RE: How about fixing present Personal Account rules?

[Michael Jones <powderfinger99@yahoo.com>]

<<<<
There is a hodgepodge of always changing rules for 401k's, IRA's,
SEP's, etc. The country is now full of 401k Millionaires for
instance. There are probably very few people who have achieved
anything like adequate savings with the on-again, off-again $2000
per year IRA accounts. There are huge inequities between one plan
and the other. Perhaps we should clean up the present Personal
Retirement Account situation before we consider replacing Social
Security under yet another set of arbitray rules.
>>>>

This is a good idea to consider the total retirement savings picture
when considering SS reform. The easiest way to do this is to
remove all taxes on capital gains. If there were no taxes on
capital gains all these programs which try to dictate worker
behavior would not be necessary.

Think about it. There would be no need for IRA's, Roth's, Education
IRA's. All the money you invest is treated the same. You get to
determine where you see fit to spend it whether it's retirement,
college, or a home. Whatever you want.

Realistically, this kind of change would not happen because
(for better or worse), big changes are not easily made in a
democracy. Also, the actuaries would probably go nuts since
they would have to go back to their caves and figure out how
to redistribute income "fairly" under this system.

<<<<
How about letting everyone contribute to their voluntary IRA type
account each year up to the amount of their FICA tax? That would
standardize the rules for everone.  It would also give everyone a
direct comparison between the investment value of Social Security
and their own investments.
>>>>

Less rules, less complication is needed not more. The average
person on the street understands that the current tax system we
have is unworkable. The only thing that citizens can do is try
to work the system as best they can to get what they want. The
result is the mess of a tax code we have today.

<<<<
Most investors would have a hard
time beating Social Security's returns consistantly.
>>>>

<RANT MODE>
Time to beat the same drum, as I have over and over again
on these forums. Here it is again: 
</RANT MODE>

Going forward, most people will not even get back their 
contributions. To put this in simple terms: put $10,000
into the bank. If the bank were Social Security, you might
have only $9500 in the bank 40 years later. You lost money.
(this example assumes both numbers are in 1999 dollars).

A system with a real negative return is not hard to beat.
One simple chance would do it: offer each worker the compounded
return of treasury bonds on their contributions. As long as the
treasury bonds return an inflation beating rate, you would 
always have more money than when you started. And with no change
in risk!

If we all agreed that treasury bonds were real investments, then
we could fix SS simply by making this one change. The OASDI
component of your contributions would be compounded at the 
treasury bond rate. Voila! The funding problem goes away!

All that would be required is to raise payroll taxes high enough
such that everyone would get this rate of return. How can
defenders of the current system suggest anything otherwise?
After all, this is how treasury bonds create wealth, through
taxation.

Michael