American Savings Rate IS NOT ZERO

Discussion in 'Economics' started by aeliodon, Oct 29, 2008.

  1. I realized that American savings rate is not zero - its probably 12.5% which is the amount deducted from each paycheck as payroll taxes. You end up getting that money back when you retire.

    So Social Security is a forced savings program. I think that's why most people in America don't save much. In many countries without SS or pensions people save save 50% of thier income. And if we didn't have SS, welfare, pensions, etc. we'd probably save 50% of our income as well.
  2. cvds16


    you must be one of the most ignorant people I have met recently :eek: :confused:
  3. Dang.. you beat me to it..

    But to be fair, that's not enough to say the poster is ignorant... just one stupid post.

    Maybe he's been temporarily blinded by NObama-itis and his brain just went off half-cocked?
  4. Euler


    Seems likely he (or she?) is trolling.

    At least I hope so, for his/her's sanity's sake :D

  5. Just missing a huge amount of interest, dividends, capital gains, etc.
  6. Not so fast guys. These could be the words of a university professor, not quite sure if it is economics or political science.
  7. You're right.

    This is why Social Security should only be invested in stocks, thus boosting the real economy, unlike T-Bonds.
  8. Duh... Social Security funds are not invested in ANYTHING... they're just siphoned-off by the Congress... "'cause we ain't using the money right now anyhow"..
  9. piezoe


    This is a very common misconception. Social security in the US is a defined benefit plan, and it is set up to trade lower risk, and lower contributions during ones working years for the possibility of leaving an estate to ones heirs. In other words, to receive from an individual, defined- contribution plan the same monthly benefit that social security provides with low risk that you will not outlive it, you would have to contribute considerably more per month to a private plan than you do to social security. This feature is made possible because the contributions of those who die relatively young subsidize those who die at a more advanced age-- a shared-risk feature not possible in an individual plan, such as a 401K.

    There are two more important aspects re the US social security system. One is that it was intended to provide only enough income in retirement, or in the case of disability or survivor benefits, to prevent one from being impoverished, and as such, people of means are expected to supplement their retirement income from pensions and/or a private investment plans.

    A second critically important aspect, and the one that makes it impossible to substitute private investment plans for social security, are the many Americans at the low end of the wage scale who would be unable to fund a low-risk, private retirement sufficiently to guarantee even a minimal subsistence upon retirement. That is to say, if one were to contribute their social security payments to a private plan instead, the total contributions would be too little to provide a secure retirement without the shared risk feature of social security.

    Sadly, there is not one person in a hundred that understands these important differences between a shared-risk, defined benefit plan with insurance aspects, such as social security, and a defined contribution plan such as an individual 401K. I am not arguing for or against either approach to retirement funding, but certainly social security has worked quite well as it is now set up, and to fix it so that it is sound for another century requires only minor tweaking. Consequently i am baffled to understand why it has been turned into a political football, and the fix is consequently being delayed. I suppose there might be those either philosophically opposed to the concept of social security or who stand to gain financially by doing the system in. Perhaps that explains the delays in fixing it.
    Now medicare, that's a whole different kettle of fish!
  10. it was something al global warming gore was talking about, a lock box for SS which was laughed at
    #10     Oct 29, 2008