Isn't this just another for or Social Security?
6
It is obvious that as CEO of Blackstone, a money management firm, Hamilton E. James is unlikely to be objective in his retirement plan prescription, and therefore cannot be considered a fiduciary in looking out for the best interests of the readers of this article.
16
Lets do some math. What's 1.5 percent when you're making $14/hr? Its $436/yr......at best. Add in the employer contribution. The total is less than $900 - a YEAR. No matter how well that amount is invested, it doesnt get the average worker significantly closer to the $300,000 - $400,000 amount the author says we all need.
This plan doesnt help the average worker at all. Sure their proposal promises to help us (I mean, FORCE us) to save more. But its just a ploy by the investment companies to take even more money right out of our pockets legally. Once its out, they'll have many opportunities to steal it. Of course they wouldn't call it stealing. They'd CALL it investing. You and me? We'd call it just another money grab.
This plan doesnt help the average worker at all. Sure their proposal promises to help us (I mean, FORCE us) to save more. But its just a ploy by the investment companies to take even more money right out of our pockets legally. Once its out, they'll have many opportunities to steal it. Of course they wouldn't call it stealing. They'd CALL it investing. You and me? We'd call it just another money grab.
15
The LAST person on earth who should be involved in this in any way is someone from the leadership of Blackrock.
17
What's this!!! A financial plan run by the government??? History shows there is just never any waste, incompetence, bureaucratic or political hang ups, or corruption in large government run programs. Never, never, never. I think another mandatory large government program is the last thing we'd all want.
If the government can't show a little statesmanship, show a little backbone, and clean up all the corruption that has made the financial industry so rigged for the professionals, then there will be no hope at all for not having (god forbid) a new government run program corrupted by the banks and Wall St also.
Clean up what we've got and there hardly will be a need for a new program. That, and bring the good jobs back to within our borders and with a little education to our citizenry, we will have gone a long way to providing for retirement.
If the government can't show a little statesmanship, show a little backbone, and clean up all the corruption that has made the financial industry so rigged for the professionals, then there will be no hope at all for not having (god forbid) a new government run program corrupted by the banks and Wall St also.
Clean up what we've got and there hardly will be a need for a new program. That, and bring the good jobs back to within our borders and with a little education to our citizenry, we will have gone a long way to providing for retirement.
10
The proposal is for a MANDATORY plan that will be run by the government. Don't we already have such a system... it's called Social Security.
And Social Security is the government plan the politicians are always warning us will run out of money. (Note the welfare system doesn't share the same worries).
Also note this plan will guarantee a return of 3%. Usually investment plans with guarantees are called ponzi schemes.
And Social Security is the government plan the politicians are always warning us will run out of money. (Note the welfare system doesn't share the same worries).
Also note this plan will guarantee a return of 3%. Usually investment plans with guarantees are called ponzi schemes.
17
We have to start thinking about federally funded euthanasia in this country.
10
This is basically Social Security with a few cosmetic changes.
4
Mandatory contributions based on income, no early withdrawal, government run - all sounds a lot like social security. But why two government run plans aimed at the same problem?
The S&P 500 did not return 3% this year. Nor did savings interest. Nor did the bond market. Does the government make up the difference when this happens?
Go back to your ivory tower.
The S&P 500 did not return 3% this year. Nor did savings interest. Nor did the bond market. Does the government make up the difference when this happens?
Go back to your ivory tower.
15
Typical academic drivel - you don't get a risk-free annuity unless someone else is eating the risk premium or unless you are basing payments on the assumption that everyone lives to be 100 years of age.
Why do you think annuities as they currently exist cost so much and have such restrictive clauses.
But - let me guess - you are assuming that a special 1% tax will buttress the 'free' annuities just in case.
Financial Planning 101 - there is no free lunch and the government is not gonna look after you in your dotage.
Deal with it - grow up - and save some money - invest said money in a diversified portfolio of ETF that includes bonds..... Sheesh.
Why do you think annuities as they currently exist cost so much and have such restrictive clauses.
But - let me guess - you are assuming that a special 1% tax will buttress the 'free' annuities just in case.
Financial Planning 101 - there is no free lunch and the government is not gonna look after you in your dotage.
Deal with it - grow up - and save some money - invest said money in a diversified portfolio of ETF that includes bonds..... Sheesh.
10
The federal Thrift Savings Plan is the best solution. Allow people to increase their FICA tax and place the extra into TSP. Do not allow loans or early withdrawals. It is low cost and has reasonable investment options. No need to re-invent the wheel.
6
Why are the stupid, indolent, proflagate and illegal offered US levels of support and acceptance that rivil kings, princes and heads of state on one hand and better then middle class subsistance on the others while the hard working US Citizen is told we must attone for and support those for whom we should have no responsibility?
If that is too deep for you, Why must we pay billions for Barack, Hillary, Nancy to travel and cavort and the millions of so called poor peoples... cell phones, wide screens, higher education, soft drinks, lobsters, luxury houses and air conditioning.
Really
If that is too deep for you, Why must we pay billions for Barack, Hillary, Nancy to travel and cavort and the millions of so called poor peoples... cell phones, wide screens, higher education, soft drinks, lobsters, luxury houses and air conditioning.
Really
9
No. Sorry, bad idea. We don't need another new bureaucracy.
To make retirement more secure, strengthen Social Security. Raise the minimum payouts. If possible, LOWER the Social Security retirement age, not raise it. Don't even think about privatization.
To make retirement more secure, strengthen Social Security. Raise the minimum payouts. If possible, LOWER the Social Security retirement age, not raise it. Don't even think about privatization.
19
A handful of families control half the wealth in America. One of the many consequences of this is that millions of American are going to be impoverished when they retire, if they can retire. Gimmicks such as "guaranteed retirement accounts" for one simple reason: People can't "make regular payments into a G.R.A." with money they don't have because they need to pay the rent and buy food.
20
Republican congresses will see yet another pot of money to rob and to include in the general fund. Nothing in these congresses is sacred except funding non-stop wars we do not seem to be able to win.
8
How is this different from adding the 1.5 percent mandatory contributions from employees and employers to current Social Security withholding? Wait, I get it! It puts billions into the hands of the private sector financial services industry.
20
We already have this plan - it's called social security and, despite what the Republicans say, it does work and it will continue to work indefinitely if we can get the top 1% to pay their fair share of taxes. A recent NYTimes article pointed out how the super rich have successfully manipulated the tax laws to avoid paying their taxes. The argument that SS does not work, or that it will soon go bankrupt, is an argument that is corrupt and bankrupt of morals.
19
This article is a disgrace. It is nothing but an advertisement for Blackstone and the other Wall Street fraudsters that stole billions from Main Street and now they have yet another scheme to rob the 99.9%. Strengthen Social Security, place a wealth tax and a 99% death tax on the 0.1%, and a transaction tax on all financial transactions. Please New York Times, no more free propaganda for the Wall Street grifters.
28
Hamilton James and I support a stronger Social Security system. Our G.R.A. is designed to work with Social Security, it does not succeed without Social Security. Social Security is a Paygo and a redistributional insurance system. Low and middle income workers have done best with Social Security AND pensions. The two layers together both have allowed middle class autoworkers, steelworkers, janitors, bricklayers, and teachers etc. stay middle class retirees. Everyone deserves a secure retirement.
7
A smarter plan is to provide financial education starting in high school. And the Times could provide real financial education in plain language for the largest reader demographic, middle income earners. And eschew the postcard articles like the other days nonsense on the tax law changes for the new year. Can we have real world relevance please? Many readers are two income entities together making 80K to 160K and the article is talking about a tax rate of 22%. I'm sure this made many readers angry. Do other readers often wonder who the Times thinks its audience is? Real world please.
5
I see at least 3 big problems with the scheme. First, Americans won't go for it, however sensible it might seem. There are already private products like this on the market, i.e., deferred annuities and longevity insurance, but hardly anyone buys them, because they just can't stand the thought of forfeiting all that money if they die young. Second, there really are no safe investments that would guarantee such a fund would be costless for the government. Many if not most pension funds are in big trouble, in large part merely because they reasonably assumed that long-term historical returns would continue in the future. Before the 2009 meltdown, very serious people routinely proposed that Social Security could be much more safely invested in mortgages than in government IOU's. Imaging how much worse a mess we'd be in now, had we taken that advice. And third, it's yet another pot of money sitting around begging politicians to raid it for tax cuts, Middle East invasions, or whatever.
4
Several comments posted here denigrate the Federal government’s ability to provide low-cost, efficient retirement plans free of Wall Street influence, when in fact, the government provides employees hired after 1986 with an opportunity for a reasonable or better retirement. It’s called the Federal Employees' Retirement System and consists of three parts: an annuity, a 401(k) and Social Security.
The annuity is partly paid for by the employee and partly by the government; it is inflation adjusted and participation is obligatory. The amount of the annuity is based on salary and years of service. The 401(k) is called the Thrift Savings Plan (TSP) and is managed by the presidentially-appointed Federal Retirement Thrift Investment Board and implemented through the private sector. The government automatically contributes 1% of the employee's basic pay to TSP and matches an additional 4% of employee contributions. (Employees hired after 7/31/10 have 3% of their basic pay automatically deposited in a TSP account.) TSP offers a limited range of life cycle and index equity and bond funds with administrative fees less than 0.03%. Social Security is the third part of an employee’s retirement plan.
I’m not suggesting that the Federal government offer this plan to everyone, but it could be a model for recommendations in the article. And it demonstrates that the government knows how to provide retirement plans that are in the best interest of its retirees.
The annuity is partly paid for by the employee and partly by the government; it is inflation adjusted and participation is obligatory. The amount of the annuity is based on salary and years of service. The 401(k) is called the Thrift Savings Plan (TSP) and is managed by the presidentially-appointed Federal Retirement Thrift Investment Board and implemented through the private sector. The government automatically contributes 1% of the employee's basic pay to TSP and matches an additional 4% of employee contributions. (Employees hired after 7/31/10 have 3% of their basic pay automatically deposited in a TSP account.) TSP offers a limited range of life cycle and index equity and bond funds with administrative fees less than 0.03%. Social Security is the third part of an employee’s retirement plan.
I’m not suggesting that the Federal government offer this plan to everyone, but it could be a model for recommendations in the article. And it demonstrates that the government knows how to provide retirement plans that are in the best interest of its retirees.
5
The 401(k) plans are broken. I've been investing for retirement, at least 8% of my income, since I started working 39 years ago. I put it in the funds recommended by my investment company, and looked at the principle once a year. About 20 years ago, I took a hard look, and realized I was never going to be able to retire. So, now I've been putting in the max for about 20 years, invest in a strategy that seems to be working, and I'm looking to retire on a limited income at 68 or 69. My point is that I'm a smart woman, fairly financially savvy, and I trusted the wrong company, and am going to be old and poor. These self-managed retirement programs require a great deal of knowledge, attention, and monitoring over a very long period of time, and we can simply not expect that everybody is going to be able to be successful. We need a system that is not individually controlled!!!
11
Social Security, as originally envisaged with adequate tripartite funding (employee, employer and Government), was supposed to provide precisely an income for retirement. Let us fix it instead of trying to rediscover America!.
6
Take it a step further. Create a pre-tax account that can be used interchangeably for retirement, education, and/or medical expenses (including insurance) with no limit on contributions. The incentive for contributing increases by an order of magnitude, and the burdens on our broken systems of financing is eased.
1
Americans would retire well if they saved repeatedly year after year and stopped paying their children's rent, cars, private college education, house down-payments, etc. Contrary to opinion most people do not earn $200,000 per year but yet are teachers, accountants, engineers, etc. and save while living well below their means. Jobs are disappearing because companies do not want to pay for expensive healthcare benefits while in the past this saved people a tremendous expense so they were able to save. If you are a state or federal worker who is very lucky to get these premiere benefits you are ahead of the game along with your pension and it's cost-of-living increases which the private sector does not receive. American education is missing the boat by not teaching finances early on in life as some families do not or cannot. Everyone does not experience college and Finance 101. If you are one of the unlucky people who is supporting themselves or their families on a minimum wage job you will need multiple jobs and goals to achieve more in life. This is not a government "fix" this is personal accountability. If you give everything to your children they will not become ambitious or financially responsible so don't have such expectations. Everyone must pay more attention to their retirement needs.
4
This is similar to the (mostly disappeared) defined benefit plans that were prominent 30 or 40 years ago. It is also similar to the pension plan for government employees in Minnesota. The employee contributes a significant portion (5.5% of income), the employer contributes a like amount and, based on the employee's income, a fixed pension is payed out upon retirement. The investments are done by a state board, the members of which are appointed by the governor and legislators. They stand to make only their salaries. And the biggest item is that they cannot NOT pay in, which is where many governmental pensions have run into problems (see Detroit, etal). This does not preclude other investments by the employee, it just gives a minimum base for retirement.
2
401(k)s were never intended to replace pensions. Businesses latched onto them as a cost-saving measure, which they certainly are. The only workers with pensions and whose pay hasn't stagnated over decades are union workers. Unions protect pensions and fight for pay raises, which is why the corporation-beholden GOP is trying to kill unions and why workers should embrace unions.
13
Not a few comments here reflect the not entirely unjustified suspicion of government being involved in this and other plans.
My concern with such objections is that government has proven to be the only option. Private markets have never answered up to universal issues, be they about retirement, health care, employment, or other analogous matters. We have Social Security and Medicare as government programs chiefly because "the market" failed to provide a more viable and attractive alternative of its own -- of course, at the same time it mostly opposed the government-sponsored program.
So, if government is not to be involved in this matter of retirement, what's the proposed alternative solution? Let chips fall where they may?
My concern with such objections is that government has proven to be the only option. Private markets have never answered up to universal issues, be they about retirement, health care, employment, or other analogous matters. We have Social Security and Medicare as government programs chiefly because "the market" failed to provide a more viable and attractive alternative of its own -- of course, at the same time it mostly opposed the government-sponsored program.
So, if government is not to be involved in this matter of retirement, what's the proposed alternative solution? Let chips fall where they may?
9
The problem with this idea is she has no idea about the daily struggles of low income people. They can't afford several more percentages taken out of pay considering flat wages and the rapidly rising costs of health care coverage. Smaller employers can't afford it either.
Also, it looks like another regressive tax on wages... not good for lower income people.
Academics look at their areas of interest but not globally, and employees can't afford more taken out of pay to fund something 20 or 30 years in the future. They have to pay for doctor visits today.
The plan actually hurts those she's trying to help.
And one more thing, the academics can't agree on how much income retirees need. There's been scant research on what retirees actually spend. Until we know more definitively how much retirees really need, It would imprudent to have a national mandatory retirement plan beyond the one we already have.
Also, it looks like another regressive tax on wages... not good for lower income people.
Academics look at their areas of interest but not globally, and employees can't afford more taken out of pay to fund something 20 or 30 years in the future. They have to pay for doctor visits today.
The plan actually hurts those she's trying to help.
And one more thing, the academics can't agree on how much income retirees need. There's been scant research on what retirees actually spend. Until we know more definitively how much retirees really need, It would imprudent to have a national mandatory retirement plan beyond the one we already have.
8
Ms. Ghilarducci seems to be making a career out of one idea. When she first proposed it in 2007, it was roundly rejected by both left and right.
Mr. James is a senior executive of Blackstone, a firm hardly noted for its commitment to anyone not part of the 1%. I suspect that if the authors of the article had their way, Blackstone would play a significant role in managing the huge funds that would be amassed by a government agency reaping a 3% forced levy.
It's generally not a good idea to ask a fox to design one's chicken coop.
Mr. James is a senior executive of Blackstone, a firm hardly noted for its commitment to anyone not part of the 1%. I suspect that if the authors of the article had their way, Blackstone would play a significant role in managing the huge funds that would be amassed by a government agency reaping a 3% forced levy.
It's generally not a good idea to ask a fox to design one's chicken coop.
21
The authors must face down a perfect "innovators' dilemma." America's free market forces, the ones that should be developing powerful disruptive solutions to the retirement security problem, are making far too much money doing things the old way to be interested in fixing it. Insurance companies and financial advisory firms of all stripes are minting more and more middle-manager millionaires than ever before. Look at the vast wealth being created in the c-suites of those companies, with executive committees pretending to be good stewards of investors futures but in reality more concerned with fiduciary duty to company stockholders (and especially their own stock options). The pen may be mightier than the sword, but is it mightier than these fat paychecks?
2
Could we learn from other countries? We're No 10!
http://www.thinkadvisor.com/2011/11/07/top-10-countries-with-best-retire...
http://www.thinkadvisor.com/2011/11/07/top-10-countries-with-best-retire...
3
Dr. Ghilarducci suggests that GRAs be managed by “an independent federal agency.” The record on the independence of such agencies is spotty, at best, and if Social Security is any guide, money residing in GRAs will become a new font of new cash flow for the federal government.
This column doesn’t say otherwise, so we must presume that the tax to fund GRAs would be in addition to FICA taxes, which big business may be able to absorb but small business would find oppressive, if not untenable. As much as the federal government prefers planning for and working through big business, small business remains the engine of the American economy. Saddling it with additional taxes seems unwise.
Dr. Ghilarducci’s GRA proposal could be much bolder if it incorporated a Social Security overhaul and incented IRA/401(k)-like plan participation in addition to mandatory GRA/Social Security — preferably Roth, so government isn’t deferring tax revenue.
As proposed, Dr. Ghilarducci’s GRAs do nothing for Americans who are never employed and leave those who have a lifetime in and out of work wanting. This is Social Security’s achilles heel as well. [Granted, 401(k)-like plans and IRAs suffer the same challenge, but these programs are voluntary whereas GRAs would be mandatory.]
With worker participation in the U.S. at its lowest rate since the Great Depression and no one proposing anything to improve it, perceptions of future retirement security is unlikely to improve.
It needs work.
This column doesn’t say otherwise, so we must presume that the tax to fund GRAs would be in addition to FICA taxes, which big business may be able to absorb but small business would find oppressive, if not untenable. As much as the federal government prefers planning for and working through big business, small business remains the engine of the American economy. Saddling it with additional taxes seems unwise.
Dr. Ghilarducci’s GRA proposal could be much bolder if it incorporated a Social Security overhaul and incented IRA/401(k)-like plan participation in addition to mandatory GRA/Social Security — preferably Roth, so government isn’t deferring tax revenue.
As proposed, Dr. Ghilarducci’s GRAs do nothing for Americans who are never employed and leave those who have a lifetime in and out of work wanting. This is Social Security’s achilles heel as well. [Granted, 401(k)-like plans and IRAs suffer the same challenge, but these programs are voluntary whereas GRAs would be mandatory.]
With worker participation in the U.S. at its lowest rate since the Great Depression and no one proposing anything to improve it, perceptions of future retirement security is unlikely to improve.
It needs work.
2
This is social security under a different name, with less security. Why don't we just increase SS?
13
Lift the cap on Social Security. Raise the minimum wage.
6
Hey Teresa, Please keep your stinking Socialist hands off my retirement plans! If Big Government wants to set up something voluntary that's fine - but they never do. Statism - ideas so good they must be enforced via coercion!
3
A second thought is to lower the full retirement age back to 65 and to amend the WPE so retirees earning under $59,000 aren't penalized.
1
The problem the authors describe is significant and one we must take very seriously. The defined contributions (401K) approach has not worked as anticipated and many people indeed are financially ill prepared for retirement. I believe we should return to defined benefits plans. 88% of public employees in the US are covered by such plans, which we the tax payers are on the hook for paying out. But as a result, public employees are dramatically better prepared for retirement. I have 2 defined benefits plans from previous employers and have been impressed at how well funded and invested these plans are. I guess when you have legal obligation to pay out a fixed benefit, you invest carefully. It is unfortunate that so few people in the private sector have access to defined benefits plans. Perhaps we should think of creating a public vehicle – perhaps enhancing the Pension Benefit Guaranty Corporation – that could provide all citizens access to a well run defined benefits plan.
4
The comments demonstrate quite clearly the class divide we refuse to acknowledge in our society, the suburban professionals (or people with a self image of themselves as professionals) and the failure to acknowledge just how grim things are at the lower end of the economic spectrum.
Workers surviving paycheck to paycheck with "Flexible" schedules (Great for management concerned about their labor cost, not so good for people trying to make a living). Men and Women who aged their bodies ten or fifteen years in Iraq and Afghanistan, and the only work they can find is the same kind of McJob they enlisted to escape. Not everyone can (or should) go to college. Until we can rebalance our economy to provide more good jobs at good wages, all we can do is put band=aids on the problem.
Maybe a better place to start would be a punitive corporate head tax (Contribution to the Social Security Fund) on workers who do NOT receive a corporate match for retirement contributions. Based on Participation, not "Offerings", with draconian penalties for manipulation or intimidation of employees. The temp agencies will just have to build the cost of this into their cost of business.
We need to do something for the millions of workers just trying to hold on until they turn 62 and can collect something, not the already well provided for proffesional class.
Workers surviving paycheck to paycheck with "Flexible" schedules (Great for management concerned about their labor cost, not so good for people trying to make a living). Men and Women who aged their bodies ten or fifteen years in Iraq and Afghanistan, and the only work they can find is the same kind of McJob they enlisted to escape. Not everyone can (or should) go to college. Until we can rebalance our economy to provide more good jobs at good wages, all we can do is put band=aids on the problem.
Maybe a better place to start would be a punitive corporate head tax (Contribution to the Social Security Fund) on workers who do NOT receive a corporate match for retirement contributions. Based on Participation, not "Offerings", with draconian penalties for manipulation or intimidation of employees. The temp agencies will just have to build the cost of this into their cost of business.
We need to do something for the millions of workers just trying to hold on until they turn 62 and can collect something, not the already well provided for proffesional class.
10
To go along with the quaint retro coin purse graphic perhaps the editors could have recommended some money stewards from yesteryear: Alan Hevesi. And for more up-to-date skills, Shelly Silver and Dean Skelos.
They knew how to fix things!
They knew how to fix things!
1
Retirement so called saving , the savings account interest is 0.04% pa and banks borrow from the FR at the rate of 0.5% and charge over 4..5% for simple mortgage, plus in verge of charging fees to open even a saving account with minimum of $10,000 is pure simple down right to decency and integrity. The bottom line is that come or high water to perpetuate the fundamentally flawed economic system at any cost, while the rich get richer and the poor poorer and bear the burden.
4
We should never have gotten rid of the postal savings system.
5
Japan Post ran the world's largest postal savings system and was often said to be the largest holder of personal savings in the world: with ¥224 trillion ($2.1 trillion) of household assets in its yū-cho savings accounts and ¥126 trillion ($1.2 trillion) of household assets in its kampo life insurance services, its holdings accounted for 25 percent of household assets in Japan. Japan Post also held about ¥140 trillion (one fifth) of the Japanese national debt in the form of government bonds.
from wiki
from wiki
1
Most rural and small communities still have post offices that often serve as social centers as well. Close the post offices, and you lose a vital part of a downtown in many rural areas. The could easily also offer small banking and savings services.
Here's what Bernie Sanders had to say recently about post offices and banking (quoted in the Atlantic):
"If you are a low-income person, it is, depending upon where you live, very difficult to find normal banking. Banks don’t want you. And what people are forced to do is go to payday lenders who charge outrageously high interest rates. You go to check-cashing places, which rip you off. And, yes, I think that the postal service, in fact, can play an important role in providing modest types of banking service to folks who need it."
Here's what Bernie Sanders had to say recently about post offices and banking (quoted in the Atlantic):
"If you are a low-income person, it is, depending upon where you live, very difficult to find normal banking. Banks don’t want you. And what people are forced to do is go to payday lenders who charge outrageously high interest rates. You go to check-cashing places, which rip you off. And, yes, I think that the postal service, in fact, can play an important role in providing modest types of banking service to folks who need it."
4
Except that most Americans don't trust their government.
3
Because it the same private interests now control the federal government.I am all for reform but it has to relentlessly stay focused on preventing a permanent elderly underclass.Most of these reforms have double agendas and they are often very hard to figure out
2
Thanks to Ronald Reagan and his successors.
1
Taxpayers are already on the hook for generous pensions for public sector workers. I'll be working until I drop because I have no annuity other than savings and SS (which will be bankrupt before I'm eligible) so why should us working folks fund yet another plan?
3
Because this plan is for YOUR benefit!
Before Reagan, public-sector workers were pitied. Now they're envied. What changed?
1
It would also be nice to not be forced to start withdrawing money from an IRA or Keogh plan until you need to. This forces you to keep lowering your balance in an account, which makes it grow more slowly (as if it wasn't already growing slowly anyway). The government will get its taxes paid whenever you withdraw funds, but why force this to happen when it may not be necessary.
3
You can take the money you're forced to withdraw and invest it. It's only a matter of when you pay taxes on your income.
In Canada it is called the Canadan Pension plan, we have had it for decades and we are about to improve it.
