SALESMAN: Hello, may I please speak to Mr. John…Pooblick?
JOHN: That’s me, but actually it’s John Public.
SALESMAN: I’m so sorry. How are you today, Mr. Public?
JOHN: Fine, thanks.
SALESMAN: Great. I’m calling on behalf of SSA Incorporated to tell you about a new program we are offering called social insurance. It’s an insurance plan which will pay you a monthly disability benefit if you ever become disabled. It will also pay you a monthly retirement benefit when you reach retirement age, and if you were to pass away it would provide financial support for your surviving wife and children.
JOHN: Hmm…That sounds like something I might be interested in. Why don’t you give me some more details? How much will it cost me, and what benefits does it pay?
SALESMAN: Well, the plan does vary somewhat depending upon your income level. If you could just tell me your annual income, I could give you an accurate quote on a policy right now over the phone.
JOHN: Um….well, okay. I make about $20,000 a year. I just graduated from high school, and I’m working in the landscaping department at Home Depot making $10 an hour. I’m married and have a one-year old son.
SALESMAN: That’s great, John. I have some good news for you today. Our insurance plan actually caters to people in your income bracket. I can offer you a plan with some very favorable terms.
JOHN: Wonderful. Show me the money.
SALESMAN: Well, for starters, we can give you a disability benefit of $619 per month if you were somehow injured and unable to continue your employment. That represents over 37% of your monthly income that could help you pay your bills and your rent while you are disabled.
JOHN: Now, I’ve already got some disability insurance that costs me about $25 a month and pays a little bit better benefits than you’re talking about. Can you beat the price of my existing coverage?
SALESMAN: Well, it’s difficult to say because the price of the disability insurance is kind of rolled into price of the whole package.
JOHN: Okay, we’ll come back to that. Can you tell me about the other benefits?
SALESMAN: Of course. Let’s move on to the most exciting part of the social insurance plan, the retirement benefit. Based upon what you have told me about your income, upon reaching the age of 67 the plan will pay you $5116 every month for the rest of your life.
JOHN: Wow. That sounds like a lot of money. After adjusting for inflation, how much will that be worth when I retire?
SALESMAN: About $918 per month.
JOHN: Cool. That’s a little over half of what I’m making now. That’s a pretty hefty addition to my retirement savings. I’m already saving for my retirement, you know. My financial advisor told me that if I start now investing about 10% of each paycheck in a mutual fund, I’ll have over a million dollars when I retire, even if I keep working at Home Depot my whole life. He said that if I retire at age 67 I should be able to put all my savings in an inflation-adjusted annuity at about 6.5% and get a check worth about $1150 in today’s dollars every month until I die. I listened to him, too. I’ve been taking $167 per month out of my paycheck before I even see it. It goes straight to my retirement plan to earn interest and make me a millionaire.
So, I’m pretty much set for retirement. Even so, if your social insurance plan is reasonable, I certainly wouldn’t mind having a little extra income when I retire. I could see the world or something.
SALESMAN: You certainly could.
JOHN: Okay, so what’s the bad news? How much is all this going to cost me?
SALESMAN: Well, let me run the numbers here… Based on your income level, you’re looking at $207 per month.
JOHN: Two hundred seven dollars a month! What on earth? Am I missing something here? I already told you I’m putting away just $167 per month for retirement right now and another $25 for disability insurance, and my expected return at retirement is $1150 per month. Now you’re telling me I can pay $207 to your social insurance program and you’ll only give me $918 per month when I retire. That’s significantly less than what I could get with my current retirement plan. I don’t get it. Either I don’t have all the information, or your plan sounds down-right stupid.
SALESMAN: Whoa, settle down there, John. I think you’re trying to compare apples and oranges here. Let me remind you that this is not a retirement account I’m offering you; it’s a social insurance program. The point is not to make you wealthy; the point is to make sure you don’t spend your retirement years in poverty.
JOHN: You can call it whatever you like. I’m still paying more money for fewer benefits with your plan than I am with my existing plans.
