Greenspan, Crazy, or Crazy Like a Fox?

[Jedieb]

Greenspan warned a House committee Wednesday that growing federal budget deficits and the retirement of Baby Boomers will require future cuts in Social Security and Medicare to avoid tax increases that would damage the economy. He also recommended that the Bush tax cuts be made permanent. He believes that SS can be funded with just more cuts, no taxes.

Greenspans statements have sent both sides of the aisle running for cover. The Republicans are distancing themselves from Greenspans' comments. The Democrats are blasting him and saying there's no way they'll cut benefits. But here's the thing, Greenspan is RIGHT. Not about the tax cuts, he's dead on about SS. The Baby Boomer bill is coming. There simply is no way current benefits can be met. Trouble's coming and it could happen as quickly as 4 years. Further complicating the matter, the Administration's prescription bill seems to get more expensive every week. Bottom line, the retirement age is going to have to be raised, benefits are going to have to be cut, and taxes are going to have to be raised in response the the Baby Boomers hitting 65. Any politician who tells you different is LYING to you. I don't care if they're a Republican or a Democrat.

[Pierce Tondry]

Are you hoping for debate on this, or was that mostly commentary?

[Lilaena De'Ville]

>_< SS is a joke to me, I hate paying for it, because the entire program probably won't be available to me when I'm old enough to finally use it.

[Jedieb]

Nah, I was just trying to scare everyone. Or at the very least, mobilize some people to begin eliminating as many Baby Boomers as possible. Just walk up to someone who looks like they're in their early 60's or late 50's and start clubbing them! We have to stop these Boomers!

I just for once would like to see one of the Partys address this issue seriously. This is one of the reasons I thought Bush's tax cuts were a mistake. Aside from favoring one side of the ledger, they're robbing the government of revenue that could be used to shore up SS.

[Jedieb]

SS is a joke to me, I hate paying for it, because the entire program probably won't be available to me when I'm old enough to finally use it.
I read that first sentence and thought I'd be reading a slam against one of FDR's greatest accomplishments. Then I read the second and realized LD has seen the future! I've told my wife on more than one occasion, we need to plan our retirement as if SS won't exist. Start putting money into your 401K's and 403B's boys and girls.

[Pierce Tondry]

To be honest, I'm not really informed on the ins and outs of Social Security issues. Anyone want to provide me with info?

[Lilaena De'Ville]

Originally posted by Jedieb
I ...realized LD has seen the future!

It's about time people started realizing that. :grumble

:lol

[Jedieb]

SS Info
If you're a US citizen or resident and you've working and contributing to the system you've been getting a SS Statement every year for the last few years. In it you get a summary of your earnings for every year you've filed a tax return. You also get an estimate of what your benefits will be when you retire. The statement also gives you a total of what you've already paid into SS and Medicare.

Social Security is more than just a retirement system. SS provides disabiltiy benefits and Medicare comes under the SS umbrella as well. SS can even provide death benefits.

Here are some of the major problems facing SS:
Today, SS takes in more taxes than it pays out in benefits. The excess gets dumped into SS trust funds. So right now, everything is fine.

In 2017, SS will begin paying more in benefits than we collect in taxes. It's estimated that by the early 2040's the trust funds will be exhausted and taxes collected will only cover around 70% of benefits. In other words, we're running out of money and we need to get on the ball.

[Marcus Telcontar]

It's not just a USA problem - the aging population is a real problem and yeah, it's coming. Greenspan said some very upleasant but TRUE statements.

I refer you to http://www.smh.com.au where our own politicians are facing facts and doing somethign about this, now.

The other issue is that Gen X'ers have to realise that our parents are goign to live long enough to spend what would have been interitances 50 years ago. It's no longer the case you work to 65 and have a few years before dying. You have a whole second life after 65 now.

I'm glad to see some people know this.

[Commander Zemil Vymes]

The big issue is eligible ages. They need to be raised, to keep in parity with standard of living, which has increased significantly since retirement packages first started showing up on the scene back in Germany over 100 years ago.

