NYT article on proposal to increase role of SS

[frugalecon]

...since saving up to 1/3 of salary for 20 years is unreasonable.

http://www.nytimes.com/2015/06/17/business/economy/doing-more-not-less-to-save-retirees-from-financial-ruin.html?ref=business

I worry that the ants will end up paying for the grasshoppers...

[mrmoneycleanshaven]

So a cap on the tax advantages of an 401(k) or IRA in favor of boosting tax credits to those who give matching contributions to their employees?

Get out of here.

Taking away a break that anyone can get, and hoping that giving the increased tax revenue on that to companies in hopes they increase their match is silly. Plus not everyone gets a match, but nearly anyone can have an IRA.

[Retired To Win]

Just another ill-advised governmental knee-jerk reaction to its own the-sky-is-falling retirement propaganda mantra.

[forummm]

...since saving up to 1/3 of salary for 20 years is unreasonable.

http://www.nytimes.com/2015/06/17/business/economy/doing-more-not-less-to-save-retirees-from-financial-ruin.html?ref=business

I worry that the ants will end up paying for the grasshoppers...

Why is he assuming the 2% real return will last for 40 years? I think that's a reasonable assumption for the next 10 years. But not the next 40. And retirement investments don't need to be using the risk-free rate anyway.

I don't love his suggestion. But I do think that since people have proven that in general they are terrible with money, that increasing SS (which requires increasing taxes) is a better idea than making people save for their own retirements.

I've got 41 more years until SS, I'm not expecting nations to even exist with any meaningful power by that point. I'm betting it'll likely be corporate fiefdoms in gated communities that are heavily armed and guarded, perhaps harvesting the outsiders for food, and sex, hunting them for sport.

Nations aren't going anywhere. The corporate fiefdoms like having the nations around to enforce their property rights, educate their employees and customers, and give them corporate welfare.

[StockBeard]

a stock market likely to deliver subpar returns over the next decade or so

Where is this coming from? Do people have statistically significant reasons to believe the market will enter a bear phase?

[MDM]

But I do think that since people have proven that in general they are terrible with money, that increasing SS (which requires increasing taxes) is a better idea than making people save for their own retirements.

Why is it ok to force others to pay for an individual's poor choices, but not ok to force an individual to make better choices?

[StockBeard]

Why is it ok to force others to pay for an individual's poor choices, but not ok to force an individual to make better choices?

Playing the devil's advocate here:
Not everyone has the time/knowledge/motivation to learn about some of this. It's easy once you're financially literate to forget that you're not born with it.

A parallel I can think of is that one of my software engineer friends believes that everyone loves to learn new things all the time. As such, he is baffled when people just want their computer to "work" without having to read dozens of pages of documentation. So when his friends and family ask him to "fix" their broken computer, instead of fixing it for them, he goes on lengthy explanations on where to find the solution, why the thing broke, etc... Sometimes people get angry at him, because it takes them hours, while it would have taken him 5 minutes to fix it for them. His goal is good, but the result is not always the one that's expected.

My point is, not everyone wants to be taught everything in all aspects of their lives. Maybe you love to educate yourself about finance, but maybe you'd hate to have to understand how a computer works before you are allowed to browse the internet. There are cases where you just want something to work, without having to understand all the ins and outs.

[forummm]

a stock market likely to deliver subpar returns over the next decade or so

Where is this coming from? Do people have statistically significant reasons to believe the market will enter a bear phase?

Yes. Not necessarily a bear phase. Could just be stagnation for a bit. But lower than historical returns for some period of time. The market is overvalued by nearly every measure shown to be well correlated with future market returns. CAPE is near an all time high for example.

[MDM]

Why is it ok to force others to pay for an individual's poor choices, but not ok to force an individual to make better choices?

Playing the devil's advocate here:
Not everyone has the time/knowledge/motivation to learn about some of this. It's easy once you're financially literate to forget that you're not born with it.

A parallel I can think of is that one of my software engineer friends believes that everyone loves to learn new things all the time. As such, he is baffled when people just want their computer to "work" without having to read dozens of pages of documentation. So when his friends and family ask him to "fix" their broken computer, instead of fixing it for them, he goes on lengthy explanations on where to find the solution, why the thing broke, etc... Sometimes people get angry at him, because it takes them hours, while it would have taken him 5 minutes to fix it for them. His goal is good, but the result is not always the one that's expected.

