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Social Security is a sham. That's making people live poorer after retirement. Many of them don't receive anything close to the money they earned while they were

Social Security is a sham. That's making people live poorer after retirement. Many of them don't receive anything close to the money they earned while they were working. That's not the case if they had invested the same money in a 401K. It's absolutely terrible that old people are living worse than they would have had if the government hadn't forced them to dump their money in the dumpster fire that is Social Security. [1] https://taxfoundation.org/comparing-returns-tax-favored-retirement-plans-social-security-yields https://taxfoundation.org/comparing-returns-tax-favored-reti...

kazen44 5y ago
social security goes far beyond just a pension system. things like housing, healthcare and social support for the less fortunate in society all fall under social security. the current pension system in most of the world is just not scalable because people getting older and the birth rate declining, but this does not mean that money couldn't be sourced from elsewhere. in most countries today, workers contribute the majority of the pension for the current retired generation. mind you the free market also does not have a solution for this problem, except to tell poor people or disabled people to be poor or keep working until they drop dead.
- q-big 5y ago
  > the current pension system in most of the world is just not scalable because people getting older and the birth rate declining, Is does scale in this situation: simply increase the retirement ages properly such that always at least roughly "inflow of money = outflow of money" holds. The problem rather is that there is no political will to do that.
  - Ekaros 5y ago
    And somehow important thing that has been forgotten is that you can't pay out more than has been paid in. On average for generation. Too bad boomers are the entitled generation and ruined it for their children. They talk about their contributions, but I see no hard numbers if they have truly paid in as much is being paid out.
    - jonathanstrange 5y ago
      At the risk of sounding butthurt, it's kind of strange and unfair to claim that "boomers are the entitled generation." They merely happen to have been born at a time when the social and economic situation for future generation changed due to changes in ecology, world economy, and in this case the demographic of industrialized countries. By the way, the changes have been going on for much longer. When I was young we were called "Generation X" and newspapers told us that we were going to be the first generation much poorer than their parents, with "patchwork CVs" and a "decline of traditional work opportunities." Overall, these predictions turned out to be true. So I guess we could call our parents the "entitled generation." After all, the Club of Rome warned in 1972 that economic growth was not sustainable but the warnings did not lead to major changes of the socio-economic systems, although many smaller positive changes were made.
      - kazen44 5y ago
        > At the risk of sounding butthurt, it's kind of strange and unfair to claim that "boomers are the entitled generation." They merely happen to have been born at a time when the social and economic situation for future generation changed due to changes in ecology, world economy, and in this case the demographic of industrialized countries. Also, it is good to remember that the "boomer generation" is a mainly american phenomenon. Most other western countries had a period of rebuilding after world war 2, which was not a time of economic prosperity. A good example of this is the late 1940'and 50's. American's wealth grew quite a bit during this time. Most (western) european countries had wage freezes, a corve system or even rationing during that time. Western european economic power started to increase in the late 1950's and early 1960's. (wirtschaftswunder etc) Ofcourse, eastern europe was far worse off considering the lack of marshall aid and heavy restructuring of the economy to a soviet style command economy.
- Mauricebranagh 5y ago
  And in some instances US SS is more generous than the "socialistic" UK. Single persons unemployment benefit
  - kazen44 5y ago
    the UK is considering one of the most liberal economies in europe with very little if no state involvement of the economy. Most of this happened after thatcherism ofcourse.
- kgantchev 5y ago
  People can afford those things with the cash that the market generates for them. And the free market solution to "the problem" is higher economic prosperity of society and thus fewer people in poverty. There is no other answer.
ornornor 5y ago
If you think current retirees have it bad, wait until it’s our turn. I’d be extremely surprised if the currently working generation will be getting any pension at all (in every country that has such a system) and if the retirement age to draw a pension isn’t raised to a ridiculous age. The amounts we pay in now for the most part are used to pay for current retirees, not to accumulate for our retirement. It’s a major problem everywhere which is further exacerbated with the fact that it takes more working people than retirees to support the system and that’s not the way it’s currently going. I’m privileged enough that I can save and invest significant amounts of money that I’ll actually be able to afford retiring and just see my mandatory contributions as lost/cost of doing business but that’s far from universal. Most people don’t think about retirement/can’t save anything and hope it will all work out. It probably won’t.