5
So with $170,000 you're going to "guarantee millions of Americans safe and secure retirements?" Did you factor in government overhead costs (see the Student Loan Program, Social Security, and much more)? Fraud (huge and growing with Social Security)? Non-earners, our growing deadbeat population? Let's talk some more about what "guarantee" means.
3
Social Security fraud "huge and growing"? Could you substantiate that?
1
If this were a serious proposal, the minimum contribution would be significantly more than 1.5 percent. An enormous legislative & financial structure to accomplish what ? Look again at strengthening social security.
5
You're missing the point: the rate starts at 1.5%, which seems low, but is actually a teaser. You can bet that it will start to go up quickly, as the program is expanded to cover outsiders, overhead costs soar and people clamor for more benefits from the government.
1
It's pretty obvious the present system of retirement savings isn't working for many workers. I like your proposal and think it would work but need save guards built into the system guaranteeing protection of principle..... kind of like FDIC government protection. Also what's to prevent bubbles from developing like what just happened during financial crises we're just getting over. If there is no down side risk would' t that lead eventually to a bubble crises needing government intervention because of "to big to fail" me tal
So this is how free market thinkers want to solve the problems that the free markets have created: by adding more free markets.
7
Hmmm. No mention of social security? Novel idea, almost sounds like the "evil Republican" plan to privatize social security. There is no incentive in the USA to save money, beyond that? why would I (or anyone else) trust the government to manage MY money?
4
Long ago a young man set out to manage his Traditional IRA. He invested with a broker that his father used. At the same time he was part of his employer's defined benefit pension plan. He contributed 6% of his pay to the plan, while his employer contributed a minimum 8% of payroll. Soon he was elected by his fellow workers to become a trustee of that pension plan and learned the meaning of fiduciary responsibility.
The broker recommended many things including limited partnerships, puts and calls. The young man was very trusting of his financial advisor. However, his financial advisor did not have fiduciary responsibility for the young man's account and recommended investments that brought the broker the best commissions. Eventually, the sales tactics of the broker's firm were exposed, and, through arbitration, the young man's investment was returned, but there were no profits.
Following the lessons he learned as a public pension plan trustee, the young man took all of his money away from the broker and invested in mutual funds.
Now, as an old man, he is comfortably retired, with a generous defined benefit pension, social security, socialized medical care, and a portfolio of mutual fund investments. And, because he learned the lesson at a young age that even clever young men really don't know enough to manage their own money, he continues to volunteer as a fiduciarily responsible trustee on the board of his local firefighter's defined benefit plan.
The broker recommended many things including limited partnerships, puts and calls. The young man was very trusting of his financial advisor. However, his financial advisor did not have fiduciary responsibility for the young man's account and recommended investments that brought the broker the best commissions. Eventually, the sales tactics of the broker's firm were exposed, and, through arbitration, the young man's investment was returned, but there were no profits.
Following the lessons he learned as a public pension plan trustee, the young man took all of his money away from the broker and invested in mutual funds.
Now, as an old man, he is comfortably retired, with a generous defined benefit pension, social security, socialized medical care, and a portfolio of mutual fund investments. And, because he learned the lesson at a young age that even clever young men really don't know enough to manage their own money, he continues to volunteer as a fiduciarily responsible trustee on the board of his local firefighter's defined benefit plan.
9
The plan sounds good but wont work if implemented by the gov. They give social security to all kinds of people who dont deserve it. Dont think t
hey wont find a way to raid this plan.
hey wont find a way to raid this plan.
2
Ok, Ill bite: Which "kinds of people," exactly, "dont deserve" social security?
1
How soon we forget: I was born in 1925-my wife and myself saved our money-both worked-no stock market-we put our money in CD's--the safe way--guess what-wall street and the federal reserve-connived to reduce interest rates for our savings to a paltry 1%-I understand that wall street trader(hedge fund managers -etc) are doing great--surprise?
5
I don't know money from granola, but will someone please explain, in clear language, what strikes me as a problem: If Americans put away more money for retirement, they will have less money to spend right now. Wouldn't this have an impact on the economy?
2
For those of you who bothered for even a minute to consider that this might be a good idea, I have a bridge to sell you.
It seems even intelligent, educated people are so anti-government that they will buy into such an obviously self-serving proposal by an investment manager.
It seems even intelligent, educated people are so anti-government that they will buy into such an obviously self-serving proposal by an investment manager.
5
Think of this not as something we are doing for the elderly. Think of it as something we are doing to avoid the financial and social calamity when parents have to seek out their children for food, shelter, and medical care.
1
"but the plans aren’t mature enough for us to know if they work".
Why not just increase social security taxes and then have the government guarantee a rate of return of at least the 30 year treasury? It costs nothing to implement and would probably pay out at least 3% average returns. Because the financial industry doesn't gain from that?
This basically sounds like a backdoor social security privatization scheme.
Why not just increase social security taxes and then have the government guarantee a rate of return of at least the 30 year treasury? It costs nothing to implement and would probably pay out at least 3% average returns. Because the financial industry doesn't gain from that?
This basically sounds like a backdoor social security privatization scheme.
9
What about adding to this a contribution and benefit that would supplement or extend unemployment insurance--that's another big hole in the safety net.
1
I don't understand how this is different than Social Security - maybe some of the ingredients are different, but the system of making people pay into a retirement account - out of every paycheck - is all set up.
7
There was a time when one had a home paid for that one could expect to retire on about half of one's working income...but now taxes on the home eat up much of retirement income and of course local, state, and federal taxes eat up a lot more of it. Then, medical insurance, home and auto insurance...one needs the same income for retirement as before retirement
7
Raise the cap on Social Security contribution. Oh I know all those manual laborers making over $118K will scream bloody murder at the gross injustice condemning them to fewer purchases of designer suits & tropical vacations, as well as thwarting plans for retirement at 70.
We've got a foolproof retirement system in Social Security. Improve & sustain it for gawd's sake.
We've got a foolproof retirement system in Social Security. Improve & sustain it for gawd's sake.
10
"Under our proposal, all workers and employers will have to make regular payments into a G.R.A., which builds until retirement age, then pays out a supplemental stream of income until that person and his or her beneficiary die." Sounds a lot like Social Security, doesn't it?
6
How are parents who can barely support their families in low-income, dead-end jobs supposed to come up with the money to contribute to another retirement savings plan? What do they give up? Housing rent, food, winter coats for their children? A better plan would be to raise the cap on Social Security and increase payments for retirees who have spent their working lives at the bottom of the income scale.
7
"How are parents who can barely support their families in low-income, dead-end jobs supposed to come up with the money to contribute to another retirement savings plan?"
Because this would be the only retirement savings plan, not "another."
Because this would be the only retirement savings plan, not "another."
Trying to squeeze another thousand dollars out of our poorest neighbors would be a challenge but could be done if the minimum wage were raised to $20 and half of the increase were dedicated to a retirement plan. You could peg minimum wage to the economy and future increases could have a portion dedicated toward retirement. We would need to assure that each account was in the employee's name so the government couldn't borrow from it in the future.
4
The problem with our generation is we spend the first 20 years of our careers paying off the debt we collected just so we could have a career to begin with - rather than saving for retirement or building equity in a house. Remember how your high school diploma got you that nice 30year job with General Electric, a pension, and company car allowance? Me neither. This is why we need a plan like Bernie2016 has put forward to prevent this crisis from happening to a third generation.
77
Once again, a system where women - who are subject to inequity in pay - will have less to deposit and thus continue to experience inequity in retirement.
4
It's one more way of not requiring people to think for themselves. Require high school students and college students to get financial education.
1
In grade school, generations ago, I was taught the moral lesson of The Ant and the Grasshopper. Who even knows what that is today?
This program sounds a lot like Social Security? Is someone going to tell these workers 20-30 years down the road that its a burden and needs to be cut; or that it's going to run out? We should be encouraging pension plans rather than IRA's which earn hardly any interest and is a dismal investment program. If I'm only guaranteed getting my investment back then it's only marginally better than stuffing it under the mattress.
1
I am alarmed at the attitudes of young people today (read 20's, 30's and 40's). They blithley assume Social Security won't be around for them. Well it certainly won't be with their passivity. Social Security needs to be fought for by all demographics.
Raise or eliminate the cap politicians!
Raise or eliminate the cap politicians!
5
Meanwhile some of us live(?) on the minimum social security
payment of $735 per month. Social security income should be equal for all, not according to contributions.
payment of $735 per month. Social security income should be equal for all, not according to contributions.
2
Aw, just fix Social Security! This is a work around, but we have a system that used to be fair. We should update it and increase contribution maximums and increase payments to ensure that they provide an adequate minimum retirement income for everyone! That's why we made Social Security in the firsts place!
5
As I approach retirement age (and what is that, really?), there is one potentially crushing financial nightmare I keep having. Medical costs. Turn that into a manageable, affordable "program", process or thing, and we with modest savings can breath through retirement.
4
Why not let Social Security be what it was originally intended to be, a Safety Net to keep the elderly out of poverty. Instead of increasing the cap on FICA contributions, why not decrease the payout to higher income earners who like myself have diligently contributed to our own retirement savings investments through a 401k, IRA's and post tax investments. I don't plan on relying solely on Social Security but understand there are those that do. The system needs to remain solvent as the Safety Net. If you want a higher standard of living in retirement, you had better plan accordingly.
1
Thus type of savings program should not be subjected to minimum annual distributiions. The tax burden wipes out savings that should be allowed to pass onto heirs, especially children and grand children who will more than likely need the savings more than their parents did.
1
Sadly, it seems like we're going to be setting up a lot of innocent poor folks to have their retirement picked over by the sleazy high cost managers. Let's just remove the cap on income rates for social security and apply it to all income, carried interest, inheritance, whatever and plow it into the one place these vultures can't get at it, the Social Security Trust Fund.
4
Folks, let's not re-invent the retirement wheel with the financial services industry taking another cut. Unfortunately, with the Presidency and the Congress in their pockets (look at the 2016 campaign contributions to both parties), a proposal such as this is likely to become law in 2017.
2
Best advice - save/invest 50 percent of what you earn, and work until you can't stand it anymore.
4
'Individuals would not make investment decisions directly. Instead, low-fee diversified retirement portfolios would be created by a board of professionals'
And who might these professionals be? One like the the Author that works at Blackstone and charges exorbitant expenses for fund investments?
And who might these professionals be? One like the the Author that works at Blackstone and charges exorbitant expenses for fund investments?
1
None of this is going to work.
We live in spendthrift America.
You cannot blame anyone.
If you save, you get cut out of many government programs.
If you don't save, you have access to many government programs.
There are built in incentives not to save. The big one is mortage deduction.
The bigger the mortgage, the less taxes you pay.
Not exactly an encouragement to have a debt free house like the old days.
In the old days thrift was prized. Not anymore.
Parents don't take their kids to the bank to have them open a savings account.
We live in spendthrift America.
You cannot blame anyone.
If you save, you get cut out of many government programs.
If you don't save, you have access to many government programs.
There are built in incentives not to save. The big one is mortage deduction.
The bigger the mortgage, the less taxes you pay.
Not exactly an encouragement to have a debt free house like the old days.
In the old days thrift was prized. Not anymore.
Parents don't take their kids to the bank to have them open a savings account.
6
"Most nations support retirees through universal two-tier systems consisting of a Social Security-type plan and funded workplace pensions."
Yet another benefit that we're not allowed to have here in "the land of the free" because, as Hillary instructed us, "the US isn't Denmark"...or Germany, or Norway, or Finland, or Spain, or Portugal, or France...
Yet another benefit that we're not allowed to have here in "the land of the free" because, as Hillary instructed us, "the US isn't Denmark"...or Germany, or Norway, or Finland, or Spain, or Portugal, or France...
2
This plan is a ruse. People planning for retirement must be given a secure option other than surrendering their nest egg to the predators and front-running, high frequency trading criminals in the stock market. The days of long-term investing in America by buying stocks is permanently over. Wall Street is a casino and the game is rigged.
6
What is meant by retirement? Is that when you stop working and wear a plaster pack? A better strategy is to become independent at any age. That will take hard work and sacrific in the first half of life with less concern on fashionable consumption. Instead we have an economy that says buy now, pay later, and that bill is coming due for millions and millions of live for today Americans.
1
I love how boomers always tout raising the FICA tax cap as the solution to SS's ills. After all, they will soon be retired, so its no skin off their nose. But as an Xer, its an obvious attempt at a generational wealth transfer from the young to the old. Means testing of benefits is more appropriate, and doesn't place the burden on the younger generations.
1
An apostrophe transfer seems appropriate, too.
Look, if "generational wealth" transfer is so awful, then tell your congressman you want to cut interest on the public debt all the way to zero. That'll fix those coupon clippers.
Look, if "generational wealth" transfer is so awful, then tell your congressman you want to cut interest on the public debt all the way to zero. That'll fix those coupon clippers.
Another "mandatory" savings program, like SSI? Sounds like another scheme to let the government control more of our assets. When will they learn, it's our money!
2
So, the NYT is proposing another government-guaranteed, employer-funded retirement system. What a surprise! How long will it take for the government to decide to "borrow" a few trillion dollars from the fund to meet current needs, with an IOU slipped into the kitty? Probably not very long; maybe a few nanoseconds. Can I apply for a position on the NYT Editorial Board? What a job: sitting around all day & getting paid to espouse socialist proposals! I'd hang on to that job for dear life!
2
Work till you drop.
2
Where does Hillary Clinton stand on this issue?
1
The NYT editorial page is now a commercial, brought to us by Blackstone. Where does this nonsense end?
1
Isn't what they're recommending called Social Security? Don't we already have this? Did I miss something?
3
1. Raise the cap on Social Security--a cap of $118,500 is ridiculously low, when we consider the rich who get ever richer making millions and billions
2. We don't need the authors' plan. As many commenters say just Expand Social Security and make sure politicians cannot steal from it or underfund it (the lock box idea).
3. For heavens sake, allow higher interest rates for retirement accounts. We seem to have price fixing in the banking industry when it comes to savings acocunts, which is certainly not in the "free-market" spirit. Of course, there are lots of reasons banks are not interested in paying higher interest, especially for the little fish--which brings us back to doing #1 and 2.
4. We don't need to reinvent the wheel. How do other countries that take better care of their citizens in old age handle the issue of adequate income for retirees?
2. We don't need the authors' plan. As many commenters say just Expand Social Security and make sure politicians cannot steal from it or underfund it (the lock box idea).
3. For heavens sake, allow higher interest rates for retirement accounts. We seem to have price fixing in the banking industry when it comes to savings acocunts, which is certainly not in the "free-market" spirit. Of course, there are lots of reasons banks are not interested in paying higher interest, especially for the little fish--which brings us back to doing #1 and 2.
4. We don't need to reinvent the wheel. How do other countries that take better care of their citizens in old age handle the issue of adequate income for retirees?
3
"[A] guarantee of a return of around 3 percent — about half the expected return on stocks over the long term — would be essentially costless...".
Guaranteed AND costless? What, as seen on tv? No! As proposed by a professor of economics and a COO of an investment company in that bastion of sensiblity and circumspection, the New York Times. And here I thought the only things in life that are guaranteed are... oh, forget it.
Guaranteed AND costless? What, as seen on tv? No! As proposed by a professor of economics and a COO of an investment company in that bastion of sensiblity and circumspection, the New York Times. And here I thought the only things in life that are guaranteed are... oh, forget it.
2
These ideas all sound good until the payout begins and "somehow" the projections did not work out and "they" are short of funds. When managed in the private sector IE Teamsters and others the funds just disappear when managed by a "federal agency" the funds are put in a "trust fund" of IOU's. I have faith in neither system.
1
The plan already exists - the fed employee's 401(k) the Thrift Savings Plan. Only 5 funds plus lifetime funds with risk exposure indexed to projected retirement dates.
Best of all - the load last year was 0.024%. That's ONE FORTIETH of the average load charged by Wall Street parasites! Already set up. Already working spectacularly. Why reinvent the wheel?
Best of all - the load last year was 0.024%. That's ONE FORTIETH of the average load charged by Wall Street parasites! Already set up. Already working spectacularly. Why reinvent the wheel?
6
Great idea! Now all we need is a catchy title. Like Civil Security, no, maybe Social Savings, no, maybe Social Surety ... wait, I've almost go it ...
5
I find it concerning that one of the authors of this OpEd is a COO for a "financial management firm" and the ideas presented are just one more way to generate fees from hard-earned savings. We fail as a society to realize that bankers and their ilk are still paying themselves ridiculous compensation simply because, as the famous quip goes, banks are where the money is. In the end, bankers are no different than Willie Sutton, and 21st century financial service companies are just the latest embodiment of organized crime.
1
So, largely as a means to force Americans who are able to contribute to their savings (but don't), the system penalizes those who are saving, forcing them into a savings plan with lesser returns? The article mentions the long-term return on the market is twice this proposal's goal. Education and more incentives to save would be better than this government action.
2
Yes! A national system! The immediate post-WWII world had pensions that worked. Then the greed, cupidity, and out right theft of pension money by corporations and Wall Street leaves us where we are today.
A system such as the proposal made by Ghilarducci and James is a late start, but a needed one for all workers. We now know the mistakes of the past and safe guards must be put into place like keeping this process away from Congress. There is nothing wrong with big government, but big money that wants more money by "shucking" it out of the wage earner. That killed pensions and must not kill a new program that would benefit instead of put at risk workers. I love big government, but I hate those who use it to make themselves rich at the expense of all others.
A system such as the proposal made by Ghilarducci and James is a late start, but a needed one for all workers. We now know the mistakes of the past and safe guards must be put into place like keeping this process away from Congress. There is nothing wrong with big government, but big money that wants more money by "shucking" it out of the wage earner. That killed pensions and must not kill a new program that would benefit instead of put at risk workers. I love big government, but I hate those who use it to make themselves rich at the expense of all others.
2
I like this plan. If econ professors can have a fan base, I'm a big fan of Teresa Ghilarducci.
But, there are 3 main obstacles to getting it or any plan adopted. 1. The idea that each of us should be, and is, on our own, so "I'm not paying for someone else who can't provide for himself." 2. Hatred and revulsion of government bureaucracy (because the private sector has done such a great job solving this or any problem). 3. The idea - the deluded, fantastic idea - that the government shouldn't usurp the superior investment decision making authority of the individuals with the money at stake (because market timing and stock picking is so easy for everyone).
But, there are 3 main obstacles to getting it or any plan adopted. 1. The idea that each of us should be, and is, on our own, so "I'm not paying for someone else who can't provide for himself." 2. Hatred and revulsion of government bureaucracy (because the private sector has done such a great job solving this or any problem). 3. The idea - the deluded, fantastic idea - that the government shouldn't usurp the superior investment decision making authority of the individuals with the money at stake (because market timing and stock picking is so easy for everyone).
1
What a joke of an editorial. I've saved my entire adult life. Saw 40% of those savings disappear under the Great W. The system is fixed and no matter how we try to prepare for a somewhat comfortable old age the conservatives will steal from us. Some life. A life of working to make the billionaires happy and comfortable.
2
And the New School weighs in between life and death analyses of Altlooser, Habermust and Gramsicle. And with a very bad idea. This solution is a hair brained distraction from what must be done: make social security solvent by making all incomes subject to ss taxes and by lifting the ceiling on income subject to ss taxes. I wish nonsense like this were the only problem. The real problem is the New Democratic party's acceptance that ss benefits must be reduced as part of the 'Grand Bargain' including tax reform. HRM is a founding member of the NDP, and why I - a white, male, heterosexual- cannot find one reason to vote for her. Anyone...anyone...
We are mandated to pay X via tangles of regulations in order get Y, neither of which we are to have any control over. Omg. Why this huge preference for coercive regulation instead of simply stating that all citizens at age 65 start getting a standard, flat, identical-sized, social security? Done. No more special tax-favoured/sheltered accounts. Wanna save more? Fine. Cannot save more? Fine: adequate social security sets the floor. It takes the truly twisted neo-liberal mindset to recognize a societal problem and instead of directly addressing it, dreaming up ACA-like regulation.
2
This proposal is not unlike the TIAA traditional annuity used by educators for decades. I am surprised the authors do not mention this aspect of their plan.
Folks should have no problems with the forced savings of 3% in their own accounts proposed by this plan. The people who are good savers will continue to contribute to 401(k) plans beyond that miniscule 3% amount. Also, people without 401(k) plans know how to use IRAs and yes, even taxable accounts in order to save for the future. People who are not good savers definitely need a nudge and this plan gives them that nudge in a forceful way.
Folks should have no problems with the forced savings of 3% in their own accounts proposed by this plan. The people who are good savers will continue to contribute to 401(k) plans beyond that miniscule 3% amount. Also, people without 401(k) plans know how to use IRAs and yes, even taxable accounts in order to save for the future. People who are not good savers definitely need a nudge and this plan gives them that nudge in a forceful way.
Also for people worried about a government program, please consider what the federal Thrift Savings Plan has got going with its G Fund.
Ghilarducci and James could do a better job selling their idea if they used existing parallels already used by workers.
Ghilarducci and James could do a better job selling their idea if they used existing parallels already used by workers.
2
This is a critical idea, much needed and much needed right now by thesubjects of another NYT article today - unemployed or under-employed women over 50. The threat of impoverished old age is not something we should wish on anyone, and they need help today.
Thus I urge the writers to extend their concept to retro-fit the plan to reach some of our most endangered of our species, and point to ways which Congress can manage to fund it (in part at least by cost avoidance of other less effective support programs).
Thus I urge the writers to extend their concept to retro-fit the plan to reach some of our most endangered of our species, and point to ways which Congress can manage to fund it (in part at least by cost avoidance of other less effective support programs).
As long as we are talking about government assistance, why not institute a plan which creates an account when a newborn obtains a Social Security number and fund the account with $50,000 to be invested in the Russell 1000 or something similar. This money would be the basis for a retirement account not to be tapped until 65 or later. Any deaths before that age would cause the funds to go to surviving spouses or redistributed to lower the overall costs of the system. $50,000 set aside at near birth would grow to about $1.2 million in 65 years.
1
I looked at the headline and thought I'd get advice on how to make my current retirement funds last. I'm retired and have a hard time earning income on 1% interest rates in this era of ignoring those who actually saved for retirement while working, and instead benefiting borrowers. But no; instead I got information for future retirees.
The headline to this article is confusing and incomplete: the words "future retirees" should be added to the end of this headline.
The headline to this article is confusing and incomplete: the words "future retirees" should be added to the end of this headline.
2
Ah, the Blackstone Group. Pretty sure they're salivating at the thought of holding our money. And, too, that nifty little sentence where Social Security payments could be diverted along with the "possibility" of increasing the retirement age, they've got some Dandy ideas.
I've got a couple, too. Let's expand Social Security and Medicare, Institute a financial transaction tax, tax passive income at the same rate as labor and eliminate tax havens and rich-men's loopholes.
In other words, let's elect and support Bernie Sanders.
I've got a couple, too. Let's expand Social Security and Medicare, Institute a financial transaction tax, tax passive income at the same rate as labor and eliminate tax havens and rich-men's loopholes.
In other words, let's elect and support Bernie Sanders.
6
This sounds like a reasonable plan -- which is why it will never see the light of day. This is for three reason.
1). It will benefit ordinary Americans and cost the rich and corporations a little money. Right there, it's a non-starter in our current oligarchic state.
2). It requires government taking action to help average citizens. It is therefore "socialism" in the eyes and propaganda of the feral American right.
3). It requires Congress to do something, like passing useful a law. That's a hilarious expectation!
1). It will benefit ordinary Americans and cost the rich and corporations a little money. Right there, it's a non-starter in our current oligarchic state.
2). It requires government taking action to help average citizens. It is therefore "socialism" in the eyes and propaganda of the feral American right.
3). It requires Congress to do something, like passing useful a law. That's a hilarious expectation!
3
Rather than pair this program with social security, the authors should expand and modify it with the intent of replacing social security--a program that has long been praised on NYT without often pointing out its predatory and regressive features.
Social security is insensate to the added years worked by the blue collars when they enter the market at 18 instead of 22+. That is compounded by its age-dependent policies which unfairly benefit those with longevity who often tend to be those in the upper classes who have a avoided occupational hazards and enjoyed high quality health insurance, and the regressive nature of the payroll tax tax system which provides a disincentive to labor to anyone not earning +100k. The sum total of which makes social security a cost-effective retirement assistance program for an extremely small sliver of the population who have a lifetime average earnings in a government determined, arbitrary sweet spot. And lastly, everytime a worker passes before realizing the adjusted amount he or she paid in to SS (and If there's no spouse to continue/ start collecting) then you have government collecting on what would otherwise have been passed on as generational wealth--a key piece for families to bring themselves out of poverty over time.
