Will YOU ever get to retire? And no, you state employees who get to kick back, or start new careers, after a mere 28 years on the job, this post is NOT aimed at you. I’m talking regular folks here.
I’m 54 years old. I’ve been on the job, at this and other newspapers, since 1974. I’ve got a pension (for NOW; let’s see where that is when I’m 67, or 70, which I hear is the new 65) and Social Security (same deal; we’ll see about that when the time comes) and I put as much as I can into my 401k every paycheck. In fact, my wife, who as I’ve mentioned before handles the money at our house, says we can’t really afford to be putting THAT much into the 401k, hence our pecuniary strangulation of recent years. And of course, at the rate that the people in charge of high finance have been screwing up lately, we’ll be lucky if any of those mutual funds or whatever they put my 401k into has any value at all going forward.
So I’m sort of wondering if there are going to be enough Wal-Mart greeter jobs available for all of us in the future.
Anyway, such thoughts are prompted by this release from an advocacy group, which says in part:
Many Americans envision their retirement years to be leisurely and relaxing -– well deserved from all the hard years of work they put in to save for it. Whether it’s spending more time with their families or traveling the world, most people don’t think about the financial sacrifices they will have to make along the way. Yet a new study conducted by Ernst & Young for Americans for Secure Retirement, The Retirement Vulnerability of New Retirees, shows that middle-class Americans are anything but secure when it comes to having enough savings to last throughout their golden years…
The purpose of the press release is to scare us (and it works there) and to try to get us to lobby Congress to make some kind of change in law to allow us to get guaranteed lifetime paychecks from something called "lifetime annuities." I didn’t read very far into it, sort of assuming that it’s like everything else — it would be great for people who have money to put into it.
Well, hey — if I had money in the first place, I wouldn’t worry about the future. Duh.
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Let everyone under age 50 opt out of most of their Social Security tax and we won’t have to worry about the government providing a retirement income. It’s a Ponzi scheme that will collapse in twenty years.
Anyway, I don’t plan to “retire”… who wants to sit around all day? My father worked for years after he “retired.” Building bikes at Wal-marts, delivering seeds to hardware stores around New Hampshire and Vermont… right up to age 78.
Just a thought. Instead of massive savings plans like 401K and the endnagered pension plans and oh yeah, Social Security, how about lowering one’s spending at age 50 – 65 so that the mortgage is paid in full at or before retirement as is any other high end debt. Folks who take out second mortgages or purchase high end items on credit within ten years of their projected retirement date are setting themselves up for a fall. People who have their financial houses in order don’t need to worry about working into their 70s. People who spend like there’s no tomorrow and then complain about having to pay it back are rather pathetic. We are in our 50s, our mortgage will be paid in full in under four years as will our existing auto loans. Our kids are off on their own and put themselves through college if they chose to go to college. What ever happened to living within one’s means? Taking out a new 20 or 30 year mortgage when in one’s 50s or 60s is a fools paradice. Complaining about it shows a lack of maturity. Die at your desk if you must, I’m going golfing.
Ever since I was in high school people have suggested that SS will collapse in 20 years. Well here it is 34 years latter and millions of folks are enjoying the benefits of Social Security at a time when the DOW is going in reverse. So how is better to invest in the stock market with negative growth since January 2000 rather than in SS which will remain solvent at least through 2040? Spare me all this crap about the wonders of the free market. It has zillions of problems and tons of negative spillovers. Yes the free-market does wonderful things. Wheat farming is the ideal industry for capitalism. But just check out all the problems with safety, polution and shocking CEO pay that result from unfettered, or in some cases subsidized, free-market operations. To ignore the problems of the free market is to ignore reality. SS provides a tiny safety net for working folks. Let’s leave it alone.
The welfare program misnamed “Social Security” HAS GONE BROKE 7 times, last under President Carter. All the politicians in the 1980 election claimed it was solvent, but immediately after the election, it was unable to mail out all the checks due, and Congress rushed through a huge FICA tax increase to create a revenue surplus which could replenish the money lent to the US Treasury to finance deficit spending.
Instead, the Democrats in control of Congress and the Senate spent the FICA tax surplus. Republicans in control reduced deficits a bit under Clinton, after he vetoed the lower spending bills but saw an override coming.
Social Security will need a 30% FICA tax to stay solvent for the Baby Boomers.
The SC State Retirement System is broke. It will need huge tax increases to pay out all its promised benefits.
