Listened to Ramsey for the first time today...

[jpg7n16]

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

I was not comparing privatization vs gov run program.

I am only saying that comparing "$1 for personal retirement savings" against "$1 to 10 different social programs, one of which happens to be retirement savings," and then saying that personal retirement savings is clearly better? -- that's a poor comparison.

Especially when you try and draw the conclusion that you should therefore shut down the 10 social programs because of your results.

[Petunia 100]

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

If all of those things were to happen, what difference would it make if SS were left as it is or privatized? Private investments would become worthless too, would they not?

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

It isn't the government telling me that ending the wage cap solves the problem. (Although I don't doubt they are aware, but the idea is unpopular.) Lots and lots of different people and groups point this out. Here is one, use Google if you want to see more.

The simple Social Security fix no one wants to talk about

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.

You don't pay 7.65% for SS. Are you proposing abolishing Medicare too?

And kudos to you for being willing to give your payroll tax savings right back to your employees.

[maat55]

[QUOTE]

If all of those things were to happen, what difference would it make if SS were left as it is or privatized? Private investments would become worthless too, would they not?

Privatization is the responsible solution to prevent the worse case scenarios.

It isn't the government telling me that ending the wage cap solves the problem. (Although I don't doubt they are aware, but the idea is unpopular.) Lots and lots of different people and groups point this out. Here is one, use Google if you want to see more.

Eliminating the wage cap is flat out redistribution/socialism. The governments only fix to all of our financial woes is to further destroy freedom. It is nothing more than doubling down on a bad bet.

You don't pay 7.65% for SS. Are you proposing abolishing Medicare too?

Medicare is no different than SS. Are you under the impression that the world will end without these programs? Privatizing both is the responsible solution. Destroying the country and future Americans prosperity is not.

And kudos to you for being willing to give your payroll tax savings right back to your employees.

It does not cost me anymore to do so and competition for labor will require it. The free market works when allowed to, privatization only restores reality and takes the money out of the hands of the town drunks.

I predict within the next 5-10 years, you will see confiscation of 401ks. This is what you get with out of control government and not adhering to the principles of freedom and prosperity.

Humans are not so destitute that they need imbeciles in Washington to provide their personal needs.

[Petunia 100]

Privatization is the responsible solution to prevent the worse case scenarios.

In your opinion.

Eliminating the wage cap is flat out redistribution/socialism. The governments only fix to all of our financial woes is to further destroy freedom. It is nothing more than doubling down on a bad bet.

Of course taxes are a redistribution.

Medicare is no different than SS. Are you under the impression that the world will end without these programs? Privatizing both is the responsible solution. Destroying the country and future Americans prosperity is not.

Why so snarky? I prefer polite discussion. Medicare is quite different than SS. How will people currently approaching retirement age, who have paid into Medicare and expected to be covered, cope with losing Medicare? I disagree that Medicare is destroying the country and future prosperity. Government wastes a lot of tax money, but Medicare isn't one of the ways it is wasted.

It does not cost me anymore to do so and competition for labor will require it. The free market works when allowed to, privatization only restores reality and takes the money out of the hands of the town drunks.

Many factors affect competition for labor. It's very simplistic to state that a single factor will have a direct dollar to dollar impact. Town drunks? I'm not certain what that remark means. What do town drunks have to do with competition for labor?

I predict within the next 5-10 years, you will see confiscation of 401ks. This is what you get with out of control government and not adhering to the principles of freedom and prosperity.

Humans are not so destitute that they need imbeciles in Washington to provide their personal needs.

I predict your prediction is incorrect.

[maat55]

[QUOTE]

In your opinion. Of course taxes are a redistribution.

No it is not. Constitutionally, taxes are designed to fund enumerated powers such as defense, courts and infrastructure for "We the Peoples" benefit.

Congress has unconstitutionally given itself the power to steal from one to give to another through numerous social programs.

Why so snarky? I prefer polite discussion.

My question is not meant to be snarky, it is a serious question.

