No, it doesn't invest in T-Bills. The funds aren't used to produce a return. It uses those securities as a means to take the surplus tax money and provide it to the rest of the government. It's repaid at a rate that tries to peg to inflation.
I.e. the federal government isn't telling you that you will get a 100% return on your money in 6 weeks.
Probably gonna have to split this one too..
You seriously have no clue what you are talking about.. It does invest in T-bills. It invests in special Government T-bills that pay inflation plus X%. US CPI in 2015 was .7%. Social Security got 2.5% coupon on it's T-bills.
SS in the US is not that type of program. We could switch to an Australia-style superannuation fund system -- but it would cost trillions of dollars to do so.
The Aussie system is not without its problems. It's cheaper to run; however, many participants get screwed by the fees charged by those private funds, which seriously dings the returns. The higher-fee funds, of course, don't outperform lower-fee funds.
Another issue is that even with mandatory investments, many Aussies didn't save enough for retirement (in part because many live to ripe old ages), which results in them receiving government pensions.
A third issue is that obviously, the value of those portfolios depends on market timing. E.g. if you're already retired, and the market goes into a nosedive that takes years to recover (e.g. 2008), then you're going to get hit hard. Your net worth will decline, and your income along with it. Plus, if you draw down from it, you're eroding your holdings faster.
Never said SS is that type of system. It's a horribly designed ponzi scheme that's coming to an end.. come 2037.. they won't be able to pay full benefits to future generations. Baby Boomers will suck it dry.
Social Security is means tested in the US already in it's calculation of benefit payment. Low wage earners get benefit boosts while those who earned more get less. US Federal Government created FERS and it was created in the Social Security fix in 1980s. Those new Federal employees in the 1980s got screwed. Those on CSRS (Civil Service Retirement Act) with 30 years service get 60% of their "high 3" working income. To put in context, FERS retirement will be $45,000 a year making roughly $90,000 year in your last 3 years. If it was on CSRS, it'd be $54,000 as of right now.
Most don't save for retirement because of how the system is set up. Aussies are guaranteed X amount, just as Americans are. So you don't plan for retirement.
The third issue is not obvious because all investments are about protection be it 20 years old or 65 years old. If you are planning to retire in the next 10 years, play it safe, go for dividends or reduce risk. A person who retired in 2008, assuming 30 years of work actually made a killing from 1978 to 2008 in the stock market. We are talking 1,000% return before dividends.
....no, that's not the definition of a Ponzi scheme.
If that was the case, the entire capitalist system is a "Ponzi scheme." If people don't keep buying stocks, their valuations will crater, and the market will collapse. If people stopped buying iPhones today, the company would collapse. If people stopped buying auto insurance today, the market would collapse.
Yes, it's a definition of a Ponzi scheme. Ponzi Scheme is an operation where the operator, an individual or organization, pays returns to its investors from new capital paid to the operators by new investors.
Someone missed the point
I didn't say SS was guaranteed -- although there is more than enough political/voting power to keep it going well beyond 2032.
What I'm saying is that you have the causality backwards. It's not that people don't save for retirement because the government offers SS. I'm saying that millions of Americans can't afford to save for retirement. That was the whole reason why we started SS in the first place.
Sure, some people are stupid with money. But the bigger issue is that by our very nature, humans don't plan well for the future, and value the present more.
SS for the last 40 years has been promised as that. If SS is just a safety net then call it a welfare program. Not the 3rd rail of politics and retirement. Yes, I am familiar with the theory.
Yes, China's purchases of federal debt help keep interest rates low. But that money isn't lent to consumers. It's also denominated in USD, so it's not like they are getting back Yuan. And it doesn't change anything about the "flight to safety" argument.
When China buys bonds they are supporting the Yuan price or issuing more Yuan to stimulate their economy.
