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Where all your US tax dollars go?


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#21 Alpha_ProgDes   Crossbones+   -  Reputation: 4688

Posted 19 April 2011 - 07:14 PM

The $1.2m would be for someone making $69,800, I used the same figure as the link. For sh*ts and giggles I did it again at $15k a year (close to minimum wage). Cashier would have $260k at retirement and could draw $1730 a month (and still leave a nice present for his family at death). Compared to $720 a month with social security benefits. Not as striking, and the COLA would probably even out on the monthly level after 40 years, but still interesting nonetheless.

That figure is a bit unrealistic then, don't you think? Assuming you're only considering college-education workers, not every college grad make $60K their first year or even first 3 years. And $1730 a month may be great in the South. But on the coast or metro areas, you'll still be tight for cash. Unless you have no bills whatsoever which is becoming less and less possible in this debt-driven society/economy.
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#22 Hodgman   Moderators   -  Reputation: 29329

Posted 19 April 2011 - 07:38 PM

We all depend on American exceptionalism

Illegal wars are just

Get off my lawn.


#23 Khaiy   Crossbones+   -  Reputation: 1342

Posted 19 April 2011 - 07:38 PM

It also sets up some interesting problems in terms of poor foresight if people can opt in or out of SS. There are a lot of people who don't sock any money away for retirement now, despite the overwhelming goodness of the idea. Even with the striking amount of money it would generate, a lot of people my age (early 20's, just starting their careers) don't even have a retirement account, let alone fund it well.

I don't know how much of it is due to a mindset that includes collecting SS (although that's foolish as well, since it's not a huge amount of money), but what I see a lot more is people simply wanting that little bit of extra money now, future be damned. Many people simply don't plan ahead as much as they ought to. That's not really a reason to continue SS without any changes, but I imagine a United States with optional SS participation producing a lopsided population of elderly people, consigned to little or no money to live on because of decisions they made decades ago.

When could you decide that you wanted out? Could you change your mind later? How would that even work? I'm not saying that such a system can't work, just that it's far from a panacea, and not something that would inherently correct the situation.

#24 Prefect   Members   -  Reputation: 373

Posted 20 April 2011 - 12:40 AM

A person working at 25 who puts 6% of his paycheck in an A rated bond (8% return) will have $1.2m at 65 and with 8% could draw $8k a month for life, not including any 401k or employer matching contributions.

Having an 8% return in the long run is incredibly unrealistic. If you actually look at long run numbers, you'll realize that on average, you can't do significantly better than just putting all the money into long-term government bonds, which are perhaps half that return. Sure, some people manage to beat that number in the short run, but periodic crashes tend to cancel that out - just consider all the stories about people who lost their private retirement funds as a result of financial crises. Also, for everybody that gets lucky and gets incredible returns, there will be more than enough people who don't manage this. Finally, you are conveniently ignoring inflation, which does have a significant effect over such time scales.

So sure, some people will get lucky with private capital-based retirement funds. As a society-wide retirement system, it is a horrible idea.
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#25 ChurchSkiz   Members   -  Reputation: 443

Posted 20 April 2011 - 10:59 AM


The $1.2m would be for someone making $69,800, I used the same figure as the link. For sh*ts and giggles I did it again at $15k a year (close to minimum wage). Cashier would have $260k at retirement and could draw $1730 a month (and still leave a nice present for his family at death). Compared to $720 a month with social security benefits. Not as striking, and the COLA would probably even out on the monthly level after 40 years, but still interesting nonetheless.

That figure is a bit unrealistic then, don't you think? Assuming you're only considering college-education workers, not every college grad make $60K their first year or even first 3 years. And $1730 a month may be great in the South. But on the coast or metro areas, you'll still be tight for cash. Unless you have no bills whatsoever which is becoming less and less possible in this debt-driven society/economy.


I only matched what was on the link. $1730 a month isn't that much, but a person making minimum wage is only going to get $720 a month with social security. So given that information, I'm sure he'd much rather take the $1700. Social security is not retirement, it's not meant to be lived off. Which is why I think we are making a mistake by not encouraging people to be self-sufficient with their money. How many people cash out their 401k because they think the government will take care of them when they get older?

