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Insurance against destitution in one's old age. It works like an annuity. As I posted previously social security's official designation is Old-Age, Survivors and Disability Insurance.
But destitution doesn't have to happen for social security benefits to be triggered. Also, contingent annuity is not insurance.
Reality shows that individuals are worse than corporations and governments at managing investment portfolios. So in terms of social efficiency, corporates and governments should bear the risk.
Dollars and sense don't equal social efficiency especially for corporations that aren't in that business nor their investors taking the risk. Perhaps investing for social efficiency is part of the reason for the thread title .
Dollars and sense don't equal social efficiency especially for corporations that aren't in that business nor their investors taking the risk.
Yes they do.
I manage $1B and grow it to $10B after 20 years.
You manage $1B and grow it to $20B after 20 years.
For social efficiency, should you or should I manage the money?
I did not say if corporations are in the business of financial risk management. What I was saying is that corporations should do it because they are more efficient than their employees.
Corporations include retirement benefits in the benefit package to attract talent. Taking care of that is kind of their business.
You manage $1B and grow it to $20B after 20 years.
For social efficiency, should you or should I manage the money?
I did not say if corporations are in the business of financial risk management. What I was saying is that corporations should do it because they are more efficient than their employees.
Corporations include retirement benefits in the benefit package to attract talent. Taking care of that is kind of their business.
That isn't the problem. The problem is the corporation/gov't taking the $1B, promising promising $20 billion and ending up with only $19B and a $1B shortfall to be made up by? It is the defined contribution v benefit issue.
When these simple things are taken into account we can see most everybody except the very rich top 5-8% are worth nothing to less than 0.
The above person even if his spouse is working and they are college educated and making $150,000 combined are worth nothing probably. Add up all they owe versus some equity in the home and some retirement money in an 401K or otherwise, a meager savings probably and some money in material possessions (electronics,etc) and they probably owe more than the sum total of any assets.
Anybody care to discuss these points?
Your kind of right......if you go by actual stats here's a general description listed by percentile:
1% : extremely high net worth (34.6% of total net worth in the USA)
4% : very high net worth (27.3%)
5% : high net worth (11.2%)
10%: Moderate net worth (12%)
20%: Low net worth (10.9%)
20%: Extremely low net worth (4%)
40%: No/negative net worth or a few dollars in bank (.2%)
So effectively only about 20% of the population has a notable net worth. That's still a small percentage of the population but its not anywhere near the 8% you thought. A household income of 150K puts a couple at around the 88% percentile so most likely they have a decent net worth.
When these simple things are taken into account we can see most everybody except the very rich top 5-8% are worth nothing to less than 0. When you own everything outright, have no loans and have substantial money in the bank, then you are wealthy. Upper middle class Americans are not well off either contrary to what your upper middle class neighbor living next to you with his BMW, $300,000 home and fancy clothes may have you believe.
discuss these points?
While I agree that conspicuous consumption (luxury car, large house, fancy clothes, international vacations, etc.) does not assure a net worth above zero, it is going too far to make the statement which I bolded above. I am a retired high school teacher. I own everything outright, have no loans or other debt, and have money in the bank. (Whether it's "substantial" is debatable, but it's more than negligible).
I also have a secure pension, which is a real asset. But I am not "wealthy".
My total lack of liabilities makes me very secure financially, it reduces stress, and it puts me in a personal comfort zone, but it doesn't make me wealthy. (Remember, I am a retired high school teacher).
That isn't the problem. The problem is the corporation/gov't taking the $1B, promising promising $20 billion and ending up with only $19B and a $1B shortfall to be made up by? It is the defined contribution v benefit issue.
If the corporation promised $20 billion, then they are liable for $20 billion. They have a whole team of actuaries and investment consultants and a million rules by the the IRS to figure out a contribution schedule that would get them there. They are required by law to contribute if the fund is underfunded. Not only that, they are not allowed to withdraw from the pension fund for any other purposes.
Who requires people to save more when their current asset level falls short of the scheduled? No one.
Who forbids people from withdrawing money from their retirement savings to make unnecessary purchases? No one.
If the corporation promised $20 billion, then they are liable for $20 billion. They have a whole team of actuaries and investment consultants and a million rules by the the IRS to figure out a contribution schedule that would get them there. They are required by law to contribute if the fund is underfunded. Not only that, they are not allowed to withdraw from the pension fund for any other purposes.
Who requires people to save more when their current asset level falls short of the scheduled? No one.
Who forbids people from withdrawing money from their retirement savings to make unnecessary purchases? No one.
Why is this an inherent corporate responsibility or cost? The simple thing for them to do is to not offer a defined benefit plan and offer a defined contribution plan. This enables them to focus on corporate goals and their ultimate corporate responsibility of enhancing shareholder value. Activist investors are growing and their future impact on employee benefits could eventually be also.
I just wanted to point out that Australia's net worth is highest because they have a privatized Social Security system that forces people to save something like 9% of their incomes and the employer contributes another 9%.
I think 401ks should be mandatory or quasi mandatory. That is the only way you'll get Americans to save.
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Exaggeration of a valid concept
