thought experiment: taxpayer-funded retirement accounts for all newborn citizens

"davesaddiction @ opposite-lock.com" (davesaddiction) 09/02/2020 at 08:55 • Filed to: None

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Some random billionaire threw this idea out to “save capitalism”:

each child born in the U.S. would receive $6,750 in a government-funded basket of index funds that could only be tapped at retirement. Assuming 8% returns over 65 years from birth to retirement [that’s a lot of faith in American financial markets over the next 6+ decades] , that total would ultimately exceed $1 million, and it would cost the government about $26 billion a year, if the birthrate holds.

For reference, $100k in 1955 is roughly equivalent to $1 million today, so a million in 2085 will have considerably less buying power.

Regardless of what your thoughts on this idea, let’s think this through.

There are about !!!error: Indecipherable SUB-paragraph formatting!!! !!!error: Indecipherable SUB-paragraph formatting!!! . If we divide that $26B by the number of taxpayers, that gives us about $180. So, for grins, make the median average tax payer put in $180, the lowest tax payers put in a buck, and the 1%ers put in like $18k (they can afford it). In return for this investment in their future, each child born after this program becomes a thing owes a year of service to their country between the age of 18 and 30, serving in the military, Peace Corps, a school, a hospital, etc (perhaps you could opt out during this window by returning the funds in your account to the government?).

Social Security survivors benefits are paid to widows, widowers, and dependents of eligible workers. This benefit is particularly important for young families with children.

The benefit to slowly phasing out S ocial S ecurity over time (decades) in favor of a individual retirement account is that it’s a real asset , that’s inheritable by heirs, regardless of when the owner of the account dies (if I understand it properly, if you and your spouse die before you’re eligible to draw, but once your kids are no longer dependents, they get nothing, correct?).

Clearly, there would need to be a supplementary system to this as a social safety net for anyone who would would become a citizen after they were born, and would not have such an account, and to continue to support disabled workers who receive SS benefits.

!!!error: Indecipherable SUB-paragraph formatting!!! [26 billion doesn’t sound like so much now...]

By 2035, the number of Americans 65 and older will increase from approximately 56 million today to over 78 million.

There are currently 2.8 workers for each Social Security beneficiary. By 2035, there will be 2.3 covered workers for each beneficiary.

At this pace, we probably can’t wait around decades for a change to occur... but with fewer and fewer earners per recipient as time passes, something’s clearly going to have to change (I’m also on board with not spending $700+ billion on defense).

What do you think? Where are the failure points in such a program? A large amount of money in a retirement account doesn’t help someone struggling through poverty in their 50s, clearly... This isn’t UBI, but more like a “ birthright” for all citizens born here , that would be paid back in service to the country.

Nibby > davesaddiction @ opposite-lock.com 09/02/2020 at 09:07

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thought experiment: first thing all newborns should hear

SBA Thanks You For All The Fish > davesaddiction @ opposite-lock.com 09/02/2020 at 09:10

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Even the conceptual wisp of a thought of “privatizing” Social Security in this way seems to really irritate one party, for reasons that are hard to fathom.

Would seem to bake in protections for “inflation” or “cost of living”.

One idea to make it more “legit” is to sort of ‘vest in’ over your first 18 years--  meaning every year for your first 18 years after birth you’d have to be declared on a US Taxpayer’s Tax Filing.

davesaddiction @ opposite-lock.com > Nibby 09/02/2020 at 09:11

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I mean, might as well prepare the for the world early, right?

Rusty Vandura - www.tinyurl.com/keepoppo > davesaddiction @ opposite-lock.com 09/02/2020 at 09:11

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Two things: first, I think mandatory military service will be about as aerodynamic an idea as the space shuttle was. I’d strike that provision. Second, how does the total payout compare? Think: actuarial tables. How long does the typical recipient draw, and how much do they draw over that time? If they die early, Govt saves money, right?

Interesting thought, though. Make me think of defined benefit pensions, of which but few remain beyond teachers, cops and firefighters. Nurses, too?

davesaddiction @ opposite-lock.com > Nibby 09/02/2020 at 09:12

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Do you use a track like this for your alarm clock?

hillrat > davesaddiction @ opposite-lock.com 09/02/2020 at 09:12

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Interesting idea, it’s just that capitalism will pervert this pretty quickly. I see a fuck ton of people borrowing against that money their entire lives and getting nothing when they retire.

I know I’m cynical as fuck and I can’t help thinking this way when you look at payday lenders, car title loans, etc.. There’s a huge portion of the population that lives hand to mouth and it’s not because there isn’t enough to go around, it’s because capitalism needs an underclass to exploit.

facw > davesaddiction @ opposite-lock.com 09/02/2020 at 09:13

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If it’s replacing Social Security I think it’s a pretty terrible idea. A baseline retirement plan that you can lose in the market is awful, and is going to leave us with a lot of destitute old people. Also 8% is aggressive for something like this. Historical returns on the stock market have been ~10%, so if you are accounting for inflation, you’ll probably need to be all in stocks to hit that target, which is not at all appropriate for someone in their 50's or 60's. If that 8% assumes a more conservative mix (though perhaps not conservative enough), then you are really only having 5-6% real growth. And are you letting people pick their own investments? If you do that then a lot of people are going make bad choices and lose a good chunk. If you limit them to predetermined mutual fund mixes, you are distorting the market, and favoring companies included in those. It’s also not clear that this is even a good trade off for a year of national service (though a year of national service might be a good thing regardless).

