07-12-2004 23:54									#31
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quote: no you dont, its compounded interest, not simple interest. each year the principal grows, and the interest from last year goes up, meaning an exponential growth rate.

I just calculated Gepap's example, and that gets you only $867,109 (ignoring the effects of inflation).

	07-12-2004 23:56									#32
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Which is a whole hell of a lot more than Social Security would pay you for use of your money.

	07-12-2004 23:58									#33
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But how many people have the discipline and means to do that?

	07-12-2004 23:58									#34
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quote: Originally posted by Lawrence of Arabia no you dont, its compounded interest, not simple interest. each year the principal grows, and the interest from last year goes up, meaning an exponential growth rate.

I have a little compound interest slider that I used to come up with my figures.

quote: i wont cash out till the end.

And if the market crashes just before your retirement, you might have to dealy retiring for another decade to recoup your losses.

	08-12-2004 00:04									#35
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quote: But how many people have the discipline and means to do that?

Lots. Remember that Social Security itself taxes a $50k earner $6,375 a year off the top (not even taking into account the fact that earnings rise each year). Then it provides them with quite substandard return on investment.

In addition to those funds, almost half of workers contribute to 401(k) plans. Indeed, workers are sitting on a $2 trillion nest egg already with the 401(k)s. Also, there is about $3 trillion sitting in IRAs.

	08-12-2004 00:10									#36
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1. That's still well above the median income.
2. That would only get him half a million (again, ignoring inflation), again, assuming that he has the discipline to do that for 30 years, and assuming that there aren't any complications.

What's the median social security payout?

	08-12-2004 00:17									#37
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$13,300 for somebody born in the 40s.

	08-12-2004 00:26									#38
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quote: Originally posted by DanS Lots. Remember that Social Security itself taxes a $50k earner $6,375 a year off the top (not even taking into account the fact that earnings rise each year). Then it provides them with quite substandard return on investment. In addition to those funds, almost half of workers contribute to 401(k) plans. Indeed, workers are sitting on a $2 trillion nest egg already with the 401(k)s.

Workers contribute automatically to 401(k)'s, not by choice. Besides, half of workers does not equal half the population, nor are those amounts euqla to all.

People were free before 1934 to save money and invest for their own retirements. why don't we examine how well that system worker before?

	08-12-2004 00:28									#39
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quote: Besides, half of workers does not equal half the population

That's also true of social security, after all. Only workers contribute.

quote: Workers contribute automatically to 401(k)'s, not by choice.

No they don't.

	08-12-2004 00:30									#40
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quote: Workers contribute automatically to 401(k)'s, not by choice.

Que?

-Arrian

	08-12-2004 00:38									#41
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Some simple facts about investment returns and the amount of saving you need.

Assumptions:
1. Real return on investment is 4% a year
2. Real incomes rise at 2% a year
3. Assumed real annuity income is 6% a year until death.

Years of saving, % of desired retirement pension needed to be saved each year:

45 years, 22%
40 years, 27%
35 years, 32%
30 years, 40%
25 years, 50%

	08-12-2004 00:39									#42
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They chose to participate in the program offered by their company, but after their initial "sign me up", they don;t run their own investment choices AFAIK- large mutual funds do that.

Its nbot like they independently take their cash and sign up to an e-trade account.

	08-12-2004 00:50									#43
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With my 401(k), I choose whether to participate or not and how much to contribute. Also, if I wished to set up an e-trade account to manage it all, I could do so.

	08-12-2004 01:18									#44
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With my 401(k), I can adjust the percentage of my salary put in (0-20%, IIRC), and I can decide how to allocate my money amongst a group of funds (there are probably about 15 of them). I can move the money that's already there around, as well as adjusting where the money that goes in in the future will be allocated. At this point, given the changes to the funds (new funds come in, old funds are kept although you can't put more money in... etc), my money is spread out across a lot of funds.

I'm not aware of an option that allows me to micromanage my 401(k) via something like e-trade, but honestly I don't want that. I don't have the taste for that sort of investment. I'd rather spread my money out in the available funds, aiming for a mixture that provides me with moderate risk... and leave it there for a few decades. Fire 'n forget. As such, I may make less money that people who micromanage (or rather, those who actually know how to do that properly), but that's ok.

-Arrian

	08-12-2004 01:27									#45
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You can put up to $13k per year into your 401k and your employer can match up to 25% of that.

