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-- An advocate for Social Security Reform
An advocate for Social Security Reform
Yes...this is coming from a Canadian, but I'd be hypocritical if I didn't think our own Canadian Pension Plan (CPP) wasn't in the same boat.
In fact, the solution looks to be mutual.
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A Professor Gets Personal Princeton�s Burt Malkiel offers an important defense of Social Security reform. Well-known Princeton economics professor Burt Malkiel is providing meaningful, data-driven support of market-investing in personal savings accounts as part of Social Security reform. His is a significant endorsement of the Bush plan at a time when critics are popping up all over the political map. According to Malkiel, from 1926 to the present, yearly stock market returns have averaged about 10 percent pre-inflation and 7 percent after-inflation. The absolute worst return for a 25-year investor who started in 1929 was 6 percent; for a 35-year investor it was 8 percent. Malkiel wrote in the Wall Street Journal this week that �Long-term investors can invest in the stock market with considerable confidence that they can earn a rate of return far above the 1% to 2% return afforded by the Social Security system.� This is an important defense of personal accounts. Malkiel is the former chairman of the president�s Council of Economic Advisors. He is also the former chair of the Princeton economics department. Yes, believe it or not, there�s an Ivy Leaguer in favor of Bush�s reform plan. As such, Malkiel brings enormous credibility to the issue. The Princeton professor also recommends periodic contributions to Social Security in the form of �dollar cost averaging.� Long-term investors who started in the market in 1929 and acted this way got returns averaging 7 to 10 percent yearly as the minimal low end of their historical performance. Malkiel recommends asset diversification among stocks, bonds, and real estate, along with �rebalancing� over time. In other words, younger workers should have more stocks than bonds in their personal accounts and older workers more bonds than stocks. Setting up stream-of-income annuities for the retirement years avoids the pitfalls of taking everything out of the market at a bad time (like 1929 or 2000-01). Malkiel�s defense of personal accounts comes in response to disingenuous anti-stock market ads from the AARP. The ads say, �If we wanted to gamble, we�d play the slots.� In other words, the AARP believes that investing in stocks and bonds is a crap shoot. Their new slogan is �Social Insecurity.� This campaign is flat-out hypocritical. The AARP advertises no fewer than 38 different stock and bond mutual-fund investments to their members. You can buy anything on their website from big-cap Dow stocks to emerging-market funds. If you want to �gamble,� you can even buy Argentina � through the good offices of the AARP. Of course, the AARP gets a nice fat commission on any of these fund sales. Yet, when steering their membership away from the Bush Social Security reforms, they never cite the long-run positive stock returns discussed in the work of Burt Malkiel, University of Pennsylvania professor Jeremy Siegel, or many other experts. The disingenuousness of the AARP is shameful. What�s good for their members should be good for the rest of us. After all, stock- and bond-market investing is not some new radical idea. For decades, state pension funds have successfully invested in markets for unionized policemen, firemen, and teachers. Ditto for the federal Thrift Savings Plan on behalf of the executive and legislative branches in Washington. Liberal academic critics of market investing � such as Paul Krugman � never tell us that their own retirements are taken care of by market investors like TIAA-CREF. Founded in New York City in 1918, TIAA-CREF provides retirement plans for professors of colleges and universities. They began common-stock investing in 1952. The Bush administration had better start communicating all of these facts. Last week�s Gallup poll showed that while 71 percent of Americans believe the Social Security system is either in crisis or has a major problem, folks also think � by a huge 55 to 40 percent margin � that investing some of their Social Security taxes in stocks or bonds is a bad idea. With nearly half of the public already invested in stocks, the Gallup finding has to be bad news for the Bushies. It may very well be that the White House and the Treasury are spending too much time worrying out loud about benefit cuts and the so-called transition costs of Social Security, and not nearly enough time talking up the superiority of market-driven benefits for future retirees. They�ve also been too quiet about the benefits of Social Security �ownership� for the spouse, child, or other family heir of a deceased breadwinner. Ownership and retirement returns can carry the day for President Bush. At bottom, if folks understand the trade-off between another bankrupt government entitlement and the history of dependable market returns, they�ll support the market. But this case has yet to be framed or communicated clearly. Hopefully the president will use his inaugural speech to good purpose on this and the many other dimensions of his forward-looking reform agenda. |
Re: An advocate for Social Security Reform
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| Originally posted by Fir3start3r Yes...this is coming from a Canadian, but I'd be hypocritical if I didn't think our own Canadian Pension Plan (CPP) wasn't in the same boat. In fact, the solution looks to be mutual. Whatever the solution, the fact remains that a change is needed to get us out of this govenment created Ponzi scheme. The question really is, how to dumb-down the explanation of the solution so that it doesn't scare the hell out of everyone... |
Simple...let me invest MY OWN MONEY in MY OWN RETIREMENT...I'm sick of being forced to throw thousands of my earned dollars to the government to support old people that are living longer and longer and are in no relation to me...and when I retrie in 30 years (probably wont be 40 years until I can "collect")....this system will be long gone and the 100 grand I put in to this obsolete system... I will get 0 out of.
