Social Security should not be privatized

Republican deficit hawks are recycling one of their old favorites: privatizing Social Security. While many veteran GOP pols are reluctant to tackle the popular entitlement, others believe that George W. Bush’s idea remains the best way to approach the issue.
They are wrong, and a Saturday Wall Street Journal story shows why. The WSJ interviewed couples who had responsibly put money in the stock market through their company 401(k)s. Many don’t have enough for a comfortable retirement, but those with defined pensions are better off.
(If you are a retiree living comfortably with the benefit of Social Security and a defined pension, please resist the impulse to comment smugly about how smart you were. You were lucky.)
From the WSJ
:

The 401(k) generation is beginning to retire, and it isn’t a pretty sight.

The retirement savings plans that many baby boomers thought would see them through old age are falling short in many cases.

The median household headed by a person aged 60 to 62 with a 401(k) account has less than one-quarter of what is needed in that account to maintain its standard of living in retirement, according to data compiled by the Federal Reserve and analyzed by the Center for Retirement Research at Boston College for The Wall Street Journal. Even counting Social Security and any pensions or other savings (emphasis added), most 401(k) participants appear to have insufficient savings. Data from other sources also show big gaps between savings and what people need, and the financial crisis has made things worse.

This analysis uses estimates of 401(k) balances from the end of 2010 and of salaries from 2009. It assumes people need 85% of their working income after they retire in order to maintain their standard of living, a common yardstick. . .

The problems are widespread, especially among middle-income earners. About 60% of households nearing retirement age have 401(k)-type accounts, according to government data, and those represent the majority of most people’s savings. The situation is less dire for those in a higher income bracket, who tend to save more outside their 401(k) accounts and who have more margin for error if their retirement returns fall below the recommended 85% figure. . .

In general, people facing problems today got too little advice, or bad advice. They didn’t realize that a 6% annual contribution, with a 3% company match, might not be enough.

Some started saving too late or suspended contributions when they or their spouses lost jobs. Others borrowed against 401(k) accounts for medical emergencies or ran up debts too close to their planned retirement dates.

In the stock-market collapses of 2000-2002 and 2007-2009, many people were over-invested in stocks. Some bailed out after the market collapse, suffering on the way down and then missing the rebound. . .

Consider households headed by people aged 60 to 62, nearing retirement, with a 401(k)-type account at their jobs.

Such households had a median income of $87,700 in 2009, according to data from the Center for Retirement Research at Boston College, which derived this and other numbers by updating Fed survey data, at The Journal’s request. The 85% needed for retirement would be $74,545 a year.

Experts estimate Social Security will provide as much as 40% of pre-retirement income, or $35,080 a year for that median family. (Emphasis added) That leaves $39,465 needed from other sources. Most 401(k) accounts don’t come close to making up that gap.

In the long run, workers will probably have to either work until they are 70, scale back their retirement dreams substantially or a combination of the two, as Megan McArdle, a center-right economics writer for The Atlantic Monthly, points out:

Whether Americans know it or not, they have spent decades basing their retirement plans on expectations of big capital gains in their houses and stock portfolios. But no system can completely protect us from the problem of lower asset returns. Schrager suggests that unless we suddenly become willing to save a huge chunk of our income every year, we may need to rethink our retirement plans. “I don’t know if it’s ever going to be realistic that everyone saves enough to spend the last third of their life on vacation,” she says.

That’s all right for economists and journalists, who can probably spend a good bit of their golden years at a desk, typing. But is that realistic, or appealing, for people with less cerebral jobs? Realistic or not, it may be the future for all of us.

Social Security must be preserved as a defined-benefit. Otherwise, the United States can look forward to returning to a time when many of the elderly lived in poverty. And, in the future, there will be far more of them than there were in the 1930s.

320 comments Add your comment

DW

February 21st, 2011
9:33 am

Good Grief

February 21st, 2011
9:37 am

“(If you are a retiree living comfortably with the benefit of Social Security and a defined pension, please resist the impulse to comment smugly about how smart you were. You were lucky.)”

