July 17, 2007

Viva La Housing Society: Social Security, Savings and Debt, and Retirement.

John McCain has just given the US public a crash course on why debt is not a good thing. McCain raised $11.2 million this past quarter but spent most of it and has very little cash on hand. Seems rather commonplace for many Americans to spend more than they earn. Not only that, the major issues that we should be discussing such as the credit bubble, declining dollar, Social Security, and international conflicts are nowhere to be found in the mainstream political debate. Why isn’t any politician tackling any of these problems head on and discussing them? The only person I’ve heard mention “inflation” is Ron Paul, who by the way is financially better off than Mccain. Maybe basic finance does help those in politics. Either way, I think most Americans are realizing that being able to purchase something on cheap credit does not equal financial independence. On the contrary, many are realizing crippling debt is like jumping into the ocean with an albatross around your neck.

So we close off the first two quarters of the year with the fuse inching along to the dynamite box full of funky credit and Wall Street collateralized debt obligations that are so complicated, even the people that created them have no idea how to untangle them. The big bang is here and the world is realizing and watching morbidly, that we spent way beyond our means. In this article I will discuss three main issues that will impact the entire country. From young professionals starting their career to those in retirement. This credit bubble discriminated against no one. If you wanted a home equity line of credit, you were welcomed. If you wanted a no money down interest only loan, come on in. This bubble is one for the ages and we are starting to see that the public is starting to get the memo that massive credit is not a solid solution for sustainable growth.

Social Security – Shhh! Please be Quite

It has been argued that Social Security is the third rail of politics. We remember Al Gore and his lock box talk. Or Bush and his goal of privatizing Social Security. Both went down in mad Ghostrider flames. Yet the issue still looms. Even Clinton recognized the issue with Social Security but no political will was willing to attack the problem. The buck has now passed from three presidents onto another one that will inherit the problem in 2008. Every expert acknowledges that we have a looming problem with Social Security. But anytime a politician brings up the issue, it gets shot down. Typical of the housing bubble, Social Security is a ponzi scheme heading down a slow but sure road of insolvency.

For one, 44 million Americans depend on Social Security (so guess how they'll vote). Two thirds of senior citizens depend on Social Security as their main source of income. 18 percent of senior citizens rely on Social Security as their only source of income. Income that pays for food and housing cost. Keep in mind, even if you have your home paid off you will still get yearly tax bills. You will also need housing insurance and maintenance costs factored in. Why do you think many senior citizens are victims to reverse mortgage loans that are so financially egregious, you would think that you were dealing with a local bookie or turf accountant.

In 1960, there were 5.1 workers putting in money to the system for each person drawing on benefits. In 2005, the number dwindled to 3.3 workers. The projected number for 2031 is 2.1 workers for each person drawing on Social Security benefits. Why the sudden shift? Well we can thank a population boom phenomenon otherwise known as the baby boomers.

Baby boomers are considered to be folks born from 1945 – 1964. The total number of births during this time is somewhere in the ballpark of 76 million. Currently they are 20 percent of the adult population. An incredibly large number. The term is normally given to those in the age bracket of 44 to 62. The major shift will start occurring in 2008 when we start seeing baby boomers go into full retirement. The system is solvent until 2018, which at the time more will be paid out than paid into the system. By 2042 the system will be dry. So anyone in the 20 to 39 age range needs to start planning for another venue of retirement benefits since the last three presidents didn’t do squat regarding the issue.

With a high cost of living, mounting credit card debt, ridiculous college costs, and entry level salaries how is it possible for young professionals to realize the dream of their parents? Hard work and savings are paramount. But the way mom and dad did it is not going to apply to this generation since the Social Security safety net won’t be there for many and housing costs are much larger in proportion to those a generation ago.

Savings and Debt – How does it Break Down?

