My Faith-Based Retirement

[flintlock]

Re: My Faith-Based Retirement

I've come to realize the best retirement plan may be to learn to live on less. At least they can't take that away from you. Not a doubt in my mind that assets will be "redistributed" in the future to make things more "fair" for everyone. All those who were told to convert their IRA's to a Roth and get "tax free" gains may live to regret it. I suppose it all really depends on when the music stops. Those close to retirement age now may do just fine. You thirtysomethings out there, duck and cover.

[charliebrown]

Re: My Faith-Based Retirement

http://www.financialservices.org/upl...%20Summary.pdf

This is a better summary, and does not state that 401k will be confiscated. It does state that perhaps tax deductiblility of 401k contributions may be eliminated.
That seems very likely, given the push to increase revenues.

Professor Ghilarducci recommended replacing the tax-exempt status of 401(k) plans with an inflation-adjusted $600 federal income tax credit and forcing workers to invest 5% of their pay into a government-run retirement account. The Guaranteed Retirement Account (GRA) would invest in special-issue government bonds paying interest of 3% above inflation.

4 As Professor Ghilarducci explained ina September 26 New York Times Op-Ed piece, the “government would pool the proceeds from all the accounts into a sovereign wealth fund, and get its 3 percent rate of return (probablymore) by investing in a diversified portfolio of both safe and risky assets. The government is

large enough to handle this risk.”5

This is the part that is troubling. As I said. Now the .gov is promissing a 3% over inflation return. What happens when that does not marterialize. A sorry letter to retirees or a bail out?
And again we have the gvt forcing people to invest 5% of their income into this SWF. A great way to force another few percent of money into the T bond market.
Who is going to manage the SWF. An index or some guru picking stocks of connected insiders (read solindra)?

There was also some babbel about your heirs not getting all of your acount assets, maybe half. yet another great way to penalize the young - terminally ill.

[ASH]

Re: My Faith-Based Retirement

For the last several years I've accepted the reality of Wall Street grabbing our pension money. It's the only big pile of money they don't yet control. I believe this is at the heart of the move to privatize social security, to divert that river of money to Wall street so the TBTF banks can game it to their advantage.

It's Wall street's wet dream to have the force of law divert 8% of all paychecks to them to hold and manage for the long, long term. It's the world's biggest Ponzi opportunity. They can show a dribble good early returns for the early payouts like any Ponzi, then plunder the rest and be long gone before a generation of impoverished retirees figures out they've been robbed.

Not such a relevant concern now the SS is cash flow negative. Everything that goes in comes out the same year, so no pot of money for Wall Street to manage.

[shiny!]

Re: My Faith-Based Retirement

http://www.financialservices.org/upl...%20Summary.pdf

This is a better summary, and does not state that 401k will be confiscated. It does state that perhaps tax deductiblility of 401k contributions may be eliminated.
That seems very likely, given the push to increase revenues.



This is the part that is troubling. As I said. Now the .gov is promissing a 3% over inflation return. What happens when that does not marterialize. A sorry letter to retirees or a bail out?
And again we have the gvt forcing people to invest 5% of their income into this SWF. A great way to force another few percent of money into the T bond market.
Who is going to manage the SWF. An index or some guru picking stocks of connected insiders (read solindra)?

There was also some babbel about your heirs not getting all of your acount assets, maybe half. yet another great way to penalize the young - terminally ill.

Another problem with this is the way that government manipulates the CPI to show less inflation than is actually happening.

[thriftyandboringinohio]

Re: My Faith-Based Retirement

Good point, ASH and nice to see you back posting more.

[ASH]

Re: My Faith-Based Retirement

Good point, ASH and nice to see you back posting more.

Hi thrifty, nice to 'see' you, too. I suppose I may have spoken too soon, since Congress could always increase the payroll tax. But I think (with no particular evidence) Wall Street's political ambitions are probably focused more on keeping their tax rates low and dismantling Dodd-Frank. Without a big SS surplus under current law, the project of first creating that surplus and then capturing it is probably a couple of steps too far to be the object of much serious scheming, when there are more present dangers for the industry to fight.

[ASH]

Re: My Faith-Based Retirement

I have read that one of Gilarducci's plans is to replace your 401k assets with some kind of universal gvt pension or annuity vehicle that would guarantee a fixed payout at retirement. Trouble is yet another asset like SS or Medicare backed with gvt guarantee's that are not sustainable. The intial promise will be 5-8% guaranteed y-o-y growth, but when payout time comes the cupboard will be bare. Also, I figure the benefits would be tied to some phoney-baloney CPI numbers.

