Dear Senator/Representative part 2
Reader HM suggests this sort of letter to Congress:
Senator/Representative _________:
I am writing to you to ask you to join the fight against those who want to “privatize” / “personalize” or otherwise roll back the Social Security retirement insurance program as we know it.
As I’m sure you know, to ensure Social Security had the funds to meet the baby boomer’s retirement this century, back in 1985 Alan Greenspan and the Democratic Congress changed the plan to overtax FICA payers so that the baby boom could pre-pay their retirements.
But now that the program has over-taxed FICA payers over $1.5T (Trillion), and has another $1T of accrued interest, very powerful forces are at work to essentially steal this money from middle class ratepayers like me.
These monied interests are demagoguing our Treasury bond holdings as “just worthless IOUs”, “we just owe it to ourselves”, “Congress spent the money already” etc. in the attempt to confuse the electorate about who now owes whom this $2.5T (and growing).It is NOT true that SSA’s bonds are “worthless IOUs” — the Treasury Bonds held by SSA are just as real obligations of the US government as any other government agency’s, including for example the Alaska Permanent Fund, which holds $2.5B of Treasuries per their latest report.
It is NOT true that “we just owe it to ourselves” — since Federal income tax payers are overwhelmingly well above the FICA cutoff, it can honestly be said that when the SSA Treasury bonds are redeemed to the Treasury, to raise this extra cash either a) the wealthy must pay via higher taxes, or b) we borrow the money, [or c) we print it, but I don’t want to go there].
While it is true that Congress has spent the money, that’s part of the original plan. Now that the money has been spent into the economy, our economy has grown greatly since 1985 and we can and I think should now begin redeeming the bonds for the retirees who, having paid so much extra into the SSI retirement system, are now beginning to draw their money out via regular SSI checks.
While there can be honest differences of opinion about how best to draw down our $2.5T holding, I urge you to do your part as my representative to preserve the system and prevent these rat bastards from STEALING MY MONEY.
Thank you.
Excellent letter. Explains the facts, the background, and the writer’s preferred course of action. Well done. I think I’ll steal it. NancyO
They had planned to never ever pay back the money. They raise the FICA rate so they would have money to run the government while making sure that the rich could keep the large cut in their income tax rate. They are just going to repeat what Reagan did. They are going to raise the FICA rates to get money to run the government so they can cut the income tax rate to rich. That is basically what the result of deficit commission says.
Unfortunately, the idea that we have to educate our own representatives on how a government program that has been running for over 70 years works is somewhat ludicrous.
I’ve thought about the idea of letting the t-bonds accrue interest instead of redeeming them, but I think that before we raise FICA rates we should first run down the treasury holdings to their mandated minimums, since in my case as a Gen Xer I’ve been over-paying the increased FICA since day 1 and to have the SSTF just sit there accruing interest my whole life seems highly unfair.
As for “personalization”, I am not exactly opposed to this, but I do think the insurance aspect needs to be maintained so that everyone can count on a minimum livable income for retirement at age 65 regardless of their circumstances.
Running a spreadsheet simulation of a typical middle-class contributor (born in 1945, $1500 in wages in 1963 growing to $60,000 in 2005) here are some facts:
Total income: $1.53M
Average FICA rate (incl “employer match”): 9.7%
Total contributions: $177,000
SSI: $2050/mo
Comparing this with a mandated savings plan into 10-year treasuries (each 10-year purchase rolling over into new 10-year purchase), I get:
Average 10-year rate: 7%
Individual fund balance at age 65: $815,000
So in this case a private account looks to be a much better deal, as it throws off $2000/mo at 3% interest and the money will pass on to the kids. But then again this is the perfect case of working 40+ years in decent jobs and not having to be kneecapped by supporting others who could or did not.
