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Social Security Part 2?

Harry Guerrilla

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They had a hearing on this and I was interested in your take on it.
To give a brief outline on this,

would force all workers to save 5 percent of their annual income in a new type of retirement vehicle.....a Guaranteed Retirement Account. These savings could not be controlled by workers like IRAs and 401(k) assets, but would instead be deposited with the government. Workers could not touch the money until retirement........and even then the savings could not be drawn out any way workers might desire, but would be converted to an annuity – a guaranteed stream of income for life.

....these new accounts would avoid stock market risks; the government would guarantee that the savings earn a 3 percent annual return on top of inflation. The government would also pay each worker $600 a year in the form of a tax credit, which would help workers who now earn too little to take advantage of a tax deduction because they owe little or no federal income tax anyway.

FactCheck.org: Are congressional Democrats talking about confiscating IRA and 401(k) investment accounts?

This idea is being pushed by the Economic Policy Institute,

http://help.senate.gov/imo/media/doc/Eisenbrey.pdf

Personally I don't like it and it's another form of Social Security, which I ask, if we're going to do this, why have 2 different programs?
Why not merge them into one?

Not to mention, what about people like me, who don't want this?
 

obvious Child

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I think I'm going to have to disagree with you on some points Harry.

The beauty of annuities is that they are dependable unlike your traditional 401k or Roth. Furthermore, many financial planners are suggesting to their high net worth clients that annuities are a better proposal coupled with traditional retirement as people are living longer and the costs of living longer are growing exponentially. With a known baseline of income, it's easier to project what you need to grow your other sources of income by.

I don't think a mandatory system is good though, but an opt out is preferable with automatic opt in from the start. It's no disputable fact that many older Americans have effectively failed to plan for retirement as something like 70% of retirees' main source of income is Social Security, which was never intended to be the primary source of retirement funds. Projected life expectancy will be a problem, but this idea in theory is not bad.

What I like about this is that isn't not a ponzi scheme like Social Security. You don't need a constant influx of fresh meat to keep the system going. And this could be made so that every person gets an annuity based on how much they input. Meaning the Rich have a real incentive to move towards this rather then Social Security. If the deductions are pre-tax, then this could do real wonders to certain peoples' taxes. From what I understand, the annuities are going to be handled by private firms, not the government. This is a big plus and will create a huge expansion in annuity providers.

We could possibly phase out traditional social security for something like this. But that limit on when you can take it needs to be changed.
 

Harry Guerrilla

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I think I'm going to have to disagree with you on some points Harry.

The beauty of annuities is that they are dependable unlike your traditional 401k or Roth. Furthermore, many financial planners are suggesting to their high net worth clients that annuities are a better proposal coupled with traditional retirement as people are living longer and the costs of living longer are growing exponentially. With a known baseline of income, it's easier to project what you need to grow your other sources of income by.

I don't think a mandatory system is good though, but an opt out is preferable with automatic opt in from the start. It's no disputable fact that many older Americans have effectively failed to plan for retirement as something like 70% of retirees' main source of income is Social Security, which was never intended to be the primary source of retirement funds. Projected life expectancy will be a problem, but this idea in theory is not bad.

What I like about this is that isn't not a ponzi scheme like Social Security. You don't need a constant influx of fresh meat to keep the system going. And this could be made so that every person gets an annuity based on how much they input. Meaning the Rich have a real incentive to move towards this rather then Social Security. If the deductions are pre-tax, then this could do real wonders to certain peoples' taxes. From what I understand, the annuities are going to be handled by private firms, not the government. This is a big plus and will create a huge expansion in annuity providers.

We could possibly phase out traditional social security for something like this. But that limit on when you can take it needs to be changed.

Well the problems I have are, the rate of return, I get way more than that on most/all my investments.
In that way, it's garbage to me, so if it were an opt out thing, I'd be cool with it.

I don't have a problem with annuities, but they can have just as bad or worse expenses as mutual funds.
I think if they are wanting to secure retirement, why not end SS and move all the funds to this program.