Note that there is a similar concept suggested as a means of fighting inequality called Baby Bonds that would give a cash payment to each baby (possibly progressively based on the wealth of their family). Generally though, those funds would be available when they reach adulthood, putting higher education, home owning, and other such things on the table, giving the disadvantaged a hand up early in life.

davesaddiction @ opposite-lock.com > hillrat 09/02/2020 at 09:14

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I guess there’s no way that you could prevent that? Not sure.

Predatory lending has to go.

MasterMario - Keeper of the V8s > davesaddiction @ opposite-lock.com 09/02/2020 at 09:15

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It really doesn’t do anything besides prop up wall street. Like you said $1 million won’t go very far in 65 years.

Want people to be able to reti re comfortably? Make companies pay them a living wage. I think if you tied company taxes to employee usage of government benefits you’d see this change quickly. Whatever benefits (like food stamps) the government provides an employee, that cost (or at least a portion of it) is added to the company’s tax total. And if you only have a part time employee you owe the portion of that total. So if they work 10 hours a week for a company , then the company owes 25% of the benefits paid. It would encourage companies to hire full time employees and pay better rates.

davesaddiction @ opposite-lock.com > Rusty Vandura - www.tinyurl.com/keepoppo 09/02/2020 at 09:19

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I didn’t say mandatory military service - there was a list of options.

The government definitely does “ better” with SS if you die early. Paying out on someone for 30 years doesn’t work well, but the system was set up for the law of averages. With people living longer, it necessitates changes (either later retirement age or lower benefits).

Yeah, I wonder if pensions are on their way out for those professions as well (you forgot to list military pension).

hillrat > davesaddiction @ opposite-lock.com 09/02/2020 at 09:21

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Sure there is, aggressive legislative intervention. Unfortunately people who get exploited by predatory lenders don’t have lobbyists to represent their interests.

This crony capitalism bullshit we have going on here is really kind of the worst.

davesaddiction @ opposite-lock.com > SBA Thanks You For All The Fish 09/02/2020 at 09:21

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Giving a true asset to people who have very little chance of building that up in their life seems to be a way to end the cycle of poverty in some families...

Yeah, that’s probably a good addition.

davesaddiction @ opposite-lock.com > MasterMario - Keeper of the V8s 09/02/2020 at 09:25

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Yes, a true living wage for new lower middle class work needs to happen, too, but investing early in every child seems like a great idea.

Interesting concept tying pay to gov. benefits, but seems like that would encourage companies to hire a few people as possible, not hire more...

facw > Rusty Vandura - www.tinyurl.com/keepoppo 09/02/2020 at 09:25

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If they die early, Govt saves money, right? 

Not under the plan above. What he’s proposing is that the contribution is made at birth, and then belongs to the account holder, and would be inherited if the holder dies. Very different than S ocial S ecurity where if you die early you get less (though your spouse may get some benefits). One of the stresses on Social Security today is that people are living much longer in retirement than when the program was created, so it has to pay out a lot more.

It is true that the business world clearly prefers defined contribution plans rather than defined benefit plans, but I don’t think it makes sense for a safety net program. I do think it makes a lot of sense for a general retirement plan, both because it makes switching jobs easier, and because we aren’t relying on those defined benefit plans still existing when we get to retirement (they are required to carry federal insurance, but that program is broken in several ways as well).

Nibby > davesaddiction @ opposite-lock.com 09/02/2020 at 09:27

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yes

Nibby > davesaddiction @ opposite-lock.com 09/02/2020 at 09:27

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i don’t use an alarm

davesaddiction @ opposite-lock.com > hillrat 09/02/2020 at 09:28

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Getting big money out of politics is another thing that has to happen...

Bezos just topped $200,000,000,000.

And is EX is worth $66,000,000,000! Insane. If they’d stayed married, their worth would be more than double Bill Gates’...

SBA Thanks You For All The Fish > davesaddiction @ opposite-lock.com 09/02/2020 at 09:30

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The right legislation would probably want to study what works in generational trusts for best practices.  You’d also have the issue of what to do if people are disabled or killed at an earlier age...  and is it transferable or inheritable in any way?

Jb boin > davesaddiction @ opposite-lock.com 09/02/2020 at 09:31

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Then it will force peoples to always want more inflation so they can, one day, be rich, maybe... and increase the risk of having terrible economic crisis in case of bursting bubb les like we have seen in 2008.

