Social Security.... the Oily Truth.

[jtice]

Just an interesting read a buddy emailed me, thought you might like it...




Hello,

I had an interesting thought the other day (as unlikely as it may
seem, even more unlikely is that I remembered it).

Currently you can not watch or read any news print without seeing
something about "Privatizing Social Security". The message certainly
seems to be getting through, because about 55% of American, give or
take a few, believe that Social Security has "Major Problems".

http://www.cnn.com/interactive/allpolitics/0502/poll.gallup/content.1.html

Well just because Americans believe that it has "major problems"
doesn't make it true. But sure enough if you go to the SSA website
(http://www.ssa.gov/policy/docs/chartbooks/fast_facts/2003/ff2003.html#f
inancing [Look at third graph down]) it does look like it will fail
around 2042, in about 37 years. Damn that sucks, I will be about 62,
and have been working for 45 years and still not be eligible for
benefits (Guess I should keep smoking cigarettes, maybe I won't have to
worry about it.).

Seems like a nice round number "37 years", I wonder what else will
happen in that same amount of time. Just by happenstance I found a
nice little bit of information that is fun to chew on. Dig this.....

According to an excellent site filled with information:

http://www.cia.gov/cia/publications/factbook/geos/xx.html

(Ya it is the CIA website, and I know what you are thinking, "Well damn
if they were wrong about Iraq's WMDs...". They were just a little off
in their game that day, or maybe the WMDs are still buried in the
desert ha ha ha)

If you look at the worlds proven oil reserves and daily oil
consumption, an interesting number arises:

1.025 trillion bbl (Divided By) 75.81 million bbl/day

Equals: 37.042 Years

One would almost think that they would hear something about this in the
news. I wonder if we will soon have a "Private Oil Savings account",
it seems unlikely. If and when we exhaust our oil supply the world
will be in a dilemma, and with no alternative energy source to take up
the slack the future looks grim. Well I am off to buy duck tape and
bottled water, anyone want to car pool?

On a side note:

Seems strange that Iraq has the second largest oil reserve in the world
(http://www.cia.gov/cia/publications/factbook/rankorder/2178rank.html).
Good thing that they will soon have a democracy, so that a tyrannical
dictator will no longer have possession of such a precious commodity.
Makes me wonder, who else is on that list...Kuwait, no they are
already "free" enough, OH!!!! I got it Iran, heck ya, they have the
fourth largest oil reserve in the world.

On a second side note:

If the world's oil consumption was put in terms of dollars it would
be.. Only

3.34 trillion dollars a DAY!!

Oh I am sorry that is the world, The US alone consumes only 864 billion
dollars worth of oil a DAY.

http://www.bloomberg.com/energy/
http://www.cia.gov/cia/publications/factbook/geos/us.html

But it makes since that everyone it talking about a Social Security
program 3.5 trillion dollars to extend it 40 years. Just think Social
Security only needs money to keep working, but when the oil is out,
there will be no more.

(1.025 * 10^12 Barrels) * (7.581 * 10^7 Barrels Consumed a day) =
13,520.64 Days
13,520.64 Days) / (365 Days a Year) = 37.042 Years

Brought to you by "The Oligarchy Within" where no man is created equal.

 

[DaFiend]

Umm. Don't you americans have superannuation?

 

[pedalinbob]

This is NOT political...just my opinion on social security in general.
Those that have invested should be given proper benefits which were promised by the government.

However, in my opinion social security should be reformed.

Pretend social security does not exist.
You go to an employer that tells you that you must involuntarily contribute at least 6% of your earnings to a retirement account. The employer will match this 6%.

You cannot access this account until you are 65, and the account will only grow at <3% (I am being kind with this figure). Then, when you access the account, you can only withdraw a small percentage each month.
If you die before retirement, you lose ALL of the money (it cannot be given to your family/friends/charity). After death, any money left over is lost.
When you die, the money is simply gone.

Sounds like a scheme to me--and a VERY bad deal.

I would MUCH prefer all of my social security to be private.
It is, after all, MY money. Shouldn't I be allowed to use it as I see fit?
I can positively get more than 3% return with conservative investments. Heck, my 401k/403b has averaged 10.24% for the last 4 years (more aggressive investments, admittedly).

Just my opinion.

Bob

 

[Lurker]

Social Security is a pyramid scheme and has been since its inception. Fortunately the instability of the system has long been discussed in the media and it should be no surprise to future retirees that benefits are far from certain. Because of this I am assuming that I will be paying into it during my entire working life, probably at ever increasing rates until the day I retire at which point it will be probably be dismantled (worst case scenario, of course). My retirement planning has taken this into account and I am not counting on anything from the government (except to pay them taxes).