- n_ary 5y ago
  > I can save and invest significant amounts of money Saving/Investing has become harder as time goes on. I heard about how my grand parents' parents could put their money in the bank or something and compound interest would take care of things. Now with 0% interest everywhere, people rush to gamble in stocks or real-estate. As time goes on, it becomes harder to even hold the values of what you have.
  - ornornor 5y ago
    > Saving/Investing has become harder as time goes on. I heard about how my grand parents' parents Yeah that’s for sure. All these stories about people who were cashiers or factory workers and who bought their houses… Not happening anymore. You can invest in index funds and it seems to be the only way to keep up, unless you know what you’re doing and can pick stocks (you and 99.99% of the people on the planet can’t)
    - mcny 5y ago
      I’m not even sure about index funds. If you put money in at the bottom of the market last March, that money has almost doubled while we are still in the middle of a pandemic. I put some money into my vanguard Roth IRA and I can not pay almost double for an index fund this year than what I paid last year. Am I irrational?
dragonwriter 5y ago
> Many of them don’t receive anything close to the money they earned while they were working. That’s not the case if they had invested the same money in a 401K. Yes, it can be. It’s not on average the case if they had invested the money in a 401K, but social security is not designed as a primary retirment system but as a safety net one.
- kgantchev 5y ago
  Sure, and the 401K would be a better safety net. If the government opened up a 401K account for every retiring person, the result would be better.
ThrustVectoring 5y ago
If they invested the money in a 401k instead, the social security taxes would still go to current retirees by bidding up inflated asset prices. Building more cars in 1990 does not cause there to be more total nursing care in 2020, all your proposal does is change how retiree income is distributed.
- kgantchev 5y ago
  I'm not saying the switch is going to be pretty, I'm just saying that the math is in favor of the 401k.
alecco 5y ago
My home country allowed you to have a mix of private savings (but only certain government bonds) and Social Security. When Social Security imploded, the government just expropriated the private systems "for the greater good" and "redistributing wealth". Funny how democracy works.
elsonrodriguez 5y ago
Something to think about is whether guaranteeing automatic monthly play money for investors to gamble on the stock market has been good for society. The existence of 401ks have a lot of unintended consequences, and is ultimately not guaranteed.
- kgantchev 5y ago
  There is no risk-free value generation. And in order to provide future "social security" - you need future value generation. Furthermore it's a little bit of an oversimplification to say that the market is just gambling. It allows the innovators to realize a gain from the value they generate, which gives them the capital to innovate again, while non-innovative investors take over during the capitalization phase (when the business actually generates profit). The entrepreneurs have no interest in that phase since it offers the least amount of growth and their expertise is in the innovation phase. So yes, in aggregate... it has been good for society. It provides a quicker turnaround for innovators to innovate. And since innovation leads to growth, it's also a good way to secure people's retirement future.
not_jd_salinger 5y ago
> That's not the case if they had invested the same money in a 401K. The unquestioned assumption that the stock market is a source of infinite growth is both foolish and, for anyone that thinks about it honestly, very likely to be wrong. Even if we completely disregard the fact that limitless growth is impossible on a finite planet, and that we are daily seeing more and more cases where we are brushing against our limits, the very nature of 401ks is a pretty ridiculous way to build a retirement for a society. Putting your retirement into a 401k means that your retirement is based on the future success of the economy. Typically what you would want for retirement would be some sort of investment structure where the economy doing worse when you are older will not impact your quality of life. But instead we have set it up so that if the economy does poorly then, aside from all the normal problems of a bad economy, suddenly an entire generation of people will lose their safety net right away. Like so many aspects of our society, we've let irrational optimism allow us to be highly leveraged in many ways, such that small bumps along the way have the potential to drive the entire system into utter catastrophe. The fact that we respond to these small bumps today by even further leveraging ourselves means this disastrous end becomes increasingly likely.
- kgantchev 5y ago
  Growth is the result of value generation. One of the ways to generate value is through technological innovation, which leads to higher economic growth. At the end of the day, you're saying that technological innovation is not infinite. I suppose you're right, but if we reach the point where we've hid the limit of technological innovation. I think the theory on technological growth is that it is in fact infinite and we'll reach a point when it's uncontrollable and irreversible. It's referred to as a technological singularity. If we've reached that point, then I'm pretty sure retirements won't matter.

