Weird thought about a different way to retirement

[HisArpy]

Ok, I'll admit I sometimes think of weird stuff. Too many hours behind the wheel listening to myself think and all that. But here's something I thought would be a good subject to discuss.

Why do we ask people to pay in to Soc Sec and save for retirement and then wonder why they can't retire?

Premise:

Wouldn't it be better if everyone got a fully funded "retirement fund" when they were younger and then had to pay it back? Kind of like a lifelong loan with minimal interest.

Your profession would determine what the fund total would be. You would have to PROVE that you actually engage in that profession or your fund changes value to reflect your actual profession. Easy to do with tax return info. I could claim to be a doctor but if my income is from panhandling 1 day/week, I ain't no doctor and ain't entitled to that level of retirement funding. Of course I probably couldn't make the doctor level payments either.

Default on the payments and you lose the fund completely.

Can't will, inherit, sell, or attach the fund. Die before your retirement date, all gone.

NO ACCESS to the fund until your retirement OTHER THAN investing it. All capital gains stay in the fund.

ALL "professions" are qualified. Stay at home mom, prostitute, illegal drug dealer are all included.

Basically, it's like buying a home. You buy the home, pay off the mortgage and then sell to reap the capital gains and the original purchase price to live on in your retirement. Except there's no physical asset.

This would be a different approach to what we're doing now. Soc Sec requires an ever increasing payment base to fund the retirements of those paying in. That's the same ponzi scheme thinking they used for ObamaCare and we KNOW that didn't work. ObamaCare proves that Soc Sec won't work either, it's just that Obamacare was on a faster timeline to disaster so it showed up quicker.

I wonder if banks would even do this.

 

[MNGuy]

If they would have let me invest the money I was required to pay into Social Security, I could have retired fifteen years ago.

Social Security is a rip-off.

 

[Que]

If they would have let me invest the money I was required to pay into Social Security, I could have retired fifteen years ago.

Social Security is a rip-off.

^^ word.

15% of your income, invested in index funds every year?


To the OP. I need the role that around in my brain a little bit but it seems to me that what you're proposing actually can be done but what you're doing is buying on margin essentially. So it would both exacerbate potential losses but it would also magnify gains.

You more or less could do such a thing especially once you get an account established and start doing regular trading.

I have a friend who bad two sets of German immigrant grandparents. The paternal grandfather I think was a machinist at a mine. He made good wages but he's saved and invested and sent his son to school. His son was a PhD by the age of 21. The understanding was the son (and future scholars) would have to pay all of it back into an educational fund that would be held in perpetuity for the future offspring. the young Ph.D didn't actually have that much to pay back because he put himself largely through college playing in a jazz trio. My friend has multiple degrees all paid out of that fund and he's long since paid his portion back.

If we taught people about money and encouraged them to invest for their families the amount of wealth possible is so much in excess of the pittance offered by Social Security.

 

[chillywilly2]

You're right. You spend too many hours thinking

Soc Sec may be a rip off but if a lot of people weren't forced to save something they would have nothing and a pension based on occupation sounds bad.

 

[LadyVer]

I like my monthly SS. I still work full time, because I have to and because I like to work. Now, SS might seem like a Ponzi scheme to some, but not to me. If you want to target a Ponzi scheme, look at health insurance. Getting back to SS, why would anyone want to make SS criteria harder when it doesn't need to be?

 

[HisArpy]

You're right. You spend too many hours thinking

Soc Sec may be a rip off but if a lot of people weren't forced to save something they would have nothing and a pension based on occupation sounds bad.

Umm, you do know that your Soc Sec dividend is based on your income right? You get a percentage of your income not just an amount that everyone gets. So people who earn more, get more.

If that's not income based retirement I don't know what is.

The point I'm trying to make here is that people could increase the value of a retirement account a lot better if they had the full amount earlier. The loan analogy is probably the best one - borrow half a million at 21, pay it back over the next 44 years and retire at 65. If all you do is put it into a passbook savings account you STILL have half a million at retirement (plus the paltry interest it earned). Even if you invested it with a broker in bonds that earned 5% yield the amount you'd have 44 years later would be staggering EVEN AFTER broker fees.

