Should you pay so people can have beer and DVD's while not saving?
Published on April 29, 2007 By greywar In Politics

 *edited to include drmiler's dispute over the payout arrangement of Social Security. I will have to do more research on this aspect.   

      There is a nice article over at National Review dealing with Social Security and it's impending collapse. I suggest you read it but in case you don't want to I will summarize the key points:


1. Social Security will not cover its yearly payouts with contributions starting in 2017. Then it would have to rely on the trust fund (where past surpluses were supposed to have gone).

2. The trust fund would keep it running until 2041.

3. The trust fund is already gone (long, long gone actually).

4. This means that in 2017 Social Security is broke. We will either have o lower benefits or raise Social Security deductions from current workers.


     The article goes on to laud the benefits of private retirement accounts. This is fine and true but also not the point. Social Security is not about your retirement. It is about other people's retirement and sundry payouts.

      This is why Social Security is going broke. If you simply paid a given amount of money into the government during your working years and had it doled back out to you when you retire Social Security would be just fine even if it didn't pay you interest on your money.

     The problem is that Social Security takes the money you have paid in and gives part of it away to other people who either didn't pay in as much as you did or even to some who never did or ever will pay in a dime.

      Social Security payments pay around a center line*. If your career was spent earning (and thusly contributing) less than the average American worker you will be paid back more than you contributed. The poorer you were the bigger the difference. Conversely if you were well paid during your lifetime you won't get back out as much as you paid in. Social Security is also used as payments to people who do not and cannot ever pay into the system (like the mentally handicapped).

 

*drmiler disputes this part of the article and has personal experience to back it up:


"This where you're dead wrong! What you get is based "solely" on how much you put in. So much per quarter. When you apply they take what you've paid in over your working years add it up and divide that by 20 (years which is what they figure you'll last). The figure is now your annual income. So you take that and divide it by 12 (months) and that's what you get per month! And don't try to tell me different. I "just" went through this with my wife. So I'm 100% positive on those figures. And it's the same figures with disability. Which I know because "I" went through that!"


     Add in the overhead of a large government agency running the program and you get a negative rate of return overall. Run this way for enough years and add in the fact that people retire earlier and live longer and get what we have: a program that is mathematically unsustainable without even more taxation.

     This is why comparing Social Security to private accounts, IRAs, or 401k plans is senseless. None of those plans are intended to do anything for anyone except the person who pays into them. No one else gets paid, they are invested in solid plans, and they have a lot less admin overhead.

     The only issue to decide is whether you think that people at or above the median income in America owe a retirement to those who live below it or to those that cannot work at all. In essence it is Capitalism vs. Socialism and what balance is to be struck between the two as a moral society.

     My opinion is that the folks like the mentally handicapped should be cared for with monies held separate from anything intended as retirement for anyone. Simply make it a separate tax. Aside from that I do not buy into Social Security for anyone of my generation or later. If you were born after 1970 and can't figure out how to succeed moderately over the course of a 45-47 year working career with the current flood of government subsidies, education programs, and job placement programs then I don't have a lot of sympathy for you.

     Americans seem to believe that they shouldn't have to budget or live within their means. Most of the minimum wage people I worked with over the years drove cars that were more expensive than they needed. They bought fast food for lunch and got their groceries at expensive places like the 7-11 rather than go to the grocery store.

     Many drank, smoked weed, or had other recreational drug habits. They had nice stereos, TV's, and multimedia electronics while collecting food stamps or other government benefits (read as your tax money). I would say that 98% of the minimum wage co-workers I had over the years could have lived comfortably while saving 10-15% of their income.

     There were exceptions to this rule but these were mainly the fast food folks with lots of kids; a personal choice. Almost all of them could have started saving for retirement at age 18 or even sooner since many had worked in for minimum wage since age 14 or 15 (not an upwardly mobile crowd you see) had they simply cut back on non-essentials and saved some money. The issue was not that they couldn't save but rather that they didn't want to make the sacrifices to do so. Should this sort of decision making be paid for by the taxpayer?

     It would have been hard but even working as a pizza guy I could have saved enough for a modest retirement over the course of 47 years. I would have had to lower my current standard of living and cut out most entertainment expenses of course.  I don't think anyone should owe me any money when I am 65 just because I wouldn't do without DVD's, fast food, or a car I shouldn't have bought. You should have to make the right choices to be rewarded.

 

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Comments (Page 1)
on Apr 29, 2007
I don't think anyone should owe me any money when I am 65 just because I wouldn't do without DVD's, fast food, or a car I shouldn't have bought.


That's a good point. Old people don't need to be provided for anyway - what are they going to do about it if they're mistreated or forced to live on the streets? They're old - you'd barely even need a water cannon to break up a pensioner riot. Let them starve to death.
on Apr 29, 2007

That's a good point. Old people don't need to be provided for anyway - what are they going to do about it if they're mistreated or forced to live on the streets? They're old - you'd barely even need a water cannon to break up a pensioner riot. Let them starve to death.

