Tuesday - January 18, 2005

What Needs To Happen To Social Security

This is a very complex issue but one the overhaul of which every American needs to consider.  It just can not continue to operate the way it does.

For the purists who will not tolerate talk of privatization, you have to think about this:  there are fewer and fewer people working for every one retiring.  These workers can not support paying buttloads of money to support retirees at the current rate.  Estimates are that in a few years we will only have two workers contributing for every retiree.  Back in the 40’s this number was 42!  FORTY FUCKING TWO!!! 

Alternatives are few:  do nothing and run the program into bankruptcy by 2042 (hey, I don’t give a shit, I’ll be dead)—or—reduce benefits --or—increase the age of retirement to 72, then 73, then 74, then 75—or—pay higher social security payroll taxes.

There are those who say we need to raise the payroll ceiling currently set at about $90,000.  What these people seem NOT to understand is that if I make a lot more money but pay more into social security, then my social security check DAMN WELL better be higher than everyone else’s because I paid more.  These moonbats who are proposing raising the ceiling do so under the assumption that payouts still stay at today’s levels.  Typical socialist bastards.

THE MATH

So......what other alternatives are out there?

Privatization.

I did a quick bit of math via Excel and plotted out the life of a 20 year old earning $20,000 a year to start, averaging a 3.5% raise over his lifetime, and taking out 13% of salary for “social security.” (Note: fully privatization means that the employer who currently pays approximately 6.5% with the individual the other 6.5% to total 13%, would give that to the individual as it is his anyways!)

I factored in a “modest” growth through investments of 4% per year of these deducted monies (a 5 year CD now earns 4.5% so I am being reasonable) and at the age of 65 this person had about $650,000 in his account!!!!!  Of course, by then people will be living longer, working longer, and their nest eggs will be considerably larger. 

Do you realize this person could then withdraw $2700 per month and NEVER touch the principle?  (of course, that assumes a 5% growth of portfolio at retirement and does not factor in inflation but STILL!!!!) All that money is HIS!!!!  Or goes to HIS heirs when he dies.  Our current Social Security system does not do that.

I then raised the rate of return on the “social security” withdrawal for those same 45 years to 5% and the nest egg shot up to $830,000 or almost $3500 per month!!!!

In order to simulate a “real life” scenario of individuals actually taking ownership of their lives and retirements, I assumed this fictional individual was prudent in his investment style with periodic adjustments to the portfolio based on risk analysis (basically this means that the younger you are the more risk you can subject your money to and as you grow older you remove some risk by diversifying your portfolio to bonds, CDs, cash, money market instruments incrementally.)

So I raised the growth rate to the stock market average of 9% for the first 20 years; then a 7.5% average to reflect a blend of stocks and bonds for the next 20 and a 6.5% rate to reflect more risk aversion for the last 5 years.  The nest egg ballooned to almost $1.73 million dollars!!!!

Just 5% of that per year is $86,000 in retirement FOREVER!!! (over $7000 per month) The principle remains UNTOUCHED!!!

I also ran those numbers assuming someone staying in college, getting out and getting a $30,000 a year job.  The only variables I changed were that starting at 24 they’d be fully invest for 20 years and then stay with a mix for 15 more years yielding 7.5% and the last 5 years at 6.5%

At only 4% for the full 40+ years they’d have $980,000 (yielding over $4000 per month)

In the variable scenario they’d end up with almost $3 million ($12,345 per month)

Go ahead, do it yourself and see.  And since we almost always end up with increases in salary outstripping the nominal 3.5% I factored in, you can JUST IMAGINE what the numbers would be.  As an example, I started out in 1971 earning $200 per month (yes, $200 a month!) and when I retired it was close to $4500. There is no way that $2400 per year compounded at 3.5% would ever get close to $50000+ in 26 years.  So therefore I feel I am being very modest in my models.  For those with drive and ambition, the amount of money they’d have to partially fund their “retirement” would balloon exponentially.  Of course, this also assumes that anything they put away in this system is NOT their sole retirement.  Businesses can not all of a sudden change THEIR systems just because the person privatized.

One other note, I’ve yet to be able to somewhat accurately be able to project what social security would need to pay to future retirees to resemble what they get paid now.  But if my initial projections are correct, there is no doubt in my rabid mind that the system is doomed to failure---QUICK!!!

Witness how I admitted my difficulty in determining what social security would be paying workers in future dollars. But the leftist morons in this country who insist there is no crisis keep falling back on the argument that social security would stay solvent until 2042 and then would pay out 75% of what they pay now.

