NationStates Jolt Archive

I got my Social Security statement last week. I finally decided I needed a laugh, so I opened it and read though the statement. In it, there is an accounting for all the money that I have paid in, as well as the fictional portion that was contributed by my employer. What I hadn't noticed in past years was a little disclaimer that went something like this:

Your estimated benefits are based on current law. Congress has made changes to the law in the past and can do so at any time. The law governing benefit amounts may change because, by 2042, the payroll taxes collected will be enough to pay only about 73% of the scheduled benefits.

So what is all this hoopla about "guaranteed benefits"? If Congress can do pretty much whatever they want to my benefits, how is my risk any less than if I put some of my money in the market. Haven't the Democrats been preaching to us that our benefits are guaranteed now? Haven't those same Democrats been telling us that those awful Republicans are planning to flush our "guaranteed" benefits down the toilet in a risky stock market scheme?

Golly! You don't think they might have been stretching the truth, do you?

I think that the best part about privatization is that the Congress won't be able to borrow from the savings anymore.

As long as that money sits in the government's account, it is free for the taking by Congress.

That's not much of a guarantee, if you ask me.

Yeah, socialist security really ain't that social, or secure

Haven't those same Democrats been telling us that those awful Republicans are planning to flush our "guaranteed" benefits down the toilet in a risky stock market scheme?

Those Guaranteed benefits carry the same guarantee that the military does, the CIA and FBI does. Its fully guaranteed until they change it. The military will definately protect you...unless it doesn't. The CIA will hunt down threats to national security, unless they don't fund it properly. The FBI will investigate crime, unless they don't get funding. In which case, the government will definately not do what its supposed to. Amazing; if you don't fund it, it won't work!

Social Security will pay out your benifits...unless Congress doesn't let it.

Guess who's job it is to make sure they do let it? That's right. Yours...and mine. You can privatize Social Security just like you can privatize the military, the CIA and the FBI; it does mean anything much. Just that you can theoretically vote out the bums who messed up Social Security, and you can also theoretically convince a Private Company to stop screwing your Social Security account up too.

Big woop. Lets spend 3 trillion dollars so we can start changing who gets to screw us over as we get old. Why exactly are you so keen on this idea anyway? Big gov and Big corp are pretty much equally screwed up in my experience; have you found corperations to be amazingly good with your money? Because my family lost 1/4 of its net worth when Enron bought my mom's employer just before it collapsed.

Those Guaranteed benefits carry the same guarantee that the military does, the CIA and FBI does. Its fully guaranteed until they change it. The military will definately protect you...unless it doesn't. The CIA will hunt down threats to national security, unless they don't fund it properly. The FBI will investigate crime, unless they don't get funding. In which case, the government will definately not do what its supposed to. Amazing; if you don't fund it, it won't work!

Social Security will pay out your benifits...unless Congress doesn't let it.

Guess who's job it is to make sure they do let it? That's right. Yours...and mine. You can privatize Social Security just like you can privatize the military, the CIA and the FBI; it does mean anything much. Just that you can theoretically vote out the bums who messed up Social Security, and you can also theoretically convince a Private Company to stop screwing your Social Security account up too.

Big woop. Lets spend 3 trillion dollars so we can start changing who gets to screw us over as we get old. Why exactly are you so keen on this idea anyway? Big gov and Big corp are pretty much equally screwed up in my experience; have you found corperations to be amazingly good with your money? Because my family lost 1/4 of its net worth when Enron bought my mom's employer just before it collapsed.
But the market as a whole will continue to appreciate. Eleven percent per year is the average over any ten year period you can pick. No execeptions. Buy a S&P500 fund, or a Russell 2000 index. Any of those are going to be good 40 year investments.

I just think it ironic that the same benefits that are touted as "guaranteed" come with a disclaimer.

But the market as a whole will continue to appreciate. Eleven percent per year is the average over any ten year period you can pick. No execeptions. Buy a S&P500 fund, or a Russell 2000 index. Any of those are going to be good 40 year investments.

I just think it ironic that the same benefits that are touted as "guaranteed" come with a disclaimer.
Any ten year period? How about the DJIA from 1929-1939? DJIA in the 1965-1980? NASDAQ from 2000-2010?

*snrk* I've known for awhile that Social Security is nothing but a fat joke. Soon as the babyboomers pull out their funds, there will be nothing left, whether its privatized or not.

I have a personal separate bank account for Social Security and put some of my money each month in there. That way, they have no hope of taking it. You can't rely on the government anymore...whether Democratic or Republican.

-Asylum Nova

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."

interesting stuff copied and pasted from worldnetdaily.com ( http://www.worldnetdaily.com/news/article.asp?ARTICLE_ID=42750 )

and now the democrats are against Roosevelts idea because Bush supports Roosevelts idea.

Any ten year period? How about the DJIA from 1929-1939? DJIA in the 1965-1980? NASDAQ from 2000-2010?
Well, 2000 to 2010 hasn't happened, but '29 to '39 absolutely. '65 to '75 and '75 to '85 absolutely. Go to FreeEdgar and plot the curves yourself.

interesting stuff copied and pasted from worldnetdaily.com ( http://www.worldnetdaily.com/news/article.asp?ARTICLE_ID=42750 )

and now the democrats are against Roosevelts idea because Bush supports Roosevelts idea.
You have to watch it when you quote FDR. The Democrats might just blow a gasket. Facts have no place in their world; history even less.

Because my family lost 1/4 of its net worth when Enron bought my mom's employer just before it collapsed.


What kind of dumbass puts 25% of their net worth into ONE stock?

As proposed the SS privatization would not allow someone to do something so imprudent - at least within the ss money.