 

You are right... no matter what anyone does or doesn't do we should give them money. Shit, I don't have a clue why I am bothering to save when I should just wait and have your kids pay for my retirement! Why do without when I can mooch eh?

Of course what I actually advocated in the article was stopping the pretense that my generation should count on social Security. I think 30+ years is fair warning don't you?

on Apr 29, 2007

Social Security is, and always has been, a government sanctioned pyramid scheme designed to never pay money out to anyone, or at least designed to pay out very little of what was paid in.

It was supposed to be insurance, and it was supposed to be used when nothing else was available, but it turned into an entitlement because those in power (Congress rats) long ago learned that they could remain in power as long as they had something to bribe or blackmail voters with.

If Social Security today worked like it had originally, if the retirement age had been indexed along the way to account for longer life expectantacy, then the retirement age (or age for collecting social security) would be much higher.  As is the government is talking about moving it up to 72 or possibly even higher.  Basically making the working class continue working longer, moving the bar farther and farther out so that the fund won't have to pay money out to a lot of people that have paid into it.

The 55+ crowd got all up in arms when G.W. Bush talked about allowing a small portion of social security to be used for private accounts.  Accounts with much better returns.  Accounts that would have been for people under 55 years of age.  Accounts that wouldn't have changed at all the retirement of people 55+   The Democrats and their friends in the AARP did their job of fear mongering.  The Democrats (like John Kerry) told us that the system only needed tweaking.  The Democrats like the Clueless Old Liberal here told us the same.   LIARS.

Anyone with half a brain should be able to see just how screwed up Social Security is, but they won't acknowledge it because it is the 800-pound Gorilla in the room and no one wants to be the one that gets fired up.

Thank god I have some money in a 401-k plan.  Thank god I'm a horrible eater, don't take great care of myself, and probably won't be on the higher end of the life expectancy scale.  Perhaps I'll be one of the good ones, one of the ones that dies without taking money out of the system.  Perhaps.   Or, perhaps I'll live to be 103 and suck my money, my children's money, and their children's money out of the system long before passing...  Perhaps.

on Apr 29, 2007
To answer the ultimate question: No. I don't think one citizen should be forced to pay for another citizen's retirement.
on Apr 29, 2007
I think there needs to be a balance. I believe that the majority of the people that are being talked about here do not have the knowledge needed to understand what financial responsibility means, much less to handle their own retirement money. They live paycheck to paycheck and the modest savings they do have is used up when the car brakes down, needs maintenace work or they lose their job. It's not easy being poor - expencially in our materialistic capitalistic society. One can lower the living expenses but there are trade offs. An older car needs more fixing. An older home is usually expensive to heat. (I myself had one house that cost over $400 to heat in the winter - it was 1300 sq ft)

As to the issue of those 'undeserving.' I've seen many people, friends and family of friends, who have worked hard all their lives and can't make it when they can no longer work for whatever reason (usually medical). They get a $500 check each month. This is hardly enough to pay for housing and food, much less transportation and medical expenses. I think this amount of money hardly qualifies as 'retirement' as most of us here would define it.

I have a friend whose MIL had to move in because she only gets $300 a month from social security. If it weren't for family I don't know where she'd be. She was living with her granddaughter, but it became too difficult for her to manage her own life (job, living expenses etc.) and take care of her aging grandmother.

I guess what I'm saying is that it's not easy. Yes, there are those that abuse the system, but how much are we going to mandate how they live? Limit the number of children they can have? Limit their spending to essentials? Tell them where they can live? What kind of car they can drive?

How about we just tell all the rich that they don't need to make over $100k and limit their salary to that? Would that be fair? Setting limits (making more laws) on personal behavior is not realistic. Tell them the max size house they can have? Tell them what kind of car they can drive? Because they're being 'selfish.' Isn't that what we're saying here, that these people are selfish drains on society? Have any of you read Nickled and Dimed?

I'm all for privatizing some of our retirement, and upping the age for us younger folks. But many folks are just not capable of handling money in a way that 'we' view as proper.
on Apr 29, 2007
But many folks are just not capable of handling money in a way that 'we' view as proper.


Isn't this kind of like parenting children, but on a larger scale?

When the child begins to understand that the parent means it when he says "If you throw ketchup packets at that old lady again, we're leaving McDonalds" because the parent doesn't discuss it forever, he just follows through, it sucks for the child that day. But ever after that the child knows what to expect, and can adjust his behavior accordingly.

