How should retirements be funded?

[Link]

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So your solution is have a panel of bureaucrats who say to people, "No, you cannot have Medicare treatment after paying into the system for half a century; we need to ration and you need to die in palliative care!"?

Please quote for me where I said a "panel of bureaucrats" should be in charge of such decisions.

Do you care to share your source?

Why don't you share with the forum your source for coal miner life expectancies.

I suspect the percentage of coal miners who make it to 65 is about the same as the percentage of coal miners who would make it to 70: Virtually zero.

The best we can do is provide incentives to everybody to invest for their retirement (and you need to give people, or at least coal miners, more credit). The current system fails to do this, so we ought to change it. I have proposed a simple measure to assist with this objective: No taxes on the first $250,000 earned from capital gains, interest and dividends. This is a huge incentive for the vast majority of Americans. It would make planning for retirement easier, and create an environment where more people are thinking about the future rather than what mindless good/service they can consume today at the expense of tomorrow. We need to change the culture of debt and myopia. This is a simple measure that nudges us in the right direction.

Sounds like a bunch of flowery right wing gobbledygook from someone who has never worked a day in their life, paid taxes, or run a household.  Please tell us how much EVERYONE who is working is allowed to tuck away 100% tax sheltered under our current laws.  Now tell us what percentage of their gross income that sum represents.  Now tell us even with that complete give away how many people max out that generous tax shelter.  Once you've answered all those questions then come back and tell us about this quarter of a million a year tax exemption the average coal miner obviously needs.

[Politico]

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So your solution is have a panel of bureaucrats who say to people, "No, you cannot have Medicare treatment after paying into the system for half a century; we need to ration and you need to die in palliative care!"?

Please quote for me where I said a "panel of bureaucrats" should be in charge of such decisions.

You stated that health care should be rationed; who is going to ration it if not a panel of bureaucrats? Whenever something is rationed by a government entity, by definition you need bureaucrats to carry out the rationing!

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One, you stated something which you claimed to be a fact without backing it up with a source. Two, I stated a suspicion (hence "I suspect..."). Three, my suspicion was with respect to the working life of a coal miner, not their actual life expectancy. I suspect that very few, if any, coal miners do their job until 65 (And I suspect that many unionized coal miners have pensions that kick-in at 55 or 60, but obviously this may not be the case). Finally, if you really cared about coal miners you would not be an ardent supporter of Obama, who seems hellbent on having the EPA put as much pressure on mines as possible. This is going to cost coal miners their jobs, including those nearing retirement (whom I am not threatening in the least bit by proposing we change the age of SS/Medicare to 70 for those who are currently under 50).

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I've already done my time and made my piece of the pie.

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Obviously IRAs, 401Ks, etc. are instruments that provide tax-deferment, along with a whole litany of restrictions which make saving less appealing than it ought to be (if these instruments make saving so appealing, how come we currently have a culture of debt and myopia focused upon mindless consumption? Answer: These instruments are not providing a powerful enough incentive). These instruments do NOT provide the tax-free benefits I am proposing. This proposal is a much stronger incentive to save than anything we currently have. Perhaps it can help change the culture of debt, myopia and mindless consumption, a way of life that is incompatible with long-term growth? Or would you prefer to watch America drive itself into the grave?

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The $250,000 is an arbitrary number I would compromise on until the number of required votes is met in Congress. Maybe the number would be lowered to $200K, $100K, or even just $50K. Whatever the number, I am fine with it because I do believe we need to create a powerful incentive to plan for retirement. Making a certain amount of income earned from capital gains, interest and dividends tax-free is a much better incentive to give people to better plan for their retirement than anything else I have seen in this thread. If you have better incentives to give people to nudge them towards doing a better job of planning for their retirement, by all means share this information with us!

[Link]

One, you stated something which you claimed to be a fact without backing it up with a source. Two, I stated a suspi...

Blah Blah Blah.  I don't know what they are teaching in school these days.  I guess that is why so many people are easily manipulated by right wing lies.

Read this and educate yourself...

