Actually the report from last week in The Economist has this as the national average, no age exclusion.

The Economy in China is moving along at a 7% increase, mostly due to building ( banks are told to make loans, and they do, else back to the country side for that banker ). The new gov building was a huge project.

 

I used the annual social security statement everyone receives (I just happened to have it sitting next to me) and the yearly income I used was exactly what social security said I had. The only thing I did was round the final compensation to the nearest $100. The reason I did it that way is it is not very realistic to have a 16 year old make $50k per year.

Your way has credibility also since your only using a 31 year time span which if you take social security at 62 would put your first year of $50k income starting when you are 31 years old. That is not unrealistic. Although staying at the $50k income level from 31 years old until 62 is a bit unrealistic. It would probably make your final numbers a bit lower than the actual numbers, but overall still a valid analysis.

 

Steve, not being exceedingly quick on the uptake sometimes I have to read your posts several times to appreciate their full value, but this one is inadvertently sharing humor without a second or third reading. (I know that's not the way you intended it, but the country side comment cracked me up.)
They must be working for Bank of America in China. lol

The building boon in China might be a giant false bubble with all the construction and widespread lack of occupancy, they are building empty promises. (Yeah, I know, you probably think I watch too much MSM. But this is actually coming from a relative that has lived and worked in Chinese banks for the past 3 years.)

 

True that starting out at 50K is not really going to happen ( unless you are a lawyer in NYC, and then there are other costs that would eat into the ability to save ), the biggest part of saving for retirement is starting early.

There are several examples of where starting early is best.
One of the general examples:
Person #1 : Saves 1K per year from age 20 to age 31 ( 11 years ) and then stops contributions. Total amount in $ 11K.
Person #2 : Saves 1K per year from age 30 to age 65 ( 35 years ) , total amount paid in $ 35K.
Same rate of return ( examples usually are 7% APY )
Person #1 has $168,514 at age 65 & Person #2 has $147,913 at age 65.

 

Check me out, when I don't have coffee in me and still half asleep, I am funny

....<snip>...The building boon in China might be a giant false bubble with all the construction and widespread lack of occupancy, they are building empty promises. (Yeah, I know, you probably think I watch too much MSM. But this is actually coming from a relative that has lived and worked in Chinese banks for the past 3 years.)[/QUOTE]

Actually this was an article in The Economist some weeks back. The reference to the Celtic Tiger economy in Ireland came up.

Another point of the article, what would happen if the US slowed on purchasing products make in China ?
The bottom line was prosperity or freedom, they can't have both, so the Chinese government has chosen prosperity. Now they need to keep it up with what is happening around them.
India is starting to crowd in on their area, cheap labor and loose regulations in the Providences.
Vietnam was even starting to under bid China ( had to be someplace that the China version of Walmart got their stuff from )

The question was, can China keep shoring up the economy until the US uprights itself ?

 

I do tend to think this could be very plausible. China sees status as being very important. Look at the dramatic efforts for the olympics.

Being able to build the largest buildings and grand structures makes them feel more legitimate.

China will probably keep their economy humming until new labor markets emerge that can supply a large workforce cheaper than they can.

I think it is reasonable to think they will like follow like Japan and stay hot and eventually cool off some but still will remain a big player.

 

The fly in the ointment about Social Security versus investing on your own is simple.

First individuals are not terribly responsible and spend what they bring home. Many would have nothing to show at the end of the day.

The other is just the cycles of the market. People that retired at the point of the market collapse are in a world of hurt.

The argument for things like Unemployment and Social Security is that the government is assumed to be a safer haven than private markets and citizens.

The one thing I can tell is that I doubt that one could stick their Social Security savings in a savings passbook and have anything appreciable at .05%!

This fact can br debated all day long and neither side will agree with the other.

 

You are woefully uninformed about reasonable market returns. The example I used was with an annual interest rate of 7%. This is well below market interest and is a very conservative and safe estimate. As I stated my retirement account is earning in excess of 10%, and earned an average of approximately 8% during the downturn. If I had been able to take my social security contributions and place them in an IRA paying typical market returns, I could stop working now and still receive more in benefits than social security pays if I continue to work, but don't receive a pay raise until 62 years old. What this means is I have to continue to work at my current wages until I turn 62, and continue to contribute to social security until that time or my social security benefit is going to be less than the estimate. I will admit that the scenario I presented for my earnings is not completely fair (I assumed I stopped working right now for the private investment but not social security). If I were to go to conclusion I would have to add another 20 something years of earnings and savings to my private portfolio. This means my result is biased TOWARDS a higher social security benefit, since I didn't include over 20 years of earnings in my private portfolio. If I assume I continued working until 62, earning the same income (identical assumptions as social security), and receive the same rate of return as my previous example, my monthly benefit from the private account would be roughly $3300. That is over 2 times the benefit level of social security.

It would be nothing to take a pen and write the law that the money is untouchable until 62 at the earliest. I would bet (no I'm not doing the math again) that if I just contributed 10% earning market returns, I and most people would make out better, than receiving social security. The money that was deducted for social security would still be deducted and you would not have access to it until you were at least 62 years old. I agree most people are financial idiots, that is why the money would be deducted before it ever reaches them.

