degas

Budman, it could be done very cheap and easy by creating something like the TSP Plan that millions of government employees have now.

I don't buy this utter bull about the average american worker not being smart enought handle a private investment account.

Still scared? Heck, stick half in t-bills and half in growth and income stock funds and don't allow anybody to touch it until they retire.

I agree about the AARP - its an automatic throw in the trash when I get thier mailings.

MissPrism

I get a tiny little bit of American social security.
It wasn't until I read about it in the financial section of my newspaper that I realised that I could claim for it.
I claim it because I paid into it when I was working in the US.
It just goes straight into my bank account.
I'd be interested to know how many people could claim it and don't know about it.

mikemo

I was an AARP member from 50 to 60 yo(for about $10. total), but their programs and philosophy really and truly are whacko.
I had among my 25 or so partners, a delightful Indian physician. He earned $500,000-$800,000. a year, owned and lived in a $Mil McMansion and legally brought his elderly dad to Texas from India and put him on Medicaid at taxpayer expense.
Lots of legal abuse of the system is widely available to all.
Invest well, retire early and emigrate.
M (SMdA, Gto.)

degas

"He earned $500,000-$800,000. a year, owned and lived in a $Mil McMansion and legally brought his elderly dad to Texas from India and put him on Medicaid at taxpayer expense."

Something is very wrong with these crazy rules. Call the IRS and rat him out - guy like that is bound to be cheating in other areas.

LoveItaly

I would imagine that the father from India didn't have any income or a very small income and consequently qualified for Medicaid. BUT what I don't understand is that I thought and was certainly informed by a highly respected immigration attorney if you sponser a person from outside of the US you are financially responsible for them. But guess it takes someone street smarter than me to figure out how to circumvent the laws and systems, not that I would ever want to.

And I agree with all of you anti-AARP Fodorites, me too!!

RufusTFirefly

The amount of money that an average US worker could get by investing the 5% of FICA that is retirement benefit related isn't all that much. The vast majority are better off with Social Security than they would be investing the $1000-$2000 a year on their own--with no guarantee that they'd make anything at all.

There is a social transfer (or welfare) element to Social Security in that lower income earners (and earners with large families) get a somewhat higher percentage return on their taxes than do higher income earners.

But it is not completely a welfare program as an earner does have to pay a certain minimum amount of taxes for a certain amount of time before any benefits are payable. And higher income earners do get higher benefits in absolute dollars than lower income earners get.

degas

The Social Security system is funded through payroll taxes. The Federal Insurance Contributions Act (FICA) mandates a 12.4% levy on the first $94,200 (2006 limit) of each individual's earned income each year. The employer pays 6.2% and the employee pays 6.2%. Self-employed individuals pay the full 12.4%.

So subtract out 2.4% for disability and SSI welfare.

Take 10% (five from you and five from your employer) of your salary over 30 to 40 years invested even in a government bonds and that is a very sizable amount of money.

CaymanSue

In regards to Medicare coverage abroad: it's true that Med. does not cover any costs incurred in a foreign country, but we have found that my husband's secondary insurance does pay. We have a second home in Grand Cayman, and DH regularly steps in a fire ant nest! (Highly allergic.)

RufusTFirefly

Yeah, degas, I'm sure employers are going to jump right in and give that savings to their employees. Hah, hah, hah.

RufusTFirefly

Oh, and SSI welfare is NOT funded out of the FICA tax. It is paid for out of general tax revenues.

degas

Rufus, the employees have no choice now, they have to pay thier portion.

jsmith

The 6.2% an employer pays on behalf of an employee is mandatory. If the system were changed so everyone had his/her own account why should the mandatory contribution be changed Rufus?

An individual starting at age 25, contributing $1000 in the first year, increasing it by a 3% inflation rate each year, earned 5%, the total accumulated value at age 65 would be just shy of $189,000 - hardly insignificant.

The employers contribution could be continued as is.

Would this be a good choice for everyone? Probably not. But certainly a lot better than sending all of it to Washington.

I hate political discussions at this site but if you have any concerns about the future of SS and Medicare you should read Anya Kamenetz' book "Generation Debt" or Laurence Kotlikoff's "The Coming Generational Storm". You can see more at:

http://www.anyakamenetz.com/gd-about.html

degas

Rufus, that makes it even better if SSI is not paid out of SS taxes as it would allow more funds to go into a private account.