I believe there are even going to be insurance companies who will underwrite *gurantees* for future inome benefits. AXA Equitable, Transamerica, Hartford and ING to name a few who are reviewing it - since they have already been doing it for years.

http://mediamatters.org/items/200502160003
"OLBERMANN: President Franklin Delano Roosevelt and, at minimum, midwife to the Social Security system, would have endorsed President Bush's plan to partially privatize it. Our third story on the Countdown -- that is the claim, anyway, of at least three conservative commentators and several Republican congressmen. But it turns out those guys pretty much just made it up. In a moment, FDR's grandson, himself a former associate commissioner for Social Security, joins us to discuss the fraud."

facts r gud

Any ten year period? How about the DJIA from 1929-1939? DJIA in the 1965-1980? NASDAQ from 2000-2010?
Yes, any 10 year period. 20 and 30 year periods are even better. You really should do your research. Here, let me give you a hand:
http://www.retireearlyhomepage.com/ireturn.html

I would hope you could understand what 'inflation adjusted' means when you get there.

The data is readily available on the net for those who bother to look. You really should check for yourself instead of believe everything partisans tell you.

http://mediamatters.org/items/200502160003
"OLBERMANN: President Franklin Delano Roosevelt and, at minimum, midwife to the Social Security system, would have endorsed President Bush's plan to partially privatize it. Our third story on the Countdown -- that is the claim, anyway, of at least three conservative commentators and several Republican congressmen. But it turns out those guys pretty much just made it up. In a moment, FDR's grandson, himself a former associate commissioner for Social Security, joins us to discuss the fraud."

facts r gud

"...Afterwhich we have FDRs great aunts Grandson's nephew who will dispute the fact that FDRs mother ever dressed him in a dress.

Tomorrow we interview the great warrior RAMTHA!"

What kind of dumbass puts 25% of their net worth into ONE stock?

As proposed the SS privatization would not allow someone to do something so imprudent - at least within the ss money.

I believe there are even going to be insurance companies who will underwrite *gurantees* for future inome benefits. AXA Equitable, Transamerica, Hartford and ING to name a few who are reviewing it - since they have already been doing it for years.
Don't act so ignorant. Some companies only offer common stock in their employee savings plans. It's either invest in that, or lose the company match. What is that called, a Hobesian choice? Something like that.

But the market as a whole will continue to appreciate. Eleven percent per year is the average over any ten year period you can pick. No execeptions. Buy a S&P500 fund, or a Russell 2000 index. Any of those are going to be good 40 year investments.

I just think it ironic that the same benefits that are touted as "guaranteed" come with a disclaimer.

There is also a legally required disclaimer on every prospectus: "Past performance is not a guarantee of future returns." Or something like that.

There is also a legally required disclaimer on every prospectus: "Past performance is not a guarantee of future returns." Or something like that.
Sure, but my original point was that this same, or similar, disclaimer is on every statement of benefits that Social Security mails out. Whereas, the Democrats are demagoging SSI as a "guarantee" versus the "risky" Republican scheme.

Social security won't go bankrupt if it is administered properly. Congress requires that Social Security invest in US savings bonds it then uses the money from those bonds as a type of free money. However, those bonds will come to term eventually. If the Social Security Asministration stockpiles them and cashes them all in at one time (preferably in the middle of the fiscal year) it could really mess up the budget. When Congress can't pay it could forclose and take control of the entire country.

The first few posters in this thread show a tremendous lack of understanding of what Social Security is or how it works.

@Myrm: Do you understand how many variables are involved in forecasting SSI's prospects 37 years into the future? The easiest part of this is guessing what immigration, productivity, life expectancy, and birth rates are going to look like. The 2042 estimate is just that, an estimate. And even then, we're not talking about the bankruptcy of the system, we're talking about the reduction of benefits. This is only one forecast. You get a quarter percent shift in any of those areas and it means the difference between going broke in 2020 or unlimited trust fund growth.

The goal of Social Security is, above all else, security. T-Bonds are about the most secure investment on the planet.

@The guy who said he doesn't like the idea of the government borrowing money from the SSA: This is how bonds work! The SSA lends money to the government through the purchase of bonds and draws interest that grows the fund. That money is not in danger unless the U.S. government either collapses or defaults on those bonds through legislation, which is one very possible outcome of a privatization scheme.

@The guy who said "Social Security is going to be worthless the moment all the baby boomers withdraw their money": Way to believe the hype. Explain this one to me: Without any further adjustments to benefits or payroll taxation, the SSA will continue to function normally until the *vast majority of boomers are already dead.* As planned by Greenspan in 1983, the SSA is in a position to weather the boomer hump.

The real point here is that before Social Security, over one third of Americans lived below the poverty line in their retirement. With Social Security, we're down to 10%. Two-thirds of all retirees get more than half of their income from the SSA and 12 million households draw 90% of their retirement income from the SSA.

You can say that things will get better with privatized plans, but it'll be a roll back to the bad old days and the only folks who'll make out will be the investment and money managment firms.

that disclaimer from the original poster's ss statement was put there to scare us into accepting the presidents plan to reform social security.

i dont see his plan as doing anything but hastening the bankruptcy of social security. can we weather the huge drop in SS tax revenues until we get through to the point where those with investment accounts start collecting smaller checks from the govt? i dont see how.

proposing to take in less money in times when more money is needed doesnt make sense to me.

that disclaimer from the original poster's ss statement was put there to scare us into accepting the presidents plan to reform social security.

i dont see his plan as doing anything but hastening the bankruptcy of social security. can we weather the huge drop in SS tax revenues until we get through to the point where those with investment accounts start collecting smaller checks from the govt? i dont see how.

proposing to take in less money in times when more money is needed doesnt make sense to me.
If Social Security is such a good deal, why doesn't the US Congress pay into it?

The first few posters in this thread show a tremendous lack of understanding of what Social Security is or how it works.

