Privatized Social Security

[Bullseye]

You must not have read the whole thread. Here is my question:

Assume that the average worker contributes $10K/year to a retirement fund. Also assume that there are two workers for every retiree.

How much can each retiree withdraw per year?

Consider that every dollar someone gets from selling stock comes from somebody else buying stock. Buys have to equal sales, too; you can't buy stock unless somebody else sells, and you can't sell unless somebody else buys. And the dollars must match.

Which makes the answer "$20,000/year." Doesn't matter if we're talking about stocks, either. If you think that they can get more from selling stocks, then explain where all that extra money comes from.

Not exactly. Stock markets are run by companies or individuals that "make the market"; when someone wants to buy the market maker sells and when someone sells they buy. They make money by buying for a little less than the sell - called the "spread".

 

[JohnfrmClevelan]

Not exactly. Stock markets are run by companies or individuals that "make the market"; when someone wants to buy the market maker sells and when someone sells they buy. They make money by buying for a little less than the sell - called the "spread".

That's not really relevant here.

People here are looking at past performance and claiming that the average retiree could retire with a significantly higher income (plus a pile of principal) than SS offers. Which would be true if we were only talking about one retiree. But we are talking about pretty much everybody having a 401(k)-type stock account.

I think everyone will agree that logically, not everybody can retire a rich person just because they bought stock. That money has to come from somewhere, and the stock market does not result in the creation of any dollars. So, if you are going to make the argument (like others have) that retirees could all have a big enough pile of principal to yield $75K-$150K/year, I want to know where the dollars come from when they all cash out.

 

[Bullseye]

That's not really relevant here.

People here are looking at past performance and claiming that the average retiree could retire with a significantly higher income (plus a pile of principal) than SS offers. Which would be true if we were only talking about one retiree. But we are talking about pretty much everybody having a 401(k)-type stock account

I think everyone will agree that logically, not everybody can retire a rich person just because they bought stock. That money has to come from somewhere, and the stock market does not result in the creation of any dollars. So, if you are going to make the argument (like others have) that retirees could all have a big enough pile of principal to yield $75K-$150K/year, I want to know where the dollars come from when they all cash out.

The stock market doesn't create wealth? That's going to supervise the heck out of Warren Buffett.

Retiring rich would still be relative must as it is now. Our retirement SS benefit is based on what we've paid. The money comes from the appreciation of your investments.

 

[JohnfrmClevelan]

The stock market doesn't create wealth? That's going to supervise the heck out of Warren Buffett.

The stock market creates wealth on paper. But everybody can't cash out, or it all falls apart, just like everybody can't cash out of their bank accounts at once.

Retiring rich would still be relative must as it is now. Our retirement SS benefit is based on what we've paid.

SS benefits come from workers paying in, with the government making up any shortfall (which they have the unique ability to do). The money you collect in 2020 comes from workers paying FICA taxes in 2020.

The money comes from the appreciation of your investments.

The money supply only grows when the government deficit spends or when people take out bank loans. There aren't more dollars in existence just because the prices of stock go up. For that matter, there aren't fewer dollars in existence just because the prices of stock go down. The dollars simply change hands.

 

[Bullseye]

The stock market creates wealth on paper. But everybody can't cash out, or it all falls apart, just like everybody can't cash out of their bank accounts at once.

Why would everyone cash out?

SS benefits come from workers paying in, with the government making up any shortfall (which they have the unique ability to do). The money you collect in 2020 comes from workers paying FICA taxes in 2020.[/quote[And. . .?


[quote-johnfrmClevelan[
The money supply only grows when the government deficit spends or when people take out bank loans. There aren't more dollars in existence just because the prices of stock go up. For that matter, there aren't fewer dollars in existence just because the prices of stock go down. The dollars simply change hands.

As they would as people retire. This principle is being followed by millions retirees every day.

 

[I'm Supposn]

Aberration, … Will those individual’s retirement accounts continue, (as SS retirement currently does) provide monthly retirement benefits for the individual’s remaining lifetime of retirement years and there-after in many, (if not most) cases, also provide for the individual’s same benefits fpr individual’s spouse’s lifetime remaining lifetime of retirement years if the individual’s benefits exceed their spouse’s entitled SS retirement benefits?

