Must mention that the author, Mr. du Pont, is a former Republican Governor of Delaware, who also tried a run at the Presidency in the late 1980's. Curious to know your thoughts on the article; and if you disagree to his thoughts, I'm wondering what your solutions might be.
posted on June 7, 2001 09:19:22 AM new
Pierre DuPont was my choice to run for President when he raised this very issue (social security) in 1988.
Unfortunately, this issue doesn't play well with any part of the electorate. The retirees and those nearing retirement will not accept any reduction in benefits. The younger generation is blissfully ignorant to their retirement and the financial concerns it entails some decades into the future.
This has been the political problem with social security from the very beginning.
I believe what will continue to happen is precisely what is ongoing now.
Folks with an eye to the future are already funding their private retirement nest eggs with the thought that social security will not be their primary means of support.
Folks who can't see or plan past the immediate concerns of the day will continue to rely on social security and will continue to be the major voice in opposition to any changes to the system in direct proportion to the closeness of their own retirement.
And in general, as most folks don't plan for the future, this country will be stuck with the system barring some form of revolution or major societal upheaval on an order comparable to the Great Depression.
The politicians will continue to make minor tweaks to the system. An increase in rates here; a reduction in benefits there; an adjustment to the qualification criteria everywhere. And will continue to claim credit for "saving" social security.
I'm trying to take the decisions and planning of my future out of the hands of others. I'm just past 50 years old and I own property free and clear that I can retire to. I have IRA investments. I have stocks and bonds. I have some skills that should allow me to supplement my retirement income as necessary.
How did I achieve this? Simply by not spending every penny I earned on the latest toy but investing it instead.
posted on June 7, 2001 10:47:13 AM new
What the doomsayers neglect to tell about the SS deficit coming in 16 years is that it is only a temporary situation.
The "problem" is that the baby boom generation is coming into retirement.
This glut of retirees will last approx 15 years- you begin collecting at 62 and the average male lives to 74, female 76.
If we project out beyond the 15 years of the boomers retiring, SS goes into extremely HUGE surpluses.
The only "problem" with SS is to float the deficit for 15 years. Remember, the "deficit" is only a part of the SS funds paid out and not the total amount of funds paid out.
The debt incurred would cause little problems, provided the govt stays on course with its budget surpluses and stops these silly and useless tax refunds.
While I don't see any reason to believe we will ever see a "depression" such as the 1930's, due to a highly enlightened Fed Reserve Board, if we were to have one, there is only one way to protect yourself and that is to be flush with a lot of cash. If you have stocks and bonds, you lose. If you have realestate "paid for", you lose, unless you have enough cash to pay the taxes on the realestate, but the value of the realestate will be severly depressed if you try to sell it. If you really believe we are heading for a depression, you should sell all realestate now and rent until the crash, and then use the cash from your sales to buy the property back for pennies on the dollar.
Many people in the 1930's, especially retirees, who had their homes and farms paid for for years, lost them because they couldn't pay the taxes, and there were no buyers for the properties, unless you sold for pennies on the dollar.
So the only way to survive finanacially in a "depression" is to have hundreds of thousands of dollars in cash available - not stocks, not bonds [unless US Treasury- but then you are at risk for an inflationary economy], but cash. I would say millions in cash, but things would become quite cheap in a depression.
The SS "crisis" is so much BS by those who have an agenda other than saving SS. Some have motives to discredit and criple any Fed programs, others want this "crisis" to force the Fed govt to stay on course with its budget surpluses which would greatly cushion any SS "crisis".
posted on June 7, 2001 11:59:13 AM newReamond...not doubting anything you say, but can you provide supporting evidence regarding If we project out beyond the 15 years of the boomers retiring, SS goes into extremely HUGE surpluses.
My understanding was exactly the opposite; meaning the expanding population would continue to decrease the ratio of working folks per social security recipient.
posted on June 7, 2001 12:22:40 PM new
Thank you for the insightful graphic mrpotatoheadd.
Now statistics was never my strong subject, but is it safe to assume that if the US cannot sustain SS at a level +3 of working-age people to +65, how will we somehow get a HUGE surplus when it dips to 2/per and even less according to estimates?
posted on June 7, 2001 12:27:37 PM new
There are a number of things that can be done to ease us past this problem.
1.- Stop spending billions of dollars to keep people out of this country who want to come here and work. Some of these people actually will spend several times the income they would earn here in a year to be smuggled in but we spend more to kkep them out. We could
have a huge surge in taxes paid if we opened the gates. The idea that they come here to sit and draw welfare should be long gone. Everyone now knows there is precious little welfare left.
2.- Allow the economy to run hot for a few years and the increased business will raise taxes but the increased inflation will allow the benefits to be paid with devaluated dollars. Don't admit what you are doing to the public!
