The $1.2m would be for someone making $69,800, I used the same figure as the link. For sh*ts and giggles I did it again at $15k a year (close to minimum wage). Cashier would have $260k at retirement and could draw $1730 a month (and still leave a nice present for his family at death). Compared to $720 a month with social security benefits. Not as striking, and the COLA would probably even out on the monthly level after 40 years, but still interesting nonetheless.

That figure is a bit unrealistic then, don't you think? Assuming you're only considering college-education workers, not every college grad make $60K their first year or even first 3 years. And $1730 a month may be great in the South. But on the coast or metro areas, you'll still be tight for cash. Unless you have no bills whatsoever which is becoming less and less possible in this debt-driven society/economy.

[font=arial, verdana, tahoma, sans-serif][size=2]

We all depend on American exceptionalism

Illegal wars are just

Get off my lawn.[/font]

It also sets up some interesting problems in terms of poor foresight if people can opt in or out of SS. There are a lot of people who don't sock any money away for retirement now, despite the overwhelming goodness of the idea. Even with the striking amount of money it would generate, a lot of people my age (early 20's, just starting their careers) don't even have a retirement account, let alone fund it well.

I don't know how much of it is due to a mindset that includes collecting SS (although that's foolish as well, since it's not a huge amount of money), but what I see a lot more is people simply wanting that little bit of extra money now, future be damned. Many people simply don't plan ahead as much as they ought to. That's not really a reason to continue SS without any changes, but I imagine a United States with optional SS participation producing a lopsided population of elderly people, consigned to little or no money to live on because of decisions they made decades ago.

When could you decide that you wanted out? Could you change your mind later? How would that even work? I'm not saying that such a system can't work, just that it's far from a panacea, and not something that would inherently correct the situation.

A person working at 25 who puts 6% of his paycheck in an A rated bond (8% return) will have $1.2m at 65 and with 8% could draw $8k a month for life, not including any 401k or employer matching contributions.

Having an 8% return in the long run is incredibly unrealistic. If you actually look at long run numbers, you'll realize that on average, you can't do significantly better than just putting all the money into long-term government bonds, which are perhaps half that return. Sure, some people manage to beat that number in the short run, but periodic crashes tend to cancel that out - just consider all the stories about people who lost their private retirement funds as a result of financial crises. Also, for everybody that gets lucky and gets incredible returns, there will be more than enough people who don't manage this. Finally, you are conveniently ignoring inflation, which does have a significant effect over such time scales.

So sure, some people will get lucky with private capital-based retirement funds. As a society-wide retirement system, it is a horrible idea.

[quote name='ChurchSkiz' timestamp='1303258630' post='4800563']
The $1.2m would be for someone making $69,800, I used the same figure as the link. For sh*ts and giggles I did it again at $15k a year (close to minimum wage). Cashier would have $260k at retirement and could draw $1730 a month (and still leave a nice present for his family at death). Compared to $720 a month with social security benefits. Not as striking, and the COLA would probably even out on the monthly level after 40 years, but still interesting nonetheless.

That figure is a bit unrealistic then, don't you think? Assuming you're only considering college-education workers, not every college grad make $60K their first year or even first 3 years. And $1730 a month may be great in the South. But on the coast or metro areas, you'll still be tight for cash. Unless you have no bills whatsoever which is becoming less and less possible in this debt-driven society/economy.
[/quote]

I only matched what was on the link. $1730 a month isn't that much, but a person making minimum wage is only going to get $720 a month with social security. So given that information, I'm sure he'd much rather take the $1700. Social security is not retirement, it's not meant to be lived off. Which is why I think we are making a mistake by not encouraging people to be self-sufficient with their money. How many people cash out their 401k because they think the government will take care of them when they get older?

It also sets up some interesting problems in terms of poor foresight if people can opt in or out of SS. There are a lot of people who don't sock any money away for retirement now, despite the overwhelming goodness of the idea. Even with the striking amount of money it would generate, a lot of people my age (early 20's, just starting their careers) don't even have a retirement account, let alone fund it well.

I don't know how much of it is due to a mindset that includes collecting SS (although that's foolish as well, since it's not a huge amount of money), but what I see a lot more is people simply wanting that little bit of extra money now, future be damned. Many people simply don't plan ahead as much as they ought to. That's not really a reason to continue SS without any changes, but I imagine a United States with optional SS participation producing a lopsided population of elderly people, consigned to little or no money to live on because of decisions they made decades ago.

When could you decide that you wanted out? Could you change your mind later? How would that even work? I'm not saying that such a system can't work, just that it's far from a panacea, and not something that would inherently correct the situation.

I thought about both of your issues (opting back in and mismanagement). I thought of a couple solutions. First, when the money is taken out it would not be "free money", but be automatically directed into a new type of account (call it a 402k). This 402k would not be touchable until 62.5 without severe penalty (even more than 401ks). When this solution is requested, there would become several options for investment. A state directed investment with a modest return (say 2% or something), a private directed but approved investment with a more moderate return (say 5-8%), and a pure self-directed account where you can invest as a typical 401k. To get to the last level, you would need to qualify by proving you have other means to take care of yourself when you retire (like a decent 401k), as well as some investment experience (maybe pass a test or something).