(btw I am the author of the letter)
Excellent idea to remind our representatives that they now need to find someplace other than SS taxes to obtain funds for other budget items. Mark Thoma today reminds us of a Dean Baker column on one idea and asks why the commission didn’t suggest it (though the answer is obvious): http://economistsview.typepad.com/economistsview/2010/11/why-no-financial-transactions-tax.html#comments
Troy
your arithmetic does not cover all the facts. SS is a better deal than most people can expect to get from a private account. If you are lucky you could do better on the stock market. But experience has shown that 80% of the population is not that lucky.
Your letter also contains a few errors of fact, but the Congressman will not care about that. All he needs to know is that lots and lots of people don’t want SS cut.
peter john.
no. the deficit commission is saying raise the retirement age and cut benefits drastically. this would be a disaster to most people.
A raise in the FICA tax of twenty cents per week each year would cover the “expected shortfall.” Try to get a grip on what that twenty cents is buying you.
Meanwhile the extra money you and others paid into TICA is now being used to maintain the cash flow through this recession, and will be used to pay the boomer retirement without imposing an unfair burden on the baby busters.
your heart is in the right place, but i wish i could teach people to get their facts straight.
Send it to HuffPost.
The agenda is: reduce “entitloements” until people complain too much and privatize what remains. Unless Congress gets tens of thousands such letters, they will succeed.
Just for grins what do the numbers look like at 3 and 5 percent. Your example assumes an all equities situation as its hard to get 7% in fixed income. Just like I expect before its all done for tax reform to go back to the old IRA and 401k rules for inherited non-spousal rules you must take the RMD’s based upon the lifespan of the late holder. Eliminate the reset here. People need to save for themselves and when of an age spend it.
This letter is an improvement. I do however have this one small contention:
The value of labor is falling globally and will continue to do so indefinitely. This must occur with the existing system because machines are replacing workers and population growth is outpacing job creation. This is currently being expressed by the impossibility of well more than half of the global currency stock needing to devalue in unison so as to allow a reasonable level of employment. But of course, if half of the global currency stock depreciates, the other half must appreciate. And, there are other such indications which have been hidden by overvalued assets going back decades. In the US for example the 10% unemployment only indicates part of the shortfall in jobs because presumably, a great many jobs have been paid for by deficit spending. Then too, according to Joe Stiglitz, for very dollar that the developed nations spend on global development, they receive a return of $3. So the so called ‘demographic dividend’ has apparently been used up. And unlike coming out of the Great Depression, all of the demand factors, demand for housing and other high cost goods, savings rates, global AD, etc., are dismal.
The point is, the “rat bastards” are not trying to steal “your” money. They are instead trying to indoctrinate as many US citizens into the investment-class as possible. ‘They’ do not need more money, they need to protect their kind from our kind.
Privatizing SS is simply an extension of the 401(k) ploy, which is a way of using a citizen’s own money to create the illusion of aligned economic interests with the ruling-class. ‘They’ have found a cost-free way to indoctrinate a large enough percentage of the population into their fold to consolidate their power. Whether ‘they’ are clever’, or ‘we’ are just stupid, is difficult to say, but I suspect it is the latter.
There is then the probability that as labor devalues further that the non-shareholders unite. So ‘they’ need to strengthen their hold further. The ‘rat bastards’ are engineering a democratic tyranny… which is a far worse deceit than just stealing our money. There are natural limits to how much of our money they can steal anyway because at some point, their stealing causes a drop in consumer spending and they gain nothing but perhaps the pleasure of vanity.
But, if we continue to play along, a time will come when humanity will be divided into two very distinctly different groups: those who own everything down to the microbes, and those who own only worthless labor.
So maybe my contention is not small. The rest is true.
What are the errors?
Greenspan Commission in 1983 not 1985?
OASI trust fund went over 100% in 1992, so I guess that’s when the over-taxation to prepare for the baby boom began.
http://www.ssa.gov/OACT/TRSUM/images/LD_ChartA.html
Curiously, I entered the FTE workforce that year, LOL.
My example was basically duplicating social security with private accounts — take the total FICA payments into an IRA that just buys and rolls-over 10-year tax-free treasuries.