The only fair solution to Social Security is to phase out Social Security based on age. Cut off all the younger people, as Doug Ross suggests. Younger people making low incomes but saving 1/2 the FICA taxes in a real retirement plan will have $500,000 to $1,000,000 CASH that is THEIR MONEY at age 60.
The only fair resolution to SC state retirement is the same as it is for over-promised corporate defined benefit plans: cash everyone out with a settlement check and let them get busy funding a genuine, honest retirement.
Bud,
The reason Social Security hasn’t gone broke is simple. The government just increases the tax rate and the maximum income that is taxed.
Just take more money.
Unfortunately, the population demographics cannot support the baby boomers who will be retiring in the coming decades. The pyramid scheme will collapse.
Do the math, Bud. How many people will have to pay into S.S. in order to give you your monthly check when you retire?
And let people be responsible for themselves instead of passing the buck (literally) to the government. Give me 10% of my income for the next twenty years and let me see how much money I have.
I’ll gladly contribute 2-3% of my income for safety net programs for widows, disabled, and orphans.
You can pay into Social Security for 50 years, die the day after you retire, and have ZERO to show for it. How in the world can anyone think this is fair?
Younger people making low incomes but saving 1/2 the FICA taxes in a real retirement plan will have $500,000 to $1,000,000 CASH that is THEIR MONEY at age 60.
-Lee
How? The new math just doesn’t work the way the old math did in the last half of the 20th century. CDs pay about 3% – 2% below the rate of inflation. It’s hard to save that way. The DOW is below where it was in January 2000. Maybe these things will turn around or maybe we’ve hit the wall in our economic growth.
Long-term stock prices increase at 8% per year. It doesn’t take much management to return 10%.
Social Security has a negative return for most people in the private sector who work hard. If they just kept the 15.3% now stolen by FICA taxes, they would be 15.3% ahead.
Europeans are phasing out their bankrupt government welfare pensions. Germany has had portable, private retirement plans, not coming from employers or government, for 30 years, and the workers love it.
Good ole Lee. Always good for a laugh. If you can make 10%, risk free, on the stock market great! But for most folks that’s just a fantasy. My mom has been drawing SS for 20 years now. She’s probably recouped 10 times what she put in. Not a bad return. Over the last 8 years my 401k has floundered. The stock portion and the 84 month certificates combined are barely making 3%. In the meantime SS keeps right on paying out to my mom every month just like clockwork.
> My mom has been drawing SS for 20 years now.
>She’s probably recouped 10 times what she put
>in. Not a bad return.
And how in the world would you expect that model to work in the future when the number of retirees expands dramatically AND the lifespan of the retirees increases?
It is IMPOSSIBLE, Bud. IM-FREAKIN-POSSIBLE!
Tell your mother to send me a thank you note next time she cashes her Social Security welfare check. Because I’m paying for her retirement…
Nothing’s risk free. Just look at the bankrupt corporate pension plans, bankrupt state retirement plans, and bankrupt Social Security.
Just getting to keep your 15.3% payroll tax and convert the fiat money into gold or some tangible store of value is better than any promise from a politician.
Social Security, like any other Ponzi scheme, keeps paying out as long as there are more suckers being conned on the front end, and the taxes keep getting raised. There is an end to that game, and we are very near it.
There is an end to that game, and we are very near it.
-Lee
The same thing was said 34 years ago. Some things never change.
Doug, you’re correct, we need to scale back some on benefits. With life-expectancy gains the amount of money available to fully fund the system will not be enough. But to privatize this highly successful program would be a disaster.
TAXES HAVE AN UPPER LIMIT
FDR could lie to people Social Security not costing anything, then later add on a payroll tax.
And Truman and the other Democrats could keep lying and raising the payroll tax from 1% to 3% to 15.3%….
… but there is a limit.
The Social Security Trustees, the Congressional Budget Office, and private actuaries estimate that it will require a 30% FICA tax to deliver the benefits promised by Clinton.
Some people are already paying 48% federal income tax, 7% state tax, and 15% FICA. They can’t afford another 23% for their side of a payroll tax increase.
And those making less money surely can afford it even less.
Besides, taxes are so high now that every little increase stalls the economy into recession.
Clinton increased taxes, brought recession.
Bush rolled the taxes back partially and there was a boom.
States raised taxes to soak up the Bush cuts, and we are back into +1% growth – not a recession, but the Democrats are doing their best to put us there.
Bush rolled the taxes back partially and there was a boom.
