Why are older Americans so against Bush's Social Security plan?

[russ_watters]

(or any SS reform, for that matter)

Link: http://www.usatoday.com/news/nation/2005-02-16-young-benefits_x.htm

Should people be allowed to invest part of their Social Security taxes in the stock market and bonds?

Age Good idea Bad idea
18-29 49% 47%
30-49 55% 33%
50-64 63% 31%
65 and older 31% 64%

Those are some dramatic numbers. I find it striking that even those 50-64 are in favor of it - and by a wider margin than younger people. So why is it that older people (65+) are not? Is it simply a fear that they will lose their money? (This, despite the fact that the Bush plan will not affect them at all)

 

[CrankFan]

Probably because they are afraid that the social security program will be changed in such a way that it will cause them to loose money that they wouldn't loose otherwise.

 

[Bystander]

65 and older? Grew up with parents who'd lost their shirts in '29 --- younger than 65, parents probably weren't old enough to have actually been all that heavily invested. Other fact would be membership in the First Church of FDR.

 

[selfAdjoint]

I am an older American, and I am against the President's plan because it's bunk. It has been torn apart by economists and shown to be BS from beginning to end.

 

[GENIERE]

I am an older American, and I am for the President's plan (yet to be developed) because it will be benificial to my progeny. It is supported by all impartial economists including Alan Greenspan.

 

[Locrian]

I'm a younger american and I'm certain its bunk. Guessing why older americans would think its bunk might be trickier. I can make a guess though. His proposal includes cuts to benefits in the form of a change in how benefit increases are made. These cuts are unlikely to affect them very much, but the mere hint of cuts, even if they are small, may be enough for them to dislike the idea.

 

[BobG]

I am an older American, and I am against the President's plan because it's bunk. It has been torn apart by economists and shown to be BS from beginning to end.

That's not quite true.

It will not fix the current social security problem. In fact, it could make the current problem worse unless he cuts money somewhere else or raises taxes to meet the transition costs.

It will prevent a problem like the current one from happening 50, 60 years from now. It's a good idea even if it doesn't address the immediate problem. Currently, nearly half of the national debt is owed to Social Security and has to be paid back on time or Social Security becomes a crisis a lot sooner than projected. Separating people's retirement money from the national treasury is a good idea. It also addresses some other problems that could crop up when all of the baby boomers start cashing in their 401k's, IRA's, pensions, etc and start depressing the value of the stock market that all of those middle class retirees were depending on.

The only legitimate knock against it is that fixing the current problems should have a higher priority. If Bush's plan conflicts with fixing the current program, then it should be delayed, not scrapped. I'm not even sure about that, since we really need to address two separate problems concurrently. The important thing is that Bush's plan not make it impossible to fix the other problems with social security.

 

[russ_watters]

I am an older American, and I am against the President's plan because it's bunk. It has been torn apart by economists and shown to be BS from beginning to end.

I added this part:

or any SS reform, for that matter

...because people over 65 tend to reject SS reform of any kind. Please note, the poll question does not mention Bush, but rather the general concept of personal investing. I mentioned Bush's plan due to my perception that seniors would not leave Bush's plan out of it. Please remember, the concept of personal accounts (and the more general idea of investing part of the SS money) has been on the table for many years - it wasn't Bush's idea (interesting article: http://www.cato.org/dailys/01-22-01.html ). But by-and-large it has never been supported by seniors.

So if you would indulge me: are you in favor of the general concept of partial privatization and why or why not? How about the government investing part of the money in stocks/bonds? Please leave Bush out of it for that part.

Regarding the Bush angle: why would seniors so strongly believe Bush's plan is flawed while those just under retirement age would so strongly support it?

 

[Locrian]

It will prevent a problem like the current one from happening 50, 60 years from now.

Until more details are provided - most of which won't be provided until it passes - there is no possible way the above statement can be shown to be true. There are some less than respectable types who assume that people will get stock market returns and make vague guesses based on weak historical evidence, but that should not convince anyone.