Clearly this is missing the insurance aspect and redistributive effect, and I don’t know how much that costs.
I see another letter forming?
Dan,
I would probably have a better chance of sending a letter to the Chinese Government, and convincing them to let their currency float, than I would of being taken seriously in Washington on this issue. And I am not passionate about the soft-peg.
The consolidation of power in the US must be solved from the outside. It is happening, ‘they’ just keep taking the rope. Now, that they are hung, the emerging nations are kicking away the stool. ‘They’, and their weighty hubris seems to be doing the rest. (Big changes coming as a result of the G-20 doings. I followed it closely in the foreign press. The era of dollar hegemony is over. Americans will be furious when they learn what it means to produce what they consume)
I actually joked about voting for GW because he had so much destructive potential. That was the closest I ever came to voting. I live in Texas though so it was pointless. GW though may turn out to be the President who saved us from ourselves. Funny how things play out.
7% is nominal not real . . .
Have you tried the NYT budget deficit http://www.nytimes.com/interactive/2010/11/13/weekinreview/deficits-graphic.html“>calculator that http://economix.blogs.nytimes.com/2010/11/13/behind-the-timess-deficit-project/“>Leonhardt discusses? It really isn’t that difficult, utilizing their assumptions. Just focus on the big ticket items. I solved it with 56% spending cuts, no domestic cuts, and the only military cut of reducing troops in the mideast, I raise SS cap to 90%, and use gdp+1 for medicare, but don’t touch them otherwise. Raising taxes would be impossible, but then fixing the deficit is impossible without them.
ray
i don’t think any of them have ever calculated their expected gain. they do it because they can’t help themselves. short sighted grab everything you can while you can is not necessarily a bad survival strategy for an animal. while it’s true that people evolved to cooperate and that is an even better survival strategy, the grab everything gene is still in the gene pool. and i think that every cooperative group needs a few grab-everything types. but it is fatal to let the grab-everythings make the rules.
there are a few errors or badly stated mostly-trues in the above. haven’t the time or energy to fix them.
yeah, modeling the insurance angle of SS is hard.
I still disagree about the FICA “overtaxation” angle. People like me who entered the workforce in 1992 got caught by the Greenspan plan and have been overpaying for the past 18 years along with the BB. I have another 25 years in the system and I swant to see the $2.5T SSTF drawn back down to its 100% ratio before any FICA tax hikes are made to just “preserve” the status quo.
The extent that *my* FICA money stays accruing interest in the SSTF instead of being used as intended to soften the demographic shock of the BB wave that’s hitting us now through 2040 represents a failure to execute the idea of the Greenspan plan.
Every cohort should prepay their retirement over their working lives. I have no problem with rising FICA contributions to adequately fund my retirement, but that $2.5T amount has got to be drawn down.
It’s not a Permanent Fund from windfall oil revenues like Norway’s, its our FICA taxes + accrued interest. The $1.5T surplus over its mandated % coverage is around $10,000 per worker. It’s not a trivial amount of money.
“course, Norway’s fund has $100,000 per capita in it. I should move to Norway I guess.
coberly,
By chance, I saw Geithner on TV explaining the virtues of 401(k)s to a group of industry leaders. There were probably some “grabbers” at this symposium but if you really believe that powerful people are not “calculated” you need more exposure.
These business ‘leaders’ though simply see this type of ‘indoctrinating’ as part of sharing in the American dream etc. I doubt if they give much thought to the probability that increasing the number of shareholders could have effects on our democracy. Geither mostly talked about how employees as shareholders are more inclined to be loyal and bla bla bla. But it is the guidance behind Geithner that we need to be concerned about. I doubt if the Geithners of the world have original thoughts, that is what allows them to be who they are, good regurgitaters who don’t question precepts.
I don’t know who is pulling the strings, but I suppose ‘they’ have their offices in the Pentagon and in the WH. The string pullers most certainly though think in strategic terms with very precise intentions regarding social engineering.
