[lookout123]

yes, you're right. i am talking about ending social security. i think society would do just fine with SS being phased out. i also know that will never happen as long as people understand they can vote for entitlements. SS wasn't originally viewed as a long term retirement plan for all of society. it was a depression era feel-good. when created, few were expected to live on it very long. since its creation, people have become accustomed to counting that as part of their retirement savings and have become dependent on it. programs to help those on hard times could be built and run more efficiently than a broad based everybody-in national retirement system. IMO.


Bush is talking about setting up individual retirement accounts funded with the money that is currently just going into the big pot which is completely outside of the individual's control.

if the individual has the ability to invest their retirement money into the buckets of money they choose they can build their own retirement plan. from what i understand this would look something like the TSP's that are currently out there. the only difference is that instead of one large pool of money invested in treasuries, there will be many different accounts invested in various options. as long as the individual can't pull the money out to buy a house or car or candy bar, i don't really have a problem with it. it wouldn't be as efficient (compared to no program at all) for those that do plan for themselves, but it would allow for greater opportunity for growth while providing the safety net that you think people need. The difference is that i think most people can make better choices for their money than the government can.

************very simple math follows, i know there are variables, but there is no need to get more specific.********************

A) an individual starts saving $100/month at age 25 and does that until they are 65 (40 years)

B) if their investment choice averages only:

- 4% avg they will have $118,590 at age 65
- 7% avg they will have $264,012 at age 65
- 9% avg they will have $471,643 at age 65
those are just hypothetical numbers. if we take it a step further and see what a 40 year period in the market looks like it gets more interesting. What i am going to enter here is not a balanced portfolio or an exceptional one. it is a relatively middle of the road, growth and income oriented mutual fund. i would not recommend this one fund for someone's retirement plan, it is only a reference point for this discussion.

if a person saved $100 per month into this fund for 40 years it would looked like this:

40 year period ending:
2004 - 12.5% avg return total saved = $1.138million
1994 - 11.99% avg = $987,695
1984 - 11.72% avg = $914,940
1974 - 10.31% avg = $614,879

Those are 40 year numbers. $100/month. i know that contributions would vary based on income level, but if X% of your income HAD to go into your retirement plan, just like it does now, it would work. keep in mind that the individual who doesn't make enough money to contribute $100/month isn't exactly accustomed to a lifestyle that would require $1,000,000 in the bank.

Let's take this a step further. If an individual today gets roughly $1300/month from SS, would they be winning or losing by this plan? i don't think i would see the elderly roaming the streets fighting stray cats for garbage scraps.

*******************
edit: to be fair, not everyone has the inclination to be in equities so.
if you had put $100/month into a run of the mill bond fund from 1974-2004 (only 30 years, not 40)
the average return would have been 9% and there would be $173,396 in the account. again, not a number to shrug off.

i also forgot to mention that all of those numbers take into account commissions and operating expenses, so a system run similarly would not only be self-sustaining, it would be profitable so that it can help fund programs for those who are less fortunate.