Edit: I retract the above statement. You can show there won't be a problem like the current one; you just can't show that other problems won't occur, and you can't show it is a beneficial plan to anyone.

 

[Moonbear]

I think there are a few possible reasons, not the same for every person in that group.

1) They are mostly hearing this idea as coming from Bush, so aren't really answering the question asked but are answering the unasked question of whether they agree with the Bush plan. (With regard to the Bush plan, all anyone hears about is the partial privatization, but no further information on it...if that's all there is to it, it's not going to be enough, though I consider it good to include within a plan that includes other changes as well).

2) They don't understand it won't affect them.

3) They've been raised seeing social security as their entitlement. I know my parents have always been that way, just waiting for the day they could collect their social security check and retire.

4) Lack of knowledge about investing, so fear it.

5) I still have grandparents alive who lived through the Great Depression, so that 65 and older group includes not only people whose parents directly experienced the depression, but who themselves experienced it. They are very leery of any kind of investments. There are plenty of people in that generation who still have enormous stashes of cash hidden all over their houses because they don't even trust a bank with it.

6) (guessing) Higher percentage of people with only an 8th grade education, or less, so haven't done the math to see what a poor investment social security is.

7) They just don't really care and don't want to be bothered with changes because they're already collecting their checks so would rather see government doing something else they'll actually benefit from.

 

[franznietzsche]

1) They are mostly hearing this idea as coming from Bush, so aren't really answering the question asked

So they don't stop to think.

2) They don't understand it won't affect them.

They don't stop to think

3) They've been raised seeing social security as their entitlement. I know my parents have always been that way, just waiting for the day they could collect their social security check and retire.

They're like spoiled children and expect someone else to pay their way because they're "entitled". If i acted like that in my parents' household i would have gotten my arse beaten. You're not "entitled" to anything, except maybe the air you breathe, and even that is questionable.

You're really not even entitled to "basic human rights". Which isn't to stay that they shouldn't be universal, but if you don't work to protect them, you won't get them.

4) Lack of knowledge about investing, so fear it.

Since it doesn't affect them, this ties back into the "tthey don't stop to think"

5) I still have grandparents alive who lived through the Great Depression, so that 65 and older group includes not only people whose parents directly experienced the depression, but who themselves experienced it. They are very leery of any kind of investments. There are plenty of people in that generation who still have enormous stashes of cash hidden all over their houses because they don't even trust a bank with it.

This, while still not rational, is at least understandable. Thats just basic human nature, reacting to bad experiences with aversion towards the precipitating circumstances.

6) (guessing) Higher percentage of people with only an 8th grade education, or less, so haven't done the math to see what a poor investment social security is.

Not qualified to stop to think.

7) They just don't really care and don't want to be bothered with changes because they're already collecting their checks so would rather see government doing something else they'll actually benefit from.

Selfish.



While this may not represent everyone in that age group, that seems to be about what it comes down to. Of course, the same goes for many people of all ages, but they're not the ones we're discussing.

 

[SOS2008]

- it wasn't Bush's idea (interesting article: http://www.cato.org/dailys/01-22-01.html )

And I believe Clinton tried to gain support for using the surplus (that we had at that time) to fund a transition. First, I don't understand why there aren't more details available on Bush's plan (maybe he really does want the Democrats to come up with these things for him). Didn't he mention in the State of the Union speech that he is not proposing speculative stocks, but rather T-bills, bonds, etc., (that would be guaranteed by the government?)? Of course this would mean a rate of return only a little better than a typical savings account--which I thought this was supposed to be the purpose of the "Trust Fund" that either never had money placed in it, or if there had been money, the government has spent it. It would seem that the Trust Fund idea is the same as Bush's privitization idea, only for all the money being collected from everyone to be put aside in an interest bearing/invested account (well if it had been adhered to).

As stated under another SS heading, younger generations will not receive pension plans (except government employees who can begin collecting these funds after only 20 years--they don't have to wait until age 67!?). Only some of those who work for companies offering 401Ks will participate in the program, and even with aggressive stocks are likely to see returns on par with T-bills, bonds, etc. if they are lucky.

