My new stimulus plan idea

[jIM_Ohio]

Originally Posted by jc3900

No your plan will not work at all! What we need is to end all social welfare programs. Then we need to introduce new legislation to get rid of social security and retirment benefits. My solution would be to let anyone who wants to drop out of any government retirement programs at the gain of not paying the tax and at the cost of losing the benefit. What would then happen is that an equilibream age where benefits =costs would set up somewhere in 40 year old age group. Then I would also put forth an innitiative to force the government to take no more loans and to start paying off their accumulated debt. Oh also I would pull our troops out of Iraq and afghanastan and end the united states empire and the role of world policemen. This would most likely downscale the military to 50% its current $ level.

Basically I would end all the long term entitlements and thus end the dependency of the future generations on government. I would cut government spending and then cut taxes so as to provide enough money to start paying off our debt and running government. Each year as more and more people would be taken off entitlements taxes could again be lowered further and further. This is the plan our country needs, not some wimpy one time tax relief that keeps our country in debt and heads us ever faster into a financial crisis. You need more to save an economy than a spending frenzy. You need to fix the fundamentals instead of just trying to keep a sinking ship floating.

While I dislike government handouts, I do not consider SS to be a handout. Everyone pays in, everyone can take out. More than likely, based on inflation, everyone will get more real dollars out than they put in. It is an insurance plan and the purpose of government is to provide some basic things for it's people so the people do not bear the expense of that basic thing itself.

Utilities for example
military for example

equating the war on terror to a tax deduction for having a baby is way unfair. The two issues are not related.

[jc3900]

While I dislike government handouts, I do not consider SS to be a handout. Everyone pays in, everyone can take out. More than likely, based on inflation, everyone will get more real dollars out than they put in. It is an insurance plan and the purpose of government is to provide some basic things for it's people so the people do not bear the expense of that basic thing itself.

So if given the choice when you were 20, you would have chosen SS over getting 15% of your income each year? Sorry, but SS is one of the worst programs on the books and if you are saying that it runs effeciently than I must ask you to actually do a little research before you make such rediculous comments. Oh and when you finally do get to your research, you should consider that SS is just a large pyramid scheme that doesn't even pay you interest for holding your money.

[Scanner]

Most people like jc forget that SSI provides disability insurance as well as retirement benefits.

I am unable to qualify for private disability insurance because of my profession (underwriters starting exiting years ago). SSI is my families' only safety net for my income albeit a poor one.

The private marketplace just cannot fill the void.

[sweeps]

JC, Social Security is a small price to pay to avoid the massive human tragedy we would have on our hands if it did not exist.

It is not a financial investment it is a humanitarian investment.

[Broken Arrow]

Woah, take it easy, JC. Attack the issue, not the person.

[jc3900]

Most people like jc forget that SSI provides disability insurance as well as retirement benefits.

I am unable to qualify for private disability insurance because of my profession (underwriters starting exiting years ago). SSI is my families' only safety net for my income albeit a poor one.

The private marketplace just cannot fill the void.

All right Scanner, since you seem to think it is so fine and dandy, I will ask you the same question I asked Jim. If given the choice between receiving ss benefits and not paying the 15 percent, you would take the benefits?

I actually just ran the numbers really quick and here is what I came up with. If you are making 50,000$ dollars every year and you didn't pay the ss tax then you would have 7500 dollars that you would not normally have. If you would invest this 7500 dollars increased with inflation yearly for 35years you would have nearly a million dollars after accounted for inflation. ( assuming 3.5% inflation and 10% return) So you would rather have tiny yearly payments from social security than a million dollars? How good of a program does it sound like now. Oh and if you make $75000 a year that number jumps to 1.5 million.


.....Oh the wonders that can happen with simple math

EDIT: so is 1 million dollars a big enough safety net?

[jc3900]

JC, Social Security is a small price to pay to avoid the massive human tragedy we would have on our hands if it did not exist.

It is not a financial investment it is a humanitarian investment.

Well why don't you take your 1 million dollars and give out half of it? Oh I am sorry I am sure the government could fund $500,000 dollars worth of aid to the poor with a person only making $50,000

[jIM_Ohio]

I for one dislike the 15% SS tax. I think 5-10% is more in line with what a program like that should cost.