But, the way we're doing it, people are trying to retire on $100K. The question is why do it that way?

BTW, the payment on $500K over 44 years would be about the same as a car payment on a new Chevy without the full coverage insurance requirement. Anyone think they couldn't afford it if that was the monthly payment? Then opt for a lower loan balance to a level you're comfortable with.

Seriously, why is this not do-able?

 

[Colonel Hogan]

Umm, you do know that your Soc Sec dividend is based on your income right? You get a percentage of your income not just an amount that everyone gets. So people who earn more, get more.

If that's not income based retirement I don't know what is.

The point I'm trying to make here is that people could increase the value of a retirement account a lot better if they had the full amount earlier. The loan analogy is probably the best one - borrow half a million at 21, pay it back over the next 44 years and retire at 65. If all you do is put it into a passbook savings account you STILL have half a million at retirement (plus the paltry interest it earned). Even if you invested it with a broker in bonds that earned 5% yield the amount you'd have 44 years later would be staggering EVEN AFTER broker fees.

But, the way we're doing it, people are trying to retire on $100K. The question is why do it that way?

BTW, the payment on $500K over 44 years would be about the same as a car payment on a new Chevy without the full coverage insurance requirement. Anyone think they couldn't afford it if that was the monthly payment? Then opt for a lower loan balance to a level you're comfortable with.

Seriously, why is this not do-able?

1. Where does the money come from? People turn 21 and suddenly get a half mill out of thin air from the government?

2. Is the recipient paying interest on this "loan" (like they would any other loan) while they are supposedly MAKING interest off their investments? Otherwise the government is simply carrying bad debt over the course of the loan and gets nothing (?) in return after we've all financed our retirements?

3. And if the individual defaults.............the government just gets its money back???? And how are those who default kept off the government dole when they're 75 years old, sick and flat ass broke? We just let 'em die in the gutter? Doesn't sound to me like we've solved much of an impoverished aging problem if we allow that to happen.

4. Currently, YOUR Social Security TAXES pay MY Social Security benefits. Neither you, the government or anyone else is "saving" money on your behalf. The expectation is that, as I paid for my parents retirement, your kids will pay for yours. You don't have the option to default. Because if you give people that option, far too many will exercise it.

5. ANY privitization of Social Security requires bullet-proof investment performance over the course of the investment -- something that cannot be guaranteed during an extended economic depression. What do you think would have happened to your plan had it been in existence in 1929? Ohhhhh.....................shit!! Not to mention how do you regulate (or do you?) asset allocation of those who would be tempted to parlay their nest eggs by chasing the largest (and riskiest) returns (i.e. commodities, IPOs, etc.)

Bad idea. REALLY bad idea.

 

[Ms_Ann]

Early Retirement May Be The Kiss Of Death, Study Finds

 

[4est_4est_Gump]

I don't think much of the idea and I don't think much of Social Security, a temporary program to help widows at a time when there were no women, to speak of, in the work force. It has since turned into a Leviathan that does too much for too many, isn't true to the purpose of retirement, because it was only meant to be a supplemental program, not a retirement program.

But like so much other nonsense, we keep creating new rights, new funding mandates with the assumption that the money that goes into them makes us wealthy as a nation, because government spending and investment is every bit as economically stimulative and when the private sector does it.

So now we have two complaints. We're not doing enough and the middle class is being left behind. Is the government the problem? Oh hells no, it's the greedy rich...

 

[Que]

1. Where does the money come from? People turn 21 and suddenly get a half mill out of thin air from the government?

2. Is the recipient paying interest on this "loan" (like they would any other loan) while they are supposedly MAKING interest off their investments? Otherwise the government is simply carrying bad debt over the course of the loan and gets nothing (?) in return after we've all financed our retirements?