Will those individual’s retirement accounts continue, (as SS retirement currently often does) in some cases provide monthly retirement benefits for the individual’s never remarried ex-spouse’s lifetime of retirement years?

If the individual’s privatized SS account is not depleted prior to the individual’s death, the remaining account is passed on to the individual’s estate?

Under a privatized SS retirement system, if the individual’s account is depleted, will the individuals and their spouses, and their ex-spouses be continued (as SS retirement now does), entitle the individual and their spouses, and their ex-spouses to some minimum Supplemental Security Income, (SSI) benefits, as is now provided by the Social Security Administration?

You contend that such a privatized SS retirement system will not increase annual federal budget expenses? …

Supposn, … Yes. All of it. And not just the person and their spouse. They can leave whatever remains to anyone.

Depletion does not need to be possible. Control of available funds and control on disbursements prevents that. There is reason the rules need to be any different than SS.

All that’s being done is moving money from a place that makes an intentionally ridiculous return with no control at all, to a place that makes a consistently larger return. There is no reason for it to be more.

Aberration, all of it? Are you suggesting that those additional costs would be paid by general tax revenues, or by reducing the portion of FICA payroll taxes deposited into the individuals’ accounts, or taxing the individuals’ account on the commencement date of retirement, to compensate for the potential benefit expenses that retired individuals’ children, spouses, and prior spouses may in the future have claims to?
The purpose of Social Security retirement benefits is to reduce poverty among the elderly and in accomplishing that, it somewhat financially relieves their families, and improves our nation’s economy.

[Tax deferred retirement accounts purpose is to provide an opportunity for those who can afford the risks and invest to further increase their wealth when they retire. (unfortunately, many who are enticed to take those risks, couldn’t afford them. Some lost due to poor investments, others paid tax penalties for early withdrawals].

I believe Federal Supplemental Insurance Income, (SSI) is funded from general rather than from FICA payroll taxes. It’s operated as a federal charity that’s primarily for the many entitled to only insufficient Social Security benefits and for some who otherwise may not be entitled to any Social Security benefits.
Retaining the current Social Security retirement’s considerations for widows, ex-wives, and dependent children will be less feasible and/or of greater expensive (than they currently are).

If Federal Supplemental Insurance Income, (SSI) will be retained, it will continue to guarantee some minimum rate of monthly SS retirement benefits. Privatized SS retirement policy will then encourage employees, (particularly the lowest earning employees), to risk more, for greater retirement incomes. Due to SSI, Social Security beneficiaries are guaranteed at least minimum benefits. SSI will be the greatest ongoing net increased federal expense item that would be due to transforming to a privatized SS retirement system.

Respectfully, Supposn

 

[JohnfrmClevelan]

Why would everyone cash out?

Because the market is crashing? It happens. But my point was that there are not nearly enough dollars for everybody to cash out.

As they would as people retire. This principle is being followed by millions retirees every day.

No, it's not. About half the workforce/retirees hold stock, and many of those only have a small amount.

The stock market works not because a lot of the investors are rich, and they don't need to sell their stock. People bring their savings to the market, buy stocks, and sit on them. Most of the time, when the market is going up, sellers have to be tempted into selling by high prices. But in the end, dollars in = dollars out. They have to.

 

[Bullseye]

Because the market is crashing? It happens. But my point was that there are not nearly enough dollars for everybody to cash out.

Seriously?

No, it's not. About half the workforce/retirees hold stock, and many of those only have a small amount.

But you're talking about now, not after the changes we've been discussing are implemented.

The stock market works not because a lot of the investors are rich, and they don't need to sell their stock. People bring their savings to the market, buy stocks, and sit on them. Most of the time, when the market is going up, sellers have to be tempted into selling by high prices. But in the end, dollars in = dollars out. They have to.

Ok, I'm going to give up.

 

[JohnfrmClevelan]

Seriously?

Yes, seriously.

But you're talking about now, not after the changes we've been discussing are implemented.