Medicare is quite different than SS. How will people currently approaching retirement age, who have paid into Medicare and expected to be covered, cope with losing Medicare?

Like with SS, medicare takes in tax dollars and spend the tax dollars while passing the unfunded portions to the national debt. How did 1800's Americans deal with these issues? The government provides nothing, it only poorly redistributes resourses. What works for tv's and cars would work for healthcare.

It does not matter how noble you think these programs are, they are not viable and if were managed by private sector companies would be bankrupt and put many managers in prison.

I disagree that Medicare is destroying the country and future prosperity. Government wastes a lot of tax money, but Medicare isn't one of the ways it is wasted.

Medicare is approaching 50% of the healthcare market. This means that 50% of the market is government based and not market based. You need to research the difference between free market products and government controlled market products.

Why is it that healthcare and education are growing vastly unafordable? Why did we have a housing bubble? Why are houses in the 2000's double the size of homes in the 50', 60's or 70's? Why do half of Americans drawing SS have less than 10k in savings?

Many factors affect competition for labor. It's very simplistic to state that a single factor will have a direct dollar to dollar impact.

Markets will always find equilibrium. Most employers are honest and care for their workers. It would be no surprise that they would maintain current compensation.

BTW, under privatization, employers would likely still have to match current FICA taxes. The only difference is that the money would be handled in the private sector away from the "town drunks"(the 535 imbeciles in Washington).

I predict your prediction is incorrect.

Who would have predicted that Americans would have been put in concentration camps during WWII? Who would have predicted that the 4th, 5th, 6th and 8th amendments in the "Bill of Rights" would be eliminated by the Patriot Act?

I hope you wake up.

[Petunia 100]

Privatization is the responsible solution to prevent the worse case scenarios.

No it is not. Constitutionally, taxes are designed to fund enumerated powers such as defense, courts and infrastructure for "We the Peoples" benefit.

Congress has unconstitutionally given itself the power to steal from one to give to another through numerous social programs.

You stated Privatization is the responsible solution to prevent the worse case scenarios. You have a right to your opinion, but it is just that. You do not have irrefutable facts to prove your statement, so it remains your opinion. Citing the purpose of taxation does not prove your opinion.

My question is not meant to be snarky, it is a serious question.

All right, then. My serious answer to your serious question is that no, I do not believe the world will end. Thanks for asking.

Like with SS, medicare takes in tax dollars and spend the tax dollars while passing the unfunded portions to the national debt. How did 1800's Americans deal with these issues? The government provides nothing, it only poorly redistributes resourses. What works for tv's and cars would work for healthcare.

It does not matter how noble you think these programs are, they are not viable and if were managed by private sector companies would be bankrupt and put many managers in prison.

I don't recall stating "I think these programs are so noble, and that is all that matters". So yet again, you merely sound snarky.

What I do think is this: a minimum safety net to ensure the weakest and most vulnerable will not be completely destitute is a very good thing.

You state the programs are not viable; I disagree. They have worked thus far and with some tweaking, will continue to work. You may favor throwing the baby out with the bath water, I do not.

Medicare is approaching 50% of the healthcare market. This means that 50% of the market is government based and not market based. You need to research the difference between free market products and government controlled market products.

Thanks for suggesting I do not know the difference between free market products and government controlled market products and should research the matter.

Markets will always find equilibrium. Most employers are honest and care for their workers. It would be no surprise that they would maintain current compensation.

This is a huge assumption, based only on what you would personally do. In the event your assumption is incorrect, a huge hardship has just been placed on employees across America. Whoops.

BTW, under privatization, employers would likely still have to match current FICA taxes. The only difference is that the money would be handled in the private sector away from the "town drunks"(the 535 imbeciles in Washington).

Possibly eomployers would be required to match yes, but it would depend upon the final piece of legislation. Yes, the government would no longer control the excess collected funds, but who would instead? Wall Street. I don't see this as a positive.

Who would have predicted that Americans would have been put in concentration camps during WWII? Who would have predicted that the 4th, 5th, 6th and 8th amendments in the "Bill of Rights" would be eliminated by the Patriot Act?

