Insurance, a common misunderstanding

believe itLast week, we had an opportunity to sit down with local senior citizens to discuss the future of Social Security, Medicare and other pressing issues. We always have good conversations with these folks and look forward to voicing their concerns down in Washington.–Rep. Tom Reed, facebook, Aug. 6

The vice of gambling and the virtue of insurance

… a person retiring today, if they had been able to put their Social Security money into an S&P 500 Index Fund, would quite literally be a multi-millionaire. And they would have all of that money to be able to pass on to their children or whoever else they chose when they die. Your Social Security account dies with you, even if you die before ever seeing a dime back from the system. It is absolutely unconscionable what the social security system does – on a compulsory basis – to entire generations of Americans.seen on facebook

 I’d have less of a problem with SS if we could choose where and how to invest. Letting the Treasury use it, isn’t cutting the mustard.seen on facebook

a Ponzi schemeseen on facebook

Go ahead get rid of Social Security but I want a full and complete refund of every cent I paid in.–seen on facebook

We often see opinions like the above.

  • The idea that people would be better off saving their money is  common but false–insurers would be out of business if this were true.
  • If saving could make us millionaires, there would be many more millionaires.
  • You might die young, or you might not.
  • Insurance works best when the risk is shared by all.
  • Treasury bonds are a very good investment.
  • Calling SS a Ponzi scheme doesn’t make it true–SS won’t go broke as long as our Constitution lasts.

We buy insurance to share the risk. Your house might not burn, your ship might not sink, but you need insurance in case it does. Social Security is very valuable insurance.

Read more :

https://newny23rd.com/2014/04/24/the-vice-of-gambling-and-the-virtue-of-insurance/

https://newny23rd.com/2013/01/11/rep-reed-medicare-bankrupt-by-2024-many-disagree/

https://newny23rd.com/2015/06/01/social-security-questions-comments-and-accusations-at-the-big-flats-town-hall-meeting/

 

 

 

 

 

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About whungerford

* Contributor at NewNY23rd.com where we discuss the politics, economics, and events of the New New York 23rd Congressional District (Allegany, Cattaraugus, Chautauqua, Chemung, (Eastern) Ontario, Schuyler, Seneca, Steuben,Tioga, Tompkins, and Yates Counties) Please visit and comment on whatever strikes your fancy.
This entry was posted in Congress, Political, Reed's Views, Social Security. Bookmark the permalink.

24 Responses to Insurance, a common misunderstanding

  1. Tom Zoidal says:

    I was involved in those exchanges on Facebook.It is distressing to have people pass along so casually damaging rhetoric like referring to SS as a “Ponzi scheme.” In fact, when I initially saw the first Facebook quote you posted above, I suspected the poster had just copy and pasted his argument. I know that the Koch brothers have targeted SS in their long-term agenda, but do you know the source of calling SS a Ponzi scheme? Is that a Fox Entertainment talking point?

    Tom (Zoidal)

    Liked by 2 people

  2. whungerford says:

    Tom, thanks for your comment. I don’t know if Fox promotes Ponzi scheme talk or not. People throw that phrase around willy-nilly; perhaps they hope someone will explain what it means. Interestingly, SS isn’t much use to the Koch brothers or Bill Gates–they can afford to self-insure.

    Like

  3. Rynstone says:

    Unfortunately, Social Security is not run like a private property insurance company or an automobile insurance company or a life insurance company or even a health insurance company. These companies do invest there assets to increase revenues.

    There are far too many people who are and will collect more money from Social Security than they paid in to the system. If Social Security could not collect one more penny from employees and their employers they would be out of money almost immediately. This does make it a Ponzi scheme.

    Most healthy people who live and work to retirement age would be far better off if they had taken the money they and their employers sent to Social Security and invested it into the Blue Chip Stock Market.
    The unspent portion of this money could then be left with surviving family members upon the death of these investors.
    The current Social Security system is nothing more than the theft and redistribution of of taxpayers dollars. If you are a single person with no children under the age of 18 (21 if in college) and work until your early 60’s and then die nobody collects any of that money.

