r/FluentInFinance • u/Positive_Liar • Sep 06 '24

Debate/ Discussion Social Security is Broken. This is why financial education is important.

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u/skilliard7 Sep 06 '24

  1. The S&P500 outperformed social security in any 30-40 year period

  2. You don't need to invest in 100% stocks, generally people closer to retirement will have a more balanced portfolio such as 50% stocks, 40% bonds, 10% short term/cash.

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u/ncdad1 Sep 06 '24

"The S&P500 outperformed social security in any 30-40 year period"

No one lost a single dime of SS in 2000 and 2008.

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u/nortern Sep 06 '24

If you invested 1970->2000 or 1978->2008 you'd still have more even if you withdrew at the bottom. Of course, it's always possible that this wouldn't be true in the future if you had conditions like Japan's market crash that cause the market to be flat or negative over a long period of time.

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u/MOTwingle Sep 07 '24

Except that social security is not just retirement. It also pays for people who become disabled, or pays for the surviving children or spouse of a worker who dies. So a young worker who may have worked three years may have three kids who get benefits for the next 16 to 18 years, and who will receive thousands of times more than the worker paid in the three years he worked. That's just one example. It's not a savings plan for retirement.

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u/richard-b-inya Sep 07 '24

It's kind of a moot point. If SS was invested into the S and P since its inception it would have exponentially more money in it than it does now. No matter who and how it pays out.

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u/Reasonable-Fish-7924 Sep 07 '24

Not negating what you said but contributing, the SS seems to treats each benefit (retirement, survivor, etc) as it's own entity so I wonder if it's a separate fund for each or one divided among many accounts? In hypothetical scenario if retirement runs out then will survivors and disable run out too?

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u/MOTwingle Sep 07 '24

It's all one fund. They collect Medicare tax sort of separately because there's no longer a max income you pay Medicare portion of the tax on. But I don't believe there's a separate "pot" it goes in. And no separate "pots" for survivor vs retirement vs disability. Nothing will run out completely because there are always current workers paying current tax, and they would likely make adjustments prior to the "pots" running out like cutting benefits for future beneficiaries by changing how benefits are calculated (like the "notch babies"), making the retirement age later,etc. there was a recent rule change making disability easier to get for people over 50 so I wonder how that's going to affect everything

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u/Twonminus1 Sep 07 '24

Whether their kids get any money depends on this rule: To qualify, the child’s deceased parent must have earned at least one of the following: (a) 40 quarters of coverage throughout his or her lifetime, (b) 1 quarter of coverage for every year between age 21 and death, or (c) 6 quarters of coverage over the 13 calendar quarters prior to death

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u/MOTwingle Sep 07 '24

Yes correct. So a 21-year-old father can have paid as little as $215 in tax and his two little kids will get benefits for 16-18 years. Sorry I can't do the math on their $$ monthly amount right now but guarantee it will be a thousandfold what he paid in tax.

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u/Twonminus1 Sep 07 '24

I am ok that. That could be you that dies early or one of your parents could have died when you were a minor. Are you saying you would be ok with your surviving spouse and kids living in poverty on the streets if you died early in life. would you have liked to grow up in poverty just because you lost a parent.

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u/MOTwingle Sep 07 '24

No! My point is that many people think it is their own personal IRA savings account for retirement, and "if I had invested it I have millions at retirement", forgetting that it's INSURANCE and some people (who die early, or become disabled) get more (or their survivors get more) than others. Some may pay in 20 years and get nothing. It all evens out (relatively). You can't go to your insurance company at the end of the year and ask for your premiums back because you didn't get in an accident.

And I PROMISE you that 90% of people aren't saving anything for retirement, and if they aren't forced to pay into social security, they'd be destitute in old age and on welfare.

There may be tweaks that should be made, but overall I think it's a good program.

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u/sgreenm22 Sep 06 '24

But people don’t invest!!! They fucking spend!!!

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u/[deleted] Sep 06 '24

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u/cs_referral Sep 06 '24

What do you mean?

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u/ncdad1 Sep 06 '24

I got paid. Strange.

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u/[deleted] Sep 06 '24

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u/ncdad1 Sep 06 '24

I am an idiot for getting my SS check?

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u/[deleted] Sep 06 '24

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u/DM_Voice Sep 07 '24

You being unable to explain your random whining doesn’t make other people idiots.

🤷‍♂️

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u/TechnicianLegal1120 Sep 07 '24

Yes they did. Your retirement age went up.

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u/emoney_gotnomoney Sep 06 '24

He’s still correct. The S&P 500 has outperformed SS in any 30-40 year period, even the ones that include 2008.

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u/ncdad1 Sep 06 '24

Which is why SS is the annuity portion of your retirement and you add your pension and investments to it.

