Details reveal drawbacks of Social Security investment plan

[truthpusher]

http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2005/02/06/BUG7FB6ESN1.DTL

Details reveal drawbacks of Social Security investment plan
Kathleen Pender

Sunday, February 6, 2005

As details of President Bush's plan for personal Social Security accounts dribble out, it appears they are neither entirely personal nor terribly secure.

The accounts would resemble 401(k) plans in some ways, but with less freedom and flexibility for workers.

For example, once people decided to divert part of their Social Security taxes into a personal account, they wouldn't be able to change their minds. Employees could not take any withdrawals -- even loans -- from their personal accounts until retirement. And investment options would be very limited.

Upon retirement, some workers would have to use part of their personal account to buy an annuity to keep them above the poverty line. If they died soon thereafter, they wouldn't recoup the cost of the annuity.

Lots of details here:

http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2005/02/06/BUG7FB6ESN1.DTL

[54anickel]

1. Links to a different article - Bush Budget Calls for Law Enforcement Cuts

Was it changed, or did you paste the wrong link in error?

[54anickel]

4. I found this link instead...

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2005/02/06/BUG7FB6ESN1.DTL

[chelsea0011]

2. One of the major networks did the numbers for someone retiring

in 17-20 years. She gets screwed. She will get far less money than if she just recieved her normal SS benefit. What galls me about the Bush Lie(another) is that the baby boomers will cause the trouble in the future, but they are the ones who will all get screwed by Bush. Now that's how to deal with a problem. WORST PRESIDENT EVER!!!!!!!!!!!

[NMDemDist2]

7. i'll be 65 in 15 years

crap. guess I'll just work at Walmart till I drop dead

[stevebreeze]

12. that is of course the plan

[tapper]

15. Actually, I think you'll have to work 'til 66

... to get 'full' benefits. That was part of the 80s change, the gradual rise in retirement age to 67. I'll be 50 this year, and will have to work 14 months longer than my older brothers. (Not to mention *they're* on the other side of the 55 line...)

Notice that the plan splits the baby-boomers into two groups? If you figure the baby-boomers run from about 1945-1965 - the oldest half-decade gets to keep their benefits (in theory. for now.) The rest of us get zapped...

[AirAmFan]

22. It COULD be a good idea to take the reduced benefit at age 62,

if the Rethugs don't change early retirement options under current Social Security laws and regs.

If you don't mind continuing to work past age 62, could not afford good health insurance without your job, or expect to be able to save additional retirement money, waiting is probably a good idea. If you start getting Social Security and then change your mind and get a job, earnings above a certain amount result in a reduced monthly Social Security check.

But if you hate working, can afford to buy your own health insurance, don't need to earn more reitrement money, and manage your own finances with confidence, early retirement can be a VERY good deal. Under current law, for many years now thousands of people have taken Social Security at age 62, collected benefits until sometime before their normal retirement age, and then filed Form SSA 521 with Social Security. This allows "withdrawal" from retirement, with the ultimate benefit at normal retirement age ordinarily reduced to compensate for early benefits already received.

But, if you are in a position to repay the benefits you've already received, your normal-retirement-age benefit amount will be restored in full. And SSA will not charge you any interest on the money it gave you since you turned 62. In effect, SSA will have given you an interest-free loan totaling tens of thousands of dollars! If you have other sources of early retirement income, and you can invest your early Social Security checks without taking undue risks and make then grow, you'll have more than enough to pay SSA back and get your full normal age benefit. And you keep the returns on that free government loan!

I heard Suze Orman rave about this feature of Social Security on CNBC a couple of years ago.

[TahitiNut]

21. Newsflash: The 'baby boomers' are NOT the 'problem.'

Baby boomers were born (arguably) between 1946 and 1964.

The boomers started working as working adults (age 18) between 1964 and 1982.

It was in 1983 that the Reagan era 'fix' for Social Security was enacted to create a reserve in the SS Trust Fund above that required to pay current retirees: their parents and grandparents. All the boomers paid the increase, most for their entire working years and all for their highest earnings years. They are the first (and last?) generation to pay their payroll taxes, not only for their parents and grandparents, but partly for themselves ... partly relieving the next generations of the 'burden' of their old age.

They're the first generation who must wait until they're 67 for FULL Social Security (OASI) benefits. Thus, they'll begin collecting those benefits beginning in 2013 through 2031.

By 2042 (the year the Trustees predict the Trust Fund will be depleted), the oldest boomers will be 96 ... but most will have died. The youngest boomers will be 78, but over 40% of them will have died.. Most boomers will be dead in 2042.

By 2052 (the year the CBO predicts the Trust Fund will be depleted), the oldest boomers will be 106 ... but virtually all will have died. The youngest boomers will be 88, but over 70% of them will have died.. Almost all boomers will be dead in 2052.

