It’s not the help, it’s the how.

Many people believe, apparently, in our binary political realm, that if I’m not for ever bigger federal government I’m for some hedonist free-wheeling break down in order. I don’t know where anyone gets that idea – except from certain philosophers, like oh, Thomas Hobbes and Thomas Aquinas, amongst others. Marxism is sort of like that too, as is fascism, royalism and theology – without control there is chaos. Weirdly, it’s almost the exact opposite.

For instance, that I’m against the current set up of Social Security doesn’t mean that I’m against helping little old ladies or balding geezers make it comfortably through the last years of their lives. I’m just not for a mathematically and actuarial disaster in the making. I’m all for helping everyone, let me be clear. How? How do we do this? To say that one is for “change” – as so many say of late – and yet, wish to “change” nothing – well, that is not “change.” That is status quo. And we have seen, as is said, the iceberg, and full speed ahead seems to be the option proposed, straight at the obstacle facing us.

I said, the other day, that if one saves $20 a year for 40 years at a decent interest rate, one comes up with quite a nest egg – here, proof, by Kiplinger, to get a million bucks by 65:

 

And 25 is a late starting point – for many people start working in their teens, and often work right through college too – especially if they are poor or lower class, or middle class, or won’t take out the loans, or go to an inexpensive community college. Still, even the $286 a month is more than $20 a week, which is $80 a month. Or, a little less than one third – so, if one saves the $80 for the 25-65 years then one would have about $300,000 – or one third of the Million Bucks. That’s still a larger sum than SS pays out to you. At the $12,000 grand a year you may get – ($1000 a month) that would take you nearly 30 years of retirement to recoup. And if the 25 year old starts with $20, but increases that over time to say, $50 a week, or more (that there’s a federal limit on how much one can tuck away in preapproved retirement funds like Keoghs, 401(K)s etc, is absurd, of course.) then one would reach that $1,000,000. And too, there should be nothing stopping anyone from starting such an account from birth itself – -adding when one can to the growing nest egg. Many a parent and grandparent might well do that, I’m sure.

Where could one put this money? – and, I’d agree, it should be required to save it – exactly as Soc. Security is required – for it is true that many will spend it all without a thought for the morrow – and yes, society does have some interest in ensuring that people, even despite themselves, take care of themselves in old age – and too, it would be beneficial to one and all if this were required. There’s a multitude of ways to craft a law of a required savings account. One strong provision must be, of course, is that it’s not some government bureaucracy which collects the money and saves it for you – or some law which says you have to put it with this or that particular financial institution. But it could be a basket of potential places. Not in get rich quick schemes, or some subordinated debentures or commercial bonds with huge risks, no. But with annuities, life insurance annuities, savings accounts with a guaranteed interest rate of say, 3 or 5 percent. Or in mutual funds – but again, where the saver is in control of removing the funds from one account to place within another of the basket of potential savings points. It’s true to that with this new system new savings mechanisms will spring up. I’d think many a financial planner, knowing that everyone in his community would need to be saving the $20, would figure out a way to offer a product that fits a strict, but flexible, required savings account.

Yes, there should be strict provisions for fraud by the providers – yes, double and triple the usual penalties, for now we’re talking not just duping fools, but duping people who are required to entrust their money with you.

What about the vaunted “overhead”? Yes, well, the bureaucracy would be cheaper for sure. There is perhaps still some need of some reporting that this amount is being saved. But it would be almost a postcard sort of form. And too there’s the monitoring of the investment providers – they’re will still be scoundrels in the world. And too, an insurance policy of some kind, FDIC like, to cover the losses from any fraud – not to mention a vacuum cleaner to get every single penny back from the crooks. I’m not saying there will be no crooks – but it can be dealt with – as much as we supposedly are always dealing with fraud-theft-abuse in our current systems.

