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Thread: Forced retirement savings

  1. #1

    Forced retirement savings

    I'm having a debate with my friend. We are both concerned with the low savings rate in this country, the amount of personal debt that people carry, and the large expectations that people will be able to live off of Social Security for their retirement.

    My friend suggests that we force people to save for their retirement. Take a percentage of their income and throw it in an index fund until they turn a certain age. I disagree because I think people should be free to be financially responsible or irresponsible. I also think that we shouldn't bail out those who choose to be financially irresponsible. Your thoughts?

  2. #2
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    Forcing people is a terrible idea. I am against anything that restricts financial freedom. However, I would like to see policies that encourage savings and discourage spending. While I am not the first to have this idea, I would like to see the following:

    Elimination of all taxes on savings and capital gains.
    Lowering tax rates across the board on earned income.
    Introduction of a national sales tax.
    A negative income tax rate on the first x* to counter the effect a sales tax would have on the poor. x* being some level slightly above the poverty level

    I would try to make this as tax neutral as possible. But , this could go a long way to promote savings and help curb our twin deficits

  3. #3
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    [QUOTE=BrooklynBound]I'm having a debate with my friend. We are both concerned with the low savings rate in this country, the amount of personal debt that people carry, and the large expectations that people will be able to live off of Social Security for their retirement.

    My friend suggests that we force people to save for their retirement. Take a percentage of their income and throw it in an index fund until they turn a certain age. I disagree because I think people should be free to be financially responsible or irresponsible. I also think that we shouldn't bail out those who choose to be financially irresponsible. Your thoughts?[/QUOTE]

    Forcing them to save is not a good idea (which is what SS amounts to)....encouraging them is better....

    If you privatize social security people can actually see their own assets grow, rather than just get a statement once a year that makes no sense at all to the common person...people will then be more motivated to then save additionally for themselves knowing they will either reap the benefits as retirement income and/or their beneficiaries will get the money saved if they should pass.......

  4. #4
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    [QUOTE=Lawyers, Guns and Money]Forcing people is a terrible idea. I am against anything that restricts financial freedom. [B]However, I would like to see policies that encourage savings and discourage spending.[/B] While I am not the first to have this idea, I would like to see the following:

    Elimination of all taxes on savings and capital gains.
    Lowering tax rates across the board on earned income.
    Introduction of a national sales tax.
    A negative income tax rate on the first x* to counter the effect a sales tax would have on the poor. x* being some level slightly above the poverty level

    I would try to make this as tax neutral as possible. But , this could go a long way to promote savings and help curb our twin deficits[/QUOTE]


    Bold part cannot happen in a capitalist world. The whole concept of capitalism, and the forum we are moving toward with a world economy centered in globalism makes that statement impossible.

    To keep the wheel of capitalism turning, spending and investing are the name of the game.

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    [QUOTE=CanadaSteve]Bold part cannot happen in a capitalist world. The whole concept of capitalism, and the forum we are moving toward with a world economy centered in globalism makes that statement impossible.

    To keep the wheel of capitalism turning, spending and investing are the name of the game.[/QUOTE]


    please explain, not following at all.

  6. #6
    [QUOTE=CanadaSteve]Bold part cannot happen in a capitalist world. The whole concept of capitalism, and the forum we are moving toward with a world economy centered in globalism makes that statement impossible.

    To keep the wheel of capitalism turning, spending and investing are the name of the game.[/QUOTE]

    Well, it could be initiated by the government of course.


    You realize that investing is extremely capitalistic, right? Someone has to invest your money, and they take a fee for doing so. I'm surprised companies like Vanguard, Fidelity, etc. don't run more financial education programs at the high school/college level. Hook in a kid young and you've got yourself a long revenue stream.

  7. #7
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    [QUOTE=CanadaSteve]Bold part cannot happen in a capitalist world. The whole concept of capitalism, and the forum we are moving toward with a world economy centered in globalism makes that statement impossible.

