[subroc]

Ranger

I a firm believer in SS privatization.

I am not such a believer in any planned returns.

Any return you plug in will be speculation at best. I have plugged in the various percentages in my retirement accounts and while an interesting exercise, I am not sure what it tells me. When you plug in your 8% or better number it tells what could happen not what will happen. Is there any other way to predict the future in something like the stock market without using the past? Probably not. I will just highlight a couple of cautions while we have had some great years in 1995, 1996, 1997, 1998 and 1999. We have had some bad years as well 2000, 2001, 2002, we also had a hell of a pair of bad years in 1973 and 1974. In the late 90s, even while it was happening, no one believed that we would see double digit gains for 5 years in a row. So based on that, could we see 5 years of double-digit losses? Who knows?

Long term, I expect, our markets will generally do well against world markets,

Time can be either you friend or your enemy.

Whenever I need a reality check I use this example: I am not sure our markets ever would/could react like this, but one never knows. In 1990 the Japanese stock market was at 40,000...today it is 11,500 That?s 28% of the original value after 15 years. Not a very good return.

Time is either your friend or your enemy.

I am generally pretty optimistic about the United States. I believe in Capitalism. I believe in our markets. But, I am not under any illusions.

Joe Miano

 

[Uncle Bill]

Bente sounds way too sophisticated for this board. She belongs in the debate waged on the Daily Reckoning board. Hehhehhehheh I can tell you, I've been flayed on that one plenty of times.

As has been mentioned, in the end we are all dead, so make the most of the journey. To paraphrase that great Oklahoman, Will Rogers; "buy land. As far as I know they aren't making any more of that."

And I'm not sure there's much gold and silver being made anymore either. I know there's not any being mined any longer in my neck of the woods. Some of the panners still find a 'nugget' around here.

But us 'bugs' got lucky the past decade. If it passed you by, join those of us that were mostly on the sidelines in '98 '99. Not to mention the pasting some of the brethern took in the Y2K scare. Talk about a fiasco. What a ruse.

Wonder if some of those dudes are still in the desert, enjoying that Ewell Gibbons fodder? :roll:

It's still my belief, Ranger, that you can indeed do well in the no-load Mutual Fund game. Latch on to a good advisor that has a "PROVEN" track record, and hop on for the ride.

Or if you have the moxie, subscribe to Morning Star and roll your own.

Good Luck.

UB

 

[ranger]

social security

Here is a good social security privatization calculator that will calculate your benefit based on current age and income and collection at age 65:

http://www.daveramsey.com/etc/social_security/

The calculator uses 4% of the 12.4% already paid into your SS acount for the private fund and uses the gov't employees thrift savings plan. It accounts for 3% rate of inflation. I recommend plan C which has earned 12.1% since inception in 1988 (see TSP.gov). The money can be transferred to lower yield/lower risk plans as you near retirement age. Note...your politicians already have this plan.

GW has said over and again, this program will not even be an option if you are 55 and will not be required of ANYONE. If it doesn't make financial sense to you, don't participate.

Here are the results based on my age/income:

"By investing 4% of the 12.4% you already pay into social security in privatized account, you should have approximately $699,603.79 available to you at retirement in addition to a smaller traditional social security benefit.

Privatizing Your Retirement Breakdown

Your max privatized account contribution per year is 4% of your annual income - $250.00 per month for a total annual contribution of $3,000.00.

Invested over 30 years from age 35 to age 65.

Your monthly draw after retirement will be approximately $4,658.20. This draw accounts for an inflation rate of 3%.

This plan should leave your privatized retirement nest egg, $699,603.79, UNTOUCHED to pass along as INHERITANCE for your family.

Breakdown of the Current Social Security System

It costs too much, and it pays too little.
In 2018, the Social Security system will be operating on a deficit. That is, it will spend more on benefits than it collects in taxes, which could result in higher taxes, even lower benefits or raising the retirement age so you don't receive full benefits until age 70.
If you die before retirement, you receive no benefit, your family receives limited benefits and there is no nest egg for inheritance. "

Note, as stated, this is in addition to what I have already paid into SS and the 8.4% of my remaining annual SS contribution which will still last until my death and have a COLA. That is to say, I would still get a SS check every month on top of the interest withdrawn from my private account. The $4658 monthly income accounts for a 3% inflation rate and is only interest which still leaves $700,000 to pass on to my kids which SS does not do. This is a generational benefit not offered by SS which will allow my children to live a better life. Since I will only be spending the interest, even taking into acc't 3% inflation, this money will last as long as I do.

Bente

Recall in my earlier example I used 8% prior to inflation and 5.5% after inflation which is within the WSJ numbers. As I near retirement age I believe my projected SS income will far exceed someone of my age who did not take advantage of this system.

Pensions are great but they are no longer a reality in today's society unless you are a gov't employee. I don't know a single person who expects to collect the gold watch and march into the sunset.

 

[Bente]

Yes, and that's why, as a group, people in their 50's and 60's are poorer than those of that age a couple of decades ago. A pension was a very valuable thing. A 401k is great, but its economic value is significantly less than a guaranteed pension. Some people have done quite well with their 401k's, while others have lost their shirts. 401k's have market risk for the employee. Pensions did not. And that's the basic argument I'm making w/ SS. After having spent a lifetime working, you are increasing the risk of having less funds upon which to live off of in retirement.