I stopped reading at that point because it was obvious that anything else would be the same old recycled liberal talking points. If you have money now, it’s not because you worked hard for it, you were just “lucky.”

Road Scholar

February 21st, 2011
9:40 am

And throw in the age discrimination which appears to be happening during this recession…and now the inflation occuring…doesn’t paint a pretty picture of retirement for some!

They might roll back the age for SS, but keep your hands of and ideas of privatization to your own investments.

Road Scholar

February 21st, 2011
9:43 am

Good Grief: Could the roots of what was being discussed be that all investments have a risk, and some are riskier than others? Not all people are financial wizards like you must be!

Tommy Maddox

February 21st, 2011
9:45 am

Those lucky retired folks have money? Where’s the stoning mob?

granny godzilla

February 21st, 2011
9:48 am

Social Security must be preserved as a defined-benefit. Otherwise, the United States can look forward to returning to a time when many of the elderly lived in poverty.

AMEN!

We the people are our brothers keepers…..

emmysmom

February 21st, 2011
9:49 am

“Otherwise, the United States can look forward to a time when many of the elderly lived(sic) in poverty.”

If the elderly are living on social security now, they are living in poverty.

Hootinanny Yum Yum

February 21st, 2011
9:50 am

I really wanted to comment on your previous topic, “Paul Broun’s hypocrisy on black children”, but the comments were closed before I had a chance.

So maybe Paul Broun’s comments hypocritical. But what about the actions of blacks regarding personal responsibility and accountability?

Tamara Cotman, an area superintendent for the Atlanta Public Schools, is under investigation for telling principals to write “Go to hell” memos to GBI agents investigating cheating on the CRCT

Atlanta’s Concerned Black Clergy speaking out against Atlanta District Attorney Paul Howard’s criminal investigation into CRCT cheating

Two Clayton commissioners voice support for Wole Ralph after DUI charge

The homeowners and teens attending a “sweet 16″ party being less than cooperative with investigators investigating a shooting at the party

At what point will you, Cynthia Tucker, hold blacks accountable as opposed to facing the real issue at hand.

AlG

February 21st, 2011
9:53 am

I’m about to turn 64, and not yet taking SS benefits. If I had the option of investing all I put into SS since I was a teenager, even at basic bank CD rates of return, I’d be way better off. Plus, I would not see the Cynthia Tuckers of the world declaring me “lucky” and too well off to get the benefits I paid for.

Obama doesn't get it

February 21st, 2011
9:54 am

Toby Harden is spot on today –

“…The protests in Wisconsin coincided with Obama presenting his new budget in Washington. Despite all his talk of moving to the centre and cutting the national debt, Obama showed he was utterly unserious about dealing with the US government’s catastrophic addiction to spending.

He cast aside the tough measures recommended by the bipartisan Deficit Commission he appointed and failed to tackle what everyone knows is the main financial drain – the big “entitlement” programmes of Social Security, Medicare (for the elderly) and Medicaid (for the poor).

What Obama proposed would do nothing more than slow down the rate of increase in the national debt. No responsible citizen would run their own household finances this way.

Depressingly, Obama’s calculation seems to be that he can talk a good game on the deficit and spout vacuous slogans like “winning the future”. He’ll leave it to Republicans to propose swingeing cuts in entitlement programmes and then suffer a backlash from frightened voters at the polls in 2012. At least, that’s what happened in 1996. But Obama does not seem to have noticed that 2012 is not 1996.

The fact that a president would use his own campaign foot soldiers to back public employees against their elected state government shows how distorted his priorities have become. Instead of confronting unions, as President Ronald Reagan did with the air traffic controllers in 1981 when he fired more than 11,000 of them, Obama is facilitating them…”

granny godzilla

February 21st, 2011
9:57 am

Obama doesn’t get it

Please prove this…

“use his own campaign foot soldiers to back public employees against their elected state government”

I think that’s a big lie.

Reality K

February 21st, 2011
10:00 am

We the people are our brothers keepers…..

Many of our “brothers” should not have been kept!!!

Oh Please!!!

