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Our retirement system is a disaster

Discussion in 'Political Discussion' started by Patters, May 2, 2006.

  1. Patters

    Patters Moderator Staff Member PatsFans.com Supporter

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    With the decline of unions so came the decline of pensions, a far better retirement solution than 401Ks.

    - First, given the skyrocketing prices of housing and college, most people have trouble maxxing out their 401Ks.

    - Second, while an average return (8%) can double your money about every 12 years, inexperienced investors do not average that and inflation eats away around 3% of the 8% figure.

    - Third, some experts say that to retire at your current quality of life, you need to have saved 20 times your annual salary. That's a huge number, and the less you earn the harder it is to save towards that goal.

    About a year ago, I read an article that said the average person who has been putting money into their 401K for 25 years has about $120,000. That would generate around $6,000/year in interest, not much at all.

    And consider that Social Security is very much under attack, and its benefits are likely to be cut at some point. (Under Reagan, Social Security income became taxable and Clinton increased those taxes, despite Democratic opposition.)

    Even with Social Security, our retirement system is a disaster. Blame the Republicans.
  2. Harry Boy

    Harry Boy Look Up, It's Amazing PatsFans.com Supporter

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    Sounds Good,
    Whats the solution?
  3. Patters

    Patters Moderator Staff Member PatsFans.com Supporter

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    Give unions more power so that the American worker can compete more effectively with big corporations. Unions, despite their flaws, are responsible for many of the good things that workers typically get today (minimum wage, 40 hour work week, at leat 2 weeks holiday, Social Security, etc.)
  4. Harry Boy

    Harry Boy Look Up, It's Amazing PatsFans.com Supporter

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    I'll go along with that, I am a Retired Teamster (42 years) also, you better sit down now, There ARE some liberal things that I go along with (Iwas a democrat for many years) until the "New Ones" came along.

    The top of my Liberal List (LEGALIZE ALL DRUGS) no, I don't do drugs, I was a drunk :singing:
  5. Rene Vallieres

    Rene Vallieres Rookie

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    Retirement System?

    I'm sure you realize that Social Security was never meant to be a "retirement system". Even FDR used the phrase "safety net" when he was selling the idea. Very soon, the "retirement" portion of the social security system will be paying out more money to beneficiaries than it takes in. Unless the government ponies up the difference, the social security system will be bankrupt. The real problem with social security started when our nation's politicians (Dem's and Rep's) started taking out the "excess" money from the system and spending it. (That's how Clinton "balanced the budget" in his second term. He used the "excess" social security money to pay it down). They replaced the money with US Treasury bonds. US Treasury Bonds are not money. They are just promises to repay. So, when the Democrats say, don't worry, there are trillions of dollars in the social security "lock box", they are lying to us. The trillions are actually trillions of US treasury note dollars. So, in reality, the trillions represent promises to repay ourselves. How do we do this? We borrow from the federal reserve system and add the money as part of the national debt. The federal reserve banking act was signed into law by another democrat, Woodrow Wilson in 1913. Wilson would later say that he deeply regretted doing this. But that's another story. The decline of the unions have nothing to do with people not having retirement money. Don't blame the republicans because you didn't plan to take care of yourself.
  6. PatsWickedPissah

    PatsWickedPissah PatsFans.com Supporter PatsFans.com Supporter

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    1st Soc Sec was NOT intended to be the retirement system

    2nd Union Labor demands will only increase the cost of goods and destroy any US industry competitiveness in world markets

    3rd Soc Sec is not under 'attack' as the hysterical claim but instead badly needs an update

    Some American families may CHOOSE to buy new cars and widescreen TVs over the option to save in 401Ks. Those who DO save build a needed nest egg. Why should the savers then be forced to pay for the spenders' retirement?

    Patters is having real nostalgia problems leaving the 20th Century with its cries of "Workers of the world unite" and the subsequent heritage. We now live in a world economy where families in Asia compete with workers in America. It's not pleasant to go thru change but no artifice of Unionism is going to improve anything.

    Funny how unions are only successful when liberal courts require forced contributions to union coffers and force the use of union labor.

    Interestingly enough, within 25 years all this overseas mfg labor 'problem' will become totally moot. But that's another big change, and too far off to affect early 21st century policies.
    Last edited: May 4, 2006
  7. Patters

    Patters Moderator Staff Member PatsFans.com Supporter

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    Certainly the economic situation has changed since FDR (starting with Reagan, especially). We no longer have the luxury of stay-at-home parents, college and housing cost a greater percentage of our annual income than ever before, people do not have the job security that unions used to provide, people live longer, etc. Thus, in some ways we may have less control over our retirement. Even the Social Security administration says, "Social Security is part of the retirement plan of almost every American worker." (http://www.ssa.gov/pubs/10035.html). Even the Administration favors Social Security "Retirement" Accounts. Perhaps it was never intended as a retirement plan, but then I don't know what the plan was for minimum wage workers in dead end jobs who can't possibly save significant sums.

