Though I have a country in mind, I didn’t put it down as I wanted to know if anyone had any info on other countries and wanted to be open to other results, hopefully ‘modern 1st world’ ones.
There are some assumptions going around, and I hope to clarify a bit. These personal SS accounts will not be quite like IRA’s or 401k’s. Here are 2 differences. Your options for investments are very limited. The president promises you won’t be allowed to put your money into risky things. He says you’ll be limited to very safe, blue chip mutual funds. Another big difference is that you won’t be allowed to get all your money in one big wad and buy a little cottage by a lake. You will be obligated to buy an annuity, which will dribble it out to you monthly. It’s sorta like ownership, I guess, and that does seem to be an improvement over the current system.
The money that will go into the personal accounts (3% to 5% are the guesses) will add to the expected shortfall, not solve it. Estimates of the extra expense for the first ten years are at 2 trillion dollars, more or less. Part of that is to make up for the missing 3% to 5% of money going in. Part of it is to set up the bureaucracy for the new system.
One thing left unexplained is the matter of stockholder voting. Companies and mutual funds have annual elections to keep or dump the board of directors. Ballots are mailed to stockholders, so they have some voice in the way the company is run. So, who will vote these hundreds of millions of shares, held for you by the government? I hope the individual account holders will get to do the voting. I have a little fear that you won’t be trusted with that power. If some bureaucrat can vote such a huge block of stocks, I’m not comfortable with that.
I have tried to keep this factual and not partisan. In fact, I think the basic principle of personal SS accounts is a good thing, but we should go into the decision with our eyes open.
Uh huh.
- Isn’t Social Security’s rate of return around 2%? I find a wide variation in estimates, ranging from negative, to about 3%.
http://www.heritage.org/Research/SocialSecurity/CDA98-01.cfm
Criticisms and responses to the above link: http://www.heritage.org/Research/SocialSecurity/CDA98-08.cfm
This says “about 2%”: http://www.socialsecurity.org/reformandyou/faqs.html
Factcheck says you would only have to earn 3% return to be better off: http://www.factcheck.org/article305.html
CNN says “about a 3% rate of return”: http://www.cnn.com/2005/ALLPOLITICS/03/04/social.security.factcheck/
2) If (1) is true, then tell me exactly how investing part of my fund in a private long-term CD-based account will be akin to “a night with the slots”? We more than 3% in our CD right now, and historically, CD rates have been much, much higher. Shoot, we even have one CD that gets 4.5%. And it’s FDIC insured.
My “zero risk” money market account has earned about 5.5% average over the last 10+ years. The lowest it’s ever earned was 3%.
Those are some slots.
Obviously, depending on investment choices available and the general idiocy of people, some people will end up making poor choices. But then, they don’t have to join in if they don’t want to. And there’s only so much we can do to protect people from being stupid, after all.