Why are Private accounts so scary?

[MoralLibertarian]

Back before social security, when there was less economic opportunity than there is today, people got by without it by living with their kids. Now, almost 70 full years after social security, we still don't need it, and we don't even have to live with our kids. All we would have to do is take the taxes that we pay to social security and put it in a PRA. The risk free rate of a treasury bond is 4 to 6% a year: if an investor wanted to take a chance and put half their retirement in large, blue chip corporate stocks and half in treasury bonds, they could get an even higher annual return.

It's impossible to lose money by investing only in treasury bonds, and your returns are guaranteed to be greater than the current yields of social security. So why is this scary to people? Why are people afraid to take control of their own destiny? Why would we even want "social security reform" when it would be cheaper for each American to set up their own retirement account? It's not hard: go to Scottrade.com and set up a Roth-IRA account. Only buy treasury bonds and corporate stock. And if that fails, there is always living with your children.

[VigilanteNighthawk]

At 11/11/06 01:44 AM, MoralLibertarian wrote:

The question:

So why is this scary to people?

The answer:

And if that fails, there is always living with your children.

[MoralLibertarian]

At 11/11/06 01:48 AM, mofomojo wrote: So, what how exactly does the investment on these accounts grow? The economy?

like I said mofo, if you're afraid that the stock market is going to tank, invest in government debt. Three month treasury bonds offer a yield of 4.73 percent nowadays and the US government has never defaulted on its debt in its history. The return you get, while varying, will always be positive, as opposed to social security's negative returns in 50 years.

At 11/11/06 02:01 AM, VigilanteNighthawk wrote::

The answer:

And if that fails, there is always living with your children.

To fail, you would have to be too irresponsible to save for yourself and you'd deserve it.

[Begoner]

What makes you think that the yields on treasury bonds will remain constant with so much additional demand?

[MoralLibertarian]

At 11/11/06 12:35 PM, Begoner wrote: What makes you think that the yields on treasury bonds will remain constant with so much additional demand?

Good point. As a matter of fact, we're seeing sort of the same thing with our long term yield curve right now, since lots of Asian nations and citizens heavily invest in our bonds. Still, we're talking the difference between a positive rate of return, however menial, and a negative rate of return.

[MortifiedPenguins]

Question: If these things are so profitable, why isn't everyone using it.

[BeFell]

At 11/11/06 09:55 PM, MortifiedPenguins wrote: Question: If these things are so profitable, why isn't everyone using it.

Americans are ignorant of the nature of investing. For example, what would you do if you won the lottery and acquired 5 million dollars? If you are thinking anything other than investing the entire sum at a guaranteed 5% and making $250,000 a year for scratching your ass, chances are you won't have any money for very long. How many Americans do you suppose do that? Not many. Our society is one of instant gratification and thus very few people think to put their extra cash away so they will have even more of it at a later date.

What makes a private account system such a good idea is it forces people to save but unlike social security, it allows them to maintain control of their money and potentially earn far better yields. The possibility of financial failure can easily be limited by placing a cap on the proportion that can be placed in the high risk bond market, lower risk private bonds and the lowest risk government bonds. Hell if that still sounds risky to you, invest in a Federally insured CD with your local bank for about 5%. Even if your bank folds you'll still recover up to $100,000.

Basically the only way people would lose all of their money in a private account system with diversity mandates is if the government were to go bankrupt. Wouldn't that be an ever bigger problem in the current system?

[stafffighter]

Modern terms of investment are so complicated the average American would only ruin themselves trying to act in them. This is why we have professionals like Befell, who I'm seriosly considering buying a foamy t-shirt for to do my taxes. medium right?
This ties into the government as a force meant to shield the public for which it stands. The skills for private accounts are highly specialized and proportionally few of us have those skills.

[MortifiedPenguins]

At 11/11/06 10:35 PM, BeFell wrote:

At 11/11/06 09:55 PM, MortifiedPenguins wrote:

Basically the only way people would lose all of their money in a private account system with diversity mandates is if the government were to go bankrupt. Wouldn't that be an ever bigger problem in the current system?

Then how can I start doing this at my age. with limited or smaller resources.

[Sir-S-Of-TURBO]

In Denmark we pay way higher taxes than most of the world and get to boast one of the best social security and living standards in the world.

Dont see the logic in not helping those who needs it and i never will.

[JoS]

At 11/11/06 09:45 AM, MoralLibertarian wrote: the US government has never defaulted on its debt in its history.

The US has never had a debt of $8 trillion before either. Rememebr Treasurey Bonds are aprt of your national debt, a large part I migth add.

[MoralLibertarian]

At 11/12/06 11:26 AM, JoS wrote: The US has never had a debt of $8 trillion before either. Rememebr Treasurey Bonds are aprt of your national debt, a large part I migth add.

I guarantee you the US government will not default in our lifetime. They roll over debt like no one can because of their credit rating.

And stafffighter, this stuff really isn't too complicated, but if it's too hard for you to figure out, that's why your PRA is generally run by someone knowledgeable about markets. It's like mutual funds: you're not really investing, someone else is doing it for you.

[MortifiedPenguins]

At 11/12/06 12:09 PM, MoralLibertarian wrote:

At 11/12/06 11:26 AM, JoS wrote:

And stafffighter, this stuff really isn't too complicated, but if it's too hard for you to figure out, that's why your PRA is generally run by someone knowledgeable about markets. It's like mutual funds: you're not really investing, someone else is doing it for you.

Am I elligable to start this thing.

I've been thinking of investing my money in either Stocks or CD's.

[stafffighter]

At 11/12/06 12:09 PM, MoralLibertarian wrote:
And stafffighter, this stuff really isn't too complicated, but if it's too hard for you to figure out, that's why your PRA is generally run by someone knowledgeable about markets. It's like mutual funds: you're not really investing, someone else is doing it for you.