That is also what I've read, although her thinking may have evolved. However, the early version of the plan which I read about struck me as highly dangerous for exactly this reason. Gilarducci struck me as someone who had conflated the government paying itself "interest" by creating more publicly-held debt with the sort of return on an investment that would actually help pay for future program expenses. I get the impression that there are a lot of credentialed people running around out there who have trained themselves to think of the Trust Funds as "real" savings, because the arithmetic and legal truth of the matter is a common line of attack on the entitlement programs by conservatives. If one favors old age entitlements on principle, and believes that elderly citizens ought to receive benefits from the program on the ethical basis that they paid into the programs, then I think there's a bit of a knee-jerk reflex to deny anything the other side has to say -- including the factual observations about how the programs are structured. There's also a temptation to consider the programs in isolation (i.e. "what does Treasury owe the Trust Funds") as opposed to the global budget implications (i.e. "what does Treasury have to finance?"). Anyway, I haven't read a recent description of her proposal, but the early stuff sure sounded like magical thinking.

Update: The sovereign wealth fund description charliebrown turned up sounds like a better idea than what I was complaining about above. Not that it's a great idea, but it's not necessarily the circular investment in the government's own debt I was worried about. I think that when I first read about this, the detail of "special issue government bonds" was included, but not the SWF investments in (presumably) assets not including the government's own debt.

[DSpencer]

Re: My Faith-Based Retirement

This sounds like another bait and switch program, to calm the masses, and the gvt getting it nose in even more stuff. I'm not a big fan of 401k, it needs to be revamped. Why does a SEP-IRA participant get to save more than a 401K. Why do i have less than stellar choices? Why if my employer does not offer a 401k
I can only save 5K in a traditional IRA? I think the whole thing should be replaced by a SEP-IRA, where everyone would be eligible to save 20% of their earnings
in an account that has no constraints. I can buy stock, and bond index funds, and gold in whatever allocation I want. It is completely portable etc.

Why have any of these plans? Why not just set the tax rate so that people can afford to save enough for retirement?

I can't imagine the enormous amounts of money and time wasted on educating people about 401(k)'s, IRA's, Roth vs traditional and so on. Then all the fees. Then the hassle of having 2 or more accounts when one would do. Then figuring out the loopholes.

What is the goal? Is this the best way of achieving it?

We need a clean slate approach. The current system is hopelessly arbitrary or worse.

[flintlock]

Re: My Faith-Based Retirement

Why have any of these plans? Why not just set the tax rate so that people can afford to save enough for retirement?

I can't imagine the enormous amounts of money and time wasted on educating people about 401(k)'s, IRA's, Roth vs traditional and so on. Then all the fees. Then the hassle of having 2 or more accounts when one would do. Then figuring out the loopholes.

What is the goal? Is this the best way of achieving it?



We need a clean slate approach. The current system is hopelessly arbitrary or worse.

Because a shell game won't work if its slowed down or simplified.

[lektrode]

Re: My Faith-Based Retirement

it would seem that the present structure of social security isnt that far off the mark, that its simply a problem of under-funding - and overpaying-out to those who dont actually 'need' it - seems to me the simple/obvious answer is:

up the cap on income exposed to the FICA levy and meanstest the payouts.
the rates can stay the same

personally i find it extremely puzzling why this issue is so 'complicated' - when we likely have MILLIONS of people taking in MILLIONS TO HUNDREDS OF MILLIONS per year and paying FICA on only the 1st 106k ?? (110 this year)
and millions of people retiring with 10s of thousands to hundreds of thousands of income - monthly?
and collecting social security?

just how is that logical or 'fair' ???

oh - and dont even get me going about how its logical or SANE even, that while we have a 'crisis' on social security and medicare/caid ??? we are at same time allowing a "tax cut" in the form of a reduction in the FICA levy that amounts to about 20bux/week for the typical wage earner??? (that the state govs immediately sucked up in increased local taxes/fees)

and this is supposed to somehow 'stimulate' the economy and create jobs?

DOES ANYBODY INSIDE THE BELTWAY ACTUALLY BELIEVE THIS?
well... anybody outside the whitehouse anyway...

[lektrode]

Re: My Faith-Based Retirement

....if inflation was not a constant force eroding everyone's savings, it might be feasible to simply save up cash in the bank (or mattress) and not have to worry about being an investor in addition to your day job.

yeah but... that would render moot the function of the banksters and well... one can see how this might 'complicate' things for the political class.

[ASH]

Re: My Faith-Based Retirement

it would seem that the present structure of social security isnt that far off the mark, that its simply a problem of under-funding - and overpaying-out to those who dont actually 'need' it - seems to me the simple/obvious answer is:

up the cap on income exposed to the FICA levy and meanstest the payouts.
the rates can stay the same

personally i find it extremely puzzling why this issue is so 'complicated' - when we likely have MILLIONS of people taking in MILLIONS TO HUNDREDS OF MILLIONS per year and paying FICA on only the 1st 106k ?? (110 this year)
and millions of people retiring with 10s of thousands to hundreds of thousands of income - monthly?
and collecting social security?

just how is that logical or 'fair' ???