My point is, not everyone wants to be taught everything in all aspects of their lives. Maybe you love to educate yourself about finance, but maybe you'd hate to have to understand how a computer works before you are allowed to browse the internet. There are cases where you just want something to work, without having to understand all the ins and outs.

Sure, getting things for minimal effort is nice, but why is it ok to force others to pay for an individual's poor choices, but not ok to force an individual to make better choices?

[Eric]

Why is it ok to force others to pay for an individual's poor choices, but not ok to force an individual to make better choices?

Playing the devil's advocate here:
Not everyone has the time/knowledge/motivation to learn about some of this. It's easy once you're financially literate to forget that you're not born with it.

A parallel I can think of is that one of my software engineer friends believes that everyone loves to learn new things all the time. As such, he is baffled when people just want their computer to "work" without having to read dozens of pages of documentation. So when his friends and family ask him to "fix" their broken computer, instead of fixing it for them, he goes on lengthy explanations on where to find the solution, why the thing broke, etc... Sometimes people get angry at him, because it takes them hours, while it would have taken him 5 minutes to fix it for them. His goal is good, but the result is not always the one that's expected.

My point is, not everyone wants to be taught everything in all aspects of their lives. Maybe you love to educate yourself about finance, but maybe you'd hate to have to understand how a computer works before you are allowed to browse the internet. There are cases where you just want something to work, without having to understand all the ins and outs.

Sure, getting things for minimal effort is nice, but why is it ok to force others to pay for an individual's poor choices, but not ok to force an individual to make better choices?

You're stating this like SS is welfare, a simple wealth transfer, which it's not.  If you pay into it, you'll receive a return. (assuming you're alive)  So while it may force everyone to pay (more) into the system, everyone would receive more benefits.  I'm not sure how that equates to "minimal effort" or "poor choices".

[StockBeard]

I don't like the word "force" here. You're not forced to stay in a country if you don't like their tax system. I might be an idealist, but I feel it averages out somehow. You give money to cover for other people's "bad choices", and somewhere, somehow, somebody else had to do something that helped you. It balances out.

Plus at the end of the day, I prefer to be on the side of the fence that pays taxes, than the side of the fence that receives money from the government. Paying taxes is a good problem to have, it's a problem for people who actually have money :)

If it didn't work out, rich people would flee the country. They don't, which indicates that there's something in it for them?

[mathlete]

I've got 41 more years until SS, I'm not expecting nations to even exist with any meaningful power by that point.

Same here (same age and everything!)

To me, social security is a program in which poor young people pay to support wealthier older people. It's just another tax like Medicaid. I never expect to use the program.

[mathlete]

Plus at the end of the day, I prefer to be on the side of the fence that pays taxes, than the side of the fence that receives money from the government. Paying taxes is a good problem to have, it's a problem for people who actually have money :)

This is a good mindset to have.

I was born with a skillset that makes me a lot of money. I was born with an aptitude for finance. I'm lucky. I'd much rather be in my tax bracket then be someone on welfare.

[mrmoneycleanshaven]

Why is it ok to force others to pay for an individual's poor choices, but not ok to force an individual to make better choices?

Playing the devil's advocate here:
Not everyone has the time/knowledge/motivation to learn about some of this. It's easy once you're financially literate to forget that you're not born with it.

A parallel I can think of is that one of my software engineer friends believes that everyone loves to learn new things all the time. As such, he is baffled when people just want their computer to "work" without having to read dozens of pages of documentation. So when his friends and family ask him to "fix" their broken computer, instead of fixing it for them, he goes on lengthy explanations on where to find the solution, why the thing broke, etc... Sometimes people get angry at him, because it takes them hours, while it would have taken him 5 minutes to fix it for them. His goal is good, but the result is not always the one that's expected.

My point is, not everyone wants to be taught everything in all aspects of their lives. Maybe you love to educate yourself about finance, but maybe you'd hate to have to understand how a computer works before you are allowed to browse the internet. There are cases where you just want something to work, without having to understand all the ins and outs.