Any reforms that reduce the "pyramid scheme" nature of the program are welcome in my opinion, but we will see.

 

[powernoodle]

1) the average household income in America is around $42K. Each of us currently pays 12.4% of our personal income in social security tax. Half of that appears on your pay stub (and the feds keep it), and half goes directly from your employer to the feds.

2) so, of that 12.4%, lets do what the President wants and say we get to keep 6% to invest on our own, and let the feds have 6.4%. (It appears that the President will actually want to let us keep 4% or so of our own money rather than 6%).

3) 6% of the average household income in America is $2520 per year, or $210 per month.

4) if a household invests that $210 per month for an average working life of age 25 to 65 (40 years), and if that investment gains 10% per year (the stock market has gained 11% per year averaged since the 1930's), you end up with $1,339,000 at retirement.

5) so lets say that at retirement that $1.3M grows at 10%; take 7% of that each year as income, and you get $93,000 per year of retirement income. Think you get by on that? And that leaves 3% to leave in the pot to cover inflation. And, you never touch the principle of $1.3M. You give that to your kids when you die. It is, after all, your stinkin' money. And, you've still given that 6.4% of your income (see #2 above) to the feds each month for your entire working life to support the bums who have played bingo with their income all of their lives and haven't saved for retirement like you have.

Result: you can hold your hand out and beg for scraps from the feds ($600 - $1400 per month in SSI), and pray that this pyramid scheme (that is literally what it is because current income is used to pay past obligations) will still be around when you retire, or you can be a millionaire at retirement while still have given 6.4% of your income to the feds for their socialized retirement plan. Yes, $1.3M won't be worth in future dollars what it is today, and not every household makes $42K (but half make more). And the market may earn less than 10% per annum. But this is just social security, and doesn't take into account what should be your primary retirement plan - pension, 401K, Roth IRA's, and maybe a little rental property or two for diversification. Imagine having that $93,000 per year, plus all of your pension, 401k, Roths, etc.

Let me keep my 6% to invest, and the feds can have the remaining 6.4% from which I want nothing back. And thank God for those like President Bush who have the temerity to suggest that I actually keep a little of what I spend a lifetime to earn.

/ubbthreads/images/graemlins/happy14.gif

best regards

 

[PEU]

[ QUOTE ]
pedalinbob said:
I would MUCH prefer all of my social security to be private.
It is, after all, MY money. Shouldn't I be allowed to use it as I see fit?
I can positively get more than 3% return with conservative investments. Heck, my 401k/403b has averaged 10.24% for the last 4 years (more aggressive investments, admittedly).

Just my opinion.

Bob

[/ QUOTE ]

don't be so sure that private SS is better, Argentina privatized its SS about 10 years ago, and some people have less than the total amount they put on their account...

I agree our SS system (search AFJP) can be perfected, Chile did it better (search AFP Chile)


Pablo

 

[PlayboyJoeShmoe]

I dig what Powernoodle said.

Who knows? I don't have ANYTHING going towards the end at this time. I am in a partnership of self employment, and probably haven't paid more than $1000 EVER into SSI (and likely less!)

I always figure I'll be working when I die...

But maybe something will give... I can hope!

 

[twentysixtwo]

SS has issues that need to be addressed.

The real problem is that people insist on comparing SS to a savings plan. It's better compared to an insurance plan.

Pedalinbob - I don't know how old you are but let's say you're 35 and have 2 kids, you get hit by a car and as of tomorrow, you're disabled and can no longer work. You then live to a ripe old age of 70 or so.

In that case, you'd collect far more than you ever paid into it.

Is SS perfect? No, but the privatizing it will change it from a social safety net into a "Every man for himself / Winner take all" type of system.

Some people are too stupid to save for their retirement. Some people are unlucky and invested all their stocks in techs just before the bubble burst. Some people had good jobs at companies like Bethlehem Steel, Kmart, or US Airways and found out just before retirement that their company wouldn't be giving them that pension they promised.

Just look up PBGC (Pension Benefit Guaranty COrporation) Forget the SS bailout, this is a hell of a lot scarier.....


Me? I'm 38 and have paid tons and tons into SS - assuming I continue to work until I retire, I'll see a pretty lousy "return." On the other hand, if I'm like my father and have a heart attack at 47 and can't work anymore, I'll probably make out like a bandit.

That's one investment I'd rather lose on.

