CNBC cited results from a WSJ poll that showed 57% of those polled are against personal accounts as part of a social security fix. It has been a while since I have written about this so I wanted to touch on it again for anyone who is new.
Personally I love the concept. Having some control and the ability to have a shot at better returns should be appealing to most folks. It starts to unravel for me as soon as it gets beyond the concept stage. The start up costs, anywhere from $700 billion-$2 trillion, I find to be overwhelming. I also think, and this is the big one for me, a lot (maybe close to half) of the participants, by virtue of no other experience, will not be suited to managing an investment account. Unfortunately too many professionals are not suited to managing investment accounts either.
I think this will lead to too much buying at tops and too much selling at bottoms. This ties in with studies that show fund shareholders do far worse than the funds they own. Further I think that during the next real bubble (maybe in 2020 or 2025 if history is any guide) a lot of people will blow these accounts up. Then what?
A first step to fixing the problem, in my opinion, should be raising the ages for collecting benefits. Currently 62 or 65 is the starting point for most folks. I believe the life expectancy for someone in this country who has already made it to 65 is about 85. So that means drawing a benefit for 20 years. You no doubt are aware that when social security started it was expected that someone would draw a benefit for just a couple of years. Maybe for anyone between 40 and 50 years old today the starting ages should be 67 and 70. Then maybe for today's 30-39 year olds the starting points should be 69 and 72.
I think the startup costs for raising the ages would be a little less that the $700 billion-$2 trillion startup money needed for personal accounts.
Under my plan (sounds like Gore, eh?) I would not be eligible until I am 69, I am 39 now. For what its worth I am less concerned about whether social security will carry me into old age than Medicare. I am planning with the assumption social security will not be there but I am hoping for Medicare which is in bigger trouble, but gets no attention. At the rate at which healthcare costs are going I doubt my social security check will cover health insurance premiums but I do think it will cover supplemental insurance when the time comes.
Health insurance and related expenses will be our biggest costs so I am hoping some tackles the Medicare issue soon.
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2 comments:
39 is still a good age to be looking for a job. The standard question in job interviews is, "When did you graduate from high school?" 1980 seems to be the cutoff. The question is meant to insure that no older worker is accidentally hired.
So, what do we do with all those 62 year olds who no one will hire? Today they can start collecting SS. Under your plan of raising the retirement age to 69 that 62 year old has seven more years of unemployment to struggle through.
great point.
Any idea will have flaws and mine is no different.
I have written a few times about the necessity for the US economy to evolve and I think this speaks to that point in some degree.
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