Economy
Related: About this forumSweden partially privatized its Social Security
As part of sweeping pension reforms in the 1990s, Sweden made a part of its Social Security system private.
Employers and employees contribute 18.5% of workers salaries to the countrys pension system, but about 2.5% of that goes into a privatized investment account earmarked solely for an individual, called a premium pension. Employees can choose how that money is invested, and are offered a list of funds to choose from. It could potentially lead to an increased future pension because of financial returns, and also to diversify the source of funding, said Hervé Boulhol, senior economist of pensions and population aging at the Organisation for Economic Cooperation and Development.
https://www.marketwatch.com/story/sweden-partially-privatized-its-social-security-heres-how-it-has-worked-out-2019-09-06?mod=mw_theo_homepage
Chile in South America has privatized retirement to a larger extent!
I am afraid, soon coming to USA.
elleng
(130,126 posts)Thrift Savings Plan https://www.tsp.gov/index.html
Fed employees don't ALSO participate in Social Security, have Pensions, and can opt into TSP.
exboyfil
(17,857 posts)Ever since the early 1980s when the law was changed. It actually happened a couple of years before I went to work for the federal government.
elleng
(130,126 posts)retired in '01, we 'just' get our (pretty good pensions.) The program for those changed in the '90s, as I recall, but no Soc Sec.
exboyfil
(17,857 posts)I started working for the Federal government in Feb., 1985, and I paid SS (it was a reduced step rate that was eventually going up to the same as private employees).
https://www.washingtonpost.com/blogs/federal-eye/post/federal-retirement-contributions-questions-and-answers/2012/02/23/gIQArFxsVR_blog.html
Employees first hired in 1984 and after generally are in the Federal Employees Retirement System. They earn the same Social Security benefit and pay the same Social Security contribution as other workers. Typically that is 6.2 percent of salary, although in 2011 and 2012 (now that a full-year extension has been signed) it is 4.2 percent.
mahatmakanejeeves
(56,884 posts)The Swedish plan sounds like an IRA.
exboyfil
(17,857 posts)6.1% less than Sweden. What about leave the current SS withholding alone (except for removing the cap). Keep that system the same.
Mandate a 3%/3% discretionary account where you could purchase Treasury securities directly with minimal overhead or participate with a mutual fund company and invest in mutual funds or ETFs?
exboyfil
(17,857 posts)Note you can still invest in Treasuries like you essentially do with Social Security.
Voltaire2
(12,610 posts)current recipients. And enrich Wall Street. And make it your fault you cant survive on your pension, instead of social problem that we can resolve politically.
at140
(6,110 posts)you may be able to leave it for your children if you wish.
That is the main benefit I would not mind having.
Can't do it with a mass participation account.
Voltaire2
(12,610 posts)how well these individual accounts performed.
The pressure from the right to get us out of collective programs is inexorable and needs to be fought and pushed back just as inexorably.
at140
(6,110 posts)It has been around for a long time and participation in private account is higher.
exboyfil
(17,857 posts)I suspect the return is higher than for everybody but the lowest earners (and that is because that is how SS is structured).
Many other countries maintain sovereign funds even for collective assets where they at a minimum buy the debt instruments from other countries. Our "investment" is 100% Treasuries.
at140
(6,110 posts)in my 40's, and that investment has quadrupled over 30 years. But I have not bothered to compute return on my social security taxes since age 20. Well actually Social Security is more an insurance product than straight investment, and the return will all depend on how long I live. I must take my Gym routine seriously LOL.
