Social Security Reform....

[PrincessFiona]

Whether we're dems or republicans we all know that there has to be some sort of social security reform. What changes do you guys think should be made? I have to say that I'm intrigued by Bushes idea to privatize a portion of it.....I'm not ready to jump on the bandwagon and I certainly wouldn't support privatizing it altogether, but if a portion of people's money was invested it might earn more returns than if the govt. has it....???

kris

[spotty_dog]

My husband had a good point on this one. If you mismanage your own savings you have SS to fall back on, but if you mismanage your SS then what happens?

Also, perhaps my generation is cynical but the young people I know aren't counting on SS, and we don't consider it *our* money. We're paying in to the system to support those who currently depend on it, not in hopes of ever seeing it when we retire ourselves. If we take that money out of the SS pool and put it in private accounts, what happens to the baby boomers as they hit retirement age?

[SueC]

I think the idea of privatizing social security is a very bad one. I, of course, don't have any better ideas, but I think if people are allowed some control over how those funds are invested, there will be, like Alison suggested, a lot of people that do mismanage their funds and the government will still be left to care for them. What went wrong with the current system--is it that with the graying of the population there are just too damn many people that need to be supported, did we borrow against it?

[PrincessFiona]

I thought that the money would be invested without touching people's pockets...ie you don't have a choice..you have to invest and can't see the money until you retire? Maybe I'm wrong though!!!

I, of course, also agree with the fact that there will be a huge hole in social security and don't know how that would be fixed..

You could say I am a cynic about SS but I prefer to think I a realist. I am not planning on seeing a single cent of income from SS unless it is disability income long before I reach retirement age (but let's hope not). So, on a personal level re: my own retirement, I don't care too much about what happens.
On a broader level, I think it is important how this is handled. Is the idea that people can direct their own investments? Or will someone within the government direct the investment decisions of Social Security? If so, that is a hell of a lot of money and I think there will be ongoing concerns about investment decisions and remaining bipartisan. (Ex: what would the general sentiment be if a large portion was invested in Halliburton stock?). Large pensions, like Calpers and others associated with state governments, can have a lot of sway with voting their shares of stock. I think that my concern about investing SS would relate to how stocks are selected and how shares are voted. Would it be best to farm out the work to private investment companies? Maybe so, but given the scandals within those companies of late, that could be a problem too.

[PrincessFiona]

hmmmm That is really food for thought, Nellie...

[spotty_dog]

The proposals on the table are for Personal Retirement Accounts. I understand it to mean that the money you pay into Social Security goes into an account that you can then choose to invest. The balance is tracked and the resulting interest increases the value of your retirement account. Whether stocks, bonds, money markets or real estate, I think you will have enough control over this retirement money to throw it away on risky investments if you so choose.

By the way, scanning the Bush campaign website for info on his plans (very vague) raised this question. What kind of IRAs are there besides Roth and Traditional, and why would the Bush plan promise to "streamline" the three into one? I mean, we've just rolled some of our savings from traditional to Roth accounts, and if we're going to lose the resulting tax benefit I want to know more about it.

Hah, hahaha, there's a current article about the PRAs:
http://tinyurl.com/6jy2u

As for what happened...it appears that back when we had a surplus, the overage of SS money that was being taken in and not being paid out to current retirees was counted as part of that surplus but policy makers promised that the SS portion wouldn't be touched. Or if it was (usually promising only to use it to pay down the national debt), it would be returned in spades as the surplus continued to grow. But then we spent the surplus. SS is now budgeted to get only enough money to pay current retirees. An increase in retiring people would mean that SS would have to be re-budgeted to increase the deficit further, or benefits would have to decrease.

'Least, that's what it looks like on a quick glance.
Here's the SSA's FAQ page:
http://www.ssa.gov/qa.htm

Thanks for that info, Alison. I talked to someone about this yesterday who alluded to the SS change looking more like personal accounts rather than a pension being invested in a broader range of products (as I had pictured).

I just think that if someone wants to invest their retirement savings, why not open a Roth or Traditional IRA? Like you said, I already have those and am not particularly interested in "streamlining" them or having some government involvement in the funds going in. Wonder if you can just opt out. Sounds like a big PITA to me.....

And if this happens, how will a portion of our SS withhold be allocated to the current pot for people drawing on SS right now and then for these future accounts?

I think there should be strict rules about withdrawing any portion that is SS -- stricter than for IRAs. SS is a safety net for people retiring and inevitably a good chunk of people who are investing their own SS benefit will blow it somehow (and many will not). When they reach retirement, we need to be ready for that.

just another thought....if the SS contribution to the PRA is done via an income deduction on taxes, along the lines of a traditional IRA, that would be a lot easier.

[SueC]

As for what happened...it appears that back when we had a surplus, the overage of SS money that was being taken in and not being paid out to current retirees was counted as part of that surplus but policy makers promised that the SS portion wouldn't be touched. Or if it was (usually promising only to use it to pay down the national debt), it would be returned in spades as the surplus continued to grow. But then we spent the surplus. SS is now budgeted to get only enough money to pay current retirees. An increase in retiring people would mean that SS would have to be re-budgeted to increase the deficit further, or benefits would have to decrease.

How in the world did they not see that coming??? I count on the people that have the power to do this sort of thing to be smarter than that!!!

From what I have always heard, one of the major incentives to create SSI was the stock market crash in 1929 and subsequent closing of banks. The elderly who had managed to squirrel away a nest egg lost it all in the crash or when their banks folded. Other nations had had such programs for years, and it was evident that the US needed a supplemental program, sort of a national retirement plan, for the elderly. And it worked. After implimentation of SSI, the poverty rates for the elderly fell.

Perhaps if people were encouraged to put money into a federally regulated fund, in addition to their SSI contributions? We are as a nation not known for saving mone, and for many their only retirement plan is their company's 401K.