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What If Your Social Security Was in the Stock Market Yesterday? |
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Yesterday’s stock market disaster, with the Dow plummeting 778 points—a larger drop than after the Sept. 11 attacks—may make Wall Street traders and billionaire hedge fund investors hyperventilate.
But imagine how much worse for the rest of us it would have been if, three years ago, President Bush and Sen. John McCain had succeeded in their efforts to privatize Social Security, gambling in the stock market funds that have been a guaranteed income for America’s retirees?
Many of our 401(k)s and pension plans took a hit yesterday—but no matter how our individual retirements fare on Wall Street, we would still have Social Security to back us up.
Not so if McCain became president.
Because even during this volatile stock market crisis, McCain has repeated his plan to privatize Social Security if he becomes president. McCain has said the way Social Security works is a “disgrace,” and in the Senate, he voted repeatedly to support privatizing Social Security and against protecting Social Security from benefit cuts. He even voted to raid Social Security funds.
In 2005, McCain toured the country with Bush to campaign for Social Security privatization. McCain married into a multimillion-dollar fortune, and he also will have a taxpayer-funded pension because of his decades in Washington. So, despite drawing a monthly Social Security check himself, it’s clear he doesn’t understand how important Social Security is to millions of retirees.
For the vast majority of America’s retirees, Social Security makes up 50 percent or more of their income.
Yet McCain supports a scheme that, if it had been in place now, would have left millions of seniors in poverty yesterday. Retirees who worked their entire life for their Social Security retirement income would have seen little or have nothing to fall back on.
In contrast, Sen. Barack Obama has fought against privatization and other policies that undermine Social Security. He’s pledged to protect Social Security benefits.
There’s only 35 days to go before the election, but McCain’s agenda has already proven disastrous. We can’t trust him to gamble with our economy and our retirement.
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Paid for by the AFL-CIO Committee on Political Education Political Contributions Committee, www.aflcio.org, and not authorized by any candidate or candidate’s committee.
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Our pension fund IS in the stock market. We’re supposed to get a check tomorrow. I can’t help but wonder if it will come.
If your retirement assets were in the stock of publicly traded companies, their day to day value would naturally fluctuate up and down as investors bid the prices of shares up and down. Yesterday was a down day. There will be up days, and over the long haul, the trend has been strongly up. And at least you’d be the owner of something that could be sold for cash. With Social Security, you own nothing. There is no fund with the money that you and your employer have been paying in, it’s all spent. You are just relying on the future charity of your children and grandchildren to keep paying more and more Social Security taxes to support you in your old age. If you had no children and grandchildren, then you’re relying on other people’s children and grandchildren. It’s just “welfare”. Is that something you’re proud of?
wow, MHinnov, what an example of seeing part of the picture and declaring you know the answer! Yes, the markets fluctuate and yes, *historically*, they have gone up over time, but in the past 8 years the stock market has been essentially flat. Therefore, in order for public SS funds invested in the stock market to have enough money to pay off the people drawing SS, the govt would have to put money into the fund to maintain its solvency. you still pay, one way or another. This is how state govt pensions operate. Tax dollars fill the void when returns are too low.
Now, if this were your own SS money that you’d invested, those funds would be just like 401Ks, 403Bs, etc. People’s principals have declined dramatically recently and although, over time, you’d hope it would regain its value, if you are near or at retirement your savings have taken a massive hit (as is now happening) and you don’t have time for the market to “recover”.
Japan’s financial sector collapsed in the early 1990s and its markets are just now getting back to where they were. We could be in for a long slow to no-growth economy. The current SS system of “welfare” trades the potential benefits of high returns for the GUARANTEE of a steady safety net. Plus, it makes selfish folks like yourself recognize that we owe something to the generations that came before us, whether they were lucky enough to have enough money on their own to live comfortably in retirement or not. That is what CITIZENSHIP is about, not “the we’re all in it for ourselves and screw the next guy” kind of attitude that comes from the corrupt ideology of conservatism.