    To keep the wheel of capitalism turning, spending and investing are the name of the game.[/QUOTE]


    Steve, sorry if I wasn't clear. I meant these policies on a personal level. And by discourage, I do not mean eliminate or prevent. To increase the savings rate, spending has to be reduced. Obviously a national sales tax won't eliminate personal (or any other type of) spending. Hope this clarifies. But I still don't understand your statement. Increasing the savings rate is completely possible in a "capitalist world."

  8. #8
    [QUOTE=BrooklynBound]I'm having a debate with my friend. We are both concerned with the low savings rate in this country, the amount of personal debt that people carry, and the large expectations that people will be able to live off of Social Security for their retirement.

    My friend suggests that we force people to save for their retirement. Take a percentage of their income and throw it in an index fund until they turn a certain age. I disagree because I think people should be free to be financially responsible or irresponsible. I also think that we shouldn't bail out those who choose to be financially irresponsible. Your thoughts?[/QUOTE]

    What your friend is suggesting sounds like the current SS system to me. A portion of pay along with a match by their employer which might as well be considered part of their pay is forced into a Government retirement fund.

    If you look at the tax code we have all kinds of government incentives to save. IRA, HSA, Keoghs, Self directed pensions, 401K, 401B it goes on and on. The tax benefits for people to save can be enormous if people just fully utilize what's available. There are plenty of people who have never made big incomes who are multi millionaires through frugal living and saving, just as there are many people who make very little money who are living as if they were multi millionaires through debt. It's a free society and people need to take responsibility for themselves. If you eat badly and don't exercise your risk of a heart attack or other health issues goes up. If you spend more than you make to support a life style you can't afford your risk of financial ruin goes up. The real formula for success is self discipline and education not forced savings.

  9. #9
    flushingjet
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    [QUOTE=Winstonbiggs]What your friend is suggesting sounds like the current SS system to me. A portion of pay along with a match by their employer which might as well be considered part of their pay is forced into a Government retirement fund.

    If you look at the tax code we have all kinds of government incentives to save. IRA, HSA, Keoghs, Self directed pensions, 401K, 401B it goes on and on. The tax benefits for people to save can be enormous if people just fully utilize what's available. There are plenty of people who have never made big incomes who are multi millionaires through frugal living and saving, just as there are many people who make very little money who are living as if they were multi millionaires through debt. It's a free society and people need to take responsibility for themselves. If you eat badly and don't exercise your risk of a heart attack or other health issues goes up. If you spend more than you make to support a life style you can't afford your risk of financial ruin goes up. The real formula for success is self discipline and education not forced savings.[/QUOTE]

    Good points, yet the tax code and laws are so Byzantine most people
    have no idea what they can do, or can't do re: their savings.

    They dont understand the tax code or what deductions they can take,
    or not.

    Employers confuse the issue more IMO by designating employees HCEs even if they arent on the board of directors or a major stockholder, or giving a limited palette of investment options

    In general, I believe most people dont know how to manage what theyve already got to the maximum potential-Ive worked for 3 large companies and in each case the fund manager says most people are so risk averse that they stick the majority of their 401K deduction in the Money Market / "Stable" Funds and get returns that are less than say, more agressive stock funds or even comparable CDs.

    However, the Goverment approved index fund or group of funds deduction is just what the GOP has already suggested occur, with taxpayer choice to invest in it, or not, uyet Democrats always shout it down as tampering, risky, etc and that the SS funds are in a immutable "lockbox"

    As we all know there's no such thing. It's been explained ad nauseum here already.

    Even if now, finally after waiting for decades, we get a yearly statement summarizing our lifetime contributions and what we would expect to receive with certain retirement scenarios,
    a monthly doleout of X Thousand at retirement seems hardly appealing, or a fair ROI.

    Myself, I've already made 30 years of mandatory contributions exceeding $100K and counting; knowing that I will not receive a fair/decent
    ROI, or the ability to manage it, or draw upon it in any size portion I desire is beyond annoying to say the least.

    It's like if I receive any part of it back at all I should shut up
    and be happy.