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http://www.psychologytoday.com/blog/the-scientific-fundamentalist/200811/common-misconceptions-about-science-ii-life-expectancy

Obviously IRAs, 401Ks, etc. are instruments that provide tax-deferment, along with a whole litany of restrictions which make saving less appealing than it ought to be (if these instruments make saving so appealing, how come we currently have a culture of debt and myopia focused upon mindless consumption? Answer: These instruments are not providing a powerful enough incentive). These instruments do NOT provide the tax-free benefits I am proposing.

Politico you have no idea what you are talking about.  If you fund your ROTH IRA with after tax dollars you never have to pay any kind of taxes on the proceeds.  That is not "deferment."  If you have a traditional IRA you can use before tax dollars and you don't pay any taxes on the money until you withdraw.  So someone like Mitt Romney makes literally MILLIONS completely tax free every year in his IRA.  If he has a traditional IRA he will have to pay taxes on the money he withdraws but it will only be taxed as regular income.  Most people when they retire make substantially less money so even if they have a traditional IRA they are in a lower tax bracket when they withdraw.

And as Mitt Romney illustrated quite nicely you can put all kinds of things in your IRA.  You have thousands upon thousands of stocks, bonds, mutual funds, ETFs, REITS, etc that you can put in your IRA.  Which coal miner is limited by what they can put in their IRA?!  Most people couldn't say two coherent words about the majority of those investments.  How exactly are they being limited?

[Politico]

One, you stated something which you claimed to be a fact without backing it up with a source. Two, I stated a suspi...

Blah Blah Blah.  I don't know what they are teaching in school these days.  I guess that is why so many people are easily manipulated by right wing lies.

Read this and educate yourself...

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http://www.psychologytoday.com/blog/the-scientific-fundamentalist/200811/common-misconceptions-about-science-ii-life-expectancy

Is this the best you can come up with? Here is what the CDC has to say about mortality in 1935 versus 2010:

"Although single year improvements in mortality were often small, the age-adjusted risk of dying dropped 60 percent from 1935 to 2010."

"The risk of dying decreased for all age groups but was greater for younger age groups with a 94 percent reduction in death rates at 1–4 years compared with a 38 percent decline at 85 years or more."

"[T]he 2010 rate represented a 60 percent decrease from the 1935 age-adjusted death rate of 1,860.1 deaths per 100,000 population signaling significant progress in reducing the overall risk of death in the United States across all groups."

Source: http://www.cdc.gov/nchs/data/databriefs/db88.htm

This trend is why the system needs to be changed in order to remain solvent. A simple change like moving the retirement age from 65 to 70 will ensure the system is solvent for all future generations (and this change will really make the system similar to how it was setup in 1935). Business as usual is not going to cut it, buddy!

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There is a whole litany of restrictions involved.

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Yes, until you withdraw. A tax-deferment is nowhere near as powerful of an incentive to save as allowing income from interest, dividends and capital gains to be tax-free.

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As I stated previously, if these instruments make saving so appealing, how come we currently have a culture of debt and myopia focused upon mindless consumption? My suggested answer (you are more than welcome to provide an alternative explanation): These instruments are not providing a powerful enough incentive. Tax-deferment is not appealing enough; we need to offer tax-free incentives.

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The Internet provides a whole wealth of knowledge for people to obtain if they so choose. If we make a big deal about this incentive to get tax-free income from capital gains, dividends and interest, I am certain we will see a number of people learn how to take advantage of this offer. This will, in turn, help people think more about the future than currently.

What is your grand proposal for providing incentives to people to plan for their retirement? Are you bankrupt of ideas other than "BIG GOVERNMENT TAXING-AND-SPENDING"?

[Link]

"The risk of dying decreased for all age groups but was greater for younger age groups with a 94 percent reduction in death rates at 1–4 years compared with a 38 percent decline at 85 years or more."

Would you mind telling me even today what percentage of the population is 85+?  Since you bolded it and it seems to be the lynchpin of your argument.

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There is a whole litany of restrictions involved.

Really?  Like what?  When I was a teenager instead of just trolling on the internet I simply wrote a check, filled out some pretty basic forms, and opened an account at Vanguard.  Pretty easy.  So what restrictions did I overcome with my genius at the ripe old age of 18?