Don't ever let anyone say that the 'baby boomers' are the 'problem'! It's a damned lie!

The only 'problem' with the Social Security system today is the increasing impoverishment of working (not idle rich) people earning below $90,000/year!

In 1980, the "bottom 90%" received 67.9% of the total Adjusted Gross Income in the country. By 2000, that share had shrunk to 54.0%. (Today, it's well below 50%.) That's a "redistribution" of 13.9% of the nation's income to the wealthy! By 2000, the 'bottom 90%' have lost over 20% of their share of the wealth their labor produces in this country in just 20 years! Since then, it has gotten even worse.

These are the people who pay the 'payroll tax.' It's their very impoverishment that has reduced Social Security revenues. The class war has been going on for over 25 years. Just when are the victims going to wake up and fight back??

[sandnsea]

23. More numbers to run

There's the economic shift and the horrible minimum wage. We really need somebody to run both of these numbers. How much would we have if we hadn't lost so much income and if minimum wage had kept up. And how much would it mean if income were more balanced over the next 75 years. I wish I was better at math, it just makes my head pop.

[AirAmFan]

25. Exactly! After paying retirement checks for millions of past retirees

with decades of FICA deductions from their paychecks, Boomers will be SCREWED out of their payback if President Flim-Flam has his way. In his new stump speech to sell this Social Security 'reform' snakeoil, he asks, "When you die, why shouldn't your heirs get your benefits, rather than people you don't know?

See http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=132&topic_id=1567898&mesg_id=1567898 for a thread on this simpleminded, extremist, and twisted notion from "the toxic Texan".

[whistle]

3. Your links appear to be about Bush's budget cuts not SS privitization

[truthpusher]

8. Link Updated - Thanks!

[SillyGoose]

5. I am convinced that this SS scheme is nothing more than a fascist plot.

Who will benefit from this con job? The corporations and the overpaid CEOs, that's who.

"Fascism should rightly be called Corporatism as it is a merge of state and corporate power." Benito Mussolini

[snippy]

6. There are lots of questions to be answered.

Among those questions are:

Will benefits be reduced for people who choose not to participate in the private accounts? If so, by how much?

How much are guaranteed benefits going to be reduced for individuals participating in the private accounts? Can they be reduced to zero?

How will survivor benefits be affected, especially for participants in the private account system who then die young?

Will the decision to participate in the private account system be irrevocable?

What investments will the government allow individuals to make in the private accounts?

What other decisions, such as asset allocation and rebalancing, will the government allow individuals to make and how often?

What will be the administrative costs of the private account system and who will pay such costs?

What limits, if any, will the government place on future increases in the administrative costs?

What remedies will the government allow to private account participants for misfeasance and malfeasance by the managers of the accounts?

What safety net will exist for participants in the private accounts who have catastrophic losses in their accounts after or near retirement age?

Will the balance of an individual's private account be considered to determine eligibility for Medicaid payments for nursing home expenses?

Will the balance of an individual's private account be subject to creditors' liens?

Will family members have a legal obligation to provide support for individuals whose total guaranteed benefits and income from private accounts are inadequate to live on?

Partial answers to some of these questions have been provided by the administration, but they still need to be addressed more fully. And there are lots of other questions to ask.

[Yo_Mama_Been_Loggin]

20. What investments will the government allow individuals to make?

Those that benefit Bush's buddies "The Pioneers".

[gizmo1979]

9. There is no upside to Bush's plan!

It's actually a plan to end social security,not a plan to help.It's the slippery slope to no security net at all.If Bush wants us to put money in a private account just let the people keep the extra 4% and put it in their own 401 K.

[Toucano]

10. What exactly is the "extra" 4%?

The employee's contribution to Social Security?

[gizmo1979]

11. Right

Isn't that what it is? I'am just saying that's what Bush always says about tax cuts let the people handle there own money.They know how to use it better than the gov.

[Toucano]

16. The problem with that, as I see it,

is you're allowing people to "opt out" of social security. That undemines the whole system.

I realize you're calling Bush out on his inconsistency and that's true. I remember his "town hall" meeting where he said in one breath the part about "it's your money" and in the other something about how you won't be allowed to gamble with it or buy lottery tickets with it.

Which begs, I believe, your question: If it's my money, as he claims, why not let me do whatever I want with it? What justification can there be for any restriction at all?

If it isn't "your money", but rather an inter-generational promissory obligation in which we all invest and share the burden of keeping our society secure (hence the name: social security!), then there can be no reasonable argument for allowing people to opt out.

If anything, contributions should be based on income, not just wages.