February 21st, 2011
10:02 am

Let’s not have people owning their own money. It must be kept by the Federal Government and doled out as the politicians see fit. Privitizing Social Security would only serve to allow people who paid these taxes to actually keep that money. Heaven forbid that workers keep their money and even pass along that money to their family members when they pass away.

Kamchak

February 21st, 2011
10:02 am

If I had the option of investing all I put into SS since I was a teenager, even at basic bank CD rates of return, I’d be way better off.

Everyone’ hindsight is 20/20, sport.

Not at the Trough

February 21st, 2011
10:03 am

If the Congress would quit dipping into Social Security I would be for you this time cynthia. I figure if you let people invest on their own, an awful lot of them, the same ones that are irresponsible now, will be irresponsible, and either won’t save or invest or make bad investments due to ignorance, and they will still be whining for something more from the government trough anyway. People who are told repeatedly that the government will take care of them aren’t magically going to decide to take care of themselves. In this country it is too easy not to, and to still have the big screen TV, and the bling and fake nails.

granny godzilla

February 21st, 2011
10:06 am

Reality K

Thankfully you have not been appointed by God or our country to make that choice.

Ragnar Danneskjöld

February 21st, 2011
10:06 am

Every entity that sponsors a “sufficient” defined benefit program is bankrupt, or at the door of bankruptcy. So whether social security ought to remain a defined entity requires one to choose (a) whether the sponsor ought to be bankrupt, or (b) whether the defined benefit ought to remain so low as to ensure poverty for the recipient.

On the other hand, allowing the recipient a voice in the investment of the funds allows potential gains, and potential losses, all of which would be due to the election of the investor. Those of us who believe in freedom think the individual ought to have the right to invest, and win or lose based on our investment. We would choose to not allow a bureaucrat, or worse, a congress, to select our investment vehicle.

Oh Please!!!

February 21st, 2011
10:07 am

What if the government is afraid that Social Security is going bankrupt? How do they prevent that?
Answer: Raise the retirement age, reduce the benefits, or (for the conspiracy theorists) euthanasia. Of course euthanasia would require government control of heatlh care.

Jimmy62

February 21st, 2011
10:07 am

Those 401ks still get a better return than social security.

Hootinanny Yum Yum

February 21st, 2011
10:07 am

I just wet my Depends!!! Kamchak said, “sport”.

Just saying..

February 21st, 2011
10:08 am

Good Grief: Could you please define pre-judging?

Bubba

February 21st, 2011
10:09 am

‘Everyone’ hindsight is 20/20, sport.’

That ain’t hindsight, Kam. My dad was grousing about that 50 years ago.

luangtom

February 21st, 2011
10:09 am

This is certainly typical Liberal view-point. I am not “lucky” because there is some money left in my 401(k) account. I investigated and consulted as to where those meager funds should go. I did not gamble, I did not see over-inflated numbers and follow that dream. I was pushed into utilizing a 401(k) plan due to my place of employment being bought up by a foreign owner that knew nothing of defined benefit programs. They rolled all of the funds of the defined programs into personal 401(k) plans and literally skimmed a full one-third off the top for “administrative” fees. So, do not tell me how “lucky” I am. I am lucky to be able to make it from one month to the next. Luck has nothing to do with my funds themselves. I guess I am lucky the market has not reacted worse than it has. Otherwise, I would be participating in the “nanny state” that CT subscribes to.

james

February 21st, 2011
10:11 am

Everyone’ hindsight is 20/20, sport.-

actually Kam it may be the genesis of a pretty good point. CDs (under the FDIC guidelines) or treasuries are more “risk free” rates of returns. I have always thought a solution to the current China/debt malaise is to issue more debt to the “us” being US taxpayers. I even has a DC name for the instruments “Freedom Bonds”- cute, huh?

Why have what amounts to two massive ponzi schemes- US treasuries held by foreigners and the Social Security system?

granny godzilla

February 21st, 2011
10:12 am

Oh Please

“What if the government is afraid that Social Security is going bankrupt? How do they prevent that?”

OR the best and simplest option….