It’s interesting to see how the folks that expect to be on the receiving end of welfare, having spent everything they earned throughout their working life, so ardently extol the virtues of “citizenship” (by others, of course); while those who have chosen to live more frugally, and have taken care to put enough aside, and to invest it prudently and diversely, extol the virtues of self-reliance. I don’t buy the idea that most of our citizens are just too dumb to provide for themselves. They’ve just been led to believe that somebody else will take care of them in the end. Like children instead of grownups.
I asked this question a few weeks back when Lehman Brother’s fell, I asked “imagine if our SS was privatized?” to which another poster commented “then the failure would not have taken place now, but when it did n 10 or so years, we would have absolutely nothing.
I point you now to our dearly departed friend George Carlin, who in his last video explains it best.
Video: George Carlin - They want obedient workers and now they want your social security, RIP old friend
“What If Your Social Security Was in the Stock Market Yesterday?”
Bush would have succeded in his efforts to destroy the living standard of American Workers. Retirees would ahve to get out in the streets and began begging for food.
But imagine how much worse for the rest of us it would have been if, three years ago, President Bush and Sen. John McCain had succeeded in their efforts to privatize Social Security
Personally, I think I’d be MUCH better off had Social Security been privatized. I could have taken 4% of my salary that went to Social Security and used it to purchase real investments with my name on it. I’ll take that over Social Security every day of the week and twice on Sunday.
Yet McCain supports a scheme that, if it had been in place now, would have left millions of seniors in poverty yesterday.
That’s a blatant lie. The proposal to privatize Social Security was A) optional and B) did not apply to those born before 1950.
I don’t have to “gamble” in the stock market to do better than Social Security. I could take my FICA dollars, stuff them in a high-yield savings account and beat the rate of return I’ll get from Social Security. That’s pretty much true for anyone who entered the system after 1990. Combine the 12.4% tax rate with reduced benefits (via increasing the retirement age) and Social Security now guarantees average workers a negative rate of return.
Here are some factors to consider, as per your statement.
By “real investments” do you mean real estate, fancy cars, or valuable art pieces? What happens if you lose those real investments in a flood, or hurricane, or other horrible disaster, and your insurance company, whose assets are definitely ‘tied’ to the stock market, says they can’t pay you what your assets are worth, or they will not give you enough to replace those assets or repair the home that you just lost.
Two: privatizing Social Security cannot work as an option, it has to be all or nothing. That is the only way it CAN work.
Three: just tell me where you can find high yield savings accounts. They went out in the 60’s. There are moderate yield CD’s, but most of the time you have to put in 50K or more for very long periods of time. I know. I’ve shopped around.
Four: What happens if you become permanently disabled, BEFORE you are able to accumulate vast storehouses of wealth, as is the case with me. I did not plan on not being able to work before I was ready to retire. I had hoped to have a decent pension, together with Social Security, so I could at least be able to take care of myself. Well, that just did not happen.
I have said this before, so I will repeat my self here: “Unless we as a nation do not put in adequate safeguards to protect the old, the sick and the disabled, we will be guilty of genocide.” This is NOT an economic issue, as in saying should our country invest its energy and time (and taxpayer dollars) in assuring that all people can have some kind of gurantee that they can at least survive in their old age, but it is a SOCIAL issue, and one every civilized society must address.
By “real investments” do you mean real estate, fancy cars, or valuable art pieces?
Personally, I mean stocks. That’s what I would buy. But I would never force that decision on anyone else. If you’re not comfortable with the volatility of the stock market, you should have the freedom to choose an investment that matches your risk tolerance. Heck, you could invest in Treasury bonds if you really wanted to.
Two: privatizing Social Security cannot work as an option, it has to be all or nothing. That is the only way it CAN work.
Why? Because you say so?
Three: just tell me where you can find high yield savings accounts.
E-Loan is currently offering 5.25% on 5-year CDs with a $10K minimum. If you were saving for retirement could use your FICA dollars in, you’d hit $10K pretty quickly. And the 5-year term is no problem. Saving for retirement is a 40+ year endeavour (49 years, if we go by the Social Security standard). If you’re willing to accept an infinitesimal amount of risk, Vanguard’s Pennsylvania Tax-Exempt Money Market is currently yielding 6.2%.