SALESMAN: You’re forgetting the survivor benefit, though. Sure, you already pay a combined total of about $192 for your retirement plan and your disability insurance, but what if you suddenly lost your life? Who would care for your surviving wife and kids? This plan I’m offering you has a survivor benefit. In the event of your death, the plan will pay up to $664 per month to your surviving children or $866 to your retired spouse.
JOHN: Oooohhh… Big whooping deal. I have a $250,000 term-life policy that costs me about $15 per month, and it will provide for my wife and kids much better than your plan. And even when I’m old I can still get an annuity that continues making payments to my wife after I die. So, if you think about, after pooling together my retirement plan, my disability insurance, and my life insurance policy, I’ve got my own “social insurance” plan that provides a better disability benefit, a better death benefit, and a retirement benefit about 25% higher than what your plan offers, and it all costs me $207 per month which is exactly the same price as your plan. Now, if that’s not comparing apples to apples I don’t know what is.
SALESMAN: Well, now, let’s talk about that retirement plan of yours. I think you are being misled by someone who stands to gain financially by selling you risky investments instruments. Now, I don’t know what your financial advisor has been telling you, but the kind of return on your investment you are expecting requires substantial risk. If you want to play the stock market with your life savings, that’s your prerogative. But I want you to know that this plan we are offering you is a no-risk plan, so, one should expect that it should offer a somewhat lower return.
JOHN: Playing the stock market? You make it sound like I’m shooting dice or something. I know how the rich folks get rich. It’s by investing what they’ve got, and I’m not talking about little savings accounts, either. If you really want to accumulate wealth, you’ve got to invest it in the stock market. Now, I know that when I get to close to retirement age, I’m going to need to start putting more of my money in bonds just in case there is a big stock market crash right before I retire. My financial advisor has already taken that into consideration. I know the stock market can be scary for short-term investing, but in the long term, the stock market has never had a negative return over a 20 year period, even during the Great Depression. The tiny return your plan pays might make sense over a very short period, but over a 45 year time period, it’s just a stupid investment.
The $1150 monthly check I was telling you about just assumes that my stocks make a real return of about 4% a year, and the stock market has never even had a 45 year return that low in its entire history, but my financial advisor just likes to be conservative with his numbers. It’s more likely that I’ll end up averaging a 6 or 7 percent real return on my retirement savings, and that means I’ll get a monthly check that’s more than twice what you’re offering. And even in the worst case scenario where my portfolio only yields about 3% a year over inflation, my existing plan would just about break even with yours.
SALESMAN: Well, play with fire if you want to, but I’m telling you: risk-free is the way to go.
JOHN: I’m curious. Just what do you mean by risk-free? Surely SSA Incorporated can’t withstand a total meltdown of the US economy. If the US economy takes a nose dive, how will your company be able to continue making payments to its customers? How do you guarantee your stated distributions?
SALESMAN: SSA Incorporated has….ummm….very deep pockets. But, actually, we don’t really guarantee your distributions. The amounts of your monthly distributions are changed periodically by a vote of our…ummmm… board members, so we can’t really guarantee anything. I can reassure you, though, that our finances look really good right now. We are going to have to make a 23% cut in distributions sometime down the road in order to remain solvent, but that won’t happen until at least 2042.
JOHN: 2042? Do you know I retire in 2052?
SALESMAN: I do recall you saying that. Yes.
JOHN: So, even though you told me earlier that I can expect $912 per month in retirement benefits, it’s really only going to end up being about 3/4 of that?
SALESMAN: Well, unless we find new sources of funding.
JOHN: Like increasing my monthly contributions?
SALESMAN: That’s one way.
JOHN: Well, I hate to have wasted so much of your time, but I really don’t think I’m interested in your social insurance plan. And, honestly, I can’t really see why anyone else would want it either.
SALESMAN: Well, that’s easy for you to say. But not everyone out there is as well-to-do as you are. Some people have trouble making ends meet and can’t afford to save for retirement like you can. The least you could do is have a little compassion and support this program that benefits people who have never been given the chance to achieve all that you have in life.
