Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Politics : Formerly About Advanced Micro Devices -- Ignore unavailable to you. Want to Upgrade?

To: steve harris who wrote (213521)	12/18/2004 9:22:05 AM
From: RetiredNow	Read Replies (2) \| Respond to of 1575273

Hi all, been away for some time. Came back to catch up and realized that my posts were becoming increasingly shrill. It seems as though the palpable hate of the Islamic terrorists is so infectious that they've managed to ignite hate in a fat, old, gray, bald, otherwise genial, and peaceful man...myself. Therefore, I think I'm tired of debating who is the worst terrorist, as well as the moral solvency of Islam in general. So at least for myself, on to more interesting and personally meaningful debates: Social Security! Not sure if anyone is still debating social security, but I pulled some figures from the Social Security Administration's site. This may help people think more clearly about the future of the program: Current Net Present Value of all inflows and outflows of SS through 2078, less current assets in the SS trust fund = ($3.7 Trillion) This represents the current UNFUNDED obligation that the U.S. cannot meet. An obligation is the same thing as a liability on a balance sheet. To pay this amount, the government would have to increase taxes or take on more debt. But it gets worse. The true unfunded balance should be measured as if the trust fund would exist in perpetuity. Therefore, the following estimate: Current Net Present Value of all inflows and outflows of SS through 2078, less current assets in the SS trust fund = ($10.4 Trillion) These are the Social Security Administration's OWN ESTIMATES. So what are some of the choices to pay off this debt? 1) increase taxes 2) reduce benefits 3) borrow money some time in the future to cover outflows in excess of inflows 4) tag all inflows to the contributor's social security number, borrow money today to fund the transition, and payout all future retirees only according to amounts sustainable by their own contributions to the system. One additional, twist to the last option, is that you can ensure people don't experience a reduction in benefits, by allowing them to invest in the market to earn a higher return. However, the gov't currently earns about 5.8% on it's own invested assets (currently around $1.5 trillion). So all those amounts privatized will maybe earn 8%. Then subtract 1% for administrative fees and you get down to 7%. Yet market returns come with market risk. So the real question is whether an extra 1.2% per year is worth the increased risk? Only each of you can answer for yourself. For me, I'd prefer the market risk. I'd take my own privatized portion and invest it in an horizon appropriate Fidelity Freedom Fund and forget about it. That way, I've optimized my risk/return/investing horizon opportunity. Here's my conclusion after reading the report. The SS program is indeed in trouble. Outflows begin to exceed inflows in 2018. The SS Trust Fund will have $0 in assets in 2042. Beyond that year, excess benefits paid over incoming contributions will have to be added to the gov't budget every year. Now luckily for me, I will be long retired by then and probably even dead. So I'm not impacted. But anyone under 27 may care quite a bit, because you'll be 65 or younger in 2042. So if you are 27 and under, you'd better pay very close attention to what Bush is proposing, because what he's doing is one small step in the right direction. As you can see above, we already owe the money to the conservative tune of $3.7 trillion. However, it is UNFUNDED. That means, the U.S. gov't doesn't know where they'll get to the money yet to meet it's obligation to current contributors to SS. One way to meet that obligation is to take on more debt. That's not fiscal irresponsibility. It's actually VERY responsible, because it is an ackowledgement of the gov't responsibility to the paying current workforce. If they wan't to fund the entire balance through 2078, they would have to almost double the current national debt by adding the $3.7 trillion. So the solution that you are looking for is one that will NOT cost you or I any additional money, while maintaining your future benefits. The ONLY way to do that is to make more money than the gov't currently makes on the SS trust fund. And that means taking on market risk. We don't want to politicize the stock market by allowing our gov't to invest our money for us, so that means privatization. But again, you're going to have to beat a 5.8% return. That's should be easy to do, especially for those under 27, who have an investing horizon of 38 years. Some food for thought, for you all.