@Myrm: Do you understand how many variables are involved in forecasting SSI's prospects 37 years into the future? The easiest part of this is guessing what immigration, productivity, life expectancy, and birth rates are going to look like. The 2042 estimate is just that, an estimate. And even then, we're not talking about the bankruptcy of the system, we're talking about the reduction of benefits. This is only one forecast. You get a quarter percent shift in any of those areas and it means the difference between going broke in 2020 or unlimited trust fund growth.

The goal of Social Security is, above all else, security. T-Bonds are about the most secure investment on the planet.

While I think complete abolition of SSI is the best idea, my intention in the original post was to point out that even the SSIC refuses to guarantee the benefits that the Democrats would have you believe are secure. If I were going to bet on the future, and I would, I would sock away as much money as I can afford.

What I'm waiting for is the other shoe to drop on retirement savings. That is the idea that we have put away all this pre-tax money and that's really unfair. Someone is going to propose a tax on all 401-type savings in the near future. Bet on it!

While I think complete abolition of SSI is the best idea, my intention in the original post was to point out that even the SSIC refuses to guarantee the benefits that the Democrats would have you believe are secure. If I were going to bet on the future, and I would, I would sock away as much money as I can afford.

What I'm waiting for is the other shoe to drop on retirement savings. That is the idea that we have put away all this pre-tax money and that's really unfair. Someone is going to propose a tax on all 401-type savings in the near future. Bet on it!

*proposes tax on 401(k)'s and 403(b)'s* :D

*proposes tax on 401(k)'s and 403(b)'s* :D
Okay:). I should have said a competent authority. Unless, of course, you are a member of Congress.

But don't you think that day will be here pretty soon? Maybe if the Democrats win the Congress before SSI goes bankrupt?

Okay:). I should have said a competent authority. Unless, of course, you are a member of Congress.

But don't you think that day will be here pretty soon? Maybe if the Democrats win the Congress before SSI goes bankrupt?

Nah. It's more politically palatable for the Dems to propose lifting the cap on income subject to SSI/FICA taxes. This alone will help, but won't be enough. As SSI was originally intended to make sure that old people did not retire only to become destitute, but has now become more like a universal entitlement, I would favor means-testing benefits. It should also be noted that I am 19, do not expect to see a dime of SSI under the current system, nor would I expect to if it was means-tested (hopefully I'd be well enough off that I won't qualify for means-tested benefits). But it's better than Wall Street being able to scam me out of my money and make a dishonest buck.

Follow the money, and you will get an idea of why George Bush wants to privatize Social Security so badly. The same financial institutions that lined his campaign coffers have a lot of commissions to gain from SSI privatization.

Since the most direct link to my source doesn't want to work, go to www.opensecrets.org, click on George W. Bush, then click on Sector Totals to reveal how much he owes the financial industry.

Follow the money, and you will get an idea of why George Bush wants to privatize Social Security so badly. The same financial institutions that lined his campaign coffers have a lot of commissions to gain from SSI privatization.

Since the most direct link to my source doesn't want to work, go to www.opensecrets.org, click on George W. Bush, then click on Sector Totals to reveal how much he owes the financial industry.
I wish I could compare apples to apples in this comparison of Bush to Kerry, but I can't. It's close though. Kerry, in his re-election to the Senate, got 30% of his contributions from the financial industry. Another 15% came from lawyers. Bush, on the other hand, received 33 million from financial interests, but that only came to 9% of the total contributions for his re-election. So the money trail isn't as clear cut as one might hope.

Now, what's the best course? Probably a transition to individual retirement accounts. Maybe that's on top of a means tested old age welfare payment. But if everyone is contributing 5% of their income to a retirement fund, there is no way in the world they won't be millionaires at retirement age. Not unless Congress tries to manage the money.

Don't act so ignorant. Some companies only offer common stock in their employee savings plans. It's either invest in that, or lose the company match. What is that called, a Hobesian choice? Something like that.
Nope, it's you who are ignorant. All employee savings plans offer a variety of investment options. many include company stock, but none are exclusive to it. Some do offer employees ESOPS - the chance to buy company stock - but this is after tax and discretionary (not required). It is common for companies to offer matching contributions in the company stock. Considering it is 'free' there is not much to complain about. The employee often has a chance to diversify even the matched contributions. Their own money can go to an investment of their choice, including fixed accounts.
Stock options are not as common as they once were, but still not unheard of. Once again, they are free.

So no, there really is no reason for a person to tie 25% of their net worth into one stock. If the position was given to them for free then there really is only a paper loss - it was not a loss of their savings. -unless they foolishly put their savings into the same stock that was given to them for free (which many fools did)

that disclaimer from the original poster's ss statement was put there to scare us into accepting the presidents plan to reform social security.

i dont see his plan as doing anything but hastening the bankruptcy of social security. can we weather the huge drop in SS tax revenues until we get through to the point where those with investment accounts start collecting smaller checks from the govt? i dont see how.

proposing to take in less money in times when more money is needed doesnt make sense to me.
The trouble is, that the longer we wait, the more expensive the problem becomes.

Sure, you can screw people (who've been paying for decades) out of their benefit just because they are successful - but is that the best answer?

Well, 2000 to 2010 hasn't happened, but '29 to '39 absolutely. '65 to '75 and '75 to '85 absolutely. Go to FreeEdgar and plot the curves yourself.
I did. 1929-1939 shows a massive loss. As does 65 to 75. 65-85 shows slight gains.

Nah. It's more politically palatable for the Dems to propose lifting the cap on income subject to SSI/FICA taxes. This alone will help, but won't be enough. As SSI was originally intended to make sure that old people did not retire only to become destitute, but has now become more like a universal entitlement, I would favor means-testing benefits. It should also be noted that I am 19, do not expect to see a dime of SSI under the current system, nor would I expect to if it was means-tested (hopefully I'd be well enough off that I won't qualify for means-tested benefits). But it's better than Wall Street being able to scam me out of my money and make a dishonest buck.

