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Comment by leggomylibro | Hacker News Reader

I'm in the same boat; I view my social security "contributions" as a lifestyle tax from the last generation, and I'd opt out of them in a second if I could. Instead, I'm planning my retirement around Roth IRAs and 401k savings.

I think this is definitely a common sentiment amongst us youngsters.

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I thought that way in my early- to mid-20s.

I read lots of thoughtful articles about how SS was broke, wouldn't last, etc.

As I got a little older, I started reading more about the history of SS, how it's always needed various adjustments over time, how people have always said it's going broke, it's unsustainable, etc.

I realized that, for most of its history, the people who have said those things are actually more likely the ones who'd like it to go away entirely.

While everyone else just makes the changes necessary to keep it going.

After a while, I found I'd move into the "let's just make the changes necessary to keep it going, because it's a good program and has always had its detractors" camp. (which is where I am now.)

To pile on to this. Even is SS makes no changes whatsoever, they can still pay out ~75% of the benefits starting in the late 2020's or early 2030's and all the way through the 2080's or 2090's based on the SS Trustee report. SS is going to be around unless we choose to elect officials that dismantle it. The fear mongering and apathy needs to stop.

It's worth noting that if there are benefit cuts of 25% that it's unlikely that each individual will see a 25% cut. It's more likely (in my opinion at least) that we'll see some sort of means testing where seniors with other income (from 401Ks, private pensions, other savings) see their benefits cut much more than 25% while those with low incomes retain their full benefits.

So if you are saving a lot it could, ironically, be a self fulfilling prophecy that you get no social security.

So what you're saying is I can cash in my 401k for a boat.

I dunno. Fishing boat or speed boat?

I'm sorry, but this statement is not true. These numbers require the use of the Social Security trust fund. The Social Security trust fund is a "special issue treasury bond" in which money is deposited and then spent by the US government.

So, when the trustees say that Social Security can pay 75% of the benefits, what they mean is that there are enough IOUs in the trust fund to pay 75% of the benefits. But when we start redeeming the IOUs, we will quickly discover that the money isn't in existence. We are going to have to raise taxes or cut spending or otherwise get the money from somewhere else. The trust fund is just a very very clever way of obfuscating the fact that the government has no money saved at all for Social Security.

All you are saying is that the US needs to continue to service its debt without defaulting. Since there is no sign that we will default now or later, this is simply more fear mongering.

Actually, the 75% number is when there is no trust fund whatsoever and all outgoing payments are funded directly by incoming payments.

> But when we start redeeming the IOUs

You are aware, I'm sure, that said IOUs have been redeemed every year of SS's existence.

Until they aren't. Bear Stearns paid its bills every year until it suddently didn't.

SS is not a money transfer from today's young to tomorrow's old--it's a transfer from today's young to today's old. Don't think of it as "savings" you're "contributing" toward.

Isn't this similar to investments or savings where you put in money expecting to receive something in the future? That money isn't static, it's actively being used in other ways. For example, money I deposit in my bank account today is going out into loans the bank is issuing today. I'm not taking a position on Social Security, just wondering if the analogy does much useful work.

No; investments go toward productive work to create economic value. Social Security doesn't have any element that would actually create wealth. It works exactly like a Ponzi scheme.

To be fair, when I buy a company's stock on the public stock market, it's more of a lottery ticket than an investment. It's not as if buying a stock actually puts money into the company's pocket for them to use to "create economic value". Buying a stock puts money into the pocket of whoever last bought that stock so that they can continue gambling.

This is not entirely correct.

By buying stock in a given company you increase demand for that company's stock and increase its value. A company's market cap is a very real thing that allows it to engage in economic activity that it would otherwise be unable to execute on.

Is buying real estate or a business an investment? You're not creating economic value, just putting money into the pocket of the previous owner.

I guess it depends on your definition of "creating economic value". If I buy something for $110 from someone who paid $100 for it, I guess you could argue that either you or I just "created" $10 of economic value. I don't subscribe to that. Value is only created when you improve something.

Buy a lump of gold for $100 and turn it into a $110 bracelet -> value created.

Buy a lump of gold for $100 and sell it to someone 1 second later for $110 -> no value created.

I didn't mention gold. I asked about two cash-flow generating assets that would be considered investments by most people (but of course you can have your own definition of investment).

I'm more debating the definition of "value creation" rather than "investment". But admittedly I did conflate the two terms in an earlier response. I'd offer: not all investments, even the ones that provide monetary returns, do so by creating value.

How do a business provide monetary return if not by creating value? A house also provides value (in the form of housing), why would anyone want to pay rents otherwise?

I don't see how the analogy requires or implies the creation of economic value or productive work or any other particular use of the money, only that the money put in today is being used today for whatever purpose.

Again, I'm not arguing for or against Social Security, just whether or not the original analogy is apt. If it's not, it does no harm to those arguing against Social Security unless the argument relies largely on the analogy being sound. I can't imagine that's the case at all. If it is apt, I think it likely can be expressed in a way that more clearly shows its intent.

This is almost too ridiculously misinformed a statement to even justify replying to, but since it's easy enough, the SS trust funds earn interest through investment as necessitated by law. They've also been used as an intergovernmental loan vehicle, acting to keep gov't debt lower than it would otherwise have been. It's not a Ponzi scheme.

The trust fund is an accounting fiction.

Social Security is paid out entirely by proceeds from people paying into the system. If ever the number of new people paying in is not enough to cover the outflows, then the system collapses. That is how a Ponzi scheme works.

Or, the inflows are increased, or the outflows are decreased. All of which can be done with a stroke of a pen.

If, for instance, we get rid of the contribution cap tomorrow, Social Security becomes 100% funded - in perpetuity.

Madoff was in no position to do so. Congress is.

Mercedes dealers and developers of luxury apartments in Singapore, London, etc. would love this.

Well, you hope. The value of investments can go down as well as up.

I don't see why changing the tax rules around retirement accounts (like taxing Roth withdrawals) would be any more difficult than changing Social Security payouts. You never know what may happen in the future. The government could even make owning gold illegal.

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