I hope you wake up.

Now I am unaware of the mentioned atrocities, and need to wake up. More snark. Actually, it is entirely possible that I am awake but simply disagree with you.

If you would like to have a polite discussion with me, that sounds interesting. If you want to spout snarky comments, I'm not interested. Your call.

[maat55]

[QUOTE]

You stated Privatization is the responsible solution to prevent the worse case scenarios. You have a right to your opinion, but it is just that. You do not have irrefutable facts to prove your statement, so it remains your opinion. Citing the purpose of taxation does not prove your opinion.

Privatization of SS/medicare accomplishes a few things. It eliminates unfunded liabilities, it eliminates government dipping/redirecting of the funds and it eliminates unfair results from generation to generation, which includes one generation enslaving the next.

Must I provide you numerous quotes from the Founders? Be honest, do you really believe we have Constitutional government as provided by our Founders?

I don't recall stating "I think these programs are so noble, and that is all that matters". So yet again, you merely sound snarky.

Obviously, you have a thin skin. I'm merely debating reality.

What I do think is this: a minimum safety net to ensure the weakest and most vulnerable will not be completely destitute is a very good thing.

Are not self-motivation, family, friends, churches, charities and state governments not enough to handle this? Do we really have to empower a small group of people in Washington for these issues?

You state the programs are not viable; I disagree. They have worked thus far and with some tweaking, will continue to work. You may favor throwing the baby out with the bath water, I do not.

They are broke, the funds are continuiously raided, they are massively under funded, they promote dependency and they tax a major portion of ones discretionary funds. In order to fix them it will take higher taxes and lower benefits. This has been the case from generation to generation. If you research, you will find that the tax rates on SS have increased from 2% to 12.4%. The reality is that we are nearing the endgame of a failing ponzi-scheme.

Thanks for suggesting I do not know the difference between free market products and government controlled market products and should research the matter.

I'm suggesting that you either ignor or are ignorant of the unintended consequences, pitiful results and generational costs of freedom and prosperity that comes with these "minimum safety nets".

This is a huge assumption, based only on what you would personally do. In the event your assumption is incorrect, a huge hardship has just been placed on employees across America. Whoops.

How so? Current Fico taxes would be transfered to private accounts instead of SS/medicare where they are misused. I'm all for mandated 401k's and HSA's to replace SS/medicare.

Possibly eomployers would be required to match yes, but it would depend upon the final piece of legislation. Yes, the government would no longer control the excess collected funds, but who would instead? Wall Street. I don't see this as a positive.

This is sad. You are accepting governments corruption over the free market. It is the governments job to police Wallstreet, not be in bed with them.

Now I am unaware of the mentioned atrocities, and need to wake up. More snark. Actually, it is entirely possible that I am awake but simply disagree with you.

Fair enough.

If you would like to have a polite discussion with me, that sounds interesting. If you want to spout snarky comments, I'm not interested. Your call.

Look, I am who I am, If you are affended, I give up.

[Wino]

You are all missing an important point in Dave's original hypothetical:

If you contribute 1.5% for your life in a private fund, compared to the 4.2% (plus employer match, but we'll ignore that for this question) "contributed" by you directly,

Do I get to keep the extra 2.7% because I noticed it just sitting there being ignored?

[UnknownXV]

Regardless, unfunded SS liabilities are about 15.8 trillion USD currently. Yes, that's nearly more than the total national debt. Unfunded liabilities for Medicare? 83 trillion.

There is no way there will be any Social security money for my generation (I'm 22) when I am eligible to collect it. It will be gone long, long before that. It seems a rather easy observation to make, I don't understand how people aren't freaking out. This is EXTREMELY serious considering how many people depend mostly or even entirely on SS for their retirement plan.

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.

The point is it's not sustainable. Should it exist or not? That's debatable. In its current form, it's so woefully inadequate to supply people with any sort of retirement even now. Even in just a decade from now, it's going to be bankrupt, and then there's medicare which is way worse because medical costs are skyrocketing, compounding the issue.

