit our goals and make the changes ourselves, since with these "new" retirements we cannot rely on anyone but ourselves. We have no other choice.

And you know why that is? It's because too many plan participants sued their investment plan managers for making decisions on their behalf that they (later, with perfect hindsight) deemed to be "wrong" decisions. I've been around these plans for decades, managed the investments, even done the required valuations for the annual 5500 filings. I've seen idiot participants sue for too much risk-taking, too-little risk-taking, etc.

So, what's the end result? I tell ALL of my clients that they are living idiots to make investment decisions on behalf of participants.

About 10 years ago the CDN government looked at our CPP (SS) and OAS. Both were looking to be soon underfunded. Over the next few years they raised contributions considerably. What a difference 10 years makes. Both are doing quite well, and expected to remain healthy.

I think both plans pay considerably less than their American counterparts, but they are healthy plans. However, our health insurance is very affordable.

I just retired and can draw from CPP when I turn 60, and OAS kicks in at 65.

Au contraire... it's not only not too late, but using SS receipts to finance the day-to-day obligations of government and the subsequent issuing of bonds, is exactly that.

The Fed, acting on behalf of US taxpayers paid out TARP $ and took MBS in return; so, we did buy MBS with SS contributions.

My father was a coal miner. He raised and helped educate nine kids. He retired with a relative small SS and UMWA pension and lived with the body bent and blackened in the mines.

Even so, he owned his modest house, had no credit cards, ever; and died leaving my mother with with $300k in the bank.

I don't have much sympathy for those who gambled and lost fortunes as in the halcyon days of Silicon(e) Valley. That's life, tough as it is. Before anyone throws stones, I lost a fortune in late 80's/early 90's. Nobody to blame but me, sadly.

Mike,

You will learn nothing from anyone on this subject as it is only conjecture and, know this, the idiots in Washington can not be relied upon to solve this issue any time soon.

Fortunately, I heeded the wisdom and lessons from my father and grandfather's generations. I never trusted, nor relied upon, a government to fund my retirement. Learning about saving for a rainy day made me undersand that my latter life parade would generally be rained upon. So supply your own umbrella.....

Everyone should be, or quickly need to become, informed consumers. The American dream is what it is, a DREAM! Sold by politicians and Madison Avenue and, unfortunately, too many folks believe or demand it be a reality. It appears that noone seems to want to "cut their cloth to suit" in their waning years.

I would rather eat hamburger than steak, waking up and rejoicing every day, knowing that I own everything in my life and owe nothing.

According to the Trustee's report SS should have enough money to pay for 100% of its obligations until 2037, and then at a 75% payout rate until 2083. I seem to remember that those projections included some pretty pessimistic estimates for both population and GDP growth, but I can't point to a link for them right now. So it seems that Social Security isn't really in dire straights and will continue to pay benefits for the foreseeable future.

Medicare, on the other hand, is in trouble and will take some considerable changes to fix.

Those numbers are based on SS IOUs. From a cash flow standpoint SS is either upside down right now, or is about to.

SS Truees = Oxymoron !

Of course they do. They are the only ones that can afford ot pay for large goverenment programs such as defense, and welfare. They used to pay an even larger burden of the taxes many decades ago. That's how tax systems have always worked. The bottom 95% works for the benefit of the upper 5% and with their large salaries and profits, they pay the bulk fo the socila programss that keep the workers happy enough to continue do the work, that makes the upper 5% wealthy. If you fail to keep the lower 95% happy, you run the risk of social unrest. If they start starving to death, historically, they will revolt and they will even cut off the heads of the ruling class.

If you increase taxes on the middle class, they put off buying a new TV or car, or cut back on services. If you increase taxes on the bottom 50%, they hold off getting medical treatment, can't pay their rent, can't afford good food, and other wise struggle to stay above the poverty line without hte aide of entitlement programs which then just ncourages them to not work. If you raise taxes on the upper say 1%, they have to hold up purchasing their 3rd Ferrari, 4th house, or invest a little less money in that risky start-up. So by taxing the upper class you trading less capital investment from more consumer spending. The middle class spends a larger percentage of their money. The upper class saves, invests or otherwise accumulates a larger percentage of their money, meaning less money goes towards consumer spending. What's more useful to a company $1 in capital loans, $2 in stock equity, or $1 in consumer spending. If I was any business, I'd take the increase revenues ahead of a loan or stock equity. This is why "trickle down" doesn't really work when compared on equal terms. Put hte moeny in teh hands of consumers, and tax those that profit the most from the least amoutn of work... because quite frankly they can afford it, and socially, if we were less greedy, the pwoer, control, and respect they earn from their status and position should be almost as valuable and the millions they make at the expense of others.