I’ve been clipping a few charts from the previous LA Times with fascinating data. After reading how Kobe is still up to his antics with the LA Lakers and David Beckham’s Galaxy salary is larger than many third world country’s gross domestic product, I enjoy heading over to the business section. The numbers are startling and the picture that is painted is that young folks of today consume at a high pace and save very little for retirement. It could be a generational thing where many of us are more comfortable paying with a credit card rather than cold hard cash. This debt mentality is also a contributing factor for the housing bubble. After all, a generation raised at the teat of debt is easily coerced into further spending. Large mortgages didn’t phase many young professionals. I’ve had a close friend purchase a Real Home of Genius condo with his wife for half a million dollars in a regular suburb of Orange County. The condo is slightly over 1,000 square feet and as cookie cutter as they come. Their combined income barely allows them to cover the mortgage, taxes, and association fees but they are following the lead of mom and dad. The only caveat is, mom and dad bought with 10, 15, or 20 percent down and went 30 year fixed. But the need to own a home is so psychologically ingrained that folks are willing to live on Cup-o-Noodles to pay the mortgage.

Let us take a look below at some raw numbers:

Average amount in bank accounts per household

















This first table looks at average amounts in bank accounts per household. Keep in mind that with averages, a person with $200,000 in the bank will skew the chart higher. But even with that considered, the amount of money in accounts isn’t that high. You may say, “well of course not, these people have them in 401(k)s and retirement accounts.” I’ll get to that in the next section but suffice it to say that folks aren’t really saving elsewhere.

The next chart looks at household debt from the same sample in the survey of 158,000 US households:

Average debt per household, including mortgagages

















This chart should put a major hole in many housing pundit theories of Americans being okay with large mortgage debt. The above chart includes revolving debt and mortgage debt. The highest average is in the 30 to 39 category and it tops out at $107,525. Now think about a young professional couple buying a starter home of $500,000 with 20 percent down. They’ve taken on $400,000 in debt. Or 4 times the average overall debt of those in the 30 to 39 and 40 to 49 group range.

Another scary factor is many of those hitting retirement are still in debt. As we’ve mentioned, if you are relying solely on Social Security as your main retirement income or a large part of it, $50,000 in debt is a large chunk of change.


It is pretty clear that anyone in the 20 to 39 age bracket will need to fund their own retirement and not depend on Social Security. So how are folks doing?

Percentage of households with 401(k) plans

















Well there goes the argument that the majority of people are funding their 401(k). The 20 to 29 year olds are the one’s who need to fund their 401(k) accounts most aggressively. Those in the 30 to 39 age range seem to be getting the message that Social Security will not be there for them. Is fear of no Social Security the only reason for this shift? We have another reason:

Percentage of households with pension plans

















Pension plans are going the way of the Dodo bird. Anyone under the age of 40 is most likely to be at the tail end of a generational ending of pension plans. You can see from the numbers above that only 8 percent of household in the 20 to 29 range have pension plans and 14 percent of those in the 30 to 39 age range. If anything, these charts should show you that we are not in the world of our parents.

Let us not even dive into the declining dollar, massive deficits, and the ridiculous shadow government tactics used to calculate inflation. This all ties into the housing bubble because with such a high cost of living and lack of future planning, many young professionals seem to indicate by their buying habits a “screw the future” and live a carpe diem type lifestyle. To keep up with the dream of being equally as successful as their parents, they are mortgaging their present lifestyle to meet a dream that is no longer available. They chase this dream by diving into credit and hyping the monthly payments. Yet this is unsustainable. At which point will folks in the 20 to 39 age range become furious about paying into a system that they will not benefit from? At what point will they realize that inflation numbers are cooked and demand better accounting practices?

Sometimes it seems that the media is trying to create a generation of zombies that will stay away from picking up a book and educating themselves about the true state of affairs. According to A.C. Nielsen Co., Americans watch an average of 4 hours of television a day! Mortgage ads spouting crack pot numbers. Flip this House. Extreme Home Makeover. And all the other housing related shows seem to be the number one source for where people get their housing information. In addition we get this mantra of easy monthly payments and the advent of gorilla marketing making it seem like using cash is for old folks. The credit card commercials tell you two things; the faster you spend the better and don’t be uncool and use cash. God help us if people are using the television to educate themselves regarding the credit bubble, savings, debt, and retirement.

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Jim said...

I am deeply, deeply concerned about this issue.

As a thirty-something who has been paying off my school and other debts and saving for a rainy day, I foresee that as I get closer to peak earning years, the boomers will basically be trying to tax me out of my entire earnings to support themselves in retirement after failing to save for the past 30 years.

