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shawa
CNO
Joined: 03 Sep 2004
Posts: 2004
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 Posted: Thu Mar 17, 2005 1:55 pm Post subject: All That Work for Nothing? |
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Another excellent point for privatization!
http://www.opinionjournal.com/columnists/bminiter/?id=110006423
| Quote: | All That Work for Nothing?
A letter from the Social Security Administration makes the case for reform.
BY BRENDAN MINITER
Wednesday, March 16, 2005
The other day the Social Security Administration sent me a letter that upon close inspection turned out to be the most compelling case for reform I've ever seen. The letter, which I get each year, details how much I've paid into the system and what I can expect from the government when I retire. Like many Americans, I typically give the letter a cursory read and promptly file it in the trash. But not this year. With the debate raging over creating private Social Security accounts, I decided to give it a careful look.
Surprisingly, what I found is that the biggest problem with the system isn't that it will run out of money. Anyone who follows the debate knows that Social Security will begin paying out more money than it takes in just 13 years from now. After that, the system falls into decades of deficits. To keep the checks rolling out to retirees, Congress will either raise taxes, cut benefits, cut spending on other government programs, or some combination of the three.
Faced with this set of choices, we can be sure that Congress will not make the wisest decision. But we can be certain that the political class will find a way to keep sending checks to retirees, one of the most politically active cohort of Americans.
It should be noted here that this letter was not a form of political propaganda peddled by the administration. Rather the letter made the case for reform unwittingly by simply detailing how the system works now.
It showed that for the past 16 years I've paid tens of thousands of dollars into the system--money that was used to fund my grandmother's retirement and, now that she is gone, the Social Security checks of other older Americans. This is what is called the "intergenerational compact": We pay into the system today to support those who are already retired with the expectation that when it comes time for our own retirement, the next generation will support us. Although I was never asked to join this compact, there is a certain logic and fairness to it. It's also the closest thing we have to a guarantee that the system will be there for us after spending a lifetime paying into it.
Looking over the letter, however, it became clear that there is a fundamental flaw in the arrangement. Although, I've already paid enough into the system to "qualify" for benefits, not a penny of that money is likely to be counted in determining the size of my retirement benefits. What's more, whatever I pay over the next two years probably won't count either.
The problem here is that I am only 30 years old. Social Security counts only a worker's top 35 wage-earning years when determining benefits. And since the government considers 67 to be my "full retirement age," assuming a steady climb of income, I'm still two years away from starting to accrue the credit that will determine the size of my monthly Social Security check. In other words, the system is exactly the inverse of what we've all been told to do in planning for our retirement. Those who work hard and put money into the system early in life, get the same as those who start paying in later on. And as a proportion of what they've paid in, the early-contributing ants actually get less than their grasshopper peers.
Those who defend the current system are always quick to point out that Social Security isn't supposed to be a pension, but rather an insurance policy that takes care of the disabled as well as providing a retirement benefit. But here too, the system is skewed against those who pay in early.
According to the letter I recently received, if I become disabled my monthly checks will be about $250 larger (in today's dollars) than they will be if I take early retirement at 62. And although there's no credit for early work, those who work a few years after their full retirement age get credit for the "extra" money they pay in. If I retire at 70, my monthly checks will be about $800 larger than they would be if I was to take early retirement and $400 more than if I call it quits at 67.
This all stacks up in favor of reform because private accounts are the only thing that can bring some equity to the system. Private accounts would pay workers based on the total amount they've paid into the system over their working lifetimes, not an average of what they paid in for part of their time in the work force.
If private accounts had been around in 1989, I would have started growing mine with the first paycheck I earned pruning apple trees in the dead of winter in upstate New York. That account would have then been able to take advantage of what Albert Einstein called "the most powerful force in the universe," compound interest. So instead of penalizing workers like me, who pay in early, private accounts will give workers the advantage of nearly two extra decades of accruing retirement assets.