Any easy way to calculate compounded interest is "The Rule of 72" which states that you will double your initial investment every 7.2 years at a 10% interest rate, or double you initial investment every 10 years at 7.2%. Gives you a good idea.

	08-12-2004 01:30									#46
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OK.

So when you retire, you will have your 401(k) benefits and the SS checks. Good for you, and anyone else with a 401(k)

The point of SS is to make sure every worker gets something once they are of retirement age. It's than simple. People are free to save on their own or use other government sponsored programs.

	08-12-2004 01:41									#47
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Yeah, it is great. However, I doubt I will ever see a drop of the SS money. So, why am I paying it? Because they spent all the money and are using the money I am paying to pay those who are retired now... What is going to happen when the Baby boomers retire?

The thing of it is that there are plenty of tax deferment plans (government sponsered) apart from SS that work better because they are self-directed or comanaged.

The government f'd up, and now we are paying for it. I don't want this to happen agains, and I don't trust the governement enough not to f'up again.

	08-12-2004 01:48									#48
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Japher, I demand that you return to your previous avatar. Don't wait, don't even think about, JUST DO IT

	08-12-2004 01:51									#49
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Did you read the OP?

The point of the whole thread was that the system as it was designed, speically after the tax increases in the early 80's created a system that was viable well beyond your death-and Krugman's point was that even once the surplus was gone, a relatively small amount of general fund money would allow the system to keep going.

What Oerdin brought up was that the problem today is not how the system was created, but the fact that the government, like many corporations have done, dipped into the retirement fund to finance various projects, including Bush's tax cuts. If the system is in danger, its because the Congresses since the surplus began to rise and the Presidents of this time allowed the Trust fund to be used for other things.

Again, the point of the OP is that the myth that the SS system is broken is that, a myth- fault a profligate gov. for raiding the fund. Privatization, which will add vast new costs and worsen the problem of government spending, won't help.

Some people just hate the very notion of Social Security.

	08-12-2004 01:55									#50
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quote: Yeah, it is great. However, I doubt I will ever see a drop of the SS money. So, why am I paying it? Because they spent all the money and are using the money I am paying to pay those who are retired now... What is going to happen when the Baby boomers retire?

No you are not paying for todays retirees- given we have built up a large surplus, people a decade ago probably paid for todays retiree's.

	08-12-2004 01:57									#51
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Because in its present incarnation it is a Ponzi scheme.

	08-12-2004 02:03									#52
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No one cares.

	08-12-2004 02:04									#53
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quote: Originally posted by Japher You can put up to $13k per year into your 401k and your employer can match up to 25% of that.

It depends on the employer. I've heard of 1 to 1 matching schemes.

	08-12-2004 02:06									#54
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GePap: It's hard to believe a reporter when everyone else is saying there is no money in some secret account meant for SS retirement. If there were, than why all the recent tax defered retirement savings accounts? Why do they keep pushing back the retirement dates? That ain't just the big cheese being nice or stingy. They know there is no money.

pchang

	08-12-2004 02:06									#55
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quote: Originally posted by Japher I doubt I will ever see a drop of the SS money. So, why am I paying it? Because they spent all the money and are using the money

They spent it on a tax cut for the wealthy.

	08-12-2004 02:06									#56
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quote: It depends on the employer. I've heard of 1 to 1 matching schemes

Actually it doesn't, as far as pretax dollars are concerned.

	08-12-2004 02:07									#57
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Social Security is doing what it was designed to do, but it wasn't designed very well for our current and future situations. This fact doesn't have anything to do with how Social Security was raided.

	08-12-2004 02:18									#58
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quote: No, it's a foot in the door to total privitisation. Once he can get us to accept a little bit, they can get us to accept some more, and then some more, and finally they can give the whole wad to the investment bankers who will then loot it ala the Savings and Loan, Insuance, and Mutual fund crises.

The mutual fund crises? Insurance crises? When were these?

	08-12-2004 02:26									#59
	Got spare money?

Okay, fine, I can't defend that.

	08-12-2004 02:35									#60
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This is a really ironic discussion. The left is defending the status quo, meaning that regressive labor taxation will have to be increased over the coming years. The right is proposing a system that will alleviate the burden on the less well-to-do while giving them "a piece of the rock." For the transition period, Bush is partially proposing borrowing money, which will fall against the next generation's rich people -- i.e., the richer half of the country who pay all of the income taxes.

The left should be all for this plan, like Moynihan was.

Last edited by DanS on 08-12-2004 at 02:45