Other than when Volker was killing inflation when was 7% available on fixed income? The assumption of using equities might make sense in 20s and 30s but after than some shifting into fixed income to avoid the possibility of a down draft in equities makes sense. Looking at those Vanguard Target retirement funds that have existed since 2003 they show returns in the 5% range. You do get 7% plus if you go to the 500 index fund and total bond market index since 1976 however. The question is what kind of return in the future, many say it will be lower than the past.
Three relatively little known (then) economists collaborated on a paper called: Asset Returns and Economic Growth (the following link wasn’t working Sat night but should be good) http://www.j-bradford-delong.net/movable_type/bdk-bpea.pdf which on my reading concluded that you could not achieve historical returns on equities under the Intermediate Cost economic assumptions of the Trustees The paper is known as BDK after authors Dean Baker, Brad DeLong, and some guy named Paul Krugman. On the other hand you would clearly get better returns if the economy actually came in in line with the economic numbers of the Trustees’ Low Cost alternative. On the other hand under those projections Social Security would be fully funded as is.
Which is to say that privatizers silently work from two sets of books: one to predict Social Security crisis based on Intermediate Cost projections that show fairly sharp slowdowns in future productivity compared to the past, and another to project returns on personal/private accounts right in line with historical results. Well you can’t (or shouldn’t) be able to use two sets of assumptions as momentarily convenient. Back in 1997 (when I got into this subject) I put this in the form of a ditty:
If Privatization is Necessary, it Won’t be Possible. If Privatization is Possible, it Won’t be Necessary.
Baker implicitly made the same point with his “No Economist Left Behind Challenge” of Nov 2004
http://www.policyarchive.org/handle/10207/bitstreams/20762.pdf Bush’s Social Security Commission assumed 6.5% returns, but Dean couldn’t make the Trustees numbers return more than an ultimate 3.8%. Now various privatizers have claimed to meet the challenge, but mostly have to assume economic policies which continue to divert gains from productivity from workers to capital and/or assume the bulk of those returns from foreign investments, gliding over the fact that under either scenario a system of worker funded accounts would suffer by workers not having enough assets to divert to those PRAs to begin with, even if capital is happily pocketing its own high return.
In my experience privatizers dodge this problem by refusing to explicitly cite their economic assumptions so that they can be compared directly with fully funded Social Security under Low Cost. People with more math chops than me can work themselves through the math of BDK and the calculations of NELB, but to date I have seen nothing to justify abandoning my little ditty, if workers keep getting screwed out of their share of gains from productivity they just won’t have the funds to put into those 401ks. On the other hand if we return to levels of productivity and real wage even half-way back to those we had in the late 1990s then the flood of income into Social Security fully funds the scheduled benefit without any changes in taxes, indexing or retirement age.
(JS-Kit sometimes doesn’t seem to take comments, leading to multiple posts by frustrated commenters. Mostly the comment gets to the servers but doesn’t always make it back to the display. Anyway I deleted two copies of the above.)
The NW Plan for a Real Social Security Fix uses a blended approach to get us on an ultimate path to what I once called the 100/100 Plan, which is to say 100% of the scheduled benefit and a steady state 100 Trust Fund Ratio. It turns out that the smoothest path towards that involves some small phased in increases in FICA even as the Trust Fund is drawn down.
http://spreadsheets.google.com/pub?key=r49_nOHQG4QdHuwcbMGmP0Q
The advantage of this over a straight out policy of just drawing the TF down to 100 and then putting in a fix is that it avoids the sharp discontinuity that would result in the mid 2030s. Under our plan TF ratios steadily shrink from 2014 until they reach a fairly steady state 123-129 in the years starting in 2044 and extending through the rest of the projection period.
>Other than when Volker was killing inflation when was 7% available on fixed income?
