Privitizing Social Security, a Republican Agenda

Jodi - posted on 10/17/2010 ( 22 moms have responded )

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http://www.msnbc.msn.com/id/21134540/vp/...

Basically, what Rachel Maddow is talking about (for those who don't watch the link) is the repulican party's agenda to privitize social security by setting it up on WallStreet in the stock market.

I just saw this as a posted link on facebook and thought I would share it and see what everyone's thoughts are...I hope the link works!

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[deleted account]

Laura, that is an odd recommendation. I have not heard that. Many professionals advise people to start with 50% of their retirement in the stock market and for every 10 years closer to retirement, move 10% over to safer accounts. That would minimize losses to less than 50% even in the worst markets and still allow for moderate growth.



EDIT: We posted at the same time.

I did not go to business school, the basic mathematics of investing are taught before 6th grade in American schools. All you have to understand is addition, subtraction, multiplication and percentages. Business school will help you better run business, and spot better investments, but if you do not have a deep understanding of business politic, you can keep a diverse portfolio and still see good returns--you may loose on some investments, but others will gain.



Btw, you can tell a good investor by the way they are paid. If you pay a flat fee, that is a red flag. If you pay by a percentage of your earnings, that is a good investor because he will not get paid unless you do.

Isobel - posted on 10/18/2010

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I'm exaggerating of course, I am in business school, and of course I will invest my money once I start working in preparation for my retirement...the fact is though, that many people do not go to business school and have no idea what risks there are in the stock market. They take the words of shady investment ":experts" and then lose it all.

There needs to be a risk free alternative for those who have no idea what they are doing.

[deleted account]

Jodi, the Australian system sounds interesting. I do not understand the math though. If a person invests $2600 a year, given an average 50 year career, that person would only have $130,000 at retirement, unless you factor in interest. Who is paying the interest in your system?

Our system works similarly, we are required to pay a percentage of our income into social security (I don't remember the exact amount), the government then keeps it invested and begins paying benefits to people once they are of age to qualify. The longer you wait to collect benefits, the higher your benefit check will be.

Isobel - posted on 10/18/2010

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actually, the recommendation is that you take anything you will NEED over the next 10 years out...that still left a SIGNIFICANT amount lost...I don't recommend gambling with retirement savings...and that's what Wallstreet is...a giant casino.

[deleted account]

Laura? That is exactly why no one should ever put ALL of their money in the stock market. And as one gets closer to retirement, the funds should be moved gradually into safer accounts.

Isobel - posted on 10/18/2010

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My friend's parents who are 75 and had all their money in the stock market a few years ago might disagree with you.

Jodi - posted on 10/18/2010

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I actually don't understand the system in the US, but I am going to say this. Currently, all workers in Australia have 9% of their wages paid into compulsory superannuation. This is NOT garnished from their wages, the employer pays it directly. The MINIMUM full time wage in Australia for an adult is $560 a week, and this equates to around $2600 per year going to superannuation. Even without interest, CPI and the rest of it, the lowest paid Australians entering the workforce today (even if they remain the lowest paid) will end up with and unindexed amount of $110,000** on which to retire. Now index it over time.....



**The way it works out is that assuming you remain on that lowest income for your working life, and you have NO other assets at all to survive on when you retire, your income will continue to be the same for around the average life expectancy. Some people will live longer than others, some will end up running out of money if they live longer, but that is what the government pension will be for. Once it raises to 12%, it is expected that the money saved will not run out.



Not only that, but they have just raised the rates so that in a few years (off the top of my head I can't recall the details), the average Australian will have a further 3% in their superannuation (so it rises from 9% to 12% gradually).



If it all pans out, we will retire reasonably happy. unfortunately, my generation has already missed out on a portion of this, so we won't be sitting quite so pretty (I only have 25 years to save this as opposed to the 45 years in my intial figures).



Anyway, no, a private company shouldn't run these things. In Australia you have the choice, My fund is with a company that is a non-profit organisation. Admin fees are so minimal you wouldn't blink (I think I pay around $100 a year plus about $200 for my life insurance which pays out $400,000 if I die before my superannuation reaches that level. If it can't be government run, it should absolutely be government regulated.