Also, younger generations may be forgetting that older generations tend to own their homes, have little if any credit card debt, have savings accounts, and are more frugal with spending. Their cost of living makes the average SS check of $900 more meaningful.

Social Security is more like an insurance plan, except that you may actually be able to collect some of it back after paying your premiums year after year. I am in favor of keeping a mandatory withholding program of some kind PLUS incentives for retirement investments and savings. Otherwise the younger generation will be SOL after their parents die and can no longer bum off of them.

 

[polyb]

I have to agree that it is BS true and through. Here are some basic questions:

How many people know how to invest their money, outside of going to a broker, and how secure is that money once it is invested?

How come the 'private investments' will be restricted to a few designated companies?

If these companies go bust, will you be SOL?

Have you people already forgotten about Enron?

How accountable will these companies be once malfeasance happens? It will happen!

Given the obvious spin or misinformation(there's that gal again!) why should this proposal be trusted?

Given the background of the CATO insititute, why should they be trusted?

How come SS is not being managed in a responsible manner? Or how about the the government as well?

Who will be accountable? Can we skin'em?

It amazes me that some of the commentary here has not taken into account the fact that these business/finance guys will take your shirts and not care one bit if your left out in the cold. There also seems to be a lack of concern about how trustworthy these finacial institutions really are, which is makes me think:"There's another SUCKER born every minute!"

Make sure your not one of them!

 

[GENIERE]

Democrats are always fixing the social security crisis. Apparently the crisis only occurs when a democrat is president. The fix is always easy as demonstrated by President Carter:

Carter signs a Social Security measure that would keep the system solvent until 2030, resulting in a huge increase in payroll taxes. (December 1977)

Notable Democrats that claim Social Security is in a crisis:

Senate:

Dick Durbin (D-IL) … Social Security Will Be Unable To Pay Out Full Benefits. The Sooner Congress Acts To Avert This Crisis The Easier And Less Painful It Will Be…

Byron Dorgan (D-ND):…Fixing Social Security Is An Urgent Priority. It Ought To Be At The Top Of Both Parties' Agendas…

Kent Conrad (D-ND):…And There Was Virtual Unanimity Of Opinion That We Simply Have To Get A Higher Return From The Social Security Investments…

Sander Levin (D-MI): …People Can See, I Think, A Social Security Crisis Where Their Immediate Family Is Affected Even If Not Immediately…

Harry Reid (D-NV), Senate Minority Leader: …most of us have no problem with taking a small amount of the Social Security proceeds and putting it into the private sector…

House:

Charles Rangel (D-NY:…I Am One Democrat That Truly Believes That Democrats Will Not Benefit By Doing Nothing On Social Security…

Edward J. Markey (D-MA:…I Am An Advocate For Investing A Portion Of The Surplus In The Private Sector…

Jerrold Nadler (D-NY:…It's A Way Of Getting More Money - A Higher Return On The Trust Fund, And Is A Prudent And Good Thing To Do…

Presidents:

Bill Clinton: …Investing Will Earn A Higher Return And Keep Social Security Sound For 55 Years…

Bill Clinton:…What I Believe We Should Do Is To Invest A Modest Amount Of This In The Private Sector, The Way Every Other Retirement Plan Does... The Arizona State Retirement Plan Does…

Bill Clinton:…Even After You Take Account Of The Stock Market Going Down And Maybe Staying Down For A Few Years, Shouldn't We Consider Investing Some Of This Money, Because, Otherwise, We'll Have To Either Cut Benefits Or Raise Taxes To Cover Them…

Bill Clinton:…This Fiscal Crisis In Social Security Affects Every Generation…

JOHN F. KENNEDY:..The Social Security program plays an important part in providing for families, children, and older persons in times of stress. But it cannot remain static. Changes in our population, in our working habits, and in our standard of living require constant revision...

...