I was just using this data:
http://research.stlouisfed.org/fred2/series/GS10
I think the dirty secret is mathematics won’t allow for everyone to save, save, save for retirement.
All the compounding interest means if every retired person is a millionaire the young people are necessarily impoverished.
Interest on interest is a nasty thing, and the old money around is getting pretty scary.
Avg 10 year rate…………………
Yeah right!!
Bruce
it would help if the people could understand that their “extra” tax that they paid for Social Security will, if the bad guys don’t fix it, pay for their own retirement. yes, the TF needs to be drawn down for that to work as advertised. meanwhile the tiny increase in the payroll tax called for under the Northwest plan will pay for the longer lives expected by the people paying the tax.
As for the higher general taxes needed to pay back the money borrowed from the Trust Fund, it is importand to realize that EVEN IF those taxes are imposed on the same people who are paying the payroll tax, those people will NOT be “paying extra” for their Social Security. They will be paying, for the first time, for the submarines, and farm subsidies, and wars in iraq, that were paid for in part by the money borrowed from SS.
This is important enough that anyone who doubts it needs to sit down with a pencil and think it through very carefully. As it happens the taxes to pay back the Trust Fund will fall most heavily on those who cut the tax cuts under bush… and that is not generally the same people who pay the payroll tax.
Lord,
Why do you leave the war profiteers harmless in the pain?
Demobilizing from the half war in an establishment which is 70% waste is not prudent, unless you clip Lockheed coupons.
Heywood
i am glad you noticed that. i wish it were more widely understood.
ray
oh, they calculate, but they usually do bad calculations based on too many assumptions that they dont’ undestand. they make money because they seize power, and with power you can usually make your predictions come true.
i have wondered about these “behind the scenes string pullers.” thing is, they are both “there” and not really behind the scenes. nor are they really completely effective, nor necessary to explain the results. a more or less self maintaining consortium of powerful folks acting in their own self interest would lead to essentially the same results.
Love this back & forth, and how it reads that one days thoughts change overnight. I do admit, because I’m captive to the system, that reading what has been taking place & what is proposed, really scares the bejesus out of me. I have had to switch to taking my meds first thing after rising in the morning, other wise, my B.P. gets to high, which in this old man isn’t good. I could stop reading A.B., but then I wouldn’t have that primal rage that I was born with and have contented with all these years, satisfied.
Norman
a nice old guy like you should go out and talk to his neighbors and friends, and then go talk to your congressman.
one thing that makes it hard, is that it’s hard for someone who doesn’t make a study of it to get all your facts right. and it’s easy for the congressman to ignore you anyway, and much easier if you say somthing he “knows” is not true.
i expected to have to fight the “rat bastards.” what is killing me is the “liberals” who are looking for a “compromise,” or calling for a “fix” that raises taxes on the “rich.”
there is no need to compromise, and the fix is a tiny tax incresae on the workers to pay for their own retirement. it would be fatal to turn SS into welfare.
The Nouveau Rich is what is getting really scary. This small group, Benny and The Inkjets, will own $3 trillion in Treasuries and USG backed MBS by June of next year. The effect, and intent, is to drive down real returns on fixed income to around 2%. So returns on the trust fund and private accounts is going to be significantly below historical returns.
Productivity and technology advances have historically driven equity returns, but recently people have been realizing much of this may be due to huge advances in the use of Asian Robots, and going forward similar gains are not sustainable and may even reverse as Asian Robots become more expensive to operate.
This does not bode well for the outlook on equities.
They say the central bank meddling is all temporary, but these are the same things Japan did that did not work and in Japan temporary became 20 years and counting.
Then we have unaffordable healthcare still mushrooming in cost and this puts a drag on both business profitability and personal income and savings.
So the long term investment outlook overall, whether private accounts or new special treasuries issued at a “competitive” rate does not look as good as what it was historically.
And if the Federal Reserve is successful at delivering even moderate inflation, that wipes out real return on existing fixed income securities, and we know stagflation was very bad for equities when we tried that back in the ’70s.