Follow the money, and you will get an idea of why George Bush wants to privatize Social Security so badly. The same financial institutions that lined his campaign coffers have a lot of commissions to gain from SSI privatization.

Since the most direct link to my source doesn't want to work, go to www.opensecrets.org, click on George W. Bush, then click on Sector Totals to reveal how much he owes the financial industry.

If you follow the money you will see why congress does not want to release your money to you to manage yourself:
http://www.kimdutoit.com/ee/index.php/themrs/single/social_insecurity

Democrat or Republican - this will hurt their ability to spend like drunken sailors in a whorehouse. Yippee!

Something else you should know. SSA has a budget of $550 billion. They have administrative expenses of 8 billion. Do the math - thats a 1.4% expense ratio. That is HUGH for an entity that invests in nothing but treasuries. The average for long treasury mutual funds is .95% - meaning about half do it for less - many for MUCH less.
http://www.ssa.gov/budget/2005bud.html

So of course the financial services industry wants in. If you could do a better job and get paid for it you'd want in too! Let the consumer decide - there is no reason for the government to limit choice.

I did. 1929-1939 shows a massive loss. As does 65 to 75. 65-85 shows slight gains.
BZZZT! BZZZT! BZZZT! WOOP-WOOP-WOOP! BS DETECTOR! BS DETECTOR!


Sorry, do not pass go, do not collect $200.

What index are you using? is it inflation adjusted? After tax or defered tax?

You picked the wrong subject to BS me with.

"Thank you for playing, please try again."

BZZZT! BZZZT! BZZZT! WOOP-WOOP-WOOP! BS DETECTOR! BS DETECTOR!


Sorry, do not pass go, do not collect $200.

What index are you using? is it inflation adjusted? After tax or defered tax?

You picked the wrong subject to BS me with.

"Thank you for playing, please try again."
DJIA...returns from 1929-1939?
http://chart.finance.yahoo.com/c/my/_/_dji.gif

1929 is on the far left. 1939 is right next to 1940. Cheers.

DJIA...returns from 1929-1939?
http://chart.finance.yahoo.com/c/my/_/_dji.gif

1929 is on the far left. 1939 is right next to 1940. Cheers.
If you continued to contribute through that period you would still make money. Dollar cost averaging works wonders. Plus i don't think Yahoo inflation adjusts.

I don't make claims on the accuracy of the site but it was the only inflation adjusted chart I could find, though I didn't look terribly hard either.

http://home.earthlink.net/~intelligentbear/com-dj-infl.htm

While I think complete abolition of SSI is the best idea, my intention in the original post was to point out that even the SSIC refuses to guarantee the benefits that the Democrats would have you believe are secure. If I were going to bet on the future, and I would, I would sock away as much money as I can afford.

What I'm waiting for is the other shoe to drop on retirement savings. That is the idea that we have put away all this pre-tax money and that's really unfair. Someone is going to propose a tax on all 401-type savings in the near future. Bet on it!

They're guaranteed until 2042. I don't think many Dems believe, or are pitching the idea that Social Security is currently bedrock. I think they're pitching the idea that Social Security should be bedrock and that reform should be aimed at shoring up the trusts rather than disemboweling them.

Hell, if Bush somehow gets this carveout ripoff under radar, the SSA will see its trusts dwindle much more quickly and will likely face a reduction of benefits by the 2020s. But I bet you'd try to blame this on the Democrats or the SSA also, because their guarantees and forecasts didn't consider such administrative idiocy.

This idea about 401(k) tax is strawman buffoonery. What is most likely, assuming lawmakers don't gut the SSA, is that we see a change in benefit schedules with an emphasis on later retirement. This is to say, benefits may be reduced for those who retire as soon as eligible, but increased for those who retire later.

If you continued to contribute through that period you would still make money. Dollar cost averaging works wonders. Plus i don't think Yahoo inflation adjusts.
The stuff you could buy with it would be decreased by inflation as well. Nice try, no cigar. You have to have gains above and beyond inflation to get money. And its kinda pointless to contribute though that period when you aren't making/lost money. You can't say you made money when you just threw your own money in there.


Admit it, you made a stupid statement, and you got called on it. You don't always make 10% returns over a 10 year period. Lowest return over a 25 year period is 6%.

The stuff you could buy with it would be decreased by inflation as well. Nice try, no cigar. You have to have gains above and beyond inflation to get money. And its kinda pointless to contribute though that period when you aren't making/lost money. You can't say you made money when you just threw your own money in there.


Admit it, you made a stupid statement, and you got called on it. You don't always make 10% returns over a 10 year period. Lowest return over a 25 year period is 6%.
I don't want to put the time into working out an example of how much better dollar cost averaging is, especially when the market is declining. But just remember that if you are constantly investing the same amount, you buy a whole lot more shares when the price is down. I'm starting to reap the benefits of that practice after this last little hiccup in the market.

As far as the returns go, I can't support what I said. I tried to work out several examples, but I just couldn't do it. I still suspect that if you continued to invest over 1929-1939, you'd have made money at the end. The steep slope after '35 just begs for consistent investments in the prior years.

Now, back to the failed promise of Social Security, how about the idea that returns just suck? From the Heritage Foundation:

* Social Security pays a very low rate of return for two-income households with children. Social Security's inflation-adjusted rate of return is only 1.23 percent for an average household of two 30-year-old earners with children in which each parent made just under $26,000 in 1996.1 Such couples will pay a total of about $320,000 in Social Security taxes over their lifetime (including employer payments) and can expect to receive benefits of about $450,000 (in 1997 dollars, before applicable taxes) after retiring at age 67, the retirement age when they are eligible for full Social Security Old-Age benefits.2 Had they placed that same amount of lifetime employee and employer tax contributions into conservative tax-deferred IRA-type investments-such as a mutual fund composed of 50 percent U.S. government Treasury bills and 50 percent equities-they could expect a real rate of return of over 5 percent per year prior to the payment of taxes after retirement. In this latter case, the total amount of income accumulated by retirement would equal approximately $975,000 (in 1997 dollars, before applicable taxes).

