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  #1  
Old 12-22-2004, 10:17 AM
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How is our social security being invested currently?

I have read many issues regarding the SS, but I have not read anything about the current management of the social security. How is this big chunk of money being invested by our brilliant admistrators? How much interest doe it generate each month?

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  #2  
Old 12-22-2004, 10:35 AM
webwench
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It is not invested, and generates no interest. It's a 'pay as you go' system (what we in the 'arguing on the internet' trade call a Ponzi scheme).

At current tax levels and life expectancies, the rate of return is negative for most people. Hardest hit are men, who pay in the longest/most and, on average, die sooner than women.
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  #3  
Old 12-22-2004, 10:35 AM
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Don't worry the whole rotten system will collapse in the next 20 or so years. Good riddence the Gov can't be trusted with money, they spend it like drunken sailors.

I suspect a lame duck president will cut benifits in the next few years. Maybe GW but probably one of the next two after him.
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  #4  
Old 12-22-2004, 10:47 AM
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Quote:
Originally Posted by webwench
It is not invested, and generates no interest. It's a 'pay as you go' system (what we in the 'arguing on the internet' trade call a Ponzi scheme)...
I guess you could call it a Ponzi scheme. Or maybe you could be more accurate and call it the most successful social program in this history of the world.

What's wrong with "pay as you go"? How do you think we pay for highways? We do it through gas taxes, pretty much on a pay as you go basis.
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  #5  
Old 12-22-2004, 10:55 AM
webwench
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Originally Posted by dculkin
I guess you could call it a Ponzi scheme. Or maybe you could be more accurate and call it the most successful social program in this history of the world.

What's wrong with "pay as you go"? How do you think we pay for highways? We do it through gas taxes, pretty much on a pay as you go basis.
It's just great until the money starts being siphoned off for other purposes... until people assume that Social Security was meant to provide their entire retirement fund, rather than being just a supplement... until politicians bill it to their constituents as being something it's not... until it gives a negative return for most people, who are at the same time forced into the system, when they could better invest the money themselves... until you get a bump in the population like the baby boomers all retiring at once... until it gets used as the greatest scare tactic and political hot potato in history, making reform and adjustments to it almost impossible...

Yeah, it's working great. And all those ellipses make me feel like I'm channeling bhd.

Hey, if it had a voluntary opt-out clause, I'd be happy.
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  #6  
Old 12-22-2004, 10:57 AM
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The problem with SSI is that it requires a certain number of people working to support one retiree. The proportion of people working to retirees is shrinking.

I understand that SS has about a 2-3% return on investment. A worker could beat that with an CD, not to mention a 401k.

All that wealth confiscated by the state is lost to the wage earner.

I wish that 20 years ago I could have goten out of SS and take every dime I stuck in there. I'd invest in a 401k that tracks the S&P and in gov bonds. I'd be worth twice what I am now and on retirement, have plenty to live off of and also a legacy for my kids. They get zip from the money put into SS.
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  #7  
Old 12-22-2004, 11:08 AM
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Originally Posted by Botnst
...I'd be worth twice what I am now and on retirement, have plenty to live off of and also a legacy for my kids. They get zip from the money put into SS.
Not true. I am getting a tremendous benefit from all the money my parents paid into Social Security - it buys my Mom's groceries and helps pay her mortgage. That's a lot better than zip. I see it as a tremendous gift.

Sure Social Security has a strong socialist theme running through it, but so what? It is a good thing. And so is capitalism. I am proud that I live in a country that has both capitalism and such a fine program as Social Security.
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  #8  
Old 12-22-2004, 11:11 AM
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Quote:
Originally Posted by webwench
...until it gets used as the greatest scare tactic and political hot potato in history, making reform and adjustments to it almost impossible...
These days the scare tactics are all coming from the anti-SS crowd.

Quote:
And all those ellipses make me feel like I'm channeling bhd...
That's the second time today I've seen a reference to bhd. Who is that?
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  #9  
Old 12-22-2004, 11:16 AM
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the question is more accurately put: how was SS money spend decades ago and who spent it?
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  #10  
Old 12-22-2004, 11:16 AM
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SS is, as previously stated, a Ponzi or pyramid scheme. It simply takes money from person A and gives it to person B. This worked fine when SS was started in the 1930s. There were 35 workers paying in for each recipient collecting. Hence the burden on each worker was quite low and the widows and orphans didn't starve.

Fast forward. People stopped having kids. SS benefits were greatly expanded. There are now three workers paying in for each recipient. SS has morphed from a program to prevent the indigent from starving into a type of government pension program. As a result each of those three workers are paying a heavy burden. The great majority of workers in the U.S. pay more in SS taxes than in income taxes.

At present the SS tax collects more than is required to pay out. The excess monies are handed over to the treasury and spent on general government programs - missiles, pork barrel projects, what have you. The treasury issues the SS system bonds in return. SS can cash in these bonds when its payouts begin to exceed intake - predicted to happen in the next 10-15 years.

The problem is, where does the money to redeem those bonds come from? The treasury already spent it. The government will be forced to raise general revenue to pay off the SS bonds. There are several ways of raising this revenue. Taxes (income, corporate, user fees, AMT, etc.) can be raised. This has the bad effect of stifling economic activity. Government bonds could be sold. This drives up interest rates. Or the government could print money (essentially devaluing the dollar). This generates inflation or hyper-inflation.

So there ain't no easy answers.

Europe is interesting. The economies are stagnant because consumers won't spend. The average European worker saves 10% of their income, vs. 0.8% in the U.S. The reason is Europe has government run and paid pensions. Nobody trusts the governments to actually deliver the pensions, so they have decided to save aggressively for the future. I'm not sure what this means. Maybe Europeans are smarter than Americans because they've learned not to trust the government?

- JimY
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  #11  
Old 12-22-2004, 11:19 AM
webwench
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Originally Posted by dculkin
That's the second time today I've seen a reference to bhd. Who is that?
bhd = boneheaddoctor.
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  #12  
Old 12-22-2004, 11:20 AM
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SO much right wing propaganda. So little time to refute it. I'll be back.
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  #13  
Old 12-22-2004, 11:22 AM
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The reason I posted this thread is that in my early career, I was posted to Singapore to work. Great place to bring up your family! They have a much better retirement system. It is called the Central Provident Fund. The employer matched the employee contribution as it is in our SS, however, each individual has his own account and that his and only his. The government investes the fund very prudently and generates good returns. When the person reaches the retirement age, he draws from his account and only from his account. If Joe lives to be 91 and ran out of money at 82, that's his problem! This system is no diffenrent from the many 401K out there. Do you want to share your 401K with someone else? Probably not. The system in Singapore provides a much improved system compared to our archaic SS. It does not go broke like ours! And provides an equitable distribution of the fund.
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  #14  
Old 12-22-2004, 11:22 AM
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Quote:
Originally Posted by webwench
bhd = boneheaddoctor.
Now, that's scary.
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  #15  
Old 12-22-2004, 11:31 AM
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Quote:
Originally Posted by Flash Gordon
...The system in Singapore provides a much improved system compared to our archaic SS. It does not go broke like ours! ...
Do you have any reliable data (i.e. not from W or his people) showing that our system has or will go broke? I've seen evidence to the contrary, but I don't know who really knows what they are talking about. As for anything that comes from W's people, I assume that all that information is untrue.

By the way, Singapore's system sounds great, but I am in way over my head on this stuff, so I can't really comment.

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