Raise the cap of $106,800 on Social Security taxes (an increase for the top 6% of income earners)

hobby

February 21st, 2011
10:13 am

granny– you believe that anything that is said against Barry is a lie…….one day (maybe) you will see the truth….but I doubt it.

Kammy,sport—- in 20/20 hindsight SS should never have been enacted at all!!

Jimmy62

February 21st, 2011
10:13 am

This also points to the fatal flaw in social security. We spend the first third of our lives basically not saving. The next third we save, and use that to get through the last third. That last third used to be more like the last tenth, but now we live longer, healthier lives but retire at the same age. Not sustainable, nor should the young be expected to pay for old people to not work for a third of their lives, that’s not fair to the young.

What does that mean? For one, we need to be serious about raising the age for SS benefits, which originally were set to life expectancy, and now falls far short of when most people need to retire. An average 66 year old man is far more active today than a 66 year old man was 50 years ago.

Quedawg12

February 21st, 2011
10:15 am

Not at the trough…………..I thought we were talking about social security???? Where did the “big screen TV, and the bling and fake nails” come into the picture. You are headed down the road of no return with some pretty fragile comments. For the record, I do not know any of the elderly with these items.

granny godzilla

February 21st, 2011
10:17 am

hobby

“you believe that anything that is said against Barry is a lie”

Piffle

in fact double piffle with a cherry on top.

Jimmy Stewart

February 21st, 2011
10:19 am

Every time Kamchak says “sport”, an angel gets their wings.

Oh Please!!!

February 21st, 2011
10:19 am

granny, you left off raising the tax rate too. BO actually lowered the SS tax rate from 6.2% to 4.2% on employ withholdings. Of course the companys (or as President Obama calls them The Enemy) will still have to pay the 6.2%.

hobby

February 21st, 2011
10:19 am

if you were counting on SS to sustain you in your old age (like was promised) <you were gullible
if you worked hard, saved and invested (and now have money in retirement) <you were smart, not lucky!

hobby

February 21st, 2011
10:22 am

Granny
“in fact double piffle with a cherry on top.” <——piffle

Quedawg12

February 21st, 2011
10:22 am

Hobby………….Did you read the article or did you just get to the point where you disagreed and spewed???

jconservative

February 21st, 2011
10:23 am

Social Security will not be privatized any time soon. It will be difficult enough to simply extend the eligibility age to save the program. A major overhaul to the basic concept will need to wait for another day.

But some observers do feel that the 2% FICA “holiday” now in effect may lay the groundwork for a major change in the program. The question is how many are taking that 2% and putting it into a retirement nest egg?
I would guess most are spending every penny of it.

I trust anyone planning retirement is factoring in Social Security proceeds as just one of several sources of income.

As my dad used to tell me, it is not how much you make that is important, but rather how much you keep.

Conservative Blasphemer

February 21st, 2011
10:23 am

Conservatives and their “every man for himself” rhetoric make me physically ill. “I’m smart, I have money, I work(ed) hard, blah, blah, blah”.

These social Darwinists are so proud of their accomplishments that they can’t fathom that not everyone is capable of making financially sound choices. What a lovely world indeed that would endow its people with foresight, critical thinking abilities, and unfettered opportunity from birth. Alas, that world is an idealist’s world, a principle and not a way of life.

Mistakes or market collapse would mean these people would be left empty-handed at a time of their lives when they can no longer seek gainful employment.

Let ‘em die. It’s all their fault. I could care less. Yes, that is the creed of the ever-so-arrogant conservative know-it-all.

Bubba

February 21st, 2011
10:23 am

When I was in high school, they had a SS bureaucrat come into our civics class to talk about how wonderful the retirement system is. He took questions at the end, and I asked him why Social Security couldn’t be voluntary. He looked like someone had just kneed him in the groin and said “that just wouldn’t work.” Then he called on somebody else.

Say What?

February 21st, 2011
10:24 am

The problem is that SSI was never meant to be a retirement plan! It was to assist those who needed it during retirement (and of course funded by the wealthy). Then it turned into a cash cow for the gov’t, not to mention a political tool to scare the death out of the elderly. SOme would also say a racist tool, as the expected longivity of the averagel black man is less than age 65.

