Author Topic: "Why Are Americans So Bad at Saving?"  (Read 19651 times)

midweststache

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"Why Are Americans So Bad at Saving?"
« on: June 29, 2015, 12:56:01 PM »
This short video on The Atlantic was just posted on a friend's FB and drove me nuts. On one hand, I like the idea of making retirement plans opt-out, rather than opt-in. It's a small gesture that would go a long way for some people.

On the other hand, the justification for it -- "saving Americans from ourselves" -- makes us sound inherently incapable of taking responsibility for our spending AND is incredibly infantilizing.

Some points are excellent; some are patronizing and offensive.

http://www.theatlantic.com/video/index/375166/social-security-the-greatest-government-policy-of-all-time/

Philociraptor

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Re: "Why Are Americans So Bad at Saving?"
« Reply #1 on: June 29, 2015, 01:05:16 PM »
Can't watch at work, but I'm a big proponent of saving people from themselves. People are generally very bad at planning for the long term, and government guaranteed payments each month are an easy way to fix it. Just because you understand the math and can delay gratification in order to have a comfortable retirement doesn't mean that the majority of people do/can.

Cassie

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Re: "Why Are Americans So Bad at Saving?"
« Reply #2 on: June 29, 2015, 01:24:55 PM »
I agree that we need to save people from themselves:))

xenon5

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Re: "Why Are Americans So Bad at Saving?"
« Reply #3 on: June 29, 2015, 07:35:49 PM »
Hear Hear, I also agree that the general population needs to be saved from themselves.  I surely don't want to be the one to have to save them when a generation finds itself in dire straits.
« Last Edit: June 29, 2015, 07:38:30 PM by xenon5 »

EngineerMum

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Re: "Why Are Americans So Bad at Saving?"
« Reply #4 on: June 29, 2015, 10:53:58 PM »
You could just go down the route that Australia has taken - no option superannuation. No opting out, if you have a job (with some exceptions such as the self employed) you pay super at 9.5% minimum. And no option to take it out early, not even for buying a house (as they do in NZ I believe).
I think most people in my generation accept that they will be funding their own retirement; those retiring now only had compulsory super for part of their working lives so many of them still need social security, but at least the middle class are mostly part self-funded.

ShoulderThingThatGoesUp

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Re: "Why Are Americans So Bad at Saving?"
« Reply #5 on: June 30, 2015, 07:27:30 AM »
You could just go down the route that Australia has taken - no option superannuation. No opting out, if you have a job (with some exceptions such as the self employed) you pay super at 9.5% minimum. And no option to take it out early, not even for buying a house (as they do in NZ I believe).
I think most people in my generation accept that they will be funding their own retirement; those retiring now only had compulsory super for part of their working lives so many of them still need social security, but at least the middle class are mostly part self-funded.

We have no option on Social Security which taxes around 6% of your income up to some number, but it's layer upon layer of accounting fiction and it's projected to become insolvent. So I don't really think there's a good reason to trust the US Federal government to do this properly. And everybody lost their mind when GWB proposed private investment accounts for Social Security rather than the crapfest currently in place.

onehair

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Re: "Why Are Americans So Bad at Saving?"
« Reply #6 on: June 30, 2015, 09:05:26 AM »
A lot  of us didn't back GWB's plan for privatizing Social Security because if you that article claims Americans are bad at saving you ought to see how they are at investing!!   Plus it failed in Chile.   The amount of silliness I hear daily is astonishing.  From buying stocks in the hopes of said stock rising high enough to sell for a big profit, hoping to win the lottery so they can live in comfort, suspicious annuities, reverse mortgages, , hopes of big inheritances, not to mention the vampiric kind of financial planner who could care less about the wellbeing of their clients and suck fees and commissions from some well meaning if misinformed people.    For those who can't or won't save or learn financial discipline they will need the social safety net Social Security and its sister programs offer. 

No Name Guy

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Re: "Why Are Americans So Bad at Saving?"
« Reply #7 on: June 30, 2015, 01:09:53 PM »
Can't watch at work, but I'm a big proponent of saving people from themselves. People are generally very bad at planning for the long term, and government guaranteed payments each month are an easy way to fix it. Just because you understand the math and can delay gratification in order to have a comfortable retirement doesn't mean that the majority of people do/can.

I'm here to save you from yourself there Philociraptor.  Please send me all your money and I'll guarantee you a nice steady pay out, at some point in the future.

EricP

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Re: "Why Are Americans So Bad at Saving?"
« Reply #8 on: June 30, 2015, 01:15:31 PM »
GWB's plan lost traction because the public turned on him due to the debacle of starting two wars in the Middle East.  I don't remember the details of the plan, but it failed because of politics, not necessarily because the people didn't like him or the plan was a bad plan.

maizeman

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Re: "Why Are Americans So Bad at Saving?"
« Reply #9 on: June 30, 2015, 11:28:22 PM »
You could just go down the route that Australia has taken - no option superannuation. No opting out, if you have a job (with some exceptions such as the self employed) you pay super at 9.5% minimum. And no option to take it out early, not even for buying a house (as they do in NZ I believe).
I think most people in my generation accept that they will be funding their own retirement; those retiring now only had compulsory super for part of their working lives so many of them still need social security, but at least the middle class are mostly part self-funded.

We have no option on Social Security which taxes around 6% of your income up to some number, but it's layer upon layer of accounting fiction and it's projected to become insolvent. So I don't really think there's a good reason to trust the US Federal government to do this properly. And everybody lost their mind when GWB proposed private investment accounts for Social Security rather than the crapfest currently in place.

