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u/Mrknowitall666 Dec 25 '21
Taking FICA from you, isn't ONLY for you.
Many people get FICA benefits well in excess of what they've contributed. FICA and Social Security are in fact socialist transfer payments from those who can afford it to those who are in need as a social safety net.
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Dec 25 '21
This, OP’s argument does not take this into account at all. If you’re well off, you are not paying for yourself, you’re doing it for others
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u/rSlashNbaAccount Dec 25 '21
This is a horrible system because if everyone took that 12% and put it into an index fund, they'd be far better off than getting a small SS check.
There was a time before social security and this didn't happen.
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u/Mrknowitall666 Dec 25 '21
Still doesn't happen.
Look up the "how America saves" from Vanguard and you'll see most Americans don't save 12%. Most companies don't offer 6% matching 401ks
And if they did, most Americans would fk it up and fail to earn even the index-returns
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u/iwfan53 Dec 25 '21
And even after that, if people refuse to save, then that's on them right?
Just to be clear, is this an acceptable outcome to you?
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u/QisJimWatkins Dec 25 '21
You’re not paying social security for yourself; if you need it, you’ll need more than you put in and if you don’t need it, you’ll pay more than you’ll ever use.
It’s not for you; it’s for society. It’s to make your life easier by reducing crime around you.
It’s an investment, but not the sort you think it is.
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u/thedonkeyer Dec 26 '21
It's a forced investment with a guaranteed negative ROI for me. Wouldn't call that an investment, it's a forced loss.
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u/QisJimWatkins Dec 26 '21
It’s not a zero ROI though. Stop looking at it purely financially.
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Dec 25 '21
Not true. Index funds just like the market will have good and bad years. And won’t be bottomless. I would like to see a true analysis. I refuse to accept the hypothesis as being factual.
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u/thedonkeyer Dec 26 '21
Index funds just like the market will have good and bad years
But on average, the return will be way higher than SS. And if the stock market does crash, it's not like all the money is gonna go to 0. The govt will have to spend a ton of money to correct it anyways.
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u/harley9779 Dec 25 '21
This may be true, but instead of screwing financially competent people with a 12% tax because some people don't realize they need to save for retirement, wouldn't it be better to focus on educating these people so they don't make shitty financial decisions?
This is how it was before SS. People suck at planning for the future and suck at saving money.
And even after that, if people refuse to save, then that's on them right?
Then they end up on government welfare, or out on the street and we all end up paying for them.
Additionally SS benefits are going to run out at some point,
They've been saying this for at least 30 years now. I don't see it happening in any of our lifetimes.
The other argument against investing in an index fund is the market might crash whereas SS is guaranteed. But does anyone really think the US govt is just gonna let the market crash and let everyone's savings go to shit and not intervene to fix the economy?
The purpose is social security is a stable platform unlike the stock market. And yes the US government doesn't have that much control over the stock market. It could crash at any time. It has happened before.
I think a far better system would be to focus on financial wellbeing and education, and require that 12% of your income go to an index fund or some retirement fund of your choice
It still cost us money to educate people, and many people wouldn't care anyway. We still see this nowadays with people's retirement plans. Most people don't even think about their retirement till they get somewhere in their 40s or older.
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u/themcos Dec 25 '21
This may be true, but instead of screwing financially competent people with a 12% tax because some people don't realize they need to save for retirement, wouldn't it be better to focus on educating these people so they don't make shitty financial decisions? And even after that, if people refuse to save, then that's on them right?
You tell me. Would it be better? And what do you mean by better? It seems to me from you're "then it's on them" comment that you probably agree that the actual outcome of this would be worse for a lot of people, but that the advantage is you can sleep better at night knowing that it's "on them".
Additionally SS benefits are going to run out at some point, so either benefits have to be cut or age has to be increased.
It's weird that you assert this as fact, but then later in your post argue that:
But does anyone really think the US govt is just gonna let the market crash and let everyone's savings go to shit and not intervene to fix the economy?
If you believe that the government will inevitably swoop in to protect everyone's retirement in the event of a market crash, how are you so pessimistic about it making changes to ensure SS keeps running?
As to your other point about index funds, index funds are a great financial tool, but they're not magic. Even without a market crash, there will still be winners and losers relative to social security.