All of these ills can be fixed with a semi-private system with has some basic oversight guidelines and a minimum level of required participation, but still allows for people to manage their own finances.
Social security is insensate to the added years worked by the blue collars when they enter the market at 18 instead of 22+. That is compounded by its age-dependent policies which unfairly benefit those with longevity who often tend to be those in the upper classes who have a avoided occupational hazards and enjoyed high quality health insurance, and the regressive nature of the payroll tax tax system which provides a disincentive to labor to anyone not earning +100k. The sum total of which makes social security a cost-effective retirement assistance program for an extremely small sliver of the population who have a lifetime average earnings in a government determined, arbitrary sweet spot. And lastly, everytime a worker passes before realizing the adjusted amount he or she paid in to SS (and If there's no spouse to continue/ start collecting) then you have government collecting on what would otherwise have been passed on as generational wealth--a key piece for families to bring themselves out of poverty over time.
All of these ills can be fixed with a semi-private system with has some basic oversight guidelines and a minimum level of required participation, but still allows for people to manage their own finances.
The editors' inability to learn from history is appalling.
To put all my eggs in the basket of some 'independent government agency' to oversee all the money that the feds mandate be directed to them and have so say over what degree of risk one wishes to assume is irresponsible.
And to think that the congress, in dire need of money, wouldn't be eyeing this to 'borrow' from at the get go is also ignoring history.
Further, the amount that we are forced to contribute can only go to ourselves or our beneficiary means this is no way to use this financial tool to pass on our hard work to our heirs, some of whom may be unable to work or have some developmental or other disability we need to consider in our private lives.
Not only do we lose control over mandated contributions (FICA, SS, etc all over again) but the assumed gullibility of trust in yet another government agency is close to being comical, based on the track record of financial responsibility shown shown over the last couple of decades.
I'm wondering how in the world the editors could even dream up such a plan. Oh, wait. Perhaps it was in the wee hours of a very well lubricated office party, amongst those who weren't so inebriated that they could still stand. What a foolish proposal.
To put all my eggs in the basket of some 'independent government agency' to oversee all the money that the feds mandate be directed to them and have so say over what degree of risk one wishes to assume is irresponsible.
And to think that the congress, in dire need of money, wouldn't be eyeing this to 'borrow' from at the get go is also ignoring history.
Further, the amount that we are forced to contribute can only go to ourselves or our beneficiary means this is no way to use this financial tool to pass on our hard work to our heirs, some of whom may be unable to work or have some developmental or other disability we need to consider in our private lives.
Not only do we lose control over mandated contributions (FICA, SS, etc all over again) but the assumed gullibility of trust in yet another government agency is close to being comical, based on the track record of financial responsibility shown shown over the last couple of decades.
I'm wondering how in the world the editors could even dream up such a plan. Oh, wait. Perhaps it was in the wee hours of a very well lubricated office party, amongst those who weren't so inebriated that they could still stand. What a foolish proposal.
22
This would be an improvement over the status quo, but it is laughable how it ignores the obvious: beefing up Social Security. This would eliminate all the extra overhead of a completely new program.
By "beefing up" I mean significantly increase the retirement benefits and guarantee the funding by increasing the contributions from general federal revenue.
Congress should fund the SS shortfalls from higher federal income taxes on the wealthy (e.g., closing loopholes used by the rich, and higher marginal rates on the super-rich), and from cuts to defense spending (particularly from ending the foreign military interventions in other nations' civil wars).
No new programs. Just common sense and political will are needed.
By "beefing up" I mean significantly increase the retirement benefits and guarantee the funding by increasing the contributions from general federal revenue.
Congress should fund the SS shortfalls from higher federal income taxes on the wealthy (e.g., closing loopholes used by the rich, and higher marginal rates on the super-rich), and from cuts to defense spending (particularly from ending the foreign military interventions in other nations' civil wars).
No new programs. Just common sense and political will are needed.
3
"low-fee diversified retirement portfolios would be created by a board of professionals who would be fiduciaries appointed by the president and Congress and held accountable to investors." Would these professionals be drawn from the same pool of worthies who currently stock corporate boards, voting themselves and top executives fairly generous compensation packages? Would there be a revolving door between such boards and our large financial institutions? Would they be "held accountable" to the same extent that the top management of Lehman Bros. and Bear Stearns, i.e., not at all?
3
So, if I understand correctly, we are to allow the government to manage retirement funds. Aside from the fact that they are already empowered to do that, i.e., Social Security, what is different here? If the government gets a pot of money, then a) it wants it, b) it gets it, c) it issues a phony IOU creating debt d) claims that the debt is high because government gives welfare money to poor people e) cuts the benefits from the program and f) ends the program as a government give-away. Separate from all of this, the wealthy corporations continue to be allowed to raid and spend their employees' retirement funds and then turn the debt over to the government when the corps go bankrupt, and the corporate executives get a government bailout of tax dollars to make them whole and continue to allow them to have tens of millions in salaries and bonuses with which they can cheat on their taxes and ship excess funds to off-shore accounts so any of their money will not be taxed at all. Now, where does the Times get the people who write this stuff and do they actually get paid for doing so?
2
See the movie "The Big Short" for a perfect reason this proposal should not fly far. Workers have been and continue to be dupes for the wealthy. Any new retirement programs should direct the saved money toward infrastructure development with guaranteed returns of 5 percent. The money would go into the economy today, and future retirees would continue to be part of the future economy. Our system breaks down when too few people spend money on everyday necessities and small pleasures. As more dollars drift into the portfolios of the rich -- as they do naturally in a capitalist system -- fewer people participate in the daily spending needed to drive the economy. The people we elect must address this. Simply requiring working people to direct more money into a Wall Street investment program would feed the fraud politicians refuse to address. Run to see "The Big Short."
3
Most of those non-saver workers are also lottery players. They call the lottery their "retirement plan". Why not make that true by putting 1 percent of every dollar bet into an IRA account for the worker, not reachable for any reason until the worker reaches a stated retirement age, say 62. Each bet would require presentation of a card identifying the bettor, the account, the depository institution chosen by the bettor, etc. The account would escheat to the state where the bet was placed if the bettor died before age 62. Bettors would receive yearly statements showing how much they had bet during the year, their investments, how they had done, etc.
Everybody wins. More people would become lottery players. Stockbrokers and banks would get millions of new clients and dollars. State governments would receive additional millions, including all those escheated tax dollars. Low income workers would save at least something for retirement, along with receiving a yearly reminder of how much they're spending on lottery bets. Non-bettors lose nothing and gain the satisfaction that some of the state taxes they would otherwise have to pay were being paid by bettors.
Everybody wins. More people would become lottery players. Stockbrokers and banks would get millions of new clients and dollars. State governments would receive additional millions, including all those escheated tax dollars. Low income workers would save at least something for retirement, along with receiving a yearly reminder of how much they're spending on lottery bets. Non-bettors lose nothing and gain the satisfaction that some of the state taxes they would otherwise have to pay were being paid by bettors.
What a sad article. We do have a multi tiered system. The government has a system of social security which provides a substantive base for retirement. Then society asks its members to have some common sense to add to this base with their own savings. Is this to much to ask. Is it my responsibility to provide tax money to those who are irresponsible? It is certainly not a corporate responsibility to save for them. Their responsibility is only to pay a fair wage. Would thou provide a cradle to grave support system with no individual responsibility. Shame. There are no guarantees in this life.
3
This sounds like the Republican plan to privatize Social Security. Once a plan like this is put in place we will no linger need Social Security then once that is gone we can reduce government cost by turning this over to the private sector that always works so much more efficiently than the government. Then the economy will go bust and all of this money will disappear into the pockets of the oligarchs. Nice try but wrong answer. Please come back to play our game another time.
3
This proposal is ridiculous.
A mandatory retirement savings program with excessive government control that is linked to the travails of the investment industry (note I did not state the market) is a recipe for disaster. Need we re-create the situation with Freddie Mac and Fannie Mac?!
Better would be to split up Social Security and create two components. One would be a basic insurance entity for disability coverage and a guaranteed minimum pension similar to an annuity. The second would be for self directed investment accounts to be held by individuals that could be modeled on the way TIAA-CREF is structured. That is fiduciarilly responsible investment firms would be chosen and would offer a limited range of portfolios with extremely low carrying cost, that is no more than 1% per year.
America needs to move beyond the antiquated structure of Social Security and its fear of investment risk if it's going to adequately be able to address the long term financial needs of fiscally constrained retirees.
A mandatory retirement savings program with excessive government control that is linked to the travails of the investment industry (note I did not state the market) is a recipe for disaster. Need we re-create the situation with Freddie Mac and Fannie Mac?!
Better would be to split up Social Security and create two components. One would be a basic insurance entity for disability coverage and a guaranteed minimum pension similar to an annuity. The second would be for self directed investment accounts to be held by individuals that could be modeled on the way TIAA-CREF is structured. That is fiduciarilly responsible investment firms would be chosen and would offer a limited range of portfolios with extremely low carrying cost, that is no more than 1% per year.
America needs to move beyond the antiquated structure of Social Security and its fear of investment risk if it's going to adequately be able to address the long term financial needs of fiscally constrained retirees.
1
This article is a scam. They said stocks and bonds are liquid therefore they have less of a return than illiquid investments but they don't even explain what those illiquid investments are. Why would I want my retirement money in some locked up ill-defined investment put together by the finance/insurance industry with a very poor record ? So far the states that are using these illiquid private investments like hedge funds are doing so poorly so many want to opt out. It is easy to contribute to the 401k plans but people refuse to do so and then like the article points out people raid them early . A better solution would be to allow larger contributions to the 401 k plans, allow zero withdrawal and allow more investment choices. There is nothing wrong with stocks and bonds and being liquid and giving up "return" for the "safety" in hedge funds and whatever else they have in mind for illiquid investments. What is going to give a better return, real estate, currency hedging, metals, options, commodities, Bitcoin? I will take stocks and bonds over those choices any day of the week for an industry average return of 6% to 7% percent a year. If the investment choices were broader to include some sort of annuity type fixed income investment then that would be appropriate for the 3% guaranteed return they are talking about. Sounds like these two people are feeding out of the hands of the insurance and finance companies. Baloney don't go for it!
1
I think the idea of mandatory retirement savings is a good idea. But I think people ought to have a choice. I am not sure I would trust a government-sponsored program any more than a private company given that the recent lack of oversight by the Feds created one of the worst economic crashes in history. Personally, I would need to know specific details on what safeguards will be instituted to prevent the ongoing collusion between big money and our government officials concerning how and where our money would be invested and protected with a 100% guarantee. Maybe we just increase the percentage amount that each individual must pay into social security with the provision that Congress can't "borrow" from it to pay other expenses.
2
Why create a new system and a new bureaucracy with individual accounts to do essentially the same thing social security is designed to do? Social Security should be beefed up to actually provide for a decent retirement. The system could be 'saved' by requiring those with higher incomes to also continue to contribute on those higher incomes. Yes, even those who make a million a year should contribute on that amount. Employers should have to contribute for their contingent workers instead of classifying them as contractors.
3
I will describe a case for allowing for early withdrawal.
A woman becomes gravely ill in her 50's. She is unemployed living off the grace of friends and family with no significant saving. She was once employed in a factory contributed to Social Security for many years but her factory closed and moved to India. She pieced together a living for several years working part-time jobs until she became sick. Without insurance she needed cash for quality medical care. She died before receiving the quality medical care she needed. Too bad for her. Too bad for her family too. All the money she paid into Social Security? Gone.
A woman becomes gravely ill in her 50's. She is unemployed living off the grace of friends and family with no significant saving. She was once employed in a factory contributed to Social Security for many years but her factory closed and moved to India. She pieced together a living for several years working part-time jobs until she became sick. Without insurance she needed cash for quality medical care. She died before receiving the quality medical care she needed. Too bad for her. Too bad for her family too. All the money she paid into Social Security? Gone.
4
As I wrote in reply to JFK in NYC, this bureaucracy already exists. It is called the Federal Retirement Thrift Investment Board and administers the Thrift Savings Plan (www.tsp.gov). All federal employees and military are eligible to contribute to it and it is one of the components of their retirements. There are several funds to choose from so investors can select the degree of risk they are willing to accept for their portfolios. This system has very low fees (average expense ratio of a mere 0.03% in 2014) and, historically, the funds have been quite successful delivering returns competitive with commercial instruments. As of December 31, 2014 there was over $510 billion being managed by the Board.
It would seem somewhat straight-forward to extend enrollment in the TSP family of funds to non federal employees. If you do a little research you would find that the TSP is highly regarded by professional investment managers.
It would seem somewhat straight-forward to extend enrollment in the TSP family of funds to non federal employees. If you do a little research you would find that the TSP is highly regarded by professional investment managers.
4
This is a problem with no easy solution. I have diligently saved for retirement for nearly 30 years, and part of that time have had the benefit of employer contributions. I have managed my plan and have done better than most mutual funds. I realize I am fortunate, and that many members of the workforce do not have the same level of income to fund a similar retirement savings plan. At the very best, Social Security will not be sufficient to pay for anything beyond a bare-bones lifestyle for these people. As a society, we need to decide whether to augment current Social Security levels or effectively abandon these people to a poverty-level existence. My vote would be to augment Social Security.
But at the same time, I have read numerous articles about average levels of retirement savings for persons with more significant incomes. The averages are dismal, leading me to conclude that many people of financial means either border on being financially illiterate or have chosen to live a grasshopper lifestyle. A compulsory retirement savings program for these people may be appropriate. Whether that program should closely resemble the one the authors describe is open for debate. My hunch is that such a program could be set up to have minimal administrative costs, provided Wall Street does not have a major say in how it is structured. That would be the main challenge.
But at the same time, I have read numerous articles about average levels of retirement savings for persons with more significant incomes. The averages are dismal, leading me to conclude that many people of financial means either border on being financially illiterate or have chosen to live a grasshopper lifestyle. A compulsory retirement savings program for these people may be appropriate. Whether that program should closely resemble the one the authors describe is open for debate. My hunch is that such a program could be set up to have minimal administrative costs, provided Wall Street does not have a major say in how it is structured. That would be the main challenge.
3
The main financial hurdle facing most people trying to build a nest egg is inadequate savings. The amount needed to fund a "secure" retirement fund for an average person is way more than most are on track to accumulate and even higher than what the authors state. At a 4% withdrawal rate $625,000 is needed to provide $25,000/yr. Ideally more than that to cover a downturn/emergency buffer and to leave something for a spouse/children. Many do not realize this and unless you start saving in your early 20's, and even then, a significant ongoing contribution is necessary to get there. Many do not or cannot begin saving until much later in life (I didn’t) meaning an even higher commitment is needed. 10% of salary is a starting point. This requires sacrificing elsewhere. More flexibility would be helpful, e.g. raise contribution limit on IRA to match 401/403 for individual savers. Tax deferred contributions encourage savings and deferring taxes on accumulated interest and dividends helps accounts grow faster. These benefits should be retained. Financial transaction taxes (that hit re balancing) do not help.
On a side note, I notice many of the commenters here like to shoot down other peoples posts with snide remarks rather than state their own opinions in the clear. This behavior should be discouraged.
On a side note, I notice many of the commenters here like to shoot down other peoples posts with snide remarks rather than state their own opinions in the clear. This behavior should be discouraged.
2
Pensions are a thorny problem--mathematically, demographically, behaviorally and in their governance. No one has ever quite figured them out. I salute Teresa Ghilarducci for trying. But the hardest part of a plan like hers, which gets light treatment in this op-ed piece, is likely to be the conversion of the savings to lifelong income. Will the income be converted to an annuity from a life insurance company, or will it come out of the pool of managed wealth? Will it fluctuate? How will it deal with inflation? What happens if lifespans get longer? How will the program deal with the unlucky people who happen to retire in a down market? Experts around the world are trying to answer these questions as we speak, but no one has succeeded. It might be said that Social Security, like democracy, is terrible, except when you compare it to all other systems. [The writer is author of Annuities for Dummies and publisher of Retirement Income Journal.]
1
Workers would pay a combined 15.3% payroll tax plus 15% into a G.R.A. plus Income taxes for a total of 45% or 50%. If health insurance for the family is required under ObamaCare and your state requires automobile insurance for the car you drive to work than as much as 60% of workers’ salaries would be invested by the government. If the government also convinced you to take out some easy loans for college then 70% of you paycheck will vanish.
Your prospect for a good marriage and procreation will be almost nil. This, of course, is socialism for the workers. It is also ultra-capitalism for the rich who have investment income taxed at reduced rates and not subject to payroll taxes or the G.R.A.
The authors are nevertheless correct about the reasonable goal of supplementing Social Security with about $500,000 in savings (30 times $14,500). The solution is to tax net wealth above $500,000 and lower all taxes on families with less wealth.
Eliminate job killing payroll taxes and allow all taxpayers to choose a rate between 8% and 28% that would be paired with a net wealth tax of 2% gradually reducing to zero for the top rate. Each taxpayer could maintain up to $500,000 in tax free savings for retirement, education or health care. Wealth taxes paid could be used to offset estate taxes so even the very wealthy would want to pay some wealth taxes as an inexpensive form of life insurance. Business tax reform would require nothing more than a 4% VAT and 8% C corporation income tax.
Your prospect for a good marriage and procreation will be almost nil. This, of course, is socialism for the workers. It is also ultra-capitalism for the rich who have investment income taxed at reduced rates and not subject to payroll taxes or the G.R.A.
The authors are nevertheless correct about the reasonable goal of supplementing Social Security with about $500,000 in savings (30 times $14,500). The solution is to tax net wealth above $500,000 and lower all taxes on families with less wealth.
Eliminate job killing payroll taxes and allow all taxpayers to choose a rate between 8% and 28% that would be paired with a net wealth tax of 2% gradually reducing to zero for the top rate. Each taxpayer could maintain up to $500,000 in tax free savings for retirement, education or health care. Wealth taxes paid could be used to offset estate taxes so even the very wealthy would want to pay some wealth taxes as an inexpensive form of life insurance. Business tax reform would require nothing more than a 4% VAT and 8% C corporation income tax.
4
To clarify, the proposal is to create a public pension plan, not a savings plan at all. If it was a savings plan, then there would be no way to guarantee a 3% return. But since the cash is pooled, each holder has an account with an imputed value based on the value of the greater pool. In other words, a cash value, not a portfolio.
There are o-so-many problems with this proposal. First of all, this would create a pension pool that dwarfs institutional giants like Calpers. The appointed "experts" would essentially control the markets. And as political appointees, there are endless possibilities for political activism entering shareholder meetings and board rooms. It would amount to Presidential control over the nation's business enterprises.
These authors have fallen into the fallacy that it's possible for any entity to function as a fiduciary. Anyone who controls someone else's money does so with an agenda that can't possibly be 100% aligned with the beneficiary. "Fiduciary" is a common law concept, better applied to remedies than to forward planning.
There are o-so-many problems with this proposal. First of all, this would create a pension pool that dwarfs institutional giants like Calpers. The appointed "experts" would essentially control the markets. And as political appointees, there are endless possibilities for political activism entering shareholder meetings and board rooms. It would amount to Presidential control over the nation's business enterprises.
These authors have fallen into the fallacy that it's possible for any entity to function as a fiduciary. Anyone who controls someone else's money does so with an agenda that can't possibly be 100% aligned with the beneficiary. "Fiduciary" is a common law concept, better applied to remedies than to forward planning.
1
Then how do you explain the success of university endowments funds?
Possibly because they cannot be plundered by politicians looking for a way to fund their projects.
Preparing for retirement is each individuals responsibility, not the governments.
There are options other that creating another government program! Almost all carry some risk so investing in government bonds particularly TIPS is about the safest and fee free. There are low cost mutual funds for those who want to take more risk with the expectation of more return on their dollars.
Social security is not and was never intended to be a retirement saving plan. When enacted social security was intended to be just a safety net providing some security, during the countries financial crisis, depressions or major recessions. Not to support families but the individual worker.
Individuals and families must adjust their dependency on employers and government when preparing financially for their future. During the 1980s many employers shifted the financial burden for retirement from the employer, to the employee. Many employees did not understand what had happened. Consciously or subconsciously I think people perceived government and social security as being their retirement nest egg taking care of them to their death. Depending on your earning you may receive 30-35% or less of todays income. An example a worker making $62,000 per year and having worked 40 plus years will receive about $20,000 annually in social security payments.
Each person is responsible for their own well being NOT the government!
There are options other that creating another government program! Almost all carry some risk so investing in government bonds particularly TIPS is about the safest and fee free. There are low cost mutual funds for those who want to take more risk with the expectation of more return on their dollars.
Social security is not and was never intended to be a retirement saving plan. When enacted social security was intended to be just a safety net providing some security, during the countries financial crisis, depressions or major recessions. Not to support families but the individual worker.
Individuals and families must adjust their dependency on employers and government when preparing financially for their future. During the 1980s many employers shifted the financial burden for retirement from the employer, to the employee. Many employees did not understand what had happened. Consciously or subconsciously I think people perceived government and social security as being their retirement nest egg taking care of them to their death. Depending on your earning you may receive 30-35% or less of todays income. An example a worker making $62,000 per year and having worked 40 plus years will receive about $20,000 annually in social security payments.
Each person is responsible for their own well being NOT the government!
2
The SSI program is currently funded by a 6.2% of gross earned income matched by another 6.2% by the employers (or employee). 12.4% is certainly enough funding for any individual to have a nice retirement . . . if the funds are invested consistently and properly. A five percent annual return will offer plenty of retirement for a person contributing over a 40 year period.
One only needs to look at how well managed mutual fund insurance companies handle their portfolios to see how money may be best managed for long term growth and security. Corporate bonds and the home mortgage markets are typical stalwarts of secure investments.
I would suggest we look at solving the Fannie / Freddie and Social Security issues with an integrated program that uses a historically safe underwriting of 30 year loans through Freddie / Fannie to fund our Social Security program.
For example:
Set home loans at 6% interest rate.
(High quality loans with min 20% down)
5% growth repaid to SSI fund and 1% administration.
Result:
Home mortgage market is stabilized.
And within a generation, our Social Security trust fund is completely solvent.
For a more detailed description, please see:
http://ihopepresidentobamareadsthis.com/?p=58
One only needs to look at how well managed mutual fund insurance companies handle their portfolios to see how money may be best managed for long term growth and security. Corporate bonds and the home mortgage markets are typical stalwarts of secure investments.
I would suggest we look at solving the Fannie / Freddie and Social Security issues with an integrated program that uses a historically safe underwriting of 30 year loans through Freddie / Fannie to fund our Social Security program.
For example:
Set home loans at 6% interest rate.
(High quality loans with min 20% down)
5% growth repaid to SSI fund and 1% administration.
Result:
Home mortgage market is stabilized.
And within a generation, our Social Security trust fund is completely solvent.
For a more detailed description, please see:
http://ihopepresidentobamareadsthis.com/?p=58
4
The authors completely fail to understand the savings crisis in the US. The crisis is not for the lack of plans, investments, and schemes. The root of the savings crisis is that the majority of Americans cannot make enough from one job to pay their living expenses, let alone put away $1000s a year in retirement plans.
Social Security is an excellent system. It would be completely solvent if 1) the government had put all contributions since 1970 in 30-year Zero coupon treasury bonds and not let Congress borrow from it to fund fiscal deficits, 2) eliminate the salary cap on contributions (now around $110,000) which will have the super wealthy pay into the fund, 3) tax 1099 income (capital gains, dividends, unearned income, etc.) over $100,000 at 1% to fund Social Security. These 3 steps would make Social Security completely solvent and not on the backs of the working poor and middle class.
The US doesn't not need another investment scheme, another retirement account system on top of the confusing system of IRA, SEP, 401-K, 403-B, Profit Sharing, Defined Benefit, and the list goes on.
Social Security is an excellent system. It would be completely solvent if 1) the government had put all contributions since 1970 in 30-year Zero coupon treasury bonds and not let Congress borrow from it to fund fiscal deficits, 2) eliminate the salary cap on contributions (now around $110,000) which will have the super wealthy pay into the fund, 3) tax 1099 income (capital gains, dividends, unearned income, etc.) over $100,000 at 1% to fund Social Security. These 3 steps would make Social Security completely solvent and not on the backs of the working poor and middle class.
The US doesn't not need another investment scheme, another retirement account system on top of the confusing system of IRA, SEP, 401-K, 403-B, Profit Sharing, Defined Benefit, and the list goes on.
11
In Albert Brooks' dystopian science-fiction novel, "2030" (yes, that Albert Brooks, the comedian — and the book is quite good), he paints a troubling but all-too-realistic future in which tens of millions of older Americans are destitute.
There are many reasons to think this may come to pass.
Globalization and technology have permanently removed millions of jobs that will never return. Older people will never catch up to younger works when it comes to the skills needed to find a higher-skill job; as Nicholas Cage has written in "The Glass Cage," algorithms are already "working" as security officers, paralegals and even taxi drivers.