Would there still be overhead for the providers? Of course. Perhaps that too can be put in a set range – or one fee – a flat, say 5% of the annual growth – or a $100 fee to move the account. I don’t have a specific – it’s a concept – that’s got to be worked out. Surely there’s a cost, it can be allotted for, and required and limited, too. No 55% fees for some old lady who’s clueless about investments would be allowed. But a 5% a year by the savings bank that’s paying her 3% interest. That would work.

And too, getting from our current system to this next one – how is that to be done. I’ll note here that Daniel Patrick Moynihan, as early as the late 1960s began to offer ideas as to how to slip as seamlessly as possible from the current system to the new. Mr. Ryan’s plan looks at this too. Is this settled? No, of course not – there might still be better ideas of how to go from one to the other. Perhaps it may take oh, 30 years for us to completely switch – but it’s got to be done. Or we’re not going to keep Social Security anyway – indeed, that’s the problem – the problem is currently unsolvable with current thinking. And if every idea proposed is to be immediately trashed because it dares suggest true reform of some kind – then we shall all suffer accordingly.

The idea that no change is possible, or the concurrent idea that any change automatically means screwing the people of today and letting old ladies eat dog food (though from long experience, Dinty More Stews and Chef-boy-ar-dee products are cheaper than can dog foods – I have worked in supermarkets, as well as shopped, the price difference is clear – human food is cheaper than dog food.) Stop accusing anyone with a different idea as some heathen out to wreck granny. Yes, I’m sure some plans are wreckage worse than what we have. But we must face this reality – and soon. And it’s just the right thing to do.

I close to note this little bit of what could be called racial based unfairness – African American men tend to die younger – often before 65 – for whatever reasons, which is a whole other subject – but they pay into the system all their lives – and then, when dead – neither their widows nor children, or other heirs and assigns ever see a dime of that money. Yet little old white ladies eating well on their $12,000 a year live to 90 – and well, that’s just unfair to the African-American community. And if you were truly non-racial and liberal as so many proclaim to be – you would be doing your darnedest to help the African-Americans of today and the future by making them wealthier and letting old white ladies live on their own means. That too is part of the change I envision.

If you don’t like any of this – then don’t tell me “keep it the same” – for that’s steering into the iceberg – propose something else other than limiting benefits to those who paid in and are now deemed less deserving, or merely continuing raising the contribution of the youth to feed and house the elderly, to the detriment of the future of the youth, when they are elderly, for then we are merely spiraling downward all together.

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3 Comments

  1. jim, how many people will have a 401 k for retirement, hardly anybody, they will cash them out before hey retire, maybe for medical bills in this country, but not canada. if you put 20 a week for 40 years, you would need a 19 percent yearly return every year on average to get 1 million dollars, dream on, not possible. if we did not
    spend 700 billion for military defense a year we could maintain our entitlement programs, we spend more than any country on earth on military and defense, and we can,t win wars, we have a military industrial compex heavily supported by the

    republican party, backed by the religious reich that wants to rule the world and control the sex life of women and gays.

  2. jim i live in atlanta, i see many elderly black people who collect social security, i see many white people who have no health insurance, and black people too, who do not live to collect social security because of our terrible, for profit health care that discriminates against people based on profit only, we need a health care, run by the goverment, without profit involved for most of our citizens.like all of europe, canada, australia, by the way most of european countries are in great financial shape, it,s just a few that republicans use to trash all of europe.

  3. 1) the very differences of individuals you note is why one size fits all doesn’t work, and 2) you are seeing what is there, which is fine, as it goes, but you are not seeing that which is not there, which could be better. You are assuming that there is simply one way best way, and we’ve found it, and that nothing should be changed — even as “reform” after “reform” are required to keep the things afloat. Beats me why when people see things that don’t quite work want to keep them, rather than even consider a better plan. If you don’t like my plan, what’s yours? More of the same? How do we get out of the actuarial and financial morass that is current social security system? Soon, there will be none for anyone, for we’re borrowing to pay it now, and soon we’ll be paying more in interest on the debt than we are paying for social security itself. It’s nuts.

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