Look - if this was an isolated system, it's easier to see. If the market consisted only of workers and retirees, it's clear that the only dollars available for retirees are those contributed by workers, and in the present. In reality, it's a little more complicated than that, because there are other buyers and sellers in the same market. But if you are going to argue that all of the retirees can withdraw significantly more that the workers are contributing, then you have to accept that the difference is going to come from other buyers. And that is going to have a negative effect on stock prices.

Ok, I'm going to give up.

Come back to the debate anytime, as soon as you figure out where all of those other dollars for retiree distributions are going to come from.

 

[Bullseye]

Yes, seriously.



Look - if this was an isolated system, it's easier to see. If the market consisted only of workers and retirees, it's clear that the only dollars available for retirees are those contributed by workers, and in the present. In reality, it's a little more complicated than that, because there are other buyers and sellers in the same market. But if you are going to argue that all of the retirees can withdraw significantly more that the workers are contributing, then you have to accept that the difference is going to come from other buyers. And that is going to have a negative effect on stock prices.




Come back to the debate anytime, as soon as you figure out where all of those other dollars for retiree distributions are going to come from.

LOL, I've already figured that out. I just can't figure out how to get it across to you.

 

[JohnfrmClevelan]

LOL, I've already figured that out. I just can't figure out how to get it across to you.

If you truly have it figured out, getting it across to me won't be difficult. You just need facts + logic.

 

[I'm Supposn]

Bullseye, I’m presuming to elaborate on JohnFrmClevelan’s arguments; John, I apologize to the extents that my presumptions may essentially differ from your positions.
s
Among self-directed privatized SS retirement accounts, there will be those that due to misfortune and/or poor investment decisions. on the day of their retirement will lack sufficient value to finance their minimum remaining lifetime needs.
Upon retiree’s commencing day of retirement, if our nation’s within an economic recession or depression, an entire generation will (in aggregate) be in that same unfortunate position.

Additionally, there currently are Social Security retirement’s benefits provided for the retirees’ widows, ex-wives, and dependent children that are determined by the retiree’s entitled monthly benefits. The costs of those additional benefits cannot be individually calculated until the retirees’ retirements or deaths, and/or their wives and ex-wives retirements.
Do you propose that those benefits should be terminated, or some portion of retirees’ accounts be taxed on the date of their retirement, or taxed when the funds are withdrawn from the retirees’ individual accounts?
You don’t propose that those expenditures be funded from general rather than FICA tax revenues?

I believe Federal Supplemental Insurance Income, (SSI) is funded from general rather than from FICA payroll taxes. It’s operated as a federal charity that’s primarily for the many entitled to only insufficient Social Security benefits and for some who otherwise may not be entitled to any Social Security benefits.

If Federal Supplemental Insurance Income, (SSI) will be retained, it will continue to guarantee some minimum rate of monthly SS retirement benefits. Privatized SS retirement policy will then encourage employees, (particularly the lowest earning employees), to risk more, for greater retirement incomes. Due to SSI, Social Security beneficiaries are guaranteed at least minimum benefits. SSI will be the greatest ongoing net increased federal expense item that would be due to transforming to a privatized SS retirement system.

It's suggested that proponents of “privatized Social Security retirement accounts”, are only considering those that can afford the risks and have less consideration for those who for any reasons, will consequentially have insufficient value to finance their minimum remaining lifetime needs.

Respectfully, Supposn

 

[Bullseye]

Bullseye, I’m presuming to elaborate on JohnFrmClevelan’s arguments; John, I apologize to the extents that my presumptions may essentially differ from your positions.
s
Among self-directed privatized SS retirement accounts, there will be those that due to misfortune and/or poor investment decisions. on the day of their retirement will lack sufficient value to finance their minimum remaining lifetime needs.
Upon retiree’s commencing day of retirement, if our nation’s within an economic recession or depression, an entire generation will (in aggregate) be in that same unfortunate position.

In the modern history of our country there has never been a 35-40 year (length of the average work career ) where stock market returns have been as low as the
virtual ROI of SS.