  10. #10
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    [QUOTE=Winstonbiggs]What your friend is suggesting sounds like the current SS system to me. A portion of pay along with a match by their employer which might as well be considered part of their pay is forced into a Government retirement fund.

    If you look at the tax code we have all kinds of government incentives to save. IRA, HSA, Keoghs, Self directed pensions, 401K, 401B it goes on and on. The tax benefits for people to save can be enormous if people just fully utilize what's available. There are plenty of people who have never made big incomes who are multi millionaires through frugal living and saving, just as there are many people who make very little money who are living as if they were multi millionaires through debt. It's a free society and people need to take responsibility for themselves. If you eat badly and don't exercise your risk of a heart attack or other health issues goes up. If you spend more than you make to support a life style you can't afford your risk of financial ruin goes up. The real formula for success is self discipline and education not forced savings.[/QUOTE]

    which is why privatization of SS makes sense to me....

    people may not have the discipline or may not even know that they have it...yet if they see something tangible, such as a privatized SS account which is there and growing for multiple purposes in the future, that would encourage the discipline to save further...

  11. #11
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    [QUOTE=Lawyers, Guns and Money]Steve, sorry if I wasn't clear. I meant these policies on a personal level. And by discourage, I do not mean eliminate or prevent. To increase the savings rate, spending has to be reduced. Obviously a national sales tax won't eliminate personal (or any other type of) spending. Hope this clarifies. But I still don't understand your statement. Increasing the savings rate is completely possible in a "capitalist world."[/QUOTE]

    Sorry, misunderstood what you were talking about. Disregard what I said above.

  12. #12
    [QUOTE=Come Back to NY]which is why privatization of SS makes sense to me....

    people may not have the discipline or may not even know that they have it...yet if they see something tangible, such as a privatized SS account which is there and growing for multiple purposes in the future, that would encourage the discipline to save further...[/QUOTE]


    This may be a skirt of the issue but in fact your SS pay in is not for you at all, it's is for the current SS recipients. Your benefits are tied into what you paid in but in fact the system is designed so that current workers are paying in for current retired recipients. The notion that your SS contribution is your money is false which is one of the problems with the Republican argument.

    Besides the government using SS as a slush fund, the reason SS is failing is because the ratio of workers to retires has shifted dramatically from a huge multiple of workers paying in to recipients taking out to a very small multiple.

  13. #13
    flushingjet
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    [QUOTE=Winstonbiggs]This may be a skirt of the issue but in fact your SS pay in is not for you at all, it's is for the current SS recipients. Your benefits are tied into what you paid in but in fact the system is designed so that current workers are paying in for current retired recipients. The notion that your SS contribution is your money is false which is one of the problems with the Republican argument.

    Besides the government using SS as a slush fund, the reason SS is failing is because the ratio of workers to retires has shifted dramatically from a huge multiple of workers paying in to recipients taking out to a very small multiple.[/QUOTE]

    Unless you unwisely have me on ignore,
    I just wrote 2 posts below,

    [b]However, the Government approved index fund or group of funds deduction is just what the GOP has already suggested occur, with taxpayer choice to invest in it, or not, yet Democrats always shout it down as tampering, risky, etc and that the SS funds are in a immutable "lockbox"[/b]

    [b]As we all know there's no such thing. It's been explained ad nauseum here already.[/b]

    So what do you mean about "Republican argument"? Democrats like Algore
    are the ones always yammering that its set aside for us. Yet since its inception, benefits have been expanded beyond its original scope, and the money is NOT set aside, like a 401K or Pension fund.

    Also, the money is supposed to be our (i.e. the ones who paid into it) money, not doled out like Xmas cookies to any and all who queue up for
    associated benefits outside the original scope of the program.