And as the USD is still the reference money, will fuck the whole wor l d economy even more than the US :)

facw > davesaddiction @ opposite-lock.com 09/02/2020 at 09:32

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it necessitates changes (either later retirement age or lower benefits) 

Or higher taxes. Please don’t assume that we automatically have to make things crappier. In social security’s case, all that would be required to make the program very well funded would be to eliminate (or just raise) the payroll tax cap (currently Social Security taxes are only paid on around the first $ 130k of income). Eliminating the cap would also make the program more progressive, since the very rich currently only put in a tiny sliver of their income. Biden may have voiced support for this in one of the debates last year (he was kind of rambling).

MasterMario - Keeper of the V8s > davesaddiction @ opposite-lock.com 09/02/2020 at 09:33

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encourage companies to hire a few people as possible

Companies already do this.

To add to your point though , with widespread automation on the horizon, UBI will at some point become a necessity. At some point a large workforce just is not necessary, so we will need to decide whether we implement UBI or descend into a dystopia with a few haves and a majority of have-nots.

facw > SBA Thanks You For All The Fish 09/02/2020 at 09:38

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There huge problems with privatizing social security and I find it hard to fathom why one party is happy to ignore them. I could give you a long list, but lets just start with what good is a saf ety net program where you can sabotage the net through poor investing choices, or just bad luck? Sure you could have a safety net for the safety net, but that just increases the moral hazard and encourages risky investing.

And sorry, but that “ vest- in” idea is spectacularly bad. Why on earth would you ruin someone’s retirement (and deny them any sort of safety net) because of something someone else  did when they were a child?

davesaddiction @ opposite-lock.com > SBA Thanks You For All The Fish 09/02/2020 at 09:40

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I see it as a true asset, but maybe only once the person has done his/her year’s service, or reached a certain age? I don’t see much of a reason to give the account of a 14 year old who dies to his parents.

There would need to be a continuation of SS for the disabled (in addition to their birthright).

hillrat brought up a good point: how do you prevent a person from borrowing against this future asset? I guess there’s a way to do it, legally, but it seems complicating.

And what of the case of a 45 year old who becomes terminally ill? Seems like they should be able to access it early if they desire to.

For Sweden > davesaddiction @ opposite-lock.com 09/02/2020 at 09:41

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How about instead the feds give every kid a project RX-7

SBA Thanks You For All The Fish > davesaddiction @ opposite-lock.com 09/02/2020 at 09:46

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Well, those are really good points... I assume you “vest in” on the benefits side as well. Of course, they essentially do that with Soc Sec as well. Your benefit is theoretically higher if you take it later.

Some assets are also set up so you can’t borrow against them.  I think IRAs are in the class of asset, so there are precedents there.

davesaddiction @ opposite-lock.com > MasterMario - Keeper of the V8s 09/02/2020 at 09:51

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It will be a very interesting transition. We’re already a service/entertainment based economy, and it will only go further this way with time. Saudi Arabia already has some kind of UBI - clearly it’s a much easier thing when large money-generating assets are state-owned.

It’s a crime that anyone is homeless or hungry is a country as rich as ours...

davesaddiction @ opposite-lock.com > Jb boin 09/02/2020 at 09:52

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No, you’d want less inflation, so your money keeps its value over time.

SBA Thanks You For All The Fish > facw 09/02/2020 at 09:53

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You seem more upset than necessary...

“Vest In” only means that if a child were to die of an accident as a 5 year old that somehow that account wouldn’t continue to even exist or accrue for the parents or siblings. It’s like stock options— if they aren’t fully vested they basically cancel out. It wouldnt make sense for the account to continue to exist.

The “well it’s not guaranteed like Social Security” argument is familiar but ignores that those benefits today are basically either borrowed (mostly from Treasury issuance, and usually to the Chinese) or simply printed. So, I’m not sure that argument flies.

The other counter-argument is generally that this approach artificially inflates the stock market. Which we have apparently done already with absurdly low interest rates.

Some variation of the idea gets floated every 20 years and immediately gets shot down for the reasons you cite.  I’m not sure those reasons apply any more.

Future next gen S2000 owner > MasterMario - Keeper of the V8s 09/02/2020 at 09:55

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I’ll play devils advocate. Let’s suppose companies are legally obligated whatever is defined as a living wage, would the people benefi ting from that investment more or spend more?

I think its an interesting thought experiment. One could argue that both options present unique advantages. If they spend more the economy grows, more upward mobility options exist. If they save more they are able to live more comfortably in their retirement years.

Future next gen S2000 owner > davesaddiction @ opposite-lock.com 09/02/2020 at 10:00

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I’d like to see the comparison of how the million stacks up relative to SS dividends paid out. Make it an apples to apples comparison. If SS is paying out more than 1 million over the life of a person, then this would exasperate the problem of not having enough money.

It is an interesting idea. Compound interest is your friend. It really makes me question why don’t I take some money and put it in IRA’s for my kids. It’s would take a chunk out of my savings now but it would give them a solid footing in the future.

