Social Security 101: Private Accounts Should Earn You More

Discussion in 'Economy' started by Bonnie, Jan 7, 2005.

  1. Bonnie
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    Bonnie Senior Member

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    Larry Lindsey, Bush's former top economic adviser and a boolster of his plan, calculates, that if I started an account at age 28 and invested one-third of my employers payroll taxes in a stock index account-up to a miximum of $1,000 a year-the account would now be worth $157,000 and pay a monthly benefit of $911 when I retire.

    Two thirds of my and my employers payroll taxes would still be invested in government bonds through the social security system, giving me an addtional benefit of $1,179 fot a total of $2,096- a good deal better than the $1,787 a month promised in my annual Social Security statement.

    Either way, though, if private savings accounts had been instituted in 1967, the Social Security system as awhole would be solvent, instead of facing an $11 trillion shortfall as the Baby Boom generation retires.

    That's the main reason that Bush favors Social Security reform plus a "carve out" infaltion adjustment: Over the long-term (after paying back $2 trillion the government needs to borrow to get it started), earnings will wipe out Social Securit's $11 trillion shortfall.

    Bush is surely right about this: Money invested in private markets will almost certainly earn more money than money invested in government bonds, making more for workers and shoring up the system.

    Specifically, the average annual return on funds invested in the SS system right now is 1.8% after inflation. The average return for stocks os 7.4 % per year. That's over the period form 1926 to the present, including the great depression. In the past 200 years, in fact stocks have averaged a 10.4% annual return before inflation.

    Assuming that most workers would not want to put their money entirely into stocks and instead would divide it evenly with corporate and governement bonds, tha average return would be 4.9%, still vastly outsrtipping Social Security.

    This means that, if the future is anything like the past, workers should be far better off having their money invested in private markets than in Social Security..........

    www.realclearpolitics.com/Commentary/com-1_6_05_MK.html
     
  2. Mr. P
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    Mr. P Senior Member

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    Over time this (privatization) has been provin to be a great deal..
    I have a link as proof if anyone wants to see it...People making more after they retire than while working! Wow!
     

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