Four: What happens if you become permanently disabled, BEFORE you are able to accumulate vast storehouses of wealth, as is the case with me.
Disability insurance. It’s a lot cheaper than Social Security. Or, if you fail to plan for just such a contingency, welfare. I know a lot of Americans think welfare is a bad word. But, as you so eloquently put, it’s a necessary function of society.
“Unless we as a nation do not put in adequate safeguards to protect the old, the sick and the disabled, we will be guilty of genocide.”
Well then we’re guilty (though I disagree with your use of the word genocide). Social Security does not protect the old, the sick and the disabled. It protects those who paid in to it. Period. I agree that we need to take care of those who are unable (or even unwilling) to take care of themselves. But Social Security is not that system.
In 2005, without government assistance, there would have been 55 million Americans living in poverty. Thanks to a host of anti-poverty progrmas (primarily Social Security), that was reduced to 30 million Americans, including 9.5 million children and 2.4 million seniors. That’s a dismal success rate of 45%. And what did we pay for that? Social Security alone cost $564 billion.
On the other hand, what if we had given every person under the poverty line $10,000? That would completely eliminate poverty in America. I’m talking 100% success rate, not just seniors and children; EVERYBODY. How much would it cost? If I’ve done the math correctly, it’s $550 billion: less than we paid for Social Security.
A couple of responses here:
STOCKS? You’re joking. Only if you had a lot of money to invest can you diversify enough to actually earn a decent return. We were given stock options at two of our places of employment. We purchased as much as we were allowed to, which was not much. Two things happened. Both companies failed; our stocks were worthless. As far as our other retirement options, we have some mutual funds, a combination of low, moderate and aggressive growth, which, not surprisingly, have flat lined right now. Maybe they’ll go up, but we have already lost a good deal. We have friends who had huge diversified mutual funds, and they lost thousands.
In order for Social Security to work, every person who earns a paycheck in America has to pay into it, or there would not be enough funds. Social Security was originally intended to help both those who retired and their spouses. It was assumed that most women would outlive their husbands, but most women did not work, so something had to be set up to help them should their husbands die. No, I’m not making this up. Social Security was also intended to SUPPLEMENT any pension plan a person might have. It was never intended to be the sole source of income during retirement. What happened of course, is that most companies no longer provide pensions in the traditional sense, and the ones that do are in the form of privatized plans (401Ks, IRAs, etc.), and these are just too risky. Also, there would be no way of telling who would actually qualify for Social Security benefits, because as I said, widows and widowers were also eligible to collect benefits even if they never worked. It’s their safety net. Social Security NEVER protected just those that paid into it. It protected all seniors at the age of 65.
I’m not entirely sure if one can get disability insurance outside of the realm of an employer-employee benefits package, but I do know that most plans end when a person is eligible for either Social Security or Medicare. I know mine did. And my spouse only had short term disability for a maximum of one year.
My point is that Social Security is the very best thing we have right now. It is not welfare. It is the ’social’ aspect of our government, of any responsible government, that is so crucial. We have already seen what absolute capitalism causes, and we end up with the few having extreme wealth and the many, in or near poverty. Privatizing Social Security right now would put a large percentage of people at tremendous risk. These are people who are near retirement age with no adequate pension plan, who may have lost a very good paying job, after working very hard all their lives, who may be sick or become disabled. It is not just Social Security that they paid into. They paid taxes all their lives, as well. They paid for education, even though they may not have had children; they paid for roads that they may have never traveled on. What I’m saying is we paid our dues to our government; we did not pay to make a handful of people rich. We paid to protect our lives and our quality of life. There has to be genuine reciprocity between our government and its citizens, and Social Security is one very good way our government can give back. The main reason it is assumed to be going ‘bankrupt’, is that our government has been borrowing against it for many years, and to do what, you might ask? Partly to purchase stocks and bonds to fund a reckless war.
STOCKS? You’re joking. Only if you had a lot of money to invest can you diversify enough to actually earn a decent return.