 

[pedalinbob]

powernoodle and twentysixtwo both made my point, thank you.

here is an idea: give each person a choice: opt-in, or opt-out.

this way, those that opt-in will be covered no matter what, and those that opt-out arent stuck with the bill.

those that opt-out will purchase insurance that covers us in the event of an inability to work (i already have extended long term disability that i pay for).

i like it!

Bob

 

[Samoan]

[ QUOTE ]
powernoodle said:

4) if a household invests that $210 per month for an average working life of age 25 to 65 (40 years), and if that investment gains 10% per year (the stock market has gained 11% per year averaged since the 1930's), you end up with $1,339,000 at retirement.

[/ QUOTE ]

Source?

The accepted assumption for gains based on the market is 6%, substantially less that your assumed 11%.

I'm not saying yours is a bad thought/idea, I actually agree. It's just that the numbes are a little, well, ambitious.

I'm one of thse folks whose income is right at the median. I kick 10% into my own investments and 6% (with a double match, resulting in 18%) into my 401K. I'm not countig on the Feds. I have this mindset primarily due to my dad. Dad would have hidden money under the mattress if he could have counted on it to make a decent return.

-F

 

[Samoan]

[ QUOTE ]
powernoodle said:

4) if a household invests that $210 per month for an average working life of age 25 to 65 (40 years), and if that investment gains 10% per year (the stock market has gained 11% per year averaged since the 1930's), you end up with $1,339,000 at retirement.

[/ QUOTE ]

Source?

The accepted assumption for gains based on the market is 6%, substantially less that your assumed 11%.

I'm not saying yours is a bad thought/idea, I actually agree. It's just that the numbes are a little, well, ambitious.

I'm one of thse folks whose income is right at the median. I kick 10% into my own investments and 6% (with a double match, resulting in 18%) into my 401K. I'm not countig on the Feds. I have this mindset primarily due to my dad. Dad would have hidden money under the mattress if he could have counted on it to make a decent return.

-F

 

[DaFiend]

Ok, i get it now your SS is like our Pension, i think, from what i gather you guys have said, but here, everybody pays for the pension through incometax. So you guys don't have superannaution? Or is it like a super fund, controlled by the government? I think the idea here in australia is to eventually scrap the pension ( to more or less stop the dole bludgers, bludging their way through life, getting handouts, while the rest of us work our ***'s off for them)

In Australia, our employer pays a percentage into OUR chosen superannuation fund. Employees can contribute more out of their own money if they wish. For those of us who earn less than *i think* $45-50,000 (australian) the government will match employee's contributions dollar for dollar up to $1000. So if you put a grand of your own cash in a year, you end up 2 grand better off than if you didn't make your own contributions to the fund. You can get paid in a lump sum or monthly/weekly payments(depending how you want to work the tax system.)

EDIT: Added *in Australia, to "i think the idea hear * is...."

 

[James S]

DaFiend, our SS has been around since the 30's. i don't think the government is allowed to do anything with the money investment wise, it doesn't earn any interest for them there. This is probably a good thing as if they had the ability to spend it on other things or invest it in other things they certainly would do so....

Started out just as a small additional amount of money to cover cost of living increases for folks retiring on a fixed pension but has increased to give more and more to more and more people. And of course, once you have the government giving out money to increase pensions, then companies will no longer feel it necessary to give pensions, so the government will feel compelled to pick up that slack, and cover their children, and send their children to school and and and and...

and thats the problem /ubbthreads/images/graemlins/smile.gif

Even the libertarian that I am i don't have a problem with keeping aged widows off the street and providing for food for families who's main bread winner has died and left them with no income. But once people realize they can vote themselves more money, they keep doing so until the government goes bankrupt /ubbthreads/images/graemlins/grin.gif

 

[Hookd_On_Photons]

At about the time our original 13 states adopted their new constitution, in the year 1787, Alexander Tyler (a Scottish history professor at The University of Edinborough) had this to say about "The Fall of The Athenian Republic" some 2,000 years prior:

"A democracy is always temporary in nature; it simply cannot exist as a permanent form of government. A democracy will continue to exist up until the time that voters discover that they can vote themselves generous gifts from the public treasury. From that moment on, the majority always votes for the candidates who promise the most benefits from the public treasury, with the result that every democracy will finally collapse due to loose fiscal policy, which is always followed by a dictatorship."

"The average age of the worlds greatest civilizations from the beginning of history, has been about 200 years. During those 200 years, these nations always progressed through the following sequence:

From Bondage to spiritual faith;
From spiritual faith to great courage;
From courage to liberty;
From liberty to abundance;
From abundance to complacency;
From complacency to apathy;
From apathy to dependence;
From dependence back into bondage."