    Social Security is a Ponzi scheme of gigantic size. The US Government mandated and controlled Soclal Security Ponzi scheme dwarfs Bernie Maddoff



    https://www.federalbudgetinpictures.com/social-security-recipient-worker-ratio/

    Tom Zoidal, This is a must read article for you.
    https://www.usnews.com/opinion/articles/2012/12/19/the-shocking-truth-on-entitlements

    https://www.forbes.com/sites/johngoodman/2015/08/13/why-was-social-security-designed-like-a-ponzi-scheme/

    https://mises.org/library/social-security-most-successful-ponzi-scheme-history

    https://www.commdiginews.com/business-2/social-security-medicare-ponzi-schemes-103110/

    Like

  4. josephurban says:

    There is no such thing as your “Social Security Account”. When you were working you a tax into the system and that money helped support retirees. If you are retired then other people are now paying into the system to provide you with benefits. Many folks do not even understand the basics of how SS is structured. Hence…”Ponzi Scheme”…”my account”… “i want my money back”.. all demonstrate people don’t understand it.

    Liked by 1 person

  5. Rynstone says:

    Joe, We must stop the false premise of Social Security, keep a small tax in place to support people who are a certain age and have not enough time to save and invest and then allow and mandate everyone under this age to invest their own earnings into an account they control and can leave behind in their estate. End the Unconstitutional theft and waste of taxpayer earnings by the Federal Government . Give Americans the right to control their own earnings and stop forcing taxpayers to fund every government entitlement scheme the out of control Congress comes up with to gain more votes. Shrink the Federal Government to it’s Constitutional size.

    Most people over the age of 65 currently collecting benefits will receive far more than they put into the current corrupt unsustainable system.

    Like

  6. josephurban says:

    Ryn. Just a few points.
    Social Security is not “unconstitutional” as you claim. That was settled in 1937 by the SCOTUS.
    There is no “false premise” to SS. It is what it is. Workers today are taxed to pay for those taking SS. When you reach the age when you want to take SS you will have it. The premise is not false. It is what it is.
    American today have the “right to control their own earnings”, after they pay the taxes needed to run the nation as a civilized society. If you are fortunate enough to have excess funds to invest, good for you.
    It is true that there is some waste in the government. But people like Scott Pruitt, Tom Price and Zinke are usually discovered and drummed out of government. As long as the POTUS tolerates that piracy of tax payer funds there is not much one can do about it.Congress seems to have their own corruption issues (See Collins of Buffalo for details). Waste in government is a separate issue from SS.
    SS is the one system that have proven effective and popular. A person does not have to fear losing their retirement nest egg to a conman or being wiped out in a bad market. They are not held hostage to the ups and downs of the market. (note: Before SS, over 52% of elderly Americans lived BELOW the poverty level).
    As you may know, SS also provides for folks with disabilities. And children who have a parent die. (See Tom Reed , for example, whose family received this federal aid when he was a boy).
    The SS tax, like Medicare , is something we pay for the good of society. We place our own narrow interests aside and help our fellow man. Perhaps that concept is the one that is the fundamental sticking point between people of differing viewpoints.
    We all pay taxes for things we don’t want and don’t consider important. That is the price you pay for living in a society. You get the benefits. You pay the taxes .

    Liked by 1 person

  7. whungerford says:

    Rynstone has answered Tom Zoidal’s question in part–his sources are writers for Forbes and mises.org, organizations that may not reflect the common interest of most of us..

    Like

  8. Rynstone says:

    Social Security Retirement is a different thing than taking care of children of a parent who pass away. Also Social Security disability is also different. Social Security is marketed as a “retirement fund” and a “Pension” for everyone.

    Please show me in the US Constitution and the Federalist Papers where Social Security is Constitutional Don’t give me the ruling by activist Supreme Court Judges.

    And don’t use the “General Welfare Clause”. If we are to believe that the General Welfare Clause allows the Congress to pass any law they feel is in the General Welfare of teh County we are no longer a Constitutional Republic.
    The Bill of Rights limits the government by enumerating the rights of the people and listing the things the government cannot do.