kazen44 5y ago

social security goes far beyond just a pension system. things like housing, healthcare and social support for the less fortunate in society all fall under social security. the current pension system in most of the world is just not scalable because people getting older and the birth rate declining, but this does not mean that money couldn't be sourced from elsewhere. in most countries today, workers contribute the majority of the pension for the current retired generation. mind you the free market also does not have a solution for this problem, except to tell poor people or disabled people to be poor or keep working until they drop dead.

q-big 5y ago
> the current pension system in most of the world is just not scalable because people getting older and the birth rate declining, Is does scale in this situation: simply increase the retirement ages properly such that always at least roughly "inflow of money = outflow of money" holds. The problem rather is that there is no political will to do that.
- Ekaros 5y ago
  And somehow important thing that has been forgotten is that you can't pay out more than has been paid in. On average for generation. Too bad boomers are the entitled generation and ruined it for their children. They talk about their contributions, but I see no hard numbers if they have truly paid in as much is being paid out.
  - jonathanstrange 5y ago
    At the risk of sounding butthurt, it's kind of strange and unfair to claim that "boomers are the entitled generation." They merely happen to have been born at a time when the social and economic situation for future generation changed due to changes in ecology, world economy, and in this case the demographic of industrialized countries. By the way, the changes have been going on for much longer. When I was young we were called "Generation X" and newspapers told us that we were going to be the first generation much poorer than their parents, with "patchwork CVs" and a "decline of traditional work opportunities." Overall, these predictions turned out to be true. So I guess we could call our parents the "entitled generation." After all, the Club of Rome warned in 1972 that economic growth was not sustainable but the warnings did not lead to major changes of the socio-economic systems, although many smaller positive changes were made.
    - kazen44 5y ago
      > At the risk of sounding butthurt, it's kind of strange and unfair to claim that "boomers are the entitled generation." They merely happen to have been born at a time when the social and economic situation for future generation changed due to changes in ecology, world economy, and in this case the demographic of industrialized countries. Also, it is good to remember that the "boomer generation" is a mainly american phenomenon. Most other western countries had a period of rebuilding after world war 2, which was not a time of economic prosperity. A good example of this is the late 1940'and 50's. American's wealth grew quite a bit during this time. Most (western) european countries had wage freezes, a corve system or even rationing during that time. Western european economic power started to increase in the late 1950's and early 1960's. (wirtschaftswunder etc) Ofcourse, eastern europe was far worse off considering the lack of marshall aid and heavy restructuring of the economy to a soviet style command economy.
Mauricebranagh 5y ago
And in some instances US SS is more generous than the "socialistic" UK. Single persons unemployment benefit
- kazen44 5y ago
  the UK is considering one of the most liberal economies in europe with very little if no state involvement of the economy. Most of this happened after thatcherism ofcourse.
kgantchev 5y ago
People can afford those things with the cash that the market generates for them. And the free market solution to "the problem" is higher economic prosperity of society and thus fewer people in poverty. There is no other answer.

ornornor 5y ago

If you think current retirees have it bad, wait until it’s our turn. I’d be extremely surprised if the currently working generation will be getting any pension at all (in every country that has such a system) and if the retirement age to draw a pension isn’t raised to a ridiculous age. The amounts we pay in now for the most part are used to pay for current retirees, not to accumulate for our retirement. It’s a major problem everywhere which is further exacerbated with the fact that it takes more working people than retirees to support the system and that’s not the way it’s currently going. I’m privileged enough that I can save and invest significant amounts of money that I’ll actually be able to afford retiring and just see my mandatory contributions as lost/cost of doing business but that’s far from universal. Most people don’t think about retirement/can’t save anything and hope it will all work out. It probably won’t.