Right now, every retired couple has to be at least a millionaire if you don’t have a pension or SS didn’t exist. That is scary. If we could get to the point that they did, or had some combination of SS and adequate personal savings, and they lent back their savings to younger generations, then we would have a concept that may work.
I guess Timmy hasn’t been watching the “insider selling” (biz leaders) vs “insider buying” data. The ratio this year has been over 10:1 in favor of insider selling!
And we are getting another little setback in our efforts to recapitalize banks. Wall Street banking bonuses are projected to be a record $144 billion this year. Thanks due to imaginary profits generated by “regulatory forbearance” (translation:extend and pretend…write down losses in future years).
Can’t imagine how Timmay missed that one?
But the GM IPO (100 year event) is coming next week and someday Citi government stock is on the way too. Next we grapple with Fannie and Freddie and FHA. So maybe something for the Little People’s 401Ks in that pile.
Cedric
the SS concept works. Just fine. The problem is that the lying about it has been going on so long that it is almost impossible to think straight about it.
Your notes toward another plan, while possibly “correct” would just lead to another system with problems and inequities of its own. Please study Social Security until you can see just how it works and stop being confusd about pay as you go and the importance of the trust fund or whatever interest it happens to earn.
the interst on the trust fund is not very important. yes, it can save you a few bucks a week, but as others have pointed out, you end up paying that interest one way or another out of taxes or just higher prices on the things the high end tax payers sell you. all the TF is is a way to collect money in excess of current needs in order to have a cushion against times of lowered tax income… like now, and througout the baby boom retirement. a straight pay as you go would work justas well, but it would appear less generationally equitable to some. when you understand how it works… and generally the absolute fatuity of the idea of generational equity… you will, i suspect, come to agree with me that there is no system that can work any better.
I wasn’t proposing a different system. I think SS plus personal savings and a real return on money invested in both areas should work fine. (they told my demographic that SS alone wouldn’t be enough to retire on and keep the standard of living we were accustomed to, so we had better have personal savings too)
The point I was trying to make was we need real reasonable return on money, and the USG & Federal Reserve have been doing their best to keep that from happening lately.
I also think the “overpaying” into the SSTF is fine in theory, and it was done to reduce generational inequity. I doubt Gen X,Y,Z would really want paygo starting in 2015.
Now since that money was lent to (invested in) the SofA, and some want to argue it was not spent productively and did nothing to further the greatness, safety, profit opportunity, and goodwill value of the country, therefore we are handing down a piece of crap investment to future generations, then we have some points to discuss. But whether SS or the SSTF is the problem is not one of them.
coberly,
I don’t think we differ much here.
What bothers me to no end is the “tiny oligarchy” view. Our system is instead best described as a ‘democratic tyranny’. But this ‘system’ in its dynamics, is too complicated for most folks to understand, which is in part why it so effective… and dangerous.
I see our system as a pyramid with layers of influence. Across the bottom there are the 401(k) holders and other minor shareholders. But if SS were to be privatized this layer would be made much stronger, a great many more stakeholders would be transformed into ‘shareholders’. Corporatism on steroids.
Where this gets complicated though is along the upper levels. The ‘string pullers’ though are not oligarchical, they are instead, as you suggested, “a more or less self maintaining consortium”. String pulling occurs though but it actually originates with technocrats, with plutocrats being those who decide which policies best serve ‘their’ objectives. This dynamic extorts the technocrats via ambition and this puts a premium on delusion. Accordingly, our most rewarded technocrats are those who best serve the interests of the consortium as a product of intellectual corruption. Technocrats are essentially made to compete with each-other for recognition and that which follows. And so they craft accordingly and this is systemic corruption of the worst type.
These dynamics have of course always existed. But never before have so many citizens been duped into becoming foundational support for this pyramid. US citizens have been lured into subservience by trinkets and kept ignorant by endless entertainment etc. It is the absence of dissent that allowed our democracy to be manipulated into a plutocratic-serving-global-tyranny. And it is the citizenry that is most worthy of blame, this is after-all a democracy.