JOHN: Dude. I’m a high-school graduate. I work at Home Depot for $10 an hour. I know I’m not, like, living on the streets and stuff, but I certainly wasn’t born with a silver spoon in my mouth. If this plan doesn’t benefit me, I can’t really see how it would benefit anyone.
SALESMAN: Well, I hope you realize just what you’re doing. I hope you understand the blank check you are writing to those Wall Street tycoons managing your money. Don’t you dare complain about the rich getting richer and the poor getting poorer, because it’s your aching back those billionaire bankers are standing on. Every time you deposit your $167, it just fuels their unquenchable greed and insatiable lust for power. If you spend your money on our plan, I can promise you that not a dime of it will be invested with those fat cats.
JOHN: Ummm….Did any of what you just said somehow sweeten the terms of your plan, because I’m afraid I missed it? Or were you just trying to tell me to give up my dreams of retiring a millionaire in exchange for the thrill of depriving some investment brokerage of the 0.5% fees on my meager assets?
SALESMAN: THEY GOT TO YOU DIDN’T THEY! THEY TOLD YOU THE PLAN WAS GOING BROKE! THEY TOLD YOU IT WAS A PONZI SCHEME AND WOULD BE INSOLVENT IN TEN YEARS. WELL, THEY’RE WRONG! THIS IS THE MOST SUCCESSFUL PROGRAM IN THE HISTORY OF MANKIND! ONLY A FOOL WOULD THROW IT AWAY, OR THE LACKEYS OF THOSE BILLIONAIRE BANKERS WHO ARE ONLY OUT FOR PROFIT AT YOUR EXPENSE! DON’T LISTEN TO THEM, JOHN. DON’T LISTEN TO THEIR TRASH!
JOHN: ????
SALESMAN: So, what’s it going to be, John? Can I interest you in a social insurance plan through SSA Incorporated?
JOHN: I’m pretty sure I already answered that question five minutes ago. No, I don’t want your plan, and I can’t see why anyone would, regardless of how little they make. Everything you have offered me in your plan is already available through other providers and at a much lower cost. Your plan is of no value to me, and my meager earnings are better spent elsewhere.
SALESMAN: Ha! Ha! Ha! Gotcha. I was just yanking your chain about that whole SSA Incorporated thing and you having a choice in the matter and all. I’m really calling on behalf of the US government to let you know that you have just been enrolled in the Social Security Plan. Your approval in the matter is irrelevant. We will begin confiscating the monthly payments directly from your paycheck. Like you said, it’s so much better to set it aside for retirement before you have a chance to see it.
JOHN: What!!! You can’t just steal my money like that!
SALESMAN: Um…. Actually, we can. But we’re the US government, so it’s not really called stealing. After all, don’t forget that we’re working for you. Don’t let it worry you too much, though. We only take half the $207 from your paycheck. The other half is paid by your employer.
JOHN: Why on earth does that matter? That just means it’s more expensive for him to employ me now. He’ll just reduce my other benefits to compensate, or it will be an eternity before I see a raise.
SALESMAN: Yeah, I know that, and you know that, but there is no need to make it common knowledge. It just makes people feel so much better if we keep the visible deductions relatively small. You know how it is; appearance is everything. And what they don’t know won’t hurt them, now will it?
JOHN: But I needed that money for my own retirement savings! How am I going to be able to afford my $167 retirement contribution now that you’re stealing $207 a month from me? How am I going to retire a millionaire?
SALESMAN: John, John. It was a pretty lame dream in the first place. You don’t really want to be a millionaire, though, do you? No, what you really want is security. You want someone to take care of you, to manage your finances for you, to care for you when you are too old to care for yourself. That’s what we’re doing. Sure there are some people who are millionaires, but you just weren’t meant to be one of them. You were born to be a poor person, and that’s okay. It’s okay to be poor. You know why? Because you have a compassionate government whose always going to look out for you. Now, you have a good day, John Public.