But, what do I do about it? They have the votes - the tyranny of the majority seems to bear an unstoppable tidal wave of taxation and socialism in our future. Seems like my only option is to leave for somewhere that doesn't have this problem. Thoughts?

mrfnuts said...

Great article doc!

You bring up something that has been bothering me since I was a kid.

Ever since elementary school, I've known that social security was nothing but a ponzi/pyramid scheme. My parents new it, even my public education system teachers knew it.

Pyramid scams in general are illegal, however, the government has instituted the largest of them all -- and FORCES every working person to participate. Why are pyramid schemes besides social security illegal? I can only surmise that the government doesn't want competition in the scam department.

The worst thing about social security is, now that I've been working 10 years, of which the last few I've been paying just shy of $12K per year into this system -- I've known the whole time that it's nothing but a ponzi scheme I'm forced to participate in through coercive government force.

Frankly I think the sooner that social security blows up the better. At least that way all the ugliness of what it is would be exposed and people could start saving for retirement (and perhaps I won't have to cough up 12K each year and may thus be able to put it into my savings account).

Of course, I'm sure that all the powers that be will try to put off the death of social security as long as possible, and probably up my annual ante to the system as it goes into it's death throes...thus, we can all look forward to at least another 50 years of paying ever increasing amounts into this insolvent system.

No... this ponzi scheme will be a chain around are necks for decades to come....ugh!

George said...

I really like your site but this one falls down quite a bit. Social Security does not "run dry" in 2042 -- the trust fund may, if the hyperbolic and bizarrely conservative projections are right, but social security isn't drawing on the trust fund to pay benefits today either.

Economist Dean Baker and others have done a good job exposing the Social Security hysteria for what it is -- hysteria.

Try here before writing on Social Security next:


Anonymous said...

I completely agree with Jim. When will we wake up and give our idiotic millionaire politicians the boot? O want to throw up when I hear Hillary or Edwards talking about taxing the “rich” and giving more to the “poor?. Oh yeah, like my “poor” neighbors and acquittance who are so freaking stupid. Not a pot to piss in, no 401K, no IRA. Close to 60 years old they live in a 600k house with zero down. Drive a brand new car, leased of course and last Christmas she bought a freaking pre-made artificial tree for 600 dollars!
What about my idiotic liberal mother in law, working since 30 years in the public school system on the back of us tax payers. She is the first who wants to “re-distribute the “wealth” from us “rich” folks and constantly talks about the social security dilemma. Never ever is she mentioning that she will get thousands of dollars a month from the Public employees retirement fund, all paid by us “wealthy” tax payers.
What about that piece of shit standing in front of me at the gas station register, trying to buy gas and cigarettes with her Welfare card and when this didn't work (thank god) she pulled out a roll of 20's and paid cash.
What about the ghetto garbage living right down the street from me in a brand new house, rented on section 8?
What about the cess pool called public education? Waste going on like there is no tomorrow.
What happened to this country, have we become so numb to whats going on in this country? You have to constantly fend off sticky fingers trying to pull a little more out of my wallet? Like worms on dead meat, crawling all over the place and trying to get as much as possible with out any effort.
Every freaking penny I have in my accounts, savings, IRA, 401k, brokerage my wife and I earned through hard work and savings. We both drive used cars, almost no debt, shop for clothes at Marshall's,
we use coupons and don't ask me when we had our last vacation.
Oh, I forgot, we are rich and need to be punished. I'm “rich” and I only care about myself, I need to be punished.

Brian B said...

George W's 1st attempt to overhaul social security failed. So guess what his second attempt was: amnesty for immigrants. Since the American workforce is declining and the immigrant population is increasing, the best thing to do is put them on the payroll. Make them legit and suddenly you have 12 million new SSN's funding the retirement coffers. Makes a lot of problems go away.

Comprende, mi amigo?

Alex said...

Get rid of death taxes and screwing the young people on SS suddenly becomes much less of an issue. We won't have SS, but at least give us the SS money paid to our parents and grandparents tax free.

Dr Housing Bubble said...