    The Congress cannot amend the Constitution thru legislation
    https://en.wikipedia.org/wiki/Social_Security_Amendments_of_1965

    https://tenthamendmentcenter.com/2010/08/13/is-social-security-constitutional/

    https://constitutioncenter.org/blog/constitution-check-is-social-security-unconstitutional/

    The Ninth and Tenth Amendments to the Constitution are examples of how the government acknowledges it doesn’t have complete dominion over every facet of the people’s lives, and that the federal government is not the only entity with governmental power in the United States. The Ninth Amendment reads “The enumeration in the Constitution, of certain rights, shall not be construed to deny or disparage others held by the people.”[6] This shows the federal government doesn’t have the ability to infringe upon the rights of the people in any circumstance, even if the rights aren’t explicitly protected by the Constitution.

    The Tenth Amendment states “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.”[7] This limits the authority of the United States government to those powers listed in the Constitution and concedes the premise that individual States retain the powers not granted to the national government but that are also not barred to the States by the Constitution. Also, it grants that the people themselves retain power under this system of government as well. These are key points of the concept of limited government established by the Constitution in the United States because they overtly state the power of the federal government is not unlimited.

    Like

  9. Anonymous says:

    I’ve paid taxes for 50 yrs to support a government that acts extravagantly in terms of military, global reach, tax breaks to the rich and corporations, etc., etc. What an irony that Rynstone should post an article that states that by receiving SS seniors are “serious takers.”

    Like

  10. Tom Zoidal says:

    I’ve paid taxes for 50 yrs to support a government that acts extravagantly in terms of military, global reach, tax breaks to the rich and corporations, etc., etc. What an irony that Rynstone should post an article that states that by receiving SS seniors are “serious takers.”

    Liked by 2 people

  11. whungerford says:

    Social Security is not run like a private property insurance company or an automobile insurance company or a life insurance company or even a health insurance company. These companies do invest there assets to increase revenues.

    Yes indeed, SS is much like private insurance except when it is better–private insurance companies collect customers money and return benefits just as SS does; SS is better because it doesn’t keep back profit.

    There are far too many people who are and will collect more money from Social Security than they paid in to the system. If Social Security could not collect one more penny from employees and their employers they would be out of money almost immediately. This does make it a Ponzi scheme.

    It is a good thing that SS sometimes pays out more than an individual pays in–that’s the benefit of insurance. A Ponzi scheme like Madoff’s runs out of money; SS can’t do that because it is funded by all the people.

    Most healthy people who live and work to retirement age would be far better off if they had taken the money they and their employers sent to Social Security and invested it into the Blue Chip Stock Market.

    Perhaps some lucky people, particularly very wealthy people, would be secure with savings, but SS isn’t intended to benefit primarily wealthy persons–insurance is better than savings because one doesn’t outlive insurance and for other reasons.

    As “Father William” said in the poem, “I have answered three questions and that is enough. Do you think I can trifle all day with such stuff?”

    Liked by 1 person

  12. josephurban says:

    Ryn said:
    “The Ninth Amendment reads “The enumeration in the Constitution, of certain rights, shall not be construed to deny or disparage others held by the people.”[6] This shows the federal government doesn’t have the ability to infringe upon the rights of the people in any circumstance, even if the rights aren’t explicitly protected by the Constitution.”

    Not sure what this has to do with paying a Social Security tax? Well, because it is perfectly within the Constitution for the government to force you to pay taxes and to then give you the right to collect Social Security when you retire. Nothing unconstitutional about it, as the SCOTUS has ruled.

    You need to read the Ninth Amendment again. It says that the Constitution does NOT enumerate ALL the rights you have. In other words, you have rights BEYOND what the Constitution states. Now, the founders placed this in for a good reason. Let me explain.

    There were two schools of thought regarding rights. One school did not want ANY rights enumerated because they FEARED people would think the rights so enumerated were the ONLY rights you have. Others wanted specific rights enumerated because they feared without an enumeration people could not claim NY rights. The Ninth Amendment was the compromise. The first 8 Amendments list SPECIFIC rights. The Ninth tells us that the first 8 Amendments do not, I repeat. DO NOT enumerate all the rights you have.It is very clear language.Nothing in the Ninth Amendment restricts the government form identifying many more specific rights. For example, the right to vote, which was added later.

    Regarding the 10th Amendment, you are correct. The power of the federal government is not unlimited. Which has nothing to do with Social Security.

    As fate would have it, the very first blog post I ever wrote (in 2011) was on the very topic of the Ninth Amendment.
    https://josephurban.wordpress.com/2011/01/

    Like

  13. Rynstone says:

    The Communists have spoken and spoken well. Karl Marx would be proud.

