Listened to Ramsey for the first time today...

[snafu]

If you look at the history of SS signed by FDR in 1935, men were expected to live to age 58. Only 54% were expected to draw benefits and actuarians prophesied that would be about 5 yrs. It was never imagined that 70 would be the new 50 y/o. and that baby boomers expect benefits in their late 90's. Those drawing benefits now will far exceed the sums they have contributed. It was presumed the government would collect interest on the sums collected from generations of contributors and the program would be be mostly self supporting.

[kork13]

One thing to consider here is that my numbers use the 4% withdrawal rate which never hits the principal. In reality, as you get older, you could increase spending and start spending down principal and have a lot more per month.

I seem to remember listening to one show where Dave Ramsey said to use an 8% withdrawal rate in retirement... which again (in addition to his over-optimistic 12% return) would make more money technically available, and better explains the claim that OP heard...

[dczech09]

If you look at the history of SS signed by FDR in 1935, men were expected to live to age 58. Only 54% were expected to draw benefits and actuarians prophesied that would be about 5 yrs. It was never imagined that 70 would be the new 50 y/o. and that baby boomers expect benefits in their late 90's. Those drawing benefits now will far exceed the sums they have contributed. It was presumed the government would collect interest on the sums collected from generations of contributors and the program would be be mostly self supporting.

Social Security was originally set up as an insurance program that protected against living pas a life expectancy. It was never supposed to be a retirement plan.

But as life expectancies rose, the age at which benefits could be drawn never increased. So more and more people became eligible to draw and the program essentially became a retirement program.

The sad thing is that some people actually believe that SS will take care of them, so they do not need to invest otherwise. In my example that I ran, the benefit would be $1,953 per month. Who can live off of that? Some could, but it would be tough. You certainly are not traveling with that kind of income.

[disneysteve]

If he invested the money (with the employer still matching) into a Mutual Fund that averaged 11.4% growth, he would have about $184,000. Since the Mutual Fund averages 11.4%, he could withdraw 7% and still leave 4.4% to cover inflation.

Investing on his own, his beneficiary could use $10,000 to bury him and still have $174,000 left over.

You are leaving out an important detail, though. Very few mutual funds have track records that good. Even if you happen to get lucky and pick one that does, your calculations assume that someone is 100% invested in that fund (or funds) for their entire life, including retirement.

Do you really think that someone in their 50s or 60s or beyond should be 100% in a growth stock mutual fund?

Your point about what happens after you die is a good one, though. Investing independently builds wealth for your heirs. SS certainly does not.

[Nika]

Social Security is social insurance. It is a safety net. And we, as a country need it.

I'm so tired of the whining about the extra interest that you are missing out because you are a financial guru who could get 12% a year guaranteed for life. Even if you could, it is not all about you.

Look at the levels of financial responsibility and literacy in our country. People cannot even budget to pay their mortgage or bills on time or realize they can't have 40K car on a 40K income... We expect every single one of them, from McDonalds fry cook to a wallmart shelve stocker to get those returns and have a discipline and expertize to make sure 100% that he is covered for the rest of his life? Seriously? Look around you. Every time you think "oh, man this person is an idiot, think how well he would fare being 100% responsible for his retirement."

And if they do blow it, what do you think will happen in society if millions upon millions of people have $0 income and can't work? In theory you can say "this is their problem" but in reality it is not. It is society's problem and no one would be isolated from it. And in this country, we don't let people starve to death. Idiologically, you might say that this is what should happen to them, but think for a moment about the reality of this scenario.

Besides, they will have a vote, and will vote for politicians that will feed them from taxing the current workers. At least with social security they have contributed to the system.

Again, it is a social insurance. Even for a responsible high-earner, who pays more than he will ever get out of it can use insurance. You never know. A catastrphic medical condition could wipe all savings in a scary short amount of time even with good insurance(that is another conversation), and it is good to know that at least you could eat and keep warm if the worst case scenario happens.

[Petunia 100]

I agree with you, Nika.

Artwest, a withdrawal rate of 7% would work fine if the portfolio were not volatile. However, a portfolio of 100% stocks is extremely volatile. What would a retiree dependent on those 7% withdrawals do in a down market? Would they forego buying food and living indoors until the market bounced back? The only other option is running completely out of money.