This would discourage people from blowing the money when young and provide some buffer for people making dumb investment decisions.

On the flip side, to initiate such a program would require some planning. Someone who's 40 isn't going to just give up social security, so I was thinking you could use the existing ss credit system to determine opting in or out. So for example, if you have 20 credits and you decide to opt you, you can still get 5% of your social security benefits when you retire, but going forward on you can keep your 6.2% for investment. If someone wants to opt back in, they resume gaining credits at the level they had when they opted out. So if you had 50 credits and you opted out, and for 5 years you opt out and then want to opt back in, you resume with 50 credits again for benefit calculation. You would only lose those 5 years where you kept the 6.2%. This would allow not just young people but people in their 30's and 40's to elect to opt out as well without losing all the money they put in initially. I think you gain 4 credits a year so it would probably make sense to opt out up until you are 50 or so. Also, they could make a rule that after the max credits you can't opt out.

How many people cash out their 401k because they think the government will take care of them when they get older?

The real question is how many people cash out their 401k because they really like corvettes?

[quote name='ChurchSkiz' timestamp='1303249283' post='4800524']
A person working at 25 who puts 6% of his paycheck in an A rated bond (8% return) will have $1.2m at 65 and with 8% could draw $8k a month for life, not including any 401k or employer matching contributions.

Having an 8% return in the long run is incredibly unrealistic. If you actually look at long run numbers, you'll realize that on average, you can't do significantly better than just putting all the money into long-term government bonds, which are perhaps half that return. Sure, some people manage to beat that number in the short run, but periodic crashes tend to cancel that out - just consider all the stories about people who lost their private retirement funds as a result of financial crises. Also, for everybody that gets lucky and gets incredible returns, there will be more than enough people who don't manage this. Finally, you are conveniently ignoring inflation, which does have a significant effect over such time scales.

So sure, some people will get lucky with private capital-based retirement funds. As a society-wide retirement system, it is a horrible idea.
[/quote]

Please provide data, the average return of the S&P 500 over the last 140 years is 10.6%. 8% is a conservative number in investment terms, which amounts to a typical A rated bond (which is a secured investment and thus considered fairly "safe"). Unless someone invests all their money in one stock, or cashes out at the bottom of a crash, their retirement money is going to be ok, as proven statistically over 3 pretty strong market crashes in the last hundred years.

I'm also not conveniently ignoring inflation. Inflation is real but it is also real for SS funds as well. Which means that the current system is even more unstable when you factor in that inflation is outpacing the rate of investment. Rate of return on SS money is around 2.76% (http://www.ssa.gov/oact/progdata/fundFAQ.html), and average inflation is around 3.4% ( http://inflationdata.com/inflation/Inflation/AnnualInflation.asp). So certainly the 8% you can get privately is going to outpace the rate of SS and be a better option for anyone that is smart enough to invest privately.

As for society-wide, I acknowledge that some people really suck with money, which is why the system should be voluntary. If someone wants social security and wants to pay for it, I think that's great. But for a vast population of this country, we are throwing dollars at dimes and told it's a good deal. I'll pay around $300k in 40 years and for that I get a small monthly paycheck and as soon as I die it's gone. And there's a high likelihood by the time I go to retire I will get even less benefits than what is promised to me currently. I am much better off paying a straight tax to those who can't invest and keeping at least some of my money.

[font="arial, verdana, tahoma, sans-serif"][quote name='frob' timestamp='1303241479' post='4800476']We all depend on American exceptionalism

Illegal wars are just

Get off my lawn.[/font]
[/quote]

You misquote with "Illegal wars". I never said there was a legal justification for war.


What exactly would make ANY war legal? Law is a function of civil society. Wars by definition are outside of civil society.

Wars cannot ever be a legal matter. Wars mean the law has failed and multiple parties use their own moral judgement and military force to make decisions and elicit change.

The closest you can get is when a large number of people agree that one nation is committing atrocities, and collectively they agree to violate civility and force the group into compliance. That is a painful justification for normally unlawful action hopefully based on moral arguments for the good of humanity at the expense of those who will die. It becomes a mater of human morality, not a legal right.




Thousands of years of recorded history show that when you have enough people there will be tyrants who are willing to destroy their own citizens or destroy the citizens of other nations.

With this many people we can find individuals willing to commit mass murders and even genocide, and left unchecked they will succeed.

The question is simple: Will the rest of the world let the acts continue? Will the powerful nations decide that the actions of a few people are so immoral and destructive against humanity that they must be stopped, even at the cost of international war?

Currently the nation that intercedes is America, who has the largest and most advanced military. It does not need to be America. It could be any nation. It could be a collection of nations. Periods of general global peace is not about which nation intercedes, only if an intercession will happen. When they left unchecked and allowed to grow, history shows the destruction caused by the (for lack of better label) amoral tyrants leave behind is far greater than the damage done in stopping them. Because there are weapons that can destroy the entire world, there is a tendancy to intercede early.

Social security is not retirement, it's not meant to be lived off.

Now, I'm being honest, I thought that was the whole point of SS (well originally when it was created). If not, then what was the purpose of its creation?