Social Security and the Time Value of Money

I’m really saddened by how political the social security issue is. Its too bad we can’t take this problem away from politicians that are more worried about their votes next election than about fixing the problem.

I usually don’t agree with President Bush. But his willingness to tackle this issue during his second term is valiant. Second term presidents have the opportunity to tackle the tough issues because they are unencumbered by future elections, and its great to see this 2-timer get to this phase of his Presidency.

What is Wrong With Social Security?
Well, the basic problem is that each year, we take a bunch of money in, and pay it out immediately to the benefactors. This works as long as the number of workers paying in greatly exceeds the number of folks taking out of the system. Unfortunately, our census studies show that the number of retirees is going through the roof compared to the number of workers, and there will be a shortfall. There are no politics to consider here – its just plain accounting.

Time Value of Money
What President Bush has been trying to say is that Private accounts inherently have the advantage of the time-value-of-money. Here, each individual paying into the system puts his money in the bank. Each year it collects a modest amount of interest or gains, and, after doing so for 30-40 years, that small initial investment is a sizable retirement asset.

The current system cannot take advantage of time, and will always have the problem of needing a growing population of workers.

“Means Testing” Out – Can’t Trust Government Anyway
Last night, President Bush introduced the notion of decreased benefits for the wealthy. I’m not surprised by this at all, and I’ve been expecting it for some time. As a 34year old ‘worker’, I pay into Social Security each year, but I have no illusions that I will actually get anything from the government when it comes time to retire.

The fact is that Social Security will be out of money. Taxes will either have to be raised, or some people won’t get any benefits. If, during any of the next 30 years of my life, the government “changes its mind”, I could be screwed. If I were counting on Social Security for my retirement, I would be financially irresponsible. These politicians are whimsical, and we just have no idea what they will do.

Private Accounts Provide Protection
Given that many of us are already being means-tested out, why shouldn’t we have a federally sponsored system which allows us to use the time value of money for our retirement savings? Doing so helps social security problem, because those individuals saving for their own retirement means that they will not need other government services when they get old. Further, it means that these people will be immune to political winds that could otherwise touch their retirements.

Some people say “well, what if the stock market crashes”? This is a fair question. But, when I weigh my own risks for retirement, I still think its more likely that I’ll get screwed by Uncle Sam than that the stock market will crash so intolerably that I’ll lose all my money.

It does mean that individual retirement planners need to be smarter than ever before. We need to understand asset-allocations and how to shift assets to reflect the amount of risk we want to take as we near retirement. Oh my goodness – do you mean we need to take responsibility for our own finances?

Can’t Close the Borders Anyway

Governor Schwarzenegger caused a bit of a stir when he suggested we need to “close the borders” yesterday. Apparently, this is somehow offensive.

The fact is, unfortunately, that even if we wanted to, we can no longer lock down on our borders in California. Why not? Well, we let too many Mexicans in already. Now they are here, many legally, and they vote. And they want to be able to bring their aunts, nephews, mothers, uncles, grandparents, grandchildren, nieces, etc into the US as well. How are they going to vote? Well, of course, they vote for their illegal resident relatives and their Mexico-residing relatives to be brought into the US legally. Wouldn’t you vote to have your uncle be allowed into our country?

To prove my point, consider California State Senator Gil Cedillo. This guy is so insane, he actually thinks illegal aliens should be legally issued drivers licenses in our state. No politician that wasn’t pandering to the immigrant vote would ever propose such absurd legislation. (Give legal rights to known criminals and no prosecute them for their illegal behavior? I thought our Senators were supposed to help enforce our laws?) So how does he stay elected? Well, we’ve already let enough of them into the state that they now have the power to elect him.

Some may think this blog entry indicates some sort of ethnic bias on my part. I have no ethnic bias. The fact is that those immigrating to the US from Mexico are largely uneducated and poor. 66% of those immigrating do not even have a high school education (see Center for Immigration Studies). The effect of this over the long term will simply mean a lower standard of living and lower benefits for the all of us. They will need more medical financial assistance, will be costlier to educate (they don’t speak english yet), and will consume more welfare dollars. We’ll either need to raise taxes, cut costs (like education and road maintenance for all), or lower benefits to the native poor that are already here. Oh yeah, we’re already doing those things!!!

