How to Fix Social Security

[Schneed10]

Originally Posted by mheisig

Why are we assuming that the people who failed to plan for retirement will still be in the workforce at the age of 80, whether they want/need to or not?

Medical, health and emotional issues will weed out a substantial number, and age discrimination aside, companies will find ways to get rid of them.

The fundamental problem with providing for these people is it kills of incentive. What's the incentive to live responsibly and manage your money wisely if the government will bail me out regardless of what I do?

Maybe if people could look ahead and see that they'll be living on the street at 70 if they don't plan ahead they'll have some incentive to manage their finances responsibly.

Doesn't have to be age 80, I was just throwing out a number. Make it age 70 (an age a majority of Americans live to). Many of them will be in the workforce because they HAVE to be. They'll have no other way to sustain themselves than to seek a job that provides the bare essential needs (food, shelter, heat, water).

I agree on your point about incentive, you can still build incentive into this program. Please don't mistake me for someone who thinks the current system is any good. It's not, it's horrible. The only thing worse than this system would be having no system at all. That's the part where I'm calling for change - force people to contribute a minimum amount to a low-risk portfolio consisting largely of bonds - but give them options to contribute more if they wish. And on the extra contributions, give people a choice of what to invest in (stocks, bonds, real estate trusts, international stocks, etc.). With this type of program, everyone still contributes a minimum amount, just enough to sustain them in old age. But it also affords everyone the opportunity to control their destiny, and thus enhances the incentive you speak of.

In other words, you need to provide those with half a brain the opportunity to be incented. Those without half a brain will not take advantage of any incentive, no matter how delicious that carrot might look to a reasonable person. Those people still need to be hand-held to an extent, or our economy will suffer in the long run. You need a hybrid model.