Social Security is inadequate on its own and cannot fully support a retired life. What's more, the political will to steer it away from insolvency clearly doesn't exist.
The 401(k) was an enormous scam perpetrated on the nation, as it could never adequately match a well-funded pension. Now many, if not most, corporations and businesses no longer provide pensions — exactly what they wanted.
Social Security could be propped up considerably at a stroke by taxing all income, not just that below (?!) $118,500 that is "related to labor." That's not happening any time soon, and even if it did, it would not touch these other, more serious problems.
And so Brooks' future of millions of seniors living in shanty collections outside town — let's call them Reaganvilles, perhaps Bushvilles — seems all too close for comfort.
There are many reasons to think this may come to pass.
Globalization and technology have permanently removed millions of jobs that will never return. Older people will never catch up to younger works when it comes to the skills needed to find a higher-skill job; as Nicholas Cage has written in "The Glass Cage," algorithms are already "working" as security officers, paralegals and even taxi drivers.
Social Security is inadequate on its own and cannot fully support a retired life. What's more, the political will to steer it away from insolvency clearly doesn't exist.
The 401(k) was an enormous scam perpetrated on the nation, as it could never adequately match a well-funded pension. Now many, if not most, corporations and businesses no longer provide pensions — exactly what they wanted.
Social Security could be propped up considerably at a stroke by taxing all income, not just that below (?!) $118,500 that is "related to labor." That's not happening any time soon, and even if it did, it would not touch these other, more serious problems.
And so Brooks' future of millions of seniors living in shanty collections outside town — let's call them Reaganvilles, perhaps Bushvilles — seems all too close for comfort.
57
Another scheme to take from the poor and give to the rich. most working class Americans can't afford to contribute to any kind of no withdrawal funds.they need the money to pay for basic living expenses. the wealthy who make over 200k a year can afford it but the rest of us can't. stop trying to take away our ability to survive and tax those that have exploited us forever and let those wealthy individuals pay for our retirement since we are the ones that made them rich in the first place by bailing out every other scheme to squeeze our meager wages out of us. our basic living expenses made them rich because we are the millions that pay percentage wise the highest amount of our earnings for rent food utilities clothing Healthcare school expenses for ourselves and our children. the wealthy pay the same price for a carton of milk as we do but the percentage of the wealthy earnings is not computable it is so small compared to our percentage. they should be paying thousand dollars for that milk that extra tax would be used to pay for our security in our old age to enjoy a quality of living we now do not have. how do you do that. simply require a purchase ID card will store information about earnings and wealth and it will be used to calculate the price of milk for the more fortunate buyers. think what the percentage of our earnings is for a family of four monthly food and utilities bill compared to what that same calculation is for Trumps Clintons Bushes etc.
17
$1,000 set aside per year, starting at birth and compounded at 3% per year through age 65 would build to nearly $250,000. The cost, with the current population, would be less than half of what we pay out for Social Security retirement benefits and could roughly double the current average Social Security benefit.
This simply points to the fact that there are lots of ways to improve the well-being of the average American, but there is no political will. As it stands, the Social Security trust fund will be exhausted in 15 years (at current rates) and, failing corrective action of increased revenue or reduced costs, benefits will have to be cut by nearly 30%.
This is a problem that is best solved well in advance, when it is less painful, than at the moment of crisis. Yet our Congress has been unable to do anything to backstop our most important domestic program, Social Security, much less provide increased security for the declining American middle class.
This simply points to the fact that there are lots of ways to improve the well-being of the average American, but there is no political will. As it stands, the Social Security trust fund will be exhausted in 15 years (at current rates) and, failing corrective action of increased revenue or reduced costs, benefits will have to be cut by nearly 30%.
This is a problem that is best solved well in advance, when it is less painful, than at the moment of crisis. Yet our Congress has been unable to do anything to backstop our most important domestic program, Social Security, much less provide increased security for the declining American middle class.
21
The best way to ensure the solvency of Social Security trust fund is to eliminate the upper level cap on contributions. That simple step would solve the problem and allow for an increase in benefits for current retirees. It seems simpler - maybe even achievable if we elect more Democrats to Congress - than adding another plan.
2
"...but there is no political will."
Which translates to: the wealthy and their politicians won't allow it.
Which translates to: the wealthy and their politicians won't allow it.
2
What will $250,000 do if one lives to 100 years and the value of a dollar changes? It must be in interest/stocks ,etc. which is costly to manage. It is less costly to have a minimum retirement plan sufficient for dignified life. Oh. Nasty government program like Social Security! Guaranteed...wow , what an idea..
1
A good idea-- certainly better than the current system. To really work well, though:
--U.S. employment needs to stabilize further. Witness the Times' January 1, 2016 article on a St. Louis Fed report that finds that 50% of workers over 50-- especially women-- have been unemployed long term.
--Health care options for the elderly need to become more affordable. As matters now stand, many seniors must impoverish themselves before they will be eligible (under Medicaid) for comprehensive long-term health care. Realizing that the end game is to blow through your resources in order to become eligible for Medicaid hardly encourages long-term savings.
--U.S. employment needs to stabilize further. Witness the Times' January 1, 2016 article on a St. Louis Fed report that finds that 50% of workers over 50-- especially women-- have been unemployed long term.
--Health care options for the elderly need to become more affordable. As matters now stand, many seniors must impoverish themselves before they will be eligible (under Medicaid) for comprehensive long-term health care. Realizing that the end game is to blow through your resources in order to become eligible for Medicaid hardly encourages long-term savings.
16
Let me also note:
(1)Good idea in that this is mandatory, and thus more reliable than the 401(k) system.
(2)As numerous commenters have pointed out, this plan could be accomplished by expanding Social Security.
(3)A third option is to establish a sovereign wealth fund, like those used in Singapore. Invested funds could be directed, like one of Singapore's funds, to invest in U.S. based ventures-- including infrastructure rebuilding.
(1)Good idea in that this is mandatory, and thus more reliable than the 401(k) system.
(2)As numerous commenters have pointed out, this plan could be accomplished by expanding Social Security.
(3)A third option is to establish a sovereign wealth fund, like those used in Singapore. Invested funds could be directed, like one of Singapore's funds, to invest in U.S. based ventures-- including infrastructure rebuilding.
5
"Blowing through your resources" is not a plan, it is inevitable if you are in the 99% and live beyond 75.
1
Succintly put but unpersuasive.
At least part of the reason there might be a looming low income retirement problem is flat to down real wages for many people with jobs, and poor job opportunities leading to declines in labor force participation. Fix that first.
Taking 1.5% out of wages to send to Wall Street (as suggested here by a Wall Streeter) is 1.5% of austerity when the macroeconomic problem remains inadequate demand. Fix that second.
For a lot of people retirement savings isn't job #1. Getting out from pay day loans, paying off credit card debt and student loans, and building an emergency cash reserve come first.
After that, retirement savings. But a mandatory stream to money managers, that can't be withdrawn, with fixed fees no matter what, and converted to an annuity? I'd rather put it in a Treasury Direct account.
At least part of the reason there might be a looming low income retirement problem is flat to down real wages for many people with jobs, and poor job opportunities leading to declines in labor force participation. Fix that first.
Taking 1.5% out of wages to send to Wall Street (as suggested here by a Wall Streeter) is 1.5% of austerity when the macroeconomic problem remains inadequate demand. Fix that second.
For a lot of people retirement savings isn't job #1. Getting out from pay day loans, paying off credit card debt and student loans, and building an emergency cash reserve come first.
After that, retirement savings. But a mandatory stream to money managers, that can't be withdrawn, with fixed fees no matter what, and converted to an annuity? I'd rather put it in a Treasury Direct account.
21
The federal government in charge of the portfolios, with the individual investor not making decisions directly. This would be a recipe for further financial disaster. Just look at the actual financial state of social security and not the propaganda the government spews out. Social security has no money because the government has borrowed all the money out of it to cook the books on the national debt. A government official a few weeks ago admitted that the debt is actually closer to $63,000,000,000,000 not the $19,000,000,000,000 the White House and Congress are telling us because they play a shell game funneling money out of social security and other funds to cover their tracks of fiscal suicide with our money.
18
Just increase Social Security benefits. The system is in place, and it works. Yearly payments should not stop early for better paid employees. I'm afraid if we create another nationalized system for pensions, the politicians will have excuse to wreck social security. As an employer, I know social security works, keep things simple and effective and increase benefits. And vote for Bernie Sanders, that's his plan.
147
You do make one point: people don't have enough money when they retire - boost the SS withdrawal, for the middle and up class. Remove the Max contribution (those making more than ~150k don't have to add to SS, that is plain stupid).
SS and medicare should be the 2 big government programs we enhance and all enjoy - medicare should fuse out Obamacare and SS should put all those useless, paper shredder leeches, on our economy (money managers) out of business.
SS and medicare should be the 2 big government programs we enhance and all enjoy - medicare should fuse out Obamacare and SS should put all those useless, paper shredder leeches, on our economy (money managers) out of business.
93
On please. Another solution fostered by genius economists. You know, like zirp and we, the eurozone and the euro, NAFTA, cafta, WTO, heuristic price adjustments, how many fairies dance on the head of a pin.
You want to restore retirement security? Then eliminate SS income caps for contributions, better yet, ban the idiots at the fed from ever lowering rates less than 5%. Zero rates? Really? The greatest con job, theft and transfer of wealth under a reverse Robin Hood scheme ever pulled off by a bearded gnome.
A $ will double in ten years at 7%, at 10%, in 7 years. More retirement wealth has been stolen since 2008 than for the past 50 years. Why? To bailout deadbeats, debtors, wall street, bank e ecs. The economy would have healed 5 years ago if the prudent and savers among us would not have had trillions of wealth stolen by a corrupt federal reserve.
It doesn't,t take some rocket science solution that merely generates more fees and another perpetual annuity for financial criminals.
You want to restore retirement security? Then eliminate SS income caps for contributions, better yet, ban the idiots at the fed from ever lowering rates less than 5%. Zero rates? Really? The greatest con job, theft and transfer of wealth under a reverse Robin Hood scheme ever pulled off by a bearded gnome.
A $ will double in ten years at 7%, at 10%, in 7 years. More retirement wealth has been stolen since 2008 than for the past 50 years. Why? To bailout deadbeats, debtors, wall street, bank e ecs. The economy would have healed 5 years ago if the prudent and savers among us would not have had trillions of wealth stolen by a corrupt federal reserve.
It doesn't,t take some rocket science solution that merely generates more fees and another perpetual annuity for financial criminals.
51
Lift the cap on Social Security -- why are upper income earners exempt from everything in this country?
It's easy for employees of think tanks and financial firms to condemn those who do not save for the future, but many Americans simply do not make enough money. These great minds should try to work for minimum wage in this country and then still set aside some of that for savings for the future and "small fees" for the financial industry.
I recommend instead that they put some of their brain power on improving Social Security and getting it through Congress where too many Republicans want to cut it.
To quote Bernie Sanders, "our job cannot be to cut Social Security. Our job must be to expand it so that every American can retire with dignity and respect."
That's something all economists and money managers -- and voters -- should get behind.
It's easy for employees of think tanks and financial firms to condemn those who do not save for the future, but many Americans simply do not make enough money. These great minds should try to work for minimum wage in this country and then still set aside some of that for savings for the future and "small fees" for the financial industry.
I recommend instead that they put some of their brain power on improving Social Security and getting it through Congress where too many Republicans want to cut it.
To quote Bernie Sanders, "our job cannot be to cut Social Security. Our job must be to expand it so that every American can retire with dignity and respect."
That's something all economists and money managers -- and voters -- should get behind.
258
A good and simple plan to eliminate the earnings cap on Social Security taxes. You don't have to be a Socialist to see the need to change the regressive nature of the cap. If the US Government wants to into the act of helping retirees, then publicize further to Americans the advantage of delaying taking Social Security benefits until well after 59 1/2.
1
When I was still teaching at UC, Berkeley, some of my colleagues and all the upper administration were making $200,000 or more per year. That meant that after the first couple of months every year they got a 6.2% raise since they no longer paid into Social Security. Those of us around $100,000 paid all year. What's fair about that? I can't imagine the Republican trolls in Congress EVER going for raising the bar.
2
The reason Social Security taxes are capped is that payments are capped. If you want to tax all income without limit and then pay everyone the same amount, you're talking income re-distribution, plain and simple. If that's what you want, then say so, but systems that take money from one and give to another generally go broke.
1
This plan sounds familiar. It sounds similar to the NJ pension for teachers and public workers. The problem is that the State of NJ, under several Governors, did not pay its share into the plan, even while the employees did. Now the system is in crisis.
46
No - the problem is that your gravy train pension plan is unaffordable and unsustainable. The truth is that public employee parasites have bankrupted NJ and many other states.
1
The social security program has been forced to raise taxes from its original rate several times to remain solvent. The program needs additional sources of revenue to continue promised benefits in the future. I would be concerned about establishing another mandatory government program that "guarantees" a 3% annual return. Where would that return come from? The only way I see it funding this guarantee is raising the mandatory input so as to pay those coming of age. We call those schemes Ponzi schemes.
17
Social Security a Ponzi scheme? Heard this argument a few times and the bottom line is that from the dollar bill in your wallet to the bonds in the trust fund to the savings bond in your safety deposit box; all are backed by the full faith and credit of the U.S. government. The only thing that threatens this "full faith and credit" is the prospect of default, which many Republican Congresspersons flirt with on a periodic basis.
2
And the social security tax increases over the past 30 years stand in contrast to the lower and lower tax rates on high incomes, dividends, capital gains. We have the 'great' Alan Greenspan to thank for the current Social Security system which puts the whole burden on the working poor and middle class. Greenspan's reward for his social security funding scheme was to be appointed Chairman of the Fed by Reagan. And we now know how disastrous he was at the job as well.
2
Or insurance premiums
Workers in the lower income groups would be better served by increasing benefits under Social Security. This could be supported by taxing all earnings with no upper limit as there is now. That mandatory percentage in the proposed plan could be converted to a smaller increase in the social security tax. The beauty of social security is that your benefit is based on a lifetime of earnings, it's indexed to inflation and you only get a benefit for as long as you or your spouse survives.
149
And whatever money you've contributed in premiums that you don't receive as benefits remains in the pool, rather than being passed through inheritance.
Whether people think that's good, bad, or anything else, I think we should include that distinction between private investment and public insurance.
Whether people think that's good, bad, or anything else, I think we should include that distinction between private investment and public insurance.
12
Good idea, keeping in mind of course that there is Zero money actually in the Social Security "Trust" fund, that the government arbitrarily defines an inflation rate that bears no resemblance to the real rate of inflation (zero for '15), and medical costs are rising exponentially due to a number of factors all influenced to a great degree by a corrupt set of government "watchdog agencies" like the FDA. Social Security has never been more than a Ponzi game and the suckers are starting to wake up. No amount of tinkering will save it. Young people know this and some day they are going to say no mas.
I write from the perspective of watching 78 years worth of savings disappear while trying to stay out of both the hospital and the poor house. My biggest enemy? The Fed sponsored inflation that has eaten the value of my saved dollars.
I write from the perspective of watching 78 years worth of savings disappear while trying to stay out of both the hospital and the poor house. My biggest enemy? The Fed sponsored inflation that has eaten the value of my saved dollars.
Costless is what the authors call this program which sounds the most naive government program proposed over the last seven years. Yet, this program screams of cost and of course MORE MONEY for Blackstone and the "independent" financial managers.
31
Well, now that the minimum w2age has risen to ten dollars an hour in some states, people will now have a lot of extra money to save and invest for their retirement.
13
LOL. Was that snark?
1
A lot of extra money? Where do you live?
"Now that the minimum wage has been raised to $10 an hour people will have a lot more to save for retirement." This post is intentionally ironic, right?
2
Retirement in America is not what it used to be. It is much BETTER than the retirement of our parents and grandparents. Work used to be more manual. Used to be that people worked until physically spent. Retirement was more sedentary, and life expectancy was much less.
So, most worked all their life until they could not work anymore, retired to a rocking chair and died soon thereafter - in their 60's or 70's.
That's not today's retirement. If the current system is so broken, why/how have we reduced Age 65+ poverty from 35.2% (1959) to ~10% (every year since 1995, despite ~50% increase in number from ~32MM to ~46MM - Bureau of Labor Statistics).
We have plans that work - if retirement preparation is a priority. Tomorrow's elderly poor generally (not always) lacked commitment - nothing else.
SUCCESSFUL RETIREMENT IS POSSIBLE - AND IT IS BEING DONE TODAY! Take an individual, age 25 in 1982, who saved the maximum in an IRA every year THEREAFTER and retires at age 66 (2023), earning $50,000 at retirement (slightly less than 2014 median household income). Assuming a 5% rate of return, she will have accumulated $380,000+, which, converted to a life and 20 year certain annuity at 2015 purchase rates, would be $23,644. Add in her social security (retiree and spouse), of $21,000+/year (assuming steady earnings) = 80+% pay replacement rate, and almost half of the benefit is indexed for inflation!
Don't break what's working today for the majority of Americans.
So, most worked all their life until they could not work anymore, retired to a rocking chair and died soon thereafter - in their 60's or 70's.
That's not today's retirement. If the current system is so broken, why/how have we reduced Age 65+ poverty from 35.2% (1959) to ~10% (every year since 1995, despite ~50% increase in number from ~32MM to ~46MM - Bureau of Labor Statistics).
We have plans that work - if retirement preparation is a priority. Tomorrow's elderly poor generally (not always) lacked commitment - nothing else.
SUCCESSFUL RETIREMENT IS POSSIBLE - AND IT IS BEING DONE TODAY! Take an individual, age 25 in 1982, who saved the maximum in an IRA every year THEREAFTER and retires at age 66 (2023), earning $50,000 at retirement (slightly less than 2014 median household income). Assuming a 5% rate of return, she will have accumulated $380,000+, which, converted to a life and 20 year certain annuity at 2015 purchase rates, would be $23,644. Add in her social security (retiree and spouse), of $21,000+/year (assuming steady earnings) = 80+% pay replacement rate, and almost half of the benefit is indexed for inflation!
Don't break what's working today for the majority of Americans.
25
IRA's and other tax-gimmick savings plans are not working as replacements of company plans - private savings of workers are not adequate. They never have been and never will be, especially as wages are stagnant and inequality increases.
We don't need more plans to give Wall Street and the finance profession a larger percentage, we need expansion of Social Security, with tapping of all income to support it.
We don't need more plans to give Wall Street and the finance profession a larger percentage, we need expansion of Social Security, with tapping of all income to support it.
11
Your plan works only for the employed. What of the many unemployed and underemployed? Unemployment lasts longer for those who are 50 , and it erodes both savings and the ability to save.
5
Good grief! The poor and near poor do not lack retirement savings because they "lacked commitment". What a slap in the face, arrogant thought! If you have have more expenses than income, commitment to staying slightly above water is a daily struggle. In those circumstances, retirement is not even a consideration.
Our present state of affairs is the result of eliminating traditional retirement plans and replacing them with 401ks that were never intended to provide a "third leg" to the three-legged stool of retirement. They were meant to be a tool for those who already had "enough" for retirement. They are a gift to Wall Street whose fingers are in the pie.
By the way, what happens to your ideal retiree if her husband dies? Her social security benefit will be reduced to about 10k. Spouses do take their benefit with them when they die. Only surviving spouses whose own benefit was very low are eligible for a partial survivor benefit.
BTW, if you think workers will be retiring without work related injury, talk to a physical therapist. Computing eight or more hours a day is leaving us a population of people with chronic repetitive stress injuries.
Our present state of affairs is the result of eliminating traditional retirement plans and replacing them with 401ks that were never intended to provide a "third leg" to the three-legged stool of retirement. They were meant to be a tool for those who already had "enough" for retirement. They are a gift to Wall Street whose fingers are in the pie.
By the way, what happens to your ideal retiree if her husband dies? Her social security benefit will be reduced to about 10k. Spouses do take their benefit with them when they die. Only surviving spouses whose own benefit was very low are eligible for a partial survivor benefit.
BTW, if you think workers will be retiring without work related injury, talk to a physical therapist. Computing eight or more hours a day is leaving us a population of people with chronic repetitive stress injuries.
1
This is rich, the wolf devising a new plan to eat Grandma. Why not cap Social Security, a real retirement plan that has saved millions from poverty, and make it stronger?
116
Make all income from all sources liable to Social Security taxes, and let's just round up and incarcerate or exterminate those plutocrats who resist. "The tree of liberty must be refreshed from time to time with the blood of patriots & tyrants. It is it's natural manure..." as one of our founding fathers (the brightest and most cowardly one) said. We are acquiring a surfeit of tyrants in the Republican Party; they need to refresh our liberty tree.
3
I read in an old history book that elders used to be taken care of by their children and grandchildren. Is this true?
4
Would it not be simpler just to increase the Social Security contribution by 3% (1.5% by employer, 1.5% by worker)?
So many details here are overly simplistic. For openers, building a model on a 3% investment return means that the growth rate just matches assumptions concerning the long term rate of inflation.
In many aspects, this proposal sounds very much like a resurrection of the conservative plan to privatize Social Security by allowing its trustees to invest in the open markets. The only difference is to now define it as a separate agency while it operates under nearly identical rules.
We can -- and must -- offer something better than this.
So many details here are overly simplistic. For openers, building a model on a 3% investment return means that the growth rate just matches assumptions concerning the long term rate of inflation.
In many aspects, this proposal sounds very much like a resurrection of the conservative plan to privatize Social Security by allowing its trustees to invest in the open markets. The only difference is to now define it as a separate agency while it operates under nearly identical rules.
We can -- and must -- offer something better than this.
37
Why not increase the contribution to social security? Why do we need a second stream of guaranteed income? This is just one more reason to kill social security.
23
I can see the masters of the universe licking their chops on this one.
15
Valid proposals. The abolish the Federal Reserve too. Stop their thoughtless behavior, driven by inaction by Congress, from further distorting economic reality. Zero interest rate policy has punished savers ( those who planned well) and would even endanger the long term prudence of insurance companies, if left alone longer. Postponing reality does make it any less real. We will pay a steep price for trying to make money out of thin air.
5
I agree with other comments that just expanding Social Security is a better approach, but even that overlooks the fundamental problem of low wages. So many workers are earning below subsistence or "paycheck-to-paycheck" wages that the deductions from their meager wages will be hard to handle financially. People may need food stamps and other government support just to be able to afford the deductions.
35
"...managed by a federal agency.."
Surely the writers are joking - are they writing a comedy routine?
Surely the writers are joking - are they writing a comedy routine?
14
We need to carefully evaluate all aspects of our plans and programs. Sometimes our "humanity" gets in the way of our "good intentions". In other words, our message may seem fully plausible but our true motives may be suspect. (Lust can be a deceitful thing and oftentimes we do not acknowledge its presence.)
2 Ye lust, and have not: ye kill, and desire to have, and cannot obtain: ye fight and war, yet ye have not, because ye ask not. (James 4:2 - - - The Holy Bible)
We need to ask Almighty God (The Living God) for guidance. He is the ONLY Person that knows ALL, truly cares about ALL and will be here to see it ALL.
2 Ye lust, and have not: ye kill, and desire to have, and cannot obtain: ye fight and war, yet ye have not, because ye ask not. (James 4:2 - - - The Holy Bible)
We need to ask Almighty God (The Living God) for guidance. He is the ONLY Person that knows ALL, truly cares about ALL and will be here to see it ALL.
1
I retired 10 years ago. At a certain point, my company of 20 years gave me a choice: pension or 401(K). Throughout my working career, I had saved the maximum amount allowed in company plans and received some matching funds, a great deal for me.
I chose the pension, knowing that 401(K) investments, while possibly lucrative, are slaves to the market. With my luck, I knew I would get hammered with a 401, so I took the pension. I feel sadness for those workers now who have no choice and do not make enough to save in company plans, if they exist now.
I chose the pension, knowing that 401(K) investments, while possibly lucrative, are slaves to the market. With my luck, I knew I would get hammered with a 401, so I took the pension. I feel sadness for those workers now who have no choice and do not make enough to save in company plans, if they exist now.
23
Have you looked at how pensions generate income to fulfill their obligations to their pensioners?
Investments run the show. It's just someone else is doing the investing, and to look at some of the auto companies and big cities in the midwest, you'll see even the experts get it wrong. A pension is far from a guarantee.
Investments run the show. It's just someone else is doing the investing, and to look at some of the auto companies and big cities in the midwest, you'll see even the experts get it wrong. A pension is far from a guarantee.
1
Bill, accepting the company retirement also has a huge risk. What happens when your company goes bankrupt? My company went bankrupt in 2003 and current retirees lost about 40% of their payouts. Assuming that your old company will be around, and healthy enough to pay pensioners, is not a realistic backup plan. Be sure you are aware of all the risks.