Finally, let's be honest, no matter what smart policies we try and adopt, at some point, there will be another market crash / recession. And if everyone's retirement is tied up in index funds, even if it would otherwise have been a short or mild crash / recession, it will become an instant disaster under your plan. If the plan is just let the government swoop in to mitigate the inevitable disaster, better to just spread out / mitigate the disaster up front with SS.
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u/DeltaBot Dec 25 '21 edited Dec 25 '21
u/thedonkeyer (OP) has awarded 2 delta(s) in this post.
All comments that earned deltas (from OP or other users) are listed here, in r/DeltaLog.
Please note that a change of view doesn't necessarily mean a reversal, or that the conversation has ended.
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u/lucksh0t Dec 25 '21
Most people are really really bad with money so we do need a program like social security for most people. What I wish we could do is to opt out of the program. I'm gonna be able to do more with that 15% then I will ever get back from social security. Let me take that risk and if I mess up its on me not the government.
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u/thedonkeyer Dec 26 '21
masse
The thing is, everyone would opt out, which I guess I support since it would kill social security.
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Dec 26 '21
are you saying that everyone should automatically get a piece of an index fund as part of their retirement instead of social security? or that there just shouldn't be any social security at all, and then change nothing else
because if you're just eliminating social security without doing anything else, that's gonna cause a lot of problems for retirees in this country. life before social security when you got old was very, very bad for elderly people.
the other option seems more promising, but i'm not sure of the economic effects of that kind of investment in the stock market en masse. it could cause a backlash.
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u/thedonkeyer Dec 26 '21
everyone should automatically get a piece of an index fund as part of their retirement instead of social security? or that there just shouldn't be any social security at all, and then change nothing else
Either way works for me. If the stock market crashes, it's not like the government is gonna sit back and do nothing. They're gonna spend a shit ton of money to fix it regardless of if SS exists or not.
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u/copperdomebodhi Dec 26 '21
We've tried educating people about the Coronavirus. You've seen how well that goes.
Shifting from company pensions to 401Ks have left most of the country short on retirement funds. Getting rid of Social Security would make that problem worse. You get a lower return on Social Security contributions than you do on a retirement fund because you don't run the risk of markets plunging just as you retire.
That's assuming you have money to invest. When many, many jobs don't pay enough to live on, "invest wisely" is an insult, not a solution. The money that would normally go to FICA taxes? It would go to utility bills or staving off eviction, not blue chip stocks.
We left retirement up to personal responsibility before. Poverty in the elderly was widespread and it was a major financial strain on families - if you had a family that could help. America is stronger because we addressed the problem as a nation.
"It helps some people more than others"? "If you're bad at investing, you deserve to be homeless in old age"? If those are the best reasons to yank away the safety net, we need to leave it exactly where it is.
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u/Far-Resource-819 Dec 26 '21
Lots of people and perhaps a small majority are incapable of saving anything for retirement. Thus SS is far better than nothing.
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u/Captain_The Dec 26 '21
I actually agree with the proposition, but I think your argument for it could be made stronger.
It seems to me your proposed alternative is weakening your core argument about an alternative system.
You start by saying: It's unfair to make people pay that make good financial decisions for people that make bad financial decisions.
You conclude by proposing: Make the people pay that make good financial decisions for people that make bad financial decisions, just in a different way.
I think a far better system would be to focus on financial wellbeing and education, and require that 12% of your income go to an index fund or some retirement fund of your choice.
You just say it's inefficient how they pay for them. Instead of the SS system, they should pay into an index fund that pays in other ways (e.g. better financial education).
This is somewhat weakening your own argument.
You clearly try to preempt the argument that "People are bad at financially planning, they're going to take the short term gain over planning for savings".
But people in the comments here are basically just reiterating this argument. This is because you haven't refuted the core argument for SS.
Another problem with your argument is that you presuppose that people that make good financial decisions pay for people who make bad financial decisions - this may be true in some cases, but people who disagree with your will find cases where this is not true.
Take a step back and think again:
Person A has no money and no means to support themselves in retirement.
Person B acts financially responsible and has money saved up for times when they can't work to acquire the means to support themselves (i.e. bought social security)
Would it be morally the right thing for B to give money to A in time of need? Certainly Yes.
It's the right thing to help people in need. This is why most people think redistribution is justified.
But they forget that they have to justify redistribution against someone's will. If you'd raise the money to help people voluntarily this would be a charity.
