Why Privatization of Social Security is a Good thing

Bush is for privatization of Social Security and Kerry is against it. I have compiled some numbers to argue why privatization is a good thing.

Currently 7.65% of your gross income goes to Medicare and Social Security. Out of that 6.20% goes to Social Security and 1.45% goes to Medicare. If Americans are allowed control of 2% leaving 5.65% for the government the results are astonishing.

For example someone earning minimum wage at today�s rate of $5.15 an hour will bring home $10,712 a year. This person will gross $892.66 a month contributing $68.29 a month to Social Security or $819.48 a year. If this person works from age 16 to age 65 never receiving a raise he would put $40154.52 into Social Security. The maximum monthly income this person can expect from Social security is $564.00 a month as calculated from the Social Security website.

Now if this person is allowed to control just the 2% I mentioned earlier and invested in good growth stock mutual funds this is what happens. This 2% translates into $214.24 a year for our example or just $17.85 a month. Lets look at a few things.

Many growth stock mutual funds have annual return rates at 20% and above but we will not go to that extreme.

• On a 8% annual return the savings of $10495.80 invested over 49 years would be worth $130525.55.
  
• On a 10% annual return the savings of $10495.80 invested over 49 years would be worth $279725.20
  
• On a 12% annual return the savings of $10495.80 invested over 49 years would be worth $618521.03
  

In other words if our example lives to be 80 he can expect to get $725.14 a month if he received an 8% annual return, $1554.03 a month for 10%, and $3436.23 a month if he received 12% annual return. So this small portion of the Social Security that was privatized made our subject better off than Social Security could.

And the remaining 5.65% can fund all the current dependents of the Social Security System.

The amazing thing is that our example received minimum wage his entire working life and never received a raise. The numbers would definetely be higher.


[edit on 20-10-2004 by BlackJackal]

I am for it depending on the details.

I am nearing retirement and do not want my benefits cut by 25-50% like the Democrats say Bushs plan will do. If I am wrong I am sure a republican will tell me

I am at the stage where I can not invest enough to fill in the cut back.

I would like to see the plan in simple words spelled out

See this was around long before bush spouted his bs to gain votes from people that don't like him... wishful thinking on his part if you ask me.



Politicians in Washington are stealing your future.

Every year, they take 12.4% of your income to prop up their failed Social Security system - a system that is heading toward bankruptcy.

If you are an American earning the median income of $31,695 per year, and were given the option of investing that same amount of money in a stock mutual fund, you would retire a millionaire - without winning the lottery or a TV game show.

That million dollars would provide you with a retirement income of over $100,000 per year - about five times what you could expect from Social Security.

Even a very conservative investment strategy would yield three times the benefits promised by Social Security.

Libertarians believe you should be able to opt out of Social Security and invest your money in your own personal retirement account. An account that you own and control - one that politicians can't get their hands on.

Republicans and Democrats say it can't be done - that your Social Security taxes are needed to pay benefits to today's retirees. Instead of letting you invest in your own future, they want you to have faith that someone else will pay your benefits when it comes time for you to retire.

Although most won't admit it publicly, their "solutions" to the Social Security crises all come down to some combination of tax increases and benefit cuts.

Libertarians know that there's a better way.

Countries like Chile, Mexico, Britain, and Australia have successfully made the transition from their failed Social Security systems to healthy systems based on individual retirement accounts. In Chile, over 90% of workers have opted out of the government-run system. It's time America did as well.

The federal government owns assets worth trillions of dollars - assets that it simply doesn't need to perform its Constitutional functions. By selling those assets over time, we can keep the promises that were made to today's retirees, and to those nearing retirement, while freeing the rest of America from a failed Social Security system.

Libertarians will introduce and support legislation to give you that choice, and put you in control of your own retirement future.

lp.org...