I don't want to see millions of seniors starving in the streets, completely destitute.

[maat55]

Social Security is social insurance. It is a safety net. And we, as a country need it.

I'm so tired of the whining about the extra interest that you are missing out because you are a financial guru who could get 12% a year guaranteed for life. Even if you could, it is not all about you.

Look at the levels of financial responsibility and literacy in our country. People cannot even budget to pay their mortgage or bills on time or realize they can't have 40K car on a 40K income... We expect every single one of them, from McDonalds fry cook to a wallmart shelve stocker to get those returns and have a discipline and expertize to make sure 100% that he is covered for the rest of his life? Seriously? Look around you. Every time you think "oh, man this person is an idiot, think how well he would fare being 100% responsible for his retirement."

And if they do blow it, what do you think will happen in society if millions upon millions of people have $0 income and can't work? In theory you can say "this is their problem" but in reality it is not. It is society's problem and no one would be isolated from it. And in this country, we don't let people starve to death. Idiologically, you might say that this is what should happen to them, but think for a moment about the reality of this scenario.

Besides, they will have a vote, and will vote for politicians that will feed them from taxing the current workers. At least with social security they have contributed to the system.

Again, it is a social insurance. Even for a responsible high-earner, who pays more than he will ever get out of it can use insurance. You never know. A catastrphic medical condition could wipe all savings in a scary short amount of time even with good insurance(that is another conversation), and it is good to know that at least you could eat and keep warm if the worst case scenario happens.

So, we are to just accept the miserable results and atrocious management the government provides and just wait for the train wreck to occur?

You're welcome to stand in line for that non-sense, but I as an American, would prefer to take my chances on my own. 12.4% of ones discretionary income is a lot of potential wealth. SS is nothing more than a serfdom creator.

[Gailete]

I made minimum wage my first 10-15 years of my working life. Then I became a nurse and my last few years I was making about $35K a year. Then I got hit with a bad chronic illness and had to go on SS at around age 48-49. This year my take is around $1200 a month from which they take ~$100 for Medicare A & B, then with the rest I have to pay out another $250 for the supplements C & D. I'm here to tell you that it is near impossible to live on this amount unless you have a paid off home and minimal utility bills, eat like a bird, etc. HOWEVER, I am extremely thankful that SS has been here for me as after supporting myself since I was 17, to get smacked down barely 2 years after I got rid of a husband that got us into $43K credit card debt (I think he still carries his 'share' of it over 12 years later, while I paid off everything that had my name attached), a huge house payment and two car payments, my savings had been wiped out. When I got sick I was working hard to save up for retirement, but things didn't go exactly as planned.

With all the people I see that seem to have no concept of how to handle money, most would find it impossible to save up for their retirements any more. Some I think just give up. My whole life I have tried to live by frugal principles and it is a good thing since if I hadn't we would be in a hole so deep we could never get out.

[Petunia 100]

So, we are to just accept the miserable results and atrocious management the government provides and just wait for the train wreck to occur?

You're welcome to stand in line for that non-sense, but I as an American, would prefer to take my chances on my own. 12.4% of ones discretionary income is a lot of potential wealth. SS is nothing more than a serfdom creator.

What train wreck do you foresee? If we do nothing at all, people will receive approximately 75% of their promised benefits. If we continue to raise full-retirement age as we have been and remove the wage cap, people will receive 100% of their promised benefits.

Currently, employees are paying 4.2%. I understand you are counting what your employer pays, but I think it is a mistake to assume that if SS were abolished tomorrow, every employer would be happy to fork over an additional 6.2% of salary to every employee.

[dczech09]

My argument is not so much about the necessity of such a service as it about the quality of our service that we have today.

It does not take a rocket scientist to determine that people can do better investing on their own than what Social Security gives them. I have determined that, and believe you me, I am no rocket scientist

My question is why should we be forced to rely on a few people in Washington? Why should we not be given an option? I am pretty sure that our country was built on options, not bureaucracy.

