I assume you’ve visited with your parent about that.
I think the federal gov’t already goes overboard on tax incentives for DB plans.
If people aren’t saving for retirement, more tax incentives aren’t going to change their minds.
first-person analysis is usually irrelevant in the discourse.
Similarly, I am against the death penalty, but if someone wrongs me, I’d still wish them death, but that’s only because there’s a subjective bias there.
I’d be ok with putting Putin on the list.
so it’s not enough to just remove him, but you want him to suffer? interesting
The thing is, in a democracy, people are going to say “How does this impact me?” Since most of us have parents, first-person analysis will win.
Perhaps.
More and more young people hate the older generation now. At some point, poverty will override whatever affection is left for the old.
OASDI may not be able to get “above market” returns but OASDI should achieve long term returns greater than just investing in US government securities by investing in other asset classes.
But, OASDI currently pays more in benefits than it collects in taxes. There is no cash flow to invest.
Hence my comment about the disconnect of Bush proposing private accounts but not proposing higher taxes.
I was familiar with the Bush non-solution and I appreciate that OASDI has negative cash flow. This is the problem the Canadian program was facing 30 years ago so the system was reformed by greatly increasing contributions and building up a fund that subsequently was actively invested. The Canadian long term funding rate was fixed at a level that would build up sufficient funds to stabilize the system for at least the next 75 years. It is such a fund I am referring to for OASDI investing.
There was an active debate in Canada over whether social security funding is a tax or a pension contribution. I expect the US would view it as a tax and tax increases have more of a negative connotation in the US than in Canada.
OAS still has govt bonds (not sure about DI). Theoretically it could sell those and purchase market assets. Not saying it is a good idea, but it needn’t be cash flow.
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Yeah, the Canadian trust fund was also small in the 1990’s and held long term government bonds. Interest rates were pretty high then so they would have been held to maturity and then reinvested.
Canada was in tough shape financially in the mid-90’s and the reform of the CPP was just part of a necessary overhaul of the government’s finances. There were significant tax increases and spending cuts. We had a brave Finance Minister spearheading the reforms. Don’t see any current politicians who would do that.
So was I. But to be more specific, no, I don’t think we should change the discount rate over time. I don’t propose any changes to the way they calculate the reduction / additional benefits.
And yet, hardly any employers offer them.
So I took a look at the link you supplied. Couple of observations.
Little transparency. I could not locate anything wrt identifying risks. In the fixed income portfolio, there is no info on duration, industry concentration, top 5 names, credit quality, or OAS. These are basic. I did read the Act, and it appears the financial statements, prepared quarterly, only go to the Minister of Finance. Does she make them public?
The stated expense is about 29bps. Which is very good for an actively managed find. Sadly, I’m guessing it does not include the expenses of the third party draws. I cannot imagine Blackrock or any of the many private equity firms doing this for shits and giggles. But without the financials,there’s no way to know the total draw. I guarantee some folks are living large with those draws.
Which gets to a sticky issue. Did you know you bought McAfee, the consumer focused internet security company? Here in the US there is deep suspicion on how and who gets rich by having te public pension buy out the current owners at above market. Here it conjures the bogeyman of socialism, with government ownership of the means of production…blah,blah,blah. But it must be hard making sure the regulators of a private firm are not conflicted just because the govt is a major owner.
Lastly I found it strange that the investment objectives were only higher returns with an eye on total risk. It seemed to lack any mention of the liabilities. They have an actuary, but I did not catch any reference to any ALM.
Thanks for the link. I’m looking at the Japanese system now that you’ve whet my curiosity.
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Yes, $2.7 trillion for OASI and $99 billion for DI.
This is a good example. Suppose SS “redeemed” those bonds from the general fund for cash and invested the proceeds entirely in US stocks. Assuming the stock market does decently, the trust fund exhaustion date would be pushed back. So the Social Security worksheet looks better. Are Americans better off in total?
(I’m just looking at that in terms of the gov’t trading borrowing money to buy stocks, ignoring the rate that the trust fund is projected to decrease. Since we expect to draw down the entire thing in the next 13 years, probably common stocks aren’t the best asset class.)
Let’s not forget The Giver . . .
My bad. The letters say “DB”, but my brain thought “DC”.
That said, I lived through the 1980s. I have no desire to promise people non-COLA’d retirement benefits, or to have the taxpayers guarantee investment returns.
I can only support a “very fully funded” design that wouldn’t be popular.
So require COLA to get the tax incentive and whatever funding you think is appropriate.
Overboard on DB plan tax incentives? Care to explain that one? That hasn’t really been my experience.