#26 ChurchSkiz   Members   -  Reputation: 443

Posted 20 April 2011 - 11:18 AM

It also sets up some interesting problems in terms of poor foresight if people can opt in or out of SS. There are a lot of people who don't sock any money away for retirement now, despite the overwhelming goodness of the idea. Even with the striking amount of money it would generate, a lot of people my age (early 20's, just starting their careers) don't even have a retirement account, let alone fund it well.

I don't know how much of it is due to a mindset that includes collecting SS (although that's foolish as well, since it's not a huge amount of money), but what I see a lot more is people simply wanting that little bit of extra money now, future be damned. Many people simply don't plan ahead as much as they ought to. That's not really a reason to continue SS without any changes, but I imagine a United States with optional SS participation producing a lopsided population of elderly people, consigned to little or no money to live on because of decisions they made decades ago.

When could you decide that you wanted out? Could you change your mind later? How would that even work? I'm not saying that such a system can't work, just that it's far from a panacea, and not something that would inherently correct the situation.


I thought about both of your issues (opting back in and mismanagement). I thought of a couple solutions. First, when the money is taken out it would not be "free money", but be automatically directed into a new type of account (call it a 402k). This 402k would not be touchable until 62.5 without severe penalty (even more than 401ks). When this solution is requested, there would become several options for investment. A state directed investment with a modest return (say 2% or something), a private directed but approved investment with a more moderate return (say 5-8%), and a pure self-directed account where you can invest as a typical 401k. To get to the last level, you would need to qualify by proving you have other means to take care of yourself when you retire (like a decent 401k), as well as some investment experience (maybe pass a test or something).

This would discourage people from blowing the money when young and provide some buffer for people making dumb investment decisions.

On the flip side, to initiate such a program would require some planning. Someone who's 40 isn't going to just give up social security, so I was thinking you could use the existing ss credit system to determine opting in or out. So for example, if you have 20 credits and you decide to opt you, you can still get 5% of your social security benefits when you retire, but going forward on you can keep your 6.2% for investment. If someone wants to opt back in, they resume gaining credits at the level they had when they opted out. So if you had 50 credits and you opted out, and for 5 years you opt out and then want to opt back in, you resume with 50 credits again for benefit calculation. You would only lose those 5 years where you kept the 6.2%. This would allow not just young people but people in their 30's and 40's to elect to opt out as well without losing all the money they put in initially. I think you gain 4 credits a year so it would probably make sense to opt out up until you are 50 or so. Also, they could make a rule that after the max credits you can't opt out.

#27 way2lazy2care   Members   -  Reputation: 782

Posted 20 April 2011 - 11:18 AM

How many people cash out their 401k because they think the government will take care of them when they get older?


The real question is how many people cash out their 401k because they really like corvettes?

#28 ChurchSkiz   Members   -  Reputation: 443

Posted 20 April 2011 - 11:29 AM


A person working at 25 who puts 6% of his paycheck in an A rated bond (8% return) will have $1.2m at 65 and with 8% could draw $8k a month for life, not including any 401k or employer matching contributions.

Having an 8% return in the long run is incredibly unrealistic. If you actually look at long run numbers, you'll realize that on average, you can't do significantly better than just putting all the money into long-term government bonds, which are perhaps half that return. Sure, some people manage to beat that number in the short run, but periodic crashes tend to cancel that out - just consider all the stories about people who lost their private retirement funds as a result of financial crises. Also, for everybody that gets lucky and gets incredible returns, there will be more than enough people who don't manage this. Finally, you are conveniently ignoring inflation, which does have a significant effect over such time scales.

So sure, some people will get lucky with private capital-based retirement funds. As a society-wide retirement system, it is a horrible idea.


Please provide data, the average return of the S&P 500 over the last 140 years is 10.6%. 8% is a conservative number in investment terms, which amounts to a typical A rated bond (which is a secured investment and thus considered fairly "safe"). Unless someone invests all their money in one stock, or cashes out at the bottom of a crash, their retirement money is going to be ok, as proven statistically over 3 pretty strong market crashes in the last hundred years.