[DC Al Fine]

"The risk of dying decreased for all age groups but was greater for younger age groups with a 94 percent reduction in death rates at 1–4 years compared with a 38 percent decline at 85 years or more."

Would you mind telling me even today what percentage of the population is 85+?  Since you bolded it and it seems to be the lynchpin of your argument.

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There is a whole litany of restrictions involved.

Really?  Like what?  When I was a teenager instead of just trolling on the internet I simply wrote a check, filled out some pretty basic forms, and opened an account at Vanguard.  Pretty easy.  So what restrictions did I overcome with my genius at the ripe old age of 18?

I think he's talking about the retirement/disability requirement to withdraw funds.

[Link]

"The risk of dying decreased for all age groups but was greater for younger age groups with a 94 percent reduction in death rates at 1–4 years compared with a 38 percent decline at 85 years or more."

Would you mind telling me even today what percentage of the population is 85+?  Since you bolded it and it seems to be the lynchpin of your argument.

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There is a whole litany of restrictions involved.

Really?  Like what?  When I was a teenager instead of just trolling on the internet I simply wrote a check, filled out some pretty basic forms, and opened an account at Vanguard.  Pretty easy.  So what restrictions did I overcome with my genius at the ripe old age of 18?

I think he's talking about the retirement/disability requirement to withdraw funds.

You can withdraw funds for a host of expenses without penalty.  Basically other than a car you can withdraw funds to pay for all of life's biggest expenses education, healthcare, and your first home.  And having an IRA doesn't prevent you from having other non tax sheltered savings vehicles.  Actually don't quote me on the car thing.  I am not a tax expert and I never looked into that.

The point I and other posters were making is even if you exempted all investment income (capital gains, dividends) from any kind of taxation there is no empirical evidence that Jim Bob with a high school diploma is going to save a sufficient amount of money to support themselves in retirement.  This does not happen in the real world.  Sorry.  It is a fantasy.

My problem with Politico is he is making several assumptions and generalizations that are not backed up by the facts as we know them.  And then there are the distortions that may have a grain of truth but they have been blown way out of proportion.  The age thing for one.  There is no doubt that there are more people over the age of 85 now than there were in 1965.  But it wasn't like everyone was dropping dead at 65 in 1965.

I already stated that one of the big problems is spending obscene amounts of money on demented stroked out octogenarians in nursing homes.  If someone like that comes down with a pneumonia why spend $50K keeping them alive a few months longer in an ICU?  Conversely why spend that $50K on them and deny medicare to a 65 year old relatively health person who needs an operation?

[Politico]

"The risk of dying decreased for all age groups but was greater for younger age groups with a 94 percent reduction in death rates at 1–4 years compared with a 38 percent decline at 85 years or more."

Would you mind telling me even today what percentage of the population is 85+?  Since you bolded it and it seems to be the lynchpin of your argument.

Incorrect. The lynchpin of the argument is that the risk of dying has decreased dramatically for ALL AGE GROUPS since 1935, when SS was introduced with the current retirement age of 65. The CDC has even displayed a massive decrease of 38 percent for the oldest people out there (i.e., those 85 and older).

SS/Medicare are GOING BANKRUPT if we do not change them. I have offered a solution: Raise the retirement age in such a way that the system resembles the conditions of 1935 (i.e., "70 is the new 65," if you will).

What do you offer to prevent the end of SS/Medicare? I hear nothing other than denial from you. You act like the system is going to be fine by doing nothing. That is not the state of the programs. They are going to be seriously underfunded in a few years if changes are not adopted soon.

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There are a whole litany of restrictions involved IN ORDER TO ENSURE THE FUNDS IN YOUR ROTH IRA ARE NEVER TAXED. These restrictions are spelled out for you in the fine print of your Roth IRA. In any case, a Roth IRA is nowhere near comparable to my proposal for no taxes on interest, dividends and capital gains up to a certain value (whether it is $50,000 or $250,000 or my actual preference of NO CAP).

