Wednesday, April 27, 2005
Pretty surprising to find this in the NYTimes, but look at this:

After comparing our relative payments to our pension systems (since salaries are higher in America, I had contributed more), we extrapolated what would have happened if I'd put my money into Pablo's mutual fund instead of the Social Security trust fund. We came up with three projections for my old age, each one offering a pension that, like Social Security's, would be indexed to compensate for inflation:

(1) Retire in 10 years, at age 62, with an annual pension of $55,000. That would be more than triple the $18,000 I can expect from Social Security at that age.

(2) Retire at age 65 with an annual pension of $70,000. That would be almost triple the $25,000 pension promised by Social Security starting a year later, at age 66.

(3)Retire at age 65 with an annual pension of $53,000 and a one-time cash payment of $223,000.

You may suspect that Pablo has prospered only because he's a sophisticated investor, but he simply put his money into one of the most popular mutual funds. He has more money in it than most Chileans because his salary is above average, but lower-paid workers who contributed to that fund for the same period of time would be in relatively good shape, too, because their projected pension would amount to more than 90 percent of their salaries.

What is surprising is how unsurprising this result is, yet there is still so much opposition to the privitization of social security. Would anyone be satisfied with the same return they receive from Social Security if they had put that money in a mutual fund? The answer is no. Everyone knows (and expects) to obtain a higher return on investment from their mutual fund than from Social Security (of course that is a pretty low expectation).

So this really begs the question, why would anyone be opposed to privitization of the Social Security program?
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I am an attorney in Chicago. Politically speaking, I am an indepedent that tends to lean conservative on fiscal issues and progressive on social issues. I try to remain as unbiased and open-minded as possible. Please email or post any comments, and especially criticisms. If something I say is wrong, or you disagree - let me know about it!



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