The ‘oligarchy’ theories on the other hand, are just another example of technocrats providing their masters with the best possible excuse, in this case, it is the ‘only a few bad apples’ defense, which of course also exonerates most of their own kind. But it is their compliance and betrayal that most weakened our defenses.
Fortunately, the ROW is finding ways to pull our economic plug.
coberly: “A raise in the FICA tax of twenty cents per week each year would cover the “expected shortfall.” Try to get a grip on what that twenty cents is buying you.”
How about, instead of raising tax rates 20 cents per week, raise wages $1.20 per week? (You do not have to raise tax rates to increase revenues. Every conservative knows that. 🙂 )
I think that the vast numbers of people have been seduced with “bread and circuses” to a large degree. Add to that the highly technical and complex world that many citizens do not understand – do not have the education or mental capacity to grasp even if we have the time and dedication – and we have a sorry mess.
My 401K has earned more than 9% this year. I have 6% matching and I love it! However, I do not delude myself that I am part of the ‘investing class’. I am very lucky to have realized that my company was willing to give me free money and it reduces my taxes. They have even hired advisers who have steered me pretty well. My little drop in the investment ocean is a better gamble than the Lottery, thats about it.
I think I will still large parts of the letter that started all this. I think I might actually understand most of it.
thanks,lissa
Charles,
‘They’ did not give you “free money”. Back in the ’80s companies switched from pensions to 401(k)s. But the pension plan funding was derived from what people earned. Pensions were essentially forced savings so that folks had money to retire on. Some nations such as Singapore simply have forced savings plans.
Essentially, you are paid in part with a pension, 401(k), medical insurance, etc. Societies chose though not to give citizens a choice in these matters because of course some citizens lack the discipline to save on their own, so, instead allowing citizens to become burdens on society, they are ‘required’ to save. But whether employers pay into these funds or not, these costs are passed onto the consumer, this makes these costs part of labor costs. People may argue about this but basically if employers absorbed these costs this would show as reductions in their profits, but, from the onset of 401(k)s being standardized as retirement plans until now, the distribution of wealth in the US has shifted upward dramatically. So, macro-economically at least, the most inescapable profit indicator, wealth distribution, shows that 401(k)s have in no way come at the expense of profits.
So unless your employer is an anomaly, it is you who has been giving ‘free money’ to your employers, not the other way around.
Consequently, your thinking that 401(k)s etc. are in addition to your base compensation, as a gift of sorts, supports what I explained earlier. You were tricked into thinking that you might get something for nothing when in fact you were made part of the investment-class by a social-engineering manipulation.
Upward wealth redistribution trends are occurring in part because 401(k)s obscure the conflict between employers and employees. But that is too complicated for tonight.
ray
i guess i agree with all that. “democratic tyranny” is a new term to me, though i think i heard it somewhere else recently. i have had the idea teasing my mind for years. it almost seems that we go around the word teaching other countries “democracy.” but we dont, in public, teach them how to manipulate the democracy… most days i don’t have any faith that the people can govern themselves. some days i am a little more hopeful. but there isn’t much doubt that the way democracy works in this country is more like a medicine show than sober governing.
ray
re the free money reply. yes. yes. and more yes.
it is tragic that the people of this country have been taught to beleive pensions are a “gift” from the employer, and therefor revokable.
pensions are a part of the compensation package. that is, they are your wages.
I get the full match from my employer but I still by a lotto ticket once in awhile. I figure I’m balancing my portfolio with the ultimate high risk/high reward investment.
This report and the conversations here remind me of something Al Gore stumped on ca. 1999: The concept of the Lockbox for social security. He was ridiculed for it by the GOP punditry and I think they even parodied it on SNL at one point. Doesn’t seem so damn funny now.
Well my .02:
1- SS is not the big problem, it’s Medicaid & Medicare.