    Of course, this right-wing talking point is a bit of a fallacy, unless you believe that only money that physically exists somewhere is real. Our entire economy is based on borrowing and spending, and there are literally trilliions of dollars of debt that exist in various forms, including notes. That the government chooses to borrow from Social Security is a political matter, but in fact the money does exist in the form of treasury notes. That's as good as cash; if not, our system would collapse.

    Unions in their heyday provided not only better financial security, but set standards that nonunion companies were forced to match. Part of taking care of yourself is demanding just pay, working conditions, health care, retirement, etc. We don't live on an island; we live in a nation, and as citizens have as much right to expect billion-dollar highways as to expect elderly people not being forced to beg and live on the streets.
  8. Rene Vallieres

    Rene Vallieres Rookie

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    Very True..

    Excellent question. Many people in this country lack that "YANKEE" attitude. In the end, we must all be responsible for ourselves. If everyone was raised with that idea, then the smaller percentage of those ending up needing help could be well cared for. And, I'm all in favor of helping these people. But we can't live our lives figuring that someone else will pull up the slack.
  9. Patters

    Patters Moderator Staff Member PatsFans.com Supporter

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    Or, of course, the update can wait a few years.

    There are many reasons why people don't save for retirement -- some are simply bad with money, but others have bad luck (Enron retirees) or fail at their jobs or face a family crisis that drains their retirement or really don't earn enough to save a meaningful amount. As far as those middle class folk who simply spend their entire paychecks week to week, we're still stuck with the fact that we don't want them starving in the streets. What's your solution?

    Our nation is a business that must be managed, but if you think draconian measures are the only way to manage it, you're wrong. The fact is, even with our many benefits, our nation is strongest in the world. I'll gladly match up liberal achievements with conservative ones, and you tell me who is more responsible for our growth as a nation? Investing in people has served the nation well. Those investments sometimes change depending on social conditions, but they have made us the greatest nation by many measures. As far as unions go, they playED an important role in improving the welfare of workers, and while I don't think they are as important right now, it's a shame they don't have more power with which to influence the debate about retirement.

    If workers rights are to balanced with shareholders rights, then they need strong representation. It's a problem without the simple solution you seem best able to grasp.
  10. Rene Vallieres

    Rene Vallieres Rookie

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    Economics 101

    I'm afraid your naive view of a bond instrument is the fallacy. A US Treasury bill is simply money borrowed. Money borrowed must be repaid with interest. Since the Federal Reserve Banking Act of 1913, our government no longer issues currency. The power was transferred from congress (see the US constitution) to the Federal Reserve Bank. We pay the federal reserve a fee for each bill as well as interest on the money it prints and issues into the monetary system. We only get money from the federal reserve when we don't have any of our own due to the yearly deficit. When the US wants to use their own treasury bills it can only do so by having the actual tax dollars on hand to redeem them or, much more likely, again borrow the money from the federal reserve banking system. They do this every year when we have a budget deficit. When the US government has to turn it's own treasury bills into real dollars by borrowing from the federal reserve, this will cause inflation. There is no fallacy there. But again, that's another story.

    You call me a republican, but you don't know me. The problem with liberals like yourself is that you have good intentions but know nothing at all about economics and how our monetary system works. Just to give you a hint, 2 + 2 always = 4. The fact that you think debt instruments represent real money leads me to believe that you need a remedial course in economics 101.
  11. PatsWickedPissah

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    So you ignore the point that the big unions like the NY Transit Workers rely on FORCED contributions to union coffers. Says something about workers' preferences if 'free to choose'. Maybe then they would eschew contributions to leftist political action and instead could put some dues money into their own IRAs.
    Last edited: May 4, 2006
  12. Patters

    Patters Moderator Staff Member PatsFans.com Supporter

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    I don't think that has anything to do with my point that treasury bonds as good as cash. I agree with you it is wrong to take money from the Social Security Trust and put in treasury notes instead -- it's a way both parties deceive the American people. That said, my point is simply that treasury bonds are as good as cash and as long as they're in the "lock box," then it's like having the money there.

    What's the difference between a $100 bill and a treasury note for $100? Who guarantees them? At any rate, let's hope the Chinese, Saudis, and Japanese don't start believing as you do; otherwise, they're fools to lend us money.
  13. Patters

    Patters Moderator Staff Member PatsFans.com Supporter

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    Of course it can wait, and it will wait. Don't worry so much about the SS and Medicare fund projections. You're probably reading those right-wing websites that pretend the treasury notes have no value. The SS fund is secure up until 2040, but we certainly need to figure out a solution within the next decade.