It also starts WAY to young (age 65-67 now), I think it should start around age 75. RMDs should be pushed later as well, that is another issue in and of itself.

Yes, the 15% could be invested better.
Yes, the government is inefficient in how it used the surpluses
Yes, the government is inefficient even if the surpluses were fixed.

I know a girl I went to HS with whose dad was a cop killed in the line of duty. She received SS checks as a survivor of her dad until she became 18. Without it, maybe she couldn't have gone to college (I didn't know her that well to know one way or other).

People cannot collect SS unless they paid in- SAHM need to collect based on their husband's plan (even when husband dies), so I think the plan has merit considering more than half of retirees would be destitute without SS.

[jIM_Ohio]

Originally Posted by jc3900

All right Scanner, since you seem to think it is so fine and dandy, I will ask you the same question I asked Jim. If given the choice between receiving ss benefits and not paying the 15 percent, you would take the benefits?

I actually just ran the numbers really quick and here is what I came up with. If you are making 50,000$ dollars every year and you didn't pay the ss tax then you would have 7500 dollars that you would not normally have. If you would invest this 7500 dollars increased with inflation yearly for 35years you would have nearly a million dollars after accounted for inflation. ( assuming 3.5% inflation and 10% return) So you would rather have tiny yearly payments from social security than a million dollars? How good of a program does it sound like now. Oh and if you make $75000 a year that number jumps to 1.5 million.


.....Oh the wonders that can happen with simple math

EDIT: so is 1 million dollars a big enough safety net?

SS is not an investment plan. It is closer to an annuity or insurance product.

The example above does not account for the following:

what happens if person dies at year 10? In your example, the survivors only get what was invested.
what happens if person is disabled at year 5? In your example the 5 years of 15% contributions need to last the rest of this person's life.
what happens if person lives until age 150? In your example, the person ran out of money around age 90 or so (based on 4% rule).

SS is insurance, similar to the way an annuity or insurance product works. It's rate of return will be similar to that of an annuity paying between 3.5 and 7% (meaning you will get between 3.5-7% of your contributions out annually).

If you know how an annuity works, skip the blue, otherwise, for review:

Annuities and insurance products work because the insurance companies can deal with probabilities. Myself as an individual I cannot take that risk.

There is a bell curve of when people live (say for example avg age of a male is 85). The insurance companies know that 66% of all males will die at 85 +/- 5 years (5 years representing the standard deviation of males).

So they can promise an annuity (series of payments) based on my age (say I choose to start at age 70) so they plan for 15 years of payments.

I give the annuity company money, they take on the risk of getting the return needed to make money, and in return for taking on that risk, they give me 1/15 (~6%) of my money back every year.

If I die at age 75, The insurance company made money on me.
If I die at age 100, I have been getting 1/15 of my money back each year from age 70 to age 100, so 200% return for me.

But the probability I live to 100 is low (maybe only 5% of people live that long), so the risk of insurance company actually paying out more than they take in is low, plus the insurance company invests the money in their "general fund" which has an average return of much higher than the 1/15 rate they promised me in the annuity contract.

The problem with SS is they need to pass legislation to make plan index to life expectancies, money coming in, and the general fund of the US government is invested in treasuries yielding 2.5%, not 5-7% like an insurance company can.

I consider this a good thing- government takes on less risk and gives a lower reward. People which want a higher reward need to take on more risk.

[disneysteve]

Originally Posted by noppenbd

You are most definitely in the minority. I think most people's spending is limited by their credit limit and/or checking balance (and some not even by that). ESPECIALLY when it comes to spending for Baby.

Interesting thread hijack that is tangentially related. I am currently reading "Predictably Irrational" by behavioral economist by Dan Ariely. One chapter is about how people establish price "anchors" and that controls how much they are willing to spend on such a item going forward. He did some experiments which basically showed that people are highly influenced by suggestion in establishing this anchor and that it pretty much dictates what they feel is a fair price afterwards.

People definitely do this. I read a review of the book but haven't actually read it yet. I did see a study last week done by Stanford where they did a wine-tasting. They served people 2 identical glasses of wine but told them that one came from a $10 bottle and the other came from a $90 bottle. Sure enough, the $90 bottle was preferred 2 to 1 by participants in the study.