2- As stated previously, 401k’s replaced pensions as corporations wanted to reduce costs.
3- Most 401ks are not as generous as when they were first proposed by corps. This trend will continue & they will (generally speaking) be slowly reduced in % or in the total amount they contribute one way or another. Eventually corporations will try to eliminate 401ks altogether & come up with some other bogus retirement scheme connivied by Wall St.
4- The larger problem we face is the offshoring of jobs in the USA. This reduction coupled with population growth & the need to work “somewhere” by the 50+ aged work force that were laid off does not paint a pretty picture for the older part of the work force or the USA period.
5- Financial Planners need to tell folks that they need to plan on retiring by age 52 or at least plan on your income being reduced to $10/ hr at age 52 due to firms laying off older workers along with the lack of jobs.
Dale,
If you haven’t done this already, go to a third-world nation during a campaign/election. Guatemala and El Salvador for example make for some interesting campaign viewing. Most of the population can not read so symbols are used to represent each party, these are made very simple in form so as to allow for easy application on rocks, trees, walls, and etc. For instance, in Guatamala, instead of posters like those used here, a splotch of bright-colored paint is applied with a dabber and then a second smaller dab of another color is applied to in the middle of the larger dab. Then of course similar symbols are put on the ballots. These countries seem to be preparing for some sort of massive target shooting extravaganza.
Anyway… if you think that the American ‘bubbas’ are duped into voting against their best interests, ‘you ain’t seen nuthin”.
Naturally, democracies are only as good as allowed by the level of sophistication of their populations.
In all fairness, I should add that I have not been out of the US in more 25 years and things do seem to be improving in some of these countries, El Salvador for example seems to have made some progress. But education is definitely a threat to the fuedalites.
gman
hah! i retired at age 52. my job had lost its charm. decided i could live happier on no money than working for … er, people like i was working for. i recommend it for everyone. it is a crime what they are planning to do to social security. but the people can outfox them by learning to live on… well, not catfood, but you will need to economize.
i don’t know anything about medicaid, and i understand that the medicare picture has changed since obamaplan. but there is a point worth making based on the 2009 Trustees Report: even with the huge horrible hairy predictioins for Medicare cost, when taken with the rise in incomes over the same time period, the cost of Medicare and Social Security together would leave you with twice as much “after tax” income as you have today.
it’s a question of simply paying for the cost of health insurance on the assumption that living longer and healthier is more valuable to you than a new car. of course in America people think that the reason for making more money is to buy a better car, and health care should be free.
this is not to say that the cost of health care shouldn’t be brought down (and it can be). just that if we want our sacred way of paying for medical care, we can afford it.
Average 10-year rate: 7% – On what planet? In which currency? If you can deliver that return over ten years, you’ve outperformed 95% of all professional fund managers. Over 20 years, you’d be better than 99+%. That’s the magic of compound interest.
to ray I love:
For me the 6% matching is free money.� There was no retirement of any sort in
my�level of employment.� I grant you that the company has some way of turning
this into a profit, tax relief or something, but for me the 401k was an easier
way to save and the matching doubles my investment money.�
LadyFox67�
coberly:
I work in fast food as a crew person.� My ‘compensation’ is an hourly wage.�
From time to time – �when it is financially advantageous – my employer offers
insurance or stock shares or a 401k.� We�members of the lower class�recognize
that this is a gift – we do not expect it.
This year we are getting some sort of pension plan based on years of work and
other legal restrictions.� It sounds like a new crew person could expect
retirement benefits if they stayed 20 years.� I am sure that it can be taken
away just as soon as it does not offer the company some monitary gain.
I am sad that people in this country��thought that pensions�gave them�security.�
In a system that is rigged so that companies have all the power, the best
workers can hope for is that they can find a way to increase profit that will
give the workers something, too.� I think we have been fooled for way to long
and it is too late to take back our government from the corperations.� At least
not without a revolution…
LadyFox67