Additionally, there currently are Social Security retirement’s benefits provided for the retirees’ widows, ex-wives, and dependent children that are determined by the retiree’s entitled monthly benefits. The costs of those additional benefits cannot be individually calculated until the retirees’ retirements or deaths, and/or their wives and ex-wives retirements.
Do you propose that those benefits should be terminated, or some portion of retirees’ accounts be taxed on the date of their retirement, or taxed when the funds are withdrawn from the retirees’ individual accounts?

You don’t propose that those expenditures be funded from general rather than FICA tax revenues?

My thought is that the accounts are inheritable.

I believe Federal Supplemental Insurance Income, (SSI) is funded from general rather than from FICA payroll taxes. It’s operated as a federal charity that’s primarily for the many entitled to only insufficient Social Security benefits and for some who otherwise may not be entitled to any Social Security benefits.

Again, better performance would alleviate a lot of those problems

If Federal Supplemental Insurance Income, (SSI) will be retained, it will continue to guarantee some minimum rate of monthly SS retirement benefits. Privatized SS retirement policy will then encourage employees, (particularly the lowest earning employees), to risk more, for greater retirement incomes. Due to SSI, Social Security beneficiaries are guaranteed at least minimum benefits. SSI will be the greatest ongoing net increased federal expense item that would be due to transforming to a privatized SS retirement system.

It's suggested that proponents of “privatized Social Security retirement accounts”, are only considering those that can afford the risks and have less consideration for those who for any reasons, will consequentially have insufficient value to finance their minimum remaining lifetime needs.

Respectfully, Supposn

Please understand what I've said on this thread doesn't comprise a complete, comprehensive proposal; there are a many issues that would have to be resolved before launching anything near what I've proposed. I'd suggest you take a look at the retirement system Chile has had for decades as an example of a POSSIBLE way this would work.

 

[Bullseye]

As an interesting data point here's an exercise I've suggested for other people I've talked to about investing for retirement. Here in San Diego it's pretty easy because we have a thriving cruise ship industry:

Go to the cruise terminal and talk to people boarding or going ashore for tours. Ask them if they had an investment plan. for retirement.

Now go tot the nearest Walmart and ask the greeters the same question.

I'd bet a considerable amount that the cruisers will answer "yes" while the greeters will answer no.

So why not create more cruisers by affording all worker the opportunity to invest as part of their retirement planning?

 

[JohnfrmClevelan]

Bullseye, I’m presuming to elaborate on JohnFrmClevelan’s arguments; John, I apologize to the extents that my presumptions may essentially differ from your positions.
s
Among self-directed privatized SS retirement accounts, there will be those that due to misfortune and/or poor investment decisions. on the day of their retirement will lack sufficient value to finance their minimum remaining lifetime needs.

That's not my argument, but thanks.

In the modern history of our country there has never been a 35-40 year (length of the average work career ) where stock market returns have been as low as the
virtual ROI of SS.

Instead of stocks, think of a market for baseball cards.

1) You have a Derek Jeter rookie card. Another buyer offers you $1000 for it, and you take it.

A few months down the road, Jeter is on the HOF ballot. You buy the card back for $1200.

A few months after that, he gets into the HOF. You sell your card for $1500.

The card kept going up in value, just because people wanted to own it. But no dollars were generated in the transactions; you made $1300, but other people are down $1300 (but they have the card). Your "profit" depends completely on other buyers with money wanting to buy your card at a price where you want to sell. And their profit will depend on new buyers coming in and wanting that Derek Jeter card at ever higher prices. That's going to depend on a lot of factors.

*************

2) You go to a card trading show with your Derek Jeter card, and you want to sell and cash out. Buyers at the show are holding a total of $1 million.

a) You are one of only two people selling Derek Jeter cards. You end up doing pretty well, as there are lots of buyers with lots of dollars looking to buy them.

b) You are one of 1000 people selling Derek Jeter cards. Now, you are only going to get $1000, max.