It's 12.4%. You pay 6.2% of your salary, and your employer pays another 6.2%. One of the "joys" of self employment is noticing both social security and medicare take much bigger bites out of your paychecks than when you were working for the man (since you're now paying both the employer and employee halves). I point this out just because the conventional retirement wisdom is that just saving 10% of ones income is enough to assure a safe retirement, and social security withholding by itself is effectively "saving" more than that target, yet absolutely no one suggests social security income is enough to live on in retirement. 

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Re: "Why Are Americans So Bad at Saving?"
« Reply #10 on: July 01, 2015, 06:50:29 AM »

It's 12.4%. You pay 6.2% of your salary, and your employer pays another 6.2%. One of the "joys" of self employment is noticing both social security and medicare take much bigger bites out of your paychecks than when you were working for the man (since you're now paying both the employer and employee halves). I point this out just because the conventional retirement wisdom is that just saving 10% of ones income is enough to assure a safe retirement, and social security withholding by itself is effectively "saving" more than that target, yet absolutely no one suggests social security income is enough to live on in retirement.
The SS component is baked into the conventional wisdom, though. So effectively the CW is 22.4% 21.09%
(edited, because the employer's 6.2% is in addition to the "100%" you see -> (10%+12.4%)/(100%+6.2%))
« Last Edit: July 01, 2015, 06:53:05 AM by zephyr911 »

MrMoogle

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Re: "Why Are Americans So Bad at Saving?"
« Reply #11 on: July 01, 2015, 11:31:41 AM »
I see it both ways.  Yes most Americans are bad savers, so having a forced savings, through SS or another method, provides a safety net (although small one).

On the other hand, government is taking more and more responsibilities from its citizens, which can make the citizens less responsible.  Bigger government, bigger inefficiencies.

It just depends on your view.  Conservatives believe in self or family or community (think church) reliance, where liberals believe in government reliance.  If you can understand that, you can understand that someone who believes in the opposite is still logical.  "I disagree but you have valid points, we just have different views."

If only politicians could admit it...

The Accidental Mustachian

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Re: "Why Are Americans So Bad at Saving?"
« Reply #12 on: July 03, 2015, 05:14:29 AM »
The uk has just started auto enrolment. You can opt out. (although i and many others expect this to change over time)

When fully up and running,

you will have to put a min 4% in (plus tax relief at 20%) making it 5%
employer will put in 3%

Cant be drawn before age 55 (rising to 57 in 20 years or so)

In general, like the US there is a HUGE problem of people with no pension provision. The universal govt pension payable at 67 (and rising all of the time as life expectancy increases) comes in at around $9000.

I doubt this is going to solve the problem as the contributions are too low, but its a step in the right direction.

Ferrisbueller

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Re: "Why Are Americans So Bad at Saving?"
« Reply #13 on: July 04, 2015, 07:47:17 AM »
Don't think it's just Americans. People virtually everywhere are shit with money and finances.

Americans do have a huge huge amount of advertising flung at them every day (i remember in the 90s being amazed that there was an ad break druing the opening credits of star trek tng) which can't help and America does seem to be a lot more consumerist than many of other western countries.

maizeman

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Re: "Why Are Americans So Bad at Saving?"
« Reply #14 on: July 04, 2015, 02:54:47 PM »

It's 12.4%. You pay 6.2% of your salary, and your employer pays another 6.2%. One of the "joys" of self employment is noticing both social security and medicare take much bigger bites out of your paychecks than when you were working for the man (since you're now paying both the employer and employee halves). I point this out just because the conventional retirement wisdom is that just saving 10% of ones income is enough to assure a safe retirement, and social security withholding by itself is effectively "saving" more than that target, yet absolutely no one suggests social security income is enough to live on in retirement.
The SS component is baked into the conventional wisdom, though. So effectively the CW is 22.4% 21.09%
(edited, because the employer's 6.2% is in addition to the "100%" you see -> (10%+12.4%)/(100%+6.2%))

Good point, I hadn't thought of it like that before.

SpareChange

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Re: "Why Are Americans So Bad at Saving?"
« Reply #15 on: July 05, 2015, 01:04:07 AM »
I just wish I had the option to drop my SS taxes into my IRA...man that would be awesome.

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Re: "Why Are Americans So Bad at Saving?"
« Reply #16 on: July 05, 2015, 06:01:10 AM »
Canadians aren't any better, despite seing the US making stupid mistakes with their money, Canada is doing the samething and have a huge debt ratio like it was for the US back in 2008-09, we are on the same path...oh and it's predicted that Canada will be in recession soon, this should be fun to watch *sarcasm*.

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Re: "Why Are Americans So Bad at Saving?"
« Reply #17 on: July 05, 2015, 06:03:58 AM »
You could just go down the route that Australia has taken - no option superannuation. No opting out, if you have a job (with some exceptions such as the self employed) you pay super at 9.5% minimum. And no option to take it out early, not even for buying a house (as they do in NZ I believe).
I think most people in my generation accept that they will be funding their own retirement; those retiring now only had compulsory super for part of their working lives so many of them still need social security, but at least the middle class are mostly part self-funded.

We have no option on Social Security which taxes around 6% of your income up to some number, but it's layer upon layer of accounting fiction and it's projected to become insolvent. So I don't really think there's a good reason to trust the US Federal government to do this properly. And everybody lost their mind when GWB proposed private investment accounts for Social Security rather than the crapfest currently in place.

Yeah, that terrible Social Security system has only worked great for 80 years. Probably best to tear it out and start over with a system (many? most?) people have proven to be terrible with (the stock market) and can further enrich the rich (banks and advisors charging 2% per year). Genius! What could go wrong?