-Lee
LOLOLOLOLOLOL
I understand Jay Leno is retiring. Maybe Lee could get his job. He’s just as funny in a ridiculous sort of way. It’s really hard to spin the Bush years into any sort of a boom. Maybe fall down and go boom would fit. Or the economy went KABOOM. We did have a recovery of sorts following the first Bush recession but that was largely a recovery with virtually no wage growth. The last 7-1/2 years have seen the slowest job growth rate since the Hoover years. Maybe BOOM is Lee’s metaphor term for economic calamity.
Bud,
Please explain why I should pay into Social Security for 50 years and then only get paid back an amount determined by the government while I remain alive after I retire?
Why shouldn’t my wife and children be able to reap the benefits of my work rather than your mother? (Note – I’m also paying for her healthcare as well if she’s on Medicare and getting the artificially low rates that it pays for services).
Which do you think has a greater chance of occuring – an icrease in the FICA tax or scaling back benefits for current recipients? The current Social Security welfare recipients will be whipped into a frenzy by the AARP if any attempt at cutting benefits was even suggested.
It’s my income derived from my labor. Let me keep what I have earned. That’s not selfish, that is absolute fairness. I’ll gladly contribute a reasonable percentage into a general fund for the truly needy… otherwise let me be responsible for me. Please.
Doug,
You are arguing with government employees who don’t give a damn about fairness. They signed on for maximum free benefits, paid for by you, by reducing your retirement savings.
They don’t comprehend that the Productive Class can’t pay 100% income taxes. I had one of them tell me so, in this blog, just 2 weeks ago, that a 98% tax rate was not confiscatory, because it left the taxpayer with 2%.
Whether they understand economics or not, the market forces will rule. Any tax increases to prop up bankrupt Social Security and state pension plans will kill economic growth and reduce tax revenues.
States with out-of-bounds taxation will find the productive, private-sector residents moving their money out of state. Let the government workers and their welfare “clients” try to live off each other.
Doug, I regard myself first and foremost a pragmatist. The social security program has been astoundingly successful. Hundreds of millions of people have benefited at a relatively small cost, just 7.5% for most folks. Income over 100k is not taxed at all. I don’t understand all the fuss. The provision of a tiny bit of financial security for the elderly really isn’t that much of a burden. The proof is in the pudding. It works! Just ask anyone over 65. If adjustments to the benefits package are needed to keep it solvent let’s get on with it. But the whole GOP plan to privatize it would create the same mess that we have with healthcare. Bottom line:
GOP healthcare is a disaster
DEM social security is a huge success
Bud,
It’s 7.5% from the employee and the employer. That’s 15% of my potential income goes to pay for other people’s retirement.
How high would that percentage have to go in order for you to think it was unfair to those of us who contribute the maximum amount every year?
The only reason Social Security “works” is because of demographics. It will collapse when the number of retirees increases in the next two decades.
Although with John McCain’s open borders and amnesty policies, that may be the saving grace for Social Security — allow an unlimited number of new workers into the system who will have a statistically lower chance of living long enough to ever collect benefits but can contribute into the system for the rest of us. Genius!
Here’s some US Life Expectance rates that you would think would have every African American DEMANDING a privatization of Social Security. These numbers are from the CDC.
A black male born in 2005 has a life expectancy of 69.5 years. A white male born in 2005 has a life expectancy of 75.7 years.
So let’s think about that. A black male who works from age 18 to age 67 and pays in 7.5% of his income to Social Security for 50 years can expect to receive a monthly income for about 2.5 years and then have nothing left to pass on to his family. And if he dies at age 64, what does he have to show for 50 years of 7.5% contributions? NOTHING. ZERO.
Imagine the impact that private retirement accounts would have on building wealth in the black community.
It’s my money. I earned it. I promise I won’t ask you for a handout when I’m 65 if you promise not to make my kids pay for your retirement.
Social Security is an immense failure as a retirement system, because it isn’t one – it is a welfare program, a Ponzi scheme.
It has gone bankrupt several times.
The GAO estimates that it will require a doubling of payroll taxes to meet its year 2030 obligations.
By 2040, current growth rate of federal spending will consume 250% of the GDP. Obviously, that cannot happen. The economy will collapse long before government consumes 100% of personal incomes, it is right there now.
The only part of healthcare that is a problem is the 58% under control of the government, where costs are out of control.
The other 42% of the healthcare industry is private sector, and prices are falling and services improving over the last 25 years.
Since all the healthcare cost issues are due to government, it is insane to give teh government more power. We should be phasing out the failed programs like Medicare (20,000% over budget), and Medicaid ($77 BILLION in fraud in 2007).