Social security

[Sky King]

I agree! You'd need to have a long term disability policy to replace SSDI but they are very cheap. I tell most young people 2 things, #1 Never miss an adventure #2 Get a long term disability policy.

 

[rockloper]

Well to explain more as well as why I prefer investing to how SS is run… (Bet you didn’t think I’d go there again…) ;-)

The individual median salary in the USA is currently $44,225 annually and 13.3% goes to SS and Medicare. But let’s see what the projection would be if that 13.3% went into an S&P index fund instead. Also since the index fund is highly diversified, we don’t have to worry about market fluctuations so can just put the money in and forget about it until retirement.

Inflation is real, but we can ignore it for now since we don’t know what it will be in the future. We’ll pretend that it doesn’t exist. That way we can compare the retirement dollars with current value. Also we’ll pretend that you never get a pay raise and remain at the median salary.

OK - historically over time the S&P500 has had an annual growth rate close to 10% annually, but we’ll be more conservative and go with an 8% annual growth.

Currently about 13.3% of the salary goes to SS and medicare (for the median salary that’s $6766/year), but suppose it went into the fund. At an annual growth rate of 8%, after 30 years, the fund would have a value of $766,522 and after 40 years of only making the median income, you’d have $1,752,887 for retirement. (Yes - the magic of compounding!).

Using the 4% rule you’d be able to safely withdraw $30,666/year or $2,555/month if you quit work after 30 years. If you started work at 20, that would be retiring at 50. Since you only withdrew 4% and the historical growth is at 8% the fund would continue to grow even though you had withdrawn. Also the money would only be taxed as long term capital gains, not ordinary income.

But if you kept working until 60 that would be 40 years of working at the median salary, you’d be getting $70,115/year or $5842/month - still using the 4% rule. Yep, you’d be getting almost double what you were earning while working.

Fine but that still doesn't address the fact of eliminating the cap. That's my complaint. If that was done there wouldn't be any discussion of solvency.

 

[Sky King]

Some good ideas on saving SS

 

[mpruet]

Fine but that still doesn't address the fact of eliminating the cap. That's my complaint. If that was done there wouldn't be any discussion of solvency.

I’m currently reading the book “The Psychology of Money” by Morgan Housel. It’s not so much about how to use what money you have to obtain wealth, but rather on how people emotionally act and how that affects their ability to become wealthy. It’s really an interesting psychological study of how people really act on their emotions rather than objective analysis.

One of the points that I read last night was on how pessimism outweighs optimism in people’s reactions. We see it all the time. That’s why people tend to make poor decisions. They’re acting on their emotions. If you look at the news on many of the news channels, they will emphasize the bad things happening, and very little optimistic stories.

I’m a moderator for a group of folks heading to Alaska, and far more post are about how bad the roads are or how they can’t find fuel. You don’t see very much about the exciting and beauty that you see on the way up north - that is until they’re actually making the trip. Negativity sells. I was actually told once by a less than knowledgeable soul that I needed to carry 10 gallons of extra fuel because “They don’t have gas stations up there, ‘ya know!”

Bad news is a strong ‘click bait’ because it creates pessimism. The news streams (and YouTubers) are all trying to get income and the more clicks they generate, the more income they can command.

All of the talk about SS running out of money is ‘click bait’. It’s all about creating pessimism because that will drive folks to their point of view. It’s true that we’ve recently had to tap more into the fund than we did earlier - mainly because the baby boomers are currently retiring, and in 15 years it would be considerably smaller than now. But in 15 years most of the baby boomers will have passed. The baby boomers were working in one of the largest economic expansions in the USA, so naturally provided greater income into the SS fund, and the fund grew. And upon their retirement, it did create an imbalance between outflow and inflow, causing the fund to shrink. But after the bulk of the boomers pass, it should rebalance.

The SS fund is quite large, and is actually growing. Here is the recent report from the SS administration. https://www.ssa.gov/policy/trust-funds-summary.html

You might notice that in 2022 the growth of the SS fund was $-56B, but in 2023 it was $-22B. Yep the fund shrinkage was reduced by 36 Billion. At that rate we should reach a balance in just a couple of years.

But in any case as wise folks told Chicken Little - “No, the sky is not falling.”

 

[Sky King]

Does money bring happiness? Below the article are several more related ones.
https://bigthink.com/the-present/poor-with-high-life-satisfaction/?rjnrid=5l4RZE0

 

[mpruet]

Does money bring happiness? Below the article are several more related ones.
https://bigthink.com/the-present/poor-with-high-life-satisfaction/?rjnrid=5l4RZE0

Nope, but in my opinion, happiness is overrated. Contentment is much more critical. Happiness can be fleeting, contentment is sustained. Happiness tends to be external, contentment tends to be internal. I suspect that’s why a lot of people buy things that they don’t need or that they can’t really afford. “That Porsche will make me happy.”, they’ll say. The contented person is really much more satisfied with his life than the person who felt he had to make a huge purchase to become happy.

 

[Sky King]

For me happiness, contentment & peace are almost one in the same. I enjoy life & work & woke up happy, always 1st at work, taught my kids to always do more than expected at everything you do. Always bought, sold & traded but loved the thrill of hunt & the art of the deal the best. Money was just the yardstick. I relate to the article as it's like going to my remote camp. All you think of are the basics, cooking & eating, staying warm, tending the sauna, bear hunting in season, playing cards, just the basics of life. If I had a billion $$ I'd find a good cause for it as you can't take it with you & we ALL gotta go.

 

[mpruet]

I think that ‘true’ happiness comes from contentment within. From that viewpoint, yes they are the same.