And off to the side you can see:

Related public policy sites:
� Cato Institute
� Heartland Institute
� Reason Public Policy Institute


[edit on 20-10-2004 by TrueLies]

Unless the stock market crashes, because of any of a MILLION seperate reasons, and then Americans can return to serfdom...where they obviously feel most comfortable.

But, that couldn't happen with oil over $55 dollar a barrel, and the low interest rates, and the over inflated real estate market, and the largest debt in American history, currently floated by an over valued American dollar that will always be used as the world standard.

Oh well, I'm rich, I can move. I here Geneva's nice this time of year.

Originally posted by Amuk
I am for it depending on the details.

I am nearing retirement and do not want my benefits cut by 25-50% like the Democrats say Bushs plan will do. If I am wrong I am sure a republican will tell me

I am at the stage where I can not invest enough to fill in the cut back.

I would like to see the plan in simple words spelled out

Those claims are false see here

www.factcheck.org...

Originally posted by BlackJackal
Those claims are false see here

www.factcheck.org...

Ifg it doesnt cut what I ALREADY put in then I am for it.

If I had been able to invest all the money I have paid in already I would have been albe to retire already or at least have just a part time job ro stay busy

I am not against of the privatization but It will work better for the younger generation for the older generation and ready to retired people they will be more skeptical to acept the privatization of it.

Perhaps it will work better if first they start with the younger crowd first.

Amuk,

Let me show you something that will make you sick. Lets take for example our minimum wage man and say that he was able to invest all of his Social Security money privately and received a 12% return

The actual amount put in would be $40,154.52 but when he retired he would have a nest egg of $2,366,319.40

So our minimum wage worker became a multimilliounare!

Originally posted by BlackJackal
Amuk,

Let me show you something that will make you sick.

I know

I have been fighting for it for years I just dont want to see what I have paid in disappear.

I think the Libertarian plan calls for you to get EVERY penny you paid in PLUS intrest in one lump sum to re-invest I would like that too

Privatisation? Oh yes, that's a good one.

Well IMHO it'll take a little time but get set for the biggest shafting of the US people in history.

All it'll take is a 'slow down' or 'recession' or two and what do you know the fund value will have been transferred one way or another.....hell maybe they'll get so bare-faced they'll just go for the almighty crash and rob the people in one hit.

.....and if Americans are dumb enough to vote for the close friends of those responsible for record corporate frauds who'll do it then there'll be no excuses and no-one can say they weren't warned!

Here in the UK we've just had a pensions scandel or two thanks to private companies screwing their customers.......I'm telling yous it happens!



[edit on 20-10-2004 by sminkeypinkey]

Welfare?

Nobody is talking about welfare this is RETIREMENT and if you wished you could put the money in just a SAVING acount where there would be NO risk

Hey, I like the idea of privatization, but I was just curious what equation was being used. I wasn't able to get the same figures as you did.

I used this websites calculator for periodic investments. In the main example (Not the 2,000,000 dollar one) The monthly contribution was $17.85 and years was 49. For the second example the figures were $68.29 for 49 years.

www.gabelli.com...

[edit on 20-10-2004 by BlackJackal]

Originally posted by BlackJackal
Bush is for privatization of Social Security and Kerry is against it. I have compiled some numbers to argue why privatization is a good thing.

Currently 7.65% of your gross income goes to Medicare and Social Security. Out of that 6.20% goes to Social Security and 1.45% goes to Medicare. If Americans are allowed control of 2% leaving 5.65% for the government the results are astonishing.

For example someone earning minimum wage at today�s rate of $5.15 an hour will bring home $10,712 a year. This person will gross $892.66 a month contributing $68.29 a month to Social Security or $819.48 a year. If this person works from age 16 to age 65 never receiving a raise he would put $40154.52 into Social Security. The maximum monthly income this person can expect from Social security is $564.00 a month as calculated from the Social Security website.

Now if this person is allowed to control just the 2% I mentioned earlier and invested in good growth stock mutual funds this is what happens. This 2% translates into $214.24 a year for our example or just $17.85 a month. Lets look at a few things.