Entitlement programs are eating away at the middle-class and that is the pinch you are feeling. Not only that, but the baby boomer generation that will benefit the most from these programs also paid the least as a percentage into the system. Take a look at the historical average FICA Tax rate over time:

1955: 1.71
1960: 2.29
1965: 2.23
1970: 3.35
1975: 5.20
1980: 6.13
1985: 7.05
1990: 7.65
1995: 7.65
2000: 7.65
2005: 7.65

Notice a pattern? Over 4 times higher is the current rate that people pay into the system from 1955. You can find more details at Tax Policy Center

You vote and you get active. Apathy will not get us anywhere. This is an issue and we need to address it. This in conjunction with a declining dollar, inflation, and massive deficits does not bode well for our generation and that of our children. The great thing about information is you can research and debate with others to find a solution.


As of 2007, the maximum income subject to OASDI is $97,500. So the burden ultimately hits the middle-class. When Social Security, was enacted life expectancy was a lot shorter than in 2007. So many projections do not factor this into the equation. It could be the case that someone can be drawing from SS for 20, 25, or even 30+ years. More Viagra and Cialis to fill up the time


I’ll need to take a look at that book because I respect Dean Baker. I’ve read many articles that address Social Security. But here are some direct quotes from the Social Security site:

Q: “Does Social Security have dedicated assets invested for my retirement?”

A: “Social Security is largely a "pay-as-you-go" system with today's taxpayers paying for the benefits of today's retirees. Money not needed to pay today's benefits is invested in special-issue Treasury bonds.”

Q: “Is there really a Social Security trust fund?”

A: “Yes. Presently, Social Security collects more in taxes than it pays in benefits. The excess is borrowed by the U.S. Treasury, which in turn issues special-issue Treasury bonds to Social Security. These bonds totaled $1.9 trillion at the beginning of 2006. Social Security received $94 billion in interest from bonds in 2005. However, Social Security is still basically a "pay-as-you-go" system as the $1.9 trillion is a small percent of benefit obligations.”

Q: “I hear that Social Security has a big financial problem? Why?”

A: “Social Security's financing problems are long term and will not affect today's retirees and near-retirees, but they are very large and serious. People are living longer, the first baby boomers are nearing retirement, and the birth rate is low. The result is that the worker-to-beneficiary ratio has fallen from 16.5-to-1 in 1950 to 3.3-to-1 today. Within 40 years it will be 2-to-1. At this ratio there will not be enough workers to pay scheduled benefits at current tax rates.”

source: www.ssa.gov

Even the Social Security Administration by their own admonition states they have problems. Social Security is a pay-as-you go system. So ultimately anyone working and paying into the system is currently keeping things moving. By 2042 hard decision will have to be made (i.e., massive cuts in funds). Here are a few ideas:

1. Move the retirement age up to 70 or 72
2. Increase the OASDI tax rate to include higher brackets (up to $200,000)
3. Stop COLA increases in Social Security

Now tell me how likely any of these “solutions” are likely to be voted into law? Again, the ostrich in the ground mentality of government takes hold. Just because certain people will not face the problem, other generations (and future generations) are concerned about this problem.


Time to vote and get active. This is the middle class squeeze. Ultimately, we are on our own for preparing for retirement. Isn’t it funny how so many people think we don’t have socialistic programs but look at Social Security, Medicare, Department of Education, and other enormous departments that are spending like maniacs. Look at the DoDs budget! They spent $8 million bucks on a flatulence bomb. Yup, money well spent out of fear. Do we need protection? Of course. But can it be strategic and thought out as opposed to knee jerked over spending programs?

@brian b,

Someone should run under that campaign: “Social Security problems? We have a continuous stream of folks willing to make up the short-fall. Let us call it our work-for-boomers program.”


This would be the case if it weren’t a ponzi scheme. But if you know the theory behind a MLM, those in first do the best and those in last get holding the bag. I don’t feel comfortable passing the bag to my kids generation but apparently some folks are perfectly fine with saddling the nation and future generations with debt.

Son of Brock Landers said...

Nice post Dr HB, no politician will touch this. The only time a prez will bring up SS reform is at the beginning of a 2nd term when they are safe after re-election. You can only fix SS by 3 methods, 1. raise SS taxes 2. cut benefits 3. increase the retirement age. Some combo of those 3 will be put into place but 2018. The first change I want to see is the removal of the payroll tax cap. That adds 7 years of life to SS and stops the regressive nature of the tax.

