On a Thought from 2005

Early in his second term, President Bush launched a trial balloon regarding reforming Social Security. As a basic supporter of the notion, he caught my attention, but I had questions. As we know, the idea did not get any traction because (as a whole) Republicans fumbled and Democrats balked. However, my interest and questions still exist.

Like anything, Social Security has a history. Yes, Congress enacted the legislation in 1939, but here is a link with more of the story. The bottom line is that Social Security’s intent was to protect senior citizens from poverty.

As it can happen over time, and regardless of the reasons, many Americans developed a view of Social Security as a retirement system. As the largest demographic group in our population is approaching their time to draw, and with high unemployment numbers, Social Security’s financial soundness is questionable.

If it ever happens, odds are that privatizing Social Security won’t affect me, but that doesn’t mean I’m not supportive of the idea. Money from individual paychecks going into a dedicated account for that individual simply makes sense. Giving some basic investment choices for that account that the holder decides makes sense. I guess “making sense” is the reason Washington won’t do it and if they do, they would screw it up.

Yet, my questions from 2005 are still on the table.

  • How will we financially transition from the current system to another?
  • How will we protect senior citizens from poverty during and after the transition?

I may be for privatizing Social Security, but I still believe in its intent.

10 thoughts on “On a Thought from 2005

  1. This is a subject near and dear to me, on both sides of the issue. When I was working, I was planning on using my own savings, with whatever paltry amount I got from the government as “mad money” – basically a bonus. After having my health AND financial situation both go down faster than a U-boat with a ruptured hull, I now find myself in the reverse position – living off Social Security, with what little of my savings are left as the bonus. I do absolutely agree that, rather than trust the government to invest my money wisely, I should have received that money to invest myself (and I would be FAR better off right now if it had gone that way!). On the other hand, I realise there are many, many people who (no insult intended) could lose money investing in a Certificate of Deposit. I feel it should be handled in a similar fashion to minimum wage. The minimum wage is there to supposedly provide a livable income (trust me, it doesn’t) for those who can’t, or won’t, do better. Those who can do better, get better-paying jobs. Social Security should be a MINIMUM safety net, nothing more. Any excess withdrawals, rather than covering other people, should not be taken, and given to the individual instead. If you blow your retirement fund before you retire, tough luck – you live off Social Security and eat dog food (don’t scorn, we’re bloody close to that right now). If you save a mint, then you live like Rockefeller. Is it fair and equal? No – but we’re not a Communist country, we’re capitalists. Social Security should be a MINIMUM – heavy emphasis on that. People have taken to looking at it as a retirement plan to keep them comfortable, and trust me, comfortable in Chicago or NY is a HECK of a lot more money than comfortable in SE Ohio (which is why we’re here). If you don’t (or can’t) save for retirement, learn to love rural Ohio. If you can and do save, well, then you can move to Belize (or wherever). But that’s my migraine-maimed and drug-deluded opinion! 😀

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    • John,
      Thanks for sharing your story as you have a lot in there. Property values, plus the corresponding taxes, are a big cost-of-living factor when comparing locations … and rural SE Ohio is not only more bang for the buck, but simply cheaper.

      In terms of investments within a privatized SS account, I tend to favor the idea that the offerings be on the conservative side … yes, protecting people from themselves … but not so conservative that times like today would smother an account. Other aspects of retirement (401K, IRA, etc …) give the holder greater access to a greater range of investments.

      Thanks for your thoughts!

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  2. Now, your avatar/icon/whatever is a variety of purples and brighter colours on my Firefox tab AND on the address line at the top of my screen. Yet when you reply, your Gravatar/avatar/whatever will be dark blues and such. You’re taking advantage of my drugged-out condition, aren’t you?!?
    (Trust me, it wouldn’t take much right now!) 😀

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    • John,
      I’m glad to know that the Gravatars are playing with your mind. 🙂 The bluish one is the portion an eye … and yes, I have blue eyes. I know, blue-eyed Italian doesn’t seem right. The multiple colored one is a segment of my early headers (see Past Headers tab/page).

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  3. Unrelated but important fact. A 7.4 magnitude earthquake has hit the south-west of Pakistan, in the “horn” area just south of Afghanistan’s Kandahar province. No reports yet of damage or casualties. Just FYI.

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  4. CNN is reporting an update to 7.2 at 52 miles deep, per the USGS. Pakistani officials are sticking with 7.3. Despite the appearance, a single point at these levels is quite a lot of energy, as the Richter scale is logarithmic, not linear. Still a lot of energy released, but moderately deep which should help some. Epicentres closer to the surface are usually worse, but this area is quite rocky, so the ground will conduct the energy more widespread. The local buildings will be masonry/rock, the worst possible layout. It is a sparsely populated area, though, and a fair percentage of the residents are nomadic (live in tents), so that might help. It still won’t be good, and there’s an airbase about 34 miles away that the US is using to support Afghanistan operations. Altogether, a bad situation.

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  5. The proposals I have seen to privatize Social Security are troubling to me. They are based on people making wise long term financial plans and experience says that most folks can’t or won’t do this. Ask any financial advisor you know about the state of their clients retirement planning, for the most part it is inadequate- and they are seeing people who are actually interested in retirement planning!

    Equally problematic are proposals to allow people to invest their SS in the stock market. If you lived through the past two years, the problem with that is apparent.

    When I look at what the SS Administration anticipates my SS income to be, it isn’t much more than a safety net and I try to live responsibly and frugally.

    Certainly there are problems with SS but on balance SS and Medicare have substancially improved the lives of senior citizens. Perhaps we should spend some time looking at what has worked and the good we as a nation have done and then consider how we improve it.

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    • Nancy,
      There’s no question that most American’s fall very short when it comes to retirement planning. Some, not all of it, comes from the perception that SS is a retirement. In terms of the stock market, I agree – thus the investment options in a privatized account need to be not only limited, but a range of conservative investment options. Of course the tougher question lies in defining that range.

      Timing is always important, especially as we think about those on the verge of retirement a few years ago (at the big drop). I’m in Cincinnati, a P&G town, which uses its stock plans as a retirement system … and when that stock tanks, those on the threshold of retirement are affected. Then again, financial planners would also say that it’s not a good idea to put all your eggs into one basket … even a stable one as P&G.

      Yes, SS has improved the lives of senior citizens .. and it should continue … thus why I still wonder about taking care of the less fortunate elderly within a privatized system.

      Thanks for visiting and your thoughts!

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    • Nancy- I would have to say, based on my observations of politics over the past 40+ years, that stock market investments (in a privately-held Social Security account) would have to be sharply limited, and only available after some “base” level is met. Yes, that would be one more issue – determining a certain minimum level of “safe” money. Otherwise, the options would have to be limited to those where you couldn’t lose the principal, probably conservative things like CDs, money market funds, bonds, things like that. A “default” setting would have to be set up, in a completely conservative investment vehicle (CDs, money market). The one other key issue would be “ceilings” – when do you cut the rich SOBs off? A nice benefit of such plans would be to set up private 401Ks to “auto-roll” when you left a job, so you wouldn’t have to keep track of them. All in all, the legislative work needed to set up such a program would be tremendous, and until both parties calm down and behave themselves, I just don’t see it happening.

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