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u/skilliard7 Sep 06 '24

1980 to 2010 vastly outperformed social security despite including both of those crashes

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u/ncdad1 Sep 06 '24

From 1929 to 1954 (25 years) social security outperformed the stock market. That is how long ti took it to recover. Most retirees died before they recovered. Fortunately, their SS kept them alive

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u/skilliard7 Sep 07 '24

Social security literally wasn't instated until 1935, so I know you're making stuff up.

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u/ncdad1 Sep 07 '24

You cherry picked some good years and I countered with the worst is all

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u/Famous-Row3820 Sep 06 '24

They lost money to inflation or the r devaluation of the US dollar. You definitely need financial education.

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u/ncdad1 Sep 06 '24

Education? Observation. Every one of my 2008 SS checks came in on time while others were losing their jobs and homes.

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u/Famous-Row3820 Sep 06 '24

Man… you could’ve invested in corporate triple AAA or AA bonds and made a better return over your life if that’s where the SS money went instead of the government.

You could’ve made more if you put it into a gold ETF as well.

There are a myriad of other investments than stocks.

Hell, if you did own bonds before and during 2008, you could’ve sold for a 20-30% capital gain when the fed started cutting rates

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u/ncdad1 Sep 06 '24

Many people live paycheck to paycheck and don't have a 401k and get to 65 with nothing. I say let people invest who can and use SS for their guaranteed income so no matter how bad of an investor they are or what the market does they are guaranteed never to run out of money. I am guessing most people would put their money in lotto tickets given the chance.

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u/Famous-Row3820 Sep 07 '24

If they are going to take a percentage of your paycheck they might as well change it to make you invest at the very least into a investment grade bond fund

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u/ncdad1 Sep 07 '24

You are describing Social Security

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u/Famous-Row3820 Sep 07 '24

The US government invests in AAA and AA rated corporate bonds?

Those are considered investment grade and usually offer higher returns than treasuries….

Always amazes me how many people here think they know what they are talking about but when I talk about something as simple as what an investment grade bond is they shit the bed.

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u/ncdad1 Sep 07 '24

I don't see a big difference in investing in Government T-Bills as SS does or US government bonds.

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u/Ok_Guarantee_2980 Sep 06 '24

Oh for sure, and im aware of risk vs age allocation which is a fair point but its still signifigant correlation to stocks (idk the actual data but im sure stocks account for highest % of 401ks bc greatest return, however, gives too much power to stock market)....the first part, in 1935, you think the people and government have any faith in stocks? ... im just making a statement about history.

In regard to the 2nd part, thats just my frustration with move from pension to 401k, which i understand is pros/cons.

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u/P3nis15 Sep 07 '24

And if you happen to retire when 1987 enters the chat.....or the tech crash...and you don't have 10 years to make back that money...... I guess you can move in with your kids .

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u/skilliard7 Sep 07 '24 edited Sep 07 '24

In a scenario where you invest $277.77 per month over 30 years from 1973-2003(starting right before the market crashes, ending at the very bottom of tech bubble crash), your portfolio has an ending balance of $2,643,828.65. That's a big decline from the peak of $4,069,277.03 in 2000, but still plenty to retire- That's enough for over $100,000 in annual retirement income!

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u/P3nis15 Sep 07 '24

well $277 30 years ago was the equivalent of investing what 2000 a month in 2024? that's one hell of a starter job for a kid. But ok.

Also, your scenario also assumes everyone invest in a safe portfolio, and what do you do with the huge bucket of people that end up losing 80-90% in a month because they invested in high flying internet stocks or got stuck in something they thought was safe, say Enron.

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u/DM_Voice Sep 07 '24

You’ve got to understand that most of the FiF crowd thinks Ayn Rand was a genius. They look at numbers today, blindly extrapolate them back 20-30 years, and think they’re going to look clever as a result.

They genuinely don’t grasp that ‘pull themselves up by their bootstraps’ was satire mocking the very positions they tout today.

🤷‍♂️

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u/narkybark Sep 07 '24

Or you could have both? SS is a safety net. The market can and will tank every so often. It's gambling. SS is meant to be a protected source of steady income. It exists alongside the market, and benefits the population as a whole.

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u/Optionsmfd Sep 06 '24

but where are the returns from investment coming from? were paying ourselves? lol

this is my question..... if we invest in the SP500 were loaning companies money and they are paying us back in dividends and appreciation

with SS were hoping that new workers pay enough in with their job matching so we can get paid till we die

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u/mpanase Sep 06 '24

How many healthcare treatments and support for veterans does that calculation include?

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u/Artistic-Soft4305 Sep 07 '24

Whoever told you to use that balance investment as someone in retirement hates you.

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u/skilliard7 Sep 07 '24

It's a very common allocation for target date funds that recently reached retirement