Either way, I think the number is too low. If it really only costs 26 Billion, we should double it. Take the 50 Billion out of defense, bump the number to 2.5 Million or so per person.

ADabOfOppo; Gone Plaid (Instructables Can Be Confusable) > davesaddiction @ opposite-lock.com 09/02/2020 at 10:03

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Agreed. But doing something like this is sOcIalIsM  !!!1 and would also help brown/ ‘other’ people. And has been proven throughout our history, this is unacceptable. 

facw > SBA Thanks You For All The Fish 09/02/2020 at 10:03

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benefits today are basically either borrowed (mostly from Treasury issuance, and usually to the Chinese) or simply printed. 

This is not remotely true. Current social security benefits are paid from current contributions. The excess ($2.5B in 2019) goes into the trust fund (value: $2.9T at the end of 2019). The trust fund is invested entirely in treasuries (that is to say the US Government is borrowing from Social Security, not the other way around).

There are of course concerns that the retiring of the Boomers will deplete the Trust Fund (SSA expects that by 2035, they will only be able to pay 75% of benefits from payroll taxes, requiring payments from the trust fund to maintain current benefit levels), so that is something to be concerned about, but currently the taxes are still bringing in a surplus.

As for the “vest-in” if that’s all you wanted, it seems you picked a very convoluted way to do it. Just make people officially claim their account when they are an adult (you’d want some sort of transfer then anyway, since you probably don’t want children making stock picks).

hillrat > Future next gen S2000 owner 09/02/2020 at 10:09

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They’re going to spend more and that stimulates the economy, not tax cuts.

SBA Thanks You For All The Fish > facw 09/02/2020 at 10:11

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We’ve been “lending” Trust Fund reserves to the Treasury for decades to meet deficit needs. The idea that the Social Security system reserves are somehow “separate” and “never touched” is quaint, but highly misleading. There are accounting entries to track the “trillions” that are supposed to be in there, but those have regularly been “lent” to the Treasury to meet short term obligations.

It’s all “borrowed” which is my point. Those deficits all have to come back from future tax revenues, which is why people are so concerned.

davesaddiction @ opposite-lock.com > facw 09/02/2020 at 10:12

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I’m talking about Social Security, specifically, with the program funding itself through current workers. On the path it’s currently on and if current trends hold, it’s unsustainable, long term. Now additional welfare programs and a wider social safety net is another thing, and yes, these need to be expanded. No one should be hungry or homeless in this country.

Yeah, that cap probably needs to go up... But is the idea that what you receive is only calculated to a max level based on that cap? I guess I get that, since it’s a self-funded program, and you, at some level, although the percentage is variable based on your income , get out what you put in.

The maximum wage taxable by Social Security is $137,700 in 2020. However, the exact amount changes each year and has increased over time. It was $132,900 in 2019 and $106,800 in 2010. Back in 2000, the taxable maximum was just $76,200. Only $39,600 was taxed by Social Security in 1985.

Workers pay 6.2% of their earnings into the Social Security system, and employers match this amount until their salary exceeds the taxable maximum amount of income for that year. Those who have salaries larger than the taxable maximum do not pay Social Security taxes on that income or have those earnings factored into their future Social Security payments .

“In order to receive the maximum Social Security benefit, you would need to earn at least the maximum Social Security wage base for at least 35 years in your career,” says Jim Blankenship, a certified financial planner for Blankenship Financial Planning in New Berlin, Illinois, and author of “A Social Security Owner’s Manual.” “The figure is adjusted each year based on changes to the national average wage index.”

I guess it would just takes a wholesale change in how the program is viewed. If it’s no longer a government-managed savings account of sorts , and just another social safety net program based on a progressive tax, then it’s no issue eliminating the cap entirely. And really, it has always been the latter, even if it was originally sold or thought of as the former.

davesaddiction @ opposite-lock.com > For Sweden 09/02/2020 at 10:13

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FC or FD?

MasterMario - Keeper of the V8s > Future next gen S2000 owner 09/02/2020 at 10:17

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If you earned a decent wage your whole life and still have nothing to show for it when you retire, that’s on you, I don’t feel much sympathy for those types. The people who rely on government benefits though generally are making minimum wage and can barely get by with just the basics. It’s the whole, “it’s expensive to be poor” concept. Remove that barrier and at least level the playing field a bit. 

davesaddiction @ opposite-lock.com > ADabOfOppo; Gone Plaid (Instructables Can Be Confusable) 09/02/2020 at 10:18

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With the advent of hundred-billionaries , it’s well past time for corporate taxes to go up... as well as taxes on the 0.01%.

facw > davesaddiction @ opposite-lock.com 09/02/2020 at 10:19

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“ just another social safety net program based on a progressive tax” this is how I’ve always thought of it, and how it was taught to me in school . It was created to avoid the destitution that many elderly suffered during the depression, to make sure people didn’t end up on the street, not as a general purpose pension. If you are counting on social security as your only source of retirement income, you are doing something wrong.

facw > SBA Thanks You For All The Fish 09/02/2020 at 10:24

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It is not borrowed. It is lent. Other government programs are funded by those loans from Social Security, but there’s no question about our ability to pay it back. And if Social Security is forced to sell treasuries in it’s possession, that may increase borrowing costs, but doesn’t change much otherwise.