    Enron employees had no choice. They had to leave their money in Enron. I do not know what public schools are teaching about personal finance. They should teach that, and bring back foreign language programs, arts programs, after-school programs, and civics, but of course the age of selfishness is upon us and schools don't have the money to offer everything we want.

    Pissah is having real nostalgia problems leaving the 20th Century with cries of "In the Depression, blah blah blah."

    It depends what you're talking about? Are you talking about cutting Social Security, Medicaid, Medicare, Aid to Dependent Children, benefits for vets, etc.

    I didn't ignore the point, but you'll have to go back to my previous answer and see if you can understand it the second time around.
  14. Rene Vallieres

    Rene Vallieres Rookie

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    Holy Cow.....

    Gosh......you are exasperating. One more time, and please try to follow along. Let's take this example:

    When Joe China buys a 100 T-Bill, he pays uncle sam 50 dollars in real money. After a period of year's (let's just say 9 in this case), Joe China comes back and says, ..."ok, now you owe me 100 US dollars." Not wishing to get Joe China mad, uncle sam gives him 100 US dollars. Uncle sam has held this 50 dollars for the 9 years and hopefully, he's done something to improve our country with it that equals more than the 100 US dollars he paid Joe China. Now, when congress takes 100 real tax dollars out of the social security trust fund and replaces this 100 dollars in real money with a piece of paper that says "..I. O. U. 100 dollars sometime down the road" they are spending 100 real dollars and replacing it with 100 dollars the US government will have to borrow from the federal reserve banking system, paying the Fed to print the 100 dollar bill and also paying additional interest on the money after they give it to us. So, in this case 100 now does not equal 100 later, it equals 100 + printing fees + interest. Since we are running a yearly deficit, we are not paying anything to reduce the national debt, which is the overall accumulation of the yearly deficit. We are currently paying approximately 480 billion real tax dollars every year just to pay the fed the interest on the trillions we owe on the national debt. In short, we are using a debt instrument to repay a loan to ourselves. It's like using one credit card to make the minimum payment on another credit card. This is not sound economics. ...I'm exhausted...
  15. Patters

    Patters Moderator Staff Member PatsFans.com Supporter

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    What did you do, Rene? Major in economics 101. You sound like you're young, and have a little bit of knowledge, but think you have a lot. You're telling me nothing relevant to this discussion. The fact is: The Social Security fund has its assets in a variety of forms, including American debt. Every country and every person has their assets in a variety of forms, too. The fact that the Social Security funds are in one security or another is irrelevant to the Social Security fund, unless you think those investments are risky. Are you afraid the United States will default on its obligations?. I hope the government invests Social Security funds wisely, rather than just puts it under a mattress as you seem to favor. And, as I already said, I agree it's dishonest to raid the Social Security fund, but an argument could be made that it's better to raid that than to borrow from China and Saudi Arabia. I presume you disagree.
  16. BelichickFan

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    #24 Jersey

    401Ks rule. I've had mine for almost 17 years and have over $200K in it. The interest I'll accumulate over the years now is free. Yahoo. I mean, I will have to pay tax on it but I don't have to work for it. My starting salary was less than $30K so my contribution % started based on that and has slowly risen. I'm just saying that so it's not like I've made that money based on a $1M salary or anything.

    Put the max in that's allowable if you can possibly afford it, put it in something safe but with upside like the S&P 500 and just sit back.
  17. PatsWickedPissah

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    You're lucky that they were available early in your work career. The innumerate do not realize how critically important the earlier start date for interest compounding can be. Mine started late and the SOB President of the company where I was VP of Engineering wouldn't allow the ZERO COST option for his employees until I *****ed for 2 years. OK, he was Polish but that's no excuse.
  18. Patters

    Patters Moderator Staff Member PatsFans.com Supporter

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    401Ks don't rule. Assuming it increases to $500K by the time you retire, that's an extra $25K a year, though you could eat into principal and probably safely take out an extra $10K.) With Social Security, that could bring you up to $45K per year. Of course, I'm also leaving out inflation. According to one of the big investment firms (Putnam, I think) you should have 20x your desired annual salary to retire. So, based on $30K a year, you're already 1/3rd of the way there.
  19. PatsWickedPissah

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    The problem is increased life expectancy. If we'd just cut out the free drugs and Medicare to the coots and geezers they'd quickly die off and release needed Soc Security funds. Problem solved!
  20. BelichickFan

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    #24 Jersey

    Assuming 6% (which is historically very low) per year and 15 years to work (puts me at 55), that 200K would be $500K with no additional contributions. Add in my current contributions and it's more like $750K. Make it 10% interest (historically I should get 12%) and it's $1.2M. At which point I can basically live on the interest. You may say I'm overly optimistic but that 10% is still 2% over what the S&P 500 has made over the last 70 years.

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