    A safeguarded trust fund should not be perverted into a Ponzi scheme

    To want your own money safeguarded from public use/misuse with
    the option of managing it should not a partisan issue-if we're dumb
    enough to manage 401Ks, IRAs, Stock portfolios, et al we're dumb enough
    to select a managed SSI choice

  14. #14
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    We already have a forced retirement savings vehicle in the form of SS. I don't think we need another one although I'm a big fan of automatic 401(k) enrollments when people are hired. Make people "opt out" rather than have to sign up and I think you'll end up having people participate in 401(k)'s in far greater numbers. My only fear is that SS will eventually include an income or asset test and pay lower benefits to those who make more money or have more assets. Those of us maxing out the SS cap each year are contributing much more than the average American....and I don't mind that but don't reduce the benefits later to those who actually contributed the most.

  15. #15
    [QUOTE=flushingjet]Unless you unwisely have me on ignore,
    I just wrote 2 posts below,

    [b]However, the Government approved index fund or group of funds deduction is just what the GOP has already suggested occur, with taxpayer choice to invest in it, or not, yet Democrats always shout it down as tampering, risky, etc and that the SS funds are in a immutable "lockbox"[/b]

    [b]As we all know there's no such thing. It's been explained ad nauseum here already.[/b]

    So what do you mean about "Republican argument"? Democrats like Algore
    are the ones always yammering that its set aside for us. Yet since its inception, benefits have been expanded beyond its original scope, and the money is NOT set aside, like a 401K or Pension fund.

    Also, the money is supposed to be our (i.e. the ones who paid into it) money, not doled out like Xmas cookies to any and all who queue up for
    associated benefits outside the original scope of the program.

    A safeguarded trust fund should not be perverted into a Ponzi scheme

    To want your own money safeguarded from public use/misuse with
    the option of managing it should not a partisan issue-if we're dumb
    enough to manage 401Ks, IRAs, Stock portfolios, et al we're dumb enough
    to select a managed SSI choice[/QUOTE]


    Flushing, why would I ever put you on ignore? One of my favorite posters.

    The money that is being taken out of your check by both you and your employer is not your money, it is money going to current beneficiaries. Your money will in fact come from future workers. A 401K plan or other retirement plan is set aside specifically for you.

    If we pull money out from the current workers for their retirement, we will still need to pull out the same amount of money from them for current beneficiaries.

    You want to make an argument that the fund should go into stocks so the overall return is better that's one debate. The reality is SS paycheck deductions is a tax payed to current beneficiaries it is not a pension like a 401K that's set aside for the individual who is paying into it, in fact the system would prefer that the people paying into it are dead so they don't get the benifit.

  16. #16
    flushingjet
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    [QUOTE=jetstream23]We already have a forced retirement savings vehicle in the form of SS. I don't think we need another one although I'm a big fan of automatic 401(k) enrollments when people are hired. Make people "opt out" rather than have to sign up and I think you'll end up having people participate in 401(k)'s in far greater numbers. My only fear is that SS will eventually include an income or asset test and pay lower benefits to those who make more money or have more assets. Those of us maxing out the SS cap each year are contributing much more than the average American....and I don't mind that but don't reduce the benefits later to those who actually contributed the most.[/QUOTE]

    ?

    Actually, there already is, if you are retired yet have an income
    exceeding, say 32,000 married filed jointly
    you still have to pay tax on SS benefits.
    So if that isnt a income test I dont know what is.

    In addition to receiving a Social Security Income
    after paying FICA tax for decades,
    Seniors also recieve Medicare benefits,
    after paying a Medicare tax.

    However, if you see the type of medical savings senior citizens receive
    compared to younger folks
    (i. e. Medical Service Providers compelled to accept assignment of
    Medicare benefits, additional prescription discounts)
    Seniors lucky enough to be healthy and accumulated a
    degree of wealth, often get benefits out
    of proportion to their actual need, or overall ability to pay,
    based on age alone.

    Nothing to do with the price of a Denny's Grand Slam breakfast.

    Argue about having paid all kinds of
    social obligations & dues, or being sicker in general
    and so forth,
    reverse age discrimination hardly seems fair to the young either.

  17. #17
    Everyone should have an IRA account...
    It's the best thing the gov't ever created.

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