Viewed from this perspective, it's clear that by uniting against reform, Democrats are defending a system that is skewed against the workers they claim to represent--those who are handed little in life and must enter the work force early. Some of them work their way through college, but many stay in blue-collar and service-related jobs. They make less money each year, but make it up by working longer and harder.
The Social Security debate is now about whether to allow these workers to capitalize on all of their hard work while saving for retirement. Isn't that what the Democratic Party is supposed to be all about?
Mr. Miniter is assistant editor of OpinionJournal.com. |
He makes a good point I hadn't considered.
With private accounts, every paycheck you earn from the time you are
a teenager working a part time job has FICA withholdng going into
your OWN account earning compounded interest over your lifetime!!
_________________
“I love the man that can smile in trouble, that can gather strength from distress, and grow brave by reflection. ‘Tis the business of little minds to shrink; but he whose heart is firm, and whose conscience approves his conduct, will pursue his principles unto death.” (Thomas Paine, 1776) |
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Barbie2004
Commander
Joined: 18 Sep 2004
Posts: 338
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| Posted: Thu Mar 17, 2005 1:59 pm Post subject: |
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I have no idea why everyone isn't for private accounts!!
Who in the world would rather give the government control over their money??
I'm baffled.
But then again, the MSM is controlling the message, and they don't want us to have financial freedom anymore than they want us to have speech freedom.
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shawa
CNO
Joined: 03 Sep 2004
Posts: 2004
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| Posted: Thu Mar 17, 2005 2:26 pm Post subject: |
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You're right Barbie!
And the Libs/Socialists in Congress are fighting it tooth and nails!
FICA taxes going into PRIVATE accounts is $$$$$ they can't get their greedy hands on to spend on all their boondoggle programs!
_________________
“I love the man that can smile in trouble, that can gather strength from distress, and grow brave by reflection. ‘Tis the business of little minds to shrink; but he whose heart is firm, and whose conscience approves his conduct, will pursue his principles unto death.” (Thomas Paine, 1776) |
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RogerRabbit
Master Chief Petty Officer
Joined: 05 Sep 2004
Posts: 748
Location: Oregon
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| Posted: Thu Mar 17, 2005 2:27 pm Post subject: |
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| Barbie2004 wrote: | I have no idea why everyone isn't for private accounts!!
Who in the world would rather give the government control over their money??
I'm baffled.
But then again, the MSM is controlling the message, and they don't want us to have financial freedom anymore than they want us to have speech freedom.
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So is this 72+ year old retiree. MSM keeps telling me that I do not want Mr Bush's suggested changes and I keep trying to get that in my mind but common sense keeps taking over and most seniors I know have the same feeling. It will not affect me and it will be voluntary.
The trouble with the 535 Reps and Senators is only one of them have any common sense and that one isn't even sure of it
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"Si vis pacem, para bellum" |
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AMOS
Senior Chief Petty Officer
Joined: 30 Jul 2004
Posts: 558
Location: IOWA
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| Posted: Thu Mar 17, 2005 3:35 pm Post subject: A no-brainer |
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Priivate accounts is a no-brainer, at the very least. People who think "their" money is sitting there for them should start their search for a nursing home right now. It's spent before it comes in, some on your neighbor's SS disability.
We've had "private accounts" for some time. They're called Individual Retirement Accounts (IRA's), among others. Bush's plan allows the taxpayer to, at least get something out of their doggone payroll taxes. |
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USS Endicott
Seaman Recruit
Joined: 24 Sep 2004
Posts: 46
Location: California
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| Posted: Thu Mar 17, 2005 4:25 pm Post subject: |
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Count me as one of the skeptical. I know the government has always spent my FICA taxes and that has always been my complaint about Social Security. I don't trust the government to run a private account for me either. How about this, I get to keep my money to spend, invest, give to charity, whatever floats my boat? The government doesn't get to take my money and start a private account for me. I don't see me keeping my own money in Bush's plan. What's to keep them from doing the same with the private account that they've done with Soc. Sec.? It is my understanding that the gov't will still take my money and put it in a private account for me. How do I know they won't use those funds? Do you guys trust the government to manage your accounts? They can't manage medicare or any of the other programs they have going. I think the government will still take my money, invest it in whatever scheme makes the politicians richer and at the end of the day I'll find out they've lied, spent, or lost all of the money I've given them over the years, in much the same way that several corporations have spent their employees pensions and left the employees with nothing.