* The rate of return for some ethnic minorities is negative. Low-income, single African-American males born after 1959 face a negative real rate of return from Social Security. For every dollar he has paid into Social Security, a low-income, single African-American male in his mid-20s who earned about 50 percent of the average wage, or $12,862, in 1996 can expect to get back less than 88 cents. This negative rate of return translates into lifetime cash losses of $13,377 (in 1997 dollars) on the taxes paid by the employer and employee.

The trouble is, that the longer we wait, the more expensive the problem becomes.

Sure, you can screw people (who've been paying for decades) out of their benefit just because they are successful - but is that the best answer?
that IS the question eh?

all i know is, this plan of bush's ISNT the best answer. its a road to disaster. so why arent we looking for the BEST plan instead of being railroaded into a bad one?

DJIA...returns from 1929-1939?
http://chart.finance.yahoo.com/c/my/_/_dji.gif

1929 is on the far left. 1939 is right next to 1940. Cheers.

A simple enough chart, but flawed. you may know about something called deflation, a very bad economic thaing which happened in 1929. Your chart does not reflect that the cost of EVERYTHING went down about 20% in that period, which moderates the losses somewhat. You also use the DJIA, a narrow and slightly more volitile band of only 30 stocks compared to the S+P500. (though finding pre 1950 S+P500 is admittadly difficult - most is proprietary and not easily available)

There is no doubt that there are a very few (3%) ten year periods with a loss. meaning I do stand corrected - the actual number is 15 to avoid losses. To call the few down ten year periods dramatic is a gross overstatement.

The average rolling 10 year performance is about 10%, but obviously not all 10 year periods are identical. The probability of a negative return in 10 years is very low - about one in thirty. Even when there is a negative return, it is not dramatic and in those very few cases the next 5 years has always brought it back to the black.
http://www.harrisinsight.com/education/Coping_With_Volatile_Markets.pdf#search='stock%20market%20rolling%2010%20year%20chart'
I have seen a chart showing the best and worst 10 year rolling periods, but I can't find it - I suspect it is proprietary research - I'll continue to look for it. (which is why this took a while ot post)

Meanwhile I found this:
http://www.fool.com/boringport/1999/boringport991220.htm

Regardless of all this - I find it interesting that liberals think allowing a person to control their own money is 'risky'. They make the assumption that the stock market is the only investment choice out there - which is not correct. Once they convice everyone that the most agressive option is their only option they then try to scare everyone into believeing the risks are far greater than they actually are. Their faith in the individual is troubling.

If a person wants to invest their money conservatively they may, if a person wants to invest their money agressively they may. That is both the joy and the responsibility of freedom. To deny that is to deny freedom - regardless of the motive.

that IS the question eh?

all i know is, this plan of bush's ISNT the best answer. its a road to disaster. so why arent we looking for the BEST plan instead of being railroaded into a bad one?
Call it what you want - you provide nothing to demonstrate your lable is accurate. Nor do you offer any opposing solution to consider that would fit the definition of better, let alone best. That is very silly of you.

Myrmidonisia,

Please note my previous post - there are some 10 year periods with negative returns. DCA during that period could moderate it, but then it is not a total of ten years - since not all of the investment made is seasoned for 10 years. Yes, that is bean counting on my part, but true.

Also not considered is professional management - During many of the flat periods and negative periods professional management resulted in enhanced performance a high proportion of times - particularly asset allocation.

Sadly, the field of professional management is overcrowded today, even after the tech-wreck. Once again it is up to the consumer to do their homework. Just like doctors, mechanics and teachers - not all money managers are made the same.

Lowest return over a 25 year period is 6%.
and you consider that bad??? Hell, it's six times what most people get from their current social security benefit. And 6% over 25 is a WORST case!!!

Myrmidonisia,

...
Sadly, the field of professional management is overcrowded today, even after the tech-wreck. Once again it is up to the consumer to do their homework. Just like doctors, mechanics and teachers - not all money managers are made the same.
And that is what makes an index fund so much better than 90% of the managed funds. They just can't beat the return of the market.

I think the anti-privatization folks are just too consumed in their hatred of George Bush to even look out for their own interests. The average age on this board is pretty young. These are the same folks that, in general, think that SSI will do them no good at all. But for them to advocate a change that will clearly benefit everyone is just too much, because it's not an Al Gore or John Kerry proposal.

Thanks for the good analysis and commentary.

and you consider that bad??? Hell, it's six times what most people get from their current social security benefit. And 6% over 25 is a WORST case!!!
6% over 25 years. I can get 3% a year from a bank account.

1060 over 25 compaired to 1030 the first year, 1060.9 the second, 1092.72...etc.

6% over 25 years. I can get 3% a year from a bank account.

1060 over 25 compaired to 1030 the first year, 1060.9 the second, 1092.72...etc.

Hmmm, so the absolute worse you could do is compound at double the rate you can get at a bank - and you don't think that's a good deal? Must be the sloppy public education system you went through that gave you that conclusion.


Do your math, it works out to CONSIDERABLY more than double the amount of money you'd have at the end of 25 years. Lookup 'compounding' if it is too difficult for you, though a spreadsheet you make yourself would be more enlightening. You've already got a good start on it, run it out 25 years now. Don't forget to include your annual contributions....

Oh, and BTW - with private ss you'd be able to use a bank account if you wish. At 3% it'd still produce better returns than you get currently with ss benefits.

And that is what makes an index fund so much better than 90% of the managed funds. They just can't beat the return of the market.

I think the anti-privatization folks are just too consumed in their hatred of George Bush to even look out for their own interests. The average age on this board is pretty young. These are the same folks that, in general, think that SSI will do them no good at all. But for them to advocate a change that will clearly benefit everyone is just too much, because it's not an Al Gore or John Kerry proposal.