Risk? Again, you continue to give short shift to risk by simply looking in the rear view mirror. If you want to invest in something which has returned 12% in the past you have to realize that PAST PERFORMANCE is NO GUARANTEE of FUTURE RETURNS. You are NOT factoring in the risk that your 12% historic model could actually LOSE you money in the next decades (plenty of current examples on that one). The trick is to pick the NEXT winner, the FUTURE area of growth. It's NOT plugging the numbers into someone's calculator. It's figuring out what specific investments to chose which will make you money in the future and betting part of your SS retirement funds on that decision. Some will win, but some will lose. You change the nature of SS.

Transition costs? Don't forget SS is a pay-as-you-go program. If you want to partially privatize SS, now is a time we can ill afford to do so. We're in a big hole already w/ a record federal budget deficit and neither you nor your calculation takes into account the economic ramifications of the large transition costs (paying current retirees and those over 55 according to the current schedule of benefits, while the contributions to the program are shrinking). AARP doesn't believe that current and near retirees won't see a benefits cut, which is why they're fighting this tooth and nail. The transition costs will be huge, and increase the deficit even more. Whether GW promises no benefits cuts for these folks, we as a nation will face increased gov't borrowing (already at record levels) which uses up capital that would be better spent on investing in our nation's economic growth. Something's gotta give.

The question is, is SS in crisis. No, not even in 2042 or 2052 is it in crisis. And we certainly can raise the retirement age based on longer life expectancies, as we have done in the past.

What IS in crisis is the federal budget.

That said, I COMPLETELY agree that you should/must take responsibility for yourself and save for your own retirement. Go ahead and put aside $3000/yr. Make paying yourself (to save for retirement) the first bill you pay each month,.. treat it like your mortgage (which hopefully you're paying off real quick). This forces you to live more frugally (which is good discipline in general and also good practice for when you actually retire), builds up a nest egg that you can leave to your kids if you don't use it up, and introduces you to investing. You don't need the government to tell you to do that, start doing it now on your own. And if you say you can't afford to save for retirement on your own, then maybe you're living too rich. Max out on your 401k. Then see how you manage to grow that $3000/year over the next few decades. It ain't as easy as plugging it into Dave Ramsey's calculator. Trust me on that one. But you will have the power of time on your side (making sure to achieve returns which beat the inflation rate).

Then, when you approach retirement age, the supplement of that SS check starts looking better each day. When I was in my 30's I wanted to get every penny of the SS tax I paid, instead of sending it off to SS. Now, with my husband at 52 (3 years short of that magic 55 age), I must say, I want the promised SS benefits my husband and I have paid into for many years. Whether we're ever going to get it, is another matter..


..more than enough said from me on this issue..

bp

 

[Jerry]

Evidently it's a non-issue for me. Just got off the phone with SS and I'm now among the ranks of RETIRED!!!!
:shock: :shock: :shock:

 

[Uncle Bill]

Evidently it's a non-issue for me. Just got off the phone with SS and I'm now among the ranks of RETIRED!!!!
:shock: :shock: :shock:

Like you, I was shocked to have lived that long. Always thought I'd have been shot by a jealous husband along the way. hehhehheh

But now that you've 'crossed over', trust me, it ain't all it's cracked up to be. :roll:

UB...looking forward to a goober's experience at moving into geezerhood. :wink:

 

[Jerry]

Sweet Bride said "Hell, you've only worked one day a week for the last 15 years!!!! What's different now????"

 

[ranger]

social security

Seems FDR was a supporter of private accounts:

In a Jan. 17, 1935, address to Congress, Roosevelt, the originator of the federal retirement system, looked into the future and saw the need to move beyond the pay-as-you go financing and eventually establish "self-supporting annuity plans," noted Wall Street Journal columnist John Fund.

"For perhaps 30 years to come, funds will have to be provided by the states and the federal government to meet these pensions," Roosevelt told Congress.

But after that, he said, it would be necessary to move to "voluntary contributory annuities by which individual initiative can increase the annual amounts received in old age."

Roosevelt proposed that "the federal government assume one-half of the cost of the old-age pension plan, which ought ultimately to be supplanted by self-supporting annuity plans."


Fund quoted a top Republican member of the Ways and Means Committee.

"What Roosevelt was talking about is the need to update Social Security sometime around 1965 with what today we would call personal accounts," he said. "By my reckoning, we are only about 40 years late in addressing his concerns on how [to] make Social Security solvent."

 

[ranger]

social security

This will be my final post on the subject, then I can get onto more important topics like how to get my dog to stop his cheating ways.

Here is a link to a Cato Institute study on social security privatization. Click the link at the bottom of the executive summary to read the entire document. It is 13 pages, but well worth your time if you are interested in the topic.

If the facts in this study don't sway you, all I can say is any logical argument can be defeated by the simple refusal to reason logically.

Dog training regards,

Rich
http://www.socialsecurity.org/pubs/ssps/ssp-32es.html

 

[Jerry]

To me, the problem will be the fact that young people just getting started in life will probably be spending that money on rent, mortgage, food, etc.

Jerry