Don said...

Actually there isn't so much a Social Security problem as there is a Federal deficit problem. Yes, it's structured like a ponzi scheme, BUT, it's managed to be sustainable anyway. It's structured as an insurance system (more on that later). It's worth noting that revenues into the Social Security trust fund have consistently met or exceeded the best case estimates that the trustees have estimated... the fabled crash of the social security system can be avoided with a small adjustment to the system (raising the cap on social security taxes about 5-10% would do the job).

That said, Social Security was never meant to be a pension, it was meant to be a guarantee against abject poverty in old age (which is part of why, as an investment, it ends up doing much better for low wage earners than high-wage earners). Social Security provides a base level of income that you can count on in case you end up facing a stock market crash when you're ready to retire or you realize that putting your retirement savings into 2% insurance contracts was maybe not the best way to prepare for old age.

Don said...

"liberal", your mother-in-law won't be getting any social security: Instead she pays a higher percentage of her income into a pension fund run by the state to fund that pension. It might behoove you to learn a bit more about how things work before ranting about them.

"alex," unless your parents and grandparents are fricking super-wealthy, there won't be any estate tax. You do realize that the estate tax doesn't begin to kick in until the amount that each individual heir receives exceeds two million, right?

George said...

Doc -- of COURSE the SSA website trumpets the "crisis" -- the Bushies made them start doing that and start including the same scare tactics in the annual statement. Scaring people about the crisis was the first thing they tried on the way to the privatization final solution. You will like the Baker book, guaranteed. Like your site, it's an antidote to the conventional hype psuedowisdom that passes for thought in the press.

Anonymous said...

Don,...... if you don't like my rant just don't read it, its still a free country, real simple. I was waiting for someone like you defending this rip off:....she pays a higher percentage of her income..won't be getting any social security! Like they want the crap we have to put up with.
Freaking higher percentage, yeah right, they really, really dig deep into their income to fund their exclusive retirement funds, from salaries paid by us stupid tax payers who are lucky to find a company to work for who has a half ass 401K, of course. What arrogance, to have a teachers union, a federal employees union, for people who's job is solely financed by tax payers money, i.e property tax and bonds and who turn out garbage worthy of some third world country. Did you ever wonder why every idiotic school needs an “principal”, a vice principal, a principals cell phone holder and dialer, a principals principals assistant secretary, every damn freaking school? What a wonderful system, I want to throw up!
Defenders like you Don, should move to the promised socialized land of Europe, and please take the politicians, lawyers, judges and all the other tax sucking vermin with you. After you lived and worked there for years (oh no, not just a wealthy American visiting), we talk again and see what you think. Maybe we even can get you of the Prozac you started taking while trying to survive the oh so human European society.
Don't like my rant Don? Just don't read it! Just make sure to keep your fingers out of my pocket and don't twist and spin what I have to say, thanks!

The North Coast said...

I'm a baby boomer born in 1952 and I'm here to tell you that not only will people of my generation NOT be the people to benefit the most from the system, but we will be totally left in the lurch.

If you were born before 1940, you are receiving far more than you put in.

However, if you were born after 1950, you are already paying in much more than you stand to receive, and when the first wave (1945-1950) of boomers hits retirement in just a few years, they just might be confronting lower benefits (due to go still lower)

It will be a real blow after having your 401K blown up by whatever corporate scammer you trusted. Many former employees of outfits like World Com and Enron, to name only the most prominent examples, are now withing a couple of years of retirement age with NO funds, thanks to their naive trust in their 401K plans.

The chief beneficiaries of this ponzi scheme are the Great Generation born 1915-1935, the most cossetted and long lived generation of elders ever.

It is too bad, because we need to make provisions for indigent elders. However, we are going to have to make some really major revisions, such as taking out the minum age many years.Remember, the SS system was designed in 1933, when the average life expectancy was 61 years. The whole thing is founded on the idea that most people will not live long enough to collect- the guys in the New Deal brain trust did not visualize a life expectancy of 83 years.

