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Comment by wikiburner | Hacker News Reader

I've had similar thoughts on social security. It would make a lot of sense to simply require citizens to save or invest a certain portion of their annual income.

You could have enforced diversification (certain percentages allowed for high vs. low risk), and accreditation boards to vet and approve mutual and index funds.

Also, the investment would have a very stimulative effect on the economy, and you could probably also set it up in such a way that it works on autopilot (like a 401(k)) for those that can't be bothered..

It would be quite a bit less draconian than the government simply confiscating the money. In the private sector, the current setup would rightly be called a ponzi scheme.

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> It would make a lot of sense to simply require citizens to save or invest a certain portion of their annual income.

Not to serve the purpose of social security, which is to serve as a minimal fallback defined benefit pension to to mitigate the effects of old-age poverty in the event that personal retirement savings fail due to investment risk (either by failure of personal investment, failure of private pensions, etc.)

It would be a nice public subsidy to the financial services industry, which is why that industry and their political proxies keep recommending this, but it wouldn't actually serve the purpose social security is designed to serve.

> It would be quite a bit less draconian than the government simply confiscating the money.

Not really; either way the government is seizing the money and directing its use.

That's only viable if you also force salaries up dramatically for low earners, or what you are doing is requiring people to starve.

No, I'm saying individuals would invest in lieu of social security. Those low earners are already losing part of their income to social security.

There would obviously have to be a transitionary period where the government makes up the shortfall, in order to honor the commitments made to retirees. It would be painful, but only a small addition to the 87 Trillion in current liabilities of the U.S. government.

http://online.wsj.com/news/articles/SB1000142412788732335320...

No, most low earners are receiving more back in benefits of various types than anything they pay into the system.

Thus if you replace these systems with mandatory investments, you are reducing their available cash.

I think you're either misunderstanding me or how social security works. I'm only talking about replacing social security, not "these systems".

Everyone who gets a paycheck pays their 6% in social security, regardless of income level.

But the curve that determines your payout is dramatically tilted towards low earners: That is, SS pays a much larger fraction of your highest earning years income if that income was low. As a result, low earners have to live only a few years past 65 to receive benefits greater than what they put in. High earners have to live decades.

> Everyone who gets a paycheck pays their 6% in social security, regardless of income level.

Social security tax is 12.4% on the first $113,700 of wages or self-employment income, and 0% on income from all other sources and wages and self-employment income past the first $113,700, so, no, you don't pay "6% in social security, regardless of income level".

(Note that on wages, but not self-employment income for obvious reasons, half of the 12.4% is paid as 'employer share', so that the employee never sees it, so it might appear, if you look only at wage withholding, that the rate is 6% -- or rather, 6.2% -- but that's not accurate.)

>It would be quite a bit less draconian than the government simply confiscating the money.

Oh, the irony.

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