In other words, when it's sink or swim, people will learn to swim. Some people might not plan ahead and might end up in a bad situation, but the MAJORITY will learn to adapt when they see what happens to those who DON'T take care of their own future.
on Apr 29, 2007

I think there needs to be a balance. I believe that the majority of the people that are being talked about here do not have the knowledge needed to understand what financial responsibility means, much less to handle their own retirement money. They live paycheck to paycheck and the modest savings they do have is used up when the car brakes down, needs maintenace work or they lose their job. It's not easy being poor - expencially in our materialistic capitalistic society. One can lower the living expenses but there are trade offs. An older car needs more fixing. An older home is usually expensive to heat. (I myself had one house that cost over $400 to heat in the winter - it was 1300 sq ft)

That's fine.  However, I don't think I should be responsible for other people's irresponsibility.

on Apr 29, 2007
My biggest thing with people buying more than what they should, no saving, and so forth is that no one teqaches this in school nor is it part of the fabric or US society to learn such a thing.

The people you mentioned who drove around in cars they probably shouldn't bougght, smoking weed (or something else), expensive clothes and so on probably don't have a clue as to what savings is or how money works. Probably don't understand how interest works, real estate, what GDP is, and other economic formulas some people use to decidedd whether they will invest in a company or not.

So when you tell someone who works in a pizza shop for 8 dollars an hour that they should put 1 and hour into a 401k or a 457k, tey will look at you like your on crack and ask you where you got your stuff from.


I would also state that there are people who do get paid a good amount and buy over priced houses, cars, clothes, go out every weekend to some show, buy cool electronics, and have huge credit debt. In fact, don't most Americans have huge credit debt? They might have a 401k, but I bet that they don't put there tax returns pycheck back into a 401k. I bet they spend it on some cool electronic gadget or pay some bill.

What the heck is a financial planner anyway????




Education is key.
on Apr 29, 2007
Oh, and what no one has talked about is that sice this economy is so driven by people who put themselves in debt to buy stuff, what would it look like if more people actually was more responcible with their money?


I have a questions: Does anybody here teach their childen how investment works? What it means to save money? What it means to not put yourself in debt or have smart debt? Does your kid know what GDP is? What a Mutual Fund is?Do they even have a savings account or an educational account? What is interest? What is compounded interest?
on Apr 29, 2007
If paying into Social Security stopped today, how many people would take that extra money in their paycheck and save it? Assuming a person never makes more than minimum wage in their entire life, they would realize about $1000 per year or about $83.33 per month in “saved” social security payments. Assuming the cash “saved” is placed in an IRA at 5% fixed rate (not an impossible rate to achieve on average over 45 years) that person would have $168863.02 saved for retirement. Now remember this person never made more or less than $7 an hour over 45 years starting age 20 years old (unrealistic sure, but the figures are just to simplify things, of course nothing is simple in life I know). This persons annual salary is $14560.00 a year, and unless he fills out his taxes incorrectly, only pays Medicare, the most of rest is refunded. Now assuming they stop getting interest on their money at age 65 and took out the amount they lived on each week, this money would last them 11.5 years or until age 76, still too young to die IMO, but we all know interest would continue after age 65.

I know there are many variables in life. This could be adjusted so inflation, minimum wage increases are factored in. I would hope nobody would have to have a minimum wage job for 45 years. I didn't even have the hypothetical person withdraw his money realistically (Then it would probable last this person into their 90's, as the last interest payment before withdraw is $8443.15), I just did this to illustrate what could be accomplished by keep your SS money and investing it yourself.
on Apr 29, 2007
The only issue to decide is whether you think that people at or above the median income in America owe a retirement to those who live below it or to those that cannot work at all. In essence it is Capitalism vs. Socialism and what balance is to be struck between the two as a moral society


It is not Capitalism Vs Socialism. It is Moral Capitalism Vs Selfish Capitalism. Technically, no one ows anything to others. But morally, the Haves owe a lot to have-nots. the first obligation is to get the have-nots off their bad habits (somehow .... by education, regulations, advice, restrictions ...etc) and try to minimize their number as much as possible. After that morally we still have to help as much as we can.

If the Haves, dont pay taxes and social security more than the poor do, How else do you think they should contribute more than the poor do? just by charitable contributions? i dont think this is enough to make us really moral society.
on Apr 29, 2007
How do "haves" owe a lot to "have nots"? I can't understand this.

It is nice to do things for those who are less fortunate, and compassion is good for our society (IMO), but I think saying *owe* is taking it too far.
on Apr 29, 2007
Well if we refuse to do the decent thing and put down those members of our society who are incapable or unwilling to look after themselves then we at least owe them a life worth living. Forcing them to scavenge from garbage bins for survival is rather harsh considering how much money the average person has to waste. It'll only breed discontent and more dangerous neighbourhoods.
on Apr 30, 2007
cacto: I don't think that's a very realistic way to describe life in America, even for the impoverished.

Most people have families who could care for them if the gov't weren't doing it for them, and there are vast charitable organizations there as well.

on Apr 30, 2007
but I think saying *owe* is taking it too far.


i said "Morally" not technically. How much you Morally owe anyone, depends of course on how you feel about your obligation to others and to the society in general. That is exactly why charity is not the answer. many of us dont feel that we owe anyone anything and at the same time believe that we are entitled to use ALL the resources availble which is generally provided by those same others and that same society. it is a natural selfish feeling. morality is the only corrective measure.
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