I agree with your suggestion, with the caveat that it is practical policy if the goal is to provide a secure retirement for every American, but it might not be seen as "just" by everyone.

The reason that well-to-do folks receive SS benefits is mainly political. There wasn't (and maybe isn't) enough political support for an obviously redistributive retirement system. That's why benefits scale with income (and therefore payroll tax collected), why payroll tax is capped, and why folks who don't need SS still receive a check. These mechanics obscure the fact that those with lower lifetime earnings are the ones who most need SS income in retirement, and that the indexing of benefits to income is such as to provide a subsidy to those at the lower end of the income spectrum. So, if we all agreed that society should provide a minimum level of retirement income to everyone -- and if we all agreed that those able to support that system have an obligation to do so -- SS would be structured as you describe. But not everyone is on board with this concept. Some people who are okay paying for the public goods they use aren't that interested in paying for individual benefits of which they are unlikely to have any need. Others worry that decoupling benefit levels from contributions to the system will encourage people to spend instead of save, thus ensuring that they need public help when they reach retirement. Myself, I suppose that a "need-based" system that assesses "need" based on lifetime aggregate earnings would help disincentivize free riders, but that's similar to the current system of indexing benefits to contributions, and doesn't really address what we do with the irresponsible individuals who earn enough during their lifetimes that they could have saved, but chose not to.

Ideologically, I dislike SS, but I see its practical value. If we're going to have to have such a system, I'd prefer a means-tested one such as you describe. And we might as well abolish the artificial distinction between payroll and regular income taxes, so that we can talk about all government revenue and expenditures on an equal footing, and prioritize.

[jiimbergin]

Re: My Faith-Based Retirement

The problem with means testing is that a lot of people (especially seniors) believe that they have paid in a lot of money and it is theirs at retirement. Had the benefits simply been funded out of taxes instead of something called Federal Insurance Contribution Act then people might not have believed that it was their money in the fund

[ASH]

Re: My Faith-Based Retirement

True. It's kind of fun to compare the size of Social Security's Trust Fund (~$2.678T) versus its annual burn rate (~$736B). People who think their "savings" are tied up in those Trust Funds would be dismayed by how much has been "saved".

Also, I found this interesting summary of a paper about the redistributive nature of Social Security. I guess the interesting thing is that although the formal rates of contribution and benefits are fairly progressive, they become less so when one takes into account the differential in life expectancy between the economic classes. The system is set up to subsidize the poor, but the poor don't live as long as the rich, so in aggregate they don't collect as much of a subsidy as implied by the rates.

[lektrode]

Re: My Faith-Based Retirement

The problem with means testing is that a lot of people (especially seniors) believe that they have paid in a lot of money and it is theirs at retirement. Had the benefits simply been funded out of taxes instead of something called Federal Insurance Contribution Act then people might not have believed that it was their money in the fund

here's another issue/problem that the use of clever synonyms by the political class has created:

instead of referring to what FICA funds as 'retirement insurance' or 'old-age-survival insurance' its called 'social security' thus creating in the minds of some that they are entitled to it because 'its their money'

why would or SHOULD people think they are entitled to a guaranteed payout for paying into something called 'insurance' ?

we pay for auto, homeowners, business, liability, theft, medical, life 'insurance' but most of the time we hope we never have to file a claim, much less feel like we're entitled to a payout or a "return on investment" in most of these types of insurance (esp when most of it is an EXPENSE, vs an 'investment') - why is it somehow different for 'social security' - which was meant to cover one if one became too old or otherwise incapable of working/earning a living - it was supposed to be 'insurance against starvation', was it not?

how is it then it has somehow morphed into an entitlement that pads the retirements of those who are LUCKY enough to NOT NEED IT?

i dont get it - altho i do understand the reasons why/how the political class framed the debate and language that was used to ram it thru congress way back when (in the days of the prev great depression) - but it seems to me that we would not have had the means to keep the old/infirm from dying in the streets without it all these years - and considering it was the effects of the 'business cycle' that led to creation of the 'federal reserve' (along with an out-of-control gov that's run for the benefit of the same group) that was most responsible for people of modest means being left broke and unable to feed/house themselves in their old age?? - i dont really have a problem with its existence (esp since i'm staring at the reality of the effects of said biz cycle and the failure of the same group to effectively deal with it)

and i also think its hilarious the present discussions of raising the retirement age, when its those most likely to arrive at that age, while still able to work, that wont need it (the whitecollar/political class vs people who physically labor for a living and are lucky to be even able to still walk upright without pain meds)

and hey!
i'm still holding my own and worried about making it to 67 (and being able to work til 70)