I guess I'm strange. My spending is guided by what I need and how much I'm willing to pay, not by how much is in my pocket or my checking account or how much is available on my credit card balance. Heck, my 2 Visa cards alone have a combined limit of about $70,000. If I used that as my spending guide, I'd be in a lot of trouble.

[zooracer]

Originally Posted by jIM_Ohio

I for one dislike the 15% SS tax. I think 5-10% is more in line with what a program like that should cost.

It also starts WAY to young (age 65-67 now), I think it should start around age 75. RMDs should be pushed later as well, that is another issue in and of itself.

Yes, the 15% could be invested better.
Yes, the government is inefficient in how it used the surpluses
Yes, the government is inefficient even if the surpluses were fixed.

I know a girl I went to HS with whose dad was a cop killed in the line of duty. She received SS checks as a survivor of her dad until she became 18. Without it, maybe she couldn't have gone to college (I didn't know her that well to know one way or other).

People cannot collect SS unless they paid in- SAHM need to collect based on their husband's plan (even when husband dies), so I think the plan has merit considering more than half of retirees would be destitute without SS.

Actually my brother is receiving SSI and he has never contributed to the system.
He is 34 and will probably get his 650 dollar SSI check every month for the rest of his life.
He ran his own business of selling plants for about 7 years, and never paid taxes. The rest of his adult life was spent as a bum, drug addict, and federal prisoner.

Never paid in.

[vsjhoc]

Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI) are two different programs.

SSDI - based on prior work under Social Security, for blind or disabled workers, widowers, or adults disabled since childhood.

SSI - for people 65 or older, or blind or disabled, and with limited income and financial resources. You don't have to have worked in employment covered under Social Security. It's financed through general revenues.

The Economic Stimulus payment is not payable to people whose sole source of income in 2007 was SSI.

[jc3900]

Originally Posted by jc3900
All right Scanner, since you seem to think it is so fine and dandy, I will ask you the same question I asked Jim. If given the choice between receiving ss benefits and not paying the 15 percent, you would take the benefits?

I actually just ran the numbers really quick and here is what I came up with. If you are making 50,000$ dollars every year and you didn't pay the ss tax then you would have 7500 dollars that you would not normally have. If you would invest this 7500 dollars increased with inflation yearly for 35years you would have nearly a million dollars after accounted for inflation. ( assuming 3.5% inflation and 10% return) So you would rather have tiny yearly payments from social security than a million dollars? How good of a program does it sound like now. Oh and if you make $75000 a year that number jumps to 1.5 million.


.....Oh the wonders that can happen with simple math

EDIT: so is 1 million dollars a big enough safety net?

Hey Jim, instead of outright ignoring my wonderfull statement why don't you respond to what I actually said? I will just post this again until you can actually give me an argument that says social security can pay this much out to everyone of the participants.

Guess what though, you won't be able to. Because social security is a pyramid scheme that is forecasted to crash! All of the money you put in is used to pay off another person.

[jIM_Ohio]

Originally Posted by jc3900

Hey Jim, instead of outright ignoring my wonderfull statement why don't you respond to what I actually said? I will just post this again until you can actually give me an argument that says social security can pay this much out to everyone of the participants.

Guess what though, you won't be able to. Because social security is a pyramid scheme that is forecasted to crash! All of the money you put in is used to pay off another person.

jc- did you really say anything profound?

what exactly am I supposed to respond to. I do agree SS is a wealth transfer system. We pay in and the money goes back out to the poor (because when the rich receive it, it is taxed at 50% I believe). But the system will always be there unless our politicians listen to you.

I can invest what I have now aggressively because SS is there for "worst case". If I did not have a safety net I could not take the risks I do.

But it's clear you have your opinions and a postive discussion is impossible. You really don't see the merits to having the system so oh well for you.

It is not a pyramid scheme- pyrmid schemes mean the person at top makes all the money and the people at the bottom do not, yet do all the work.

SS is the opposite- the people at the top get the least benefit because the people at the bottom get the most. It is transferring the wealth from the business owners to the working class.

I do not agree with that in principle, but I have paid in, stopping the system is a political nightmare, and with some moderate math changes (policy changes) the system can remain solvent.

