Changing Social Security

[southpaw]

It needs overhauled to meet future demands and to prevent a massive democrat sponsored tax hike to fulfill the promised benefits or massive cuts in promised benefits.

We are the only industrialized country that doesn't fund a portion of SS throuogh the private sector.

Here a proposal to fix the system. Its what 3.4 million bureaucrats (US Federal Employees) use as a retirement account. If its good enough for them why not the rest of us?

Social Security following Thrift Savings Plan's lead
By Sandra Block, USA TODAY
The personal investment accounts that are the centerpiece of the Bush administration's Social Security proposal would be modeled after a popular federal retirement savings plan that offers a mix of index funds with microscopic administrative fees.

The Thrift Savings Plan (TSP) is similar to the 401(k) plans many private companies offer their employees. More than 3.4 million federal civilian employees, postal workers and members of the armed services participate in the plan, which had more than $152 billion in assets at the end of 2004.

There are two reasons the federal plan is an appealing role model for personal savings accounts, benefits experts say:
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•Diversification. The TSP funds invest in broadly diversified stock or bond indexes, so participants can't take big bets on specific sectors or individual stocks.

"You don't want a bunch of cowboys to have an opportunity to invest in pork bellies," says Syl Schieber, director of research for employee benefits consultant Watson Wyatt. "Having a limited number of options that gets you the diversity you want is the way you ought to go."

Diversification reduces the risk of big losses, but it doesn't eliminate it. Any investment in the stock market involves risk. In 2002, for example, its common stock investment fund, which invests in the S&P 500 index, declined 22.1%.

•Low costs. The Thrift Savings Plan offers bargain-basement fund expenses, a feature required by the law that established the plan.

At the end of 2004, the average expense ratio for funds in the plan was 0.06%, down from 0.12% in 1992. On a $1,000 investment, that works out to an annual fee of $6. Investors can find funds that invest in the same indexes, but they'll typically pay more.

Many investors in 401(k) plans also pay higher fees, which can reduce investment returns. If the Bush administration replicates the Thrift Savings Plan's expenses for personal savings accounts, critics would have a difficult time portraying them as a giveaway to Wall Street interests, Schieber says.

Here are the investment options available to TSP participants:

•Common stock fund. Seeks to match the performance of the Standard & Poor's 500 index, an index of stocks of 500 large to midsize U.S. companies.

•Small-cap fund. Seeks to match the Wilshire 4500 index, made up of small and midsize companies not in the S&P 500 index.

•International fund. Seeks to match the Morgan Stanley Capital International index, a broad index of companies in 21 developed countries.

•Fixed-income index fund. Seeks to match the Lehman Bros. U.S. Aggregate index, an index of U.S. government bonds, mortgage-backed securities and corporate bonds.

•Government securities investment fund. Invests in U.S. short-term Treasury securities.

The TSP plans to add so-called lifecycle funds to its portfolio later this year. These funds, which are becoming increasingly popular in 401(k) plans, automatically shift to more conservative options as the investor nears retirement.

Bush has suggested using a similar strategy with personal investment accounts to protect individuals from market downturns as they approach retirement.
How fun

[LionPride]

I find it funny too that Clinton, Gore (snore), and other Democrats a few years ago were talking about how the program is heading for disaster and that we must overhaul it. Clinton even spoke of this disaster in one of his SOTU speeches.

Now that a Repulican president has offered a way of doing so, Democratic leaders are out there saying the program isn't broke and doesn't need to be fixed.

Which is it folks?

[southpaw]

Ya and Harry Reid is on the record proposing the same program Bush is now.

[southpaw]

Guess who's against is own plan now.......Harry "the next Tom Daschle" Reid.

[count2infinity]

if the democrats were smart...they'd just sit back and wait...if it fails they come out looking good and can reform it how they want to, if it works...everyone wins. Just my opinion tho...

[The Ancient Enemy]

Count is exactly right. But let's not get too upset here, they have every right to voice their opinion if they think the plan is a waste.

[LionPride]

You don't understand the point here.

Many of those now opposing this plan and saying there is nothing wrong with SS are the same one's saying it was headed for disaster just a few years ago.

Count - it's a pipe dream to think the Dems would back anything this conservative president put in front of them.

[docsensei]

The democrats are just playing politics as they always do. If they had their guy in the White House they would be touting the same plan as Bush. The division between the GOP and the Dems has never been greater and if you think the left is going to support ANYTHING Bush wants to do, you're in for a rude surprise.

[once a runner]

Yeah, "playing politics" is strictly the domain of the democrats. The republicans just sat back and said nothing during the Clinton years. Politics, is now, and will always be a 2 way street.

I'm certainly not opposed to getting more money when I retire. However, what I still don't understand and it was not answered on the other thread, is how do we pay for it? This was asked often while Kerry was throwing out proposals during the campaign.

How do we pay the current retirees and soon to be retirees if we are putting less money into SS and more into the stock market? The only way I see is to borrow the money and increase the deficiit even more. The Bush plan is putting money into the stocks, but not actually fixing the system.