sethnintendo said:
sc94597 said:
When most of these new assets cannot be taken out until 30-50 years from now (you are not allowed to touch it until retirement) how exactly would the boom, bust? Nobody will stop investing or remove their assets out of fear, because they can't. They'll just move it to other assets, if they are afraid. By the time people can collect, the stock market would have grown large enough to accomodate, assuming no interim disasters. This is also especially true if we consider that the diversification of assets wouldn't make any single investment more popular than any another. Also if it is done gradually (slow decrease in social security and slow increase in personal account mandates this would also not be an issue.) It would have to be done gradually anyway, because there are people already invested in the social security system. Social security would likely still exist, but mostly for the poor and disabled.
Sure, any circumstance in which resources are being allocated unoptimally will lead to a bubble, but some bubbles are much worse than others. And this one is at least predictable.
This would be much less endangering to the stock market than the poor manipulation of interest rates by the FED anyway.
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I believe the stock market is already over inflated. The bubble has grown and many companies stocks are pumped up more than they are really worth. If all of a sudden the SS money is dumped into 401Ks then this will cause the market to jump up way too high. The people that can pull money will to make a decent profit. Sure the SS money would perhaps stabilize it overtime but it would be an almost instant cut in overall SS money when the bubble pops shortly after the huge spike. No worries then it would take about 5-10 years to recover that lost money before another bubble. The overall trend would be up but imagine if you became of retirement age when the market was way down. Your money would be cut in half during the down years but you still would like to start taking money out. If anything it should be put into CDs or some other low interest but less volatile market.
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It isn't going to happen like that. It will happen gradually. There is no "SS money" to put into 401 k's anyway. The 401 k's would be future investments, and would likely start out at a very low mandated rate (like 1%-3% of a person's income) and grow gradually. Social security would be scaled down gradually to make up for the burden on employees. A sizable portion of the workforce already has 401 k's (something like 50%) so the effect is even more minsicule that would be thought. Plus you can put a sizable portion of this money into bonds if you are afraid about stock market fluctuations.