The Social Security trust funds have a $2.8 trillion surplus invested in Treasuries. The surplus was intentionally built up (policy changes made during Reagan's presidency) to reflect the baby boomers working and saving up funds for when they retire. Once they start retiring in full force it will take until 2033 before the trust fund balance is depleted. Even if no further adjustments are made, SS tax revenues will be sufficient to pay out 3/4 of all SS claims through 2088 (end of the actuarial projection period). So only minor tinkering, if any, would be warranted. The system is really on very solid ground. Poverty among the elderly is virtually nonexistent now, whereas it was a significant issue in the past.
http://www.ssa.gov/oact/STATS/table4a3.html
http://www.ssa.gov/oact/trsum/

I just wish I had the option to drop my SS taxes into my IRA...man that would be awesome.

I don't think you really do want that. The value of a government guarantee that you won't outlive your savings is really huge. It's the cheapest and best possible annuity you can buy. Even if your portfolio gets depleted, you'll have a lifetime of checks waiting for you. That's really valuable longevity and bad investment insurance.

nobodyspecial

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Re: "Why Are Americans So Bad at Saving?"
« Reply #18 on: July 05, 2015, 09:58:25 AM »
The value of a government guarantee that you won't outlive your savings is really huge.....That's really valuable longevity and bad investment insurance.
Unless a future government decides that your home counts as an asset and you don't receive anything. Or you move abroad/have a foreign citizenship and future voters decide that you don't deserve "their" money.

Without getting totally bunker+ammo stockpile - if you are in anyway outside the demographic of elderly people that voted for the incumbent you can't necessarily totally trust future governments.


MoonShadow

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Re: "Why Are Americans So Bad at Saving?"
« Reply #19 on: July 06, 2015, 12:59:54 PM »
I agree that we need to save people from themselves:))

Not just no, but hell no.

What do you think happens after "we" save "the people" from their own poor choices? Who do you think the "we" actually is in this context, and what do you think the "we" will have to say about your life choices once the self-downtrodden are protected from themselves?

MoneyCat

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Re: "Why Are Americans So Bad at Saving?"
« Reply #20 on: July 06, 2015, 01:03:41 PM »
Most people have very low intelligence, so there are two options: 1.) Let them destroy themselves and take you with them or 2.)  Save them from themselves even though they don't "deserve" it.  There is no legitimate third option, despite what the libertarians say.

zephyr911

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Re: "Why Are Americans So Bad at Saving?"
« Reply #21 on: July 06, 2015, 01:24:34 PM »
Yeah, that terrible Social Security system has only worked great for 80 years. Probably best to tear it out and start over with a system (many? most?) people have proven to be terrible with (the stock market) and can further enrich the rich (banks and advisors charging 2% per year). Genius! What could go wrong?

The Social Security trust funds have a $2.8 trillion surplus invested in Treasuries. The surplus was intentionally built up (policy changes made during Reagan's presidency) to reflect the baby boomers working and saving up funds for when they retire. Once they start retiring in full force it will take until 2033 before the trust fund balance is depleted. Even if no further adjustments are made, SS tax revenues will be sufficient to pay out 3/4 of all SS claims through 2088 (end of the actuarial projection period). So only minor tinkering, if any, would be warranted. The system is really on very solid ground. Poverty among the elderly is virtually nonexistent now, whereas it was a significant issue in the past.
http://www.ssa.gov/oact/STATS/table4a3.html
http://www.ssa.gov/oact/trsum/
Thanks for the dose of relaxation there. It's funny, but one of the reasons I was always so bent on investing and getting ahead was contant exposure to SS hysteria as a child. I figured I'd need to do it all for myself if I couldn't count on the feds for help.

I still leave it out of my calculations because now I'm trying to quit most of my wage-earning jobs 20-25 years before I'm eligible. I'd rather leave it out there as potential icing on the cake, and use any proceeds for philanthropy or other altruistic endeavors when the time comes, than build a FIRE plan around drawing down principal till SS time. I guess you could say it's part of my safety margin.

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Re: "Why Are Americans So Bad at Saving?"
« Reply #22 on: July 06, 2015, 02:44:53 PM »
Most people have very low intelligence, so there are two options: 1.) Let them destroy themselves and take you with them or 2.)  Save them from themselves even though they don't "deserve" it.  There is no legitimate third option, despite what the libertarians say.

Most people are not stupid, although most are ignorant. If it concerns you, educate them. I'll side with the libertarians any day.

Philociraptor

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Re: "Why Are Americans So Bad at Saving?"
« Reply #23 on: July 06, 2015, 02:46:39 PM »
Most people have very low intelligence, so there are two options: 1.) Let them destroy themselves and take you with them or 2.)  Save them from themselves even though they don't "deserve" it.  There is no legitimate third option, despite what the libertarians say.

Most people are not stupid, although most are ignorant. If it concerns you, educate them. I'll side with the libertarians any day.

Many people don't care to be educated; if most are not stupid, some are. What shall we do with them?

MoonShadow

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Re: "Why Are Americans So Bad at Saving?"
« Reply #24 on: July 06, 2015, 02:56:22 PM »
Those of you on this forum that are big fans of Social Security are missing some very real problems with it. The largest myth that needs to die is the idea that Social Security has a trust fund backing it up, and that the argument is whether or not it is "well funded" or not, as if it was a pension.

This is a lie. There is no trust fund. Zero. Zip. Nada.  It's a legal illusion.  All SS benefits are paid from funds received from FICA taxes in the same year, and the closest thing to a 'trust fund' that exists is a set of "special issue" US Treasury bonds.  Just IOU's from one branch of government to another.  Mathmaticly, they don't matter and the real funds were spent long ago via the general fund's expenses.  The only way anyone gets SS benefits now, or in the future, is if there remains enough working adults to pay the ongoing taxes.  I think a lot of you Boomers should really consider what is going to happen to Social Security as a whole once enough of your voting block dies that the Millenials take over the electorate.  As a general rule, they are not fans of being taxed for elder benefits, and at least one current candidate for the presidential nomination has already proposed completely eliminating FICA taxes.