We will HAVE to push the retirement age for people like me and those younger out to 68 or even 70, and we really ought to push it out to 66 or 67 for people born after 1945. Just that much an adjustment would make a massive difference in the ratios.

There is no way we, as a country, can afford to support whole generations of people in retirement for 30 years, as we have been doing since 1960 at least. I don't think that will continue, and I believe that, when we have the benefit of the "rear view mirror" that the Baby Boomers will have a much shorter lifespan than their parents, who will probably be the longest lived and most pampered generation of elders in world history.

Jim said...

Dr. Housing Bubble said:

You vote and you get active. Apathy will not get us anywhere. This is an issue and we need to address it. This in conjunction with a declining dollar, inflation, and massive deficits does not bode well for our generation and that of our children. The great thing about information is you can research and debate with others to find a solution.

Ah, but this was a big part of my issue - the sheer number of the baby boomers are likely to make my vote and activism meaningless. If there are as many of them as there are earners, do we really expect that we're going to able to convince the selfish generation to take it easy on us and not tax us to death?

When the media and schools and a large number of Americans already actively advocate for bigger government and higher taxes at every turn on a daily basis?

I don't think so.

And if my assessment of the impossibility of turning it around labels me apathetic, then so be it.

This is definitely a country where the "rights" of individuals mean very little these days (c'mon, the cops can pull you over and search you at any time essentially without cause now, and the NSA is listening to your phone calls, do you feel "free"?), and the tyranny of the majority combined with a government already constantly straining at the reins to grow in size, scope and control seems like it will almost certainly trump here.

It's all going to hell. If you make a decent living and want to live somewhere you're not being watched by video cameras 24x7 and paying 90% marginal tax rates, time to find a new place to live, I'm afraid.

Anonymous said...


I'm new to this site and love reading your blogs. Your Debt chart shows that the average american (30-39) is 107,000 in debt. It's hard to analyze this statistic because the people that will show as best off, don't own a home. I am in my mid 30s and bought my first home about 6 years ago. I paid 20% down and bought a house within my means. I am still have 150,000 in debt for the house. I have no other debt. It looks like I'm worse off than the average american in my age bracket.

Joe said...

Dr HB,
First let me say I enjoy your site and have learned much, but I must agree with George and a few others. It has become received wisdom among many people that SS is in trouble and will soon be gone, taking away their rightful share of the pie. We hear a lot of dates tossed around as to how long it will be fully funded but the same thing can be said about all government programs. Our defense dept is fully funded till the end of the year. The fact that SS is funder for 20/30/40 years (pick your source) speaks very well for it. The decline in the amount of contributors to benefits drawers can be explained by productivity. an example would be food, far more farm workers were required to feed the American people in 1900 than now due to increased productivity. None of us have a share in SS until we begin drawing, it's social insurance. Like our tax $ for infrastructure-you may or may not use the roads your $ paid for. Thanks again for your blog, you do great work.
take care,

meadandale said...

@george et all

There is NO trust fund. There is NO lock box. It's all a big scam.

Social Security funding excesses are being spent and replaced with IOU's from the US Treasury.

Where do you think that the US Treasury is going to get the money to pay back those IOU's??? You, of course, through higher income taxes, among other things.

Those that think there is no crisis in SS might as well just put their heads back in the sand. We'll be getting back to you in the next couple of decades when the fed, states and local governments are all being crushed under the weight of mounting retirement obligations with no ability to pay but by coming after YOU, John Q Taxpayer with a big collection plate and a pair of handcuffs if you don't feel like putting more money in the kitty.

Joe said...

Meadandale et al

What do you think treasuries and other types of securities are ? Where do you think your insurance payments and your IRA's and pension contributions go ? Do you think your paycheck is converted to cash and sits in a corner at your bank ? They are all IOU's. Treasuries are 100% backed by the US government. If you fear default on payment of the debt (and I am not trying to ridicule anyone with that fear) then SS is only one among many vital programs which would collapse if no longer funded. Medicare, education, infrastructure. Our economy is bleeding red ink, but seeing SS as being less safe than any other program, particularly those which are only funded till the end of the fiscal year, is not rational.

candely said...