I'm not very market savvy. Hopefully, you guys can give me a clearer idea of what Bush is planning to change. The way I understand it, people in a certain age group will have even more money taken out of their payroll taxes. In essence, Bush is raising taxes, but through the back door and only on certain people. If I opt out of Social Security, it's probably too late to start making money in a private account and if I stay in, the benefits go down because less people are paying in. Social Security has always been a ponzi scheme and it looks like I'm going to be the one at the bottom of the ponzi ladder.
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"God Bless America and keep watch over our military personnel. Thanks to all who have served and are serving now!" from a California American. |
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Ladder Yankee 33
Ensign
Joined: 12 Aug 2004
Posts: 68
Location: Cumming, GA
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| Posted: Thu Mar 17, 2005 5:25 pm Post subject: |
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Smoke and Mirrors, smoke and mirrors. The government gets our gold and we get the shaft! It's how it worked in the past, and will work in the future. FLAT TAX w/no income tax is the only way to go. Do away with the IRS and pay as you go. If you don't buy, you aren't taxed. Won't happen in my life time though. Take away the cash and the pols have no power over you for good or bad. KISS!
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"Win the Delta Come Hell or High Water!"
RivDiv11, RAS111, T-111-9, RM3 11/68-11/69 |
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DLI78
PO3
Joined: 10 Nov 2004
Posts: 273
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| Posted: Fri Mar 18, 2005 5:29 am Post subject: |
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From what I've heard about the idea being floated, if you opt for a private account your future social obscurity benefits will be cut a little to offset that. Seems reasonable to me. And if they go with something similar to what the federal workers are getting (again, from what I've heard about it), then they will give you a few choices for investment of the private account.
My 401K is like that. The company that manages it for my company has several baskets, and they have a tool you can use to assess your comfort with the different levels of risk. I started it a few years ago (couldn't afford one before), so I opted with aggressive since the market was down and I don't have 30 years to wait for it to recover. I could have opted for managing it myself. Life it too short to study all that stuff then spend an hour or more every day reading tea leaves to see how to move my money around.
Well, while my younger friends were seeing their 401s tank, including the one that scoffed at the "stupidity" of letting some auto-pilot basket manage your funds, my account went up. "How did you do that?" she asked. I let people who do this **** for a living manage it for me. On the company's dime. And that is bad because......?
It's my best shot at being able to retire at 70 rather than working till I die at my desk.
I'm 50 now and you bet you butt I'll put as much into a private account as I can if this goes through. And if they let you choose conservative or risky approaches, I'll gamble on the American economy. I don't have time to be conservative with my economic plans.
What I like about this private account plan being discussed is that you might be able to pass your own chunk of money on to your spouse and kids. Can't do that with social insecurity.
I think I heard President Bush say the other day that the private account is only part of the fix. So we will probably see some other benefit reductions or more likely a higher retirement age.
What I've noticed from all this discussion going on is that the President hasn't laid out a specific plan. He is pushing an idea and he is waiting for Congress to work out something they can live with. Sounds like Democracy to me.
If you live in a red state I envy you. If you're in a blue state, write your congress critters and senators and urge them to do the right thing by the voters and work on a plan that fixes the problem without sticking yet another gun in the ribs of every worker. I'm tired of having my pocket picked (cleaned out is more like it) every two weeks.
I like the idea of being able to gamble some of my social security money on the markets rather than the 1/8 of a percent return you get on a regular passbook or whatever the goverment gives you now.
I'm glad the system is helping my parents, but I know it won't be enough for me to live on, not with a mortgage that will end when I'm 80.
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DLI 78
Army Linguist
1978-1986 |
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