Thanks for the good analysis and commentary.

Don't kid yourself. If only 25% of funds beat the index (and there are more), that means there are about 2,500 out there who do. That is quite a few.

Not all funds are trying to beat the index. Many look to come near with less risk. Mr. Bogle wants you to believe that index story without question so you buy his product. Think it through and you see the flaw. He discusses everything in averages and de-emphasises risk and diversification. Don't paint with too broad of brushstrokes, you'll miss the good stuff. Look at each facet as you would a gem - ther is no easy rule or generalization.

The best bet is to forget about being a do-it-yourselfer. Like car repairs; most people who try to do it themselves end up worse off than if they used a good mechanic. The trick is finding a good mechanic. There are precious few. That is what I was discussing before, not mutual fund managers.

Hmmm, so the absolute worse you could do is compound at double the rate you can get at a bank - and you don't think that's a good deal? Must be the sloppy public education system you went through that gave you that conclusion.


Do your math, it works out to CONSIDERABLY more than double the amount of money you'd have at the end of 25 years. Lookup 'compounding' if it is too difficult for you, though a spreadsheet you make yourself would be more enlightening. You've already got a good start on it, run it out 25 years now. Don't forget to include your annual contributions....

Oh, and BTW - with private ss you'd be able to use a bank account if you wish. At 3% it'd still produce better returns than you get currently with ss benefits.

BOzzy, I think you are making very astute posts to a very dull audience. Keep up the good work.

For those ignorant of SS, let's review the basics. Most people think that the SS money we working folks pay in goes into an account, earns interest and then is waiting for us at our retirement.

In fact, SS is a Ponzi scheme, where the payments of new/current workers are used to pay benefits to retirees. Any surplus is then raided by Congress, who writes an IOU for the money. There is no "lock box", only Treasury IOU's that future generations will have to pay. This habit started in the 1960's when LBJ was looking for funding for the Democrat's war in Viet Nam and did not want it to show up in higher taxes.

Like all Ponzi schemes, it is destined to collapse when not enough new investors (workers) can be found to pay in and meet the outflow payments to retirees. The coming baby boomer retirement will cause the inevitable inversion and the system will collapse.

So, ANY private account is inherently superior to leaving the money in the government's hands, where it will be spent.

Thanks, but I think 'dull' is too harsh a word. Most only know what they've been told by others, who were told by others in turn. Processing new information, particularly when it is contrary to your prejudice, is always difficult. It is one thing to say you're open minded - quite another to experience it.

So what is all this hoopla about "guaranteed benefits"? If Congress can do pretty much whatever they want to my benefits, how is my risk any less than if I put some of my money in the market.


Your aren't guaranteed at all. In fact there is no right to Social Security, if one really looks at it. As you've seen, congress will do as it pleases.

I don't agree with Bush's plan, and I wish to see it fazed out completely...over a coarse of 15 years...

BOzzy, I think you are making very astute posts to a very dull audience. Keep up the good work.

For those ignorant of SS, let's review the basics. Most people think that the SS money we working folks pay in goes into an account, earns interest and then is waiting for us at our retirement.

In fact, SS is a Ponzi scheme, where the payments of new/current workers are used to pay benefits to retirees. Any surplus is then raided by Congress, who writes an IOU for the money. There is no "lock box", only Treasury IOU's that future generations will have to pay. This habit started in the 1960's when LBJ was looking for funding for the Democrat's war in Viet Nam and did not want it to show up in higher taxes.

Like all Ponzi schemes, it is destined to collapse when not enough new investors (workers) can be found to pay in and meet the outflow payments to retirees. The coming baby boomer retirement will cause the inevitable inversion and the system will collapse.

So, ANY private account is inherently superior to leaving the money in the government's hands, where it will be spent.

In fact, most of what you say here is flat-out incorrect. The SSA currently maintains $1.6 trillion in trust funds, invested in treasury bonds, as per the recommendations of the 1983 Greenspan Commission. That is a "lock box." Social Security will only revert to a Ponzi scheme, in which we require more workers than beneficiaries, if the government elects to undermine those funds (say, via a 4% carveout) rather than seeking to shore them up through revised benefit schedules.

The upcoming boomer retirement will strain the system, true, but notice that the "collapse" (which in fact is a 27% reduction in benefits, not total bankruptcy) will not come until 2042, at which point the vast majority of boomers *will already be dead.* That "crisis" will have passed.

Your claim that the only security is "treasury IOUs that future generations will have to pay" shows a fundamental lack of understanding as to how a bond works. Let me spell it out: The SSA has $1.6 trillion in hand. They lend that real money to the U.S. government in return for a bond (exactly as if you or I invested in a government bond). That means that the U.S. government is indebted to the SSA for a given amount of capital at a given rate of interest. This is no more an imaginary IOU than the bonds I've purchased with my own 401(k) plan and the govt. can no more default on this debt than I can elect not to repay my credit card bill. That is to say, the SSA has loaned money to the government through these bond purchases. It is the government who has taken this money and it is up to the govt. to repay these loans. It isn't that the retirees are picking the pockets of the future generations. It's that the govt. must rely on the taxes of the future generations to repay the debts it has assumed.

Please, do not correct what you perceive to be ignorance about the SSA with greater ignorance.

...

Please, do not correct what you perceive to be ignorance about the SSA with greater ignorance.
Ditto.

Here is an interesting bit of history that I collected from various sources. A lot of it was from personal recollection, so the numbers may be off, but not by any substantial amount.