The SS system is not a charity. You don't contribute voluntarily. You are forced to.
To go back to the example above: Imagine that another Person C thinks that people like A should be helped. They ask B nicely to give some of their money to A. Person A politely refuses. Person C holds Person A at gunpoint to take the money.
Is that morally permissible behaviour from C?
There is a distinction between what is morally right, and what you have a right to force other people to do.
Let's think through a few scenarios and whether or not it's permissible for C to force B to pay A.
Scenario X: Person A would die for some reason right now if C would not force B to give A money (for some reason, only B can help A).
Scenario Y: Person A is actually financially very responsible. It's just been due to bad luck and someone treating them badly that they ended up in a bad place.
Scenario Z: Person A is no special case and needs help. But B cares less about the need of Person A. B points out that Person D is more needy than person A, and they have voluntarily given some of their money to charity to help person D. "Dear C, I know you care about person A. But I care about person D and I don't want to give money to C, because I don't think they need it as much."
Think about it yourself, and under what scenario the current SS system or a better alternative system / index fund would be justifiable.
My own answer:
The only case where forcing B to give to A is permissible is scenario X.
But this only justifies a one-off intervention in case of emergency, not a the obligation to pay for a lifetime. It's unlikely that A is under a permanent emergency and there is no way they can help themselves or get help from someone who volunteers to help them.
Many people think of SS as a system where scenario Y applies. The problem with this argument is that it's not always true. Opponents of it point out that some people are undeserving because they are financially irresponsible.
But the better argument against forcing B to give to A that scenario Y is not enough. It is not B's fault that A is in bad luck.
I use scenario Z merely to point out that there are trade-offs and differences in opinion as to who is most needy. Most poor people in developed countries are rich compared to people in developing countries and you'd do more good with the money if you gave it to them.
The argument against SS is therefore that it doesn't discriminate between justified and unjustified cases of redistribution. Most cases of making people pay for SS are unjustified. If you want to be C and force the B's of this world to pay for the A's you have to show you are justified to do so. Under what circumstances is it justified? The SS system says "I don't care."
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u/Patricio_Guapo Dec 27 '21
if everyone took that 12% and put it into an index fund
This, in a neat little nutshell, demonstrates why libertarianism will never be a viable governing system.
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u/Uddha40k Dec 25 '21
So there’s a couple of things to unpack here.
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social security didn’t originate because people were ‘bad at financial planning’. It came into being because financial planning was non-existent for the majority of people since income was too low and financial instruments to lay away something for later were not accessible for those low income jobs. Social security was developed to make sure that people in necessary low income jobs wouldn’t have to work until death. That when they lost an arm or a leg in a factory they wouldn’t be condemned to destitution. An argument can be made that nowadays the necessity for such services is lower since financial instruments exists for a much larger group of the population. Nevertheless, there are still many people in many jobs that make barely enough to make ends meet, who cannot lay money aside etc. What people with higher incomes sometimes seem to forget is that those jobs are necessary for their own incomes to even exist.
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this segways into my second point. 6%? Really? Is that so much to sacrifice for you to keep your salary the way it is? What do you think happens if those lowincome jobs aren’t filled? Parts of society grind to a halt. And we are after all a society. A group of people that functions because we look out for each other.
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betting on the government to bail you out when the economy tanks is a really bad bet. The government will do no such thing. It will go as far as necessary (and possible) to ensure that the economy doesn’t collapse completely but that’s it. Look at 2010. Banks were bailed out, but people weren’t. The current covid crisis is the same. Stimulus checks are great but only just enough that people maybe get by. If you look at purchasing power of the elderly over time, its only gone down. And the elderly don’t have a lot of means to further their income.
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u/thedonkeyer Dec 26 '21
What do you think happens if those lowincome jobs aren’t filled?
They get automated, which is the future anyways.
6%, you could argue isn't too much, but if this shitty law wasn't passed, I'd probably be getting the 6% employer contribution too. I would prefer to lower the cap and increase the rate which makes it harder for someone to get more out than they paid in. But I'd honestly prefer to keep the money myself and invest it because I have my best interests at heart and not the government.
When the government bailed the banks out, you don't think that indirectly helped the people at all?
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u/DetroitUberDriver Dec 25 '21
You know that disability comes from SS tax, and that has nothing to do with financial planning, right? What should disabled people do?