2
How can the NY Times publish this? It's advertising for Blackstone, hopefully The Times got paid to do it.
22
The same way that the Times' news pages have become the Hillary Clinton (especially) and Donald Trump channel, while according limited or marginal coverage to other candidates. At least this is on the opinion pages.
Possibility for people just entering the workforce, worthless for us entering retirement.
5
One way to fund this new plan for those who have failed to save adequately for retirement is to tax leisure time. In keeping with our graduated and progressive income tax structure, any leisure time tax would begin on everyone who failed to work at least 40 hours per week averaged over a 52 week year. Tax rates for leisure could be higher than tax rates for work, creating an incentive to find work and a disincentive for leisure. The tax would be highest on those who had 100% leisure time (between the ages of 18 and 70). With a labor participation rate in the low 60% range, this would create a huge new class who would contribute to Society through taxes which would then be directed toward ensuring their retirement.
2
Very funny!
This is satire, right?
1
Oh, yes. Those not working 50 hours a week are certainly enjoying leisure.
Perhaps you might look about to see that, despite the glowing reports from Washington on how robust and wonderful our economy and job market is, there are people looking for full time work where there aren't enough jobs at all, say nothing of full time good paying jobs, in order to meet this inflexible mandate, which would be nigh unto impossible to supervise. We can't even catch the Medicare cheats despite the infrastructure being in place for 20 years.
Perhaps you might look about to see that, despite the glowing reports from Washington on how robust and wonderful our economy and job market is, there are people looking for full time work where there aren't enough jobs at all, say nothing of full time good paying jobs, in order to meet this inflexible mandate, which would be nigh unto impossible to supervise. We can't even catch the Medicare cheats despite the infrastructure being in place for 20 years.
Something needs to be done, I agree, but this isn't it. Another federal bureaucracy? The overhead alone would be staggeringly expensive. And having government employees make my investment decisions for me? I don't think so.
15
Actually, the bureaucracy already exists. It is called the Federal Retirement Thrift Investment Board which administers the Thrift Savings Plan (www.tsp.gov). All federal employees contribute to it. If you do a little research, you would find that it has low fees and is a very successful investing mechanism with returns competitive with commercial investment instruments. It has several funds to choose from allowing investors to tailor the degree of risk they wish to maintain in their portfolios.
2
Aye, there's the rub. Distrust of our government.
Excuse me? There's no overhead in private plans, considering the fees investment funds take?
While I think this is "a smarter plan" only for the private investment industry, not for the purported beneficiaries, on the other hand, expanding Social Security would not accomplish the same thing, and neither would going back to defined benefit pensions, insofar as none of that money can be passed on by the worker after their death except to spouses. So if we want to expand social insurance plans to fund people's retirement, that's fine with me, but it is different from private accounts in many ways, not just with respect to who is managing the money or leveraging fees from doing so, and I wish we would be clear about that, too. Paying more money into Social Security is paying a higher insurance premium (which may well be needed to fund the system), but it is not the same thing as paying more money into a private investment.
I fear this kind of private investment scheme as an "attractive nuisance" for corruption as well as for siphoning off money from it to the financial industries sector.
I fear this kind of private investment scheme as an "attractive nuisance" for corruption as well as for siphoning off money from it to the financial industries sector.
1
Dismiss Defined Benefit Pension plans because it would not be a benefit for anyone (after death) but one's spouse? Its not a long term savings plan to put the kids through College. It's a retirement plan for an employee (and his spouse)!
The best retirement benefit , of any benefit I received after 32 years as a pilot in the Airline Industry was/is my Defined Benefit Pension .
And why, because we had a UNION.
The best retirement benefit , of any benefit I received after 32 years as a pilot in the Airline Industry was/is my Defined Benefit Pension .
And why, because we had a UNION.
And if the benefits are never received, due to untimely death(s), the money remains with the pension plan. I am trying to point out that retirement plans differ from investment accounts in more ways than the discussion seems to be including. I suspect that some of what accounts for the differences in details between the various kinds of financial plans for funding retirement is who under the particular program assumes the risks.
I agree with many, expand Social Security.
However, I do feel the need to comment on the guaranteed 3% a year which is about half of the gain in the stock market. Well where does the other 3% on average go? A better plan is to handle this like a 401K that one can put money into and there is a cash value when you retire that you can draw from. However with a large number of people investing in it and it being professionally managed, it'll grow effectively. But to guarantee an annuity is baseless and might as well be an extension to SS.
However, I do feel the need to comment on the guaranteed 3% a year which is about half of the gain in the stock market. Well where does the other 3% on average go? A better plan is to handle this like a 401K that one can put money into and there is a cash value when you retire that you can draw from. However with a large number of people investing in it and it being professionally managed, it'll grow effectively. But to guarantee an annuity is baseless and might as well be an extension to SS.
4
But where is the bottom line? What is the average income a older person can expect to receive from their scheme? Can a person expect to get enough money to live on?
Like healthcare at any age, basic living expenses in old age should a right of all Americans. I have spent some time looking at healthcare. I have found that a universal government run system such as enjoyed by all other industrialized countries will not only greatly improve our results, but will save us enormous amounts of money. If we get our healthcare system to be as efficient as those in other wealthy countries, we will spend about $1.4 TRILLION less each and every year.
I haven't studied pensions, but I would wager the economic benefits of elderly folks having enough money for basic living expenses, just as in universal health care, would be positive.
Like healthcare at any age, basic living expenses in old age should a right of all Americans. I have spent some time looking at healthcare. I have found that a universal government run system such as enjoyed by all other industrialized countries will not only greatly improve our results, but will save us enormous amounts of money. If we get our healthcare system to be as efficient as those in other wealthy countries, we will spend about $1.4 TRILLION less each and every year.
I haven't studied pensions, but I would wager the economic benefits of elderly folks having enough money for basic living expenses, just as in universal health care, would be positive.
9
More money for the government Royal Class to spread amoung it's Court to maintain its power and control.
Just make sure this "savings" is put in that same "lock box" as social security's.
Brilliant!
Just make sure this "savings" is put in that same "lock box" as social security's.
Brilliant!
3
The authors omit an important fact - the plan they describe does exist, but only for Federal government workers. It is the Thrift Savings Plan, into which the government contributes an automatic 1% and the employee can contribute up to 5% to be matched by the government, and the "catch up contribution" (not matched) if age qualified.
The investments are in various funds (government bonds, private bonds, large stock index, small stock index, international), and on retirement you can take either a lump sum or purchase an annuity.
One further point - the government considers the TSP as only one leg of a three leg retirement stool - the others are social security and a traditional pension.
The investments are in various funds (government bonds, private bonds, large stock index, small stock index, international), and on retirement you can take either a lump sum or purchase an annuity.
One further point - the government considers the TSP as only one leg of a three leg retirement stool - the others are social security and a traditional pension.
16
Yes, and far inferior to the old Defined Benefit Government Pension.
But better for the masters of the universe on Wall Street.
But better for the masters of the universe on Wall Street.
Wages need to increase for 50% of the population before this could be viable. You can't save what you don't have.
30
Haven't you been reading the press releases from Washington? All is rosy, the grass is greening up and the milk and honey are already flowing in many places.
You astutely have seen that workers who aren't making it on a daily basis have no room for more forced removal from their paychecks, and if you have no job at all due to high unemployment and very minimal job opportunities, where are you supposed to get the money? Oh, I'm sure on page 2,530 of the law there will be a paragraph saying that the agency will keep track of what you haven't contributed, and will remove more in the future, if you ever get a better job, to make up for your shortfalls earlier in your working career.
You astutely have seen that workers who aren't making it on a daily basis have no room for more forced removal from their paychecks, and if you have no job at all due to high unemployment and very minimal job opportunities, where are you supposed to get the money? Oh, I'm sure on page 2,530 of the law there will be a paragraph saying that the agency will keep track of what you haven't contributed, and will remove more in the future, if you ever get a better job, to make up for your shortfalls earlier in your working career.
1
Seems like just another corrupt privatization scheme designed to subvert Social Security and redirect at first some, and eventually all, of the money that could be used to increase Social Security revenue, and put it into the pockets of Wall Street greedsters.
Social Security and Medicare work. Keep them. Build them. Protect them from the ever-circling vultures.
Social Security and Medicare work. Keep them. Build them. Protect them from the ever-circling vultures.
39
The best plan is to eat less, save more, spend less. It will keep you healthier and wealthier. The idea that the government can make you do it is typical nonsense. Think social security, a plan that is nothing more then a Ponzi scheme. The GRA proposed would still have a 'loan' feature, meaning like the current 401's you could borrow against it. Yes, the authors say that would not be true, but you know government, they lie all the time, especially with executive actions. Currently about 50% of the amounts in 401's have been borrowed out. When all is said and done this GRA scheme is nothing more then a government attempt to bail out Social Security, which is going bankrupt.
5
Once again , I hear "Ponzi scheme" when discussing Social Security. Does this program not work? I don't see any examples of eligible recipients not getting their EARNED benefits.
1
"In our plan, the more than 95 million workers without a pension plan would each have his or her own G.R.A. managed by an independent federal agency."
The really scary words in the above:
Independent federal agency!
No such thing these days, imo.
The really scary words in the above:
Independent federal agency!
No such thing these days, imo.
8
Here is my stock tip: go long on Purina and Alpo because a lot of unfortunate people about to retire will be subsisting on it. Also be sure to vote Republican so that social security will be phased out entirely, thus ending what is left of the middle class. There will be the 10% living in gated communities and the poor.
8
I think this article is supposed to come across as an example of cross-sector, non-ideological thinking. You have Dr. Ghirladucci, whose work I respect on these issues, and Mr. James, who is a .1 percenter or very close.
I believe the intended rhetorical effect is for the reader to conclude 'Well I'll be, a financial services guy who doesn't want to rob us blind getting rich through financial services fees! Hallelujah! Must be a great plan! And an academic non-1 percenter is on board!'
However, the fact is that there are way better fixes for this and easier. Expand social security and have the rich pay for it through a reconstructed estate tax, as well as other taxes on speculation and financial capital, including a a penny tax on every financial transaction.
i am not impressed Mr. James is on board with this.
Change the frame from this bogus neoliberal question 'How can we tax people just because seventy year olds are starving?' to
'Aren't you glad we allowed your kids to get an entire one million dollars from your estate even though they didn't do anything to deserve it and had all the privileges that come with wealth?'
and
'See, you are too big to fail. The public bails you flunkie frat boys out when you run the global economy off a cliff. Now, here's your transaction tax to pay for the care of those who bailed you out and many whose lives your irresponsibility ruins every recession'.
I believe the intended rhetorical effect is for the reader to conclude 'Well I'll be, a financial services guy who doesn't want to rob us blind getting rich through financial services fees! Hallelujah! Must be a great plan! And an academic non-1 percenter is on board!'
However, the fact is that there are way better fixes for this and easier. Expand social security and have the rich pay for it through a reconstructed estate tax, as well as other taxes on speculation and financial capital, including a a penny tax on every financial transaction.
i am not impressed Mr. James is on board with this.
Change the frame from this bogus neoliberal question 'How can we tax people just because seventy year olds are starving?' to
'Aren't you glad we allowed your kids to get an entire one million dollars from your estate even though they didn't do anything to deserve it and had all the privileges that come with wealth?'
and
'See, you are too big to fail. The public bails you flunkie frat boys out when you run the global economy off a cliff. Now, here's your transaction tax to pay for the care of those who bailed you out and many whose lives your irresponsibility ruins every recession'.
6
Your ideology on making judgements on my heirs and their worthiness to inherit what I leave them is showing. Please let me, the owner of my assets, make the decision.
The only reason the government wants and needs to tax an estate is to raise more money to make up the shortfalls incurred by the government's inability to be financially responsible. Yet, we've heard it so often that many people now assume it is the government's money to use, and to pass any of it on is stealing from the Feds.
The only reason the government wants and needs to tax an estate is to raise more money to make up the shortfalls incurred by the government's inability to be financially responsible. Yet, we've heard it so often that many people now assume it is the government's money to use, and to pass any of it on is stealing from the Feds.
1
The authors overlook a relatively painless and immediate option to increase retirement savings.
Human nature being what it is, good progress could be made by making 401K's and 50% of tax returns into opt-out investment plans. If 5% of salary and 50% of any tax refunds were automatically invested into pretty secure index funds (such as my S&P 500 index fund which has earned over 80% in a 10 year run) unless the individual opted out, many if not most Americans would take no action and be automatically in a better place in retirement. With this PYF (pay yourself first) plan, I have been able to roughly match my SS benefit with a lifetime annuity.
Human nature being what it is, good progress could be made by making 401K's and 50% of tax returns into opt-out investment plans. If 5% of salary and 50% of any tax refunds were automatically invested into pretty secure index funds (such as my S&P 500 index fund which has earned over 80% in a 10 year run) unless the individual opted out, many if not most Americans would take no action and be automatically in a better place in retirement. With this PYF (pay yourself first) plan, I have been able to roughly match my SS benefit with a lifetime annuity.
1
The plan sounds good, but it will result in a very large pot of money that will be very attractive to politicians who will find ways to share this wealth with non contributors. Might as well call it "Social Security Plan B".
2
>
GOP's ultimate plan for most is to work until you die. They don't even allow for suicide, if they had their way. And yes we are heading to a crisis with retirement security. Note: after the New Deal the suicide rate among the elderly was reduced by more than 50%.
Look, for the last ~40 yrs many American people have allowed and in many cases supported the GOP in one way or another. The GOP has dismantled the New Deal bolt by bolt, and retirement security was a major part of the ND. Many are so worried that their fellow citizen is getting over on them and therefore have taken the scapegoat bait which the GOP continually offers up to get people who need this security to believe they are freeloaders and these programs must be ended.
Now the roosters are starting to come home for many of these GOP supporters and the rest will have to suffer with them.
GOP's ultimate plan for most is to work until you die. They don't even allow for suicide, if they had their way. And yes we are heading to a crisis with retirement security. Note: after the New Deal the suicide rate among the elderly was reduced by more than 50%.
Look, for the last ~40 yrs many American people have allowed and in many cases supported the GOP in one way or another. The GOP has dismantled the New Deal bolt by bolt, and retirement security was a major part of the ND. Many are so worried that their fellow citizen is getting over on them and therefore have taken the scapegoat bait which the GOP continually offers up to get people who need this security to believe they are freeloaders and these programs must be ended.
Now the roosters are starting to come home for many of these GOP supporters and the rest will have to suffer with them.
9
One needed reform is to make mandatory the requirement that all investment firms sign a fiduciary pledge to act only n their clients best interest.
7
The 401K is fatally flawed. It is not reasonable to expect its individual owner to make correct decisions about investing.
Instead, lets just expand Social Security. Raise the tax rate to a level that results in a retirement income big enough to sustain a moderate standard of living.
Instead, lets just expand Social Security. Raise the tax rate to a level that results in a retirement income big enough to sustain a moderate standard of living.
13
The authors of this article have stated a bunch of "facts" that have no basis -- like the fallacy that employer-funded defined benefit pension plans perform better than employee-directed savings plans like 401-K. Employers have been dumping the guaranteed benefit plans as fast as they can because their investment performance is volatile and can require massive employer contributions to make up for poor performance.
We have a system of guaranteed pension savings: It's called Social Security. It needs more funding, but Republicans are instead trying to starve it to death.
We have a system of guaranteed pension savings: It's called Social Security. It needs more funding, but Republicans are instead trying to starve it to death.
15
The problem with Social Security is that it's a transfer program, not a savings program. It's insane to have a national retirement savings program with no savings...all SS tax revenue is immediately spent on SS benefits. Today, the benefits exceed the tax revenue. Even when SS taxes exceeded benefits, they could only be 'invested' in US treasury bonds which don't make the 'savings' available to the economy. SS can only use treasury bonds as investments, and those can never be more than IOU's of the federal government. We surely don't want elderly Americans dependent on federal government IOU's. We need real private savings.
5
No Bob, privatized savings is exactly what we don't need. That will only make the rich and wall Street richer, everyone else will suffer.
1
" SS can only use treasury bonds as investments." The SS is smart to do so because treasury bonds are THE SAFEST INVESTMENT in the world! Too bad so many uninformed people do not understand that.
2
As one of those just retired baby boomers, the article is locking the door after the horse left the barn. It is too late for many of my age group to save for retirement and lack of access to a 401k at work is just an excuse when they could have been saving in an IRA all these years. I side with those who promote personal responsibility and the current system works if you use it. The suggestion that plans are restricted to short term stocks and bonds just so they could withdraw funds is pure fantasy. Tighten the withdrawal requirements for existing programs to achieve the same end. As to the current system, the first change I would make is a universal contribution limit. A 401k can contribute 17,500 but someone without a 401k can only contribute 5,000? That is a real problem. As to the GRA, this is merely a poorly disguised Social Security plan that won't help people that didn't already save for retirement and adds bureaucracy and fees. The real issue is the financial illiteracy of the public. Your best investment you can ever make is to educate yourself. Be that as it may, I look back at times in our lives when our fellow boomers were asking why we didn't get the new car or take the vacation, and raised our family in a 1400 square foot home. Fast forward 40 years and my fellow boomers are staring at retirement, wondering where it all went, and are pleading for advice from us.
14
Agree with Tom, "the best time to plant a tree is 20 or 30 years ago". This proposal is simply treating the symptom and not the disease. Saving is a discipline which should be taught at an early age (hopefully by parents) and reinforced over the years. It starts with little things (ordering water instead of drinks if eating out) and moves up to "we don't need Yankee tickets, a hot tub, a boat or a new car". The other reality is people may be pushed out of their job early or become disabled so saving early and often is good life-style insurance and "you insure what you cannot afford to lose."
1
Not a bad idea, but has several weak points, as many comments note: political appointees, revolving door to Wall Street, not as good as expanding Social Security.
The most important thing a retirement plan should do is to get Wall Street out of the business of managing the funds and skimming off, no make that ladling off, fees. Senator Sanders has it absolutely right when he says that the business model of WS is fraud. The best thing a retirement plan could do is to hang five hedge fund managers randomly selected by lottery every April 15. Sort of the way the Romans disciplined mutinying legionnaires -- crucifying every tenth man at random.
The most important thing a retirement plan should do is to get Wall Street out of the business of managing the funds and skimming off, no make that ladling off, fees. Senator Sanders has it absolutely right when he says that the business model of WS is fraud. The best thing a retirement plan could do is to hang five hedge fund managers randomly selected by lottery every April 15. Sort of the way the Romans disciplined mutinying legionnaires -- crucifying every tenth man at random.
1
I saved. Now my social security has been cut because govt raised the amount I must pay for my Medicare to help those who didn't save. Who came up with that scheme? I didn't realize they could decide to take away what you were supposedly getting. On top of that some I bonds purchased in 2003 are now earning zero percent. I feel like the ant in that fable where the grasshopper played while I worked but now I have to give them what I tried to save for my old age. I am now in my 80's.
5
I can feel the gloating from readers who are employed by the public sector. Don't gloat. Who's funding YOUR pension? Chicago police and fire pension funds are less than 50% funded. If discounting isn't used, the amount owed to Chicago Public School teachers is something like $100 billion. Where's that money coming from? The kids you educated and graduated with third grade reading and math skills? Most other public pension funds are in similar straits as a result of dishonest accounting to hide the real cost of pensions. Probably not one single K-12 teacher knows that the Dow Jones Industrial Average ended the year with its first loss since 2008. The bad stock market (where your pension money is invested) means (1) you may not retire with what you've been promised and (2) more classroom budget cuts are coming.
Mar Thomason's comments are spot-on. The government is already using Social Security money to finance debt, owing the program about $2.5 trillion.
The bottom line is that there is no prudent place to invest that quantity of money that would be involved and get a low-risk return except US government debt. It certainly doesn't exist in the stock market.
Of course the 1% who own most of our Washington officials will never let this happen.
The bottom line is that there is no prudent place to invest that quantity of money that would be involved and get a low-risk return except US government debt. It certainly doesn't exist in the stock market.
Of course the 1% who own most of our Washington officials will never let this happen.
3
The real question is how would these be held? Would these accounts be government guaranteed accounts held at private banks or would they go into some giant government administered slush fund? That is, would MY account actually be mine, or would it be more akin to "my" social security?
Would their be government of employer matches? The huge benefit of 401k programs are the employer matches and the tax evasion. My former employer offered a dollar for dollar 8% match up to the federal maximum. That meant I could put it in cash and get a 100% return right off the bat if I wanted.
There is a huge retirement problem in this country, but a tremendous amount of that isn't from a lack of wanting to save, it's the inability to save. There are many, many households with two working adults that are barely scraping by.
Would their be government of employer matches? The huge benefit of 401k programs are the employer matches and the tax evasion. My former employer offered a dollar for dollar 8% match up to the federal maximum. That meant I could put it in cash and get a 100% return right off the bat if I wanted.
There is a huge retirement problem in this country, but a tremendous amount of that isn't from a lack of wanting to save, it's the inability to save. There are many, many households with two working adults that are barely scraping by.
3
We should've never moved from guaranteed pensions to voluntary 401-k savings plans since most Americans are not educated enough about the financial markets.
4
O Pleeeze! A "Federal Agency" is going to invest my money... same folks who built Fannie and Freddie?
3
Expand social security already. This plan does nothing superior.
Or bring back pensions. Since our corporate bosses will not support because it goes against laws of physics, raise more social security money!!!
Or bring back pensions. Since our corporate bosses will not support because it goes against laws of physics, raise more social security money!!!
6
How is this different from social security?
7
Its less secure and it does nothing for those earning little.
1
Nothing is free. Sequestering 1.5% of national income has consequences. The assumption that market returns would not fall under this scheme is unwarranted, as is the assumption that jobs and salaries would be unimpaired. Further, it doesn't address the fundamental underlying problem, the immature financial behavior of the majority of the public, driven by an expectation of entitlement for all driven by popular culture. No other population on earth demonstrates comparable levels of financial irresponsibility. we need to change the culture, not the retirement plan.
1
An admirable and credible proposal by the best brains in the business, although like all other proposals, DDOA (dead or diluted on arrival).
The road to retirement is becoming increasingly bumpy for all Americans with no real fixes in sight. Nevertheless, the least we can do is to pave the road with good intentions. So thank you for that.
The road to retirement is becoming increasingly bumpy for all Americans with no real fixes in sight. Nevertheless, the least we can do is to pave the road with good intentions. So thank you for that.
1
A 3% return? Is that even keeping up with inflation? Needs to be at least 4% -
2
"Just over half of workers don’t have access to a workplace retirement plan." And just which half set of workers have workplace retirement plans? Well, they happen to be the ones whose plans are bankrupting towns. cities, and states across the nation. And these same also enjoy free or almost free Cadillac health plans for life.
The double-whammy on private sector workers is that while they have none of these benefits they must pay for these with outrageous property and income taxes - leaving little for their own retirement savings - and for the ever soaring costs of health insurance. So Meryl Manthey, featured in "Over 50, Female and Jobless" who moved to Wantagh will be forking over $15K/yr. in property tax (assuming a small home) so that her district teachers will attain a $100K/pension and a free to them Cadillac health plan.
There is a much simpler solution than the Rube Goldberg plan proposed by these authors. One that does not leave private sector workers serfs to those in the public. Start with Medicare for all. No more public worker Cadillac plans bleeding communities dry. Everyone public and private on the same plan. Between what private sector workers pay now and what public don't the costs are already in the system - so this should be cost neutral.
Next is a nation-wide retirement plan. Public workers are overcompensated for retirement - take that extra and set up the nation wide plan. Everyone on the same plan. Wanna be bold? This is it!
The double-whammy on private sector workers is that while they have none of these benefits they must pay for these with outrageous property and income taxes - leaving little for their own retirement savings - and for the ever soaring costs of health insurance. So Meryl Manthey, featured in "Over 50, Female and Jobless" who moved to Wantagh will be forking over $15K/yr. in property tax (assuming a small home) so that her district teachers will attain a $100K/pension and a free to them Cadillac health plan.
There is a much simpler solution than the Rube Goldberg plan proposed by these authors. One that does not leave private sector workers serfs to those in the public. Start with Medicare for all. No more public worker Cadillac plans bleeding communities dry. Everyone public and private on the same plan. Between what private sector workers pay now and what public don't the costs are already in the system - so this should be cost neutral.
Next is a nation-wide retirement plan. Public workers are overcompensated for retirement - take that extra and set up the nation wide plan. Everyone on the same plan. Wanna be bold? This is it!