**Edited to fix up the math, because I screwed up after a late night, LOL. Thanks for pointing that out Kelly :) I just wanted to make the point that we have a compulsory system, and the way we have been able to enforce it is by making the employer pay, rather than the employee. It has been a bit of a burden to employers over the years, and has increased the cost of living, but I do think that in the long term it will pay off. It first became compulsory about 20 years ago.

Dana - posted on 10/18/2010

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That's if people have enough money to begin with or a reliable investor! As much as it would be nice, some people are NOT smart enough to handle their money on their own. WE WILL have to pick up the slack later if we get rid of social security. And we all know republicans don't like to do that...

[deleted account]

I have had a very good return on my investments in the stock market, so yes, I do think there are good times to invest in the stock market. I do not think anyone should put ALL of their money in the stock market, and I do think that people need to invest a sizable amount in more stable, low return accounts, but the stock market is a good way to get a high return on long term investments. The market goes up and down, it has throughout history, and it will recover, just as it has done in the past. The point is to have a very diverse portfolio that can withstand market falls.

Dana - posted on 10/18/2010

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Sorry, Kelly but, if you think most Americans have their own IRA's and retirement plans by now then you're living in a bubble. It's no wonder you don't understand why people don't want to get rid of social security.

Also, yeah, you will be able to loan it to the investors who may OR may NOT offer a higher return, they may lose it all. Do you really think in this climate ( I see you said no already) or any other time, it's good to trust those on Wall Street with your money.

[deleted account]

Really, most don't? I would think that most Americans have their own IRA's and retirement plans now. Most of the people I know certainly do. We have known for years about the problems with social security, by now everyone should be planning to fund their own retirement or at least part of it. Social security should only account for about 40% of a person's retirement income, and that is a generous percentage based on a low cost of living. If we already have to save for the other 60%, why not just do it 100% ourselves so that we have more control over where to invest the money? The current system allows the government to borrow from social security, then pay it back at little or no interest--the interest they are able to pay is simply not enough to support the system. The Wall Street plan is basically the same, except instead of loaning it to the government, it will be loaned to investors who can offer a higher return on it, as they are in the field of making money, where the government is in the field of running a country.

I do not think it is a particularly good idea to invest social security in the stock market at this time, as the market economy is simply too volatile right now, but once the economy has recovered, it could be a good plan to invest PART of social security into higher return accounts.

btw, I do not understand how the baby boomers are to blame for the current social security situation. They were required to pay into the system by law, and they did, and the government set the benefit amounts, so I guess I'm just not seeing what they did wrong.

Jodi - posted on 10/17/2010

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I would still rather keep putting money into it in the hopes that my daughter one day would reap the benefits. BUT, I also have a retirement plan and a Roth IRA. That specific issue is more the fault of the baby boomers than the government, I get your point, but I don't think giving up on what has worked out SO well in the past is the best way. If anything, we take this as a learning experience to figure out how to fix that problem and prevent it in the future, although I don't know enough about the ins and outs of SS or other funding to say just what that solution is.



*edit to add- I only brought up our retirement and IRA because we actually have *something* to fall back on, most American's don't, so possibly I have a bit more relaxed view on it than others may.

[deleted account]

It is going bankrupt! It will not have enough funds to pay everyone eligible by the time you and I retire.

Jodi - posted on 10/17/2010

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I propose social security stay as is, what's wrong with the system out there now?

[deleted account]

So what do you all propose be done about social security?



Personally, I think it should be disposed of and people should take responsibility for their own retirement. Just invest the portion of your income that is being paid into social security into a personal IRA tailored to your needs and comfort level. Of course, there would probably be irresponsible people who would not do it, then cry to the government to support them when they can no longer work and have no savings. Of course, another good solution would be to require people to invest a certain percentage of their income, but let them invest it as they wish within approved accounts.

Jodi - posted on 10/17/2010

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I agree, it's complete malarky, unfortunately, what happens when a republican president gets elected and the majority of the house is republican? THAT is my concern I guess, I need my social security, even if I didn't, it's MY money going in there, I should be able to choose whether or not someone else gets to try to make money off of it.

Kimberly - posted on 10/17/2010

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America's new favorite pastime! Retirement Roulette!

Hey Grandpa put it all on RED... Aww better luck next time- Black it is! You crapped out!

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