 

While I am still chuckling about the country side comment (yes, I'm easily amused for hours), I can't help but think it is easier for China to make such decisions ("shoring up the economy") because of the socialist nature of their economy.
I haven't looked at statistics, but it appears to me the fastest growing economies have socialistic leanings while we in the good ole' USA fight tooth and nail to decentralize everything (less fed intervention, more state level decision making, more localized control, etc.) and stop the "redistribution" of wealth. While these are good "talking points" do they actually gain us some traction in the move to economic recovery? Of the top economies in the world today, which are moving in the right directions and what is the structure of their leadership?

For the rest of our reading public, Please let's not make this a Liberal vs Conservative thing. I'm not taking sides or suggesting which way we should go, only making a personal observation.

 

Might want to do some reading on investing for retirement.

As you close in on retirement age, you shift a portfolio towards more stable investment instruments from the more aggressive ones used early on. Any kind of investment reading would uncover this bit of info.

For those who cannot make the decision on their own with a 401(k), several Mutual Funds have target year funds that do this for the person from day 1 to age 65 ( 59.5, 68, 70, or what ever you wish within a rounding of 5 or 10 years ). This way they have a fund they can keep until distribution time, without thinking about it.
The target year fund would have just that in the name, the year you are going to retire i.e. 2030, 2040, 2050, etc.

The government saving the population from themselves was the reason the self directed Social Security account ( in whole or part ) never took off, or the option to do so with it.

I would be willing to pay a SS "fine" ( another 2% on me only, not the employer ) to be able to put a percentage ( go with 15% ) into my 401(k) without it being shut off at the annual limit.

This would net the SS program another 2% of the wags to help shore up the plan, and I get to put away more money into my 401(k), to theoretically reduce the chance of me being a burden on society later in life.

Might not be so obvious, this SS "fine" would not go against my SS plan, it is an out and out bribe to allow me to put more into my 401(k), and would not change the SS distribution ( as it stands today - future I can see a distribution change for my age group ).

 

The few things you all are not getting with investing is that this still takes someone with a fairly keen sense. I understand the markets and yes on average they return fairly well but you have to know how to invest, where to invest and when to switch to lower risk items, etc.

Not all 401k plans are the same though. They are NOT guaranteed and even the more conservative ones can and do lose money.

Think about the poor folks from Enron that had no choice but invest in Enron stock. How is their 401k looking these day? Maybe Bernie Madoff's investors would like to chat with you?

The other thing is there are some people that the thought of the slightest risk freaks them out and they will invest this in a money market returning .05% or something stupid and be way behind in the game. You do have to consider the lowest common denominator.

Social Security gives everyone the chance to invest blindly in their future, also it provides disability benefits for those that can't make it to 62/65/67/109 whatever the retirement age is.

You never know what tomorrow brings and there is a sense of security that people have with benefits from Social Security as opposed to a 401k or IRA.

 

No, this is what a target year fund does for the person, the person just needs to be able to figure out what year ( rounded to 5 or 10 ) they are going to be 59.5, 62, 65 or what ever age they are planning on retiring at.

Over the short term, yes over the long term no. Long term investing is what investing for retirement is about.

This topic is about a self directed SS program, or at least part self directed. The one that the was shot down a few years back.

This would be the person that chooses not to do a self directed SS program, and gets what the gov gives them then. The Self directed was an option, and it had limits as to what could be invested in. This type of person is the one that only gets x amount per month, and maybe a COLA.

You have that correct. It is blind to the part that I cannot say if it is going to be there when I get to retirement age.
I can also see new laws being passed, where if I did too well in my 401(k) that I get less. The system has been falling apart for years, due to the add on distribution types, it was not planned correctly for all the contingencies that it now covers.

 

+1

Just a quick note on the downturn. Using the assumptions I did with the investment. If the amount of money invested lost 50% of it's value just before retirement, the benefit would still be approximately what would have been received from social security and that's if the person decides to start taking it at that point. By the time a person is within 5 years of retiring most of the nest egg should be in very safe investments so they are very unlikely to lose any value. In the case of this meltdown even if the person was mis-allocated and left the money primarily in stocks or was far enough away from retirement that they had a lot of exposure to stocks, most of the value was returned in two years. I'll also add that if the person was within 10 years of retiring the recession was perfectly timed. There would have been a lot of money going into the market to buy a lot of shares when they are low. After they recovered the person is in a very good position.

Another personal example. I invested about $5k in a little known pharmaceutical company. The cost of a share was ~$4 and stayed there a long time. I figured the company was going to go out of business, but they didn't. When I sold it, the shares were valued at ~$23 per share. At the time Ford was trading at ~$2. $28k invested in Ford at that time would be worth ~217k as of Friday's close. I am by far not a professional investor, but a money manager might have been able to see the value in Ford (at the time it was listed as a buy being the only car company not receiving help and having the strongest vehicle lineup). I will admit this is the only time I have actually made money from my own ideas, which is why I typically don't invest in individual stocks unless there is some other underlying reason, like x-plan.

 

How is SS a 'sense of security' when it is bleeding money and in the short future that money will be gone because of bad government policy.

 

You say that you don't want socialism or communism? You have zero faith in your fellow American citizens, and believe that government must collect our earnings so that they can take care of every individual.

It's true that not everyone will be responsible enough to take care of themselves. Some of thoes people need our help. Others need an incentive, like the possibility of complete failure, to do for themselves.