Many growth stock mutual funds have annual return rates at 20% and above but we will not go to that extreme.

• On a 8% annual return the savings of $10495.80 invested over 49 years would be worth $130525.55.
  
• On a 10% annual return the savings of $10495.80 invested over 49 years would be worth $279725.20
  
• On a 12% annual return the savings of $10495.80 invested over 49 years would be worth $618521.03
  

In other words if our example lives to be 80 he can expect to get $725.14 a month if he received an 8% annual return, $1554.03 a month for 10%, and $3436.23 a month if he received 12% annual return. So this small portion of the Social Security that was privatized made our subject better off than Social Security could.

And the remaining 5.65% can fund all the current dependents of the Social Security System.

The amazing thing is that our example received minimum wage his entire working life and never received a raise. The numbers would definetely be higher.


[edit on 20-10-2004 by BlackJackal]

That is all very interesting and all, but that is what 401k and investment is for. Putting ALL of your ss$ in the form of invesments is like gambling. What happens when another Enron happens, or the stock market crashes? Perhaps there could be a compromise to allow people some flexibility but without a for sure program, alot of people would be dirt poor at retirement. Who will pay for them?

Talk about appealing to people's greed.

Just one thing.....who is getting 8, 10 or 12% these days?

Stock market 'growth' has been remarkably underwhelming for several years now, has it not?

Originally posted by sminkeypinkey
Talk about appealing to people's greed.

Just one thing.....who is getting 8, 10 or 12% these days?

Stock market 'growth' has been remarkably underwhelming for several years now, has it not?

Well those are conservative numbers that I used. Take a look at these mutual funds. You have got mutual funds with 5 year return rates of 47% and many over 25% so plenty of people are getting 8%, 10% and 12%

biz.yahoo.com...

I was reading news about Bush's presentation of the privatization plan, and this thread came to mind.

I used to work in the financial sector, and I'm ver much against the privatization.

Originally posted by BlackJackal
Amuk,

Let me show you something that will make you sick. Lets take for example our minimum wage man and say that he was able to invest all of his Social Security money privately and received a 12% return

The actual amount put in would be $40,154.52 but when he retired he would have a nest egg of $2,366,319.40

So our minimum wage worker became a multimilliounare!

The 12% return in the current market, or the future market for that matter, is quite hard to obtain. I just look at my own portfolio, which is not that bad.

More importantly, there is a risk in the investment that can't be reasonably hedged unless you are paying for the hedge. So, since markets are largely efficient, the risk free return is just that, about what you get in your average CD.

I think that Soc Sec should have zero risk tolerance. Peoples very livelihood hinge on this money. No returns, yes, but I can count on them to buy my loaf of bread.

If the market crashes, and one day it will, what would the retirees do? Commit mass suicide?

Privatization is an exceptionally bad plan.

If Social Security is to be privatized right now, what would be done with it's current debt, since all fiscal concentration would be void at the moment. Would it be summed into the national debt? What exactly would fill the voids as they appear until stablization is acheived?

I had about 100,000 invested in mutual funds in 1998.I am currently at a little over 100,000. So in 7 years I have gained very little. social Security is safe and you tend to get more out of it than you pay in. That is if you live 10 years or longer after you start recieving social security. One thing to remember is that once wall street gets a hold of that money someone will find a way to steal it leaving investors holding the empty bag.

I have two BIG problems with privatization:

1. What happens to those in the 50s and beyond. But this time in our lives, it is waaay to late for alternatives to the current SS plan. Like AMUK, I cannot afford to be privatized any more.

2. What happens to the thousands and thousands of Americans who blow their retirement savings, invest unwisely, and/or get taken to the cleaners by scam artists?
Then, the governement will be forced to bail them out---you just know that will happen. Or, another group of attorneys will ge rich on another unfortuante group of Americans.