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Re: "Why Are Americans So Bad at Saving?"
« Reply #25 on: July 06, 2015, 02:59:34 PM »
Most people have very low intelligence, so there are two options: 1.) Let them destroy themselves and take you with them or 2.)  Save them from themselves even though they don't "deserve" it.  There is no legitimate third option, despite what the libertarians say.

Most people are not stupid, although most are ignorant. If it concerns you, educate them. I'll side with the libertarians any day.

Many people don't care to be educated; if most are not stupid, some are. What shall we do with them?

We?  We won't be doing anything with them.  There is no "we", and I am not obligated to agree with your vision of society.  So the default condition is likely to prevail, in the long run.  It would be advisable that you predict how things will actually happen in the future, not how you think they should happen, and order your life accordingly.

Philociraptor

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Re: "Why Are Americans So Bad at Saving?"
« Reply #26 on: July 06, 2015, 03:14:03 PM »
Those of you on this forum that are big fans of Social Security are missing some very real problems with it. The largest myth that needs to die is the idea that Social Security has a trust fund backing it up, and that the argument is whether or not it is "well funded" or not, as if it was a pension.

This is a lie. There is no trust fund. Zero. Zip. Nada.  It's a legal illusion.  All SS benefits are paid from funds received from FICA taxes in the same year, and the closest thing to a 'trust fund' that exists is a set of "special issue" US Treasury bonds.  Just IOU's from one branch of government to another.  Mathmaticly, they don't matter and the real funds were spent long ago via the general fund's expenses.  The only way anyone gets SS benefits now, or in the future, is if there remains enough working adults to pay the ongoing taxes.  I think a lot of you Boomers should really consider what is going to happen to Social Security as a whole once enough of your voting block dies that the Millenials take over the electorate.  As a general rule, they are not fans of being taxed for elder benefits, and at least one current candidate for the presidential nomination has already proposed completely eliminating FICA taxes.

I'm missing the problem here. Given the above, SS benefits are paid from current SS taxes and IOU's. Taxes, retirement age, and other factors can be changed to keep the system working as the proportion of working adults to retired adults changes. I'd prefer a basic income rather than the patchwork of SS, welfare, and unemployment, but meh. And no congress is going to eliminate SS (or some form of it), especially since people in congress are often older and being voted in by the folks who are retired or soon to be.

Most people have very low intelligence, so there are two options: 1.) Let them destroy themselves and take you with them or 2.)  Save them from themselves even though they don't "deserve" it.  There is no legitimate third option, despite what the libertarians say.

Most people are not stupid, although most are ignorant. If it concerns you, educate them. I'll side with the libertarians any day.

Many people don't care to be educated; if most are not stupid, some are. What shall we do with them?

We?  We won't be doing anything with them.  There is no "we", and I am not obligated to agree with your vision of society.  So the default condition is likely to prevail, in the long run.  It would be advisable that you predict how things will actually happen in the future, not how you think they should happen, and order your life accordingly.

Not sure what you mean here, or what you believe is my "vision of society". I agree with MoneyCat that it is logical to help those in need, even if they don't want or "deserve" help.
« Last Edit: July 06, 2015, 03:17:14 PM by Philociraptor »

MoneyCat

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Re: "Why Are Americans So Bad at Saving?"
« Reply #27 on: July 06, 2015, 03:14:31 PM »
Most people have very low intelligence, so there are two options: 1.) Let them destroy themselves and take you with them or 2.)  Save them from themselves even though they don't "deserve" it.  There is no legitimate third option, despite what the libertarians say.

Most people are not stupid, although most are ignorant. If it concerns you, educate them. I'll side with the libertarians any day.

Many people don't care to be educated; if most are not stupid, some are. What shall we do with them?

We?  We won't be doing anything with them.  There is no "we", and I am not obligated to agree with your vision of society.  So the default condition is likely to prevail, in the long run.  It would be advisable that you predict how things will actually happen in the future, not how you think they should happen, and order your life accordingly.

Then burn with the rest of society, but don't complain about it.  You can't complain about it when you purposefully choose not to be part of the solution.

MoonShadow

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Re: "Why Are Americans So Bad at Saving?"
« Reply #28 on: July 06, 2015, 03:36:18 PM »
Not sure what you mean here, or what you believe is my "vision of society". I agree with MoneyCat that it is logical to help those in need, even if they don't want or "deserve" help.

First you would have to define "need" in this context.  Social Security was never designed to be a pension that anyone had access to after they achieved a certain age, it was designed to be a 'safety net' to keep the elderly out of poverty.  One could make the argument that it has worked for this end so far, but there are a lot of factors involved, so it's overall success is debatable.  And while I would agree that there is no congress that is ever likely to destroy SS, that doesn't mean that it will look like you expect it to by the time you reach "full retirement age".  For example, there could be a means test added to the qualfications, or the calculations formula modified (again), without violating the original intent of the program.  The current formula favors the lower lifetime (taxable) income earner, so by retiring early and living off of investments (which are not FICA taxed) most FIRE types would do well with the current formula.  However, the formula has been altered in the past without much fanfare, and if a future formula reduces benefits across the board by 30% that would save the program for another generation at least; but then everyone who claims after the change would be getting 30% less than they expected.  I'm just saying that assuming that your SS benefit estimate will prove accurate after the Millennials (who are known for this kind of thing, because they're grandparents were typically well off while their own parents often got laid off; and they have a high solidarity to their age peers over their own family) take control of the electorate.  The GEn Xer's, like myself, will never have control of the electorate, because there is not enough of us.  However, the Gen Xer's (particularly in politics) understand Millennials much better than Boomers, as a rule.  There are a lot of candidates running for the Republican nomination, the majority of which are actually Gen Xers.  Rand Paul is a Gen X, and is playing the Millennials' tune.  While the candidates for the Democrats are *all* Boomers.  Some crazy things are going to happen the first time a majority of Congress & the President are Xers elected by a majority Millennial electorate.