Right now, it looks like I'll be around 67 when I'm SS-eligible. IMO, they really need to push that into the 70's. No pragmatic person is planning on using Social Security cash flows in their retirement package anyways. Having it tighten on a smaller demographic would improve the payout, and really help to ease the risk of superannuization (running out of retirement benefits before death).

Put it another way: people retire, and use whatever retirement trusts, IRA's, annuities, or profit-sharing programs they've accumulated, plus other investments, and live off those cash flows for a few years. Social Security would act as a safety device, providing a smaller cash flow in the event of a catastrophic plunge in interest rates, as we've seen in the past year or so.

Right now, its being tapped by too wide a demographic, and thus its really not a factor in anybody's retirement plan. If it is, these people need a slap in the face, because it isn't going to do squat. They tighten the eligibility to say, 75 years, and the package will provide for a stronger support to its beneficiaries.

[Jedi Master Carr]

I planing on starting some kind of retirement fund some day there is no point in me relying on SS. Really something has to be done on this issue but I have no clue what.

[Commander Zemil Vymes]

Look into it. If your company offers a profit-sharing fund, or an IRA, then comb over the little details, such as how it rolls over, how liquid it is (in case you change jobs) who manages the portfolio, what its made up of, etc. If its simply a stock purchasing plan, I'd look for something more diversified, or purchase positions on your employee stock to hedge against movement.

Bigger thing than retirement planning at our young age IMO is making sure that you've got great health and disability insurance. If you don't have a good policy for that, I recommend strongly that you get it before you make another big purchase.

[Jedieb]

If nothing is available from your employer or you don't like any of their options then you should immediately start looking into starting a ROTH IRA or at least a regular IRA. I'd recommend a ROTH because of the tax advantages. I'd also recommend PAYING YOURSELF FIRST! If you have a steady income then you should set up your checking account to make monthly contributions to whatever retirement vehicle you're using (IRA's, 401Ks, etc). If money is tight then start with something modest like 5% of monthly income. If you get into the habit of paying yourself first then you never see the money and you don't really miss it.

IRA's V. 401k's
I work for a non profit organization so instead of a 401k I use a 403b. As does my wife. If freedom of choice were my top priority then a ROTH IRA might be a better option because I could pick whatever mutual funds and stocks I wanted. Some 403b's give you the same flexibility but most offer a set list of options. The younger you are, the more aggressive the option you want to choose. I should probably be putting more money into my ROTH, but I'm laxy and we're waiting to get the kids all out of daycare and free up some more cash for investing so I'm at about 10%. My wife's choices are a nobrainer, her 403b is excellent because it has matching contributions. That's free money and an instant return, even in a bear market. Whatever you choose, choose SOMETHING. The earlier you start the more you'll have at the end of the game.

[Charley]

Agreed on the IRA choice. However, I'd probably hire a financial advisor unless you know how to pick a well diversified portfolio (its harder than you'd think). You want to insulate yourself from rate risk, reinvestment risk, default risk, and a whole plethora of forces that can affect portfolio performance. You can't really go about this with a day trader's mentality or you're going to get screwed in a big way. Do your homework before you start playing portfolio manager. If you can't devote the time, pay the reasonable commission for an advisor to do it for you.

[Jedieb]

You can't really go about this with a day trader's mentality or you're going to get screwed in a big way.
I would never advise anyone to get into day trading. Unless you have unlimited funds and don't care about losing money. It's just far too easy to lose your shirt. One of the easiest ways to invest is to get a solid Index fund. That way you've got the whole market covered and your returns will follow the Dow. Yes, you'll have bad years, but over the long haul you'll average between 10%-13%. Plus, most index funds have small fees and that helps your return. Every time I've bought recommended funds I've been less than thrilled. I've done better on my own with patience and solid research.

[Charley]

Yes, index funds are almost like "investment for dummies". Highly correlated to market performance, and thus relatively easy to keep an eye on. You stay afloat on major issues (watch CNN lol) and you can do well with an index fund.

I haven't looked into it, but SPDR shares do this kind of thing, but in a very liquid format. Not sure how it correlates to, say, the S&P, but given a few years and who knows. SPDR's might become the T-bills of the equity market :rolleyes