I'm a baby boomer born in 1953. I plan to work beyond my 70's and hopefully live over age 100. I eat only organic fruits, vegetables, nuts and few grains. I am not overweight and obese. I do not smoke. I exercise daily and drink plenty of water over 15 glasses per day. I plan to get another Masters degree in something that interests me and out of shear enjoyment of learning. I do not think in terms, "who will support me in my old age? ...because that old paradigm doesn't fit my belief system. I know my skills, knowledge and expertise will be in demand for the next 30 decades from now. I feel sorry for the younger generation who are already complaining they might be taxed to support the boomers. I'm sure the majority of baby boomers will be creative enough to support themselves if the ss system runs dry.

Anonymous said...

As frustrated as I am about what I am hearing about the SS system. I at least have time to build my 401K, investments etc. I am not planning on getting anything out of SS in 25 years so if I do, it will be gravy.

Musnbny said...

I appreciate candely's comments. There is little if any scientific evidence that organic foods are safer than non-organic foods, but the "cleaner" foods are, the better makes good, common sense. The water that you are drinking is good if you tend to get dehydrated but it sounds excessive. I wouldn't do it because I don't want to pee all day. :)

The two things that you said that have been proven without controversy is tobacco avoidance and diet/activity to prevent obesity. Tobacco is the number one preventable cause of death in the USA, but poor diet/inactivity is number 2 by only a couple of percent and is likely to become number 1 soon. We are getting fatter and have more diabetes, etc, so there are some arguments that social security will be fine because the trend of living longer might just reverse as we eat ourselves into oblivion.

carlgrace said...


Take a deep breath, friend. Everything will be okay...

You do make some good points, but there are of course counter-points, and the most important thing someone can do in order to have credibility is to listen to the other side of the argument without resorting to childish ad-hominim attacks.

You are right that there are problems with the way this country is run, but calling people you don't know who are on welfare a "piece of shit" and someone on section 8 "ghetto garbage" is not helpful. The amount of money our country spends on social programs (except for entitlements such as SS and Medicare/Medicaid) is dwarfed by the amount we spend on "defense". Studies have consistently shown that people grossly overestimate the amount of money our country spends on things like foreign aid and welfare.

You and your wife have benefitted greatly from the way our country is run. Your 401(k), for example, is in fact a government subsidy to encourage you to save for retirement. Do you consider yourself "trash" for taking advantage of it? Of course not. Do you send your kids to public school? Did you go to a public university? Do you use roads and bridges? Do you like living in a free country and participating in a free but regulated market? All of these things are expensive, and as a society we have made the decision that it is worth it to invest collectively in these things.

You may be a reasonable person, but you come across as a mildly uninformed reactionary.

Anonymous said...

...I'm sure the majority of baby boomers will be creative enough to support themselves...

Yeah right, I see them all around me "taking care of themselves".

Calgrace... If someone tries to pull a fast one and uses his welfare debit card to buy cigarettes, soda and other stuff in front of me and then pulls out a roll of 20's they are a "huge piece of welfare shit"!!!! If I have to live in a neighborhood where we homeowners have a considerable investment and some low life investor puts some Ghetto garbage section 8 right beside me and they think that now they own the place, behave like they in Compton and all the show is "social banditry" I call them what they are, section 8 ghetto garbage. Last time I checked meth cooking and going on robbery and identity theft binges is not yet covered by civil rights.

401(k), for example, is in fact a government subsidy.... It is not a subsidy for me... why do I have to pay taxes on this when I withdraw it? So it lowers my taxable income, yeah right, they are so kind giving me back my money I earned in the first place.
Where does the government give me anything? Your other examples are pretty weak too, of course I use streets and such. Thats why I pay registration, property taxes and all the other fine government art of extortion. You want great schools for your 4 rug rats... pay extra school taxes for your rug rats.
Reactionary? So whats wrong with that? Just because everyone is soooo political correct in this country nowadays and is afraid to speak their mind? Rhetoric our so called liberals use is the same Stalins commie garbage used to justify everything!
All you get is the drivel people like Don are spewing since years and making this country a bad Kafka story.

carlgrace said...


Touche, most of my examples were pretty weak. You may have had some negative personal experiences, but the majority of poor people in this country are not running meth labs or participating in "social banditry".