n_ary 5y ago
> I can save and invest significant amounts of money Saving/Investing has become harder as time goes on. I heard about how my grand parents' parents could put their money in the bank or something and compound interest would take care of things. Now with 0% interest everywhere, people rush to gamble in stocks or real-estate. As time goes on, it becomes harder to even hold the values of what you have.
- ornornor 5y ago
  > Saving/Investing has become harder as time goes on. I heard about how my grand parents' parents Yeah that’s for sure. All these stories about people who were cashiers or factory workers and who bought their houses… Not happening anymore. You can invest in index funds and it seems to be the only way to keep up, unless you know what you’re doing and can pick stocks (you and 99.99% of the people on the planet can’t)
  - mcny 5y ago
    I’m not even sure about index funds. If you put money in at the bottom of the market last March, that money has almost doubled while we are still in the middle of a pandemic. I put some money into my vanguard Roth IRA and I can not pay almost double for an index fund this year than what I paid last year. Am I irrational?

dragonwriter 5y ago

> Many of them don’t receive anything close to the money they earned while they were working. That’s not the case if they had invested the same money in a 401K. Yes, it can be. It’s not on average the case if they had invested the money in a 401K, but social security is not designed as a primary retirment system but as a safety net one.

kgantchev 5y ago
Sure, and the 401K would be a better safety net. If the government opened up a 401K account for every retiring person, the result would be better.

ThrustVectoring 5y ago

If they invested the money in a 401k instead, the social security taxes would still go to current retirees by bidding up inflated asset prices. Building more cars in 1990 does not cause there to be more total nursing care in 2020, all your proposal does is change how retiree income is distributed.

kgantchev 5y ago
I'm not saying the switch is going to be pretty, I'm just saying that the math is in favor of the 401k.

alecco 5y ago

My home country allowed you to have a mix of private savings (but only certain government bonds) and Social Security. When Social Security imploded, the government just expropriated the private systems "for the greater good" and "redistributing wealth". Funny how democracy works.

elsonrodriguez 5y ago

Something to think about is whether guaranteeing automatic monthly play money for investors to gamble on the stock market has been good for society. The existence of 401ks have a lot of unintended consequences, and is ultimately not guaranteed.

kgantchev 5y ago
There is no risk-free value generation. And in order to provide future "social security" - you need future value generation. Furthermore it's a little bit of an oversimplification to say that the market is just gambling. It allows the innovators to realize a gain from the value they generate, which gives them the capital to innovate again, while non-innovative investors take over during the capitalization phase (when the business actually generates profit). The entrepreneurs have no interest in that phase since it offers the least amount of growth and their expertise is in the innovation phase. So yes, in aggregate... it has been good for society. It provides a quicker turnaround for innovators to innovate. And since innovation leads to growth, it's also a good way to secure people's retirement future.

not_jd_salinger 5y ago

> That's not the case if they had invested the same money in a 401K. The unquestioned assumption that the stock market is a source of infinite growth is both foolish and, for anyone that thinks about it honestly, very likely to be wrong. Even if we completely disregard the fact that limitless growth is impossible on a finite planet, and that we are daily seeing more and more cases where we are brushing against our limits, the very nature of 401ks is a pretty ridiculous way to build a retirement for a society. Putting your retirement into a 401k means that your retirement is based on the future success of the economy. Typically what you would want for retirement would be some sort of investment structure where the economy doing worse when you are older will not impact your quality of life. But instead we have set it up so that if the economy does poorly then, aside from all the normal problems of a bad economy, suddenly an entire generation of people will lose their safety net right away. Like so many aspects of our society, we've let irrational optimism allow us to be highly leveraged in many ways, such that small bumps along the way have the potential to drive the entire system into utter catastrophe. The fact that we respond to these small bumps today by even further leveraging ourselves means this disastrous end becomes increasingly likely.

kgantchev 5y ago
Growth is the result of value generation. One of the ways to generate value is through technological innovation, which leads to higher economic growth. At the end of the day, you're saying that technological innovation is not infinite. I suppose you're right, but if we reach the point where we've hid the limit of technological innovation. I think the theory on technological growth is that it is in fact infinite and we'll reach a point when it's uncontrollable and irreversible. It's referred to as a technological singularity. If we've reached that point, then I'm pretty sure retirements won't matter.