4
I was recently in a social security office and my worst fears were confirmed there were perhaps a half dozen elderly people in the office the other eighty or so were either young or non English speaking folks (this was in Florida) the same was true in SanFrancisco eight years ago when I first filled for my benefits the only difference was in Fla. the folks were mostly Spanish speaking and in S.F. Chinese my point is obviously S.S. Works very well when it is used for what it's intended to provide a safety net for those who retire and have no pensions, as a self employed individual I paid twelve percent of my income to S.S. For fifty years plus federal and state income taxes and I do feel a great deal of resentment when Im constantly reminded how fragile the system is, it has been raided to pay for much other than what was intended. As far as a new plan it must be mandatory, it must not be allowed to be touched by private hands and when the fed gets through bailing out Wall Street we should go back to real economics including both the gold standard, a more forceful version of glass Siegel disband the fed and have interest rates and tax policies more similar to the forties fifties and sixties that didn't allow WallStreet anywhere near public money, when the American way of life actually meant something positive.
6
A return to the gold standard? The forties, fifties, and sixties were not decades "under the gold standard." FDR eliminated that in the early thirties and thank God he did.
Not only have the investment firms lined their pockets with the average American's money over the 401K years (supposed to replace pensions - ha!) , most of us who had to watch major stock market crashes in 1987, 1999, and, of course, 2008 were hurt exponentially by the downturns. Most of the reasons for those downturns were Wall Street speculation and bubbles (along with cashing out before things went down), during which our investments plummeted. The "experts", of course, maintained that "don't worry, it'll come back", and most of us had our money in funds that we couldn't touch without penalty anyway. Guess what - it didn't come back.
This country is fairly oblivious to how the wealthy are treated compared to the ordinary taxpayer, and this article recites more of the same. As one commenter said, why don't we just ask the financial industry for our money back from the last time we bailed them out - that would be about $2 Trillion, thank you. I would add that should be done with the same level of interest that they've docked us over the many years of siphoning off funds that didn't belong to them. Management, schmanagement.
Sanders, Warren et al have the right idea. Raise taxes on the wealthy, and expand Social Security. The authors of this article are just ignoring the past scams, and proffering a new one.
This country is fairly oblivious to how the wealthy are treated compared to the ordinary taxpayer, and this article recites more of the same. As one commenter said, why don't we just ask the financial industry for our money back from the last time we bailed them out - that would be about $2 Trillion, thank you. I would add that should be done with the same level of interest that they've docked us over the many years of siphoning off funds that didn't belong to them. Management, schmanagement.
Sanders, Warren et al have the right idea. Raise taxes on the wealthy, and expand Social Security. The authors of this article are just ignoring the past scams, and proffering a new one.
19
No one seems to consider in all their forecasting that there is no guaranteed employment up to the age of retirement. We are all aware that the actual unemployment numbers are far higher if calculated for full time employment at realistic wages. A large percentage of that under-employed group are people in their 50's who in order to continue paying their mortgages and who may still have kids at home to support, must delve into their 401Ks and other retirement savings. As a friend explained to me, by not raising the minimum wage and allowing massive lay offs without asking corporations to be accountable, the government is handing to them yet another form Corporate Welfare. Remember the Walmart manager who directed the employee that requested a raise to consider getting food stamps?
13
In our community, several large employers - including Walmart - create jobs that are part-time, low or no benefits, unpredictable work hours, low wages. I know so many people who have to work two, three, or even four jobs - all part-time - in order to make ends meet. And despite all those tiny jobs and working hard, they do qualify for food stamps and other public assistance, which those large employers are well aware of. Those employers shift the employees' health care onto the Medicaid system, do nothing for future retirement, and use people up like cannon fodder. I am developing a hatred for the one per centers, even though I am related to those who are in that group. It sickens me, this class system. And don't even get me started on the impact of racism and sexism and ageism. Is this really the future of this great and beautiful nation? When did it happen that it became so awful?
1
MyRA is essentially the government trying to ensure that they have at least some suckers who will have to buy US government bonds. Stay away.
6
"...retirement savings of $14,500, when they will need between 20 and 30 times that amount." -- Where does this number of 290,000 to 435,000 come from?
24
I was stunned recently to learn that my daughter, who lives in NYC, works for a company that offers no retirement plan at all, and even more that this has become commonplace. With no employer contributions, the burden is on her to generate enough savings to support her retirement. The limit of $5,500 for IRAs is not nearly enough to build up a sufficient nest egg, even with her approach of using Roth IRAs to avoid taxes on the interest earned. It seems to me that rather than employing a device like the one proposed in this op-ed, it would be more effective if the current $5,500 IRA cap were raised to an appropriate percentage of gross income (certainly more than 3% is required), and if that amount could be put into a Roth IRA as tax-free contributions (at least for workers with no employer-based retirement plan). Since employers have abandoned their responsibility to help build retirement savings, they could contribute by paying the tax on such contributions. The incentive of not having to pay taxes on contributions was a big attraction when IRAs were first offered, and adding the Roth component on the interest earned would make them better suited as a main retirement vehicle. Such a plan would generate more than the $170k of estimated savings under the op-ed plan, an amount that would produce only a few hundred dollars per month in retirement income - even with Social Security (assuming it's still around), it's not enough.
69
Actually, it's even worse than that. I haven't had an employer who has any sort of retirement planning opportunity at all so I tried to set up an automatic deduction from my paycheck so I would never touch it. The would not even help me do that!
1
This issue affecting millions should be front and center in the Democratic 2016 debates. And we need more facts on how “Most nations support retirees through universal two-tier systems consisting of a Social Security-type plan and funded workplace pensions.”
How do funded workplace pensions work and who funds them? And do other nations put a low cap on social security taxes like the US?
And during the era of guaranteed pensions, before US companies change to 'self directed 401 ks, and off shored millions of jobs, how did these pensions affect the bottom line of corporations and shareholder returns? Just for some comparison.
How do funded workplace pensions work and who funds them? And do other nations put a low cap on social security taxes like the US?
And during the era of guaranteed pensions, before US companies change to 'self directed 401 ks, and off shored millions of jobs, how did these pensions affect the bottom line of corporations and shareholder returns? Just for some comparison.
12
Do not undeerstrand this: "The current tax deduction for retirement savings would be converted to a $600 refundable tax credit to pay for the contributions of households below median income." Can the writers explain? How would this work? Does it mean you would no longer be able to deduct IRA contributions and would only get a $600 credit?
1
This scheme by the 1 would force all savings to come from workers with current pay inadequate from current expenses. It both continues and ignores the history (since Reaganomics) of shifting the burden from employers to workers.
11
This is a great plan for firms that could the retirement assets of millions. Otherwise, as presented, it's a tax that would fuel a new bureaucracy and reduce economic growth. Since, consumer spending is more then 70% of GDP.
1
This is a scam. There should be no fees involved for investing in valid instruments, just as social security is in treasury bonds and costs nothing. Managed funds usually underperform the market. Plus you have to assume that the market is a safe place to put money to begin with. It isn't.
5
We have millions of people in this country right now who are walking around without a dime to their names, who have huge credit card and car loan payments to make and college loans they will never to be able to pay off. The party in this country ended a long time ago, somewhere back in the Carter administration. No retirement plan of the type suggested here has any chance of working. The plan will be rightly resisted by all the people who can barely afford now to pay their monthly cable TV, Powerball lottery and medical marijuana bills, let alone plan for their retirements. But let’s not become despondent about this. Some elements of a workable plan are already being spelled out in NY Times editorials and by Paul Krugman. A detailed description of the plan will be publicly announced in a few months by Sen. Clinton and will probably be called the Let’s-Get-All-The-Money-We-Need-From-Sheldon-Adelson-And-The-Koch-Brothers-Retirement-Aid-Package-For-Everyone, under which all people living in the U.S. including new arrivals who walked into the country yesterday will be guaranteed generous retirement packages, free college tuitions for their children, free internet service and other amenities designed to make life grander. Let’s not worry now about any small-scale plan such as the one suggested here, when our real answer to the retirement problem is coming soon.
4
Corrections:
... huge credit card and car loan payments to make and college loans they will never be able to pay off...
... by Mrs. Clinton ...
... huge credit card and car loan payments to make and college loans they will never be able to pay off...
... by Mrs. Clinton ...
Finally! Someone floats some good ideas. I have a small pension from working as an educator for over a decade. It is based on a simple idea: I put in a certain amount and my employer does the same, both mandated by the legislature. My small sums are put into a large pool which is professionally managed and always, always does better than my own investments,mostly in index funds. It's an annuity I can draw out when I retire.
My observations are these. Don't trust the government to match the employee contribution because they won't. If you look at the history of pensions in deep trouble today, it is almost always because governments (usually state and local government), promised to pay later in order to balance the local budget without meeting their real responsibilities.
Second observation is that there needs to be lots of watchful eyes, as always when there's a big pot of money. Many will try to subvert a little extra into their own pockets when it is not the benefit of the present and future beneficiaries. It's not prefect but far better than what we have now.
My observations are these. Don't trust the government to match the employee contribution because they won't. If you look at the history of pensions in deep trouble today, it is almost always because governments (usually state and local government), promised to pay later in order to balance the local budget without meeting their real responsibilities.
Second observation is that there needs to be lots of watchful eyes, as always when there's a big pot of money. Many will try to subvert a little extra into their own pockets when it is not the benefit of the present and future beneficiaries. It's not prefect but far better than what we have now.
3
How will this benefit the private equity giant Blackstone (employer of on of the authors which gets the bulk of their assets from pension fund investments)?
4
Two things in this article make no sense to me:
1. I am aware of no government agency that has access to investment vehicles that yield more than US Treasuries, that yield next to nothing.
Government is not the place to go for investment advice.
2. I see no point in this concept that employers can or should contribute to so-called investment accounts, above and beyond paying competitive wages or salaries from which employees can set some aside in savings. It simply will cause more age discrimination in employment -- as it already does now.
What causes employment discrimination against middle aged and older workers right now is mandatory employer contribution to health insurance and retirement annuity premiums that skyrocket after the age of 50. That is why, for the same job at the same wage/salary, employers shy away from older workers. Any of us who have been department managers know that we were urged by HR to cull out the older workers who cost more in benefits packages.
1. I am aware of no government agency that has access to investment vehicles that yield more than US Treasuries, that yield next to nothing.
Government is not the place to go for investment advice.
2. I see no point in this concept that employers can or should contribute to so-called investment accounts, above and beyond paying competitive wages or salaries from which employees can set some aside in savings. It simply will cause more age discrimination in employment -- as it already does now.
What causes employment discrimination against middle aged and older workers right now is mandatory employer contribution to health insurance and retirement annuity premiums that skyrocket after the age of 50. That is why, for the same job at the same wage/salary, employers shy away from older workers. Any of us who have been department managers know that we were urged by HR to cull out the older workers who cost more in benefits packages.
1
Just stop the Federal Reserve from printing money. The dollar has lost over 95% of its value since the Fed's inception. Whatever happened to the social contract?
1
Lost 95% of its value? Compared to what?
2
Why not just raise social security income by removing social security cap on income
40
Better yet, shutter the fed and make banks pay to use ur money. Only business in U.S. that doesn't pay for the product it resells.
No fees, no politicians, exempt from debt collection or attachment.
If Wall Street gets their claws in it they will lard it with fees to line their pockets and rob you of any growth.
The simplest thing to do would be to expand Social Security by rising the amount of income subject to tax, indexing that cap to inflation, taking the inflation rate calculation out of the hands of politicians (chained CPI, for example, was an attempt to cut benefits over time by understating inflation), and allowing working Americans the option of increasing the amount of money they contribute to the system.
The last thing we need is another bureaucracy.
If Wall Street gets their claws in it they will lard it with fees to line their pockets and rob you of any growth.
The simplest thing to do would be to expand Social Security by rising the amount of income subject to tax, indexing that cap to inflation, taking the inflation rate calculation out of the hands of politicians (chained CPI, for example, was an attempt to cut benefits over time by understating inflation), and allowing working Americans the option of increasing the amount of money they contribute to the system.
The last thing we need is another bureaucracy.
315
For that matter, eliminate the income gap altogether. If we did that, we could reduce the percentage that everyone pays without reducing annual contributions into the system. It would also redress the highly regressive manner in which Social Security is currently funded.
3
Yes, but Congress must be prohibited from spending (raiding) the SS "trust fund", as they do now. SS funds must be kept in a "lock box", invested only in long term government bonds.
The writer claims to be a professor of economics. Defined benefit pension plans are underfunded and will absolutely lead to the next financial crisis in this country as future pensioners realize that the money they have been promised will not be there and tax payers realize they will have to pay continually higher taxes to keep these plans even close to solvent. How exactly is more of that recipe going to fix this problem?
1
I think this is the third article I've read about this plan and I don't know why the NY Times is so obsessed with it. It isn't really new as variations of it have been bouncing around Washington for at least 10 years. The real story is is why similar proposals have languished in Washington notwithstanding bipartisan support. That's what I would like to read about.
4
If Social Security was not set up as a Ponzi scheme and did not include countless millions of individuals who have paid zippo into the system (i.e. stay at home Moms) you would have the plan you described. Take employee and employer contributions, apply an agreed rate of return over the life of the investment, buy an annuity at normal retirement age and voila you have guaranteed income for life.
Now for all the deadbeats and laggards who could only find low-paying jobs since they decided to have fun during their school days there's always Welfare to supplement their meager retirement checks.
Now for all the deadbeats and laggards who could only find low-paying jobs since they decided to have fun during their school days there's always Welfare to supplement their meager retirement checks.
2
Wow, could you be any nastier?
"Stay at home moms" do valuable, unpaid work, enabling the working members and children to function. It's been estimated several times, by several different sources, that the value of that work, ie, if it had to be replaced in the open market, exceeds $100,000 in some areas.
http://www.forbes.com/sites/investopedia/2011/05/10/the-economics-of-sta...
"Deadbeats and laggards" does NOT describe many people who are unemployed, or underemployed these days, due to no fault of their own. Two of my highly educated siblings have been suffering economically when their high-paying, high status jobs disappeared -- to corporate bankruptcy during the "Great Recession". They are both struggling, underemployed, attempting to continue paying for a fiscal life structured under one set of circumstances, that is now a house of cards. Show me where the high paying jobs are, I dare you.
People like them DON'T take "any work they can" because they have a financial burden of debt, like mortgages, that they acquired when they could afford it, not foreseeing the catastrophic meltdown of the economy that was NOT THEIR FAULT, yet, you feel free to castigate them for it. Taking a minimum wage job hurts them more in the long term then it helps in the short. They, and the overall economy, are better served by taking unemployment, and seeking a job commensurate with their skills.
"Stay at home moms" do valuable, unpaid work, enabling the working members and children to function. It's been estimated several times, by several different sources, that the value of that work, ie, if it had to be replaced in the open market, exceeds $100,000 in some areas.
http://www.forbes.com/sites/investopedia/2011/05/10/the-economics-of-sta...
"Deadbeats and laggards" does NOT describe many people who are unemployed, or underemployed these days, due to no fault of their own. Two of my highly educated siblings have been suffering economically when their high-paying, high status jobs disappeared -- to corporate bankruptcy during the "Great Recession". They are both struggling, underemployed, attempting to continue paying for a fiscal life structured under one set of circumstances, that is now a house of cards. Show me where the high paying jobs are, I dare you.
People like them DON'T take "any work they can" because they have a financial burden of debt, like mortgages, that they acquired when they could afford it, not foreseeing the catastrophic meltdown of the economy that was NOT THEIR FAULT, yet, you feel free to castigate them for it. Taking a minimum wage job hurts them more in the long term then it helps in the short. They, and the overall economy, are better served by taking unemployment, and seeking a job commensurate with their skills.
4
Why not just put $5000 in a stock index fund for a every newborn? A 6.5 percent return over 62 years produces over $250,000. Why not fund it with an increase in the taxation of dividends, long term capital gains, or a nominal financial transaction surtax?
10
Excellent suggestion to start at birth.
The "retirement portfolios would be created by a board of professionals who would be fiduciaries appointed by the president and Congress and held accountable to investors."
So that certain means that tobacco companies are off limits, irrespective of their prospects. There will be pressure to not invest in oil companies, coal companies and nuclear power companies. Coke and Pepsi might be eliminated because of their sugary soft drinks. Other companies may be ordered to divest from certain businesses.
In other words, no thanks.
So that certain means that tobacco companies are off limits, irrespective of their prospects. There will be pressure to not invest in oil companies, coal companies and nuclear power companies. Coke and Pepsi might be eliminated because of their sugary soft drinks. Other companies may be ordered to divest from certain businesses.
In other words, no thanks.
1
I would guess that the admirable Mr. James, who sees a business opportunity where most of us see the consequences of bad social policy and practice, will be much richer after the implementation of this plan.
This is just another version of privatized social security and it's a really bad idea.
This is just another version of privatized social security and it's a really bad idea.
15
All Americans end up contributing to the support of the indigent, the indigent elderly, the uninsured medically needy, the improvident, and the larcenous (that's my nod to Wall Street inside traders, and their ilk). We pay after the fact with homeless sweeps, charity for the elderly infirm, economically foolish allocation of emergency services like paramedics to care for the medically needy, etc. So we all pay one way or the other. Paying up front with mandatory (i.e. taxes) contributions to a retirement trust that would guarantee a living wage to the elderly would be a direct way of responding to this challenge. So if Social Security and Medicare taxes went up to 20% of wages or so (counting both employer and employee contributions), with a reasonable hope that no one's grandma would have to eat dog food, then that's a trade-off I'll take. Particularly since my wife is someone's grandma.
9
There is little in this proposal about making retirement savings last longer (other than disallowing early withdrawal, which could be done for anything). It is rather a plan for mandatory retirement savings. Perhaps a good idea, but my concern is that it would undermine support for social security, since this is the sort of plan Republicans always propose to replace social security. Social security as a mandate and strongly encouraging voluntary additional retirement savings is probably a better compromise for the American polity.
9
The reasonable suggestions in this editorial are (1) to require a reasonable minimal investment into retirement accounts, (2) to make it harder for people to take money out prematurely, and (3) the elimination of the tax deductions for retirement saving.
There are absolutely no requirements that an IRA be more liquid than necessary. You can put more or less whatever you want in your IRA, you just have to take certain minimum distributions - in other words, you are required to keep it only as liquid as necessary for it to do its job. There is no reason that a pension plan manager cannot provide a fund with very specific withdrawal dates for use in IRAs.
A guaranteed return of 3% is absurdly low. That portion of the plan would be better provided by allowing investors to make additional contributions to social security (perhaps with some adjustments to the rules for spousal benefits, which are an invitation to abuse already).
There are absolutely no requirements that an IRA be more liquid than necessary. You can put more or less whatever you want in your IRA, you just have to take certain minimum distributions - in other words, you are required to keep it only as liquid as necessary for it to do its job. There is no reason that a pension plan manager cannot provide a fund with very specific withdrawal dates for use in IRAs.
A guaranteed return of 3% is absurdly low. That portion of the plan would be better provided by allowing investors to make additional contributions to social security (perhaps with some adjustments to the rules for spousal benefits, which are an invitation to abuse already).
2
We should give the government more responsibility to manage more of our money because...they have such a great track record in fiscal responsibility and investment strategy? Sorry, but LOLOLOLOL!
The solution to the retirement problem is better personal finance education. People can make GOOD financial decisions when they have access to information and principles that will help them live on less than they earn. We'd have more people investing for their futures if we emphasized paying with cash and living below one's means, instead of taking out loans, buying on credit, and being in debt for life.
The solution to the retirement problem is better personal finance education. People can make GOOD financial decisions when they have access to information and principles that will help them live on less than they earn. We'd have more people investing for their futures if we emphasized paying with cash and living below one's means, instead of taking out loans, buying on credit, and being in debt for life.
3
Where would you store the money withheld? You suggest "investing" it, but one of the problems that led into the subprime mortgage crisis was too much money chasing too few investments, especially safe, stable investments.
When that house of cards tumbled down, it was not the professional investors and money managers who lost money -- it was people like me who had money invested by those professionals in investments that were not stable.
I'd rather save the money in a bank account than have it "managed" by people who work for "the public good."
Been there, done that.
When that house of cards tumbled down, it was not the professional investors and money managers who lost money -- it was people like me who had money invested by those professionals in investments that were not stable.
I'd rather save the money in a bank account than have it "managed" by people who work for "the public good."
Been there, done that.
11
"... a nation of financially-secure retirees." Pipe dream, this. A dream of the people but not of today's One Percent or, really, many politicians who are under the thumb of corporations, including the investment industry. If they would have their way, we'd all be in utter poverty for our entire lives, grateful for part-time and minimum wage jobs and in old age simply crawl away and die. Americans have not shown a will to vote out the "scoundrels" who answer to business and industry and, increasingly, the global economy. And they don't have much interest in an outright revolution. These plans, in the absence of big changes in our politics and economic system to once more benefit common people, really are just good ideas to rearrange the deck chairs on the deck of the Titanic.
7
it's a fact of human nature that few people save enough to support themselves through retirement, largely because the family rather than the individual is the focus of financial behavior. thus, roughly 4 million retired parents currently live with their adult children, but perhaps 2/3ds are dipping into their retirement savings to support the millennial generation.
the subtext is that social security, which does not invest but essentially transfers wealth, will be depleted by 2030 under current procedures. the fundamental problem with all "investment" schemes is that wall street will as freely destroy wealth as create it; additionally, "annual investment returns of 6% as in the past can no longer be expected in the future."
it's hardly benign to assume that corruption, bribes, price fixing and ratings inflation will not proliferate in a government administered gush of billions of dollars into financial institutions.
fix social security for the long term, and put the increased funds in US bonds where they have always been sequestered. this puts the money to work inside the american economy, keeps interest rates low, and lets the macroeconomic free market decide how best to put all that wealth to work.
the subtext is that social security, which does not invest but essentially transfers wealth, will be depleted by 2030 under current procedures. the fundamental problem with all "investment" schemes is that wall street will as freely destroy wealth as create it; additionally, "annual investment returns of 6% as in the past can no longer be expected in the future."
it's hardly benign to assume that corruption, bribes, price fixing and ratings inflation will not proliferate in a government administered gush of billions of dollars into financial institutions.
fix social security for the long term, and put the increased funds in US bonds where they have always been sequestered. this puts the money to work inside the american economy, keeps interest rates low, and lets the macroeconomic free market decide how best to put all that wealth to work.
5
I hope your plan has a way to protect the elderly from the thieving children and younger, hot-to-trot spouse.
2
You've got to be kidding.
If I didn't see the Blackstone connection, I'd have dismissed this as one more utopian NYT piece, along the lines of the guy who wants to tax window views in NYC - when reality is that the the foundation of the high-end condo market is 20-year tax abatements.
Now, I see something that - net-net - says to let the Social Security system invest in equities.
Frightening.
There're all these pension funds - especially public-sector ones - that're going to hit the rocks after decades of chasing eight percent returns - and paying hedge-funds enormous fees to aid and abet the chase. Even the most successful at investing are going to have challenges, because politicians have given away NPV (aka nice-sounding future benefits) like they give away money - i.e. as if it were free.
We're magically going to achieve risk-free three percent returns - while real interest rates languish at zero? Folks will contrive to make this look good for 2-3 years (like ARMS), using capital reserves to spoof real incoming investment streams.
What I've been (unhappily) waiting for is some indication that the big money players are getting ready to structurally short the equities market. What they first need to find are parties willing to take on almost unlimited amounts of what they all think will be bad bets. Your article tells me that time is nigh.
Ten years ago, I might've been had. Today, just too much lsrge-scale junk out there (e.g. Groupon - down ~8X, since IPO)
If I didn't see the Blackstone connection, I'd have dismissed this as one more utopian NYT piece, along the lines of the guy who wants to tax window views in NYC - when reality is that the the foundation of the high-end condo market is 20-year tax abatements.
Now, I see something that - net-net - says to let the Social Security system invest in equities.
Frightening.
There're all these pension funds - especially public-sector ones - that're going to hit the rocks after decades of chasing eight percent returns - and paying hedge-funds enormous fees to aid and abet the chase. Even the most successful at investing are going to have challenges, because politicians have given away NPV (aka nice-sounding future benefits) like they give away money - i.e. as if it were free.
We're magically going to achieve risk-free three percent returns - while real interest rates languish at zero? Folks will contrive to make this look good for 2-3 years (like ARMS), using capital reserves to spoof real incoming investment streams.
What I've been (unhappily) waiting for is some indication that the big money players are getting ready to structurally short the equities market. What they first need to find are parties willing to take on almost unlimited amounts of what they all think will be bad bets. Your article tells me that time is nigh.
Ten years ago, I might've been had. Today, just too much lsrge-scale junk out there (e.g. Groupon - down ~8X, since IPO)
24
I hope the Times received fair compensation for this advertorial.
The "low-fee diversified retirement portfolios would be created by a board of professionals who would be fiduciaries appointed by the president and Congress and held accountable to investors." Accountable, my foot.
This is nothing but a cheap money-grab propped up by cherry-picked statistics and doomsday rhetoric.