 

[kcballer21]

Clarification about Bill Clinton and privitization (I hope).
http://www.talkingpointsmemo.com/archives/week_2005_02_13.php#004834
It seems that many people feel that certain democrats (or whoever) oppose the President's plan out of spite. I'm personally not old enough to have considered privitization under any other president, but Bush hasn't convinced me (not that you guys care).
Anyway, if you scroll down a little you can find this link:
http://www.schumer.senate.gov/calc/
I don't know if this type of thing has already been posted, but it's pretty interesting. Remember to read the fine print.

 

[franznietzsche]

Anyway, if you scroll down a little you can find this link:
http://www.schumer.senate.gov/calc/
I don't know if this type of thing has already been posted, but it's pretty interesting. Remember to read the fine print.

Its on the internet, it must be true!

Calculations are based on Congressional Budget Office (CBO) economic assumptions.

Based on assumptions. Hmmmm...

And at any rate, unlike some of you people, i don't like to pretend I'm entitled to anything. I'm not entitled to social security benefits and neither are you. So benefits have to be cut, big surprise. At least under private accounts, that money stays mine. Anyone who plans their retirement around social security, well its your own fault for assuming that would be there. You're not entitled to it. And its going to have to be cut.

 

[GENIERE]

Anyway, if you scroll down a little you can find this link:
SocSec Calculator
I don't know if this type of thing has already been posted, but it's pretty interesting. Remember to read the fine print.

schumer.senate.gov/calc

Suckie Schumer’s site?

You must be bonkers to suggest that idiot’s site! I have a bridge to sell you, an oldie but goodie.

Senate Minority Leader Harry Reid (D-NV) Said President Should “Forget” about Strengthening Social Security Because “It Will Not Happen.” (Sen. Harry Reid (D-NV), Press Conference, 2/1/05)

The leading Dem senator says that Bush is trying to strengthen SS.

He’s still against it. A new democratic strategy?


...

 

[GENIERE]

Even FDR supports change:

"It is proposed that the federal government assume one-half of the cost of the old-age pension plan, which ought ultimately to be supplanted by self-supporting annuity plans," FDR told Congress.

...

 

[franznietzsche]

He’s still against it. A new democratic strategy?


...

Yeah, its called screw the american people, because we only care about whether or not something makes us look good.

 

[franznietzsche]

Even FDR supports change:

"It is proposed that the federal government assume one-half of the cost of the old-age pension plan, which ought ultimately to be supplanted by self-supporting annuity plans," FDR told Congress.

...

Now that is ironic.

 

[Locrian]

IAt least under private accounts, that money stays mine.

This is untrue. The money is not yours. Under the details that pres bush has given so far, when you go to collect the government will remove from the account all principal investment, the money it would have made in treasury bonds, and one of the heftiest fees in the investment industry. What's left is yours. Based on historical stock market returns, it will not be much.

The difference between what people seem to think this plan is offering and what it really is offering is quite disturbing.

Edit: To clarify, the government will take the account principal, interest and fees from what you recieve; it will not appear to leave your account until you try to collect.

 

[kcballer21]

Ah, excellent argumentation, consisting of no real rebuttal but plenty of bs.

Based on assumptions. Hmmmm...

The CBO can't project without making assumptions. Can you find a gov't agency that shows that Bush's proposal will pay out more? Come on guys, a debate consists of a point - counter point.

I have a bridge to sell you, an oldie but goodie.

Is it anything like a privitization plan that is actually controlled by the government and will ultimately benefit large corporations associated with wall street. No thanks, I'm just browsing.

 

[Locrian]

Agreed; as far as I can tell it is franznietzsche who is buying the brooklyn bridge. Maybe we need a thread devoted to dispelling Bush's social security plan myths.

 

[ptex]

Can someone tell me if Senators pay Social Security taxes? If not why is it good for me and not for them? Also what plan do they have? Is it good not good enough for me? Let me know if I am in the wrong post.

 

[russ_watters]

Can someone tell me if Senators pay Social Security taxes? If not why is it good for me and not for them? Also what plan do they have? Is it good not good enough for me? Let me know if I am in the wrong post.

I can't answer the question directly, but I can say its irrelevant: they have a pension plan as Senators and are, for the most part, wealthy enough anyway that they don't need SS. So they wouldn't vote based on if its good for them - it isn't really relevant to them.