God bless America, but at least you've just come clean--nakedly so--with your belief system.

How many businesses have you owned? I mean real, serious businesses that took significant risks and made money?

You ought to try it some time.

Since the subject is Social Security, as long as we're talking about the percentages paid by the lower and the upper 5% of wage earners, I'd just like to point out that the lower 5% of wage earners pays a much larger percentage of their wages on Social Security taxes than the percentage paid by the upper 5% of wage earners.

Yeah, but factor what's paid against the benefits and I'll bet you'll get a different story, no?

Yes. I will have to live to the age of 88 in order to get back the amount I've paid into Social Security, without interest.

I haven't done the research but I am aware that some local and state government employees do not pay social security taxes. Don't know about federal employees.
Perhaps that is a pool of money that can be tapped to help keep SS afloat?
Also remember some defined benefit government pension retirees receive reduced SS benefits..through something called "WEP".
It may affect me when its time to apply for my SS benefits.

Of course they do. They are the only ones that can afford ot pay for large goverenment programs such as defense, and welfare. They used to pay an even larger burden of the taxes many decades ago. That's how tax systems have always worked. The bottom 95% works for the benefit of the upper 5% and with their large salaries and profits, they pay the bulk fo the socila programss that keep the workers happy enough to continue do the work, that makes the upper 5% wealthy. If you fail to keep the lower 95% happy, you run the risk of social unrest. If they start starving to death, historically, they will revolt and they will even cut off the heads of the ruling class.

If you increase taxes on the middle class, they put off buying a new TV or car, or cut back on services. If you increase taxes on the bottom 50%, they hold off getting medical treatment, can't pay their rent, can't afford good food, and other wise struggle to stay above the poverty line without hte aide of entitlement programs which then just ncourages them to not work. If you raise taxes on the upper say 1%, they have to hold up purchasing their 3rd Ferrari, 4th house, or invest a little less money in that risky start-up. So by taxing the upper class you trading less capital investment from more consumer spending. The middle class spends a larger percentage of their money. The upper class saves, invests or otherwise accumulates a larger percentage of their money, meaning less money goes towards consumer spending. What's more useful to a company $1 in capital loans, $2 in stock equity, or $1 in consumer spending. If I was any business, I'd take the increase revenues ahead of a loan or stock equity. This is why "trickle down" doesn't really work when compared on equal terms. Put hte moeny in teh hands of consumers, and tax those that profit the most from the least amoutn of work... because quite frankly they can afford it, and socially, if we were less greedy, the pwoer, control, and respect they earn from their status and position should be almost as valuable and the millions they make at the expense of others.



Wow!!!!

This is the second time in two days.

I really don't know where to begin or what to say.

It's really kinda scary.



I've heard all that stuff before, but I never thought anyone really believed it.

Defined Benefit plans in the private sector are disappearing because unions have lost there footing, the plans are expensive for the employers, and are not very portable for the employees/participants. Not to mention that the Pension Benefit Guarantee Corporation is underfunded by the tens of billions of dollars.

Since the days of taking a job with one employer, staying there for 30 or 40 years, and then retiring, ended for many various reasons, the defined contribution plans (where the employee/participant takes control) are in many ways better. Unfortunately, this does take the passenger out of the back seat of the airliner and put him or her in the pilot seat. It does take some seasoned judgement to succeed. Personal responsibility can be a tough lesson to learn.

On the other hand, forcing the masses to understand why their equity mutual funds go up and down might be the only thing that saves capitalism.

If you look at the plans that are run well, you will find that even today they are healthy and strong. Not only that, but the plans are only expensive for employers who do not run it well. The downfall of most of them is when the employer "borrows" from the pension fund, or stops contributing to it because they see it as an easy way to get cash for something else. They're borrowing against their employee's retirement with no penalty, but a promise to pay it back at a later date. The problem arises when that later date comes and the company doesn't have the money. GM went down this way. United Airlines went down this way. The downfall of the Defined Benefit Pension began when the rules were relaxed under Nixon, and continued to erode as each administration since relaxed them a little more. Nobody bothered to think for a second that the light at the end of the tunnel might be a freight train.



