Should Social Security be replaced with forced IRAs,401(k)s,etc?
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Sure, if the money is deducted and funded directly into privatized IRAs, etc, of the worker's choice. It would allow competition and MUCH better returns on investment. It sure beats government officials dipping into Social Security and bankrupting it. However, there should still be a government maintained social fund, strictly for people unfit to work (people with mental conditions, amputees, etc etc).
Not true at all. The vast majority of people with any type of 401K or retirement plan on the free market have lost money in it over the last decade, and lots of money, while SS has stayed the same. Not having at least one program for retirees which is safe from a volatile market is asking for epic disaster. It's not just about, "being nice" having hordes of old homeless people is annoying, expensive, and god help us if they get their hands on a car to drive to job fairs around town.
And there are a number of other factors like overall american productivity dropping because old people stay on the job past their prime becaue they can't retire and you have young unemployed as a result - plus young unemployed are more likely to commit crimes which turns into more tax dollars spent on prison and cops.
It is actually more expensive to not have a program for the elderly to retire. And SS has paid for itself since it's creation, and never has a penny been taken from outside of the taxes designated for it. So it works well. Why change that?
Actually, money has been taken out of social security funds, and it happens time and time again. It's called discretionary spending. Also, social security funds are running out. When SS was created, the ratio was 5 to 1 (workers to retirees). Now it's about 2.5 to 1, as has been steadily declining, since creation. It's non-debatable that SS funds are running out.
In order for SS to become effective, there needs to be no discretionary spending on its funds, the retirement age needs to be routinely adjusted, since the populace is getting older, and a good American economy, with a low unemployment rate. So, to dispute your quote that, "there are a number of other factors like overall american productivity dropping because old people stay on the job past their prime becaue they can't retire and you have young unemployed as a result," the retirement age, under SS, needs to be routinely adjusted in order to keep SS from going bankrupt. Otherwise, you'll have people retiring when they're 65, and living off SS, until they're 115, in the future. If the SS retirement age is routinely changed, you'll have workers in their 80's, creating the same exact problems you just stated.
With a retirement plan, you're only dependent on yourself. Hell, you could throw all of that money into a bank savings account, then get it all back, with all the interest that grew on top of it, over the years. We already have community colleges. We already have financial aid. We already have homeless shelter programs. So, people can get educated enough to land a decent job. It's up to them.
The only SS programs I agree with are the ones providing support towards those that can't work, or those that are between jobs. If there was some kind of great depression, the government can step in. However, there shouldn't always be that kind of government intervention, since its costs have been growing, almost exponentially, each decade.
Due to unbalanced economic power between the major players in the stock market and the average citizen, such a mandatory program would be no different than requiring every citizen to enter a den of hungry lions.
Because the average citizen must compete not only with other citizens, but with larger and more powerful financial companies, the average citizen will not be able to keep up with those institutions. The larger the institution, the more time and resources they have to research the market and individual companies. The larger and wealthier the institution, the greater computing power they can apply towards analyzing and responding to market conditions. The larger and wealthier the institution, the higher, faster network connections they get with the exchanges. They can also exert more influence on politicians and governing bodies.
The average citizen will be able to spend one or two hours a week studying the market in an attempt to find and purchase the most undervalued stocks. The large institutions apply dozens or hundreds of specialists, full time to analyze the market. The average citizen might have the assistance of one out-dated software tool. The large institutions use proprietary, software, developed in under trade-secret laws to analyze the market. Those organizations may even have a staff of economists performing full-time research to improve their proprietary software. Against such odds, the average citizen will buy stocks at higher prices and sell at lower prices than the large institutions.
Was the use of Social Security not meant to be limited to a short time period? Has it not over stayed its use? It was not intended to last people a long period of time, it was meant for the last few years of their lives not the last few decades. That seems to be the census of several articles about Social Security, therefore I would say it should be replaced. However it does not apply to me so our opinions may differ if you are counting on it being around for you.
There are two things which need to be done for social security to not be majorly flawed.
1. It needs to be managed properly, which it hasn't been.
2. It needs to be managed based on accurate models which predicts various economic data out 70 or more years, which can't be done.
Thus any advantage social security might have over IRAs,401(k)s, etc are lost.
These IRAs and such can still provide for retirement granted they are started early and with a significant enough contribution.
Those conditions can be mandated by law, and replace social security.
Social security is flawed due to its relationship to population. If it is mis-managed, or managed based on inaccurate models, then either people will be taxed heavily to fund the retirement of other people and expect their children to fund theirs(which is unstable and likely leads to the next possibility), or funding for the program will be lost leading to questions of what should be done with an aging population which would be difficult to answer.