 

[polyb]

I find it ironic that the suggestion that you 'invest' your SS money is a bit obtuse. For one, what would it be invested into? For example, if you have less than 100k to invest quite often the best way to go is to put it into a 'conservative' portfolio, ie bonds and/or cd's. With only that much money you do not have enough capital to cover the risk of putting it into other things such as stocks or markets. Of course you could put it into mutual funds but there is a greater risk. There are a lot of things you could invest into but apparently the suggestion of this so called reform would limit your ability to actually put it where you would want it. So how are you actually investing it? Secondly, with the low amount that most people would have to actually invest wouldn't it be imprudent to put it into something like stocks or markets? Finally, as stated earlier, how many people are actually savy enough to invest wisely, especially considering how much risk they would be taking?

 

[Dayle Record]

This is because older Americans, have watched the government rob Social Security, over its lifetime. It was never meant to be a means to fund government, it was to be Social Security for all Americans. Then people who don't believe in taking care of elderly American workers, who paid in devised the scheme you see, that robs our retirement accounts, until they are overwhelmed when there is a population lump, like the boomers. Older Americans went through the depression, and know what Security means. They know that handing the money of all younger American workers to accounts handled by cronies of this administration, will be the end of Social Security for those that really need it, and will effectively deliver low level workers into endless slavery. That is why older Americans do not support this change. Did you know there is 450 billion or so of unaccounted funds, sitting there, that come from people that use SS numbers, that aren't theirs. There is a lot more money there, than is admitted. It is a pretense that it can't be used for our current predicament.

 

[Locrian]

For example, if you have less than 100k to invest quite often the best way to go is to put it into a 'conservative' portfolio, ie bonds and/or cd's. With only that much money you do not have enough capital to cover the risk of putting it into other things such as stocks or markets.

This is untrue. The statement may have been true decades ago, but in current times the cost to invest directly into the stock market can be exceedingly small. Consider online trading of EFTs, for instance. How conservative the person's portfolio should be will then depend more on how soon they will need to remove it, and not on how much they have to invest.

The efficiency at which an individual investor can invest their own money directly into the market is another argument against this bloated plan that is being offered by the bush administration.

 

[kyleb]

Even FDR supports change:

"It is proposed that the federal government assume one-half of the cost of the old-age pension plan, which ought ultimately to be supplanted by self-supporting annuity plans," FDR told Congress.

...

Well it sure looks like it when you take the quote out of context anyway:

http://mediamatters.org/items/200502040010

 

[hypatia]

Invest in the stock market only with money you can afford to loose. It is not a safe investment. Its a gamble.
I personally lost a lot of money after 9/11, but am young enough to recoup. We have no way of knowing what will cause the next crash.

Secured investments, self managed, starting when a person first joins the work force seems reasonable to me. As most of us know SSI was never ment to be the sole means of support.

 

[Locrian]

Invest in the stock market only with money you can afford to loose. It is not a safe investment. Its a gamble.

Calling stock market investment a gamble is highly misleading. All investments have risk, including ones generally seen as very safe, such as bonds. Historically, the stock market has low long term risk. The stock market drops of 2000 and 2001 were small and expected - what, did you think the 18%+ increases of the 90's were sustainable?

The only plausible possibility of real loss in the stock market is due to a total economic fallout. If such a thing were to happen, your stock market investments would actually be the least of your worries, and your other investments would most likely also default.

 

[russ_watters]

Pardon the lateness (I've been sick), but these were my best guess as to why seniors would be against investing SS money:

Invest in the stock market only with money you can afford to loose. It is not a safe investment. Its a gamble.
I personally lost a lot of money after 9/11, but am young enough to recoup. We have no way of knowing what will cause the next crash.

I find it ironic that the suggestion that you 'invest' your SS money is a bit obtuse. For one, what would it be invested into? For example, if you have less than 100k to invest quite often the best way to go is to put it into a 'conservative' portfolio, ie bonds and/or cd's. With only that much money you do not have enough capital to cover the risk of putting it into other things such as stocks or markets. Of course you could put it into mutual funds but there is a greater risk.