In 1999, a little noticed part of President Clinton's plan to "save" Social Security was to force 5 million previously exempted employees into Social Security. If they were forced into Social Security, it would have created billions in additional revenue. Guess what. Five Democrats – Dianne Feinstein, D-Calif., Barbara Boxer, D-Calif., Christopher Dodd, D-Conn., Richard Durbin, D-Ill., and Edward Kennedy, D-Mass.demanded that President Clinton not support forcing 5 million of their constituents into Social Security. They warned of the adverse impact on employees in terms of lower rates of return and lost flexibility. Clinton did the only other thing that was possible. He reduced benefits by delaying the full retirement age and raised the income level subject to Social Security taxes.

Why do these Senators resist the partial privatization of Social Security when they fought so strongly to keep their constituents out of the system. For that matter, why doesn't Congress pay into Social Security, opting instead for a privately managed plan? It's clear they know that the system is doomed. That it truly is a Ponzi scheme that requires more and more suckers that will pay in but never reap the rewards.

In the absence of action by Congress, Social Security will certainly become bankrupt. What action Congress should take is what should be debated and discussed now, before it's a crisis. The problem is that folks like Poland and CSW are so consumed with their hatred of George Bush, that they can't see past that. If they could, the flaws in the system they blindly support would be evident to even the most foolish of us and some serious discussions could take place.

Myrm:

What exactly are you doing here? I give information about how the SSA trusts function, outline where the money is, and why the responsibility for that debt falls on govt. borrowing through bonds rather than on future generations. I never once smear Bush for the sake of smearing Bush, though I do talk about why the 4% carveout is bad news. I'm talking about why the rush to privatize is bad policy, not whether or not Bush is a bad policymaker.

Meanwhile, you give some pointless anecdote (from memory and without research, I might add) that serves only to name five Democrat senators whom you don't like, and then you accuse me of ad hominem attacks against Bush? I talk about policy, and you accuse me of blind party rhetoric? I give numbers and describe how the SSA trust functions, and you accuse me of spreading ignorance?

I am not saying that Social Security does not need overhaul or adjustment, just that the privatization (or partial privatization) plans currently pushed by the administration are a bad, bad idea. And I'd say the same thing if Senator Kennedy himself proposed such a carveout.

Don't make assumptions about my motives. And next time, when you tell a rambling anecdote, make sure that it leads into your conclusion. Nothing in your post demonstrates that the SSA is, in fact, a Ponzi scheme.

For the record:

My motive in arguing for the reform of the SSA rather than its dismantling is very simple. I've said it before, but it bears repeating.

Before the establishment of the SSA, 35 percent of Americans retired into poverty. The SSA has reduced that number to 10 percent. It is, hands down, one of the most effective pieces of public policy in the nation's history.

So you guys can say I'm player-hating on Bush and that I'm blinded by feelings of rage, but you're wrong. What I really hate is the idea of seeing an *additional quarter of all Americans live their retirement in poverty.*

And make no mistake: A 4 percent carveout would hasten the depletion of the SSA Trusts and SSA would become a Ponzi scheme. Sort of a self-fulfilling prophecy, so all you anti-SSA folks can point and say "I told you so." But this is not inevitably where the SSA is headed. With a forty-year horizon and the miracle of compound interest, a fraction of a percent shift now makes the difference between failure by 2042 and indefinite growth.

Here's some non-party line materials that those of you who are willing to engage in serious discussion ought to check out. I'm leery of including Myrm in this category, because he responded to my more-or-less reasonable post with cries of player-hater and some inaccurate generalizations about where and how I enter this argument.

The first is the National Academy of Social Insurance. They're nonpartisan and draw on reports from guys like Cato. Yet overwhelmingly, their briefs report that privatization carveout will hasten the SSA crisis rather than alleviate it.
http://www.nasi.org/

Second is our old favorite, the AARP. The only politics AARP members have in common is that they're retired. And yet, their stance is to call on members to write their reps and ask that they resist the privatization carveout. So are all AARP members blinded by their dislike of Bush?
http://www.aarp.org/bulletin/socialsec/

In fact, most of what you say here is flat-out incorrect. The SSA currently maintains $1.6 trillion in trust funds, invested in treasury bonds, as per the recommendations of the 1983 Greenspan Commission. That is a "lock box." .

Roflmao. And what do you think happens to the money from those treasuries? It gets spent. Spent on Iraq, spent on pork, spent on education, space, and farm subsidies. It gets thrown into the general budget and spent. So much for a lockbox.


Social Security will only revert to a Ponzi scheme, in which we require more workers than beneficiaries, if the government elects to undermine those funds (say, via a 4% carveout) rather than seeking to shore them up through revised benefit schedules.
.

Your argument is pointless. You are saying essentially that the only way SS will be unstable is if the government undermines the 'funds' (via 4% careveout) rather than undermining the benefits.... ('revised' benefit schedule) Under that logic either way it is undermined. That should illustrate nicely the fallacy of your argument.


The upcoming boomer retirement will strain the system, true, but notice that the "collapse" (which in fact is a 27% reduction in benefits, not total bankruptcy) will not come until 2042, at which point the vast majority of boomers *will already be dead.* That "crisis" will have passed.
.

Unless you are one of the people facing a 27% cut in benefit. Just because the boomers will be dead does not resolve the problem. They had a bad habit of having children of their own. They also have a bad habit of living much longer than their parents. The cost of their retirement is considerably more than the cost of their parents retirement. Their children will probably live even longer. Your point is nothing more than a fantasy.


Your claim that the only security is "treasury IOUs that future generations will have to pay" shows a fundamental lack of understanding as to how a bond works. Let me spell it out: The SSA has $1.6 trillion in hand. They lend that real money to the U.S. government in return for a bond (exactly as if you or I invested in a government bond). That means that the U.S. government is indebted to the SSA for a given amount of capital at a given rate of interest. This is no more an imaginary IOU than the bonds I've purchased with my own 401(k) plan and the govt. can no more default on this debt than I can elect not to repay my credit card bill.
.
I added the bold. Ever heard of bankruptcy? more than 3% of most credit card debt is never paid. People default all the time. Since it is unsecured there is nothing to collect or repo if you fail. Just like treasuries.