    The Founders and teh Framers of the US Constitution would not believe their ears and eyes if teh were alive today.

    Ponzi Scheme Definition
    A fraudulent investment plan in which the investments of later investors are used to pay earlier investors, giving the appearance that the investments of the initial participants dramatically increase in value in a short amount of time.

    Social Security is nothing like health Ins., Auto Ins. or Property Insurance. Not even close.

    Have a great weekend comrades.

    Like

  14. whungerford says:

    Social Security is not a “fraudulent investment plan.” Saying Social Security isn’t insurance doesn’t make it so. If one would be taken seriously, one must have reasons for one’s opinions.

    Liked by 1 person

  15. josephurban says:

    Sorry ryn. But you are wrong again. A ponzi scheme , as you state, implies a get rich quick result. That is what your own definition states. Social security makes no such claim. In fact, it guarantees a income and delivers as promised. Just the opposite of a ponzi scheme, which does not pay out. Nice try, but those right wing websites are feeding you some pretty silly ideas.

    Like

  16. Rynstone says:

    Auto Insurance is there to protect you financially if you have an accident. Property Insurance is there to protect you against damage caused by a house fire, ice damage wind damage and in some cases flood damage and if someone is hurt on your property. Health Insurance is there to cover in the event that you major medial expenses. All of these companies have rates they charge customers and invest that money to earn profits on it. They must have a certain % of “cash” on hand to cover claims.

    Term Life Insurance pays out upon the death of teh insured. Whole Life Ins. pays out to teh insured either on death or on a certain time period. Life Ins. Companies must invest their incoming payments to make a profit.

    These Insurance companies spread their risk out over a large pool but must invest money to pay out claims and to cover expenses.

    With these types of Insurance companies the consumer has many choices and options to fit his/her life style and future plans.

    Social Security money is not invested to earn a profit or collect interest. Social Security taxes being collected today are used to pay the Social Security benefits that are being paid today to people who paid into the system years and decades ago.

    With Social Security there is no choice.

    Anybody who is collecting social security for more than10 years is most likely collecting more than he/she paid into the system.
    Up until now, Social Security has been a windfall for many retirees: They collected far more in benefits than they shelled out in taxes.
    This is about to change.
    https://www.finweb.com/taxes/what-is-the-maximum-social-security-withholding-tax.html

    The current Social Security system meets the definition of a Ponzi Scheme

    With Social Security you can leave none of the money that was paid in to any survivors over 21 and there only partial spousal benefits.

    A person who is 64 years of age who has no children i=under 21 and no spouse could be paying into the Social Security system up to 13,242 per year with his and his employers contribution.
    None of this money will go to this persons estate.
    A person could have “invested” (had stolen from them) over 400,000 dollars that is never left to their survivors or estate nor collected by them..
    Current SS deductions are 6.2% of the first 106,800.00 in earnings. 6,621 for the employee and 6,621 for the employer.

    Like

  17. whungerford says:

    Social Security provides needed retirement income; as many will live to retire, the risk is great. With the demise of private pensions for many, Social Security is ever more important to our well-being. One can buy an annuity from a private company, but in that case the cost will include the insurer’s profit.

    As Shaw noted in the article cited::

    And when the business of insurance is taken on by the state and lumped into the general taxation account, every citizen will be born with an unwritten policy of insurance against all the common risks, and be spared the painful virtues of providence, prudence, and self-denial that are now so oppressive and demoralizing, thus greatly lightening the burden of middle-class morality. The citizens will be protected, whether they like it or not, just as their children are now educated and their houses now guarded by the police whether they like it or not, even when they have no children to be educated nor houses to be guarded. The gain in freedom from petty cares will be immense. Our minds will no longer be crammed and our time wasted by uncertainty as to whether there will be any dinners for the family next week or any money left to pay for our funerals when we die.

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  18. whungerford says:

    What would be the alternative to Shaw’s progressive vision–everyone buying needed insurance from private insurers without benefit of volume discounts, paying high administrative costs and private profits, and leaving those who lack the means or fail to take the initiative unprotected. This is a dire prospect indeed.