I’m not an economix expert (and neither is Ms ‘Talking-Points’ Tucker) so I can’t say if privatizing SSI is the answer, but I do know that loaning the gov’t money with an interest rate of 1% with no promise to ever pay back a penny (ie, death before retirement age) is NOT the answer. My 95 yr old grandmother has managed to pay her bills having invested in nothing but bank CD’s her entire life. If she can do it, so can most Americans.

I feel a Self-DIrected, diversified portfolio (think outside Wall Street) is the answer – not Government.

wtf?

February 21st, 2011
10:26 am

let me get this straight….what passes for a journalism these days is someone copy/pasting a wall st. journal article about how bad 401k’s are doing lately, then make the jump to the evil republicans who want to give us more control of our money and you get the headline ’social security should not be privatetized’?

People in the know in the financial world are laughing at your article CT.

Complete rubish, not even worth arguing about, 10th grade journalism at best, 3rd grade personal finance at best

MiltonMan

February 21st, 2011
10:27 am

What libtards fail to mention with SS:

(1) If you are single & die prior to retirement all of your SS “Investment” is lost forever to the Governement. As opposed to having this money to yourself & willing it to someone of your chosen.
(2) Everybody gets a piece of the SS pie today – widowers with young kids, disabled, etc. The “retirement” system is no longer a retirement system.
(3) Obama the liar stated he never raised taxes but the cap of SS keeps going higher & higher – now $106k with the clown wanting to drop the cap. You know the old libtard line – sock it to the evil “rich”
etc.

Quedawg12

February 21st, 2011
10:28 am

Bubba…………..You are a LIAR. That never happened. Mainly because you parents and the parents of other students would have had a hissy fit over a “bureaucrat” coming into the classroom!!!!!LOL

goldrushhurry

February 21st, 2011
10:28 am

many of you will howl at night with the wolves, of course you realize that Ms, Tucker is right but you seemingly would quietly sleep on a park bench than admit the truth. shame on you.

Typical Demotard

February 21st, 2011
10:28 am

Conservative Blasphemer

“…they can’t fathom that not everyone is capable of making financially sound choices…. Let ‘em die. It’s all their fault. I could care less. Yes, that is the creed of the ever-so-arrogant conservative know-it-all.”

> So you Finally admit it – Democrats are fat, dumb, poor and lazy! I’ve always known this.

Conservative Blasphemer

February 21st, 2011
10:29 am

Typical Conservative

There’s as many conservatives that fall under that description as liberals.

If you need a phonics lesson to sound out that sentence, let me know.

hobby

February 21st, 2011
10:30 am

wtf
“Complete rubish, not even worth arguing about, 10th grade journalism at best, 3rd grade personal finance at best”

I agree!! But look at the average audience that she writes for

Just saying..

February 21st, 2011
10:30 am

Ragnar: You do not have the facts to back up your “every entity is bankrupt” statement, because such facts don’t exist.
And if you become informed about the real life results of workers managing their 401(k)s, you’ll discover that the great majority of people don’t do well competing against market professionals.

JimW

February 21st, 2011
10:30 am

Granny @ 9:57
“Please prove this…

“use his own campaign foot soldiers to back public employees against their elected state government”

I think that’s a big lie.”

Actually, it would be better if you would state the facts that substantiate YOUR belief. Just because you don’t agree with someone doesn’t automatically make what they say a lie. Rather than calling people liars, an intelligent discourse about the facts would be more useful.

MiltonMan

February 21st, 2011
10:31 am

Latest number of companies opting out of the wonderful ObamaCare: 730.

Conservative Blasphemer

February 21st, 2011
10:32 am

Uh, Jim, it’s normally incumbent upon the party making a claim to prove its merit.

Burden of proof, and all that. Just sayin’.

abama sin laden

February 21st, 2011
10:32 am

Hobby for prez!! Repeal ALL give away(hand outs, vote buying) SOCIAL(money STOLEN from TAXPAYERS) PROGRAMS. I will give anyone a hand up.I don’t give hand outs.