Judging by the fallout from this last dip, I'd say that the majority of Americans are not paying attention to their retirement portfolios and are destined to live off the scraps that Social Security will toss their way.

I have nothing against defined benefit plans. However, I disagree that only the plans that are poorly run are expensive. Many actuaries, investment managers, and accountants, and a lesser number of attornies, earned a good living serving defined benefit plans over the years. Nothing wrong with that. But, defined contribution plans are clearly less expensive.

Regarding participants not paying attention to their defined contribution plans, that's probably true. However, many times participants cost themselves money by tinkering with the mix of investments. Human nature has a way of causing people to sell low and buy high. As a friend of mine is famous for saying, portfolios can be like a bar of soap. The more you handle them, the smaller they get.

Blame the day job. To me it's liek a mass balance equation. NET Inputs = NET Outputs. If you examine the flow of money like it's a process, to me at least, it seeme as clear as 2+2=4... if you assume that government budgets should be balanced.... but I suppose that a different topic altogether. My town and our state at least, have balanced theirs. But then again, maybe thats why we've never seen the explosive growth of other states that are no facing massive deficits and near bankruptcy.

How does that change the implied obligation of upper wage earners to lead society both physically and financially. If we're satisfied with a very broad range of wages form the lower wage earner to the top, then how else do you propose we provide the services tha society demands without raising taxes on the top wage earners? How can you possibly argue that it's fair for a household making $60k/year to take on the burden of incresed taxes, but its' unfair for a household making $200/year just because they took on a "big risk". It's a net sum eqution, if you want one group to pay less, then you have to have thet other groups pay more.

Isn't the freedom, satisfaction, challenge and status of owning your own business worth nearly as much as the increased salary. Does EVERYTHING in life need to have a financial incentive?

A survey of most professionals shows that compensation is their 3rd or 4th concern to job satisfaction. You could increase my salary 30% or 50%, and I can guarantee my quality of life would not improve significantly. having a house 2X larger, or driving a Lexus instead of a Toyota isn't going to make a person happier. Many think it will, but it won't.


I would like to start a small business in the future. I suspect my wife and I will eventually work towards that goal. But I wouldn't do it for the money. I know that I'd make less money than I do now, but I'd enjoy my job more and I'd enjoy the challenge and greater sense of accomplishment.

Like I thought--you don't really have any idea what it takes to run a business. That's not a slam against you personally, but rather an observation.

Everything makes sense to you because you think it's all some sort of magic: start a business, make money, happily give increasing chunks of the money away to the less fortunate.

Everything in life does NOT have to have a financial incentive. Which is exactly why we don't solve problems with money, either. Get it?

What does any of this have to do with SS?

One way to fix it is eliminate all persons drawing it. Okay you can't do that. Sorry it can't be fixed. We can only let it roll.

If SS withdraws or deposits were to end tomorrow most individuals would not have and won't be able to save, invest, accumulate enough to pay the bills after they can no longer work. The aged population will be broke from medical bills too. Talk about homeless with no hope in sight.

Also as the years pass if less people opt out of the workforce jobs will be harder to find for the younger people coming behind them. Which my guess says means more unemployment, and crime. Birth control anyone!

Back when IRAs were created we were told by the adminstration that they would be our savior. I invested a big chunk of income into IRAs and 401ks like a good citizen planing for the future. It was all to compound like crazy and turn into millions of dollars. SS could be eliminated if that were the case. Well it didn't compound into millions and SS is still here.

Frankly I think the scheme is here until it goes bust so you better save lots of money instead of spending lots of money. Just saying.

He thinks the solution is to fix the SS problem by shifting more of the cost to the "rich," however that's defined.

Why isn't that relevant?

Because THIS time its actually going to work.

And FWIW, I could absolutely start and run my own successful business. I just need a good idea, funding, better marketing/networking skills and a few extra hours every day (because I happen to like sleep.)

I only suggest shifting more burden on the wealthy because 1) They can afford it. 2) They used to pay a lot more many decades ago, it's not like we're raising taxes to unprecidented levels. 3) Because money doesn't grow on trees and we can't borrow increasingly larger anounts of money forever.