The fact is that Social Security is currently a lender rather than a borrower.

Even if you want to argue that the Trust Fund is somehow a sham (I hope other treasury borrowers don’t find out they are a sham asset), 100% of current benefits are paid out directly from current tax revenues.

MasterMario - Keeper of the V8s > davesaddiction @ opposite-lock.com 09/02/2020 at 10:24

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Unless you have a ton of debt, then you want all the inflation. That debt becomes cheaper as time goes on. That’s why these 3% home loans are nuts, 3% is pretty close to the long term average inflation...so it’s essentially a free loan. Granted, inflation over the last 2 decades has been closer to 2.5%, but that’s still a very cheap loan.

davesaddiction @ opposite-lock.com > Future next gen S2000 owner 09/02/2020 at 10:28

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All depends on age of the recipient. If you die at 64 - nothing . If you die at 104 - A LOT . If you (and your employer) are both putting in 6.2% for the duration of your working life, you should have more to show for it than the hope you’ll live past 70 to get some of it back. This is an asset that can change the course of your family’s future.

If you think of it, it doesn’t really matter if its in your name or theirs when they’re little, but having it earmarked for them isn’t a bad idea (I think there can be implication for college grants if the child has actual assets - but not sure). Ours have 529s, and I’m planning to help my kids invest in a Roth IRA (maybe I’ll match what they put in?) as soon as they earn income (starting this year for my 13 year old).

Jb boin > davesaddiction @ opposite-lock.com 09/02/2020 at 10:30

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Indeed, thought about it the wrong way around :)

wafflesnfalafel > davesaddiction @ opposite-lock.com 09/02/2020 at 10:31

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sounds like goll durn communism!

ADabOfOppo; Gone Plaid (Instructables Can Be Confusable) > davesaddiction @ opposite-lock.com 09/02/2020 at 10:31

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I absolutely concur. But we all know that raising taxes on those who should be paying their fair share will be met with weaponized propaganda about how “Your” taxes are going up being screamed continously by Faux Noise et al. Nevermind that raising taxes on people making say 400k+ would have zero effect on the majority of the people who watch that garbage. Or that providing them with a single-payer healthcare system like Canada or Scandinavian countries would save them thousands each year in return for maybe an increase of a few hundred dollars in taxes.

I like your idea. But until we remove the power of profit from politics, we will never have a meaningful discussion or progress on any of these urgent issues.

We also need to have a voting base that can handle complex, and nuanced arguments, as these are complicated issues and there is no single, simple solution to any of them. Doing any good will always fail to be perfect. And will also be a compromise where a few are slightly inconvenienced for an overall benefit to society. 

MasterMario - Keeper of the V8s > Future next gen S2000 owner 09/02/2020 at 10:32

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Well, we can see how this would play out had it been implement in 1955. $6750 today is about $700 in 1955. If that $700 were invested into the S&P 500 you would have about $63,000 today...I doubt anyone would give up their SS benefits for that. Worst case I think SS pays that out within 4.5 years.

nermal > davesaddiction @ opposite-lock.com 09/02/2020 at 10:32

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The real way to fix social security is to shorten the average lifespan of old people so they’re not leeching as much money in their non-working years. Perhaps through a virus that you could unleash in nursing homes that will work in conjunction with other old people ailments to speed them through the end-of-life process.... Clearly nobody would do that intentionally though....  

davesaddiction @ opposite-lock.com > SBA Thanks You For All The Fish 09/02/2020 at 10:33

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https://www.usdebtclock.org/

Jb boin > MasterMario - Keeper of the V8s 09/02/2020 at 10:37

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It’s literally the system of most of European countries (and has been for decades) , a part of your pay is used for your retirement and this retirement plan is managed by the state and not tied to the market and even if you didn ’ t work enough you have a minimum pension .

And t here are different incentives on companies to employ full time jobs instead of part time .

davesaddiction @ opposite-lock.com > nermal 09/02/2020 at 10:38

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To be honest, it definitely came to mind that there were probably some Chinese officials high up that were super happy about the virus “solving some problems” for them.

SBA Thanks You For All The Fish > davesaddiction @ opposite-lock.com 09/02/2020 at 10:38

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I have a relative who’s an Econ professor at Purdue. He just kind of shakes his head at all the stuff we’ve done since 2008... Quantitative Easing is a fancy name, and it kept the banks afloat, but really ballooned up the debt side of the balance sheet. His summary:

“It’s all debt. It has to get re-paid someday. Or, we have much bigger problems.”