Makes more sense, at the very least.
 

obvious Child

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Well the problems I have are, the rate of return, I get way more than that on most/all my investments.

Well, Annuities are basically gambling with the House. They're betting you die early, you're betting you live. Perhaps we could have some % of the annuity go to a beneficiary if you kick the can at a certain age.
Furthermore, not everyone actually plans for retirement or invests. See those Americans living on Social Security at age 65. Considering the 3.8 to 5% they are pushing, that's not a whole lot. I know someone who used to put 40% of her income into retirement/investments pre-tax before she hit the limit of deductibility.

In that way, it's garbage to me, so if it were an opt out thing, I'd be cool with it.

Well, Considering this. If 300 millions putting in 5% of their incomes, so I'm venturing somewhere around 8 trillion dollars, that's a lot of money. That will create massive competition between investment houses as well as economy of scale. There's a possibility that a high rate annuity could come out offering stock market competitive rates. Mutual funds basically evolved from the same model.

I don't have a problem with annuities, but they can have just as bad or worse expenses as mutual funds.

Or stocks. Or any investment.

I think if they are wanting to secure retirement, why not end SS and move all the funds to this program.

The transition costs from those in SS would be immense. I think the cheaper way would be transition. Everyone over 40 gets SS. Everyone under gets a partial tax credit for the amount paid and automatically enrolled.
 

Harry Guerrilla

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Well, Annuities are basically gambling with the House. They're betting you die early, you're betting you live. Perhaps we could have some % of the annuity go to a beneficiary if you kick the can at a certain age.
Furthermore, not everyone actually plans for retirement or invests. See those Americans living on Social Security at age 65. Considering the 3.8 to 5% they are pushing, that's not a whole lot. I know someone who used to put 40% of her income into retirement/investments pre-tax before she hit the limit of deductibility.

Annuities are ok, not great, but alright.

I wish I could do that but I still have time.
I'd like to retire early and at the moment I don't have to worry about preferential tax accounts because my income is below the taxable threshold.


Well, Considering this. If 300 millions putting in 5% of their incomes, so I'm venturing somewhere around 8 trillion dollars, that's a lot of money. That will create massive competition between investment houses as well as economy of scale. There's a possibility that a high rate annuity could come out offering stock market competitive rates. Mutual funds basically evolved from the same model.

I heard that the annuities offered through the Chilean system still charged high fees.
It may have been the brokerage houses.
Can't remember.

Or stocks. Or any investment.

Pssh, I think I've paid $4 this year to trade my shares and another $1 for another investment I have.
Gotta be a shark to get the best deals. :mrgreen:


The transition costs from those in SS would be immense. I think the cheaper way would be transition. Everyone over 40 gets SS. Everyone under gets a partial tax credit for the amount paid and automatically enrolled.

That would be awesome, if they planned on doing that.
Something tells me that isn't going to happen though. :censored
 

Goobieman

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Personally I don't like it and it's another form of Social Security, which I ask, if we're going to do this, why have 2 different programs?
5% additional tax on imcome? What's not to like?
How long before this money gets 'borrowed' and replaced with IOUs?
 

OscarB63

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5% additional tax on imcome? What's not to like?
How long before this money gets 'borrowed' and replaced with IOUs?



exactly, the govt has already totally raped and pillaged SS, what makes anyone think that this new program would fare any better? seems to me like just another govt scam to get their greedy hands on more of our money.
 

cpwill

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exactly, the govt has already totally raped and pillaged SS, what makes anyone think that this new program would fare any better? seems to me like just another govt scam to get their greedy hands on more of our money.

exactly. i easily see the politicians who we have now given additional control over 5% of our income deciding to "invest" it in bonds.
 

The_Patriot

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I'd be okay with all types of private retirement accounts if they actually earned you a profit in interest over the inflation of the currency saved. I'm all for the government getting out of the retirement savings business altogether.
 
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