Personally I don't think it's morally acceptable to force people to pay into a pot so that those irresponsible and ill-informed can live well in retirement. If they made the choice to spend all of their money while working, fine; now they pay the consequences.
---

Moving on to the practicality of it, remember.. if you take the money that would have been subtracted from your paycheck and instead invest it, not only will the interest from this investment be able to pay you a monthly sum; but you can also draw from the principle, which should be quite substantial.

Say you retire at 65. Instead of contributing to SS, you put that money aside to invest. You now have $200,000 accumulated (this was assuming a modest interest rate). Let's say you can fairly safely get a 5% return on this. That's $10,000 annually to draw from, or $833 a month. Not enough to live on by a long shot. However, look at that juicy principle. You can draw from it. At 65, can you really expect to live much beyond 95? Not really. Budgeting for 30 years, you can effectively draw $555 a month extra for those 30 years. Although, this figure would decrease slightly per year, and in no way is this sum sufficient for a full and comfortable retirement, but that's the point.

Social security is not sustainable now because people treat it like a primary or even sole means for retirement. It never was meant to be this. It was just meant to supplement it slightly. You can do this on your own, and if you can't, it's really not enough to live on anyways even if it was sustainable.

[Petunia 100]

Regardless, unfunded SS liabilities are about 15.8 trillion USD currently. Yes, that's nearly more than the total national debt. Unfunded liabilities for Medicare? 83 trillion.

There is no way there will be any Social security money for my generation (I'm 22) when I am eligible to collect it. It will be gone long, long before that. It seems a rather easy observation to make, I don't understand how people aren't freaking out. This is EXTREMELY serious considering how many people depend mostly or even entirely on SS for their retirement plan.

What do you mean by "long gone"?

If you mean the trust fund will be at $0, yes, that is possible. However, that doesn't mean no benefits would be paid. Benefits would be paid from payroll taxes being collected at that time. Would benefits be lowered? Possibly. Would payroll taxes increase? Possibly. In my opinion, the likeliest scenario is some combination of both.

If you mean the SS system will have been scrapped in favor of something else, yes, that is possible too. Would that new system pay benefits to those who retired under it? In my opinion, yes, it would.

Your best defense is to consistently save/invest over the course of your working life.

[Petunia 100]

Say you retire at 65. Instead of contributing to SS, you put that money aside to invest. You now have $200,000 accumulated (this was assuming a modest interest rate). Let's say you can fairly safely get a 5% return on this. That's $10,000 annually to draw from, or $833 a month. Not enough to live on by a long shot. However, look at that juicy principle. You can draw from it. At 65, can you really expect to live much beyond 95? Not really. Budgeting for 30 years, you can effectively draw $555 a month extra for those 30 years. Although, this figure would decrease slightly per year, and in no way is this sum sufficient for a full and comfortable retirement, but that's the point.

That's a withdrawal rate of 8.3%, more than twice the typically recommended "safe" withdrawal rate of 4%.

According to the Trinity Study, if a person withdrew at the rate of 8% on a portfolio composed of 50% stocks and 50% bonds and planned to draw for a period of 30 years, they would have a 5% chance of success. That's not a plan I would want to follow.

[UnknownXV]

What do you mean by "long gone"?

If you mean the trust fund will be at $0, yes, that is possible. However, that doesn't mean no benefits would be paid. Benefits would be paid from payroll taxes being collected at that time. Would benefits be lowered? Possibly. Would payroll taxes increase? Possibly. In my opinion, the likeliest scenario is some combination of both.

If you mean the SS system will have been scrapped in favor of something else, yes, that is possible too. Would that new system pay benefits to those who retired under it? In my opinion, yes, it would.

Your best defense is to consistently save/invest over the course of your working life.

I am not convinced of the health of the economy to sustain such wealth redistribution (and it is that for those who do not earn a lot). 16 trillion dollars is the currently unfunded liabilities. And that's in today's dollars, I scarcely can imagine how much it will be when I am 65, if inflation keeps up the way it is.