I'm also not conveniently ignoring inflation. Inflation is real but it is also real for SS funds as well. Which means that the current system is even more unstable when you factor in that inflation is outpacing the rate of investment. Rate of return on SS money is around 2.76% (http://www.ssa.gov/oact/progdata/fundFAQ.html), and average inflation is around 3.4% ( http://inflationdata.com/inflation/Inflation/AnnualInflation.asp). So certainly the 8% you can get privately is going to outpace the rate of SS and be a better option for anyone that is smart enough to invest privately.

As for society-wide, I acknowledge that some people really suck with money, which is why the system should be voluntary. If someone wants social security and wants to pay for it, I think that's great. But for a vast population of this country, we are throwing dollars at dimes and told it's a good deal. I'll pay around $300k in 40 years and for that I get a small monthly paycheck and as soon as I die it's gone. And there's a high likelihood by the time I go to retire I will get even less benefits than what is promised to me currently. I am much better off paying a straight tax to those who can't invest and keeping at least some of my money.

#29 frob   Moderators   -  Reputation: 20135

Posted 20 April 2011 - 12:15 PM

We all depend on American exceptionalism

Illegal wars are just

Get off my lawn.


You misquote with "Illegal wars". I never said there was a legal justification for war.


What exactly would make ANY war legal? Law is a function of civil society. Wars by definition are outside of civil society.

Wars cannot ever be a legal matter. Wars mean the law has failed and multiple parties use their own moral judgement and military force to make decisions and elicit change.

The closest you can get is when a large number of people agree that one nation is committing atrocities, and collectively they agree to violate civility and force the group into compliance. That is a painful justification for normally unlawful action hopefully based on moral arguments for the good of humanity at the expense of those who will die. It becomes a mater of human morality, not a legal right.




Thousands of years of recorded history show that when you have enough people there will be tyrants who are willing to destroy their own citizens or destroy the citizens of other nations.

With this many people we can find individuals willing to commit mass murders and even genocide, and left unchecked they will succeed.

The question is simple: Will the rest of the world let the acts continue? Will the powerful nations decide that the actions of a few people are so immoral and destructive against humanity that they must be stopped, even at the cost of international war?

Currently the nation that intercedes is America, who has the largest and most advanced military. It does not need to be America. It could be any nation. It could be a collection of nations. Periods of general global peace is not about which nation intercedes, only if an intercession will happen. When they left unchecked and allowed to grow, history shows the destruction caused by the (for lack of better label) amoral tyrants leave behind is far greater than the damage done in stopping them. Because there are weapons that can destroy the entire world, there is a tendancy to intercede early.
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#30 Alpha_ProgDes   Crossbones+   -  Reputation: 4688

Posted 20 April 2011 - 01:24 PM

Social security is not retirement, it's not meant to be lived off.

Now, I'm being honest, I thought that was the whole point of SS (well originally when it was created). If not, then what was the purpose of its creation?
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#31 ChurchSkiz   Members   -  Reputation: 443

Posted 20 April 2011 - 02:11 PM


Social security is not retirement, it's not meant to be lived off.

Now, I'm being honest, I thought that was the whole point of SS (well originally when it was created). If not, then what was the purpose of its creation?


It's meant to be a supplement to regular retirement income. Social security is a safety net to prevent people from being dead broke when they can no longer work.

Similar to unemployment. It's not enough money to be the sole source of income, it only keeps you from being homeless.

If you have no regular retirement income and you are planning on living off social security, you are going to have a hard retirement.

If you go back to my examples, a person making $70k a year gets $1700 a month, that's a pretty big drop in lifestyle. Likewise someone making $7 an hour only gets $700 a month, and that is hardly liveable in this country.

#32 Prefect   Members   -  Reputation: 373

Posted 20 April 2011 - 03:21 PM



A person working at 25 who puts 6% of his paycheck in an A rated bond (8% return) will have $1.2m at 65 and with 8% could draw $8k a month for life, not including any 401k or employer matching contributions.

Having an 8% return in the long run is incredibly unrealistic. If you actually look at long run numbers, you'll realize that on average, you can't do significantly better than just putting all the money into long-term government bonds, which are perhaps half that return. Sure, some people manage to beat that number in the short run, but periodic crashes tend to cancel that out - just consider all the stories about people who lost their private retirement funds as a result of financial crises. Also, for everybody that gets lucky and gets incredible returns, there will be more than enough people who don't manage this. Finally, you are conveniently ignoring inflation, which does have a significant effect over such time scales.