Do you have any ideas for providing incentives to people so they can better plan their retirement? Yes or no? Or do you simply prefer Big Government that taxes-and-spends because you believe "Jim Bob with a high school diploma" needs people like you being their Big Brother?

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Nobody has a crystal ball. You cannot deny treatment just because "they would have died in a few months anyway, so why spend money keeping them alive a few more months?" Nobody knows for sure how much or how little time somebody has left. I believe Medicare treatment should not be denied to anybody. In order to ensure the system remains solvent, we can simply move the retirement age to 70 for those who are currently under 50 (since those people have time to adjust to the change). This seems a hell of a lot more tasteful than introducing death panels into the equation.

[Link]

Incorrect. The lynchpin of the argument is that the risk of dying has decreased dramatically for ALL AGE GROUPS since 1935, when SS was introduced with the current retirement age of 65. The CDC has even displayed a massive decrease of 38 percent for the oldest people out there (i.e., those 85 and older).

You don't want to answer the question because even with this MASSIVE decrease in mortality people over the age of 85 still make up a tiny percentage of the overall population.  The biggest decreases in mortality occurred in children by a wide margin.

There are a whole litany of restrictions involved IN ORDER TO ENSURE THE FUNDS IN YOUR ROTH IRA ARE NEVER TAXED.

Well if there are a litany it should be easy for you to list a bunch of them.  So far you have avoided doing so so we can assume you are full of it.

Nobody has a crystal ball.

No crystal ball is needed to know Alzheimers won't magically cure itself.  If someone is laying stroked out and demented in a nursing home bed wearing an adult diaper it makes no sense to spend $50K to keep them alive on life support for months while fighting a pneumonia.  It is the height of insanity to spend that kind of money on an 85 year old while denying a relatively healthy 65 year old Medicare. 

[Politico]

Incorrect. The lynchpin of the argument is that the risk of dying has decreased dramatically for ALL AGE GROUPS since 1935, when SS was introduced with the current retirement age of 65. The CDC has even displayed a massive decrease of 38 percent for the oldest people out there (i.e., those 85 and older).

You don't want to answer the question because even with this MASSIVE decrease in mortality people over the age of 85 still make up a tiny percentage of the overall population.  The biggest decreases in mortality occurred in children by a wide margin.

Dude, the risk of dying has decreased 38 percent for those who are older than 85. It has decreased by MORE than 38 percent for those who are 65-85. SS was introduced with a retirement age of 65 when the risk of dying was MUCH higher at ANY age. SS needs to be changed to reflect the change in times (i.e., "70 is the new 65," so to speak).

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http://www.investopedia.com/articles/retirement/03/030403.asp#axzz2KB7P6Usj

The Roth IRA is nowhere near comparable to what I am proposing, which would simplify life greatly for millions of Americans.

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Death panels are simply too distasteful to consider. I can agree with the notion of introducing right-to-die legislation, but I would prefer not to have bureaucrats deciding who gets and does not get treatment; who should die and who should not die. That decision should be left up to the individual and their family.

[Link]

Death panels...

When the facts desert you... demagogue.

There are a whole litany of restrictions involved IN ORDER TO ENSURE THE FUNDS IN YOUR ROTH IRA ARE NEVER TAXED.

Still waiting for this litany.  This is at least the third time I've asked.

Dude, the risk of dying has decreased 38 percent for those who are older than 85.

Still waiting to find out what percentage of the population is over 85.

[jaichind]

Abolish social security, IRA, and 401K.  People should be responsible for their own retirement and there seems to be no sense for the government to pay people via tax expenditures to figure out how their can fund retirement.  There should be a negative tax based on some income level threshold which also is in operation when people retire in case someone was not able to save enough to generate enough income above that threshold.  But since it is a negative flat tax there is still incentive for people to save as much as possible.  Of course this negative flat tax and also positive flat tax for income above said income level is in operation when people are working as well.  

[Link]

People should be responsible for their own retirement and there seems to be no sense for the government to pay people via tax expenditures to figure out how their can fund retirement.

Sorry I can't address your flat/negative tax structure.  I simply don't know enough about negative taxation.