It's possible it can be sustained a bit longer if we get a large influx of new workers, but currently this is another issue, not only is the fund depleted (because government took money from it and mismanaged it) but the revenue generated for it is decreasing as two things are happening; people are living much much longer than expected on average, and there are too many people retiring versus new people working.

That's a withdrawal rate of 8.3%, more than twice the typically recommended "safe" withdrawal rate of 4%.

According to the Trinity Study, if a person withdrew at the rate of 8% on a portfolio composed of 50% stocks and 50% bonds and planned to draw for a period of 30 years, they would have a 5% chance of success. That's not a plan I would want to follow.

It would depend on how much principle you had, and keep in mind that in my example the $200,000 does not in anyway represent what someone should have in total retirement savings. It should be at least double that, especially accounting for inflation.

More than anything, at least if people are in charge of it, the individuals and the market are incharge of the money, not government. I might be cynical, but I don't trust the government for much.. least of all to be fiscally responsible and smart.

Do you really think people wouldn't be able to retire if they were left to prepare their retirement on their own? You might be right for some, but that's why I've strongly advocated for mandatory economic lessons in high school. At the very least teach them the importance of constructing a budget and paying yourself first. Very simple concepts to teach, but very few schools do, and even fewer parents.

[SeanH]

I enjoyed reading's Dave Ramsey's book, but I felt his "wealth" sections were weak. He's great in the debt sections - stop digging holes, budget, set goals, engage in behaviors that won't allow you to slip, do whatever it takes to get the monkey off your back.

Maybe I'm not being fair, but he's just far less compelling once you get out of those chapters. Save and invest in mutual funds (which as indicated he assumes returns that seem optimistic [though perhaps they are historically realistic, but currently they feel like "union pension plan optimistic!" ]. It just doesn't have the fire and urgency of the debt sections where he suggests selling everything you own and getting a second job delivering pizza.

[Petunia 100]

Perhaps we should start a "Discuss Social Security Reform" thread.

I am not convinced of the health of the economy to sustain such wealth redistribution (and it is that for those who do not earn a lot). 16 trillion dollars is the currently unfunded liabilities. And that's in today's dollars, I scarcely can imagine how much it will be when I am 65, if inflation keeps up the way it is.

It's possible it can be sustained a bit longer if we get a large influx of new workers, but currently this is another issue, not only is the fund depleted (because government took money from it and mismanaged it) but the revenue generated for it is decreasing as two things are happening; people are living much much longer than expected on average, and there are too many people retiring versus new people working.

Certainly we cannot keep going as is and pay 100% of promised benefits.

It would depend on how much principle you had, and keep in mind that in my example the $200,000 does not in anyway represent what someone should have in total retirement savings. It should be at least double that, especially accounting for inflation.

More than anything, at least if people are in charge of it, the individuals and the market are incharge of the money, not government. I might be cynical, but I don't trust the government for much.. least of all to be fiscally responsible and smart.

Do you really think people wouldn't be able to retire if they were left to prepare their retirement on their own? You might be right for some, but that's why I've strongly advocated for mandatory economic lessons in high school. At the very least teach them the importance of constructing a budget and paying yourself first. Very simple concepts to teach, but very few schools do, and even fewer parents.

I think an annuity with a COLA adjustment which will pay your entire life is an important part of a retirement plan. (This is what SS boils down to.) Combine that with one investment portfolio for income and a second investment portfolio for irregular expenses, and a retired person can get along well enough. Remove the annuity and should investments perform poorly, the person faces destitution.

Although the principals of investing well are simple enough in theory, the majority fail to comprehend those principals. Most investors do not earn market returns simply because they chase what is hot, buying high and selling low. They pay high investment costs and they fail to make a sensible asset allocation plan. Investing in this manner while also withdrawing from the portfolio will lead to personal financial disaster.

Therefore, I do not favor removing the safety net of the annuity. However, I am all for the promotion of financial literacy.