Tuesday, January 28, 2014

myRAs

The biggest grip Corrections has with modern Conservatives and Libertarians is that they have abandoned intellectualism and new ideas in favor of bizarre non-sequitur ad hominems.  Replaced thoughtful economic policy with a love of a metallic numismatics.  Replaced an understanding of economic facts with stories that don't hold water, statistics that don't exist, and conspiracy theories.  Replaced critical self-inspection with pure hypocritical party politics.  Replaced Morning in America with apocalyptic cultism.  All this alienates Corrections from the movement, which we believe could be successful, if only it would think and be the party of ideas again.

An interesting litmus test for the party: myRA accounts.  While the concept isn't fully fleshed out, the idea is a government-backed Roth IRA type account, possibly with a new type of bond.  Here, we sample two possible responses:

  1. This is the government trying to take over retirement savings!   Soon they'll nationalize the whole kit & kaboodle!
  2. In the long run, this could be a means through which we can innocuously privatize Social Security.  Insofar as your payments into social security correspond to future payments out of Social Security, it wouldn't be absurd to simply force "purchases" of these savings bonds rather than having SSA keep the money.  This can over time be liberalized.
Of course, the first is hyperbolic and the second would need to be fleshed out (for instance, while payments in have corresponded positively with payments out, there are no guarantees.  Privatization would be a guarantee, which would impact the ease with which we can make Social Security solvent by defaulting on those implicit promises in the future).  But we believe how the party views the future (constructively and creatively, as it did in the past, or destructively and foolishly, as it has for some time now) will determine it's success.

 Corrections hopes that the constructive, second party wins out.

Saturday, January 25, 2014

Average Household Retirement Wealth: 2008

Below, Corrections displays a (corrected) table from Poterba, Venti and Wise (JEP 2013) displaying average household wealth at retirement age (65-69) in 2008 (click to enlarge).

Poterba, Venti and Wise calculate the expected net present value of many (often annuitized) promises that households held (such as Social Security and defined benefit pensions) that depend on the lifespan of the household.  Note that these are not liquid holdings!

Of course, while the average household had $871 thousand dollars in net present value , the median had $548 thousand ($187 in social security, $0 in defined benefit pensions, $227 in non-annuitized wealth, $15 in financial assets, $5 in personal retirement accounts, and $120 in housing).