If you are not considering the political risks with SS in your FIRE plan, you are not considering all the angles.

Philociraptor

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Re: "Why Are Americans So Bad at Saving?"
« Reply #29 on: July 06, 2015, 03:42:18 PM »
Not sure what you mean here, or what you believe is my "vision of society". I agree with MoneyCat that it is logical to help those in need, even if they don't want or "deserve" help.

First you would have to define "need" in this context.  Social Security was never designed to be a pension that anyone had access to after they achieved a certain age, it was designed to be a 'safety net' to keep the elderly out of poverty.  One could make the argument that it has worked for this end so far, but there are a lot of factors involved, so it's overall success is debatable.  And while I would agree that there is no congress that is ever likely to destroy SS, that doesn't mean that it will look like you expect it to by the time you reach "full retirement age".  For example, there could be a means test added to the qualfications, or the calculations formula modified (again), without violating the original intent of the program.  The current formula favors the lower lifetime (taxable) income earner, so by retiring early and living off of investments (which are not FICA taxed) most FIRE types would do well with the current formula.  However, the formula has been altered in the past without much fanfare, and if a future formula reduces benefits across the board by 30% that would save the program for another generation at least; but then everyone who claims after the change would be getting 30% less than they expected.  I'm just saying that assuming that your SS benefit estimate will prove accurate after the Millennials (who are known for this kind of thing, because they're grandparents were typically well off while their own parents often got laid off; and they have a high solidarity to their age peers over their own family) take control of the electorate.  The GEn Xer's, like myself, will never have control of the electorate, because there is not enough of us.  However, the Gen Xer's (particularly in politics) understand Millennials much better than Boomers, as a rule.  There are a lot of candidates running for the Republican nomination, the majority of which are actually Gen Xers.  Rand Paul is a Gen X, and is playing the Millennials' tune.  While the candidates for the Democrats are *all* Boomers.  Some crazy things are going to happen the first time a majority of Congress & the President are Xers elected by a majority Millennial electorate.

If you are not considering the political risks with SS in your FIRE plan, you are not considering all the angles.

Mmm hmm, mmm hmm, we are in agreement here. I, like many others on this forum, am planning for retirement without factoring in SS at all. It's 'icing on the cake' if it's there for me when I reach the designated "retirement age". As far as politics, it'll be interesting when the republicans start to go more liberal on social issues (they will have to or they will die out with their aging, bigoted electorate), and the difference between the parties becomes more economic. I used to be a fiscal conservative, but am definitely more liberal now; I'd bet that shift had somewhat to do with the antiquated social views of the repubs.

MoonShadow

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Re: "Why Are Americans So Bad at Saving?"
« Reply #30 on: July 06, 2015, 03:50:14 PM »

Then burn with the rest of society, but don't complain about it.  You can't complain about it when you purposefully choose not to be part of the solution.

Well, I certainly won't complain about it; but nor do I have great fears about social breakdown.  Governments didn't create our society (or any other), nor have they ever had a great deal to do with molding it for the "better".  The type of "molding" governments have always done always favors one group over another.

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Re: "Why Are Americans So Bad at Saving?"
« Reply #31 on: July 06, 2015, 03:57:56 PM »
I don't think anyone on this board ever didn't consider potential risks and changes to SS in their plans.

Of course the program will have to change; it's unsustainable in its current form. But it isn't going away or becoming completely insolvent unless changes aren't made AND 1) U.S. economy completely collapses (highly unlikely); 2) people stop having kids (highly unlikely); 3) almost no one in the future works and pays SS taxes (slightly more likely, but still unlikely).

Everyone knows this. The only reason that changes haven't been made recently is because Silents and Boomers are the biggest voting block and they keep voting for politicians who try to sell them plans for change that don't affect their own SS payout. The Millennials are a huge generation, but they aren't voting in numbers that reflect that. Likely, they won't do so until they are middle aged at least. And while they will eventually force changes in the SS system, they won't vote to overturn it because 1) by that time they will have paid a lot in, and 2) most of them will have older family members who depend on SS.

OF COURSE a lot of us Gen Xers are pissed at the older generation, who voted selfishly and didn't plan for their own retirement. I myself am supporting my mother...she is dependent on 12000/year SS plus my support to live. I'm not happy about it, but there it is.

But if Gen X or Millennial libertarian types vote to abolish their older relatives' SS checks, then guess who is going to have to take care of said poor older relatives without any help at all? Those libertarian Gen Xers and Millennials. Trust me, most younger people will recognize this as they age and their parents and grandparents age, and will begin to see maintaining SS, even with its problems, as to their own advantage. And they are likely to outvote the minority of young people who don't have older relatives, or or wouldn't give two shits if their parents and grandparents died in a gutter.


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Re: "Why Are Americans So Bad at Saving?"
« Reply #32 on: July 06, 2015, 04:39:08 PM »


The Millennials are a huge generation, but they aren't voting in numbers that reflect that.


Um, where did you get that idea?  Millennials are fickle voters, to be sure; but they are also the most politically active generation since Boomers themselves. (Although not often very well educated in politics or issues)  But they were critical in Obama's first presidential election. In many ways, they are a wild card; they seem to be hard to motivate as a whole, but once the right issue has been brought up, they are a passionate lot.

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 Likely, they won't do so until they are middle aged at least. And while they will eventually force changes in the SS system, they won't vote to overturn it because 1) by that time they will have paid a lot in,


This might prove true, if it takes another decade before they take over the electorate. I don't think it will though, and I see plenty of evidence that some major players in politics today are pandering to Millennials already.  I was never pandered to.