COVID’s sent it into the stratosphere.  It’s not good.

davesaddiction @ opposite-lock.com > MasterMario - Keeper of the V8s 09/02/2020 at 10:42

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Yep. Definitely incredible, especially considering some of the double-digit home loans our parents took on in their lifetime.

davesaddiction @ opposite-lock.com > SBA Thanks You For All The Fish 09/02/2020 at 10:45

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We made our way out of it after the war; hopefully we can do it again.

SBA Thanks You For All The Fish > davesaddiction @ opposite-lock.com 09/02/2020 at 10:46

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Thanks for the Debt Clock link, btw. I hadn’t looked at it in awhile.

It is funny (with the other side discussion going on) that “Social Security” is clearly listed as a Main GAO Accounting bucket item — Those revenues just flow into the General Fund and Benefits are also pay likewise.

I know the SSA likes to talk about The Trust Fund for SS, but the reality is that those cash flows practically have just been another source of Guvmint income and expense for decades. Any surplus has long since been applied to plaster over other holes in the budget— and any “replenishment” has to come from the other sources we already tap... taxes or more borrowing.

I have no idea how we function if interest rates go back to 8 or 9 or 10 percent.

nermal > davesaddiction @ opposite-lock.com 09/02/2020 at 10:47

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China (and Russia) are both more happy about the disruption to  the US caused by the virus. The elimination of old people is just a bonus. 

SBA Thanks You For All The Fish > davesaddiction @ opposite-lock.com 09/02/2020 at 10:49

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Those of us that remember “Stagflation” and “18 % mortgages” on homes?  Hope we don’t work out in the same way we did last time...   those were grim years under Carter.  I remember my parents and grandparents being very freaked out.

davesaddiction @ opposite-lock.com > SBA Thanks You For All The Fish 09/02/2020 at 10:51

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Not fun to look at, but important.

Yeah, it’s all one bucket.

What would take rates back up to that level?

davesaddiction @ opposite-lock.com > SBA Thanks You For All The Fish 09/02/2020 at 10:53

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Yeah, that’s not the way to do it.

Highlander-Datsuns are Forever > SBA Thanks You For All The Fish 09/02/2020 at 10:53

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Every person and country files for bankruptcy and we reset the accounts?

Tekamul > davesaddiction @ opposite-lock.com 09/02/2020 at 10:54

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The biggest issue with that plan, and SS as it exists now is 1 number : 65

When SS was created, the age was set to 1 year MORE than the average US life expectancy. To maintain that standard, SS age would be about 80.

The way we frame retirement now is deeply flawed. But it was made that way to prop up the economy (incentivize older, more expensive workers out of the job market to keep unemployment down and profits up). If people want to actually have a sustainable SS system, t hey need to expect a serious tax burden.

That 8% expectation is bunk. Also, it’s only 2020. The 401k system is still largely untested. If you graduated college the year the 401k provision was passed, you’re about 63. We don’t have anywhere near a sufficient data set.

SBA Thanks You For All The Fish > davesaddiction @ opposite-lock.com 09/02/2020 at 10:58

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A lot of us grew up thinking 8% was “normal”, but I do have an Oxford trained economist, with a second in Classics, who’s hilarious. His reaction, having combed the centuries of financial data back to the Romans (Rome had a serious inflation issue for many years— trackable in the going price for a loaf of bread), his contention is more like “well, over the longer periods 2% was more like the cost of money.”

Of course, the bad news is that sometimes the low cost of money drove irrational increases in certain goods (hint: equities and real estate) even as the larger economies were seeing very small increases in productivity. So, yeah, we might see a long period of low interest rates, but at the risk of a severe decline in quality of life and wealth creation. it’s probably not good for our kids.

And, if inflation takes off, you almost always see interest rates skyrocket to keep ahead of it.  otherwise you turn into Argentina during the bad times.

For Sweden > davesaddiction @ opposite-lock.com 09/02/2020 at 11:00

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Those with a Social Security Number ending in an odd number get an FC. Those with a Social Security Number ending in an even number get an FD .

SBA Thanks You For All The Fish > Highlander-Datsuns are Forever 09/02/2020 at 11:01

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Hoo, boy, if we start to default on the bonds? Like some debt-saddled Latin American country in the 1980s? Times probably get interesting then.

We’ll REALLY wish we’d have nationalized Goldman, Morgan, Citi and those other assholes 12 years ago. Because with independent banks, and an ugly balance sheet?  It’ll be ugly.

Brian, The Life of > davesaddiction @ opposite-lock.com 09/02/2020 at 11:08

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There are lots of ways to “save” SS without getting ri d of it. Making it “needs-based” vs a universal entitlement would certainly help. My in-laws are a great example of people who get the benefit because of their age but they have a solid retirement income on their own and do not need the SS payouts to live.

davesaddiction @ opposite-lock.com > Tekamul 09/02/2020 at 11:10

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The average annualized total return for the S&P 500 index over the past 90 years is 9.8 percent.