What I can say about your post is due to the way the Constitution is written Congress can only goad people to do positive things in a certain finite number of ways.  One of them is through the tax code.  So Congress isn't trying to tell people how they should fund their retirement.  They are just trying to encourage people to save something.  And for the average person there are plenty of investments they can put in their IRA.  Frankly of all the government creations I am forced to deal with IRAs are most of the time one of the most straight forward.  I am quite surprised at the difficulties Politico has had using an IRA.  Then again he hasn't told us what problems he's had so we have to take his proclamations with a grain of salt.

[Politico]

Link, do you have no ideas other than bankrupt "tax-and-spend-because-I-know-better-than-you" liberalism? Quite disappointing that your proposal to ensure the survival of Medicare is the introduction of death panels and presumably increased taxation; your proposal for SS is, one can only presume, to tax people more?

I would imagine that those under 50 would prefer to see the retirement age go up to 70 rather than seeing their taxes go up by a larger degree than the amount they would receive on SS from 65-69. I may be wrong, of course.

[All Along The Watchtower]

Link clearly has no ideas other than bankrupt "tax-and-spend-because-I-know-better-than-you" liberalism. Quite disappointing that his proposal to ensure the survival of Medicare is the introduction of death panels and presumably increased taxation; his proposal for SS is, one can only presume, to tax people more.

u trolling bro

[Politico]

Link clearly has no ideas other than bankrupt "tax-and-spend-because-I-know-better-than-you" liberalism. Quite disappointing that his proposal to ensure the survival of Medicare is the introduction of death panels and presumably increased taxation; his proposal for SS is, one can only presume, to tax people more.

u trolling bro

No, I simply want Link on the record in favor of increased taxes for SS/Medicare. I favor increasing the retirement age to 70 and leaving rates where they are. Link presumably favors more taxes since the alternative is the insolvency of the programs. I am curious what most people on here would prefer: A higher retirement age or higher taxes. I am also interested in finding out whether people prefer paying taxes on capital gains, interest and dividends, or if they would prefer such income being exempt from taxation up to a certain amount (I presume the latter, all else equal, would make them more likely to save more for retirement, but if not I would like to hear why).

[Link]

No, I simply want Link on the record in favor of increased taxes for SS/Medicare.

I as well as numerous Democrats have gone on record thousands of times saying revenue needs to be increased.  Do you want me to sign a document of some type and get it notarized?  Is this what this is all about?

I favor increasing the retirement age to 70 and leaving rates where they are. Link presumably favors more taxes since the alternative is the insolvency of the programs. I am curious what most people on here would prefer: A higher retirement age or higher taxes.

It doesn't matter what people say they would prefer.  A bunch of teenagers with no jobs who have never paid a penny of taxes in their lives will say all kinds of fanciful things about what they will be doing at 70.  The fact of the matter is by 65 most people are completely broke.  Even with the absurdly easy to use IRAs most people have a negative net worth by 65.  Any system that lets them pay less taxes will ensure there will be even less money for their care and support at 65.

I am also interested in finding out whether people prefer paying taxes on capital gains, interest and dividends, or if they would prefer such income being exempt from taxation up to a certain amount (I presume the latter, all else equal, would make them more likely to save more for retirement, but if not I would like to hear why).

Who cares about why?  We know that the average person will still be broke at 65.  Creating some big tax break for people pulling in a quarter of a million dollars a year isn't going to fix that.  If someone is making a quarter of a million dollars a year in capital gains and dividends... they are doing fine under current tax laws... trust me.

[DC Al Fine]

I favor increasing the retirement age to 70 and leaving rates where they are. Link presumably favors more taxes since the alternative is the insolvency of the programs. I am curious what most people on here would prefer: A higher retirement age or higher taxes.

It doesn't matter what people say they would prefer.  A bunch of teenagers with no jobs who have never paid a penny of taxes in their lives will say all kinds of fanciful things about what they will be doing at 70.  The fact of the matter is by 65 most people are completely broke.  Even with the absurdly easy to use IRAs most people have a negative net worth by 65.  Any system that lets them pay less taxes will ensure there will be even less money for their care and support at 65.

