Did Three Counties in Texas Figure-Out How to Fix Social Security 31 Years Ago?

[mrplunkey]

I've only read my first article or two, but it at least sounds interesting.

Merrill Matthews: Perry Is Right—There Is a Texas Model for Fixing Social Security - WSJ.com

 

[hanselthecaretaker]

I've only read my first article or two, but it at least sounds interesting.

Merrill Matthews: Perry Is Right—There Is a Texas Model for Fixing Social Security - WSJ.com

Hopefully red tape won't keep this from seeing the light of day.
It will probably have to be implemented in phases though. No telling how well this would work nationwide.

 

[75th]

So, essentially it's just some type of indexed annuity. That's all well and good, IMO, as long as one considered:

- amount of fees involved (which eat into the ROI)
- how do you choose the private company to issue the annuity?
- what government backing exists in the event of the aforementioned company's liquidation?

Many states now have $100,000 protection against annuity company defaults, as an annuity is traditionally only backed by the strength of the issuing company. If the SS system is going to be replaced by various private insurance companies you would need/want some FDIC-type backing in place.

 

[mrplunkey]

So, essentially it's just some type of indexed annuity. That's all well and good, IMO, as long as one considered:

- amount of fees involved (which eat into the ROI)
- how do you choose the private company to issue the annuity?
- what government backing exists in the event of the aforementioned company's liquidation?

Many states now have $100,000 protection against annuity company defaults, as an annuity is traditionally only backed by the strength of the issuing company. If the SS system is going to be replaced by various private insurance companies you would need/want some FDIC-type backing in place.

I believe they bid the money out to a number of financial institutions.

Any program like this could be insured/guaranteed, which still wouldn't protect against systemic risk. But these days, it doesn't seem like real systemic risk exists anyway (i.e. GS, AIG, Fannie, Freddie).

 

[75th]

I understand the bidding process, but if youre going to implement this on a national level, you'd have hundreds of insurance companies one upping each other on guaranteed rates or return. The higher rate guarantee = winning co further leveraging deposits = increasing risk = greater probability of trouble in a market downturn = greater need for insurance.

It's a vicious cycle. [/fat bastard]

Plus, a fixed 5.75% ROI is super in a low inflation environment. What happens if inflation climbs to 5 or 6%? May make sense to have the base rate indexed against inflation (eg CPI + 2%)? That leads to the conversation of whether or not CPI is a useful benchmark (which its not).

Just spitballing here. Id like for it to work.

 

[mrplunkey]

I understand the bidding process, but if youre going to implement this on a national level, you'd have hundreds of insurance companies one upping each other on guaranteed rates or return. The higher rate guarantee = winning co further leveraging deposits = increasing risk = greater probability of trouble in a market downturn = greater need for insurance.

It's a vicious cycle. [/fat bastard]

Plus, a fixed 5.75% ROI is super in a low inflation environment. What happens if inflation climbs to 5 or 6%? May make sense to have the base rate indexed against inflation (eg CPI + 2%)? That leads to the conversation of whether or not CPI is a useful benchmark (which its not).

Just spitballing here. Id like for it to work.

I'd guess the returns would be competitively bid-down to economic efficiency.

Long-term, i'd guess these new types of securities would settle into their own category of investments right along with munis, t-bills, and various targeted muni funds.

 

[PICK3]

I've only read my first article or two[/url]

bant!

 

[redsamurai]

. But these days, it doesn't seem like real systemic risk exists anyway (i.e. GS, AIG, Fannie, Freddie).

through what process of deductive cognitive dissonance did your brain just allow you to print that? I mean coming from you and your prior positions i'm curious as to how you formulated this whole thread in your mind so it was something palateable to you...

 

[mrplunkey]

through what process of deductive cognitive dissonance did your brain just allow you to print that? I mean coming from you and your prior positions i'm curious as to how you formulated this whole thread in your mind so it was something palateable to you...

English, Motherfucker, do you speak it?

 

[PICK3]

English, Motherfucker, do you speak it?

ololo lolol!