So sure, some people will get lucky with private capital-based retirement funds. As a society-wide retirement system, it is a horrible idea.

Please provide data, the average return of the S&P 500 over the last 140 years is 10.6%. 8% is a conservative number in investment terms, which amounts to a typical A rated bond (which is a secured investment and thus considered fairly "safe"). Unless someone invests all their money in one stock, or cashes out at the bottom of a crash, their retirement money is going to be ok, as proven statistically over 3 pretty strong market crashes in the last hundred years.

I was speaking from a German perspective, since I know those numbers better. Looking at the last 30 years of the DAX, you get about 5% yearly. Historical data for government bond interest rates always seems to be harder to come by, but as far as I know this has traditionally been fairly stable at something like 4%. I could imagine your 10% number over 140 years is massively overstated because of some periods of incredible returns.

Which brings me back to the main point: Private retirements suck not because some people are bad with money, but because they are inherently more volatile than a government-run can be. (Of course, the downside of this is that the people who run retirement funds have a vested interest in making government-run retirement systems artificially suck, so they invest heavily into lobbying efforts to destroy it.)
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#33 karwosts   Members   -  Reputation: 836

Posted 20 April 2011 - 03:39 PM

This would allow not just young people but people in their 30's and 40's to elect to opt out...


The government can't let people opt out of social security without destroying the system, or severely reducing benefits to lower earners.


The whole system is a progressive tax, and it takes money from the more wealthy earners to give it to those of lower income. If given the choice to be in or out, rationally everyone with higher earnings would opt out because the system is a net loss for them, and everyone with lower earnings would opt in because they get free money.

(Ignoring inflation for the below calculations...)
If you put into the social security calculator that you earn 100,000 a year, lets assume that this puts 12,000 a year into SS in your name. Over 50 years you've contributed 600,000 dollars. If you retire at 70 then you can get a maximum payout of $3000 a month.

If you earn 25,000 a year, then you're only putting in 1/4 as much, but your monthly payout is $1400, which is slightly less than 50% of someone who contributed 4 times as much.

Social security can only function by force, it won't work as an optional system.

http://www.ssa.gov/OACT/quickcalc/index.html
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#34 way2lazy2care   Members   -  Reputation: 782

Posted 20 April 2011 - 04:58 PM

The government can't let people opt out of social security without destroying the system, or severely reducing benefits to lower earners.

The whole system is a progressive tax, and it takes money from the more wealthy earners to give it to those of lower income. If given the choice to be in or out, rationally everyone with higher earnings would opt out because the system is a net loss for them, and everyone with lower earnings would opt in because they get free money.

The point was that the company still pays in the amount they are right now, it's just that the employee holds on to what they would pay.

So for that $100k person, the company would still pay almost $7000/year and the person pays $7000/year. With his idea the company still pays $7000/year, but the person is allowed to keep the $7000 at the cost of their social security benefits or at least part of them.

I kind of like a time based points system. That way people who pay into it the longest get the most out, but people who opt out after 10 or so years still get something.

To ensure they are using their SS income correctly you could have a SS tax deduction where any money put into a certain type of retirement plan can be deducted from the amount you have to pay into SS taxes.

The largest problem, which happens to be part of the problem that caused the financial crisis, is that independent investment raters are less than accurate. The government could set up some sort of branch to handle that that could function like the post office so the government isn't wasting money on it; making their income off of charging people they rate.

This is just me throwing out ideas for such a system, but it sounds good to me.



#35 Alpha_ProgDes   Crossbones+   -  Reputation: 4688

Posted 20 April 2011 - 05:00 PM

Social security can only function by force, it won't work as an optional system.

This may sound very Stalin of me, but honestly, I'm okay with that. I mean, you making millions of dollars a year and you pay into a system that allows the have-nots to continue paying for your services which means that ultimately your money is getting back to you through direct revenue or through investment anyway. So what's the problem? Ideology?



*wow, that was one hell of a run-on sentence, lol.
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#36 Hodgman   Moderators   -  Reputation: 29329

Posted 20 April 2011 - 06:39 PM

What exactly would make ANY war legal? Wars cannot ever be a legal matter.

Ah, you're one of those people. Carry on.