People have skills in different areas and not all of us are financially minded. The call for private accounts would create a boom in dependency of such professionals and really make more an anticdotal difference than anything meaningfull.

[Camarohusky]

But wait! Where will the Republicans go to get money when they get rid of taxes while spending exponentially more? The social Security System is only a failure now because of the failiure of the modern Republican to realize if you spend money, you must get it from somewhere.

[Hardhat]

The government has plenty of ways to get money besides dipping in the social security system.
raise sales tax
raise income tax
hell they could just make up some tax

Perhaps the best idea is a national lottery, truthfully i dont understand why we dont have one. That is how they paid for the revolutionary warl, or recovered from it actually.

Plus dont blame this on republicans Bush wants to privatize social security, democrats are the ones who have fought it so hard.

[MoralLibertarian]

At 11/12/06 04:26 PM, stafffighter wrote: People have skills in different areas and not all of us are financially minded. The call for private accounts would create a boom in dependency of such professionals and really make more an anticdotal difference than anything meaningfull.

Stupid argument. The call for private acounts create a boom in dependency of professionals? Imagine if no one's finances were ever dependent on a professional's expertise. There would be no banks, mutual funds, IRAs, brokers, etc. Your statement is entirely unsubstantiated.

[JoS]

At 11/12/06 12:09 PM, MoralLibertarian wrote:

At 11/12/06 11:26 AM, JoS wrote: The US has never had a debt of $8 trillion before either. Rememebr Treasurey Bonds are aprt of your national debt, a large part I migth add.

I guarantee you the US government will not default in our lifetime. They roll over debt like no one can because of their credit rating.

Or because they are the only country whose debt is in their own currency? All international loans are in US dolalrs, which means if the US wanted to they could print off $8 trillion and pay their debt off. No one else has that luxury.

[Demosthenez]

At 11/13/06 01:22 PM, JoS wrote: Or because they are the only country whose debt is in their own currency? All international loans are in US dolalrs, which means if the US wanted to they could print off $8 trillion and pay their debt off. No one else has that luxury.

OF COURSE!!! WHY HAVENT WE THOUGHT OF THIS BEFORE!!!

Maybe its the massive inflation part?

[MortifiedPenguins]

At 11/13/06 01:22 PM, JoS wrote:

At 11/12/06 12:09 PM, MoralLibertarian wrote:

At 11/12/06 11:26 AM, JoS wrote:

Or because they are the only country whose debt is in their own currency? All international loans are in US dolalrs, which means if the US wanted to they could print off $8 trillion and pay their debt off. No one else has that luxury.

I'm guessing you never take Economics 101 in High School.

You know, the whole inflation thing.

[Begoner]

I'm guessing you never take Economics 101 in High School.

You know, the whole inflation thing.

What are you talking about? It's a brilliant idea! That's how we can cure poverty, too! We can just give everybody heaps of money and we'll all be rich, I tell you, rich!

[MortifiedPenguins]

At 11/13/06 06:10 PM, Begoner wrote:

What are you talking about? It's a brilliant idea! That's how we can cure poverty, too! We can just give everybody heaps of money and we'll all be rich, I tell you, rich!

Obviously.

I mean, it worked in the Weimar Republic, why not here.

[Begoner]

I mean, it worked in the Weimar Republic, why not here.

Exactly. People there actually had wagon-loads of coins! Unfortunately, that was how much was required to buy a loaf of bread.

[JakeHero]

At 11/13/06 05:45 AM, Camarohusky wrote: But wait! Where will the democrats go to get money when republicans get rid of taxes while democrats are spending exponentially more? The social Security System is only a failure now because of the failiure of the modern democrats to realize if you spend money, you must get it from somewhere.

I fixed your post.

[MoralLibertarian]

This topic took a turn for the stupid.

[BeFell]

At 11/14/06 12:17 AM, MoralLibertarian wrote: This topic took a turn for the stupid.

If you were dealing with intelligent people on this issue, this topic wouldn't be necessary.

[stafffighter]

At 11/13/06 01:15 PM, MoralLibertarian wrote:

Stupid argument. The call for private acounts create a boom in dependency of professionals? Imagine if no one's finances were ever dependent on a professional's expertise. There would be no banks, mutual funds, IRAs, brokers, etc. Your statement is entirely unsubstantiated.

You're jumping from one extreme to the other. My argument is that in the case of private accounts such professionals would become so much an institution that they would serve the same purpose as a government agency. Many things are institutions in life and they have at the least government regulatory agencies

[BeFell]

At 11/14/06 11:05 AM, stafffighter wrote: You're jumping from one extreme to the other. My argument is that in the case of private accounts such professionals would become so much an institution that they would serve the same purpose as a government agency. Many things are institutions in life and they have at the least government regulatory agencies

So why not set up rules for investing private account investments so that 10% can be invested in stocks, 20% in mutual funds 20% in treasury or other government bonds and the rest in certificates of deposit. That way only about 30% of your money will be at any significant risk. Even then the risk will only be as great as you choose.

One thing that I'm kind of surprised I haven't seen addressed in this topic is the inadequacy of the current system. Does anyone think you can really have a good life being dependent on the payouts of the currents system? Even more important does anyone here actually believe the current system will still be around when they retire?

I for one don't appreciate knowing that I most likely never again see the 8% of my income the government takes from me every paycheck. I would like to see a system set up where the government can't borrow my retirement without asking and we won't have to see a 50% tax hike to ensure everyone gets the benefits they were promised. We are not suggesting abolishing social security, even a republican knows the majority of Americans are too stupid to plan for their own retirement. We are simply suggesting that when the government takes that money out the do something intelligent with it or even better give us a chance to.