This has been a busy week on the personal finance front here in the Nusbaum household. I get paid on the first of the month and in a typical month a big chunk either goes to an IRA (HSA or SEP) or to an estimated tax payment, then a little bit to pay our bills and the rest goes to buy jewelry and furs (just kidding).This month I funded my HSA for the year and put a couple of bucks in my SEP and as I was doing this something occurred to me that I had not articulated before that I wonder if other people realize.
By "other people" I mean the people behind the statistics that say our savings rate is terrible. The act of transferring the money to increase the respective accounts left me feeling like I had really accomplished something, that I was providing for our future and I felt pretty good about it, very good in fact.
Obviously there is nothing unique here but the little high that goes with putting away money seems like it could be a motivator from a short term gratification stand point beyond the actual fundamental importance. Just an observation I thought I'd pass along.
On a related note I got my Social Security Statement yesterday. It says I will get $3030 per month (in today's dollars) and my wife's benefit would be $2158. Sweet! That is way more than what we need to pay our bills. We can forget about all that crap above about saving money, we're gold, baby.
The Social Security Statement could be viewed in the same way as the online calculators that let you assume 12% annual returns from your investing every year and conclude you will die at 100 with a zillion dollars left over. The importance of saving more than you think you will need cannot be overstated. To paraphrase Woody Allen there is no problem that will be made worse by having more money.
Short post today.
12 comments:
I guess I left before the mud wrestling started yesterday.
How much you want to bet you actually see zero from that ponzi scheme (sorry I meant social security)?
SEG
i've said as much many times. I expect zero--hence my attempt to joke about being "gold."
I already knew you knew, but I had to say something to get my ponzi scheme comment posted
Roger, as a long time reader I can't let this one go by un-noticed. You have demonstrated brilliance on many fronts many times. On the social security piece you have only demonstrated cynicism. We already have too many nihilists in this country. Social Security is a generational bond and not a ponzi scheme. It is in a struggle and needs fixing. There is ample opportunity and stratgies for fixing. The longer we wait, the more difficult the fix. To suggest it disappears or has zero value is not constructive. On this one, you are missing an opportunity to create constructive dialogue.
fair criticism other than I have never called it a Ponzi. I think, but am not positive, that all I have said is that I do not expect to receive it. the logical path here will be means testing which although I don't make $50,000 a month or anything I would not fare well with means testing--which i am obviously not upset about.
further i think it is crucial to plan not to have it personally so from there the surprise can only be positive.
The alternative to Social Security is the poor farm.
http://en.wikipedia.org/wiki/Poorhouse
Without any SS, we would have widespread poverty.
That would never ever happen.
You could have legit concerns about the rich not getting anything, but then again if you're worried about being too rich to receive your benefits then why worry? You're rich.
if they means test SS at some point, I assure you that plenty of non-rich people will be out of luck.
Means Test Questionnaire
1) How much you got in your IRA?
Poor grammar intentional.
"How to end Social Security"
1) End the SS payroll deductions.
2) Refund SS contributions to everyone that has only contributed a small amount.
3) Fund current and future SS benefits that have already accrued from the general budget.
4) Refuse to accept any additional social security liabilities.
This plan would mean that those who had contributed a lot to SS and are counting on it for retirement would still get their benefits. Young people would not have to worry about whether to count on SS at all. Those people in the middle would pursue a hybrid approach saving money for retirement outside of SS to supplement the SS benefits; much like today.
Even though everyone knows that SS is not economically viable yet it is very politically difficult to fix: because it was designed to be so!! Here is a telling quote from FDR: "Those [payroll taxes] were never a problem of economics. They are politics all the way through. We put those payroll taxes there so as to give the contributors a legal, moral, and political right to collect their pensions and their unemployment benefits. With those taxes in there, no d--- politician can ever scrap my social security program."
relevant post today from Yahoo! Finance
"We can forget about all that crap above about saving money, we're gold, baby."
Ok I admit Roger I laughed pretty hard at this. Some coworkers raised eyebrows at me.
I am 30 years away from social security. Will something be there? Sure but I am not comfortable beliving those letters promise $X at retirement enough to risk my future on.
Most people that I have talked to agree. Better to be safe then sorry.
Formal definition of ponzi scheme, "A Ponzi scheme is a fraudulent investment operation that pays returns to investors from their own money or money paid by subsequent investors rather than from any actual profit earned."
Hmm, sounds like Social Security to me. The government claims that even with the current funding shortfall social security will provide 75% of the promised benefits. This requires that the government projections pan out as stated. This recession has already shortened the time until we face a shortfall (from 2019 to 2016).
What do you think the probability is the government projections end up worse than expected? I am betting it is a high probability.
Since 1980 I have heard Social Security was going bust, no one would recieve benifits. It's 2010 still hearing all of the doom and gloom. 30 years its still here. Changes will be made, the country would probably crumble without S.S..
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