With this many people we can find individuals willing to commit mass murders and even genocide, and left unchecked they will succeed. The question is simple: Will the rest of the world let the acts continue? Will the powerful nations decide that the actions of a few people are so immoral and destructive against humanity that they must be stopped, even at the cost of international war?

You do realise that to a lot of citizens of the world, that question is equivalent to: will the rest of the world step in and attempt a "regime change" against the US?

#37 way2lazy2care   Members   -  Reputation: 782

Posted 20 April 2011 - 07:10 PM


What exactly would make ANY war legal? Wars cannot ever be a legal matter.

Ah, you're one of those people. Carry on.

With this many people we can find individuals willing to commit mass murders and even genocide, and left unchecked they will succeed. The question is simple: Will the rest of the world let the acts continue? Will the powerful nations decide that the actions of a few people are so immoral and destructive against humanity that they must be stopped, even at the cost of international war?

You do realise that to a lot of citizens of the world, that question is equivalent to: will the rest of the world step in and attempt a "regime change" against the US?


What would they change the regime to?

#38 Hodgman   Moderators   -  Reputation: 29329

Posted 20 April 2011 - 07:18 PM

What would they change the regime to?

Probably some nutjob theocracy, or dictorship thinly veiled as a communist utopia, etc, etc.

That's not the point though -- I was just pointing out that, outside of the US, it's a very common view for the unchecked, mass-murdering, genocidal, immoral, destructive bad guy to be the US itself. So if you're asking all people of the world to support efforts to step in and stop this bad guy, you're asking quite a few people to take up arms against the US...

That's why cross-nation bodies such as the UN seem so ineffective and piss-weak when it comes to hard action. Once you take everyone's views into account, it's hard to agree on exactly who is right and who is wrong. A single empire with a single head of state doesn't have to deal with these shades of grey, thus, they get things done, at the cost of being wrong to half the world.

#39 way2lazy2care   Members   -  Reputation: 782

Posted 20 April 2011 - 07:22 PM


Social security can only function by force, it won't work as an optional system.

This may sound very Stalin of me, but honestly, I'm okay with that. I mean, you making millions of dollars a year and you pay into a system that allows the have-nots to continue paying for your services which means that ultimately your money is getting back to you through direct revenue or through investment anyway. So what's the problem? Ideology?

I think the most upsetting part of social security is how inefficient it is compared to just investing. It pays back worse than putting your money in a savings account for the same period of time.

#40 frob   Moderators   -  Reputation: 20135

Posted 20 April 2011 - 08:36 PM


What would they change the regime to?

Probably some nutjob theocracy, or dictorship thinly veiled as a communist utopia, etc, etc.

That's not the point though -- I was just pointing out that, outside of the US, it's a very common view for the unchecked, mass-murdering, genocidal, immoral, destructive bad guy to be the US itself. So if you're asking all people of the world to support efforts to step in and stop this bad guy, you're asking quite a few people to take up arms against the US...

That's why cross-nation bodies such as the UN seem so ineffective and piss-weak when it comes to hard action. Once you take everyone's views into account, it's hard to agree on exactly who is right and who is wrong. A single empire with a single head of state doesn't have to deal with these shades of grey, thus, they get things done, at the cost of being wrong to half the world.


Which leads us full circle to the beginning of this half of the thread. Not to derail the other half of the thread dealing with various social programs.



I completely agree that it would be wonderful if there was a cross-national body that was able and willing to take the "hard action" as you put it. The UN currently is not in that role. NATO is occasionally in that role to varying degrees.

The current global peace keeper that interrupts the "mass-murdering genocidal immoral destructive bad guys" happens to be the United States. 150 years ago it was Britain's military with their global naval forces. Before that, Spain (who before becoming peace keepers traveled the world as conquerers). Before that the world was a different place, but the known-world peace keepers included Rome and their empire, China and their empires, Mongolia and their empire, etc. Before that the world was a bunch of even smaller regions, and the peace keepers were tribal states, which eventually formed into nations and kingdoms ensuring peace between those tribal states.

So while part of me would love to see the US stop acting as a global policeman, another part of me wants to keep hold of that until we have a powerful group who is both able and willing to take decisive "hard action". In the mean time, I feel the money is well spent.
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