Sorry if it sounds like I'm a selfish pig...but I didn't work my tail off to get my career just to throw money away...I should be able to retire on my invested money. Besides...when I'm crusty, I would hate for other peoples kids to pay for me being old and playing golf on their SS taxes. Besides...I already have a retirement plan at work that will cover me without SS being around then...so why can't I invest the rest for me as well.
Figure out a way to slowly phase this out...it's a system already in trouble because of how old people get these days....it was a system designed to get you from retiring at 60 and you in the ground at 63...so 40 years of work paid for you...now living 30 years beyond retirment...what you put in, you get 10 fold back (even though the checks are like 20 bucks a week). I mean you can't even afford to live on SS alone anymore anyway...and that will only get worse. Don't hose the people already relying on the system...but for us that won't have the system when we retire...let me start investing some now for me and by the end of phase out...let me invest it all...for me!
/rant
Not saying I think that SS doesn't need some reforms, but some concerns with what's being proposed:
What about the people who use the insurance side of SS, such as those who use it due to disablities?
Where does the transition money come from, which is estimated at $1-2 trillion, meaning it will be at least $3-4 trillion and why can't this same money be used for transition so that each generation pays SS for their own generation and not for the previous one?
What happens if there is a large fallout in the stock market at some point or if there's a dependable company who's stocks plummet, like Enron or many of the airlines? Government bonds have been the most secure investment on return.
Wouldn't the costs of public aid simply increase dramatically, as people live longer and run out of invested money?
Why does SS money have to be invested as part of a trickle-down economics program? This is the main reason the administration wants this to go through.
If there's going to be an argument about something, I'd rather have it here, where things seem to be more civilized & rational than MD has become 
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| Originally posted by PhloTron Simple...let me invest MY OWN MONEY in MY OWN RETIREMENT...I'm sick of being forced to throw thousands of my earned dollars to the government to support old people that are living longer and longer and are in no relation to me...and when I retrie in 30 years (probably wont be 40 years until I can "collect")....this system will be long gone and the 100 grand I put in to this obsolete system... I will get 0 out of. Sorry if it sounds like I'm a selfish pig...but I didn't work my tail off to get my career just to throw money away...I should be able to retire on my invested money. Besides...when I'm crusty, I would hate for other peoples kids to pay for me being old and playing golf on their SS taxes. Besides...I already have a retirement plan at work that will cover me without SS being around then...so why can't I invest the rest for me as well. Figure out a way to slowly phase this out...it's a system already in trouble because of how old people get these days....it was a system designed to get you from retiring at 60 and you in the ground at 63...so 40 years of work paid for you...now living 30 years beyond retirment...what you put in, you get 10 fold back (even though the checks are like 20 bucks a week). I mean you can't even afford to live on SS alone anymore anyway...and that will only get worse. Don't hose the people already relying on the system...but for us that won't have the system when we retire...let me start investing some now for me and by the end of phase out...let me invest it all...for me! /rant |
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