They essentially boil down to:

-Investing (in the stock market) is risky.
-Small-time investors can't invest/do well investing.

While I think these reasons are understandable, I don't think they are valid.

First off, the risk: hypatia, while its true that over 5 years, the stock market can be risky, the past 5 years have been among the worst in the stock market's history. Basing your opinion of the stock market on the past 5 years alone gives an incomplete (and incorrect) picture of how good of an investment the stock market really is. Second, and much more importantly, this topic is about investing for retirement - this starts (with SS), for most people at about age 16 or 17 and lasts fifty years. To get a true picture of how good the market really is requires taking into account that double-bonus of super-long term investing and amortization (with SS, you put money in every other week for the duration). The reality is that a diversified stock fund (say, an S&P index fund) is a far better deal than what you get from Social Security (better even than from a bond fund) and very (though not perfectly) safe.

For the second part, its more understandable: SelfAdjoint informed me in a thread a few months back that index funds (even the older loaded mutual funds) and small-time investing are a pretty new thing. Today, anyone can own all 500 stocks on the S&P at a typical starting investment of $5,000. This wasn't so 20, 30, or 40 years ago when current retirees were working. So while I think about investing all the time (and put a fair amount of effort into educating myself on it), older people don't because when they were my age, it simply wasn't an option.

Beyond that, I think that getting a government check every month may provoke a knee-jerk "don't touch my money" reaction to any question about the subject.

 

[polyb]

Obviously when it comes to investing, I am much more 'conservative' than you are; the irony! :uhh:

How about this russ, the money that I am putting into SS is money that I can rely on when the time comes for me to retire regardless of what happens with the markets. Because I know I have that as a back-up, I can endevour to riskier propositions such as investing in the markets. So perhaps I would be more willing to lose my shirt with that security. If I am to take a 'nest-egg' such as SS and invest it, how prudent am I being with my money? The real secret is risk minimization(take the derivitive of the risk function and set it to zero) and with SS as a reliable source of income, I am more free to take risks with other assets. But to not have a prudent formulation where I do not have the capital to cover my risks there is a good chance I will be screwed and the people that 'win' will say 'tough luck'. I am surprised to hear you promote such a risky notion of capitalism. You should really go back and look into the whole idea of having sufficiant capital to back up your ventures.

 

[russ_watters]

If I am to take a 'nest-egg' such as SS and invest it, how prudent am I being with my money? The real secret is risk minimization(take the derivitive of the risk function and set it to zero) and with SS as a reliable source of income, I am more free to take risks with other assets.

Actually, the real secret is risk vs reward calculus. And with 15% of your income going to SS (including the employer's half), that's a huge chunk to be wasting on a negative return (caveat: that depends on how long you live) "investment".

edit: using an online SS calculator and a spreadsheet, I calculate that SS is a zero-return investment if you live for about 15 years after you retire. If you live for 20 years, that makes it about a 1% return investment. Now I've focused on the S&P, but a true diversified retirement account would include some combination of stocks and bonds/cd's. Even with a fund that's completely bonds and CD's (ie, zero risk), you can expect something like than 3-5% over inflation.

 

[adrenaline]

obviously Bush hasn't learned about the " Social security privatization success" in Chile

http://www.umwa.org/journal/VOL113NO4/jul4.shtml

My dad is a commodity and stock broker and a republican and says it's a damn awful idea. As a broker who would be managing all these "little" acccounts it would just clutter up his real work on larger investments, they would not be high on their agenda in terms of ensuring good investments (not worth their while in commissions) and the brokerage firm would still charge a brokerage fee that benefits the company but not the individual broker. (Ie; no incentive to tailor and refine the investments regularly to ensure good returns)

Why "personal accounts"? If the issue really is that we are not getting a high enough return on our tax dollars, why not simply have the gov't invest part of the SS fund in the market on our behalf? It would certainly be MUCH cheaper in terms of fees than maintaining millions of “personal accounts”. People like my dad's brokerage firm will be the only ones benefitting.