In today's market, the situation is more like a), in that it's mostly rich people buying and holding stocks, and there are lots more people wanting to buy stocks than there are people needing to cash out. And even then, stocks are a bit risky. But if everybody invested in the stock market, and everybody needed to cash out during retirement, then you are looking more like situation b). Again, money in has to equal money out, in real time. If there are lots of workers for every retiree, then retirees can withdraw more money, but if that ratio goes down, then retirees won't be able to withdraw as much, because there will be fewer buyers.

 

[JohnfrmClevelan]

As an interesting data point here's an exercise I've suggested for other people I've talked to about investing for retirement. Here in San Diego it's pretty easy because we have a thriving cruise ship industry:

Go to the cruise terminal and talk to people boarding or going ashore for tours. Ask them if they had an investment plan. for retirement.

Now go tot the nearest Walmart and ask the greeters the same question.

I'd bet a considerable amount that the cruisers will answer "yes" while the greeters will answer no.

So why not create more cruisers by affording all worker the opportunity to invest as part of their retirement planning?

Because if their money isn't going toward real investment (and secondary sales of stocks do nothing for the company), then there is no increase in real production/GDP. You can't increase consumption without increasing production.

 

[Bullseye]

That's not my argument, but thanks.



Instead of stocks, think of a market for baseball cards.

1) You have a Derek Jeter rookie card. Another buyer offers you $1000 for it, and you take it.

A few months down the road, Jeter is on the HOF ballot. You buy the card back for $1200.

A few months after that, he gets into the HOF. You sell your card for $1500.

The card kept going up in value, just because people wanted to own it. But no dollars were generated in the transactions; you made $1300, but other people are down $1300 (but they have the card). Your "profit" depends completely on other buyers with money wanting to buy your card at a price where you want to sell. And their profit will depend on new buyers coming in and wanting that Derek Jeter card at ever higher prices. That's going to depend on a lot of factors.

*************

2) You go to a card trading show with your Derek Jeter card, and you want to sell and cash out. Buyers at the show are holding a total of $1 million.

a) You are one of only two people selling Derek Jeter cards. You end up doing pretty well, as there are lots of buyers with lots of dollars looking to buy them.

b) You are one of 1000 people selling Derek Jeter cards. Now, you are only going to get $1000, max.

In today's market, the situation is more like a), in that it's mostly rich people buying and holding stocks, and there are lots more people wanting to buy stocks than there are people needing to cash out. And even then, stocks are a bit risky. But if everybody invested in the stock market, and everybody needed to cash out during retirement, then you are looking more like situation b). Again, money in has to equal money out, in real time. If there are lots of workers for every retiree, then retirees can withdraw more money, but if that ratio goes down, then retirees won't be able to withdraw as much, because there will be fewer buyers.

There's not equivalence between baseball ball cards and stocks. So the rest of your argument is moot. Stocks represent a share of the company's future progress and its current assets.

 

[Bullseye]

Because if their money isn't going toward real investment (and secondary sales of stocks do nothing for the company), then there is no increase in real production/GDP. You can't increase consumption without increasing production.

Actually the company usually holds a large block of its own stock so it has a vested interest in seeing it do well.

 

[Bullseye]

Because if their money isn't going toward real investment (and secondary sales of stocks do nothing for the company), then there is no increase in real production/GDP. You can't increase consumption without increasing production.

It's a real enough investment for the people buying it, holding it and using to improve their retirements.

 

[I'm Supposn]

In the modern history of our country there has never been a 35-40 year (length of the average work career ) where stock market returns have been as low as the
virtual ROI of SS.
My thought is that the accounts are inheritable.
Again, better performance would alleviate a lot of those problems
Please understand what I've said on this thread doesn't comprise a complete, comprehensive proposal; there are a many issues that would have to be resolved before launching anything near what I've proposed. I'd suggest you take a look at the retirement system Chile has had for decades as an example of a POSSIBLE way this would work.

Bullseye, unless you’re proposing retirees’ entire remaining lifetime of benefits be dependent upon the remaining values of their accounts at each individual month or year of retirement, then their lifetime benefits are dependent upon the retirement account’s value on the commencing day of retirement. That’s gambling on the account’s value at one specific day or year.