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 and 2) most of them will have older family members who depend on SS.


I can say, without reservation, that this will not matter one bit.  I have personally talked to many Millennials about this topic, and nearly every one *expects* to be helping one or both of their parents in their elder years; but couldn't give a damn about anyone else's parents.  They won't vote to preserve SS in the interest of older generations, they simply don't care.  As I already noted, they have the greatest 'peer solidarity' of any generation, ever.  That pretty much excludes the possibility of voting to save Grandpa's SS over reducing their own tax burden.  They also happen to be the most violent generation since the Civil War, so they might just vote for national "assisted suicide".  Combined with living wills, and they might solve the SS deficit right there.

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But if Gen X or Millennial libertarian types vote to abolish their older relatives' SS checks, then guess who is going to have to take care of said poor older relatives without any help at all? Those libertarian Gen Xers and Millennials.


I promise they already expect it, and would rather have their FICA taxes now.
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Trust me, most younger people will recognize this as they age and their parents and grandparents age, and will begin to see maintaining SS, even with its problems, as to their own advantage. And they are likely to outvote the minority of young people who don't have older relatives, or or wouldn't give two shits if their parents and grandparents died in a gutter.

Time will tell.

wenchsenior

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Re: "Why Are Americans So Bad at Saving?"
« Reply #33 on: July 06, 2015, 04:47:49 PM »
Time will tell, indeed.

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Re: "Why Are Americans So Bad at Saving?"
« Reply #34 on: July 06, 2015, 05:12:18 PM »
To the person that said we should not save people from themselves we have a responsibility as a society to make sure old people aren't homeless living in the streets. That is why SS was created. For most people it is just a part of their income but for some unfortunately it is everything. It is easy to judge when we don't know what has happened to people for this to be the outcome. Not everyone that ends up poor is that way because they blew their $.

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Re: "Why Are Americans So Bad at Saving?"
« Reply #35 on: July 06, 2015, 06:13:27 PM »
To the person that said we should not save people from themselves we have a responsibility as a society to make sure old people aren't homeless living in the streets. That is why SS was created.


That may be why SS was created, but that is not what it actually *is*.  SS as we know it today functions as a pay-as-we-go pension, and in that role it is unsustainable. By definition, that which is unsustainable will cease, in one fashion or another, eventually.

Your belief in social responsibility, or mine, is irrelevant in this context.  I would favor saving SS as a safety net, but that would require a means test for qualifications; which is politically unlikely in the near future.  However, if it isn't fixed, the Millennials will vote for someone who promises to remove it from their lives by any means necessary. Surely you understand that there are plenty of people who do not agree that SS should even exist, and many more who are opposed to it on political or religious grounds? Enough voters who grow up opposed to it on economic grounds, and a tipping point will be reached; and your best intentions will mean very little.

And adding a means test to SS would effectively remove SS from any responsible retirement planning, and particularly from FIRE planning.

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 For most people it is just a part of their income but for some unfortunately it is everything. It is easy to judge when we don't know what has happened to people for this to be the outcome. Not everyone that ends up poor is that way because they blew their $.

No everyone, no. But statisticly speaking, the majority of whom require SS to stay above the poverty line made some poor choices that led to that result.  But that doesn't matter either, because the Millennials don't see SS from that side. As a rule, they see it from the perspective that their grandparents get SS, that most of them know is paid for by their FICA taxes, and they (not their grandparents) that have trouble paying for a middle class lifestyle.

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Re: "Why Are Americans So Bad at Saving?"
« Reply #36 on: July 06, 2015, 06:15:18 PM »
You could just go down the route that Australia has taken - no option superannuation. No opting out, if you have a job (with some exceptions such as the self employed) you pay super at 9.5% minimum. And no option to take it out early, not even for buying a house (as they do in NZ I believe).
I think most people in my generation accept that they will be funding their own retirement; those retiring now only had compulsory super for part of their working lives so many of them still need social security, but at least the middle class are mostly part self-funded.

We have no option on Social Security which taxes around 6% of your income up to some number, but it's layer upon layer of accounting fiction and it's projected to become insolvent. So I don't really think there's a good reason to trust the US Federal government to do this properly. And everybody lost their mind when GWB proposed private investment accounts for Social Security rather than the crapfest currently in place.

Fear mongering, if the government does nothing, SS will pay out 75% of benefits when we are old.

MoonShadow

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Re: "Why Are Americans So Bad at Saving?"
« Reply #37 on: July 06, 2015, 06:25:51 PM »
You could just go down the route that Australia has taken - no option superannuation. No opting out, if you have a job (with some exceptions such as the self employed) you pay super at 9.5% minimum. And no option to take it out early, not even for buying a house (as they do in NZ I believe).
I think most people in my generation accept that they will be funding their own retirement; those retiring now only had compulsory super for part of their working lives so many of them still need social security, but at least the middle class are mostly part self-funded.

We have no option on Social Security which taxes around 6% of your income up to some number, but it's layer upon layer of accounting fiction and it's projected to become insolvent. So I don't really think there's a good reason to trust the US Federal government to do this properly. And everybody lost their mind when GWB proposed private investment accounts for Social Security rather than the crapfest currently in place.

Fear mongering, if the government does nothing, SS will pay out 75% of benefits when we are old.

This is true. You can expect that you will get 75% of the benefits you have been promised. I actually use 70% in my own planning models.

That is, of course, assuming nothing changes until then.  Which is still a rather risky assumption considering that SS is a political creation and not a contractual, which I still wouldn't accept at face value.  Counterparty risk is the second greatest long term planning risk, right after political risk.