Actually you can eliminate SS, but you would have to supplement the incomes of millions that rely on it with soemthing else. Whether a $1 bill is in my right pocket, left pocket or lying on the ground, its' still a $1 bill.

One thing to keep in mind is that your life expectancy goes up the longer you live. For instance, someone born in 2006 had an average life expectancy of 77.7 years but someone 65-yo then had an average life expectancy of another 18.5 years. So many of us can probably expect to live into our 80's and, with good genes, into our 90's. The Table published in 2006 can be found at
http://www.census.gov/compendia/statab/2010/tables/10s0105.pdf

A wise man recently reminded me, and he is living very comfortably, that a very famous bank robber was asked "Why do you rob banks?" His reply was, "That's where the money is?" Taxes are a price to pay so society can co-exist without turmoil. Government must get it where it is. This person I speak of also reminded me that although the richest few percent-top ten for instance pay 80 or so percent of the taxes they also have 80 percent of the money so it makes sense they pay more. Yes there is waste in government spending and it should be reduced and eliminated if humanly possible but we are in the bind we are in because taxes are too low for the 80 percent of the money earned. We won't agree. That's okay. I saved mine.

Hey, sounds good to me. If "need" is the essential criteria for taking money, I'm guessing we'll get all sorts of terrific suggestions on how to take it and how to spend it.

Sounds like a plan.

Government shouldn't make promises government can't keep.

Force older folks to retire later = fewer jobs available for younger workers, many of whom are having trouble finding jobs in the first place.

Asking the average worker to manage his/her own retirement income is smug, self-satisfied drivel. The "experts" (ie: full-time financial planners, brokers, etc.) blow it often enough but somehow we're supposed to be able to crystal-ball the future?

Ponzi Scheme? that's what the entire stock market was back in the '20s that led to the Crash of '29 and the Great Depression. Isn't the current "recession" the result of a Ponzi Scheme run by the private sector for the past decade or so?

Yep, politicians are wasteful drones but they are amateurs compared to the bankers and Wall Street magnates.

Wow! This wealth envy here is amazing...

Keep peeling this onion, we'll find "Step 2." pretty soon I think...

I guess the only solution is that when we stop working we die. That's how it used to be - except for the top x%. Hey, I'm still working!

You believe ordinary folks can't buy savings bonds, cds, etc.; or, are you saying most folks need to have discipline enforced upon them by some higher power?

Savings bonds, CD's, etc., historically, and by design, pay less than the annual rate of inflation. Investing in Savings bonds and CD's is a prescription for ending up with less money than you started with. Which, of course, is preferable to ending up with no money at all. Which is what the average worker would end up with if left to his own devices. I don't think there is any question that most folks need to have discipline enforced upon them by some higher power in order to save enough to make a meaningful contribution to their retirement. People always have current "needs" that supercede the need to save for retirement. Which gives rise to the first-time homebuyer exception for IRA withdrawals, etc. Even without these exceptions, it has been my experience as a CPA that people eventually take their money out of IRA's and 401(k)'s for something other than retirement, and just pay the penalties, even though it means in most cases that they end up with well under 50% of their money after taxes and penalties.

Enforced, no; provided with a level playing field, yes. Ask the people (many of whom were successful business owners) who lost most or all of their savings with Bernard Madoff. Over the past 30 years, we have seen a steady erosion of government regulation/oversight over the financial system, through legislation (repeal of Glass-Steagall 1999); administrative decision (SEC capital requirements 2004); or outright failure to carry out regulatory responsibilities (Madoff, Enron, Worldcom).

It's a lose-lose situation: save conservatively with CDs and such, and you won't keep up with inflation; invest through "professionals", and there is at least a perceived risk of being fleeced. Yes, some people have the time to research and manage their own investments effectively, but very rarely is someone who is working two jobs just to cover housing, food, and healthcare.

If we want our citizens to be able to spend freely with no worries of how or whether they are going to be cared for in their later years, requiring some form of personal savings for retirement/healthcare is not necessarily a bad idea. The legislators have some incentive to encourage carefree spending. When people are partying and spending money like rock stars, tax revenues go up. Of course, determing the choice of investments is another matter. I prefer to have individuals involved in the decision making.