Fund Social Security properly. Get rid of the income cap and stop spending the Trust Fund on malfunctioning junk like the F-35.
The "low-fee diversified retirement portfolios would be created by a board of professionals who would be fiduciaries appointed by the president and Congress and held accountable to investors." Accountable, my foot.
This is nothing but a cheap money-grab propped up by cherry-picked statistics and doomsday rhetoric.
Fund Social Security properly. Get rid of the income cap and stop spending the Trust Fund on malfunctioning junk like the F-35.
64
Why, oh, why does the Times think its readers are stupid? We don't need new solutions. We need the political will to implement the ones we know will work. The Times editorial section stands directly in the way of advocating common sense, while the news sections remain utterly silent.
First, don't expect useful advice from COO of "money management firms," like the co-author of this piece. It rarely trumps free advice from the proven-to-be-honest duo at Berkshire Hathaway (Mssr. Munger and Buffett). But wait! Most employed people w/401(k) plans cannot use BH. Most MUST use the herd-minded, fee-based money managers?
Especially in low interest rate or deflating times, the only people making money are the firms w/fees coming regardless of performance. I saw one money market account in an annuity this week where the manager was charging - $0.18/day to hold cash; that red ink blows my mind.
Second, as a recently retired professional in medicine and law, I'm not stupid, but I couldn't read daily stock and mutual fund reports in a newspaper 20+ years ago when my mother asked me to "manage" a $120K inheritance. So I studied. Peter Lynch: Know what you own and why you own it. More recently: Consider women CEOs unburdened by testosterone, e.g., Mary Barra at GM.
After virtually every "conservative utilities" mutual fund manager (and owner) got nailed by riding Enron stock to disaster, I quit funds. Doubled down on investing with my own eight rules. I pay Fidelity $7.95/trade and rarely do. No mutual funds so no fund fees. In my SEP-IRA and accounts for friends and family, I invest roughly $9M. Yield +5-11%/yr. for decades--net because I charge NO FEEs.
Finding a friend to invest or an employer that offers BH funds is rare; expect no change.
Especially in low interest rate or deflating times, the only people making money are the firms w/fees coming regardless of performance. I saw one money market account in an annuity this week where the manager was charging - $0.18/day to hold cash; that red ink blows my mind.
Second, as a recently retired professional in medicine and law, I'm not stupid, but I couldn't read daily stock and mutual fund reports in a newspaper 20+ years ago when my mother asked me to "manage" a $120K inheritance. So I studied. Peter Lynch: Know what you own and why you own it. More recently: Consider women CEOs unburdened by testosterone, e.g., Mary Barra at GM.
After virtually every "conservative utilities" mutual fund manager (and owner) got nailed by riding Enron stock to disaster, I quit funds. Doubled down on investing with my own eight rules. I pay Fidelity $7.95/trade and rarely do. No mutual funds so no fund fees. In my SEP-IRA and accounts for friends and family, I invest roughly $9M. Yield +5-11%/yr. for decades--net because I charge NO FEEs.
Finding a friend to invest or an employer that offers BH funds is rare; expect no change.
3
I'm not sure this is the way to go. What you're asking--an entire new entitlement to be run by yet another government agency--doesn't make a lot of sense when there is already social security.
Why not just strengthen Social Security through the numerous ways that have been spoken of for decades, but usually blocked by the GOP whose goal is to carve it out and privatize it as a reward to their financial cronies?
Or, at the very least, make the new savings plans be part of the Social Security Administration. I do like the requirement that the money remain untouched--the big problem with 401(k)s which depended on someone actually having a staff job at a company that offers this "benefit."
I understand the actuarial problem that's ready do explode in 2020 but I also understand how political divisiveness would make it hard to enact any legislation that benefits the truly poor. In the past two decades those without the means to create retirement savings are being lumped together with the welfare crowd and seen as takers, moochers, lazy and entitled.
When an entire party is based on dismissiveness about the poor, it's hard to imagine any new social welfare program getting off the ground.
Why not just strengthen Social Security through the numerous ways that have been spoken of for decades, but usually blocked by the GOP whose goal is to carve it out and privatize it as a reward to their financial cronies?
Or, at the very least, make the new savings plans be part of the Social Security Administration. I do like the requirement that the money remain untouched--the big problem with 401(k)s which depended on someone actually having a staff job at a company that offers this "benefit."
I understand the actuarial problem that's ready do explode in 2020 but I also understand how political divisiveness would make it hard to enact any legislation that benefits the truly poor. In the past two decades those without the means to create retirement savings are being lumped together with the welfare crowd and seen as takers, moochers, lazy and entitled.
When an entire party is based on dismissiveness about the poor, it's hard to imagine any new social welfare program getting off the ground.
31
Any system which allows all folks to make their own investment decisions is a bad idea - it is also regressive. Those who are in the more educated classes, those who have a bit more money may do fine. They have access to financial advisers and the resources to pay them; they likely understand the ups and downs of the market and may have a long enough view to be able to ride that roller coaster.
Others, though, live in a world where no one understands the market, where financial advisers are out of reach, and where a market downturn is likely to result in panic selling (and, thus, selling low). If we are truly to make old age more secure for all, we need a system where some % of individual savings are not invested by the individual. We already have such a system - Social Security. Rather than initiate a new program, we should expand what we have. We many need to tweak it (no gov't system is ideal), but not by privatizing it ala the GOP idea which would be regressive as noted above.
Others, though, live in a world where no one understands the market, where financial advisers are out of reach, and where a market downturn is likely to result in panic selling (and, thus, selling low). If we are truly to make old age more secure for all, we need a system where some % of individual savings are not invested by the individual. We already have such a system - Social Security. Rather than initiate a new program, we should expand what we have. We many need to tweak it (no gov't system is ideal), but not by privatizing it ala the GOP idea which would be regressive as noted above.
87
Ann-Marie
Agree. We have a population of poor and elderly that will only grow as a percent of our society unless we change current policy.
And we don't need another system. Expanding SS to include a deferred income category based on mandatory minimum contributions seems like a way to go.
Agree. We have a population of poor and elderly that will only grow as a percent of our society unless we change current policy.
And we don't need another system. Expanding SS to include a deferred income category based on mandatory minimum contributions seems like a way to go.
3
Our entire financial world is governed by outlaws. The idea that a corporation's first duty is to its shareholders boils down to letting the principal shareholders loot their minions and destroy the civil environment that makes them possible by providing them with military protection, fire protection police protection, transportation facilities, medical facilities, etc. A corporation's first obligation is to the people who make its very existence possible. Those plutocrats who don't like that should leave the country, and we should confiscate all their property before they go.
2
I guess this would be in addition to Social Security which is not mentioned at all in this argument. Or maybe, it is a trial balloon for folks like Speaker Ryan that want to kill off that most socialistic of programs, so they can say this is what we will replace FDR's legacy with. Oh, it will sound so much better to the uninformed, "See, you will have at least $170,000 in the bank when you retire. Isn't that wonderful?"
My counter, Prof. Ghilarducci and Wall Street Pirate James, is simple - put/require more contributions to Social Security, especially those earning more than the low, six-figure cap where more than half the wealth of this country is held. Of course Pirate James doesn't get to make money for himself and his corporation from Social Security, but I'm sure he can do with one less yacht, or biz jet, or . . . well, you get the idea.
You see pirate and professor, if Social Security goes bust then all the citizens are bailing out their elders, not their richers. When that becomes clear to the citizens then this trial balloon becomes a lead balloon.
My counter, Prof. Ghilarducci and Wall Street Pirate James, is simple - put/require more contributions to Social Security, especially those earning more than the low, six-figure cap where more than half the wealth of this country is held. Of course Pirate James doesn't get to make money for himself and his corporation from Social Security, but I'm sure he can do with one less yacht, or biz jet, or . . . well, you get the idea.
You see pirate and professor, if Social Security goes bust then all the citizens are bailing out their elders, not their richers. When that becomes clear to the citizens then this trial balloon becomes a lead balloon.
95
These people don't understand that an adequate income from Social Security is their guarantee against a class war that will end with all of them and all of their spawn dead in the streets. If they are going to undermine Social Security they had better, for their own security, first abolish the Second Amendment and confiscate all of our guns.
3
So anyone trying to do the right thing and saving more than $200 a month for retirement (far less than the authors acknowledge is necessary) will now pay higher income taxes as a reward for their good faith effort. Perhaps the option to save for your own retirement will not even exist. Once again reduce everything to the least common denominator. Strip away any option the middle class has to try secure a semblance of financial security. All on the name of we know what is best for you.
7
The difference between this and Social Security seems to be that huge money managers get a nice piece of unending government business.
If Social Security needs to be changed, then make and fund a change. There's no reason to overlay more programs designed to do the same thing.
If Social Security needs to be changed, then make and fund a change. There's no reason to overlay more programs designed to do the same thing.
192
The plan peaks of a real issue but the problem is that this plan must be completely protected from the likes of wall street and banks who based on their historical actions have done nothing to truly work in the common mans interests.
22
After we are done rearranging the deck chairs on the Titanic, maybe we will pay attention to bigger and more urgent problems - deflationary pressures unleashed by cheap and super productive labor forces, and yawning inequality brought about by the rich and powerful dictating tax policies to their advantage. Take adequate actions to address these core problems. Inadequacy of retirement plans is just a small symptom of the much bigger problem that apparently dares not speak its name.
334
You make the bifurcation error falsely creating two options when there are more. Why not do both? This is especially indicated because retirement planning is inextricably tied up with inequality and failing finance and government systems that work for the benefit of a very few.
1
This retirement savings plan would only marginally improve overall retirement security in the country. Much better would be to put the same amount of contributions into expanding Social Security, a social insurance plan which much more efficiently provides retirement security than individual savings and investing.
113
I think we already have something like this. Isn't it called Social Security. Maybe all we need to do is strengthen that program.
136
The present 401K self directed IRA model is broken for sure. Not only are people not contributing enough but many companies do not match and many small companies do not offer a 401K period. The proposed plan at 1.5 percent for both employee and employer will never fly. Employers will not go for it and even this is not enough. For the lower paid working stiffs, the answer seems to be work until you die or collect social security. The sad thing is even if you have a decent paying job and save the maximum to your 401K, IRA and over 50 catch up, it really is hard to accumulate a sizable sum. I have been aggressive and done well but who wants to manage risk in your late 50's as how to allocate the built up assets.
71
good for you; for people who don't want to manage risk in their late 50s, there are cheap index funds run by Vanguard & Schwab. Working into your late 60s for a person in their late 50s should be considered.
This is a logical, well-reasoned, efficient and effective proposal. As a result, it does not stand a chance.
1
Huh? Explain why better than SS.
4
The math in the example does not add up, or at least should be better explained. Three percent of $48,000 is $1,440. If someone saves this amount each year for 40 years, and earns 3% per year, they will only have about $110,000 at the end of the 40 years. Where do the authors get $170,000? Are they saying the $110,000 will then purchase a life annuity and the average person will collect $170,000 over their remaining lifetimes? If they live another 20 years, that is $8,500 per year.
18
Don't confuse conservative ideas with rational thinking.
3
I agree. Articles like this always draw commenters talking about the power of compounding. Yes compounding is magical if you are getting say a 5 percent interest rate. When a 10 year Treasury yields under 2 percent, not so much. I am guessing the described plan is based on the premise that many will pay in and never collect (die, no spouse). The plan is basically insurance.
Most investors are doing it wrong in my opinion. I suggest ignore what the government offers and avoid low-fee investment plans. Ignore 401(k)-type accounts. It's not a good idea to share retirement income with anyone no matter how low the fee is. Also it's wrong to have to hope retirement savings last a lifetime. People should not have to worry about living too long.
After much research I buy only the best Dividend Aristocrats and reinvest all dividends. My goal is to hold for life, never touching the principle, never worrying about market crashes, and have an income that will grow forever even after I retire. I keep it simple and boring.
After much research I buy only the best Dividend Aristocrats and reinvest all dividends. My goal is to hold for life, never touching the principle, never worrying about market crashes, and have an income that will grow forever even after I retire. I keep it simple and boring.
2
What average return do you expect?
2
And what will you do with your measly 6-or7-figure retirement in stocks when Wall Street and its Republican pool boys and hookers destroys the market? I have seen my IRAs drop by 60% twice in the past 40 years. Given their utterly amoral genetic makeup, the Republicans will create an economy in which a nuclear civil war is a best possible solution.
2
The whole point of changing the retirement system from pensions to 401k's and money market funds etc. wasn't to benefit retirees with better returns or safer ways to invest; it was to provide more liquidity to the stock market and drive up stock prices with increased demand which allowed funds managers and corporate execs to wring value out of companies whose fundamentals couldn't justify that kind of compensation.
Just think if Bush 43 had been allowed to do that same thing to Social Security... Seniors eating catfood to live would instead be seniors and the disabled dying in the streets. Not saying that doesn't happen now, but not like it could have been.
Just think if Bush 43 had been allowed to do that same thing to Social Security... Seniors eating catfood to live would instead be seniors and the disabled dying in the streets. Not saying that doesn't happen now, but not like it could have been.
31
Just another plan for the Government to take control of people's money.
I love my 401k and IRA plans, because I decide:
- how much to put in
- how to invest it
- when to withdraw it
If my financial adviser underperforms, I simply fire the adviser.
Why wold I turn all my Freedom over to a Government bureaucrat or a broker who pays contributions to gain political favor?
I love my 401k and IRA plans, because I decide:
- how much to put in
- how to invest it
- when to withdraw it
If my financial adviser underperforms, I simply fire the adviser.
Why wold I turn all my Freedom over to a Government bureaucrat or a broker who pays contributions to gain political favor?
66
Wait until we have a corporate/banker-generated depression. Then ask yourself those questions.
2
Because your costs charged by your 401k and IRA would be substantially lower, and, not everyone has your financial savvy or assets. Most people need help to do this, if we include 100% of our workers, people who are not above average intelligence and who are preyed on by all sorts of companies, banking included.
The government you deride created the 401K and IRA that allowed your employer to avoid giving you a guaranteed pension so he could fatten the bank accounts of the corporate executives at your expense.
2
Unfortunately, selling Americans on programs that are managed at the federal level aside from Social Security and Medicare, of course, are a hard sell these days. The ACA being the most recent example.
Social security has guaranteed the principal we have contributed over our working years, why not let the individual worker adjust the percent held by social security up to the $15,000 amount, updating it yearly or as jobs change. Wouldn't that have the same result without having to build a new agency. Our social security contribution and savings contributions would seem easy integrate into a database and record of the individual worker's contributions over his working life
Social security has guaranteed the principal we have contributed over our working years, why not let the individual worker adjust the percent held by social security up to the $15,000 amount, updating it yearly or as jobs change. Wouldn't that have the same result without having to build a new agency. Our social security contribution and savings contributions would seem easy integrate into a database and record of the individual worker's contributions over his working life
19
Is retirement a right? Or even a privilege administered in a way to become a defacto right? If so, when does a person's right/privilege accrue - after 40 years of work, or maybe at a particular age? Should it matter their profession (sedentary/active or intellectual/physical)?
Retirement is a right. It is as much a right as breathing and voting. Get that through your head, and you'll be happier when you retire.
4
Under this plan, the government is going to give everyone an annuity, absorbing the longevity risk. So if an advance in medicine comes along and people start living to 125, the government will keep paying. A typical private sector annuity is offered by a life insurance company, which balances higher payouts for annuities with lower payouts for deaths. The government has the opposite characteristic. Since the government pays for Social Security, Medicare and, oftentimes, subsidized housing for seniors, it will be hit with dramatically higher costs on every front if people live longer.
A separate issue is with the arithmetic. If people are going to spend age 0-30 in school (the Master's degree being the new high school diploma) and then spend age 55-100 retired, a three-percent-of-salary scheme won't be able to fund much of an annuity. If you want to work for 25 years and then be comfortably retired for 45 years you either need to save about half of your income or have your job be building a droid that will then earn an income for you starting when you turn 55...
A separate issue is with the arithmetic. If people are going to spend age 0-30 in school (the Master's degree being the new high school diploma) and then spend age 55-100 retired, a three-percent-of-salary scheme won't be able to fund much of an annuity. If you want to work for 25 years and then be comfortably retired for 45 years you either need to save about half of your income or have your job be building a droid that will then earn an income for you starting when you turn 55...
4
12.4% of my salary is already invested into Social Security whether I like it or not. Isn't Social Security a guaranteed retirement account (with inflation protection in retirement)? How is the proposed 1.5% GRA "tax" going to close the gap of insufficient retirement savings, when it increases retirement savings by less than 15% over the under-performing investment of Social Security? How is a 3% return going to maintain buying power when it barely keeps up with nominal inflation? How is yet ANOTHER government program going to increase investment efficiency?
We either need to accept that people that spend every dime in their working years retire on a very limited income, or if we insist on forcing people to save more, we increase the Social Security tax and benefits.
Pensions do have an advantage over 401k investing - mortality credits whereby you only have to save for an average lifetime, as opposed to building a nest-egg to protect against outliving your retirement at a very old age. Lower cost annuity options in 401ks that allow lump-sum to be converted into lifetime payments would be a good addition, but a GRA just adds another program without solving the real issue - people at every income level spending every dime they have, and then borrowing more to spend.
We either need to accept that people that spend every dime in their working years retire on a very limited income, or if we insist on forcing people to save more, we increase the Social Security tax and benefits.
Pensions do have an advantage over 401k investing - mortality credits whereby you only have to save for an average lifetime, as opposed to building a nest-egg to protect against outliving your retirement at a very old age. Lower cost annuity options in 401ks that allow lump-sum to be converted into lifetime payments would be a good addition, but a GRA just adds another program without solving the real issue - people at every income level spending every dime they have, and then borrowing more to spend.
11
We can't trust people to have the willpower to save sufficiently for their own retirement - the current crisis already proves this- so in my opinion a mandatory contribution retirement plan is essential. If people are allowed to be irresponsible and then retire in poverty the rest of us will be forced to pay anyway in the form of public assistance.
It would be simpler to just expand Social Security -- which could be done easily by lifting the current cap, and tax all income.
This proposal, by contrast, would continue to grow bankers' profits. It's privatization under another name.
Social Security works. What has not worked is the self-directed IRA. It's made banks wealthy, and ordinary workers poorer. It's time to end the horrendous mistake which is the current IRA system, and go back to guaranteed pensions.
This proposal, by contrast, would continue to grow bankers' profits. It's privatization under another name.
Social Security works. What has not worked is the self-directed IRA. It's made banks wealthy, and ordinary workers poorer. It's time to end the horrendous mistake which is the current IRA system, and go back to guaranteed pensions.
639
110% agree
7
NO; we need to increase contributions slightly and gradually advance the retirement ages for Social Security to age 70 (currently 66)-Normal and
age 65 (currently 62). These gradual increases would be 2 months/year starting in 2018 to recognize the increase in longevity. Looser definitions of disability above age 60 would be needed for some in physically demanding occupations, while tightening for younger workers.
Also a modest increase in contributions above the current contribution limit of 0.5% of Salary by Employers & Employees (1% for self employed) and 1% on all investment income including Capital Gains with NO increase in social security benefits. There is no reason for our current retiree generation to NOT contribute a small amount for those of us who are well of.
age 65 (currently 62). These gradual increases would be 2 months/year starting in 2018 to recognize the increase in longevity. Looser definitions of disability above age 60 would be needed for some in physically demanding occupations, while tightening for younger workers.
Also a modest increase in contributions above the current contribution limit of 0.5% of Salary by Employers & Employees (1% for self employed) and 1% on all investment income including Capital Gains with NO increase in social security benefits. There is no reason for our current retiree generation to NOT contribute a small amount for those of us who are well of.
This guy gets it. Lift the cap on income subject to ss tax and subject all income to the ss tax. SS revenues have subsidized all other revenue streams for decades. Now its time for payback. What doesn't HRC and the New Democratic Party get? Oh, that's right. They and their families get bought out (with millions of $) by the very people not paying their fair share of taxes and opposed to ss.
4
What has destroyed my parent standard of living will not be fixed by this.
They saved. Put it in bonds and safe stocks but mainly in fixed interest .Their interest over the last 8 years is hovering at 1 percent. Calculating the 4% rule means that they have been going backwards, compound discounting, to the tune of 70,000 per year.
The reason for this is that the GOP and the Democrats and the Fed together put the health of the stock market and the wealth of the banksters above the wealth of the retirees who played by the rules but are not stupid enough to sink their wealth into a bubble stock market. The Fed continues to miscalculate asset inflation, instead their basket of goods for inflationary measure is a joke.
So the Fed measure inflation in the real economy but not in the stock market or bubble pocket real estate that is california etc. as justification for keeping interest rates near zero.
And hypocritically they measure the lack of growth in the real economy to justify dropping more money on their friends in banking which in turn delivers it to the Venture Capitalists here to create ridiculous unicorns and huge asset bubbles in San Francisco.
And Bernanke gets a job at PIMCO.
Shame on them all.
They saved. Put it in bonds and safe stocks but mainly in fixed interest .Their interest over the last 8 years is hovering at 1 percent. Calculating the 4% rule means that they have been going backwards, compound discounting, to the tune of 70,000 per year.
The reason for this is that the GOP and the Democrats and the Fed together put the health of the stock market and the wealth of the banksters above the wealth of the retirees who played by the rules but are not stupid enough to sink their wealth into a bubble stock market. The Fed continues to miscalculate asset inflation, instead their basket of goods for inflationary measure is a joke.
So the Fed measure inflation in the real economy but not in the stock market or bubble pocket real estate that is california etc. as justification for keeping interest rates near zero.
And hypocritically they measure the lack of growth in the real economy to justify dropping more money on their friends in banking which in turn delivers it to the Venture Capitalists here to create ridiculous unicorns and huge asset bubbles in San Francisco.
And Bernanke gets a job at PIMCO.
Shame on them all.
23
Have some patience. When this batch of Mammon's acolytes succeeds in destroying the economy, their carcasses will be eaten by rodents in the gutters of Wall Street and K Street.
1
So the author argues a 401k is bad because I may not choose appropriate investments. Instead a government appointed board should be given my money to invest without any consideration of my situation, tolerance for risk or the current state of my financial circumstances? Sounds like a wall street plan to use government regulation to make sure they get more of my money by providing services to the government appointees, or by becoming one of the appointees. No thank you. My 401k is diversified well and provides better returns than the "target date" funds run by professional boards.
How about instead require financial education in school so people learn to plan and budget? Now that would really be smarter! and better.
How about instead require financial education in school so people learn to plan and budget? Now that would really be smarter! and better.
109
And how is your 401K "diversified?" Without government-guaranteed stability, it is worth less than a roll of toilet paper.
1
Those "target date" funds have only been in operation for about 10 years - not nearly long enough to see if they work. They sound fantastic, until you start asking questions about who is running the boards and what the transaction fees are. AS much as investment firms talk them up, there is no more assurance that "target date" funds will work any differently than some other strategy.
...point is where this voluntary contribution, 401k, has led us.
The Wall Street boyz would hate this. They love being able to feast on individuals trying to manage their own money. In fact, their dream is to loot Social Security.
16
Haven't you pretty much described Social Security, cept that the funds in the GRA would be subject to more risk?
31
Just because you can afford to save up to $15,000 a year in an IRA, does not mean that you can actually afford to do so. I have been saving throughout my entire work life. However, I could never afford to max out, even though I had a professional level salary, as I was raising a child as a single parent. It always seemed unfair to me, this discrepancy inherent in the system, between the workers who could, or could not, afford to take advantage of the maximum allowed. There's got to be a better way for those of us who try to do the right thing.
12
This sounds good in theory. But that much money, managed federally, would certainly encourage a lot of lobbying on behalf of corporations trying to get the managers to choose their companies for investment. Bigger, richer companies would probably receive greater investment, while smaller, poorer business would probably suffer from a comparable dearth of investment. Also right now there is a push by individuals for socially conscious investing--considering that the "investors" are the politically divided American public, would investing in a more hopeful future fall by the wayside?
66
NO, the proposed contributions are modest. Those of us who invest--a minority- would still invest, just a bit less. Models for investing are the Federal Govt. Employees' 401k plan or the Index funds run by Vanguard or Schwab. Benefits
would be modest as Authors design to supplement Social Security; very important for the 50% of our population who cannot or will not save for retirement.
would be modest as Authors design to supplement Social Security; very important for the 50% of our population who cannot or will not save for retirement.
th retirement plan that most americans will have in th future is working till they drop dead
12
That way they won't have time or energy to man the barricades and carry the pitchforks.
Never mind playing the stock market with retirement money.
Just refinance part of the national debt with retirement money. Everyone can have specially created Retirement T-Bills, T-Bills being the safest possible investment, which we could give a reasonable rate of return. This is what we did with Series EE Savings Bonds, which were limited to individuals.