I don’t know what the correct age should be for retirement benefits to begin, but it’s gotta be before 80.

davesaddiction @ opposite-lock.com > Brian, The Life of 09/02/2020 at 11:16

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Right, but that’s a wholesale change to what the program is. Turns it into just another tax and welfare program instead of one where everyone pays out and everyone* gets some out . Which is fine, but it’s a big change, and if you’re going to change who gets it, they you could easier change who pays in (or doesn’t).

Highlander-Datsuns are Forever > SBA Thanks You For All The Fish 09/02/2020 at 11:17

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I know in my gut that our current debt spending is not sustainable and a crash will likely be much worse than the great recession -or- we should bite the bullet and get interest rates back up to a place where we see a return and investments change from magic money accounts i n the stonk market and back to real material goods.

davesaddiction @ opposite-lock.com > For Sweden 09/02/2020 at 11:18

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Harsh, but fair.

Tekamul > davesaddiction @ opposite-lock.com 09/02/2020 at 11:28

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As constructed, retirement benefits from the government are meant to support the elderly which would be otherwise destitute. Everything else is privately funded retirement.

I think the SS system should provide a baseline income for those late in life, but that requires a serious tax reform.

Future next gen S2000 owner > hillrat 09/02/2020 at 11:32

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A tax cut on the lowest earners effectively acts like a raise. It doesn’t replace a real raise but it does give them more income. Studies have shown they plow that right back into the economy.

BaconSandwich is tasty. > davesaddiction @ opposite-lock.com 09/02/2020 at 11:36

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“ Assuming 8% returns”

Yeah... that seems a little optimistic.

davesaddiction @ opposite-lock.com > BaconSandwich is tasty. 09/02/2020 at 11:39

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The average annualized total return for the S&P 500 index over the past 90 years is 9.8 percent.

hillrat > Future next gen S2000 owner 09/02/2020 at 11:39

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Of course, when I was talking about “tax cuts to stimulate the economy” I was talking about the bullshit, supply-side, 1% focused cuts we tend to get in the USA.

Victorinoo > davesaddiction @ opposite-lock.com 09/02/2020 at 11:40

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The idea is not terrible, but this will cause massive inflation. If everyone has 1 million then the cost of all goods and healthcare will rise to meet the new average salary. It’s a lot like housing, the wealthier a population in a city is, the higher rental prices go to meet that new high.

Future next gen S2000 owner > hillrat 09/02/2020 at 11:40

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Y eah,  t hose are worthless.

davesaddiction @ opposite-lock.com > Tekamul 09/02/2020 at 11:41

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Yes, but why even give it to the wealthy if that was really the case? Just to make them feel better about contributing their taxes to the program?

Our country is wealthy enough that no one should be hungry or homeless.

hillrat > Future next gen S2000 owner 09/02/2020 at 11:44

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What it all really boils down to is putting more money in people’s hands, either by raising wages, cutting taxes, instituting UBI, or something else we haven’t thought of yet. 

Tekamul > davesaddiction @ opposite-lock.com 09/02/2020 at 12:05

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Fair.  They certainly don’t need it.  But it would make such a small difference.  It would be more a matter of “justice”. 

SBA Thanks You For All The Fish > Highlander-Datsuns are Forever 09/02/2020 at 12:19

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It’s fun to run the “debt service levels” at 10% interest rate... then you realize that this number substantially exceeds the ENTIRE revenue side of the income statement from only 5 years ago.

I don’t know what we do if global interest rates go to 8-10-12%.  But it won’t be pretty.

SBA Thanks You For All The Fish > For Sweden 09/02/2020 at 12:45

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Imagine if every kid born in 1962 had gotten a Ferrari 250GTO...

Highlander-Datsuns are Forever > SBA Thanks You For All The Fish 09/02/2020 at 12:45

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It’s like the TESLA stock being worth 1000 times more than Ford Motor company, sure they have a varied product like with power walls, solar, and vehicles but Ford sells $ 160b of hard goods a year vs Tesla $25b . 

Highlander-Datsuns are Forever > For Sweden 09/02/2020 at 12:46

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Turbo II for me then.

SBA Thanks You For All The Fish > MasterMario - Keeper of the V8s 09/02/2020 at 12:47

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The one thing that should have happened 40 years ago, but persists to this day?

Remove the damn “cap” on the FICA and Medicare deductions based on income. As is right now? Horribly regressive tax. If you make $450K a year? should be no problem paying the full hit on FICA.

I’m always told it’s “Politically Impossible”, which usually means it’s a great idea.

MasterMario - Keeper of the V8s > SBA Thanks You For All The Fish 09/02/2020 at 13:34

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Considering they would have had to produce 3.9 million of them their value would probably be significantly lower.

For reference, there have been less than 2 million Corvettes produced, total, since their introduction.

Brian, The Life of > davesaddiction @ opposite-lock.com 09/02/2020 at 13:34

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Well, that was the original intention of SS. It was supposed to be “retirement insurance” for people who could not save enough to fund their retirement. It was also established to benefit peole atarting at 65 years of age when the average life expectancy was, what? Early 70's?