Regarding the scandals of recent years, it appears to me that the more creative folks have chosen to work in the private sector. The SEC has not kept up with the "creativity" of the private sector..

I guess if we can require health insurance (levying a fine on those who do not comply), maybe we can do the same with retirement savings.

Sorry, I don't follow this at all. Bernie Madoff skinned greedy fat cats who
should've known better and it's a straw man in this discussion.

Lastly, any person can call their local Edward Jones or other brokerage office
and get top notch investment advice and choices. As long as we protect people
from their lack of discipline and bad choices, the problem remains unsolvable.

What would the reaction be if some supreme savings overlord were to decree
a level of savings that makes it impossible for members here to afford their
motorcycles? I guess that also begs the question, "If we force people to save,
would we have to deny them credit?"

quote
Lastly, any person can call their local Edward Jones or other brokerage office and get top notch investment advice and choices.
unquote

Er! Perhaps somewhat overstated and I do hope you are not Series 7 registered !

When we moved to the USA we brought a little bit of money with us and consulted and invested with financial advisors. I don't know how much of it was fraud and how much of it mismanagement, but it was a disaster. During that time I learned a bit and am doing it myself. It didn't go too bad...

Greedy? absolutely! Fat cats? not all. I believe most all were well-off, but not all were super wealthy. The beggest mistake many of his investors made, was to go "all-in" wioth a sinlge investor, rather than hedge themselve swith other conventional investment.

I think there was also a reference too the real estate boom and other stock market booms as pyramid schemes in a sense. Althouhg obvisouly not the same. There are similarities. The biggest factor is greed, and getting something for nothing.


I did enjoy the program after the superbowl where the CEO struggles to do any of the entry level positions in his corporation, even getting fired from one. Although, obviously physical labor is different that manageing a corporation, but shouldn't it make you question whether or not theat CEO is deserving of around 100X the pay level of those employees. Maybe 10X or 20X... as it was decades ago, but the extreme scale we see now seems difficult to justify. The arguemnt is that there is greater supply in the lower level positions. And there is a shortage of "qualified" top level management and therefore they are deserving of the high levels of compensation.

I'm not registered and don't have a bias towards Jones, just sayin' that anyone with a brain and a little money can get help investing their savings. I never said an investor has to do everything his/her financial adviser recommends, but there are multiple sources of investment philosophy and advice.

His clients were getting out sized returns for years; and they didn't question
their statements as long as they thought they were beating the market.

I was in the business appraisal business for a few years, appraising the value
of closely-held companies for trust, estate and sale purposes. My mentor, a
very smart fellow, used to say, "Don't assume something exists because of a
paper entry. Go count the bricks."

Madoff's investors believed their phony account statements; never checked
closing trade prices to reality. They never counted the bricks.

No, it doesn't. If I were an owner, I'd have a say in the matter, but the owners
of that company have had their say. So be it. Buy some shares; go the stockholder
meeting; and, have your voice in the matter.

Counting the bricks would have been very difficult if not impossible for an individual investor. Madoff acted as his own custodian, and most high-end outfits that do that sort of thing do not open their operations to the public unless you're investing a significant amount of money with them. Besides, since a majority of shares are held in nominee name (electronically) through DTCC it's very difficult to actually verify the veracity of holdings. You have to trust that the custodian has good internal controls AND has a good external auditor. If a fund manager is crooked and as figured out a way to doctor the differences between his or her computer system and the electronic record holder it would require something like a court order to actually examine the original records.

While many of Madoff's clients were wealthy, a large number were also charities. And a lot of individual investors also put money in through feeder funds that invested in Madoff's scheme, so there were a significant number of 'little guys' involved.

This was my introduction to investing. Fortunately, I was in my mid-30's and had just bought my first CD from them. Unlikely as it may seem, I was contacted 20 years later by a court in Hong Kong re a settlement, and got about half my money back. Lesson learned.

So, the option is to cross one's fingers? I move substantial portions of my holdings
from time to time amongst organizations like Vanguard, Schwab and Treasury Direct.
Is that a dead bang guarantee? Nope, but if I move a holding, at that moment, I'm sure.

As I read the stories, Madoff's investors rec'd monthly statements listing what
turned out to be phony trades in their accounts. I also read that the settlement
prices on the statements didn't bear any resemblance to the stock's price range for
that day. I'm not sure how pervasive that was, but I'm guessing it happened a
lot because posting the real settlement prices would not have produced the gains.

