Rhea

From the Whitehouse web site:

==> Question #1 If the private account is “yours�? such that you can pass on unused portions to your loved ones, this explains what happens if you save more than you need. What is left completely unexplored is what happens if you don’t have enough? What happens when your account runs out and you’re still alive?


==> Question #2 So if the 4% that you’ve subtracted from your SOC SEC contributions and put in your private account is providing money “in addition to the check you receive from Soc Sec�? then this represents an accelerated payout scheme. Who sets the pay out rate of your private account? Can you take it in a lump sum? And if you run out by living too long after having accelerated your payout, do you survive on the remaining 66% somehow?

travc

First thing, the funds from the private account are used to offset the amount you didn't contribute to SocSec when you retire. That is, the amount in your private account are reduced by an amount equal to what the SocSec fund would have generated (principle plus 3% per year). If your private accound didn't make as much (or more likely, fees and overhead cut the real rate of return to less than 3%) you get nothing from that account and you SocSec benefits will be reduced accordingly.

If your personal account does happen to make more than the 3%, the extra money must be used to buy an annuity that pays out until you die. You can't do anything else with "your" money.

If you die before you retire, it isn't completely clear what happens (the details have not been provided by BushCo). It is likely that the money will only be allowed to buy an annuity to pay out "survivor benefits" (and perhaps a small lump sum out of it on top for funeral expenses), thus mirroring the standard benefits from SocSec. It has not been made clear wether this would reduce the amount SocSec pays out the way it does upon retirement.

The private account stuff is complete BS. It does nothing to "fix" SocSec (in fact it makes expected payable benefits including revenue from the accounts given the current pay schedule decrease much more than doing nothing). It is all about shifting SocSec from a "garenteed benifit" system to a "garenteed contribution" system. Bush has said as much in so many words.

A post from Atrios everyone should look at:
http://atrios.blogspot.com/2005_02_0...78656236771913

Hooboy !!

You would still receive benefits, because you would still be contributing to SS. Your benefit would drop of course though. The amount it would drop would vary. But, all things being equal between private and SS, the amount should be about 33%.

I don't know. My guess is that there would be substantial penalties for taking out too much at once.

The better question is... how effectively will 66% of SS keep people out of poverty?

Rhea

Hooboy, out of curiosity, comapring your response to the one above you - do you actually have any idea AT ALL what the president is proposing?

Or are you just going along with it and making up shit that feels good to justify it?


Or, more politely, "source, please?"

ImGod

It's best to go to the appropriate think tank, if you want to know what they expect of the new accounts.

The Heritage Foundation is a good starting point, but there are others.

The main argument is about long term government obligations. The hope is that moving SS money into private accounts reduces the long term obligation. There is of course a shortfall in the present due to a reduction in available public money.

Example: Shifting $1000 in SS tax to private accounts removes $1000 from the pool to pay current SS benefits. However, the returns on the privately held $1000 are better so the future obligation to the current personal account holder goes down overall. They made more on their own and therefore need less from the public fund.

Overall, they assume the amount made on the personal account and public accounts will outpace the total future obligation to the account holder. The system then becomes self sustaining without additional taxes. Hopefully, to the point were the public accounts can be reduced or eliminated.

The thought process is on a 50-100 year obligation timeline. Spend the "transition" money now and reduce the future tax obligations with better returns, versus finding a way to raise the future obligation money when the time comes. They are taking a 50-100 year obligation and trying to find the best present worth value.

Of course the results all depend on a rate of return for the personal accounts that outpaces the increased life expentancy rates, increased population rates, increased cost of living rates, etc. Edit to add: and of course the debt service on the money they borrow to pay the current benefits.

Investment Specifics I find it interesting that they propose 20 percent of the private account go back into US securities.

Barbarossa

I get the feeling that there are a large number of people who would buy a shit sandwich from Bush if he called it the "You Get to Keep More of Your Money" sandwich.

Rhea

Help is appreciated here. From the seocnd link, I'm reading:

You save 4% if you make 25,000 or less. 18 years from now, everyone up to $90K can contribute 4%. (They recommend investing at least 1/5 in government securities :rolling: )


Then, when they retire, the government takes from your account whatever it must to equal what would have been an annuity purchased with a 3% growth fund.

No mention is made of what happens if you get less than 3%

If you get more than 3% the first 3% is still annuitized and added to your government part. The overage is available as either a payout or saved and inheritable.



Now, what we have, it seems, please correct me if I'm wrong, is the government paying based on treasury returns for 2/3 of the payments. And the government not having to pay on 1/3 of the returns exactly that amount that 1/3 would have gained at 3%.

Which, I think, correct me if I'm wrong, means that the government WILL NOT have to pay at 3% what it didn't collect and pay 3% on.


This a complete wash, isn't it?

Now the individual people, assuming they bot their more than 3% have a little something extra. Like, say, according to their figures at this pro-Bush site, 1.6% interest in the 4% of the income they were allowed to divert if they made less than $25K.


Groovy. 1.6% return on 4% maximum. Sounds great.


BUT

In what way does this have any effect whatsoever on the solvency of Social security?



The government has saved NOTHING. It is not-paying-out-at-3% exactly the amount that it-didn't-collect-at-3%


The answer appears hidden in the text.

Aaaah.
Reducing Benefits


(And still we have no idea what happens if you earn less than 3%. The conservative think tank appears to be guaranteeing a rate of >3%. But we all know (I think, by now) that such a claim is unmakable.)

Hooboy !!

First off, there are only suggestions on the table and not a specific proposal. Secondly, if you were to point out exactly what you have a problem with, I can address it.

What part do you think I am "making up"?

When you can articulate your question, then I will respond to it.

Barbarossa

Answer:
That's Dick Cheney speaking there. You know, the vice president.

ImGod

This is why I said in the other thread that I don't support personal accounts unless I can opt out of them entirely. I choose zero personal account payments and benefits from the government. I'd rather invest the designated personal account money myself, as I can likely outpace a government managed fund. It would also allow me to research different fund managers and their fees.

My guess is there will be a private bidding war to manage or be included in the 50 percent stock index and 30 percent corporate bond funds list approved by the government. And my "personal choice" in the matter will be zero. If I'm forced to pay in, then the beast I know now is probably better than the Frankenstein they're building.

Slowly, increase the retirement age and decrease the level of benefit increases until the system balances out based on some formula of life expectancy increases, etc.. Then it will still provide a fall back for retirement and spread the fix across current taxpayers and beneficiaries. Then give the SSA some leaway in their investment choices. Just think, SS could have been "fixed" by shifting out of US securities and into euro funds 2 years ago.