Anyway, its very sad. Scwarzenegger, while now stating that he “misspoke”, was actually pretty spot on. We do need to close the borders to immigrants that offer absolutely no value to our society. We’ve got enough poor people here already, and we don’t need more unskilled labor. But its out of our control now. We’ve given them 8M legal votes in our state already. They’re not going to stop voting until our education systems, economic systems, welfare systems, and transportation systems are just as poor as they are back home in Mexico.

Accessibility Nightmare

Ever had your shift key stuck? Get your machine into a state where no matter what you do, the shift key is effectively pressed and now you can’t access non-shifted keys? Wonder how anyone can ship such horrible software?

The answer is bugs in a system of windows called “accessibility”. You can access it from the control panel if you are curious, but nobody ever does, because its only used by about 3 people worldwide. But legally, it has to exist, because some do-gooder politician thought it was a good idea.

I just had the awful experience where my shift key got stuck. It just wouldn’t unstick – no lower case, no unshifted keys would work. And it was just a software bug. The only way out was once again, to reboot my machine. Going to the Accessibility Area in the control panel, allegedly Accessibility was not on. But this all occurred after I accidentally pressed the shift-key for about 8 seconds, and then the accessibility crap kicked in.

Hoping I had an explanation? I don’t. Its just buggy buggy buggy.

So here is a question for you- how does software that renders half of your keyboard useless help handicapped people? Does it? I’d love to hear from ANYONE that uses the accessibility features and couldn’t use their machine without the feature. What would happen if we didn’t have the law? Would machines really be harder to use?

I’m betting this is a case where a law was passed with good intent, but no realistic way to solve the problem. Software writers don’t use or need the accessibility features, so they spend as little time as possible to meet the “minimum” requirements. Handicapped people are left with machines that have ‘accessibility’, but don’t really work anyway, and they need to augment their machines with special-purpose software that really does the job right anyway. In the end, we’re left with yet-another-law, broken software, and a whole lot of wasted time.

Class Action Suits only help the Lawyers


“A Suit That Makes More Cents for the Lawyers”
A check for 49 cents arrives in the mail, in settlement of a class action against Bank of America. A staff writer for the L.A. Times starts digging and finds that the lawyers who filed the suit are going to swallow half the $4.2 million settlement. As for residual unclaimed funds, they’re going to a charity, but one the parties are unwilling to name. (Doug Smith, Los Angeles Times, Apr. 11). On the Schwartz v. Citibank class action, filed by the same lawyer (Brian Strange) and involving the same issues.

Schwartz v. Citibank late fee class action
I just received a notice in the mail informing me that, as a member of the class of Citibank and AT&T Universal Card customers, I was eligible for a refund under the terms of a settlement agreement reached in a class action lawsuit. A quick internet search revealed the following (PDF, see last page):

“The Cards business agreed to create a settlement fund of $18 million, most of which will be distributed automatically to cardholders and to make a cash payment of approximately $9 million for attorneys fees and costs.”

My refund check is for $0.18. — Paul Prichard, Moodus, CT

I’m shopping at Best Buy now

According to this article, Best Buy is phasing out use of mail-in rebates! This is fantastic news. I always get ripped off by those, and I don’t use them anymore unless I’m absolutely stuck.

I wonder how they’ll do this? A lot of the rebates come from the makers of the products that they sell. Hopefully they’ll be able to throw their weight into eliminating this scam.

Nobody knows the exact statistics behind rebates, but its estimated that somewhere between 50 and 90% of mail-in rebates are never successfully claimed either due to never having been sent in, or due to technicalities in the submission process being abused by the manufacturer to avoid paying the money.

See also:
Slashdot discussion on this announcement
Political Animal on Rebates
Rebate Runaround