Oh, and the FICA (Social Security and Medicare) tax rate is actually 15%, half paid by the employer and half by the employee, just to hide the total from the employee.  Think about what you could do with 15% of your income for your entire career, plus what you already save! Certainly some people would have been harmed by privatization of SS in GWB's plan, but most would have been better off even dumping it all into a target retirement fund or a total market fund.

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Re: "Why Are Americans So Bad at Saving?"
« Reply #38 on: July 06, 2015, 07:19:17 PM »
Someday. the Republicans will succeed in their quest to destroy Social Security and then I will lock my doors and stay inside as much as possible as the crime rate skyrockets everywhere and everything ends up on fire.  Good luck with that.

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Re: "Why Are Americans So Bad at Saving?"
« Reply #39 on: July 06, 2015, 07:46:53 PM »
I hope you enjoy your solitude. 

Here's a fun fact; on a national level, violent crime peaked right around 1990.  I'm pretty sure that Social Security was in full force for about 50 years before that, so your comment is a bit strange.

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Re: "Why Are Americans So Bad at Saving?"
« Reply #40 on: July 06, 2015, 08:19:39 PM »
I hope you enjoy your solitude. 

Here's a fun fact; on a national level, violent crime peaked right around 1990.  I'm pretty sure that Social Security was in full force for about 50 years before that, so your comment is a bit strange.

Some people -- most people -- don't want to live in your Mad Max the Road Warrior Libertarian Utopia.  I'm not alone in this.

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Re: "Why Are Americans So Bad at Saving?"
« Reply #41 on: July 06, 2015, 08:21:01 PM »
Millennials will vote for someone who promises to remove it from their lives by any means necessary.

Just to be clear, you believe a generation of working aged individuals will be able to out vote every single generation older than them?  Old people have really solid turnout numbers... working aged people do alright, but not the 70%+ that the 50 year old+ crowd get.  I'd have a hard time believing anyone over the age of 50, who has put in 12% of their income into a system for 20-30 years is going to vote to kill it off.

MoonShadow

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Re: "Why Are Americans So Bad at Saving?"
« Reply #42 on: July 06, 2015, 08:36:10 PM »
I hope you enjoy your solitude. 

Here's a fun fact; on a national level, violent crime peaked right around 1990.  I'm pretty sure that Social Security was in full force for about 50 years before that, so your comment is a bit strange.

Some people -- most people -- don't want to live in your Mad Max the Road Warrior Libertarian Utopia.  I'm not alone in this.

That "Mad Max" libertarian utopia you speak of existed in the United States, more or less, from 1785 to 1913.  Granted, there weren't many cars or gallons of gasoline to fight over, and it was truly a far cry from any 'utopia', but nor was it anything like a dystopian movie plotline.  Even western movies were fiction, and the average "wild west" town was safer than Detroit, or even Chicago, is today.  And roads were built, and police were hired and paid for. 

Have you ever heard the story of how police got the name "cops"?  It's actually an acronym, constable on patrol.  A constable, in the historic sense, is a privately paid police officer.  They still exist as an elected, but not paid, position in every county in my state of Kentucky.  Legally speaking, the constable has the same powers as the county sheriff, who is paid by property taxes.  In practice today, they are high-quality private security; some are hired to deliver court summons, some are sheriff's deputies working part-time at bank branches or sporting events.

And yes, private companies built roads prior to 1913; and in many places, private companies still build the roads.

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Re: "Why Are Americans So Bad at Saving?"
« Reply #43 on: July 06, 2015, 08:55:48 PM »
Millennials will vote for someone who promises to remove it from their lives by any means necessary.

Just to be clear, you believe a generation of working aged individuals will be able to out vote every single generation older than them? 


To be clear. Yes, that day will come. When is the only question.  Millennials, born between 1982 and 2001 or so, are a generation larger in number than the Boomers. Furthermore, they are (and will continue to be) coming of age just as Boomers are entering their final stages of life.  Keep in mind that the average life expectancy implies that half of those voting Boomers will be dead before reaching that age.  So while the voting population of Boomers will be declining over the next couple decades, the voting population of the Milennials will continue to rise.  At some point there will be a transfer of power from the Boomers straight to the Millennials, and Gen X in the middle will never matter.  Not only is Gen X a smaller population than either, we tend to be very divided politically and cancel each other out.  So when that time comes, I am predicting that Millennials will either alter, or completely destroy, Social Security.  They don't seem nearly as politically divided as Gen X, at least not on the topic of FICA taxes.  Feel free to ask a few 20-somethings what they think of payroll taxes, and if they really care that they pay for SS and Medicare.  You might find that your informal poll doesn't feel you with joy & confidence in the longevity of SS as presently exists.

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Old people have really solid turnout numbers... working aged people do alright, but not the 70%+ that the 50 year old+ crowd get.  I'd have a hard time believing anyone over the age of 50, who has put in 12% of their income into a system for 20-30 years is going to vote to kill it off.

I'm not saying that 50+ year olds will vote to kill it.  I'm saying that, at some point in the future, their vote will no longer matter; simply because they will no longer be in the majority.  Again, Gen X is a self-conflicted generation.  Many of them *willl* vote to destroy it, even if that is not in their own best interests.  Half of Gen X has voted against their own best interests their entire lives.

tj

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Re: "Why Are Americans So Bad at Saving?"
« Reply #44 on: July 06, 2015, 09:16:42 PM »
By the time the millenials are old enough for their votes to matter, they are going to be close to collecting social security. Its not going anywhere.


Besides, my experience is that millenials far are more liberal than their predecessors.