Sure, getting things for minimal effort is nice, but why is it ok to force others to pay for an individual's poor choices, but not ok to force an individual to make better choices?

You're stating this like SS is welfare, a simple wealth transfer, which it's not.  If you pay into it, you'll receive a return. (assuming you're alive)  So while it may force everyone to pay (more) into the system, everyone would receive more benefits.  I'm not sure how that equates to "minimal effort" or "poor choices".

Not true in the least. Paypouts from SS are progressive, but the taxes are linear, and already I have looked at how much I and my employer will be pumping in over the next twenty years and I'll never get my money back, let alone more than I will but in, and it'd be even worse if the rates went up.

[Eric]

Why is it ok to force others to pay for an individual's poor choices, but not ok to force an individual to make better choices?

Playing the devil's advocate here:
Not everyone has the time/knowledge/motivation to learn about some of this. It's easy once you're financially literate to forget that you're not born with it.

A parallel I can think of is that one of my software engineer friends believes that everyone loves to learn new things all the time. As such, he is baffled when people just want their computer to "work" without having to read dozens of pages of documentation. So when his friends and family ask him to "fix" their broken computer, instead of fixing it for them, he goes on lengthy explanations on where to find the solution, why the thing broke, etc... Sometimes people get angry at him, because it takes them hours, while it would have taken him 5 minutes to fix it for them. His goal is good, but the result is not always the one that's expected.

My point is, not everyone wants to be taught everything in all aspects of their lives. Maybe you love to educate yourself about finance, but maybe you'd hate to have to understand how a computer works before you are allowed to browse the internet. There are cases where you just want something to work, without having to understand all the ins and outs.

Sure, getting things for minimal effort is nice, but why is it ok to force others to pay for an individual's poor choices, but not ok to force an individual to make better choices?

You're stating this like SS is welfare, a simple wealth transfer, which it's not.  If you pay into it, you'll receive a return. (assuming you're alive)  So while it may force everyone to pay (more) into the system, everyone would receive more benefits.  I'm not sure how that equates to "minimal effort" or "poor choices".

Not true in the least. Paypouts from SS are progressive, but the taxes are linear, and already I have looked at how much I and my employer will be pumping in over the next twenty years and I'll never get my money back, let alone more than I will but in, and it'd be even worse if the rates went up.

Please expound on what part is "not true in the least".  None of your following sentences are at odds with anything I said.

[forummm]

Why is it ok to force others to pay for an individual's poor choices, but not ok to force an individual to make better choices?

Playing the devil's advocate here:
Not everyone has the time/knowledge/motivation to learn about some of this. It's easy once you're financially literate to forget that you're not born with it.

A parallel I can think of is that one of my software engineer friends believes that everyone loves to learn new things all the time. As such, he is baffled when people just want their computer to "work" without having to read dozens of pages of documentation. So when his friends and family ask him to "fix" their broken computer, instead of fixing it for them, he goes on lengthy explanations on where to find the solution, why the thing broke, etc... Sometimes people get angry at him, because it takes them hours, while it would have taken him 5 minutes to fix it for them. His goal is good, but the result is not always the one that's expected.

My point is, not everyone wants to be taught everything in all aspects of their lives. Maybe you love to educate yourself about finance, but maybe you'd hate to have to understand how a computer works before you are allowed to browse the internet. There are cases where you just want something to work, without having to understand all the ins and outs.

Sure, getting things for minimal effort is nice, but why is it ok to force others to pay for an individual's poor choices, but not ok to force an individual to make better choices?

You're stating this like SS is welfare, a simple wealth transfer, which it's not.  If you pay into it, you'll receive a return. (assuming you're alive)  So while it may force everyone to pay (more) into the system, everyone would receive more benefits.  I'm not sure how that equates to "minimal effort" or "poor choices".

Not true in the least. Paypouts from SS are progressive, but the taxes are linear, and already I have looked at how much I and my employer will be pumping in over the next twenty years and I'll never get my money back, let alone more than I will but in, and it'd be even worse if the rates went up.

Unless you plan to die earlier than average, I question your math. Even just with inflation, you should be paying in significantly less than you'll be taking out.