If the individual’s account is to provide for lifetime retirement, it’s not financially feasible that the accounts be inheritable; also the insurers of lifetime benefits (rather than the retirees), would determine the rates of monthly benefit withdrawals based upon accounts’ values at commencement of the workers’ retirements.

If your private accounts are inheritable, what about the rights that spouses, ex-spouses and dependent children are currently entitled to? Some of those rights don’t “kick-in” until the retired worker dies. Would their accounts be reduced on the commencement of retirement or as money is withdrawn from the accounts? That would be as an additional federal tax on SS retirement accounts? Those monthly benefits expenses are now paid from FICA tax revenues and they’re related to the worker’s entitled benefits amounts at retirement.
Is it proposed that under the “privatized system, those other than the retired workers’ benefits that are related to the amounts of their benefits, be paid from general rather than FICA payroll taxes?

Perhaps if you can post a tread describing Chile’s system more explicitly than what I’ve read, we can better discuss the feasibility of privatized SS retirement. Respectfully, Supposn

Bullseye, … I believe Federal Supplemental Insurance Income, (SSI) is funded from general rather than from FICA payroll taxes. It’s operated as a federal charity that’s primarily for the many entitled to only insufficient Social Security benefits and for some who otherwise may not be entitled to any Social Security benefits.
If Federal Supplemental Insurance Income, (SSI) will be retained, it will continue to guarantee some minimum rate of monthly SS retirement benefits. Privatized SS retirement policy will then encourage employees, (particularly the lowest earning employees), to risk more, for greater retirement incomes. Due to SSI, Social Security beneficiaries are guaranteed at least minimum benefits. SSI will be the greatest ongoing net increased federal expense item that would be due to transforming to a privatized SS retirement system. …

 

[I'm Supposn]

As an interesting data point here's an exercise I've suggested for other people I've talked to about investing for retirement. Here in San Diego it's pretty easy because we have a thriving cruise ship industry:
Go to the cruise terminal and talk to people boarding or going ashore for tours. Ask them if they had an investment plan. for retirement.

Now go tot the nearest Walmart and ask the greeters the same question.
I'd bet a considerable amount that the cruisers will answer "yes" while the greeters will answer no.

So why not create more cruisers by affording all worker the opportunity to invest as part of their retirement planning?

Bullseye, the majority of couples sailing as passengers on those cruise ships, enjoyed higher incomes in their later years prior to their cruises. Many of those ships’ passengers were inheritors of wealth.

Statistically this would be less the cases among a population of Walmart greeters.
Your post is an example of a sophistry and is far from a convincing example.
Respectfully, Supposn

 

[James972]

Bullseye, the majority of couples sailing as passengers on those cruise ships, enjoyed higher incomes in their later years prior to their cruises. Many of those ships’ passengers were inheritors of wealth.

Statistically this would be less the cases among a population of Walmart greeters.
Your post is an example of a sophistry and is far from a convincing example.
Respectfully, Supposn

The Chinese earn about 30% of what Americans earn yet an average Chinese person will have more saved than an average American. There is a sickness in liberal American culture.

 

[JohnfrmClevelan]

There's not equivalence between baseball ball cards and stocks. So the rest of your argument is moot. Stocks represent a share of the company's future progress and its current assets.

You don't get any of the company's assets unless they go under - and even then, common stockholders are last in line. And none of the money you will ever see, with the exception of dividends (which are becoming negligible), comes from that company.

Generally, if the company does OK, so does the stock, even if there is no solid connection between money that the company earns and the price of their stock. Same with baseball cards.

The analogy is fine.

 

[JohnfrmClevelan]

It's a real enough investment for the people buying it, holding it and using to improve their retirements.

"Real investment" means money that is used for production. None of the money you buy stocks with goes to the company, unless you are buying an IPO. Do you see the difference?

 

[Bullseye]

"Real investment" means money that is used for production. None of the money you buy stocks with goes to the company, unless you are buying an IPO. Do you see the difference?

So what? This is a discussion of alternatives to depending on Social Security for retirement. It has been and will continue to be one of the best choice people can make to ensure a comfort-ble retirement. Redirecting some/all of the SS portion of their FICA contribution could do more for the economic well-being of our citizens than any other idea on the table.