[genieroze]

24. If it's my money then why does * keep on borrowing against it? eom

[calimary]

17. What do you expect? This is the guy who wants to "fix" Social Security.

Please remember - this is the SAME guy who arrived in the Oval Office with a nice surplus, and the national debt paid down, and things left in pretty nice order by his predecessor, Bill Clinton (a Boy Scout in this respect, anyway, in that he left the place better than he found it) and immediately begins looting it all. Then, once that nice cushion is nicely squandered, he starts an expensive war with no way to pay for it. And of course, he said nothing to ANY Americans about sacrificing in any way at all, so our troops could have everything they need. It was all war on the cheap, remember?

Please recall that he's now run up a bigger debt, in a deeper black hole, than ANYBODY ELSE who's EVER run our government. Worse than Reagan - and we all thought THAT was horrendous - and dwarfing that of his own daddy.

Please also remember - this is the same guy, "Mr. MBA President," whose track record in the private sector stunk to high heaven. THREE - count 'em - THREE companies (OIL companies. TEXAS OIL companies, no less) down the toilet. Pretty maids all in a row.

And that "MBA" that his friends all boast about - how do we know what he even "learned" while "studying" for that degree? Mr. "Gentleman's C" after all.

We are being led over a cliff by a fuckin' MADMAN and a financial NINCOMPOOP.

And THIS is the guy we're supposed to let "fix" Social Security.

Yeah. He'll "fix" it, alright.

[stevebreeze]

13. we are going to borrow $4.1 trillion because we can't afford $3.7 trillion

needed to 'fix' SS? Private accounts do nothing to increase the solvency of SS even the mis administration now admits this. The real question since private accounts do nothing is who profits and who pays.
People who currently hold the stocks will profit as more money starts to chase the the same investments, prices will go up. Of course when the boomer's start to retire they will be stuck with a lower price since they will be forced to sell, when many other are selling. Wall Street wins since they will reap giant profits for handling accounts. The money comes from working people, once again!
Working people will get a less secure and lower funded retirement.

[fedsron2us]

14. Read Norma Cohen's Article from the Financial Times

and you will see how similar the proposed Social Security plans are to those introduced in the UK in the 1980's, right down to the idea of contracted out contributions and the concept of a retirement annuity. The British reforms are now widely recognized as a disaster even by members of the financial community and some Conservative politicians. The promised savings to the government treasury proved illusory and the taxpayer ended up paying more in contribution rebates than if the pensioners had stayed with their old SERPS pensions. At least in the UK citizens retained the right to contract back into the full state pension. It looks as though US workers will not be so lucky

http://www.prospect.org/web/page.ww?section=root&name=ViewWeb&articleId=8997

[fortyfeetunder]

18. Will Murkans do the math?

Folks will be better off doing the math and seeing this is a bad deal. But I doubt most of them will, since there were 51% of them voting for Bush.

[Calvinist Basset]

19. Ugh.

Mr. Bush is no better than a snake oil salesman.

[flyarm]

26. this is the same* who bankrupted every company he touched

and any of you would trust this nit wit with your security in the future??

i heard on tv yesterday that * was saying the exact words in 1988 when he ran for governor !!
but please look what you would be getting really and look why bush is in such a panic to get this through..because he is a criminal and has spent your s.s...the treasury is full of his i.o.u. 's that he doesn't have the money to pay back.. the chinese and russians areready to align with the euro..we are flat assed broke..and the only thing keeping us from depression is japan holding our treasury up...wake up americans...save your money ..now...this ass has us broke..stop living like this fake economy will last.it wont!

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Bush’s Social Security plan akin to a loan
Participants would forfeit part of accounts' profits

http://www.msnbc.msn.com/id/6903404/print/1/displaymode/1098/

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http://biz.yahoo.com/prnews/050201/fltu022_1.html
snip:
Social Security Trust Fund Fraud May Become Bush's Watergate, Suggests Author of 'The Looting of Social Security'
Tuesday February 1, 11:47 am ET


WINTER HAVEN, Fla., Feb. 1 /PRNewswire/ -- Economist and author Allen W. Smith, Ph.D., argues that the biggest obstacle to getting clear debate on the Social Security problem is the misinformation that continues to be spread by the AARP and others who argue that the trust fund holds real assets. "It is amazing how many people, including some Social Security experts, still just don't get it!" Smith said. "Weisbrot and Baker continue to spread the myth that, 'The Social Security trust fund will have more than $3.7 trillion in today's dollars in 2018.' Unless there is a change in policy, the trust fund will not have even $1 of real assets in 2018!"
Smith points out that David Walker, Comptroller General of the Government Accounting Office (GAO), while speaking at a Washington luncheon, co-hosted by Centrists.Org and the Alliance for Worker Retirement Security on January 21, 2005, said, "The left hand owes the right hand, and that has legal, political and moral significance. But it doesn't have any economic significance whatsoever. There are no stocks or bonds or real estate in the trust fund. It has nothing of real value to draw down."