Maybe you weren't around in the 70s. If not - I strongly suggest you read a book called 'The Money Changers' It is not as dull as it sounds, I promise. It is a fiction story with sex and violence. It also illustrates the economic conditions of the 70s when treasuries and the dollar were losing value rapidly and people thought one day they could be worthless.

There are two ways a country can avoid a debt - one is bankruptcy, the other is printing more money - which can lead to hyper-inflation. neither is very good. Greenspan and others have all pointed out that the SS liability will result in a mountain of debt if nothing is done. Think it through - when all those treasuries are called in, where will the government get the money to pay them off? Then, once the SS system goes into the red, where will they get that money? Is the picture getting clearer yet?


That is to say, the SSA has loaned money to the government through these bond purchases. It is the government who has taken this money and it is up to the govt. to repay these loans. It isn't that the retirees are picking the pockets of the future generations. It's that the govt. must rely on the taxes of the future generations to repay the debts it has assumed..

It IS 'pick pocketing (aka unfair) if the younger generation has to pay more in taxes than their seniors - and then get an even lesser benefit. Just because the tax money is filtered through the government does not make the money belong any less to the people it was taken from.

The whole point is that the SS system is broken. Every day that goes by it becomes more broken. There is a time ahead of us when the cost of the benefits will be more than taxpayers can support. Raising taxes will only defer the problem. Cutting benefits is contrary to the whole point of the system. (it is not welfare for the old, it is a retirement benefit) Deferring retirement age is one option, but with the 100+ demographic being the fastest growing demographic even that does not do the trick.

The only solution is to do a complete overhaul. Turn it into a mandatory savings plan instead of a mandatory tax plan. Give people the freedom to make their own decisions and remove it from the hands of Washington spenders. There will be some large costs in the transition, but those only get larger the more we wait. If nothing is done soon the mountain of costs + debt + liabilities + obligations will grow so high it will topple. By then the crisis will be unavoidable and devastating.

Bush is going the wrong route to try painting this as a crisis - it should be promoted as modernization. Just like modernizing a hotel or a freeway there are costs involved, but the dividends it will pay in the future are worth it.


Please, do not correct what you perceive to be ignorance about the SSA with greater ignorance.
You should speak. Get off your high and mighty.

For the record:

My motive in arguing for the reform of the SSA rather than its dismantling is very simple. I've said it before, but it bears repeating.

Before the establishment of the SSA, 35 percent of Americans retired into poverty. The SSA has reduced that number to 10 percent. It is, hands down, one of the most effective pieces of public policy in the nation's history.


Before the creation of SSA ships and trains were still running on steam. After SSA they developed diesel fuel engines.

Somehow, without SSA I think diesel fuel engines will continue to work.

As with steamboats, today there are considerably more factors that come into play for retirement income. By letting citizens control the investment of their SS accounts not only will fewer people retire in poverty, but more people will retire into wealth!


Oh, and AARP is turning more and more liberal every day. They never met a government spending program they didn't like. Since they are no longer the ones PAYING SS taxes, their opinion is really inconsequential.

BOzzy, a few of your rebuttals here (for the record #1: It ain't a lockbox because the government already spent the money and #2: Comparing personal bankruptcy to governmental default on treasury bonds) are fundamentally flawed. First, claiming that the money isn't secure because it is held in the form of a loan to the government just ain't right. That money is only lost if we permit the govt. to default on the debt through legislation such as this privatization scheme. A bank officer has the keys to your safe deposit box. It's still a safe deposit box so long as the bank officer doesn't loot your shit. We need to be certain that our government acts as an honest trustee. Second, if the U.S. government were to default on all government bonds (akin to personal bankruptcy), the world economy would take some massive lumps. I admit that my metaphor using personal default on a credit card is not entirely accurate. But you're picking at the metaphor instead of looking at the truth behind the comparison. The only two ways the SSA bonds vanish are through the collapse of the U.S. government or through some legislative shenanigans, like the carveout.

My point is not that Social Security would be stable without the carveout, but that the carveout will hasten the crisis. The changeover costs will exhaust the trusts within a decade (which otherwise would grow to a peak of $7 trillion before the boomers begin to sap them). The 2042 frontier moves closer because the carveout, in addition to the changeover expense, will make fewer funds available to grow the trusts because those funds will move into the private accounts. I've never said there doesn't need to be reform, just that privatization is a harmful reform.

And the steam ships/diesel engines argument just doesn't hold water. While overall productivity rates (including better technologies) do have a bearing on Social Security, the poverty rates of retirees are much more directly related. It's like me comparing polio rates before and after Salk and you making the claim that it was in fact the television that cured polio because it was invented around the same time as the vaccine. But here, I think you'll find it harder to dispute these figures with an irrelevant correlation.

Two-thirds of all households headed by a retiree have an annual income of $20,000 or less. Half of this income is from the SSA. *Every single one of these households would drop below the poverty line with the dismantling of the SSA.* An additional 12 million households depend on the SSA for 90% of their income.

Of course diesel engines will continue to work without the SSA, but these 12 million households will see their incomes drop below $2,000 a year.

I think it is important to note that any Social Security program, federal or privatized, will cost money. So accusing the SSA of picking the pockets of subsequent generations, ignores the fact that the privatization plan currently on the table will *increase* the debt incurred by future generations by $32,000 per American. This debt would arise from the predicted $1.5 to $2 trillion incurred in the first decade and the predicted additional $3.5 trillion by 2028. These expenses would cover the costs of transition (such as covering the benefits of those currently guaranteed while facing the diversion of payroll tax into private accounts). Check it: www.cbpp.org/2-2-05socsec4.pdf.

Yes, Social Security of any type will cost future generations money, but the carveout will cost significantly more.