Tom Roth: ‘You didn’t mention ‘means testing.’ No reason why the rich are getting Social Security checks.’
☞ Means testing raises all kinds of administrative issues (and annoys people who’ve been paying to the system all their lives). But one small nod in that direction that I’ve long favored, but didn’t include Tuesday, would be to make ALL Social Security benefits taxable, not just 85%, as now . . . the notion being that for those relying solely on Social Security, no tax would be due, while for someone with $200,000 a year in bond interest, well, yes, they’d give back a little more of their (unneeded) safety net. A sort of very modest but efficient means test – zero extra administration required.
Brooks: ‘I’d still bet that if I had my 12.4% myself and invested directly in conservative bonds in a manner that I could draw out as an annuity upon reaching retirement age, my payout would be more than the Social Security checks I’ll get.’
☞ Very likely. But in the meantime, all the people your Social Security contributions are currently going to would lose their benefits and starve to death.
(Note to readers wondering what that 12.4% is: It is the retirement tax you pay if you’re self-employed, or 6.2% from your paycheck plus 6.2% from your employer.)
Brooks continues: ‘The real reason I oppose ‘privatizing’ social security is that so many people will invest recklessly and lose their retirement funds and I’ll be hit up to pay for them anyway as either a new tax or an appeal for funds through my place of worship or some other community organization. And I, like a dope, will pay while others of equal wealth will say, ‘The heck with ’em, they had the money and blew it . . . let ’em starve / freeze / whatever.’ And then, of course – once people realize that someone will take care of them anyway – future workers will have an incentive to make even riskier investments with their retirement funds (or just spend them), increasing even further what my progeny will wind up paying in taxes and/or charity to keep the risk-takers from starving in their old age.’
Ken Hoerner: ‘I lost about 85% of my long-term, self-managed IRA account’s value during the tech meltdown in 2000-01. Thank God I wasn’t managing my Social Security.’
SHORTING YOUR HOUSE
I said yesterday I didn’t know how. One of you kindly sent me this link. (Thanks, Marc!) I can’t vouch for the futures market in local home prices that they are cooking up . . . I would worry about ‘spreads’ and transaction costs. But it could be worth a look. Then again, most people should not make themselves crazy about this. If you live in a home you love and can afford, just keep enjoying it.
David: ‘One way to get some gain from a housing market bubble burst (try saying that fast) is to sell your house now, rent for a while, then buy something similar or grander in the depressed/adjusted market. Lots of transaction costs, however.’
☞ I know folks doing exactly this. You never know; but it could make sense.
Tomorrow: Only cheerful thoughts.