[jc3900]

It is a very simple solution. Let those who want to opt out, opt out. Those who don't still get their benefits because the government promised them those benefits. SS is a pyramid scheme. To pay the first person you have to have 3 workers. To support those three workers you have to have 12 workers. To support the 12 workers you have to have 36 workers. Get the point. Oh and what was so profound about my statement was that someone making only 50,000 dollars annually over their lifetime could have a million dollars by the time they were 60. Someone making only $25,000 over their lifetime could have half a million! Someone making 12,500 could have $250,000. So someone in poverty could have a quarter million dollars saved. Is that significant to you?

[jIM_Ohio]

Originally Posted by jc3900

It is a very simple solution. Let those who want to opt out, opt out. Those who don't still get their benefits because the government promised them those benefits. SS is a pyramid scheme. To pay the first person you have to have 3 workers. To support those three workers you have to have 12 workers. To support the 12 workers you have to have 36 workers. Get the point. Oh and what was so profound about my statement was that someone making only 50,000 dollars annually over their lifetime could have a million dollars by the time they were 60. Someone making only $25,000 over their lifetime could have half a million! Someone making 12,500 could have $250,000. So someone in poverty could have a quarter million dollars saved. Is that significant to you?

Your pyramid scheme analagy is misleading. If you measure things in todays dollars with today's policy that is true for 30-60-90 year projections. But policy holders change policy for SS more than once every 30 years. Add to that workers in 30 years will make more money, so pay more in (relative to a worker 30 years before), that the 3 to 1 analagy is not applicable.

The people making 50k per year would not save the 15% if given to them. Two reasons-

My understanding is SS tax is 6.x% for the worker and 6.x% for the employer, so they would only get half of what you stated anyway.

If they did get that in their paycheck, what makes you think the poorest of working class people would actually invest it? They would not, they would spend it. That is why the gov't levies a SS "tax", so at minimum the working class is setting aside 6.x% of their pay.

That 6.x% is NOT an investment. You keep comparing it to an investment which grows at x% for y years. It is an insurance plan, you need to compare SS to an insurance product.

SS can pay benefits well before retirement (as other posts have mentioned). You keep using only arguments which suit your position and ignore other posts. Per my policy, I will stop feeding the trolls now. I ask that others do the same.

[Scanner]

All right Scanner, since you seem to think it is so fine and dandy, I will ask you the same question I asked Jim. If given the choice between receiving ss benefits and not paying the 15 percent, you would take the benefits?

I actually am faced with that choice on a yearly basis as a small business owner.

I could avoid SSI by filing for subchapter S corp. and distributing monies obtained out as dividends.

But. . .for simplicity sake (along with filing incorporation fees and extra accounting costs), I prefer to remain a sole proprietor and pay the double SSI (which you don't pay as a worker so quit your griping).

I am not able to qualify for disability insurance in the marketplace because ins. companies regarding my profession as "high risk" and SSI offers the only protection should I become permanently disabled. I forget my benefit - it's not much. . .I think $1500/month but that's more than any private insurance company can offer me.

The retirement benefit is just a bonus.

There's also an ethical consideration - my father was devastated by severe rhematoid arthritis at age 52. Went from being a vibrant healthy young man to crippled within a year. He had a disability policy from DuPont but SSI contributed in the difference and let me and my sister attend college.

So. . .I benefited indirectly from the safety net, in fact. . .we all do.

You and your griping ways do too.

I actually just ran the numbers really quick and here is what I came up with. If you are making 50,000$ dollars every year and you didn't pay the ss tax then you would have 7500 dollars that you would not normally have. If you would invest this 7500 dollars increased with inflation yearly for 35years you would have nearly a million dollars after accounted for inflation. ( assuming 3.5% inflation and 10% return) So you would rather have tiny yearly payments from social security than a million dollars? How good of a program does it sound like now. Oh and if you make $75000 a year that number jumps to 1.5 million.

Rancid Rush Limbaugh Piffle. Really, it's become rancid since Contract With America.

How am I supposed to achieve 1 million dollars if I am disabled and not able to provide income?

.....Oh the wonders that can happen with simple math

EDIT: so is 1 million dollars a big enough safety net?

Oh, the wonders of turning your radio station off of Rush Limbaugh.

[Broken Arrow]

jc, though it may be not my place to say, you're out of line.

As for Social Security, if you tell me that it's badly in need of repair, I agree. If you tell me it should be abolished, I disagree. Just because a program is in disrepair, that does not remove the merit of such a program to begin with.

Do you understand what I am saying? Broken isn't the same thing as Bad.