Why find excuses for lax oversight and ownership? I don't understand that at all.

Many of which, I presume, were run by fat cats, debutantes and social wannabes who
enjoyed the cachet of being a Madoff client.

They should be jailed for malfeasance because they not only had the personal duty to count
the bricks, but a fiduciary one to donors and recipients. That includes Mort Zuckerman,
but, at least, he only lost his own money.

Reminds me of a story. Homeowner calls furnace repair guy to fix ailing furnace. Furnace guy comes over, looks at the furnace and then hits it with a hammer---furnace comes on again. He then gives a bill for $100 to the homeowner who complains about getting a $100 bill for hitting the furnace with a hammer. Repair man takes it back and gives him a new one:

Hitting furnace with hammer $5.00
Knowing where to hit furnace $95.00

It isn't always about the physical aspects of any job.

Good !
All you need to be is an informed consumer, and "market professionals" are merely another source of information.
Unfortunately, most folk spend more time watching reality TV than reviewing and overseeing their finances.

So you're suggesting we need a government mandate because people are too lazy to take care of themselves?

No, we need a government mandate if you believe it is good public policy for older people who are no longer able to work to have a source of retirement income, so they don't have to be supported by relatives or public programs.

The fact is that very few people, left to their own devices, will accumulate a sufficient fund to provide for their retirement, either because they are lazy, unlucky, too poor, or have serious uninsured medical problems or other family emergencies that have used up their funds.

If you don't think it's good public policy for older people who are no longer able to work to have a source of retirement income, fine, but let's not kid ourselves that any substantial number of people are going to accumulate an adequate retirement fund voluntarily. There are just too many things, some of them no doubt important things, that will come up during a person's working life that they will use the funds for other than retirement savings.

The typical example of voluntary retirement savings is on a tax return I'm working on right now. It is a family business with 10 low paid employees and 2 high paid family members. The company put in a safe harbor 401(k). Nobody makes any contributions other than the family members, even though there is matching as required under the safe harbor rules of 100% up to 3% of compensation. The 2 family members contribute the max allowable.

Ok, Dave, I hear you, but would you also deny those same people the right to borrow money? Now, remembering these are still wages earners and not indigent, at what point do they become wards of the state?

The right to borrow money should be controlled by a creditor's willingness to assume the risk of loaning money to someone. If you and I agree on anything, I think we agree that the free market system of extending credit is self-controlling, provided creditors don't have the expectation of a government bailout. So I don't think there is any need for government intervention there.

Under current law, Social Security payments and funds held in qualified plans are not subject to creditors' liens. So a creditor's decision to loan money cannot be based on the assumption that he will be repaid from retirement funds, unless the creditor believes that the borrower will voluntarily use those funds to repay the loan.

So while excessive borrowing by a person during his working years could easily deplete his assets, it should not deplete his retirement funds. So if the goal is to have older people who are no longer able to work have a source of retirement income, that goal can be achieved without limiting the right of a person to borrow money.

Not from what we've seen in the last 10 years.

Why not pass legislation barring anyone making less than $x from buying lottery tickets?

I don't think you can squeeze one end of the sausage w/o stuff coming out the other end.

Similar to my response on loans, if a person who had a mandatory retirement contribution withheld from his wages spent every single dollar of his take-home pay on lottery tickets, it would not have any effect on the retirement annuity he would eventually get, provided that the funds withheld could not be used for any other purpose. So allowing someone to spend all his money on lottery tickets is not incompatible with the goal of providing older people who are unable to work with a retirement income.

I agree that unwise credit decisions were made in the last 10 years. The self-controlling consequences of making unwise decisions are generally that the business will lose money or even go out of business. Unfortunately, that self-controlling feature was invalidated by the bailout, so now we taxpayers are the ones to suffer the consequences of the unwise decisions.

Sucks to be them...
At least they can still serve as bad examples to those of us still earning...

Mike, I've read some of the threads here and just have to shake my head. Considering the entitlement mentality of the modern American, it's no wonder we're in a perpetual cycle of "saving" this benefit, or that.

EXACTLY what would it take to save social security? Honesty.

NO!
I was replying to JohnRan's post, if you follow the thread.....!