We have an underperforming Social Security because we as a country have given away options and instead succumbed to tyranny (in this particular area). The same goes for unemployment and welfare. Privatization would be a great option- sure would stomp the current system.

The central premise is that the program in its current condition is broken. Nobody is arguing about the merits.

[jpg7n16]

It does not take a rocket scientist to determine that people can do better investing on their own than what Social Security gives them.

Well keep in mind that Social Security is not just retirement income. It also provides widow benefits, inflation adjusted annuity for life, inflation adjusted spousal income, provision for children under age 18, and disability benefits (and more).

So I certainly agree it's not the best retirement income solution per dollar to the program, but that's not all that the money goes towards.

http://ssa.gov/OP_Home/handbook/handbook-toc.html

From: SSA Handbook § 100

100.1 What are the purposes of Social Security?

The Social Security Act and related laws establish a number of programs that have the following basic purposes:

• To provide for the material needs of individuals and families;
• To protect aged and disabled persons against the expenses of illnesses that may otherwise use up their savings;
• To keep families together; and
• To give children the chance to grow up healthy and secure.

100.2 What programs are included under the Social Security Act and related laws?

The following programs are included:

• Retirement insurance;
• Survivors insurance;
• Disability insurance;
• Hospital and medical insurance for the aged, the disabled, and those with end-stage renal disease;
• Prescription Drug Benefit
• Extra Help with Medicare Prescription Drug Costs
• Supplemental security income;
• Special Veterans Benefits;
• Unemployment insurance; and
• Public assistance and welfare services, including:

1. Temporary assistance for needy families;
2. Medical assistance;
3. Maternal and child health services;
4. Child support enforcement;
5. Family and child welfare services;
6. Food stamps; and
7. Energy assistance.

[JoeP]

We need to stress financial management in our school systems. If kids learn at an early age that they need to save and spend wisely, we can solve a lot of problems.

This is something I agree with. So many school districts require 6 years of a foreign language, yet finance is not required (and sometimes it is not even offered).

[maat55]

[QUOTE]

What train wreck do you foresee?

Default, dollar collapse, high inflation, generational prosperity decay, war, facism and Constitutional collapse.

If we do nothing at all, people will receive approximately 75% of their promised benefits. If we continue to raise full-retirement age as we have been and remove the wage cap, people will receive 100% of their promised benefits.

Do you believe everything the government tells you? These projections are based on rosey economic projections.

Currently, employees are paying 4.2%. I understand you are counting what your employer pays, but I think it is a mistake to assume that if SS were abolished tomorrow, every employer would be happy to fork over an additional 6.2% of salary to every employee.

I as an employer would increase my employees wage by the 7.65%. Free market forces would cause this across the board or prices would drop accordingly.

It is a weak idea to think that privatization would not be far better than the town drunk ponzi-scheme we are enduring today.

SS/medicare are 418 billion in the red for 2011. Those funds are either borrowed or inflated away. It only gets worse. The trustees report shows the inlays and outlays, notice those funds that are recieved from the general fund and interest, those funds do not exist. The government is using monopoly numbers.


Trustees Report Summary

[maat55]

[QUOTE]

Well keep in mind that Social Security is not just retirement income. It also provides widow benefits, inflation adjusted annuity for life, inflation adjusted spousal income, provision for children under age 18, and disability benefits (and more).

So I certainly agree it's not the best retirement income solution per dollar to the program, but that's not all that the money goes towards.

Privatization would have the same safeguards. The government can require portfolio providers to include insurance based products in every plan.

[LivingAlmostLarge]

No but the benefits would they be the same for widows/orphans, disabled? What if you never work being handicapped? How do you provide for those who need help? SS isn't only about retirement it's also for people who become disabled while working, born disabled, or lose a parent/spouse.

Privitizing SS will also only work if we privitize medicare, it goes hand in hand. The costs of health care in the US is also spiraling out of control and how do you provide for those who can't provide for themselves?

Chile has privitized SS but they also have government provided healthcare. So that means they never have to worry about covering those costs like we do if we aren't working with employer provided coverage.

What other westernized country has non-socialized healthcare and privitized retirement, disability, etc? What model can we use to see what the real costs will be?