 

[wanderlust]

One of the points that I read last night was on how pessimism outweighs optimism in people’s reactions.

Bad news is a strong ‘click bait’ because it creates pessimism. The news streams (and YouTubers) are all trying to get income and the more clicks they generate, the more income they can command.

I read a bit about how human psychology was affected by evolutionary pressures in last few million years.

Pessimism was evolutionary beneficial: If cave man noticed a move in the shade and run away, he survived the tiger. If there was no tiger, no harm. But if he IGNORED the shade and there WAS the tiger, game over and you don't spread your genes. So being pessimist was evolutionary beneficial.

 

[mpruet]

I read a bit about how human psychology was affected by evolutionary pressures in last few million years.

Pessimism was evolutionary beneficial: If cave man noticed a move in the shade and run away, he survived the tiger. If there was no tiger, no harm. But if he IGNORED the shade and there WAS the tiger, game over and you don't spread your genes. So being pessimist was evolutionary beneficial.

True, but it’s been a long time since we lived in caves. ;-)

 

[wanderlust]

I think that ‘true’ happiness comes from contentment within. From that viewpoint, yes they are the same.

I took FREE online course https://www.edx.org/learn/happiness/university-of-california-berkeley-the-science-of-happiness
Highly recommended.

Only recently psychologists started study of happiness, and (together with behavioral economists) they learned quite a lot about it. Term like "hedonistic treadmill" that if you want to improve happiness, you need to increase the doses, like drug.
Until the Enlightenment there was no such concept as happiness. Life was expected to be hard, and the "pursuit of happiness" was breakthrough idea in 18th century.

 

[wanderlust]

True, but it’s been a long time since we lived in caves. ;-)

Modern human is about 11K years old. Do you think that genetics changed a lot in this time? Especially genes which were beneficial in last 4 million years?
I am not saying that we live in caves. What I am saying is that being pessimistic is deep in our genes. I agree with what you said about the pessimism and SS, and bringing you more and deeper argument why it is so.

 

[rockloper]

I’m currently reading the book “The Psychology of Money” by Morgan Housel. It’s not so much about how to use what money you have to obtain wealth, but rather on how people emotionally act and how that affects their ability to become wealthy. It’s really an interesting psychological study of how people really act on their emotions rather than objective analysis.

One of the points that I read last night was on how pessimism outweighs optimism in people’s reactions. We see it all the time. That’s why people tend to make poor decisions. They’re acting on their emotions. If you look at the news on many of the news channels, they will emphasize the bad things happening, and very little optimistic stories.

I’m a moderator for a group of folks heading to Alaska, and far more post are about how bad the roads are or how they can’t find fuel. You don’t see very much about the exciting and beauty that you see on the way up north - that is until they’re actually making the trip. Negativity sells. I was actually told once by a less than knowledgeable soul that I needed to carry 10 gallons of extra fuel because “They don’t have gas stations up there, ‘ya know!”

Bad news is a strong ‘click bait’ because it creates pessimism. The news streams (and YouTubers) are all trying to get income and the more clicks they generate, the more income they can command.

All of the talk about SS running out of money is ‘click bait’. It’s all about creating pessimism because that will drive folks to their point of view. It’s true that we’ve recently had to tap more into the fund than we did earlier - mainly because the baby boomers are currently retiring, and in 15 years it would be considerably smaller than now. But in 15 years most of the baby boomers will have passed. The baby boomers were working in one of the largest economic expansions in the USA, so naturally provided greater income into the SS fund, and the fund grew. And upon their retirement, it did create an imbalance between outflow and inflow, causing the fund to shrink. But after the bulk of the boomers pass, it should rebalance.

The SS fund is quite large, and is actually growing. Here is the recent report from the SS administration. https://www.ssa.gov/policy/trust-funds-summary.html

You might notice that in 2022 the growth of the SS fund was $-56B, but in 2023 it was $-22B. Yep the fund shrinkage was reduced by 36 Billion. At that rate we should reach a balance in just a couple of years.

But in any case as wise folks told Chicken Little - “No, the sky is not falling.”

You continue to post responses that have nothing to do with what I'm driving at - it's called gaslighting as I'm sure you're aware. THERE SHOULD BE NO CAP!!!!

 

[user 32988]

Also we’ll pretend that you never get a pay raise

Wait, pay raises are a real thing? I thought that was just something used in movies and such...

 

[mpruet]

Wait, pay raises are a real thing? I thought that was just something used in movies and such...

Well, in 1970, the individual median salary in the United States was $4,778. Now it is $54,132. So someone’s gotten a raise since 1970. ;-)

 

[wayne49]

Life was extremely Short, Brutish, and Nasty. And still is for many in the Global South.

For a current example of one of the worst places, which is in South America:

https://www.mybestplace.com/en/article/la-rinconada-one-of-the-most-hellish-places-on-the-planet

55,000 people with no clean water, no septic system, no trash facilities, at 16,000 ft elevation. Living in a non fiction dystopia with no ending except death.

 

[RonDean]

Since 1970, the Consumer Price Index saw a 500%-plus increase. Even after adjusting for inflation, today's dollar buys a whole lot less than it did 50 or even 25 years ago.

Note: That was a simple search and was not fact checked.

 

[mpruet]

The individual median salary increased by 1100+% since 1970.

 

[Sky King]

This breaks it down in many ways for 50 tears 1971-2021
https://www.pewresearch.org/short-r...e-class-has-changed-in-the-past-five-decades/

 

[rockloper]

Well, in 1970, the individual median salary in the United States was $4,778. Now it is $54,132. So someone’s gotten a raise since 1970. ;-)

And what was corporate pay raises during this time?