Part of living in a civilized society is accepting some measure of responsibility for your fellow citizens. Of course they are also responsible for their own actions. I'm sure you feel your success is 100% earned. In my case, I know a lot of it came from being privileged to attend schools in safe areas where I didn't have to fear for my life and could focus on education. I also received a lot in terms of subsidized education from the University of California. Lots of people without college educations paid to subsidize my education. The argument is that society at large benefits by expanding the opportunities to a wider swath of the population.

Do you feel that only people with the money to afford unsubsidized education should be able to go to college? If that were true, I would not be anywhere near as successful as I am. Do you think that schools for children should not be funded by the population?

I did like that you agree with me that you should pay some fees/taxes to use streets.

The problem with being a reactionary is that is isn't much different from being a "stalin commie". In some ways "commies" and "fascists" are similar. They see the world in black and white, are consumed with hate, and are far to quick to turn to murder to further their "visions". I would submit our country is moving closer to fascism than communism. I don't mean to imply anything racist, but I am referring to the classical definition of fascism which means that corporate power is dominant, and in fact there is little difference between the corporation and the state. That is what happened in Germany, Italy and Spain in the 1930s, and it is happening here now. Hopefully the pendulum will swing back to real freedom soon enough.

Ed said...

I'm a 26 year old professional. My wife and I are renters with no debt and we save about 30% of after tax income.

But I'm not putting it into a 401k, for three simple reasons:

1. All the investments offered by my employer's 401k look extremely suspect to me. None of them are keeping up with real inflation (10%+). They're mostly just overpriced stock indices, at the tail end of a massive secular bull run.

2. Deferring taxes only makes sense if your tax rate will be lower later. Given the vast public debt burden, I seriously doubt my taxes will be going down.

3. Flexibility. Remember, we're talking really long term here. Will we need to flee the country some time in the next forty years? Who knows. But if my wealth is liquid, I can get out with it. Or on a more positive note, perhaps I'll want that capital to start my own business. Liquidity is golden -- and there will come a time when it's much harder to get other people to loan you cash. The tax benefits of a 401k are not a free lunch. It's a tradeoff, and one I don't prefer to take.

Anonymous said...

I have to agree with NorthCoast, the real beneficiaries are the people enjoying their golden years now. I'm a late boomer and I've had to follow their wake my whole life. I've known since I started working full-time that I'd never get a dime from SS, it was common talk among 20-somethings even back then (1982) that we were being screwed.

Frankly, I can see why younger people have thrown in the towel and adopted a live-for-today attitude. Why save? Taxes take your money and you just end up being one of the suckers, unless you are fortunate enough to be a really top earner and sock away serious dough.

Incidentally, talk of SS insolvency misses the real problem, which is that the inflow/outflow balance turns negative much much sooner. In fact it's a problem as soon as net inflows begin to decline. Reason: the overall budget deficit will balloon as the annual SS surplus shrinks and turns negative.

There's no really good solution, but there are things we could to that would at least own up to the problem. My suggestion: admit that SS has become a welfare system for seniors, and fund it from general tax revenues. Eliminate the FICA tax and the fiction that you have an "account". Raise the overall tax rates to compensate. Tax all the benefits as regular income, a de-facto means test.

BTW the real ticking bomb is not SS but Medicare, which is exploding as I speak. Again, no really good solutions, but it could be swept up in a general makeover of the way we pay for healthcare. We pay more as a % of GDP than any industrialized country and with almost nothing to show for it in terms of measurable results. The employment-based system we have now is disfunctional because people without access to a group plan have trouble getting insurance if they're not in perfect health, and there are big problems with portability. In short, insurance has reached the point where it is ceasing to serve it's primary function as a means of spreading risk, and has become a means of dividing people into "tranches". If you are "sub-prime", you are toast. Time to replace it all by extending the medicare system to all citizens, and fund it through a tax that replaces what employers now pay to insurance companies.

Oh yeah while we are on it, there is nowhere you can go that doesn't have this problem, unless it's the developing world. So there's the other dirty little secret - TPTB need to keep those illegals coming in because they are in general younger and helping shore up the demographics.