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Comment by clairity | Hacker News Reader

> "One of the biggest reasons the investment class was able to expand to the common person."

not to nitpick too much, but the top 10% own 84% of stock [1] so the investment class hasn't reached very far down to the common person, who own most of their wealth in their homes (why the housing crisis disproportionately hit the bottom 80%).

with that said, if there's one social program that could reduce wealth inequality, it would be manadatory retirement savings accounts for all and invested in (vanguard) index funds (and probably diversified into bonds at least). it could be employer funded, or even funded by lotteries or sin taxes for the bottom 80%.

[1] https://www.nytimes.com/2018/02/08/business/economy/stocks-e...

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Here in Australia, we have a thing called Superannuation. Your employer is forced to put away a minimum % of your income, typically 10%, into a fund of your choice. Often jobs will come with up to 15% superannuation.

Similar to the 401K in the U.S. But U.S. employers are not forced.

The compulsory nature of it is amazing. I had a gap year before I went to university, and when I checked earlier today I found that my superannuation from that single year is now worth over $15k. From a single year, I worked a manual labour job when I was 18....

This is one of the arguments for privatizing social security. Instead of social security that doesn’t really help the economy, generate more wealth or increases capital this method is essentially the same thing but reinvests in our economy. Instead of the FICA contributions going to social security, they go into an index fund that you can track and that grows.

Whenever anyone brings up privatization of social security, everyone freaks out because the big money bags will steal it and the common man will be left with nothing...unfortunately they are kind of right. Intense lobbying every time privatization has had consideration makes it so those index funds are high expense, not optimal, and little choice. Goldman Sachs is writing the rules and doing so to benefit themselves. The exact opposite that Bogle stood for. If we were to stop that somehow then this would be fantastic.

What you’re saying though was brought up seriously in the tax bill discussions. They are already making it such that every small business gets a 401k option for employees. Not just tax breaks but forcing them to offer one with expenses covered by the state. That’s a good first step. I forget if it was California that is starting that 2020 or the country. The next step is what you’re saying, 1% tax employer funded. That would be extremely popular legislation and help people far more than a pseduotax break and cost a fraction of the price. In fact it will be a net positive if people were to save more. I think that has a great chance of becoming a reality. The correct way to privatize social security with maybe a cushion in case there’s a disaster would be far more reaching and better but anything that helps the middle class save is imperative.

“ Instead of the FICA contributions going to social security, they go into an index fund that you can track and that grows.”

That works fine until a) you pick the wrong index fund (and most people don’t know anything about finance) or b) the US hits a japan level stagnation and you can’t retire at all.

The point of Social security is to be a safety net (that’s also why as a rich person you get less benefits from it).

> That works fine until a) you pick the wrong index fund (and most people don’t know anything about finance)

The irony of this posted in a Bogle thread is hilarious. Bogle subscribes to the research done in a Random Walk Down Wall Street.

Take all of the people who know the most about finance in the world (run the best funds) and they have a ~50% chance of beating the broad based index (S&P 500) any given year; If you expand that 10 years, the number of funds approaches 0. If you include the fees, it's ~42% beating the market any given year.

The "secret" and why bogleheads work is there is no picking. You pick the total stock market. But, if SS has regulatory concerns, it'll do just fine in VOO, representing the S&P 500.

>Instead of social security that doesn’t really help the economy, generate more wealth or increases capital

SS assets are invested daily by law into safe securities (special US bonds) and the cash is immediately put back to use in capital markets. Here [1] you can look through the data to grasp the scale of it.

[1] https://www.ssa.gov/oact/progdata/investheld.html

The trouble is employees are already paying 12.4%* of their salary into Social Security, so additional savings would be a significant burden that bottom 90%. If the SS money went into a managed retirement program like* * TSP it would accomplish what you're proposing.

The rationale was stated quite frankly by FDR:

"We put those payroll contributions there so as to give the contributors a legal, moral, and political right to collect their pensions and their unemployment benefits. With those taxes in there, no damn politician can ever scrap my social security program."

He didn't anticipate an aging population, let alone index funds.

Social Security is a wealth transfer from one generation to another, so after a generation has paid out to their elders, they (not unreasonably) feel entitled to collect from it. Even if they were feeling generous, they've generally planned their finances around those benefits. That's why reforming the system has been politically intractable.

* You're taxed 6.2% and the employer is taxed 6.2%. When employers are budgeting for salaries they're going to consider the full 12.4%.

* * TSP is essentially the military's 401k with a group of very low cost funds, only here you would require the assets stay in the program until retirement.

I suspect the point though being that before Bogle's ideas we would expect the top 10% to own even more than 84% of stock.

Further, regarding investing in your home, since a home has a tangible value as well (you can live in it) no doubt the bottom 80% have first to invest in a home before they can have the "luxury" of investing in stocks.

(No doubt the top 10% own their homes as well.)

> with that said, if there's one social program that could reduce wealth inequality...

... it would be returning to a more progressive tax system, increasing inheritance tax, reducing regressive taxes like gasoline and sales taxes, etc.

I suspect that a lot of stocks are owned by pension funds

>it would be manadatory retirement savings accounts for all and invested in (vanguard) index funds (and probably diversified into bonds at least)

Doesn't Australia's superannuation work something like this? If I understand it correctly, a chunk of your salary is set aside, but instead of going into a pool like Social Security, it goes into a fund. I could be (and probably am) wrong as to how it works. That being said, I would love it if we could implement something like this in the US.

Australia's superannuation is more like the US 401k but with a Government mandated minimum contribution level.

Individuals are free to pick their own fund providers or even create their own superannuation funds (with some caveats).

Also the govt encourages additional voluntary contributions by allowing a certain amount to be salary sacrificed (paid directly without tax) into super.

This is purely for the pension; unemployment benefits are completely separate. You cannot access your super funds until you reach retirement age or become critically ill.

Or leave the country, if you are not a 'strayan. But then you pay back taxes on it.

Adding some context:

https://www.economist.com/finance-and-economics/2018/08/18/a...

Australia does something like that. https://en.wikipedia.org/wiki/Superannuation_in_Australia

Singapore has something vaguely related https://en.wikipedia.org/wiki/Central_Provident_Fund

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