3. And if the individual defaults.............the government just gets its money back???? And how are those who default kept off the government dole when they're 75 years old, sick and flat ass broke? We just let 'em die in the gutter? Doesn't sound to me like we've solved much of an impoverished aging problem if we allow that to happen.

4. Currently, YOUR Social Security TAXES pay MY Social Security benefits. Neither you, the government or anyone else is "saving" money on your behalf. The expectation is that, as I paid for my parents retirement, your kids will pay for yours. You don't have the option to default. Because if you give people that option, far too many will exercise it.

5. ANY privitization of Social Security requires bullet-proof investment performance over the course of the investment -- something that cannot be guaranteed during an extended economic depression. What do you think would have happened to your plan had it been in existence in 1929? Ohhhhh.....................shit!! Not to mention how do you regulate (or do you?) asset allocation of those who would be tempted to parlay their nest eggs by chasing the largest (and riskiest) returns (i.e. commodities, IPOs, etc.)

Bad idea. REALLY bad idea.

Doing nothing is a worse idea. Increasing life expectancy, lowest labor participation rate since about its inception and close to net zero population growth means this program cannot be sustained.

Because math.

The program was predicated on the assumptions of people only living to their 60's and having four or five kids.

I haven't looked at the numbers lately but I think we are already under two workers for every recipient.

 

[Colonel Hogan]

Doing nothing is a worse idea. Increasing life expectancy, lowest labor participation rate since about its inception and close to net zero population growth means this program cannot be sustained.

Because math.

The program was predicated on the assumptions of people only living to their 60's and having four or five kids.

I haven't looked at the numbers lately but I think we are already under two workers for every recipient.

Nothing I wrote argues with your excellent points. We're on the same page, and I don't claim to know what the answer is other than increasingly burdensome tax rates. I just know Arpy's answer.....ain't.

 

[HisArpy]

Nothing I wrote argues with your excellent points. We're on the same page, and I don't claim to know what the answer is other than increasingly burdensome tax rates. I just know Arpy's answer.....ain't.

Well, it's just a theory I put out there because I spend waaaay toooooo muuuuuuch time in my own head every day.

I actually think all of the problems you list could be overcome. Yes, give a 21 year old a loan for half a mil. Make him pay for it, plus interest at the passbook rate (around .09% right now - that's basically zero) over the next 44 years. ($500000 divided by 44 divided by 12 = $947/month - Lets call it $950 including interest.) It'd be about 25% of income for someone making $5k/month which is more than the amt paid in to Soc Sec but still doable if you're dedicated.

People who are expected to earn less only qualify for a lower amount. Make an average monthly income of $3k? Qualify for $250K. Payment would be $475/month (15% of income, same as income tax).

Asset allocation would have to be set up by guidelines. Only so much allowed to be high risk, some investments not allowed, etc.

Knowing that most people don't achieve full earning potential right off the bat, the payment schedule could even be reverse amortized in the beginning to offset this.

And, this would only happen as an option to opt OUT of Soc Sec and all other social programs like Medicare. What you'd do is trade a Soc Sec retirement guarantee for the risk pool. Not for everyone but for some it's like a money magnet.

And, it's not like we're not paying in to Soc Sec AND investing income for retirement now.

Anyway, I thought it interesting enough to toss out here and see what people thought. It sure beats alt trolling and baiting.

 

[Que]

Nothing I wrote argues with your excellent points. We're on the same page, and I don't claim to know what the answer is other than increasingly burdensome tax rates. I just know Arpy's answer.....ain't.

We're heading for a huge brick wall because of demographics and automation. not in your lifetime or mine but at some point it has to be paid. The only way for that to happen is to essentially minimize the benefits to the point where essentially no one fully retires.

That might not be as bad as it sounds though if we moved towards a more automated society where people really aren't working that many hours a week when they are working but they are contributing something productive and a lot of that can be done without any particular physical ability so age is not a problem that way and the sort of tasks that require mental agility would actually help and improve the quality of life of us as we age.

I'm pretty sure that's a run-on sentence but I haven't the energy to fix it.