The government must borrow from somewhere, so borrow from ourselves instead of China. Other countries have done this for a long time, and even we did it with War Bonds as well as the Savings Bonds.
We must also increase the retirement part of Social Security, because it has become all most people will have post-Great Recession. That is a longer term cost of that crash, and of how it was handled to save only the wealthy.
Just refinance part of the national debt with retirement money. Everyone can have specially created Retirement T-Bills, T-Bills being the safest possible investment, which we could give a reasonable rate of return. This is what we did with Series EE Savings Bonds, which were limited to individuals.
The government must borrow from somewhere, so borrow from ourselves instead of China. Other countries have done this for a long time, and even we did it with War Bonds as well as the Savings Bonds.
We must also increase the retirement part of Social Security, because it has become all most people will have post-Great Recession. That is a longer term cost of that crash, and of how it was handled to save only the wealthy.
43
The positive balance in the Social Security trust fund is already invested in treasuries, which loans have funded the gross waste in the military and other deficit expanding programs.
It should be safe there, but Republicans want to avoid paying back the mmoney by cutting SSpayoits.
God forbid we should cut the bloated military.
It should be safe there, but Republicans want to avoid paying back the mmoney by cutting SSpayoits.
God forbid we should cut the bloated military.
2
"Is Your 401(k) A Total Scam?"
- Forbes
"401(k) Plans Are A Rip Off"
- Mother Jones
"The 401(k) Scam"
- Seeking Alpha
The reason these sensible publications write these essays owes to the fact that not only are we not the wealthiest nation on the planet per capita, we also simply don't agree we should take care of ourselves as many other Western Economies do:
1 Luxembourg $110,697.00
2 Norway $100,818.50
3 Qatar $93,714.10
4 Macao SAR, $91,376.00
5 Switzerland $84,815.40
6 Australia $67,458.40
7 Sweden $60,430.20
8 Denmark $59,831.70
9 Singapore $55,182.50
10 United States $53,042.00
Unlike our European peers, our social safety net is weak, our overall medical costs far more expensive, and our economy rests heavily on consumerism.
30 x $14,500 may be sufficient for those who live in some communities in this nation, but even that will likely be inadequate in the event of family tragedy and catastrophic health care expense.
Americans run away from the very system that is most likely to drastically reduce their anxiety: democratic socialism as practiced by other, successful capitalist nations, some already mentioned.
As Skip Montanaro already suggests in another post: why not just expand Social Security.
The financial industry can make plenty of money off each other in the top 0.1 - 1.0% of our wealthiest citizens. We don't need to continue to give it the small savings of the hundreds of millions of 99% of Americans.
- Forbes
"401(k) Plans Are A Rip Off"
- Mother Jones
"The 401(k) Scam"
- Seeking Alpha
The reason these sensible publications write these essays owes to the fact that not only are we not the wealthiest nation on the planet per capita, we also simply don't agree we should take care of ourselves as many other Western Economies do:
1 Luxembourg $110,697.00
2 Norway $100,818.50
3 Qatar $93,714.10
4 Macao SAR, $91,376.00
5 Switzerland $84,815.40
6 Australia $67,458.40
7 Sweden $60,430.20
8 Denmark $59,831.70
9 Singapore $55,182.50
10 United States $53,042.00
Unlike our European peers, our social safety net is weak, our overall medical costs far more expensive, and our economy rests heavily on consumerism.
30 x $14,500 may be sufficient for those who live in some communities in this nation, but even that will likely be inadequate in the event of family tragedy and catastrophic health care expense.
Americans run away from the very system that is most likely to drastically reduce their anxiety: democratic socialism as practiced by other, successful capitalist nations, some already mentioned.
As Skip Montanaro already suggests in another post: why not just expand Social Security.
The financial industry can make plenty of money off each other in the top 0.1 - 1.0% of our wealthiest citizens. We don't need to continue to give it the small savings of the hundreds of millions of 99% of Americans.
223
This plan sounds alot like CALPERS and other massive state pension funds which generated massive fees while under performing and leaving them underfunded vs future liabilities. They also had independent boards and fiduciary rules.
The flaws with the 401k programs are that 1) tax benefits strongly favor highest income households, 2) they aren't offered by many employers, 3) many of the plans that are offered have excessive fees and 4) there is no automatic savings discipline in the IRA alternative.
If everyone enjoyed the equivalent of a tax deferral in the 33% to 39% range for dollars saved as current high income workers do, there would be a lot more savers.
If all employers who don't offer 401Ks had to offer automatic contribution to IRAs just as they withhold taxes today, there would be a lot more savers, especially if the default was a small contribution amount.
If there were some simple low fee portfolio models of index funds based on risk preference, there would be a lot better long term investment gains on those savings.
While it is difficult for many households to save, the longest line in the grocery store is to buy lottery tickets and the casinos seem to be doing a steady business. When people believe their best chance of getting ahead is one of those two options, something is very badly wrong.
The flaws with the 401k programs are that 1) tax benefits strongly favor highest income households, 2) they aren't offered by many employers, 3) many of the plans that are offered have excessive fees and 4) there is no automatic savings discipline in the IRA alternative.
If everyone enjoyed the equivalent of a tax deferral in the 33% to 39% range for dollars saved as current high income workers do, there would be a lot more savers.
If all employers who don't offer 401Ks had to offer automatic contribution to IRAs just as they withhold taxes today, there would be a lot more savers, especially if the default was a small contribution amount.
If there were some simple low fee portfolio models of index funds based on risk preference, there would be a lot better long term investment gains on those savings.
While it is difficult for many households to save, the longest line in the grocery store is to buy lottery tickets and the casinos seem to be doing a steady business. When people believe their best chance of getting ahead is one of those two options, something is very badly wrong.
96
First off, CalPERS is alive and well, so let's skip the past tense. In the second, yes, they had rocky times recently--during the, you know, wossname, GIANT CRASH that deregulation, lunatic and greedy speculation, and a Republican government's looking the other way and whistling caused.
And as for the little comments about welfare quesns, the actual fact is that Jerry Brown somehow got legislation passed that massively increases worker and employer contributions.
By the way, love the fantasy that the wealthy don't freeload, following in the clawd footsteps of Ayn Rand.
And as for the little comments about welfare quesns, the actual fact is that Jerry Brown somehow got legislation passed that massively increases worker and employer contributions.
By the way, love the fantasy that the wealthy don't freeload, following in the clawd footsteps of Ayn Rand.
5
"Most currently have inadequate 401(k)-type accounts or no retirement account at all."
For most workers, 401(k) plans serve the financial industry by generating lucrative management fees. That was their unspoken purpose right from the start. Unlike the old defined-benefit plans, 401(k)'s are defined-contribution plans, which means the worker contributes money to the market's liquidity with no guarantee of getting any money for retirement.
For most workers, 401(k) plans serve the financial industry by generating lucrative management fees. That was their unspoken purpose right from the start. Unlike the old defined-benefit plans, 401(k)'s are defined-contribution plans, which means the worker contributes money to the market's liquidity with no guarantee of getting any money for retirement.
233
401K plans generate fees, but nothing like the hedge funds and derivative garbage that public pension funds invest in. The fees on hedge funds are the infamous 2/20 fees--2% annually of the principal invested and 20% of any investment gains.
37
This is hardly the first time it’s been suggested that workers be compelled to save in ways government would invest FOR them. What’s killed such proposals in the past in part is the obligatory nature of such a program, which strikes many as an additional tax; and in part lack of trust in government for a number of reasons.
First, if government can mandate 1.5% from individual and employer, they can mandate the over-6% mandated by Social Security, which could be crushing to both individuals AND employers, particularly the self-employed. They also can decide to pool resources with SS to solve THAT funding headache at the cost of additional takings from those least able to afford them. They can also choose to invest the mandated savings in U.S. bond instruments, much as they did for decades with SS overages, leaving future taxpayers holding the bag when it comes time to redeem those bonds to pay benefits while government simply uses the cash as it did with SS, making it appear even MORE like an additional tax.
In the end, we don’t save enough, and for years the incentives to do so have been weakened by Fed policy regarding interest rates. If we don’t do SOMETHING obligatory, we will be in the soup as the bulk of boomers pass through their retirement years; and in future in the event of other, similar demographic bulges. But any such program would need to have very tight protections and boundaries that Congress couldn’t easily get around in order to be believable.
First, if government can mandate 1.5% from individual and employer, they can mandate the over-6% mandated by Social Security, which could be crushing to both individuals AND employers, particularly the self-employed. They also can decide to pool resources with SS to solve THAT funding headache at the cost of additional takings from those least able to afford them. They can also choose to invest the mandated savings in U.S. bond instruments, much as they did for decades with SS overages, leaving future taxpayers holding the bag when it comes time to redeem those bonds to pay benefits while government simply uses the cash as it did with SS, making it appear even MORE like an additional tax.
In the end, we don’t save enough, and for years the incentives to do so have been weakened by Fed policy regarding interest rates. If we don’t do SOMETHING obligatory, we will be in the soup as the bulk of boomers pass through their retirement years; and in future in the event of other, similar demographic bulges. But any such program would need to have very tight protections and boundaries that Congress couldn’t easily get around in order to be believable.
12
I think we will be saved from the demographic bubble in part, by the unfortunate fact that Boomers are less healthy than their silent gen parents, and will be dying off sooner than we think.
If I am wrong, we better hope that there's no massive deportation of undocumented immigrants because they are propping up our social security system with about $1.6bn annually in fraudulent contributions which will never be collected by them.
If I am wrong, we better hope that there's no massive deportation of undocumented immigrants because they are propping up our social security system with about $1.6bn annually in fraudulent contributions which will never be collected by them.
10
I generally agree with your comment; thanks for the thoughtful analysis. But one more time: The Fed's recent zero-interest rate policy should have made no dent in rational savers' incentives! If anything, ZIRP boosted confidence in the markets by preventing a permanent dent in equity values. And that's to say nothing of the big boost in bond prices for those who acquired their fixed-income portfolios when rates were higher.
The myth that low rates have punished savers is just that, a myth. The impact of rates on savings depends on the age and risk aversion of individual savers. You write as though the only way for savers to earn a return is bank interest on cash. That may be true for more liquid, short-term savings, such as emergency cash or a stash whose purpose is known and closed to being fixed (e.g., buying a house or even a car). But retirement savings, to have a chance of beating inflation and accumulating enough to allow a comfortable drawdown and to reduce the risk of running out late in life, needs to have a heavy dose of equities. And ZIRP kept equity values from tanking. Many savers, including me, are thankful and kept contributing because of, not in spite of, the Fed's visionary policy choices.
The myth that low rates have punished savers is just that, a myth. The impact of rates on savings depends on the age and risk aversion of individual savers. You write as though the only way for savers to earn a return is bank interest on cash. That may be true for more liquid, short-term savings, such as emergency cash or a stash whose purpose is known and closed to being fixed (e.g., buying a house or even a car). But retirement savings, to have a chance of beating inflation and accumulating enough to allow a comfortable drawdown and to reduce the risk of running out late in life, needs to have a heavy dose of equities. And ZIRP kept equity values from tanking. Many savers, including me, are thankful and kept contributing because of, not in spite of, the Fed's visionary policy choices.
2
Translation: he wants SSI opened up to private investments and the Wall Street, because financial and brokerage firms have been so very reliable so far this century.
6
Remember when W and the republicans wanted to privatize Social Security? That didn't work in part because the stock market is volatile. This is just another version. Instead of replacing Social Security this supplements it, but does so by allowing someone else to control money you're forced to put in the stock market. Just say no.
261
And say no to penalizing people who saved for their retirement by sacrificing over the years. To tax away their benefits because they have too much retirement income is immoral and a breach of contract.
7
How is average salary relevant?
2
Works in the Netherlands! In Germany!
I don't know which other countries, but why not here?
I don't know which other countries, but why not here?
14
th usa is not sensible enough to become socialist
5
And why not some publicity on how these pensions do actually work in the Netherlands and Germany, etc? More than just a 1 line mention in an otherwise specific and informative op ed?
3
Too little, to late for the millions eased out of the labor force since 200 and with careers truncated by the Great Recession.
How about we just demand (tax) OUR MONEY back from the from the 1% who stole it?
How about we just demand (tax) OUR MONEY back from the from the 1% who stole it?
217
No one "stole" your money.
4
What a convenient article for the head of Blackstone to write so he can position his business to make a killing if the govt just happens to pick him. All we need is another government subsidy for retirement. As if social security wasnt enough.
Retirement is not supposed to be a guarantee. Smart investment strategy and careful strategy are not guaranteed. Homes should not be guaranteed. we need to be sure we are protected in our future and planning for it and not dependent on others.
Retirement is not supposed to be a guarantee. Smart investment strategy and careful strategy are not guaranteed. Homes should not be guaranteed. we need to be sure we are protected in our future and planning for it and not dependent on others.
29
Are you serious?
5
By this logic anyone that can potentially stand to benefit from an idea is automatically disqualified from presenting an idea... Thereby eliminating the validity of many (if not most) ideas rendered by technically experienced people.
2
And those who do not, perhaps for no fault of their own, should just die young.
9
Part of the problem is a lack of education about retirement planning and saving/investing. This is something that should be a priority for everyone and every high school and college should provide mandatory courses on this topic. Many do not think they have to worry about retirement planning/investing until they are within a few years of retirement. Many do not understand the power of compounding. There are also many sites that provide information on various retirement topics including AARP and sites like Retirement And Good Living which offers information on many retirement topics including planning, finances, health, retirement locations, part time jobs, volunteering and more.
42
When millions can't afford to save anything because their salaries are low, then knowing about the magic of compounding hardly matters. And if they risk the stock market===well, what time is the next crash? Basic retirement should not be left up to individuals, subject to a rigged economy in which jobs are outsourced and salaries stagnant. Also for decades medical bankruptcy wiped out savings. Today's college debt is so huge for many that it's impossible to save for retirement.
18
I agree 100% with Carly and Meredith. However people can and should save for retirement starting as young as possible, no matter how little they earn. This is what I tell my college-age children. But most people don't. That's why a modest but automatic 1.5% employee contribution with an employer match is a good idea.
1
An interesting plan, well worth of further thought.
One problem is its similarity to European guaranteed pension plans: all the money saved does not really belong to the worker, neither while still working, nor after retirement. It is not part of the individual's Net Assets, but it is more like an annuity -- once bought, the money is no longer one's own.
A major problem is the individuals' attitude toward saving for retirement, where substantial reeducation -- not to say reindoctrination -- is needed.
One problem is its similarity to European guaranteed pension plans: all the money saved does not really belong to the worker, neither while still working, nor after retirement. It is not part of the individual's Net Assets, but it is more like an annuity -- once bought, the money is no longer one's own.
A major problem is the individuals' attitude toward saving for retirement, where substantial reeducation -- not to say reindoctrination -- is needed.
5
We are marginally short on retirement funds. Could get worse before we die if social security doesn't grow at least as fast as Medicare expenses. Did we save everything we could have? No. We invested in living -- adopted children in addition to our biological ones, some of college educations until it became impossible, inexpensive family vacations for the family, a change in my husband's career, some extra, ongoing medical expenses. The problem is that life is made for living -- not just for saving for retirement. With wages low and stagnating, it is pretty impossible to do both.
As a side note, many of us "selfish" boomers invested heavily in giving our children a meaningful life.
We need to ask not only what individuals need, but what kind of society do we want to live in. Child care and latch key children are already a problem -- not just as an expense, but as a lack of parental presence, security, and guidance. Do we want a stingy, selfish society where no can afford to do anything but save for retirement? Do we want life to mean only accumulating money? Where is the room for being human?
As a side note, many of us "selfish" boomers invested heavily in giving our children a meaningful life.
We need to ask not only what individuals need, but what kind of society do we want to live in. Child care and latch key children are already a problem -- not just as an expense, but as a lack of parental presence, security, and guidance. Do we want a stingy, selfish society where no can afford to do anything but save for retirement? Do we want life to mean only accumulating money? Where is the room for being human?
8
It's a rigged govt policy that needs reindoctrination, not the attitude of individuals, underpaid , subject to low pay, and job loss.
1
Another approach that should be both easier to accomplish and easier to understand: just expand Social Security.
516
By expand, do you mean have higher income individuals pay for increased benefits for lower wage individuals aka Wealth Redistribution?
2
Yes, and increase payroll taxes to pay for increased benefits.
Simple, elegant, and politically unlikely.
Will the politics change?
Simple, elegant, and politically unlikely.
Will the politics change?
Yes.
The authors say that the "retirement portfolios would be created by a board of professionals who would be fiduciaries appointed by the president and Congress and held accountable to investors."
I'd like to know more about just how these professionals would be held accountable. Since they would be appointed by the President and Congress, we can be fairly certain that they will be cronies of the politicians. Just look at the revolving door between Wall St and Washington that we have today.
Who will decide when they aren't living up to expectations? The citizens they are working for, or the politicians who appointed them?
And what will the penalty be for these investment professionals should they fail to deliver the promised returns? Loss of their personal fortunes? Jail? Or will they just be kicked out and allowed to go back to a fat cat job on Wall St?
I'd like to know more about just how these professionals would be held accountable. Since they would be appointed by the President and Congress, we can be fairly certain that they will be cronies of the politicians. Just look at the revolving door between Wall St and Washington that we have today.
Who will decide when they aren't living up to expectations? The citizens they are working for, or the politicians who appointed them?
And what will the penalty be for these investment professionals should they fail to deliver the promised returns? Loss of their personal fortunes? Jail? Or will they just be kicked out and allowed to go back to a fat cat job on Wall St?
295
The problem isn't a shortage of accounts to save money for retirement.
The problem is wages that are way too low for the majority of Americans especially with extortion level costs for medical care, day care and education.
The problem is wages that are way too low for the majority of Americans especially with extortion level costs for medical care, day care and education.
587
Some people who don't earn a lot save and invest and retire with enough money. Some people who make plenty of money do not save or invest and end up crying about the government not giving them enough money in their old age. The best thing the government could do is educate people as to the amount of money they need to save or invest in order to retire comfortably. This seems to be the point of the disconnect: few people realize the amount they will need to produce retirement money that will suffice. You have to realize that some people will behave imprudently no matter how much you preach to them. These and the morally vain are the chief advocates of using government force run retirement programs. Do we really want another program that will inevitably lead to you funding retirement vacations, etc., for those who did not themselves contribute much to the system? Where does it end?
3
Correct! Must expand social security, and we need to move to Medicare for ALL. the current paradigm doesn't allow people to save, both working/middle class Americans. Everything is geared towards the uber-wealthy, and the rest of us are getting the crumbs!
21
The wealthy don't generally work dangerous or unhealthy jobs, so they need a small fraction of the medical care needed by the working class. The working class must borrow from their retirement account or life insurance, just to stay alive - seldom paying it back, but getting stuck with penalty after penalty.
8
Put a finite amount of money in, and get a lifetime annuity payout.
Wonder who is going to pay the difference??
Wonder who is going to pay the difference??
54
There isn't a difference to be paid. Any life insurance company would happily sell you an annuity right now, with no one paying any difference. The people who die young subsidize the people who live to be very old. Further, the people who don't put much in get low annuity payments out. Again, there is no difference to be paid. That's just how annuities work.
7
Funnily, I have the same question about our cheerfully polluting, trashing and warming the planet.
1
There would be no "difference" to pay, because this program would work just like immediate annuities work now. Some people live a long time after buying an annuity and some people don't. The money not paid to the people who die young would find the payments to those who live longer. This program would work the same way immediate annuities work now, but without an insurance company in the middle skimming off some of the money.
3
It's not clear to me how this is different than Social Security itself. Why not just expand that?
567
And pay for it by removing the cap on contributions?
Gee, I sure do wish that someone had proposed that ;)
#ifeelthebern
Gee, I sure do wish that someone had proposed that ;)
#ifeelthebern
12
It's different because the money is invested by money managers "appointed by the President and Congress".
Expanding Social Security is a much better idea.
Expanding Social Security is a much better idea.
17
Sounds like yet another way some well-connected already very wealthy people can siphon off fees and enrich themselves even more.
Community based banks used to exist, and paid reasonable interest in instruments called "savings accounts" that didn't cost savers anything. These savings were lent out locally, by people who bought homes in which to raise their families. This is how the US used to be. What the heck happened?
Community based banks used to exist, and paid reasonable interest in instruments called "savings accounts" that didn't cost savers anything. These savings were lent out locally, by people who bought homes in which to raise their families. This is how the US used to be. What the heck happened?
25
Congress let big corporations get out of the pension business and substitute cheap 401(k) plans that as the article points out are woefully underfunded. No more gimmicks. It's the government's job to provide a secure retirement for its citizens and they just need to raise taxes and expand Social Security to get it done.
406
Says who? I say it's the individuals job to be ready for retirement.
3
Plus a series of modest SS tax rate increases to fund it. Slow, continuous funding improvements will solve this.
7
When did it become the government's responsibility to provide retirement income for its citizens? Social Security was to be a "safety net", nothing more. The unions started the idea of employer retirement plans and the management got in on the act.
This worked quite well when people took a job upon graduation from high school or college and worked at the same business for 40+ years. When they started changing jobs before they would be vested in a retirement plan, the IRA and 401k cam into being.
Employer contributions to any form of retirement plan are deferred compensation for work being done now. The government does not "owe" us retirement income.
This worked quite well when people took a job upon graduation from high school or college and worked at the same business for 40+ years. When they started changing jobs before they would be vested in a retirement plan, the IRA and 401k cam into being.
Employer contributions to any form of retirement plan are deferred compensation for work being done now. The government does not "owe" us retirement income.
3
This is one of those nice ideas that we wouldn't need, if people were sufficiently unafraid of socialism to make it happen.
240
well put
2
Isn't that so very true!
3
Ah, you don't see the small contradiction in your argument, do you: profits, which are necessary for assets to produce returns, which are necessary for portfolios to perform, are produced primarily (perhaps even solely) by them darned capitalist corporations.
1
This is classic liberalism: forget about all the elderly, sick, disabled living now. Forget about the trillions of dollars of debt condemning a generation of college students to indentured servitude; forget about the millions of people who lost their homes and savings to the banks that have been made whole for committing trillions of dollars of criminal fraud against them. Forget about the millions of people who aren't counted any more because they've stopped looking for work, so we can say we're at 5% unemployment.
No, just forget about them all, and blather on cheerfully about how we'll fix it for people in the future.
It's like a slow-motion, self-congratulatory act of genocide, dressed up in good intentions.
No, just forget about them all, and blather on cheerfully about how we'll fix it for people in the future.
It's like a slow-motion, self-congratulatory act of genocide, dressed up in good intentions.
118
Whew. I don't know that I agree this is "classic liberalism", but I am heartened to hear that you for one have not forgotten what bleak lives people are enduring and will endure until we face the failures of capitalism and our particular form of governance by corporations and the very, very wealthy.
16
So we should focus only on the present and not plan for the future?
5
Say what? Classic liberalism is the old New Deal liberalism. The best representative running today is Bernie Sanders and far from forgetting about the elderly, the sick, indebted students and the people who lost their homes he wants to help them starting January 2017. Check it out: Single Payer, raising the cap on SS income ... check it out.
20
Watch your 401k's. They will be confiscated under innocent sounding plans like this one.
87
That's absurdly paranoid. It is true that the Obama administration has groused on more than one occasion at the extent of tax expenditures lavished on 401(k), 403(b), and 529 accounts. But don't underestimate the political power of the much maligned 10 percent, who are much closer to the truly despised 1 percent but can claim magical "middle-class" status. These are the urban and suburban professionals who shot down Obama's trial balloon to phase out 529 accounts. The administration has hinted more than once that it wants to cap 401(k) and 403(b) accounts at something like $4 million, enough to buy an immediate annuity guaranteeing roughly $250K in annual income for life. Again, between the investment industry and the affluent investors who reap the highest benefit, that gambit went nowhere.
I don't favor any move to degrade my tax-preferred retirement accounts. From the sound of it, neither do you. But it serves no good purpose to cry wolf and sound paranoid, when nothing that drastic is politically plausible.
I don't favor any move to degrade my tax-preferred retirement accounts. From the sound of it, neither do you. But it serves no good purpose to cry wolf and sound paranoid, when nothing that drastic is politically plausible.
3
That's certainly the rumor. These new govt. plans for the private sector are insurance for the bankrupt CalPERS, CalSTRS, PSERS, NVPERS, etc. If those public plans go broke, money will be taken from the private plans and given to the plantation owners (eg. the public workers).
1
Overall, the idea here is a really good one but it would also ask that we start changing our mindset about what retirement is and how we want to be in retirement. The idea of having a lot of money to do what you want with in retirement still exists among many boomers - especially those with portfolios managed by independent financial advisors and individuals who feel they can manage on there own after seeing some returns in a year or specific period. So this plan will need to win over the confidence of a lot of near retirees.
2