Matthew Yglesias: Assets and The Poor

Assets and The Poor

Okay, done with politeness. Butler just started talking about how one great thing about privatization is that it will let people have real assets and not just monthly checks. Fair enough. Then he says that's especially important "for the poor" and it's "ironic" that people on the right are so concerned about the poor while those of us on the left do not. Also ironically, poor people under the president's plan will need to transform their entire accounts into annuities. In other words, into monthly checks. So this is a non-starter.

April 19, 2005 | Permalink

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Comments

how exactly do you own anything under privitization ? it's not like you can liquidate the assets in your account - they're locked up tight until you convert them to an annuity when you retire. all you really own is an IOU from a brokerage company. right ?

Posted by: cleek | Apr 19, 2005 9:26:53 AM

"...will let people have real assets and not just monthly checks"

LOL!

Please, stop! That's right up there with "Let them eat cake."

Posted by: Mr.X | Apr 19, 2005 9:27:27 AM

There is a class of poor that would be better off under the President's plan - those without non-adult children who die before they retire. They is a very small group compared to black women who reach retirement age, who will lose big under the President's plan.

Posted by: Dennis | Apr 19, 2005 9:28:39 AM

cleek,

If you die before you retire, then your heirs get your assests. If you retire, then the money becomes an annuity. I am not sure if they get your 4% or if they get the profits of your investing after the clawback.

Posted by: Dennis | Apr 19, 2005 9:30:54 AM

If you die before you retire, then your heirs get your assests.

Question: can your heirs take your assets to Vegas or do they only get to merge your assets into their 'personal accounts' that are destined to eventually be turned into an annuity? If it's the latter, then there is no chance of any wealth accumulation in this scheme.

Posted by: abb1 | Apr 19, 2005 9:47:23 AM

"There is a class of poor that would be better off under the President's plan - those without non-adult children who die before they retire."

Oh, well, that's reassuring. Since I'm planning to die before I retire, I supposed I'd better get right behind the president's plan!

Posted by: rea | Apr 19, 2005 9:55:48 AM

If you die before you retire, then your heirs get your assests.

so, at best, the Bush non-plan is an incentive for people to kill their parents.

Posted by: cleek | Apr 19, 2005 10:01:19 AM

Yes. The annuity structure isn't being talked about enough. Especially for a target audience --me included-- that doesn't really understand such things.

So not only do annuities eliminate the element of choice (the appeal of privatization), add in years of percentage fees, down cycles of underperforming or overly conservative (and hence medicore-performing) assets and are we really beating Social Security by investing and UN-INSURING American retirement?

This dumbassery needs to stop.

Posted by: ratchet | Apr 19, 2005 11:18:59 AM

Also ironically, poor people under the president's plan will need to transform their entire accounts into annuities.

This is, of course, utter bunk. The only part of the accounts that would be required to be transformed into annuities is an amount sufficient to ensure that the SS beneficiary obtains a monthly income at the poverty level (at least).

But Matthew cannot know ANY of the three variables in that equation. Hence, at utter lie on Matthew's part.

Not surprising that the opponents of saving Social Security resort to lies.

Posted by: Al | Apr 19, 2005 11:52:27 AM

The only part of the accounts that would be required to be transformed into annuities is an amount sufficient to ensure that the SS beneficiary obtains a monthly income at the poverty level (at least).

cite?

Posted by: cleek | Apr 19, 2005 1:08:32 PM

Senior Administration Official: Upon retirement, upon reaching retirement age, there would be some limitations on how they could withdraw money from the accounts. If an individual had a personal account balance, if they had chosen to take a personal account, they would not be able to withdraw money from their account to such a degree that by doing so they would move themselves below the poverty line. In other words, there would have to be a sufficient amount coming to them, in terms of a monthly inflation index benefit stream, from the traditional system and the annuitized portion of their personal account to be able to fund a poverty-level benefit.

Now, to the extent that their personal account enables them to have total benefits that are higher than that, they would have flexibility over the disposition of those funds. They would be permitted to leave those funds in the account to continue to appreciate; they could withdraw those amounts as lump sums to deal with a pressing financial need -- and, obviously, any additional accumulations in the accounts could be left as an inheritance.

http://usinfo.state.gov/dhr/Archive/2005/Feb/03-936733.html

Posted by: Al | Apr 19, 2005 1:26:31 PM

Ironically, the price-indexed scaling under CSSS Plan 2 will make SocSec replacement ratios look "poor" vis a vis 2080 standards of living, so even the wealthy are likely to see their private account go to annuities.

Posted by: RonK, Seattle | Apr 19, 2005 2:24:38 PM

Yes. The annuity structure isn't being talked about enough. Especially for a target audience --me included-- that doesn't really understand such things.

Once it's private market annuities - cutting benefits becomes real simple. Today $1Mil buys $1K/month annuity - tomorrow only $800. Hey, it's market, it's nobody's fault.

Posted by: abb1 | Apr 19, 2005 2:32:02 PM

Dennis ... Hope you realize that according to the actuarial tables nearly a quarter of 30 year olds will die before they reach age 65 (see here). Of course, with the retirement age advancing to 67 for today's 30 year olds the odds are even worse. In most of those cases (no kids under 18) their heirs will be infinitely better off than under today's system.

Also, the clawback is a virtual clawback ... a metaphor created by the WaPo. The entire individual account would belong to the estate when an individual dies.

Posted by: DCPI | Apr 25, 2005 8:11:26 PM

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