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Re: "Why Are Americans So Bad at Saving?"
« Reply #45 on: July 06, 2015, 09:18:42 PM »
Oh, and the FICA (Social Security and Medicare) tax rate is actually 15%, half paid by the employer and half by the employee, just to hide the total from the employee.  Think about what you could do with 15% of your income for your entire career, plus what you already save! Certainly some people would have been harmed by privatization of SS in GWB's plan, but most would have been better off even dumping it all into a target retirement fund or a total market fund.

Extremely unlikely, for a large number of reasons.  First though, you have to compare apples to apples.    Along with the retirement benefit of SSI, you get the disability benefit.  That's a non-trivial cost.  You also get survivors benefits.   That again, is a non-trivial benefit.  Next, the Medicare portion also includes...Medicare.  So you get good, low cost health insurance from 65 on.  That would be extremely expensive if you were to try to buy it on your own.

Next, SS is essentially an inflation adjusted annuity.   As an exercise for the reader, look into what it would cost to buy an inflation adjusted annuity at age 62 or 65 or whatever, that pays a monthly benefit similar to what SS pays.  Hint:  It is a lot.

In short, if you add up the disability benefit, the survivor's benefit, Medicare coverage, and the inflation adjusted annuity that is SS, payroll taxes are a pretty reasonable deal for what you get, and depending on how you figure, could well be better than buying those same things on your own.  Don't take my word for it.  Fire up the Google.   

And since most people don't really save or invest very well, then most people wouldn't be better off keeping all their FICA taxes.   In fact, even the small fraction of people who do save and invest well it is debatable if they would be better off. 





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Re: "Why Are Americans So Bad at Saving?"
« Reply #46 on: July 06, 2015, 09:34:59 PM »
Oh, and the FICA (Social Security and Medicare) tax rate is actually 15%, half paid by the employer and half by the employee, just to hide the total from the employee.  Think about what you could do with 15% of your income for your entire career, plus what you already save! Certainly some people would have been harmed by privatization of SS in GWB's plan, but most would have been better off even dumping it all into a target retirement fund or a total market fund.

Extremely unlikely, for a large number of reasons.  First though, you have to compare apples to apples.    Along with the retirement benefit of SSI, you get the disability benefit.  That's a non-trivial cost.  You also get survivors benefits.   That again, is a non-trivial benefit.  Next, the Medicare portion also includes...Medicare.  So you get good, low cost health insurance from 65 on.  That would be extremely expensive if you were to try to buy it on your own.

Next, SS is essentially an inflation adjusted annuity.   As an exercise for the reader, look into what it would cost to buy an inflation adjusted annuity at age 62 or 65 or whatever, that pays a monthly benefit similar to what SS pays.  Hint:  It is a lot.


Up to this point, you are doing great. I can't argue with the above, because they are all very good points.  Everything that follows is a matter of opinion, that I don't agree with; and any actual numbers that could be produced to support it (or even contradict it) would be highly dependent upon many variables out of control of any one person, as well as the swings in both the stock market as well as the political environment.  So I would say that it all comes down to what you favor; forcing everyone into a one-program-fits-all pension plan, or allowing the general public to take risks and make mistakes.  Given the choice, I will pick the risk & freedom of self-directed independence every time.  Others seem to discount the problems and political risks of SS, and it comforts them.  I know that I am in a small minority in that manner, but there are more that favor that position than you are likely to believe exist.  Even if all that changes is some candidate for POTUS can promise the Millinials the option to opt-out of SS altogether, vast numbers will do so, and SS will still collapse upon it's own weight well before it runs out of living beneficiaries.

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Re: "Why Are Americans So Bad at Saving?"
« Reply #47 on: July 06, 2015, 09:58:59 PM »
By the time the millennials are old enough for their votes to matter, they are going to be close to collecting social security. Its not going anywhere.

Not if you actually figure out the tipping point, which (based upon the size of both generations, and the rate of 'early' (before life expectancy) death of Boomers) almost certainly occurs before 2020, the year the last of the Millennials actually can vote.  And the tipping point is actually likely to occur sooner, maybe even next year, due to the fact that the elderly typically stop voting (on average, which is the only context that matters here) before they actually die.  This is why, I think, the Gen Xer Republican candidates for president (such as Paul and Cruz) are pandering to their generation.

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Besides, my experience is that Millennials far are more liberal than their predecessors.

Only if you are stuck on the left-right or liberal-conservative dichotomy.  Millennials, like pretty much everything else, are more complex than that.  In general, Millennials are socially liberal but fiscally conservative.  The socially liberal part has, thus far, dominated the public debate; but the Repubs are trying to turn the topic towards fiscal issues.  This is exactly what Rand Paul was trying to do with his 14.5% 'Fair & Flat Tax' plan.  Only time will tell if it will work.

By the way, the combination of socially liberal and fiscally conservative is one definition of a libertarian, for which thought Rand Paul is the reigning representative in our political climate.  I can't even think of a Democrat that could claim to be a libertarian anymore.  The book, The Fourth Turning, predicted most of this; right down to the political bent of Millennials, which scared the crap out of the authors, since they were (and still are as far as I know) quite liberal.  It was published in 1997, and the follow-up book, The Rise of the Millennials, predicted their early dominance of the electorate.  The polticos know this already, and are planning accordingly.

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Re: "Why Are Americans So Bad at Saving?"
« Reply #48 on: July 06, 2015, 10:09:56 PM »
By the way, the combination of socially liberal and fiscally conservative is one definition of a libertarian, for which thought Rand Paul is the reigning representative in our political climate.

Rand Paul is not socially liberal.

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Re: "Why Are Americans So Bad at Saving?"
« Reply #49 on: July 06, 2015, 10:14:09 PM »
By the way, the combination of socially liberal and fiscally conservative is one definition of a libertarian, for which thought Rand Paul is the reigning representative in our political climate.

Rand Paul is not socially liberal.

Compared to most of the candidates for the Republican nomination, he is.