OnlinePoker
(5,702 posts)At the time, the plan had around $35 Billion completely in Canadian federal and provincial government bonds. The Chretien Liberal government set up an arms-length organization, The Canada Pension Plan Investment Board to oversee the funds coming in. Any money in excess of that required to pay current pensioners was given to CPPIB to administer and invest. In '99, they projected by 2008 they would have $88 Billion under management. They beat that and had $122.7 Billion. That year, they projected by 2016 they would have $250 Billion which was again lower than the $279 Billion actual. In 2016, they predicted we would have $300 Billion by 2020 and $500 Billion by 2030. In the 2019 annual report (from March), they already had $392 Billion. The plan doesn't just invest in Canada. Over 80% of assets are in other countries. Investments are in stocks, bonds, real estate, infrastructure, etc., a balanced portfolio. The Chief Actuary of Canada has said the plan is sustainable as is for the next 75 years. The only concern I have is, every once in a while, you hear the government talk about how they should be able to use the fund for their own purposes. Approaching my pension years, that really pisses me off.
exboyfil
(17,857 posts)You could argue to fund the war in Iraq.
Farmer-Rick
(10,071 posts)It's a popular right wing talking point. AND they always throw up Chile as a shining example on the hill of the never ending wonders of privatized retirement funds.
But let's really look at Chile. Ignore those mammoth protests in Chile against the social security system in 2016 and on and instead let's look at what really happened.
"But by 2000, investment firms charged fees so high they ate up to 50% of what a worker contributeda feature of creating a captive market of retirement investors. The high gains of the first years had all but disappeared, along with the bull market behind those returns. And the large surplus built from the previous pension system was goneused up entirely to finance the high cost of transitioning from a traditional Social Security system to a new one.
Not 20 years after adopting a private retirement account system, retirees were seeing returns of $400 on average. Nearly half of retirees were collecting substantially less." https://councilforretirementsecurity.org/2017/06/15/social-security-privatization-what-we-can-learn-from-chile/
A few other things to learn from Chile - aside from the mass protests against it:
1. Creating a captive market...(can you say health care?) leads to exorbitantly high management fees.
2. Though privatized Social Security may be safe from idiot politicians like Trump and W. they are completely at the mercy of the ebb and flow of the "free" market. No matter how carefully a person can invest, their total saving can be gone in a snap due to economic circumstances, boom and bust cycles of the market, things out of the person's control.
3. The switch from public to private is insanely expensive.
President Bachelet heavily reformed the system but it did nothing to stop the continual protests.
To paraphrase Matt DeBord, Privatized Social Security shifts risk from the government, which can easily absorb it, to the private citizen, who can't.
progree
(10,864 posts)with similar results virtually guaranteed (pathetic average 401k balances and no pension).
Also, what many people don't understand is that the revenue that Social Security receives from payroll taxes (and the income tax on Social Security benefits) is spent right away on beneficiaries.
That's one reason why all this talk of how much of a return are people earning on SS is bullshit. It's not an investment, it's a program whereby, for the most part, payroll taxes collected from current workers are being used to pay benefits to retirees. (Yes, I know there's also disability and other stuff too). It's an intergenerational transfer of wealth, not an investment program.
It used to be (for decades) that more revenue was collected than needed to pay current beneficiaries, and this difference, the surplus, was loaned to the federal government -- in return, non-marketable (by law) special issue treasury securities were issued to the Social Security Trust Fund (SSTF). But those days are coming to an end -- since 2010, revenues (excluding interest earned on the SSTF securities) have been less than what is needed to pay benefits to current beneficiaries. But the interest earned was enough to make up the difference, and then some, resulting in the SSTF still growing.
But that ends in 2020 when even with interest, SS revenues will not be sufficient to pay current beneficiaries and so SS must redeem some of the securities in the SSTF. Projections are that it will be depleted by 2035, only 16 years from now (those 10,000 boomer retirements a day add up).
Anyhow, the point is, that the cash flow into SS is already spoken for -- to pay current beneficiaries. There isn't extra income anymore that can be invested. It's known as the "legacy problem" -- if one diverts some of the revenue so that private accounts can be created, where will the money come from to pay current beneficiaries now?
I suppose Congress can change the law about what the SSTF is invested in. But given that it is projected to last only 16 years, more will have to be done to make this feasible and worthwhile.