That makes a *great* quote! I've heard it dozens of times (usually from Neal Boortz or some other Libertarian or fiscal conservative).

Too bad the quote is probably bogus. Some things are too good to be true. /ubbthreads/images/graemlins/frown.gif

http://www.snopes.com/politics/quotes/tyler.asp

I'm not a financial expert, just a cautious citizen.

As I see it, there is no stinkin' "Social Security Trust Fund". Oh sure, it exists in name. The surplus - revenues collected in excess of present payouts - is used to purchase Treasury bonds. The funds are then considered part of general revenues and are spent every year.

Those Treasury bonds are yet another obligation the government must pay for when they come due.

Somebody please explain how this is safeguarding the surplus for future use! The money's already been spent. When the bonds mature, the Treasury's got to pay for them... with current tax revenues. I know U.S. Treasury bonds are considered the safest investment there is. The problem is that the holder of the bonds is also the entity that promises to pay them!

The situation is analagous to me writing myself an IOU for $500 out of every paycheck, depositing the IOUs in a safe deposit box, then trying to cash them in when I retire. /ubbthreads/images/graemlins/broke.gif

Or am I missing something? /ubbthreads/images/graemlins/thinking.gif /ubbthreads/images/graemlins/icon3.gif

 

[powernoodle]

[ QUOTE ]
Samoan said:

Source?

The accepted assumption for gains based on the market is 6%, substantially less that your assumed 11%.


[/ QUOTE ]

Here's one source (the Federal Reserve Bank), which compares the average annual returns in Republican and Democrat administrations:

"Positive average annual returns exist for both parties over each of the sub-periods. For the period 1871-1997, the average annual returns for Republican and Democratic administrations were 10.5 and 11.7 percent, respectively. During the 1926 to 1997 sub-period, the return was 10.7 percent for Republican administrations and 15.1 for Democratic administrations. The returns for both periods give a slight edge to Democratic administrations, though the returns are similar. Statistical tests indicate that the returns are not significantly different."
Citation here.

But don't trust some weasel who calls himself "Powernoodle" on the internet. /ubbthreads/images/graemlins/smile.gif The data is out there for you to find.

Even if I'm way off, which I'm not, the current SS system provides a negative rate of return, meaning that most people receive less from the system than they pay into it. So any positive rate of return is a vast improvement. In fact, sticking your money in a cookie jar and getting zero growth still beats the current negative growth.

BTW, did you know that the social security system is currently collecting $300B each year more than it pays out in benefits? But instead of saving it for future payouts, Congress throws it in the general fund and spends it. Reason number 843 not to keep the status quo.

best regards

 

[DaFiend]

Damn. You Guys a really getting screwed over.

 

[DaGeek]

Yep! But the standards of living are still the best over here in the U.S.

 

[DaFiend]

hmmmm. i really don't want to turn this thread OT, or into a debate over who has the best standard of living
but.........

From The Age:
[ QUOTE ]
The United States was ranked eighth, a fall of one place from last year, with Norway topping the list for the past four years.


[/ QUOTE ] /ubbthreads/images/graemlins/smile.gif

But.... so the saying goes..... "beauty is in the eye of the beholder" /ubbthreads/images/graemlins/wink.gif

Any way back on topic. I just remembered i get screwed on my super, the government taxes it on the way in, taxes it while its in there, then they take another piece of the pie on the way out..... /ubbthreads/images/graemlins/mad.gif /ubbthreads/images/graemlins/mad.gif /ubbthreads/images/graemlins/mad.gif

 

[James S]

You can only afford to be this screwed up if you're this successful /ubbthreads/images/graemlins/smile.gif

 

[eluminator]

It seems like a terrible scam to me. When Roosevelt was running for president he never mentioned Social Security. In fact he promised he would cut the size of the government.
When he put it into effect it was challenged at the Supreme Court. The court, by a margin of 5 to 4, said it was constitutional only if the money collected from the taxpayers was put into a trust fund. As has been mentioned in a previous post, there is a trust fund, but there is no money in it, just IOUs.

We are now forced to pay into Social Security "for our own good". It seems to me that if we were a free people, each of us should be given the opportunity to decide if it is for our own good.

Our employers are forced to deduct the 12.4% and are forced to state on our paychecks, that they are deducting 6.2%, as was mentioned in an earlier post. That's outright fraud.

A certain person who shall go nameless proposed to socialize our health care business. She would have required our employers to deduct money from our paycheck and state on our paychecks that only one sixth of that amount was deducted. When she was informed that this would put many companies out of business, she replied "I can't be responsible for every undercapitalized business in america".

As long as Americans only elect slimeballs, it's only going to get worse.