    Some who didn’t vote for FDR and were opposed to Social Security changed their minds when they reached retirement age with paltry savings and inadequate private pensions. “I got more raises from Social Security than I ever got from my boss” one such person realized late in life.

    Like

  19. Rynstone says:

    Socialists and Communists abound. One should be investing their earnings to provide for themselves in teh retirement years or leave to their children if they die. If I die before 67 my children nor my estate will get not one penny of that money paid by my labor into medicare and Social Security.

    This is slavery and the masses accept it. It is a sad day in America.

    Like

  20. whungerford says:

    Yes, but Gary, if you live, you may get more than you paid in which is what you will need in that case. The alternative is charity–sure to be inadequate.

    Like

  21. josephurban says:

    Ryn wrote:

    “Social Security money is not invested to earn a profit or collect interest. Social Security taxes being collected today are used to pay the Social Security benefits that are being paid today to people who paid into the system years and decades ago.”
    FALSE. Social Security funds are invested in US bonds, accumulating interest. The funds are stable (without any new modifications) until 2034.

    True.People today do pay the tax that supports retirees. Many people will get back more than they put in. Many people who pay the FICA tax never receive any benefits (illegal migrants, for example). And many receive a portion from someone who has died (like Tom Reed, Republican of NY 23 ). That is why the system is so great. We help each other. We work together to make sure life is good for older people. We are all citizens and as good citizens we support those who need a little help. Why would anyone not want to do that?

    Ryn wrote that The current SS system is a Ponzi Scheme. I already demonstrated with Ryn’s OWN DEFINITION that his statement is false. No need to elaborate again.He is proven wrong by his own words.

    Ryn Said that if he dies at 67 no one will get the benefits of SS. FALSE. There are survivor benefits for a spouse and non-adult children. And his spouse will continue to get benefits provided by other taxpayers!

    Ryn uses an example of an extremely wealthy person who pays into the system. This same person has plenty of excess cash to invest as much as he wants and make his fortune. He should thank his fellow citizens that he lives in a nation that allows him to accumulate such wealth.

    So, Ryn. Answer this: What happens if a person invests and the company goes under? What happens if the market takes a temporary dive (as it did under Bush) and people lose 40-6-% of their investments? What happens if their investments are embezzled and the person leaves the country (I know someone who lost his entire pension because the boss absconded with it to a Caribbean Island with no extradition treaty).
    So , Ryn. How much money do you think a person supporting a family on minimum wage as extra to invest? How much extra income do you think a family of four living in poverty has to invest? Today, about 43,000,000 live in poverty. How much extra income do you think they have for your risky investments ?

    It is too bad you have to pay taxes. But that is a small price to pay for living in the greatest nation on earth, don’t you think?

    Liked by 1 person

  22. Rynstone says:

    far too many of you have a problem with Insurance companies, corporations and private and public corporations making profits.

    How many of you are driving a car, using a computer or smart phone, wearing cloths, eating food or wearing a watch or eye glasses manufactured in Cuba, Russia or Venezuela.
    Anybody riding a bicycle or motorcycle or power boast of any type from one of these three companies? Anybody know anybody here in the United States who has their health insurance company or gets health insurance from any of these countries?

    Companies exist to make a profit. Even “not for profits” pay many of their employees great salaries and benefits.

    Public traded insurance companies are a good thing. People invest in companies want that company to make profits to increase teh value of the stock and hopefully increase dividends.

    True Free Market Capitalism combined with the Law of Supply & Demand is what makes the world work. When governments mess with these two things it usually screws things up in a big way.

    Like

  23. josephurban says:

    Run. Nice straw man. No one is opposed to capitalism. You are not responding to the issues I explained to you. Changing the subject is not a response.

    Like

  24. whungerford says:

    Rynstone, as a supporter of free-market capitalism, you must be rather upset by the Trump Administration’s tariffs and Rep. Reed’s support of them.

    An insurance policy from a private company is good; public insurance like Social Security is just as good insurance and may be more available and affordable. In some cases, private insurers won’t provide needed protection. Flood insurance is an example. The Price-Anderson act which protects nuclear power plant operators is another.

    I presume you are familiar with red-lining–the unfair practice of denying some people needed insurance. Reprehensible free-market practices like this is one reason private insurers must be regulated. Insuring financial responsibility, having enough money to pay claims, is another.

    Liked by 1 person

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