Did you catch that?  “WHAT THEY PAY NOW?”

Have any of you readers any clue how little $16700 would be worth 40 years from today?  These fucktards do not even admit that they’ve considered the fallacy of an argument that does not take into account inflation and the decrease in the dollar’s worth for the future.  If you do the math based on low inflation of 2.5% and using the rule of 72, that $16700 would be the equivalent of having your check sliced to less than $700.  Is that what you want?

MAKING THE CHANGE

Of course, all this change does not happen overnight.  Our congress-critters need to stop abusing the social security trust fund to start with.  We then need to understand that not everyone will be able to participate at these levels so some sort of “phase in” process needs to start.  I look at it this way:  if you are under 25 you go immediately to the private plan.  Any monies contributed by you in previous years get refunded to you plus whatever amounts your employer contributed (plus interest.) Between 25 and 45 you should have the option to stay in the current system or opt out fully or partially. After 45 you stay in the system as it is today.  This way no old people or those closer to retirement need to fear being left out in the cold.

Furthermore, those who opt out totally are just that---OUT!!  The government will take NO RESPONSIBILTY for their retirement benefits.  If they are stupid and stay fully vested in the market until 70 and then the market goes in the shitter and they get wiped out---so sorry, time to die!

Also, the government will have to assume a several trillion dollar obligation (much of it unfunded) in order to continue to pay off those still either totally in the system or partially in the system until they all die off.  But that debt, like all others, will continue to decrease in value with time.  After everyone in the old system is dead the debt can either be paid off slowly or just left alone because inflation makes it worth less and less every year.  A similar example is taking out a mortgage for 30 years.  Today the payment is high but as you get better and better paying jobs and raises, that mortgage amount stays the same yet the value of the dollar has gone down.  So your $900 note is chickenfeed 29 years from now.

For those who partially opt out then you will be guaranteed a social security check commensurate with a pro-rata percentage of what you contributed and the Social Security administration would be tasked with maintaining a second set of tables simulating today’s system in order to keep percentages and payouts similar.

So there you have it.  We all know social security is going to go down the tubes.  The moron democrats and their stooges, the AARP, are out there beating their drums scaring everyone into thinking if we change the system they will be eating cat food and going without medication while living in refrigerator cartons.

But if you look at this realistically, can there be any way for you to STILL think we need social security in today’s form?

MORE DISCUSSION

Let’s keep going.  Who said this about social security recently? 

“(programs) are threatened by the looming fiscal crisis in Social Security.” There should be no new spending — or, more importantly, no tax cuts — “before we take care of the crisis in Social Security that is looming when the baby boomers retire.”

Most of you already guessed:  Bill Clinton.

So why is it that asshole Harry Reid, the new minority leader of the senate, says we don’t have a social security crisis? And why is it the democrats are now piling on yapping the same thing? Where the fuck were they in 1998?  What has so fundamentally changed in 6 years? 

The Cato Institute back in 1998 wrote that shitbird, Clinton, agreeing with him and asking him to consider personal accounts.

Hell, Clinton even proposed some privatization himself.

But I will go out on a limb and state the only reason Clinton said what he said was to start of shitstorm of discussion amongst the partisan hacks and media to take attention off his troubles.  That’s just the kind of guy he was. 

The price of doing nothing is discussed here.

For more info and a lousy alternative not privatizing click here.

Here is what the President plans to do.

WHAT’S HAPPENING NOW?

It appears the bureaucrats at the Social Security administration have been told to start an education campaign about the mess Social Security is in.  They are none too happy!  I immediately discredited their complaints when I read this:

“Trust fund dollars should not be used to promote a political agenda,” said Dana C. Duggins, a vice president of the Social Security Council of the American Federation of Government Employees, which represents more than 50,000 of the agency’s 64,000 workers and has opposed private accounts.”

Can you believe it?  The SSA has 64,000 employees!

Again, I ask the question: where were these useless fucks when Clinton was saying the system was in bad shape?  Like many civil servants, these people have been feeding at the trough too long in jobs too easy collecting too much money as salary.  Take away their trough!! FIRE THEM ALL!!

And don’t forget to go here to get lots more info.

Posted by Ranting Right Wing Howler     on 01/18/2005 at 09:25 AM   
Filed Under: • Editorials • Social-Security •  
• Comments (76) • Trackbacks(0)  Permalink •  

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