Demonstrably false



At ages 65-74 more than half the population is worth more than $200 000, and their net worth on average is much more than their working age peers.

Quit pulling unfounded assertions out of your ass.

[Torie]

To put the 200K median net worth number in context for olds, the present value of social security upon retirement is more in the range of 500k. Managing to save but 200K over a lifetime is rather pathetic as a median number. Social security that you can depend on, despite your own fecklessness and lack of investment expertise, is just critical to a stable and just society. There is just no escaping that in my opinion.

[opebo]

Social security that you can depend on, despite your own fecklessness and lack of investment expertise the poverty level wages paid to workers

[Torie]

Social security that you can depend on, despite your own fecklessness and lack of investment expertise the poverty level wages paid to workers

You would be surprised how little savings folks have who have made a handsome income all their lives in general. We are a consumerist, rather than a savers' society. We are not Japan. Your point is moot anyway, because those making "poverty" wages, have nothing in any pension plan in general, sitting there to waste or lose. The issue is what public policy to have for those who make enough to save something, if disciplined, to better secure their retirement, if anything.

[DC Al Fine]

To put the 200K median net worth number in context for olds, the present value of social security upon retirement is more in the range of 500k. Managing to save but 200K over a lifetime is rather pathetic as a median number. Social security that you can depend on, despite your own fecklessness and lack of investment expertise, is just critical to a stable and just society. There is just no escaping that in my opinion.

I completely agree. I was merely pointing out that Link's "seniors are all broke" meme is completely incorrect. The net worth charts merely point out that the situation isn't a complete disaster. A pension scheme is absolutely needed to maintain society, but the current way SS is run is completely inefficient and backward.

[Link]

I was merely pointing out that Link's "seniors are all broke" meme is completely incorrect. The net worth charts merely point out that the situation isn't a complete disaster.

There has been a big mistake.  DC Al Fine, you have to realize I don't have a problem with people pointing out real factual errors that I make.  I welcome all relevant objective data.  My estimate of the median net worth of people at 65 was incorrect but that does not mean the idea that retirees are in a precarious financial situation is a "meme."  Nor does it mean that assessment is false.

DC Al Fine, please go back and look at why I made that statement.  I made it in response to the absurd assertion that the way to get Americans to save enough for retirement is to exempt the first $250K/yr of Capital gains and dividends from all taxation.  Even your numbers clearly illustrate that strategy is absurd.  All working people are eligible to put away $5,000 tax free a year into an account that they will pay no taxes on for decades.  And even with that generous offer very few Americans take full advantage of that give away.

Ending up with a net worth of $200K at 65 when you were given the opportunity to put away thousands of dollars tax free for decades clearly illustrates either Americans suck at saving (they do) and/or they are not that great at managing their money (also true).

Furthermore what is their net worth once you remove their primary residence and vehicle from the equation?  I suspect in many cases that is six figures right off the top of their net worth.  Your home is not an investment.  It is where you live.  Even if you sell it you still have to find somewhere to live.  You still need your car for transportation.  I can assure you that $200K is not 100% in stocks, bonds, or liquid assets.

So, DC Al Fine, if you believe giving an across the board $250K capital gains and dividend exemption is the magic bullet to bolster SS then please just say that.  Otherwise temper your comments.

[Torie]

I must say that Link's body of work on this thread is well - impressive. Maybe it is because in this instance I happen to agree with him.  Who knew?  

[opebo]

All working people are eligible to put away $5,000 tax free a year into an account that they will pay no taxes on for decades.  And even with that generous offer very few Americans take full advantage of that give away.

Ending up with a net worth of $200K at 65 when you were given the opportunity to put away thousands of dollars tax free for decades clearly illustrates either Americans suck at saving (they do) and/or they are not that great at managing their money (also true).

Link, what you describe is due to inadequate incomes.  Who makes enough to be able to spare $5,000/year for savings?  I know no one like that.  That would be over $400/month!  Most people make barely enough to keep a roof over their heads, transport themselves to work, etc.