IRAs are not tied into population as much, and thus doesn't run into those problems.
They may lose money if a recession occurs, but there are ways to hedge against that and perhaps the government could have some-type of insurance against it.
I guess this could technically be under management, but the fact that congress decided to take all of the surplus money is probably the reason the system is failing. When you have more people paying in then pulling money out you are going to need that surplus for when they all start taking money out...
That would be great it would at least guarantee that there would be money for you when your old. Only problem is that there is no money in the Social Security fund all of the money paid out is through debt, they will never do it becuase you can't actually give something monetary when it's a giant ponzi scheme.
The key word in this question that I disagree with is forced. I don't think anything should be forced upon us. I would agree with doing away with SS and having an OPTION to contribute that same money into an alternative investment program or keeping that money and invest it personally.
If the question were reworded to say "Should SS be replaced with IRAs and 401(k)s, etc?" I would say yes but since it says FORCED. I have to say no.
Your opinion on wellfare, while interesting and thoughtless, has nothing to do with the argument. Social Security is paid through everyone's taxes and in the amount paid into, hence not wellfare, and independant retirement agreements (of which 401K is a type) is that, but on the market.
And no, it's a bad idea. If we didn't have social security every person to have retired in the last 8 years would have lost everything prior too and be homeless. We'd have hordes of roaming homeless old people. We need at least one program for retirement not dependant on a volatile market.
In our current monetary and economic system, we should retain Social Security - with a stipulation that the Federal Government return to it, all the money it has "borrowed" from it.
The stock exchanges on which most 401K and IRA plans trade, are effectively rigged to benefit the owners of the largest banking conglomerates. They use the money under their control to buy stocks in one sector of the market, and then the smaller organizations start doing the same, then it the stock price increases in that sector reach the news media and yet smaller organizations start buying into it. After it's been in the news for a while, the average "investor" who is just trying to shift money from one fund in their 401K/IRA to another buys into the sector with the rising prices. Unfortunately for the average investor, they are the last to get in and do so just before the big organizations sell-off their shares to move money to another sector - popping the bubble and starting a new one.
Any mandatory 401K/IRA where people have to compete with each other and the large banking institutions, hedge funds, and so on in order to make money will do nothing but transfer wealth from the average citizen and put it into the hands of the already wealthy elite.
The average citizen does not have the resources to hire hundreds of day traders, along with multiple data centers and expensive software to scour the marketplace for arbitrage opportunities. Nor do the average citizens have the resources to cause entire sectors pricing to swing up or down due to the huge quantity of money they are shifting around. The large financial institutions, however, often control so much money that they cannot help but materially influence prices when the shuffle their assets.
So Social Security, into which people have already paid, is the only retirement program from which most people will actually receive a positive return on investment.
No. Both Social Security and 401K/IRA plans are methods by which people acquire purchasing power without producing goods to be purchased. At least, that is most people's goals when investing in such programs.
With Social Security, a persons earnings are placed into a government trust. The government then has a fiduciary responsibility to administer the trust for the benefit of the contributors. Although such may be the case with a private 401K/IRA plan, such plans are not backed by the government. Such plans expose average citizens to risks they are not prepared to take. And has been noted in another post, if such a mandatory plan for 401K/IRAs been in place a few years ago, most people would have lost most of their principal when the economy took a downturn.
401K/IRA plans generally trade on the stock exchange. Although the stock exchange is supposed to help companies raise capital for expansion, it has turned into a casino. Very little money on the exchange actually makes its way to a corporation which needs financial assistance to expand. Instead most of it passes hands from one investor to another, then on to yet another investor.
This means that a sudden influx of money from a mandatory 401K/IRA law might raise stock prices, but since nothing will have changed for the underlying companies, the price to earnings ratios will go up. The return on equity and return on investment will go down. And this will happen across the whole market place. Existing investors (like the larget financial institutions lobbying congress for this change and sponsoring books and news articles to promote it) will enjoy a nice increase in the monetary value of their stock holdings. But the average citizen will not benefit. Instead, they'll pay higher prices for lesser returns.
And none of this will do anything to spur greater production or better service. Because the underlying situation for each company whose stock is traded will remain the same. The stock price goes up, but their earnings remain constant. Since demand for their products and services did not increase, they do not expand their operations. They do not hire more workers. They do not give out any extra raises. Instead, senior executives get bonuses for rising stock prices. But most of those executives already have so much money that they don't spend the extra in the "main street" economy, instead they re-invest it in the stock market.