3.- Stop spending serious money on pointless wrongheaded programs like the war on drugs that was lost years ago. Tax the crap out of recreational drugs like pot just like tobacco already is, and make a medical issue out of debilitating drugs heroin and cocaine instead of a legal issue. Run a public relations campaign long term showing the drug users on TV and in the movies as fumble mouthed low wage earning loosers who can't
keep a girl/boy friend and who forget to wash their arm pits.
posted on June 7, 2001 12:41:31 PM new
reamond, I agree with majority of your post, however, gold is a better way to safeguard against a depression, as opposed to cash. Look what happened to the german mark after WW-I.
posted on June 7, 2001 02:04:07 PM new
Gold has always been a small easily movable high value item that does not depend on a totally constructed market like diamonds or collectables. However there are other commodities that might be worth spreading your wealth to as well. Platinum is also in limited supply as are all that group of metals and it is also relatively liquid. Gold itself is becoming more and more of an engineering material like Platinum.
Large diamonds are truely rare and hold value but they are so hard to sell that it is hard for the average person to be comfortable holding such a large amount in one object.
They are easy to swallow however if you need to cross borders. If you have legal access there are medical supplies and substances such as refrigerants and industrial feedstock that hold value well.
Just be aware that for something long term - say to your grand children - space mining will probably destroy the market for platinum group metals as well as the market for nickel iron and cobalt as well as titanium and several others late in this century.
posted on June 8, 2001 08:57:03 AM new
With the new medical tech from genetic info. there is the real possibility that if we can hang on for another 20 or 30 years we might have some serious life extention available.
You may have your appearance and ability literally rolled back by decades.
Then the retirement entitlements will become a serious problem!
posted on June 8, 2001 09:07:42 AM new
The real threat most see to SS is the combination of welfare and savings programs in the current system.
The best way for current payers to protect their interest is to seek the formal separation of those two roles.
The nature of the threat is that at some time in the future, the govt will feel entitled to simply declare the entire program to be a welfare program, unavailable to those who can't justify a need.
posted on June 8, 2001 09:35:05 AM new
Hello Reamond,
As a mathematician by education I see no reason why the ratio of those paying into the system versus those taking out of the system should show an upswing after the boomers depart the stage.
If anything I would expect a long term gradual decline in the ratio.
The ratio is really a function of two variables. Birth rate and life expectancy.
Birth rates have generally levelled off since the baby boom. But life expectancy continues to climb.
posted on June 8, 2001 09:41:42 AM new
Preservation of wealth scenarios should separately consider (at least) the two major axes of inflation and the economy. These axes are related but separate.
-good economy good inflation
(what we hope for). Pretty much everything holds on ok. Stable.
-good economy bad inflation
Gold and real estate shine. Over time, common stocks keep pace. Cash and any debt securities do dismal.
-bad economy good inflation
(US in the great depression). Cash and government securities do best. Gold loses real value. Real estate mixed but largely lower, and some real estate does go below zero, particularly bare land.
-bad economy bad inflation
(Germany in the '20s). Gold loses value but does not approach zero. Cash and nearly all debt securities do approach zero. Civil disorder and irrational govt behavior is a real threat. Real estate and common stocks highly mixed and unpredictable. Very scary scenario.
The testimony speaks to most of the concerns I would have in privatizing SS, especially in regards to how best to make the transfer from one system to another without hurting those who are close (in age) to collecting. Offers some suggestions.
Shares how well privatization has work for Chili for 15 years (when this testimony was given - 1996). Also shows how Chili's SS was only SS, whereas our's is not.
Since, at least by this article, it looks like we may have until the year 2029 before our current system runs out of money we have time to implement some of these changes before that happens.
posted on June 8, 2001 01:35:46 PM new
codasaurus - And immigration can be a large factor. If there were any epidemics on the order of the Spanish flu in 1918 that would also change things.
posted on June 8, 2001 01:52:12 PM new
Congressional Research Service
Report for Congress
The U.S. Population: A Factsheet
Age Structure. Americans collectively are no longer young, mainly because the sizable baby boom population is middle-aged. The median age of the U.S. population rose from 30.0 years in 1980 to 34.2 in 1995 and is projected to peak at 39.1 in 2035, before dropping slightly to 39.0 by 2050. The elderly (persons at least 65 years old) are 12.8% of the total population in 1995, a share about one-half as large as that of children under age 16 (23.4%). By 2015, after the first surviving baby boomers have passed their 65th birthdays, the elderly will increase to a projected 14.6%; children will decrease to 21.2%. By 2030, when all surviving baby boomers are over age 65, the elderly and children will be of almost equal proportions (20.1% and 21.0%). In percentage terms, the very elderly (persons aged 85 years and older) are the fastest growing age group. They have increased by 60.3% since 1980 and are projected to be over five times more numerous in 2050 than in 1995 (18.9 vs. 3.6 million).
posted on June 8, 2001 03:43:15 PM new
For the ratio to stay the same after the boomers die out, we would have to have 0 population growth, i.e., an even number of people dying as being born and no emigration.
The projections on the graph must assume 0 or negative growth in the "estimate". The estimate graph I saw showed a steep spike in SS surpluses begining in the year 2050.
In any event, our Mezo and South American neighbors must be taken into accout, as they have an extremely young population, and by all accounts will be migrating enmasse to the US during this new century.
Figure I is the graph from the board’s report that shows that the fund’s cost rate will exceed its income rate (i.e. it will be paying more annual benefits than it will be collecting annual taxes) in 2015 using intermediate assumptions.
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Figure II is the graph from the board’s report that shows that the trust fund will not be able to pay full benefits after 2037.