SBA Thanks You For All The Fish > MasterMario - Keeper of the V8s 09/02/2020 at 13:37

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Yeah, that was actually exactly the point I was trying to tease out.

Putting everybody’s retirement into a “Dow Index Fund” is probably a terrible idea for 350 million people.  Just a hunch.

Rusty Vandura - www.tinyurl.com/keepoppo > davesaddiction @ opposite-lock.com 09/02/2020 at 13:44

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I sort of said “mandatory” because I’m sure you had death panels in mind also. /s

As a public school educator myself, I am less worried about my pension being done a way with than I am about the State of California declaring bankruptcy. And yes, military pensions belong on my short list.

I think your idea is definitely not without merit.

davesaddiction @ opposite-lock.com > Brian, The Life of 09/02/2020 at 13:44

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I get that it was retirement insurance for the poor , but if that’s really all it was, why ever give it to the people who didn’t really need it?

Rusty Vandura - www.tinyurl.com/keepoppo > facw 09/02/2020 at 13:46

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I was talking about Social Security.

I know some Old People who are living pretty high on the hog right now because of defined benefit pensions they began drawing thirty years ago. Folks working today won’t be drawing that kind of money.

I think Dave’s plan is not without merit.

Rusty Vandura - www.tinyurl.com/keepoppo > facw 09/02/2020 at 13:50

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I’m a teacher and I started late, at age 38, after I’d held, and washed out of, a series of real jobs. (I love saying real job around other educators because it irks them greatly because deep down inside, they know how good they’ve got it. Do they earn their salary? That’s the real question...)

So for the purposes of my teachers’ pension, 30 years is the first big plateau, which means teaching until I’m 68. I’ve said throughout my career that teaching was either going to keep me young or put me in an early grave and I’ve already survived two serious attempts at the latter, so I’m banking on the former. Besides, 68 is not old to be working nowadays. My mother just turned 80 and she’s still working. Granted, she’s not earning the salary she commanded 20 years ago, but she likes having somewhere to be and something to contribute.

Brian, The Life of > davesaddiction @ opposite-lock.com 09/02/2020 at 13:52

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Great question!

davesaddiction @ opposite-lock.com > Brian, The Life of 09/02/2020 at 13:59

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I think it was probably to make it more palatable to the rich, and to disguise it somewhat as a government-controlled savings account of sorts. When everyone pays in, and everyone gets out, you’re able to think you’re all in this together, even if some benefit more from the program.

Honestly, I feel the same ways about taxes. Even for those with the least income, I think should “owe” some tax each year, even if they get way more than that back in credits and other government assistance. We’re near the point where 50% pay zero tax and 50% pay all of the tax, which easily sets up an us vs. them scenario for anyone who wants to try to further divide us against our fellow citizens.

fintail > davesaddiction @ opposite-lock.com 09/02/2020 at 14:19

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I’d like to see a national pension plan with the same effective ROI as afforded to public sector retirees (the whole retire after 25/30 with 85% of your highest income nonsense enjoyed by citizens deluxe).   Similar retirement healthcare plans, too.

davesaddiction @ opposite-lock.com > fintail 09/02/2020 at 14:38

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Can you imagine what tax rates would have to be to provide that for everyone?

I wonder how long pensions like you’ve described will survive in the future.

fintail > davesaddiction @ opposite-lock.com 09/02/2020 at 14:53

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Massive by American standards , no doubt. Probably on par with first world nations. It wouldn’t be a giveaway of course, you’d have to contribute x% for y years to qualify , but it would provide something more than a casino.

Given so many untenable socio-economic issues simmering right now, I am surprised there hasn’t been more of a movement to cut that particular public sector insanity .

davesaddiction @ opposite-lock.com > fintail 09/02/2020 at 14:55

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It’s as close to a sacred cow that we have.

fintail > davesaddiction @ opposite-lock.com 09/02/2020 at 14:59

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Especially on the praetorian side.    Back in the before times, I skated with a guy who is a retired cop, full pension etc, he put in his time - he’s in his mid 50s at the oldest.  Insanity.   And I doubt either side has the stones to reel it in a bit, because patriotism warriors law and order etc.

davesaddiction @ opposite-lock.com > fintail 09/02/2020 at 15:06

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What is the full payout, including benefits, for someone like that, assuming they live into their 80s? Crazy.

fintail > davesaddiction @ opposite-lock.com 09/02/2020 at 15:09

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Especially if he padded his stats so to speak in the last few years.

Eric @ opposite-lock.com > BaconSandwich is tasty. 09/02/2020 at 15:29

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My returns we re averaging well into the double digits before the pandemic, so that’s not entirely unreasonable (I believe 2018 went nowhere overall and 2019 was something like 35 % ) . The problem is that if this much money was poured into a simple basket, it would be very easy to abuse severely at so many levels. The bounces from payroll deductions are bad enough as it is...

My son’s college savings have gained 20% this year already.