[MDM]

You're stating this like SS is welfare, a simple wealth transfer, which it's not.  If you pay into it, you'll receive a return. (assuming you're alive)  So while it may force everyone to pay (more) into the system, everyone would receive more benefits.  I'm not sure how that equates to "minimal effort" or "poor choices".

The "minimal effort" referred to wololo's analogy about the software engineer and people who just wanted their computer fixed, not SS itself.

The "poor choices" refers to forummm's comment "since people have proven that in general they are terrible with money."

So if there is any forcing to be done (and one could debate that premise itself), it seems preferable to target the individual who could save but doesn't, rather than society in general. 

[mrmoneycleanshaven]

Please expound on what part is "not true in the least".  None of your following sentences are at odds with anything I said.

If I am currently paying more into the system then I will ever get out, there is no return, and if they raise the rates that people pay into the system, and keep the structure that is currently present it makes it so we pay more, and continue to get less than we paid in.

There are winners at the bottom, because of the structure those guys make out okay and I'm totally okay that as its insurance, but come on, we should not be trying to fund a comfortable retirement on the backs of the middle class who won't get to see even their principle come back to them.

Paying in the max for 34 years (good problem to have I admit). $545,000
Drawing at 70
Living to 85
RFR of 2%
Total of $802,000

$805,000/15= $53,000

Max SS payout=$42,000

So you can see where SS falls short, and that's going with just 2% earnings, if I got an average of 2% over 40 plus years...

 

[forummm]

But I do think that since people have proven that in general they are terrible with money, that increasing SS (which requires increasing taxes) is a better idea than making people save for their own retirements.

Why is it ok to force others to pay for an individual's poor choices, but not ok to force an individual to make better choices?

I don't know that it's forcing others to pay for an individual's poor choices. I was suggesting that everyone pay in more and get back proportionally more. Instead of this complicated system of retirement accounts, people needing to know which funds to buy, how not to get screwed on fees, not sell when the market tanks, and being disciplined enough to save--why not go back to the pension-style system we used to have? This could be a portable pension where each year a portion of your salary goes to buy increased SS payments later. That way workers aren't tied to a particular business to grow their pension. It's essentially enhanced SS. Yes, if it's mandatory, then it would be irritating for some of those people who are good with money. But they would get something in return for their contributions.

And in society we already pay a lot for the poor choices of other individuals. Much of government is a result of that. Everything from the military to the courts to the justice and correctional systems.

[Numbers Man]

Maybe we should demand foreign aid be given to the USA so our elders can retire in style. Or maybe just vaporize anybody that didn't save for retirement. Anybody ever see the movie Logan's Run? People were vaporized once they turned 30.

[MDM]

This could be a portable pension where each year a portion of your salary goes to buy increased SS payments later.

Ok, I didn't understand that's what you meant.  That seems a more targeted approach, and so our opinions may be more alike than different.

[StockBeard]

Anybody ever see the movie Logan's Run? People were vaporized once they turned 30.

Should we ask the elderly to participate in a weird show where they dance/fly to their death, like in the movie?

[r3dt4rget]

Let's just start by indexing SS benefit payouts to average life expectancy. It should be at least 70 by now.

[ChrisLansing]

Today, more than half of working households do not have enough assets to avoid a drop in consumption in retirement, ...

Why do so many articles on retirement make the assumption that consumption must remain the same after retirement?     

A few things should be obvious;

1. Most people probably lived on much less (adjusted for inflation) when they were young and starting out, so it should occur to people that it's at least possible to live on less - after all, they've done it before.   

2. Expenses of various sorts should go down.    (While medical expenses are likely to go up)  Getting rid of one car should go a long way towards higher med. costs, for example.     

3. If one is currently saving at the appallingly low rate of 4.7 to 5.2 %, it should be fairly obvious that retirement income can be at least 5% lower than working income.   

If one is an "extreme" saver, at 10 or 15 % then again, obviously retirement income can be that much lower.   

My wife and I are currently saving 1/3 of income (after tax)  Obviously then our retirement income can be 1/3 lower than present income.     

I do like the idea of enhanced SS because I think most people are simply not well educated in how to manage their money.