"If the Comptroller General of the GAO says there is 'nothing of real value' in the trust fund, then there is nothing of real value," Smith said. "So what happened to the $3.7 trillion that so many people believe will be in the trust fund in 2018, or the $1.6 trillion that is supposed to already be in the trust fund today? The government has 'borrowed' it and made no provision for repayment of this debt."


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The Unlocked Box
How Bush is plundering Social Security to close the deficit.
http://slate.msn.com/id/2093707/


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Social Security campaign is political grave-robbing

http://www.boston.com/news/globe/editorial_opinion/oped/articles/2005/01/30/social_security_campaign_is_political_grave_robbing/


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BUSH MISLEADING ON SOCIAL SECURITY BEGINS

http://daily.misleader.org/ctt.asp?u=2042921&l=19446




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you must register for nyt for this oped!

The New York Times > Opinion > Op-Ed Columnist: Little Black Lies
January 28, 2005OP-ED COLUMNIST

Little Black Lies

By PAUL KRUGMAN

ocial Security privatization really is like tax cuts, or the Iraq war: the administration keeps on coming up with new rationales, but the plan remains the same. President Bush's claim that we must privatize Social Security to avert an imminent crisis has evidently fallen flat. So now he's playing the race card.

This week, in a closed meeting with African-Americans, Mr. Bush asserted that Social Security was a bad deal for their race, repeating his earlier claim that "African-American males die sooner than other males do, which means the system is inherently unfair to a certain group of people." In other words, blacks don't live long enough to collect their fair share of benefits.

This isn't a new argument; privatizers have been making it for years. But the claim that blacks get a bad deal from Social Security is false. And Mr. Bush's use of that false argument is doubly shameful, because he's exploiting the tragedy of high black mortality for political gain instead of treating it as a problem we should solve.




wake up time americans...copy these and give them to everyone you know!!

fly

[etherealtruth]

27. No safety nets...

I thought that the Chimp/neocon goal was to eliminate all social programs---to completely remove government from that role. If I am correct this is very consistent, initiate a plan that can never work and as a pleasant aside, it will benefit fascist buddies.

They have had a lot of success using the tactic of starving programs they can't legislatively destroy (the EPA has been effectively castrated). I pray that the "51%" begin to realize, after election night, their well being became irrelevant.

[AFSCME girl]

30. Hi ethereal truth!

Heard on NPR last week that the neocons are particulary salivating over Social Security because this program has such strong ties to the Democratic Party......

Love,
AFSCME girl
:hi:

[IndianaGreen]

28. Just look at the federal retirement system, the Thrift Savings Plan (TSP)

and you will see how much money federal workers have lost as the result of the stock market being down since Bush became President. Many that could afford retirement, can no longer do so.

Bush is proposing something similar to the TSP for younger workers, while scuttling what remains of SS.

[etherealtruth]

29. Simple question

If we eliminated the earnings cap (is it $90,000?), wouldn't that eliminate the solvency problem and also lower the percentage paid by the lowest wage earners?

If we raised the cap to $93,000 or $95,000, right now, and made no other changes, would that "shore up" social security?

[TahitiNut]

31. No.

Let's first of all dispel the notion that there's a "solvency problem." There isn't. It's a fair labor compensation problem for the lowest 90% of the working class. Even with this "banana republic" inequity in income distribution, a continuation of Clinton/Gore economics (full employment, lowering disability rates, etc.) would keep the Trust Fund solvent beyond the end of the 21st century.

Now, for the question of increasing the OASDI tax ceiling on wages.

Right now, just about 90% of all employees earn $90K/year or less in salary and wages. That leaves less than 10% who earn above that.

Think of it as a group of 1,000 people. Over 900 of them are already paying OASDI on their entire salary. Less than 100 earn more. At 12.4%, that's about $2,511,000 ($90,000 x 900 x 12.4% x 0.25)

If the wage ceiling were raised, say $4,500 (5%), then that $4,500 would be taxed for the nearly 100 people who earn that much, at a rate of 12.4%. That's less than an additional $55,800 (2.2%).

On the other hand, if the 900 people got a raise averaging only $500 (1.1%), that's 900 x $500 x 12.4% or more than $55,800.

The reason there's so much money paid out in wages above $90K/year isn't because of the number of people getting it; it's because of how high they're paid. Obscene.

The real issue is the "lower 90%" is getting paid less and less a share of the total all wages and salaries. We're talking about a federal minimum wage that's lower than it's been in 50 years. We're talking about collective bargaining that's the weakest it's been in 60 years. We're talking about global (un-American) corporations off-shoring the better paying manufacturing jobs because that's where they can chop the most. (When we take slave wages, we can "compete." And the plantation owners increase their wealth even faster.)