The minimum initial investment in Vanguard’s S&P 500 index fund is $3,000. That immediately diversifies you across 500 companies. Want more diversity? Vanguard’s total stock market index fund invests in approximately 5000 different companies.
In order for Social Security to work, every person who earns a paycheck in America has to pay into it, or there would not be enough funds.
Again: Why? If Social Security were optional, those who didn’t pay in wouldn’t get paid out. That would REDUCE the system’s liabilities. Besides which, if, as you believe, Social Security is so great, only stupid people like me would opt out.
I’m not entirely sure if one can get disability insurance outside of the realm of an employer-employee benefits package
Of course it does. My previous employer didn’t offer disability insurance so I bought it on my own. It cost me about 2.75% of my salary for a plan that offered full income replacement. That’s a lot better than the crappy “insurance” offered by Social Security. It’s a heck of a lot cheaper, too.
My point is that Social Security is the very best thing we have right now.
If by “very best thing”, you mean a program that:
Despite benefit cuts and constant tax increases is $10 trillion underfunded
Consumes $700 billion per year in taxpayer dollars (~5% of GDP)
Leaves 30 million Americans in poverty, including 9.5 million children and 2.4 million seniors
Guarantees younger workers a negative rate of return
then yes, I suppose Social Security is the “very best thing” we have right now. But even if you think Social Security is the “very best thing” we have right now, that does not mean it’s the “very best thing” possible.
Privatizing Social Security right now would put a large percentage of people at tremendous risk. These are people who are near retirement age
People who are near retirement age would not have been affected by the President’s proposal to privatize Social Security. As I said before, the proposal A) was optional and B) did not apply to those born before 1950. No matter how often you try to scaremonger by arguing the opposite, it will not be true.
There has to be genuine reciprocity between our government and its citizens, and Social Security is one very good way our government can give back.
That’s ridiculous. The government can’t “give” anything to its citizens. Anything the government “gives” us comes from us (unless it’s plundered from another country, I guess). That’s like saying the Social Security trust fund “earns” interest. Sure it does. Except I’m paying that interest. Besides which, even if we accept your premise that the government can “give back” why not just tax less in the first place?
The main reason it is assumed to be going ‘bankrupt’, is that our government has been borrowing against it for many years
No, that’s not the reason Social Security is running out of money. The reason Social Security is running out of money is because of a demographic shift. It’s all tied to the ratio of workers to retirees. That ratio drives the entire system. Way back when, when that ratio was nice and high, there was no problem. But since the baby boomers decided that they didn’t need to have a lot of children, the balance is shifting. THAT is why Social Security is running out of money. Lots of people are getting benefits that relatively few people are paying for. And the only way to fix it is to raise taxes or cut benefits.
There is just one point I want to mention. You are misunderstanding what I mean by ‘genuine reciprocity’, and it has nothing to do with dollars and cents, and nothing to do with my expecting our government to ‘give’ me something in return in the way of tangible goods. Reciprocity means that we have a government that is funded by taxpayer dollars, and has been set up to GOVERN the people within its borders. We pick our leaders to hopefully do a good job on our behalf, understanding our needs and wants as a society. We have leaders because individually we cannot do it all. Reciprocity means that I fully expect our government to do a good job on my behalf. If it does not, then I would be reluctant to want to support it, such as in paying taxes. I, however, am still hopeful that our government, which is our Constitution and our elected leaders, will act in our best interests. I’m not naive enough to believe that it has always done so, but good government is worth fighting for, and it has to change to accommodate for the needs of it citizens. It is our job to let our government know what we want and need. Sometimes we have to keep telling it over and over again.
You are misunderstanding what I mean by ‘genuine reciprocity’, and it has nothing to do with dollars and cents,
I don’t understand how Social Security gives you these warm fuzzies. But, hey, whatever floats your boat.
However, your warm fuzzies are a subjective, qualitative thing. I’m talking about objective, quantitative facts. Furthermore, I get MY warm fuzzies by not paying exorbitant taxes, supposedly for my own good, which I will somehow recoup when I retire. I can handle planning for my own retirement, thank you very much. And I can do a much better job of it than the government can.